AudioCodes Reports Third Quarter 2017 Results

Third Quarter Highlights:

  • Quarterly revenues increased by 5.4% year-over-year to $39.2 million;
  • Quarterly service revenues increased by 12.4% year-over-year to $12.7 million;
  • Quarterly UC-SIP revenues increased more than 15% year-over-year;
  • Quarterly GAAP gross margin was 62.8%; quarterly Non-GAAP gross margin was 63.2%;
  • Quarterly GAAP operating margin was 6.6%; quarterly Non-GAAP operating margin was 8.8%;
  • Quarterly cash flow from operating activities was $6.2 million;
  • Quarterly GAAP net income was $1.0 million, or $0.03 per diluted share, compared to $971,000, or $0.03 per diluted share, in the prior year period;
  • Quarterly Non-GAAP net income was $3.4 million, or $0.10 per diluted share, compared to $2.9 million, or $0.08 per diluted share, in the prior year period; and
  • AudioCodes repurchased 940,000 of its ordinary shares during the quarter at an aggregate cost of $6.4 million.

Details:

AudioCodes (Nasdaq: AUDC), a leading provider of voice networking solutions that enable enterprises and service providers to transition to all-IP voice networks, today announced financial results for the third quarter ended September 30, 2017.

Revenues for the third quarter of 2017 were $39.2 million, compared to $38.7 million for the second quarter of 2017 and $37.2 million for the third quarter of 2016.

Net income was $1.0 million, or $0.03 per diluted share, for the third quarter of 2017, compared to $971,000, or $0.03 per diluted share, for the third quarter of 2016.

On a Non-GAAP basis, the Company reported quarterly net income of $3.4 million, or $0.10 per diluted share, compared to $2.9 million, or $0.08 per diluted share, in the third quarter of 2016.

Non-GAAP net income excludes: (i) stock-based compensation expenses; (ii) amortization expenses related to intangible assets; (iii) expenses related to deferred payments in connection with the acquisition of Active Communications Europe; and (iv) non-cash deferred tax benefit or expenses. 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 for the third quarter of 2017 totaled $6.2 million. Cash and cash equivalents, long- and short-term bank deposits and long- and short-term marketable securities were $60.1 million as of September 30, 2017, compared to $65.1 million as of September 30, 2016. The decrease in cash and cash equivalents, long and short-term bank deposits and long and short-term marketable securities was the result of the use of cash for the continued repurchasing of the Company’s ordinary shares pursuant to its share repurchase program.

“We are pleased to report strong financial results for the third quarter of 2017,” said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes. “As demonstrated over the past 5 years, we continued to execute on our UC-SIP strategic plan, and grew sales of UC-SIP solutions, products and services in the third quarter by more than 15% compared to the year ago quarter. We believe we are now on track to deliver about 15% annual growth for the UC-SIP business which is expected to reach $100 million of annual revenues by 2020. Our performance continues to rely primarily on collaboration with our application and system integration partners worldwide, as well as through winning enterprise voice deployments and service provider network transformation projects on a global basis.

“Along with our higher sales, we continued to improve the efficiency of our operations. We increased gross margin to a record 63.2%, grew quarterly operating margin to a record 8.8% and had quarterly net income of $3.4 million, an 18% increase over the year ago quarter. We are now expecting to deliver about 25% growth in net income for 2017 compared to 2016. At the same time, we continued to invest in our new intelligent voice applications which we believe will start to contribute to improved revenues and profits in coming years. Finally, as in recent previous quarters, we continued to buy back shares to return value to our shareholders,” concluded Mr. Adlersberg.

Share Buy Back Program

During the quarter ended September 30, 2017, AudioCodes acquired 940,000 of its ordinary shares under its share repurchase program for a total consideration of approximately $6.4 million. As of September 30, 2017, AudioCodes had acquired an aggregate of 14.5 million of its ordinary shares since August 2014 for an aggregate consideration of approximately $70.7 million.

In May 2017, AudioCodes received court approval in Israel to purchase up to an aggregate of $15 million of additional ordinary shares pursuant to its share repurchase program. As of September 30, 2017, $5.8 million remained available to the Company for repurchasing shares under this court approval. The current court approval for share repurchases expires on November 15, 2017.

On October 24, 2017, the Company’s Board of Directors approved filing a new application with the court in Israel requesting approval for an additional repurchase program for up to $20 million of Ordinary Shares. The Company expects to file a new application shortly and receive a decision from the court in the coming weeks.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 8:00 A.M., Eastern Time today to discuss the Company’s third quarter operating performance, financial results and outlook. Interested parties may participate in the conference call by dialing one the following numbers:

United States Participants: +1 (877) 407-0778

International Participants: +1 (201) 689-8565

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.

