All right, welcome everybody. We'll get started as people transition out of the room. We're delighted to have Amdocs here today, and Shuky Sheffer, CEO of Amdocs. Shuky, maybe you could just start while people are getting situated, just on a little bit of an overview of Amdocs, just for the audience. Okay. So we are servicing the telecom industry, the service provider, you know, the Vodafone, T-Mobile, AT&T of the world. And I think, we are the market leader by far, and I think we are pretty much, doing everything, all the, information technology, IT stack, BSS, OSS, billing system, CRM, all the network system. And we have a very unique business model. If you see, some of our competitors are either, you know, system integrators, some of them are product companies. We are what we called product-led services company, meaning that, we develop the products which are tailored for the industry. We deploy the product, and we operate the product. So it is very unique, accountability model- Mm-hmm. that we can give our customers, and a very high success rate in transformation. And then, as I said, we are the market leader in the industry, definitely, you know, supporting all the new trends like generative AI and others. All right, so we'll dive into that, 'cause I think many investors that we talk to kind of focus a lot on the managed services portion of the business. But can you just remind everybody about kind of the four growth drivers of the company and, you know, how those have evolved over the past couple of years? So you're right, everyone likes the managed services portion, which is a, you know, it's highly mission-critical system, very stable, recurring revenue. And we have done a change in our strategy roughly five years ago. That this is pre-COVID. Mainly, we're focusing at the time on the main growth engine was digital transformation. Everyone talking about digital transformation. And at the time, we changed our strategy for different pillars. Obviously, digital transformation, by the way, which was accelerated by the COVID, actually. All the 5G monetization, we knew all our customers are going to invest heavily in 5G. Journey to the cloud. Everyone we predicted, like it's happening, is moving to the cloud, so we wanted to be ready with all our platform, systems and the services. Another one is the network automation. Historically, network was very proprietary, so we didn't have a play because between Ericsson, Nokia and others, everything was proprietary, hardware and software. Now that everything is open, we believe that we have a great play in the network automation and all the provisioning fulfillment systems and in service assurance. Another layer that we've seen at the time, which is also accelerating, is all the B2B domain. The B2C domain, I think Amdocs does a pretty good job in automating it, but the B2B... The last thing, which was added actually last year, which is also connected in a way, an acceleration of digital transformation is generative AI, which become another pillar of our strategy. All right, well, With that, before that, we had roughly $30 billion-$35 billion SAM. Now, with the new portfolio, we are close to $60 billion SAM. Okay. We'll definitely dig into the AI portion more, but, you know, a big question that we get is just: Where are companies on being able to monetize some of their 5G investments? And I know that kind of ties together a lot of the different areas you were talking about, but just what do you see from your customers? Early days. Still, you know, by the way, most of our customer did not finish to. Even if they finished to deploy the radio part of 5G, they did not deploy the core network. The only way to get the full capacity of functionality of 5G is when you deploy standalone network, which is the core network on the radio. I think the best use cases so far is fixed wireless. Mm-hmm. You can see that our customers are deploying fixed wireless. I think for the first time in history, if you look at the top 10 broadband providers in the U.S., suddenly T-Mobile is one of them. So this is the first time that the mobile or pure mobile carriers are able to provide broadband over Fixed Wireless. AT&T is doing it with us, T-Mobile and others. So this is probably the best monetization use case so far. For more use cases, the network will have to evolve, and we believe it will happen. Eventually, someone will break with offering, everyone will have to catch up, so we believe this will come. Got it. You mentioned it, but just how is AI evolving, kind of what customer priorities are? So I guess everyone is talking about generative AI, and we talk about this, what is Amdocs' angle to it? But when we look about generative AI capabilities, some of them can be built on. Mm-hmm. You have— It doesn't matter what type of system you are running, it's even if it's legacy platform, there is a way to build on generative AI capabilities on top of the system and care, in some other places that obviously we are looking into and working with our partners to do. But there are many capabilities that we are building with our new portfolio... so if we develop a new offering type of capabilities generating automatically in our catalog- Mm-hmm. We are doing it only in the latest and greatest. We are not going backwards to what we have 10 or 15 years ago. So what we believe is that there are many reason to transform today. We talked about some of them. You want to go to the cloud, you want to have monetization capabilities, you want to have better secure environment. There are many reason to modernize. You want to have 5G monetization capability, et cetera. But we believe this will be another pillar- Mm. a reason for people to modernize, to get access to a significant generative AI capabilities that are not going to be as much deployed on the legacy platform. So we believe it will be another driver. So, I mean, we've been talking for a while, and you guys have just really been at the forefront of embracing AI, you know, primarily internally for now. Just what do you think has kind of positioned you so well to be