AudioCodes Reports Third Quarter 2023 Results

LOD, Israel, Nov. 2, 2023 /PRNewswire/ -- Third Quarter Highlights

• Quarterly revenues increased by 2.6% sequentially to $61.6 million.
• Quarterly Service revenues of $30.6 million accounted for 49.6% of revenues
• GAAP results:   
     - Quarterly GAAP gross margin was 66.5% compared to 64.1% in the prior quarter;
     - Quarterly GAAP operating margin was 9.4% compared to 3.8% in the prior quarter; and
     - Quarterly GAAP net income was $4.3 million, or $0.14 per diluted share compared to $1.1 million, or $0.03 per diluted share, in the prior quarter.

• Non-GAAP results:
     - Quarterly Non-GAAP gross margin was 67.3% compared to 64.5% in the prior quarter;
     - Quarterly Non-GAAP operating margin was 15.5% compared to 9.5% in the prior quarter; and
     - Quarterly Non-GAAP net income was $8.3 million, or $0.25 per diluted share, compared to $5.1 million, or $0.16 per diluted share in the prior quarter.

• Net cash provided by operating activities was $0.2 million for the quarter.
• AudioCodes declared a cash dividend of 18 cents per share. The dividend, in the aggregate amount of $5.7 million, was paid on August 31, 2023 to shareholders of record on August 17, 2023.
• AudioCodes repurchased 880,457 of its ordinary shares during the quarter at an aggregate cost of $9.0 million.

Details

AudioCodes (NASDAQ: AUDC), a leading vendor of advanced communications software, products and productivity solutions for the digital workplace, today announced its financial results for the third quarter ended September 30, 2023.

Revenues for the third quarter of 2023 were $61.6 million compared to $60.0 million for the second quarter of 2023 and $69.7 million for the third quarter of 2022.

Net income was $4.3 million, or $0.14 per diluted share, for the third quarter of 2023 compared to $1.1 million, or $0.03 per diluted share, for the second quarter of 2023 and $5.4 million, or $0.17 per diluted share, for the third quarter of 2022.

On a Non-GAAP basis, net income was $8.3 million, or $0.25 per diluted share, for the third quarter of 2023 compared to $5.1 million, or $0.16 per diluted share, for the second quarter of 2023 and $10.5 million, or $0.32 per diluted share, for the third quarter of 2022.

Non-GAAP net income excludes: (i) share-based compensation expenses; (ii) amortization expenses related to intangible assets; (iii) expenses related to deferred payments in connection with the acquisition of Callverso Ltd; (iv) other income related to a payment made by the landlord to AudioCodes Inc., a subsidiary of the Company, in connection with the termination of a lease agreement for its offices in New Jersey; (v) financial income related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies; (vi) non-cash deferred tax expenses (income); and (vii) non-cash lease expense which is required to be recorded during the quarter even though this is a free rent period under the lease for the Company's new headquarters. A reconciliation of net income on a GAAP basis to a non-GAAP basis is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.

Net cash provided by operating activities was $0.2 million for the third quarter of 2023.  Cash and cash equivalents, long and short-term bank deposits, long and short-term marketable securities and long and short-term financial investments were $102.5 million as of September 30, 2023 compared to $124.3 million as of December 31, 2022. The decrease in cash and cash equivalents, long and short-term bank deposits, long and short-term marketable securities and long and short-term financial investments was the result of the use of cash for the continued repurchasing of the Company's ordinary shares pursuant to its share repurchase program and the payment of a cash dividend during each of the first and third quarters of 2023.

"I am pleased to report solid third quarter 2023 results with improved growth in strategic areas of our business," said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes.

 We continued to perform well in our enterprise business, now reaching a record 90% of the company revenues. Microsoft-related business in the quarter grew 13% year-over-year, with Microsoft Teams business up 21% year over year.  We experienced continued strong momentum of our AudioCodes Live managed services, with ARR growing over 50% year-over-year ending the quarter at $43 million, which means we are on track to achieve our target of $46- $50 million in 2023, representing approximately 50% year-over-year growth.

 Additionally, customer experience (CX) performance improved to 13% year-over-year growth in the quarter and conversational AI business bookings grew over 50% year-over-year. Our investments in product innovation in conversational AI are paying off and have successfully positioned our CX segment for faster sustainable top-line growth.  Since the announcement of Microsoft Teams certification of Voca CIC, our lightweight  AI-first Teams CCaaS platform, we have seen a step-up in customer interest and engagement.  The success with our CCaaS offering is having a pull-through effect on the rest of our conversational AI portfolio, in particular in our Generative AI powered recording services. We now see rising interest and progress made with our Meeting Insights workflow productivity application and SmartTAP compliance recording.