Follow AudioCodes’ social media channels:

AudioCodes invites you to join our online community and follow us on: AudioCodes Voice Blog, LinkedIn, Twitter, Facebook, and YouTube.

To download AudioCodes’ investor relations app, which offers access to its SEC filings, press releases, videos, audiocasts and more, please visit Apple’s App Store for the iPhone and iPad or Google Play for Android mobile devices.

About AudioCodes

AudioCodes Ltd. (NASDAQ, TASE: AUDC) designs, develops and sells advanced Voice-over-IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises. AudioCodes is a VoIP technology market leader, focused on converged VoIP and data communications, and its products are deployed globally in Broadband, Mobile, Enterprise networks and Cable. The Company provides a range of innovative, cost-effective products including Media Gateways, Multi-Service Business Routers, Session Border Controllers (SBC), Residential Gateways, IP Phones, Media Servers, Value Added Applications and Professional Services. AudioCodes’ underlying technology, VoIPerfectHD™, relies on AudioCodes’ leadership in DSP, voice coding and voice processing technologies. AudioCodes’ High Definition (HD) VoIP technologies and products provide enhanced intelligibility and a better end user communication experience in Voice communications. 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; 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.

©2017 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 and CloudBond are 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.

AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

September 30,

December 31,

2017

2016

(Unaudited)

(Audited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$ 22,040

$ 24,344

Short-term and restricted bank deposits

2,905

3,401

Short-term marketable securities and accrued interest

3,104

6,778

Trade receivables, net

24,597

25,448

Other receivables and prepaid expenses

5,207

3,377

Inventories

16,431

16,333

Total current assets

74,284

79,681

LONG-TERM ASSETS:

Long-term and restricted bank deposits

$ 4,507

$ 5,407

Long-term marketable securities

27,552

29,540

Deferred tax assets

9,030

11,607

Severance pay funds

19,690

17,820

Total long-term assets

60,779

64,374

PROPERTY AND EQUIPMENT, NET

3,676

3,867

GOODWILL, INTANGIBLE ASSETS AND OTHER, NET

38,427

39,054

Total assets

$ 177,166

$ 186,976

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current maturities of long-term bank loans

$ 2,507

$ 3,451

Trade payables

5,395

7,710

Other payables and accrued expenses

20,466

18,618

Deferred revenues

15,616

14,951

Total current liabilities

43,984

44,730

LONG-TERM LIABILITIES:

Accrued severance pay

$ 21,043

$ 18,941

Long-term bank loans

6,840

8,493

Deferred revenues and other liabilities

5,839

6,153

Total long-term liabilities

33,722

33,587

Total equity

99,460

108,659

Total liabilities and equity

$ 177,166

$ 186,976

AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands, except share and per share data

 Nine months ended

Three months ended

 September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Revenues:

Products

$ 79,450

$ 75,920

$ 26,522

$ 25,904

Services

35,871

31,891

12,686

11,282

Total revenues

115,321

107,811

39,208

37,186

Cost of revenues:

Products

35,241

34,896

11,909

12,042

Services

8,359

7,578

2,692

2,464

Total cost of revenues

43,600

42,474

14,601

14,506

Gross profit

71,721

65,337

24,607

22,680

Operating expenses:

Research and development, net

22,222

21,457

7,686

7,296

Selling and marketing

36,549

33,715

12,151

11,518

General and administrative

6,537

5,998

2,176

1,898

Total operating expenses

65,308

61,170

22,013

20,712

Operating income

6,413

4,167

2,594

1,968

Financial income (expenses), net

(6)

(33)

97

(7)

Income before taxes on income

6,407

4,134

2,691

1,961

Taxes on income, net

(3,049)

(2,664)

(1,642)

(990)

Net income

$ 3,358

$ 1,470

$ 1,049

$ 971

Basic net earnings per share

$ 0.11

$ 0.04

$ 0.03

$ 0.03

Diluted net earnings per share

$ 0.10

$ 0.04

$ 0.03

$ 0.03

Weighted average number of shares used in

computing basic net earnings per share (in

thousands)                                                      

31,500

35,913

30,918

33,975

Weighted average number of shares used in

computing diluted net earnings per share (in

thousands)

32,534

36,419

31,959

34,615

AUDIOCODES LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

U.S. dollars in thousands, except per share data

Nine months ended

Three months ended

September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

GAAP net income

$ 3,358

$ 1,470

$ 1,049

$ 971

GAAP net earnings per share

$ 0.10

$ 0.04

$ 0.03

$ 0.03

Cost of revenues:

Stock-based compensation (1)

59

87

17

32

Amortization expenses (2)