an early mover on this opportunity? Okay, so we jumped on this like every other company in the world about, you know, when... It's, it's funny, we announced a very significant partnership in February- Mm-hmm. - with Microsoft. This was, like, one month before the whole, Right ... Gen AI. Definitely, we are leveraging this with our partnership with Microsoft. When we look in generative AI in general, there are some things that are generic and be, let's say, cross-industries, of course, vertical. But at the same time, when we build our foundation, it's called amAIz, Amdocs amAIz, for generative AI, we took all our knowledge in the industry- Mm. In order to make it, you know, what we call carrier-grade, carrier, carrier-grade. So it has to be highly secure, you know. It has to be no latency. It has to be... We need to take care of privacy. It has to be mission-critical. And, you know, if you write now a query on, or something in the ChatGPT or in any other platform, you can wait 20 seconds. It doesn't matter. It has to be instant. So when we design our platform, we wanted to make sure that we address all of these. At the same time, we are bringing a lot of, you know, know-how about the data of the industry- Mm-hmm. - which is going to be used as part of this in the large language model. We are going to train the data, to train the models. We are going to use telco taxonomy, observability, and many, many other things. So it's not just another generative AI capabilities that you can bolt on. This is generative AI capabilities which we build for telco. Mm-hmm. I think that everything that we bring in this domain help us to tailor the use cases, which will be telco-related. Okay. So kind of being at the forefront of modernization helped you kind of be at the forefront of AI. You know, you briefly just mentioned the Microsoft announcement. Can you just give some background on both kind of the NVIDIA announcements and the Microsoft announcements you've recently made? Initially, I mentioned before the B2B domain. Mm-hmm. If you look about B2C, one of the things which is unique about Amdocs is that, when we talk about the IT portfolio, we bring end-to-end- Mm-hmm ... from the channels to the network. This is pretty unique in most of the cases that we compete. It's Amdocs with the product and services, to some type of consortium of different product companies and some system integrator that- Mm ... try to stitch everything together. So, but and when we decided to go to the B2B domain, we were missing some of the portfolio that Microsoft is very strong. Talk about, sales automation, campaign management, lead management- Mm-hmm ... contact center capabilities. So this was the initial partnership that we done with Microsoft, actually, to come with an end-to-end pre-integrated portfolio to address the enterprise domain, the B2B domain. And then definitely we lever on this partnership and relationship to expand to the Microsoft capabilities, which is mainly OpenAI, Copilot, and how we are going to embed it into our products. NVIDIA is actually complementing Microsoft. They have a lot of infrastructure capabilities. They open an AI foundry that we are part of it. Many startups are doing a lot of use cases. So I think that if you look about when you want to power our amAIz platform, which is generative AI, you need both the NVIDIA capabilities, because we know- Mm ... it requires a lot of resources and infrastructure, and the Microsoft capabilities. As we speak, we are, almost every Amdocs customer is in discussion with us on different type. It's more like in POC. Mm-hmm. There are many aspects to be evaluated, you know, that, we to make sure that you and me will get the same answer from this- Right. From this machine. But very good partnership with both of them. I think they are definitely the market leaders. But we are using also a lot of open source LLM, so this is not exclusive to them, but it's very important to our roadmap. Okay. We'll circle back to some of that, but I wanna just dive into... You know, you noted that revenue from cloud activities grew double digits in fiscal 2023, and that it was greater than 20% of Amdocs' revenue for the first or for the fiscal year. Just where are customers kind of in that cloud adoption or, you know, in that modernization journey- Yeah. that they're on? So moving to the cloud is something that everything we do, or in the process of doing, and you're doing it for many reasons. You're doing it because of... By the way, not necessarily because of TCO. Mm-hmm. You're doing it because you have a much better secure environment, a much more agile environment. You know, we are just coming out from, those of you from the U.S., from Black Friday. Yeah. So most of our customers probably have to have doubled the hardware only for four or five days a year, for Black Friday, Cyber Monday, iPhone launch, and maybe Christmas Day. So it gives you a lot of elasticity. So moving to the cloud is something that all our customer will do. And when we looked about how we can take the industry to the cloud. Mm. We came with an approach that we want to have a tailor-made cloud journey for every Amdocs customer. Some of them, it happened naturally because if you talk about customers of Amdocs, like, I don't know, AT&T, T-Mobile, Vodafone, others, they are actually on a process of completely replacing the legacy platform. Mm-hmm. So our cloud, our next generation platform, are cloud agnostic, by the way, and cloud ready. Mm. Okay, so cloud native, so by that, they are moving to the cloud. But we have many other customers that are not necessarily in the process of a transformation and running maybe previous versions, so we build also a roadmap for them. Mm-hmm. So we came with a way that we can actually give the whole life cycle of a cloud journey from, you know, the consulting part, then doing the upgrades on the- Mm-hmm ... on the platform, then the migration, then the operation, the CloudOps. Yeah. So we build a very holistic value proposition that can fit every Amdocs customer. It could be different pace, different system, but