This strong performance in strategic areas of our business coupled with the flow-through impact of previously announced initiatives in cost savings drove significant sequential operating margin improvement in the quarter. 

Despite the tragic events in Israel over the past three weeks, our global business has continued to operate without material disruptions due to our diverse global presence, lessons learned during the Covid pandemic, and thanks to the commitment and dedication of our employees and partners across the world.  Moreover, the aforementioned positive business developments, backed by leading indicators such as pipeline remaining robust, give us increasing confidence in our previously stated commitment to return to top-line growth with meaningful margin expansion in 2024 and beyond," concluded Mr. Adlersberg. 

Share Buy Back Program and Cash Dividend

In June 2023, the Company received court approval in Israel to purchase up to an aggregate amount of $25 million of additional ordinary shares. The court approval also permits AudioCodes to declare a dividend out of any part of this amount. The approval is valid through December 27, 2023.

On August 1, 2023, the Company declared a cash dividend of 18 cents per share. The dividend, in the aggregate amount of approximately $5.7 million, was paid on August 31, 2023 to all of the Company's shareholders of record on August 17, 2023.

During the quarter ended September 30, 2023, the Company acquired 880,457 of its ordinary shares under its share repurchase program for a total consideration of $9.0 million.

As of September 30, 2023, the Company had $10.0 million available under the approval for the repurchase of shares and/or declaration of cash dividends.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 8:30 A.M., Eastern Time today to discuss the Company's third quarter of 2023 operating performance, financial results and outlook. Interested parties may participate in the conference call by dialing one the following numbers:

United States Participants: 888-506-0062

International Participants: +1 (973) 528-0011

The conference call will also be simultaneously webcast. Investors are invited to listen to the call live via webcast at the AudioCodes investor website at http://www.audiocodes.com/investors-lobby.

Third quarter of 2023 earnings call supplementary slides will be available during our third quarter 2023 earnings call at AudioCodes' investor website at http://www.audiocodes.com/investors-lobby.

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About AudioCodes

AudioCodes Ltd. (NASDAQ: AUDC) (TASE: AUDC) is a leading vendor of advanced communications software, products and productivity solutions for the digital workplace. AudioCodes enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. AudioCodes offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.

For more information on AudioCodes, visit http://www.audiocodes.com.

Statements concerning AudioCodes' business outlook or future economic performance; product introductions and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements'' as that term is defined under U.S. Federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions in AudioCodes' industry and target markets in particular; shifts in supply and demand; market acceptance of new products and the demand for existing products; the impact of competitive products and pricing on AudioCodes' and its customers' products and markets; timely product and technology development, upgrades and the ability to manage changes in market conditions as needed; possible need for additional financing; the ability to satisfy covenants in the Company's loan agreements; possible disruptions from acquisitions; the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business; possible adverse impact of the COVID-19 pandemic on our business and results of operations; the effects of the current terrorist attacks by Hamas in Israel, and the war and hostilities between Israel and Hamas, and Israel and Hezbollah as well as the possibility that this could develop into a broader regional conflict involving Israel with other parties, may affect our operations and may limit our ability to produce and sell our solutions; any disruption in our operations by the obligations of our personnel to perform military service as a result of current or future military actions involving Israel; and other factors detailed in AudioCodes' filings with the U.S. Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.

©2023 AudioCodes Ltd. All rights reserved. AudioCodes, AC, HD VoIP, HD VoIP Sounds Better, IPmedia, Mediant, MediaPack, What's Inside Matters, OSN, SmartTAP, User Management Pack, VMAS, VoIPerfect, VoIPerfectHD, Your Gateway To VoIP, 3GX, VocaNom, AudioCodes One Voice, AudioCodes Meeting Insights, AudioCodes Room Experience is trademarks or registered trademarks of AudioCodes Limited. All other products or trademarks are property of their respective owners. Product specifications are subject to change without notice.

Summary financial data follows

(1)  Share-based compensation expenses related to options and restricted share units granted to employees and others.
(2)  Amortization expenses related to intangible assets.
(3)  Expenses related to deferred payments in connection with the acquisition of Callverso Ltd.
(4)  Other income related to a payment made to AudioCodes Inc. in connection with the termination of a lease agreement for its offices in New Jersey.
(5)  Financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies.(6)  Non-cash deferred tax expense.
(7)  Non-cash lease expense which is required to be recorded during the quarter even though this is a free rent period under the lease for the Company's new headquarters.

Note: Non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. The Company believes that non-GAAP information is useful because it can enhance the understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information.

Company Contacts:
Niran Baruch, 
Chief Financial Officer 
AudioCodes
Tel: +972-3-976-4000
[email protected]

Roger L. Chuchen
VP, Investor Relations 
AudioCodes
Tel:  732-764-2552
[email protected]

SOURCE AudioCodes