- Revenue: $60.2 million, a decrease of 0.1% from the previous quarter.
- Services Revenue: $32.5 million, an increase of 1.7% from the previous quarter.
- Deferred Revenues: $78.6 million as of September 30, 2024.
- Gross Margin (GAAP): 65.2%, slightly down from 65.5% in Q2 2024.
- Operating Income (GAAP): $4.9 million, representing 8.1% of revenues.
- EBITDA (GAAP): $5.9 million, compared to $6.2 million in Q2 2024.
- Net Income (GAAP): $2.7 million or $0.09 per diluted share.
- Gross Margin (Non-GAAP): 65.6%, compared to 65.8% in Q2 2024.
- Operating Income (Non-GAAP): $7 million, representing 11.7% of revenues.
- EBITDA (Non-GAAP): $7.9 million, compared to $8.3 million in Q2 2024.
- Net Income (Non-GAAP): $4.9 million or $0.16 per diluted share.
- Cash Equivalents and Investments: $88.4 million at the end of September 2024.
- Net Cash from Operating Activities: $7.9 million for Q3 2024.
- Dividend Declared: $0.18 per share, totaling approximately $5.4 million.
- Share Repurchase: 333,000 shares acquired for approximately $3.6 million.
- Annual Recurring Revenue: $60 million, up from $48 million at the end of 2023.
- Live and Managed Services Backlog: $67 million, up from $27 million a year ago.
- Microsoft Business Growth: 8% sequential growth, with Teams business up 9.2% sequentially.
- Conversational AI Revenue Growth: Expected 30%-40% growth in 2024, crossing the $10 million level.
Release Date: November 06, 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 sequential growth of 8% in its Microsoft business, with a notable 9.2% increase in Microsoft Teams business.
- The company's services revenue grew 6.4% year over year, accounting for 54% of total revenue, the highest on record.
- AudioCodes Ltd (AUDC) achieved a 40% year-over-year growth in annual recurring revenue, ending the third quarter at $60 million.
- The company has a strong partnership with AT&T, contributing significantly to its annual recurring revenues.
- AudioCodes Ltd (AUDC) is making substantial progress in its conversational AI business, with a 50% increase in the dollar value of contracts signed compared to the previous year.
Negative Points
- Total revenues for the third quarter decreased by 0.1% compared to the second quarter of the current year.
- The company's GAAP net income decreased to $2.7 million from $3.8 million in the previous quarter.
- Non-GAAP operating income for the third quarter was slightly down at $7 million compared to $7.2 million in Q2 2024.
- The decline in legacy gateway and SBC business continues to impact revenues, with an expected drop of $5 to $10 million in 2025.
- AudioCodes Ltd (AUDC) is incurring losses in its conversational AI business line, with around $9 million in losses expected for 2024.
Q & A Highlights
Q: How are customers thinking about AI investments for next year, and are budgets generally getting healthier?
A: Shabtai Adlersberg, President and CEO, mentioned increased interest and demand for AI solutions. AudioCodes is seeing a significant uptick in areas like government space, with projects requiring customization and integration with CRM and project management applications.
Q: How should we think about the growth of product and service revenue in Q4 and early 2025?
A: Shabtai Adlersberg explained that while there is growth in live services and conversational AI, there is a decline in CapEx sales of Teams, which impacts overall growth. However, as live services become a larger portion of revenue, AudioCodes expects to see growth in the Microsoft business by 2026.
Q: What KPIs are used internally to track momentum in the subscription business?
A: Shabtai Adlersberg highlighted that monthly and annual recurring revenue are key KPIs, along with bookings. The backlog has grown significantly, indicating a steady flow of bookings, which is crucial for driving business growth.
Q: Can you expand on the confidence in Microsoft business returning to double-digit growth next year?
A: Shabtai Adlersberg noted that the live business is growing significantly, and as it becomes a larger part of the revenue mix, it will offset the decline in CapEx, leading to a return to double-digit growth, potentially by 2026.
Q: What are some customer wins with conversational AI, and why are they choosing AudioCodes over competitors?
A: Shabtai Adlersberg explained that AudioCodes' solution is unique as an organizational tool, unlike personal productivity note-takers. It offers comprehensive meeting insights and knowledge retention, making it valuable for enterprises. This organizational capability sets it apart from competitors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