522

878

174

246

581

965

191

278

Research and development, net:

Stock-based compensation (1)

278

346

97

118

Deferred payments expenses (3)

136

564

63

188

414

910

160

306

Selling and marketing:

Stock-based compensation (1)

779

837

239

278

Amortization expenses (2)

90

90

30

30

869

927

269

308

General and administrative:

Stock-based compensation (1)

565

554

219

194

Income taxes:

Deferred tax (4)

2,560

1,993

1,496

817

Non-GAAP net income

$ 8,347

$ 6,819

$ 3,384

$2,874

Non-GAAP diluted net earnings per share    

$ 0.25

$ 0.19

$ 0.10

$ 0.08

(1) Stock-based compensation expenses related to options and restricted stock units granted to employees and others.

(2) Excluding amortization of intangible assets related to the acquisitions of Netrake, Mailvision and Active Communications Europe assets.

(3) Excluding expenses related to deferred payments in connection with the acquisition of Active Communications Europe.

(4) Non-cash deferred tax expenses.

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.

AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

U.S. dollars in thousands

Nine months ended

Three months ended

September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net income

$ 3,358

$ 1,470

$ 1,049

$ 971

Adjustments required to reconcile net income to

   net cash provided by or used in operating

   activities:

Depreciation and amortization

1,859

2,262

599

712

Amortization of marketable securities premiums

   and accretion of discounts, net

475

677

146

187

Increase in accrued severance pay, net

232

583

284

103

Stock-based compensation expenses

1,681

1,824

572

622

Decrease (increase) in accrued interest and

   exchange rate effect of loans, marketable

   securities and bank deposits

251

187

36

(43)

Decrease in long-term deferred tax assets, net

2,497

2,055

1,475

837

Decrease (increase) in trade receivables, net

851

(211)

960

(1,262)

Decrease (increase) in other receivables and

   prepaid expenses

(1,789)

(658)

2,398

(599)

Decrease (increase) in inventories

(98)

1,111

(488)

(642)

Increase (decrease) in trade payables

(2,315)

313

386

2,494

Increase (decrease) in other payables and accrued

   expenses

1,594

1,638

(63)

1,373

Increase (decrease) in deferred revenues

809

400

(1,160)

(1,319)

Net cash provided by operating activities

9,405

11,651

6,194

3,434

Cash flows from investing activities:

Proceeds from sale of marketable securities

12,429

Decrease in short-term deposits, net

496

1,729

161

13,508

Decrease in long-term bank deposits

900

477

300

150

Proceeds from redemption of marketable securities

5,350

900

4,500

Purchase of property and equipment

(1,041)

(1,189)

(395)

(367)

Net cash provided by investing activities

5,705

14,346

4,566

13,291

AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

U.S. dollars in thousands

Nine months ended

Three months ended

September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

Cash flows from financing activities:

Purchase of treasury stock

(16,548)

(21,726)

(6,366)

(15,000)

Repayment of long-term bank loans

(2,878)

(4,275)

(953)

(1,296)

Consideration related to payment for acquisition

   of Mailvision

(233)

Proceeds from issuance of shares upon exercise

   of options and warrants

2,012

561

479

342

Net cash used in financing activities

(17,414)

(25,673)

(6,840)

(15,954)

Increase (decrease) in cash and cash equivalents

(2,304)

324

3,920

771

Cash and cash equivalents at the beginning of the

   period

24,344

18,908

18,120

18,461

Cash and cash equivalents at the end of the

   period

$ 22,040

$ 19,232

$ 22,040

$ 19,232

Company Contacts

IR Agency Contact

Niran Baruch,

VP Finance & Chief Financial Officer

AudioCodes

Tel: +972-3-976-4000

[email protected]

Shirley Nakar,

Director, Investor Relations

AudioCodes

Tel: +972-3-976-4000

[email protected]

Philip Carlson/Elizabeth Barker

KCSA Strategic Communications

Tel: +1-212-896-1233

[email protected]

SOURCE AudioCodes Ltd.

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About the Author: Carrie Brunner

Carrie Brunner grew up in a small town in northern New Brunswick. She studied chemistry in college, graduated, and married her husband one month later. They were then blessed with two baby boys within the first four years of marriage. Having babies gave their family a desire to return to the old paths – to nourish their family with traditional, homegrown foods; rid their home of toxic chemicals and petroleum products; and give their boys a chance to know a simple, sustainable way of life. They are currently building a homestead from scratch on two little acres in central Texas. There’s a lot to be done to become somewhat self-sufficient, but they are debt-free and get to spend their days living this simple, good life together with their five young children. Carrie writes mostly on provincial stories.
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