- Revenue: $60.3 million, up 0.5% from $60 million in Q2 2023.
- Services Revenue: $32 million, up 12.3% year-over-year, accounting for 53% of total revenues.
- Deferred Revenues: $80.3 million as of June 30, 2024, compared to $77.7 million as of June 30, 2023.
- Gross Margin (GAAP): 65.5%, compared to 64.1% in Q2 2023.
- Operating Income (GAAP): $4.9 million or 8.2% of revenues, compared to $2.3 million or 3.8% of revenues in Q2 2023.
- EBITDA (GAAP): $6.2 million, compared to $2.9 million in Q2 2023.
- Net Income (GAAP): $3.8 million or $0.12 per diluted share, compared to $1.1 million or $0.03 per diluted share in Q2 2023.
- Gross Margin (Non-GAAP): 65.8%, compared to 64.5% in Q2 2023.
- Operating Income (Non-GAAP): $7.2 million or 11.9% of revenues, compared to $5.7 million or 9.5% of revenues in Q2 2023.
- EBITDA (Non-GAAP): $8.3 million, compared to $6.2 million in Q2 2023.
- Net Income (Non-GAAP): $5.5 million or $0.18 per diluted share, compared to $5.1 million or $0.16 per diluted share in Q2 2023.
- Cash and Equivalents: $93.7 million as of June 30, 2024.
- Net Cash Used by Operating Activities: $2.9 million for Q2 2024.
- Capital Expenditures: $8.8 million in Q2 2024.
- Days Sales Outstanding: 108 days as of June 30, 2024.
- Dividend Declared: $0.18 per share, totaling approximately $5.5 million.
- Revenue Guidance for 2024: $240 million to $250 million.
- Non-GAAP EBITDA Guidance for 2024: $33 million to $39 million.
Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AudioCodes Ltd (AUDC, Financial) reported a 0.5% increase in revenues for Q2 2024, reaching $60.3 million compared to the same quarter last year.
- Services revenues grew by 12.3% year-over-year, accounting for 53% of total revenues, indicating a strong shift towards service-based income.
- The company achieved a significant improvement in GAAP operating income, which rose to $4.9 million from $2.3 million in Q2 2023.
- AudioCodes Ltd (AUDC) saw a 35% year-over-year growth in Microsoft Teams live minute services annual recurring revenues.
- Conversational AI business revenue increased by 10.5% year-over-year, with bookings growing over 50%, highlighting strong potential in this segment.
Negative Points
- The company experienced a net cash outflow from operating activities of $2.9 million in Q2 2024.
- Days sales outstanding increased to 108 days as of June 30, 2024, indicating potential challenges in accounts receivable management.
- The legacy gateway business continues to decline, although the rate of decline is expected to moderate.
- AudioCodes Ltd (AUDC) anticipates elevated capital expenditures in Q3 2024 due to leasehold improvements at their new corporate headquarters.
- The Customer Experience business saw a 10% year-over-year revenue decline in Q2 2024, impacted by the push-out of a large deal.
Q & A Highlights
Q: Can you help us understand what the key drivers of growth were in the quarter and how we should think about growth in the product versus service business lines in the back half of the year?
A: Shabtai Adlersberg, President and CEO, explained that the growth is primarily driven by their managed services business, particularly the Microsoft Teams live services. This segment has been growing nicely year-over-year, and the company has invested heavily in developing a comprehensive platform called Live Platform. This platform includes connectivity services, management services, contact center applications, and recording solutions. The strategy is to land with connectivity services and then expand by upselling additional voice-related business applications.
Q: Can you just help us understand what kind of customers are adopting the conversational AI product? And is customer appetite for adopting AI use cases better than your expectations?
A: Shabtai Adlersberg noted that the conversational AI product is being adopted by customers in sectors such as finance, government, and healthcare. The company has completed projects with organizations like the Red Cross ambulance service and a large medical service organization. The projects involve integrating with contact centers, managing elements, and providing analytics, showcasing the company's comprehensive capabilities.
Q: What point do you expect growth to reinflate as you see this transition from product over to service?
A: Shabtai Adlersberg anticipates that growth will resume in either the first or second quarter of 2025. The decline in legacy business is moderating, while managed services and conversational AI services are picking up. The company expects to return to growth as the business becomes primarily based on recurring revenue.
Q: On the recovery in the legacy gateways, anything going on there?
A: Shabtai Adlersberg mentioned that the decline in the legacy gateway business is expected to moderate. The company has seen a sharp decline in the past, but it is stabilizing. They do not expect a significant further decline and believe the largest drop has already occurred.
Q: Any other puts and takes on the cash use in the quarter?
A: Niran Baruch, CFO, explained that the higher cash use in the quarter was primarily due to investments in the new headquarters. There was a slight increase in accounts receivables, but no issues with collection. The company expects to return to positive operating cash flow in the third quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
