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01/11 03:17
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture. Positive aspects include growth in services revenue and strong cash flow generation. However, there are concerns about declining margins, increased operating expenses, and tariff-related costs. The withdrawal of revenue guidance also adds uncertainty. The Q&A section reveals optimism about future growth, especially in AI and partnerships, but lacks specific data. Overall, the sentiment is balanced by positive long-term prospects and short-term challenges, leading to a neutral rating.
Revenues $61.1 million, an increase of 1.3% over the $60.3 million reported in the second quarter of last year. The increase is attributed to stabilization in the connectivity space and growth in services revenue.
Services Revenues $32.6 million, up 1.9% over the year-ago period. Services revenues accounted for 53.3% of total revenues, driven by growth in live managed services and AI-powered business applications.
Deferred Revenues $82.7 million as of June 30, 2025, compared to $80.3 million as of June 30, 2024. The increase reflects higher bookings and invoicing in services.
Gross Margin (GAAP) 64.1%, compared to 65.5% in Q2 2024. The decline is due to $1 million in additional costs from new tariffs on U.S. imports.
Operating Income (GAAP) $2.6 million or 4.3% of revenues, compared to $4.9 million or 8.2% of revenues in Q2 2024. The decrease is due to higher expenses from tariffs and investments in marketing and sales.
EBITDA (GAAP) $3.6 million, compared to $6.2 million for Q2 2024. The decline is attributed to increased costs and investments in growth initiatives.
Net Income (GAAP) $0.3 million or $0.01 per diluted share, compared to $3.8 million or $0.12 per diluted share for Q2 2024. The decrease is due to higher operating expenses and tariff-related costs.
Gross Margin (Non-GAAP) 64.5%, compared to 65.8% in Q2 2024. The decline is due to $1 million in tariff-related costs and currency headwinds from a weaker U.S. dollar.
Operating Income (Non-GAAP) $4.4 million or 7.2% of revenues, compared to $7.2 million or 11.9% of revenues in Q2 2024. The decrease is due to higher investments in marketing and sales resources.
EBITDA (Non-GAAP) $5.2 million, compared to $8.3 million for Q2 2024. The decline is attributed to increased costs and investments in conversational AI.
Net Income (Non-GAAP) $4.1 million or $0.14 per diluted share, compared to $5.5 million or $0.18 per diluted share in Q2 2024. The decrease is due to higher operating expenses and tariff-related costs.
Cash and Financial Investments $95.3 million as of June 30, 2025. This reflects strong cash flow generation despite increased investments and share repurchases.
Net Cash from Operating Activities $7.7 million for the second quarter of 2025. This reflects robust cash flow generation supporting ongoing investments.
Live Managed Services Annual Recurring Revenues $70 million, up 25% year-over-year. Growth is driven by increased adoption of managed services and new customer wins.
AI-powered business applications and voice services: AudioCodes is driving traction in its portfolio of AI-powered business applications and voice services, which are fast-growing segments.
Meeting Insights On-Prem service: A newly launched service targeting regulated industries and enterprises seeking high levels of privacy and security. It has garnered significant customer interest and a robust pipeline.
Live platform: A next-generation cloud-native platform for launching and scaling voice services, supporting Microsoft Teams, Zoom Phone, and Cisco WebEx Calling. It integrates GenAI-powered business voice applications and third-party solutions.
AI-powered real-time analytics system: Under development to offer strategic insights into the CX Business Manager.
Microsoft Teams business: Grew 6.5% year-over-year, driven by connectivity and increasing attach rate of conversational AI services.
Cisco WebEx Cloud Connect enablement: Achieved official certification, enabling connectivity services for all major UC platforms.
Higher education vertical: Secured multimillion-dollar contracts with U.S. universities for UCCX modernization and managed services.
AT&T partnership: AT&T uses AudioCodes' solutions for Microsoft Teams, contributing to multimillion-dollar annual recurring revenue.
Revenue growth: Second consecutive quarter of top-line growth, with Q2 2025 revenue at $61.1 million, a 1.3% increase year-over-year.
Services revenue: Accounted for 53% of total revenue, growing 1.9% year-over-year.
Live managed services: Achieved 25% year-over-year growth, with annual recurring revenues reaching $70 million.
Cash flow: Generated $7.7 million in net cash from operating activities in Q2 2025.
Hybrid cloud and voice services transformation: Continued progress in transforming into an AI-driven hybrid cloud software and services company.
Conversational AI investments: Increased investments in marketing and sales resources for conversational AI, supporting a 40%-50% growth outlook for 2025.
Cloud repatriation trend: Meeting Insights On-Prem is benefiting from this trend, addressing high cloud costs, latency, and security demands.
Global Economic Conditions: The company faces risks from global economic conditions, including shifts in supply and demand, market acceptance of new products, and demand for existing products.