I think this is... It's unique because most of our competition, what they have done, they said, "Okay, if you want to move to the cloud, that's it. You need to go," and to more like rip and replace mode, which some of our customer, maybe, you know, they just finished the transformation three years ago, and they don't have any appetite to do another one. Mm. We build a very comprehensive offering that can address pretty much all customer on different versions in a way that they can go to the cloud. The question about, you know, I can tell you from, from our position as a market leader, the industry is really early days. Yeah. I mean, I will not share the number, but it's less than a handful of customer they can say already moved to the cloud. Mm-hmm. Even if you move to the cloud, in most cases, even the Amdocs platform is perfect on the cloud, there's hundreds of legacy platform which are not. You are always in hybrid environment. This is really early stage. This is why, you know, we are so upbeat about this, and we see this, as you said, it's more than $1 billion of business for us, 20% of our business in 2023. Grow double digit. We see it continuing to grow double digit next year. I know sometimes when we talk, you talk about sometimes the greatest competition you face is from internal- Yeah ... you know, of a company thinking that they can do it themselves. You know, how do you get customers through that journey of saying, "Hey, well, we'll take this journey any way you want to, but you need to get to this destination, and we're the partner to help you do that? Not always it's easy. You know, some of the time it's religious, but I can tell you that many of our customer recognize that they let us deal with it. You know, we invest a lot of R&D money. We all the time come with new innovation. We are sitting in a position that we see innovation globally, so we see what's happening in the U.S., in Europe, in APAC. So, and this is what we feed our products. So, obviously, there is economy of scale, I mean, the tools and automation that we build. And so I think that the vast majority of our customer believe in the double down on Amdocs and the value they can bring in this specific domain. There are some partners that they want to continue to own. Mm. I can tell you that, for example, in generative AI, in many cases, it's partnership between Amdocs and the customer. They don't just want to outsource this, for example. Mm. But, for the most part, I think they understand the economy of scale- Mm ... and our capabilities and, a very unique accountability model. Mm. Now, I love our customer, I love the IT organization, but also in Amdocs. I mean, if you want to really get accountability and service level, sometimes it's difficult to get it from internal. So overall, I think we did well, although, as I mentioned, I think half of the industry is still, half of the revenue which is spent is still internal IT. Okay, got it. So you've noted over the last couple of quarters and on Q4 earnings recently, that you're just seeing some headwinds to kind of the legacy networks portion of the business. Can you just lay out some of those headwinds and, you know, how... Is this any different than any past cycle? I think it's mainly a result of all the macroeconomic pressure that the industry is having, like everyone else. Mm. If you think about our business, we have managed services business, which is roughly 60% of our business. This is solid. I mean, this is mission-critical system. Yeah. And then we have enhancements to legacy platform. Mm-hmm. Legacy platform, this is the platform that some of our customer are running today, and this is something that they have to do. For example, if you want to come with a new device financing option for iPhone 15, you have to do it on the legacy. Right. At the same time, there are huge investment in the future- Mm-hmm. Getting to the cloud, next generation platform, and there's always a balance and some, you know, pressure between where do you invest. And in time like this, when they see some pressure, and we see it all over, also in our industry, they prioritize next generation platform over legacy. Mm-hmm. Now, we've seen cycle historically. At the end of the day, the legacy platform are the one that they are competing with. Mm-hmm. I mean, so you see a pressure between the leadership of the company who wants to take the company to the next level. At the end of the day, the business people, they need to fight and get their numbers for next quarter, which is still running on their legacy platform. So this is not the first time that we've seen cycle on pressure. I think that the pressure on us when we explain to investor is, while we have a very successful sales year in 2023- Mm. the headwind from legacy is almost immediate. You can say, "Okay, I want to cut it by this," and- Right ... this is happening almost immediate. While all the ramp up of our new projects, as we do right now, that we won last year, is actually ramping... creeping up slowly, Q1, Q2 probably will be more softly in effect in Q3. So this is why also we guided, that we see that, relatively, you know, the actually, the second half of the year will see a certain growth comparing to the first half because of the fact that all the project that we won, we need to ramp up, you know, do all the design reviews and get to a full revenue recognition in the second half. But, we've seen cycle. This is not... Before, we did not see any cancellation, so actually, all our customers are doubling down on the investment on the modernization platform. Got it. Operating margins have continued to be a source of strength for you guys. You're calling for another 60 basis points of expansion at the midpoint into fiscal 2024. Just where are you kind of finding some of these efficiencies? So I think we always grew, you know, gradually, the operating margin, and we were able to do it because of our business model, that we have, like, 80% visibility, so we can plan ahead resources and do very good resource allocation. We invested a lot of automation over the years. We have over 50 customer under managed services, so remember that our agreements with customer are outcome-based. It's not like a rate card type of relationship, so every automation that we introduce to the businesses, we can do it over. I think that while the reason for the significant jump, as you mentioned, we don't jump every- Yeah ... 60 basis points, is because on top of the normal productivity gains and seeing that we, when we factor in what we see already, the value that we get from generative AI tools is in our software development lifecycle and operation, help us to accelerate the margin expansion. Mm-hmm. Now, you will see it going up, so if the midpoint is $18.4, we are going to start a little bit slower and end up a little bit higher, so the exit point actually will be higher than the midpoint. So... And I don't say we can jump every 60 basis points- Yeah ... but we intend to, obviously, continue and increase the margin over time. Over time, you guys have made a lot of kind of smaller acquisitions. Just what are you looking for, kind of in your M&A, and what have some of the recent acquisitions kind of brought to the table? So when we do M&A to support our strategy, and you know, our strategy, some M&A are, we see something, bolt-on technology. Mm-hmm. Technology that we don't have, and we prefer to buy versus build. A good example is one of the acquisition we announced last quarter, is a company called Astadia. And we talked about a cloud journey, so they have a very unique capabilities to move mainframe system to the cloud. Mm. Now, I know it's surprising, but some of our customer have some, not Amdocs, but mainframe platform. Mm-hmm. So this is a very unique capability to take a legacy mainframe platform to the cloud. So when we look about holistically, how we can service our customer to move to the cloud, and they have some mainframe, so we thought, "Okay, we want to have this." So this is an example of something that we didn't think we need to develop. Some of it is consolidation of customers- Yeah ... of competitors, sorry. And some of it is to, if we want to get to a completely new area, for example, we move to the network domain, we were missing capabilities. When we wanted to to get cloud capabilities, people forget now in this environment, but three years ago, you cannot hire and hire a cloud person. Right. It was like big hype. So we bought couple of boutique consulting companies in the cloud. So, so this is our strategy. If you look about our all capital allocation- Mm-hmm ... I would say this is while we have the capacity, I mean, if you look- Yeah ... we have just, I think, we're upgraded by Standard & Poor's, and we still have net cash. Mm-hmm. We have enough money both to bring back the majority of the free cash flow to the shareholders who are on our dividend and our buyback, and still have an M&A when we need it. Got it. Like, nobody in here is surprised that telcos are still on mainframe. All right. So, I mean, just in terms of... You know, you just briefly kind of mentioned capital return, but just how do you view overall capital allocation strategy? Very disciplined, like we have so far. I mean, I think we are very proud to have, which I think is important for good companies, we have 100% earnings to cash conversion. Mm-hmm. We will continue to return the majority of the shareholders via our dividend and our buyback. Yeah. At the same time, we have enough capacity to do M&A. Maybe circling back, just 'cause I thought it was interesting what you said about how you're doing a lot of proof of concepts with your customers right now around AI and, you know, that they wanna have kind of ownership in those outcomes. Just what do you think the timeline is for some of these, you know, proof of concepts and when could it start translating to- We- real projects? We did not... I can tell you that, being realistic, in our fiscal 2024 generative AI type- Mm-hmm. We included only the efficiencies and productivity gains. We did not include any revenue uptake because Yeah ... it will take some time, and still, you know, everyone is trying to build their own chain. And I think until the concrete use cases, which are monetization model, will be more like a service model- Mm-hmm ... until they will start to contribute to revenue. So we did not include anything in 2024. Okay. Perfect. And then maybe just lastly, you know, what do you feel like investors miss about the Amdocs story? I think, when you look at the fundamental of Amdocs, I mean, even so, yes, we grew very nicely in the last three years. Now we see some headwinds, but at the same time, the fundamental of the company is there. Mm-hmm. Market leader, I mean, mission-critical system. No one can switch off Amdocs platform. I think best product in the market, by far. We have, roughly 80% visibility- Mm ... when we start the year for giving our backlog. 75% of our revenue is recurring. Mm. And this visibility actually contributes to the ability to do a lot of efficiency and productivity, using a lot of technology. And we talked about the margin expansion. And at the same time, I think, we are proud that we guided at the midpoint at least, for the fourth consecutive year of double-digit EPS growth. Mm. Obviously, on top of it, there is roughly 2% dividend that. So a very, I would say, resilient business model. Now, we are not immune, I mean, to macro, but I think that a bit more resilient than others. Yeah. So I think this is the fundamental of the company, which are very strong, and, and I think that, we are and will continue to be the key partner for our customers in their journey. Definitely, generative AI represent a lot of opportunities. I think that, you will ask any industry analyst, he will tell you that Amdocs company is a very unique, and, powerful, way to address generative AI. So this is another area that I believe that, will help us a lot to continue to grow the company. Very strong earning cash conversion. I mean, this is, you know, almost a religious in the company. So all in all, very fundamental, I would say, business model and a very re-