Tariff Costs: New tariffs on U.S. imports have increased expenses by approximately $1 million in Q2 2025, with an expected $3-4 million cost burden for the full year.
Geopolitical Risks: The ongoing conflict between Israel and Hamas, as well as potential broader regional conflicts, could disrupt operations and limit the company's ability to produce and sell solutions. Obligations of personnel to perform military service may also impact operations.
Currency Exchange Rates: A weaker U.S. dollar against the euro has contributed to several hundred thousand dollars in headwinds during Q2 2025.
Competitive Pressures: The company faces challenges from competitive products and pricing, which could impact market share and profitability.
Regulatory and Security-Sensitive Markets: The company is targeting regulated industries with new products like Meeting Insights On-Prem, but these markets may have stringent requirements and slower adoption rates.
Supply Chain Disruptions: Potential disruptions in the supply chain could impact the company's ability to deliver products and services.
Strategic Execution Risks: The company is undergoing a transformation to an AI-driven hybrid cloud software and services model, which involves significant R&D and marketing investments. Execution risks include delays in product development and market adoption.
Customer Purchasing Behavior: While no shifts in customer purchasing behavior have been observed, the volatile business landscape stemming from tariff challenges could pose future risks.
Revenue Growth: AudioCodes expects second half 2025 services revenue growth to further improve based on services bookings and inherent visibility in this line item.
Conversational AI Segment: The company plans for 40% to 50% growth outlook for the conversational AI segment in 2025, supported by robust demand and increased interest in products like Meeting Insights On-Prem.
Live Managed Services: Annual recurring revenues for Live Managed Services reached $70 million in Q2 2025, representing 25% year-over-year growth. The backlog of live managed services exited Q2 2025 at $73 million, and the company expects continued growth in this area.
Microsoft Teams Business: The Microsoft Teams business grew 6.5% year-over-year, with continued strong market adoption of Teams Phone, which is expected to grow at over 20% annually. The company anticipates further business expansion in this area.
Cisco WebEx Certification: AudioCodes announced certification for Cisco WebEx Cloud Connect enablement, which is expected to create new multimillion-dollar opportunities in the EMEA region and beyond.
Meeting Insights On-Prem: The newly launched Meeting Insights On-Prem service has garnered strong interest, particularly in regulated industries and security-sensitive environments. The company expects the number of proof-of-concept opportunities to scale over the rest of the year.
Tariff Impact: The company expects $3 million to $4 million of tariff-related cost burden for the full year 2025. They are awaiting resolution on tariff rates to provide a clearer financial outlook.
General Market Outlook: Despite tariff challenges, the company has not observed any shift in customer purchasing behavior. The pipeline for opportunities remains strong as the latter part of 2025 approaches.
Cash Dividend Declared: A cash dividend of $0.20 per share was declared, amounting to an aggregate of approximately $5.7 million. The dividend will be paid on August 28 to shareholders of record as of August 14.
Share Repurchase Program: During the quarter, the company acquired 715,000 ordinary shares for approximately $6.6 million. Additionally, court approval was received in July 2025 to purchase up to $20 million of additional ordinary shares, valid through December 30, 2025.
The earnings call reflects a positive outlook with strategic growth plans, particularly in the conversational AI segment and Microsoft Teams business. Despite a slight decline in some financial metrics, the company shows strong revenue growth potential and a stable financial position. The dividend declaration and share repurchase program further enhance shareholder value. The Q&A session highlights favorable pricing power in the emerging Voice AI market. Overall, these factors suggest a positive stock price movement in the near term.
The earnings call presents a mixed picture. Positive aspects include growth in services revenue and strong cash flow generation. However, there are concerns about declining margins, increased operating expenses, and tariff-related costs. The withdrawal of revenue guidance also adds uncertainty. The Q&A section reveals optimism about future growth, especially in AI and partnerships, but lacks specific data. Overall, the sentiment is balanced by positive long-term prospects and short-term challenges, leading to a neutral rating.
The earnings call summary highlights several concerns: AudioCodes missed EPS expectations, faces geopolitical risks affecting operations, and acknowledges various uncertainties such as economic conditions and competitive pressures. The Q&A revealed plans to move manufacturing out of China, which might mitigate some risks, but unclear responses about pricing and tariffs add uncertainty. Overall, the negative earnings miss, geopolitical risks, and operational challenges outweigh potential positives, suggesting a likely negative stock price movement.
The decision to withdraw guidance due to tariff and macroeconomic uncertainties, combined with the potential need for additional financing, raises concerns. The slight revenue increase and share buyback are positive, but geopolitical risks and unclear management responses in Q&A add to the negative sentiment. The dividend declaration is overshadowed by the broader uncertainties.
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