AudioCodes Ltd. (AUDC) Q4 2025 Earnings Call Transcript

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Overview

The earnings call summary and Q&A highlight a positive outlook with growth in strategic areas like VoiceAI and conversational AI, despite slight declines in some financial metrics. The company's strategic partnerships and increased sales operations indicate strong future potential. While GAAP earnings have decreased due to investments, the guidance for future growth and market expansion is optimistic. The market's positive response to AI and improved pipeline visibility further support a positive sentiment. Despite the absence of market cap data, the overall strategic direction and growth prospects suggest a positive stock price movement.

Key Financial Performance

Revenues for Q4 2025 $62.6 million, an increase of 1.7% over the $61.6 million reported in Q4 2024. The increase is attributed to stabilization and growth in the connectivity business and strong performance in VoiceAI and Live managed services.

Full Year 2025 Revenues $245.6 million, an increase of 1.4% over the $242.2 million reported in 2024. The growth is due to recovery in the connectivity business and growth in strategic areas like VoiceAI.

Services Revenues for Q4 2025 $34.6 million, an increase of 1% over the year-ago period. Services revenues accounted for 55.3% of total revenues, driven by managed services and VoiceAI growth.

Deferred Revenues as of December 31, 2025 $84.2 million compared to $84.4 million as of December 31, 2024, showing a slight decrease.

GAAP Gross Margin for Q4 2025 65.6% compared to 66.2% in Q4 2024, a slight decline due to tariff-related cost headwinds.

GAAP Operating Income for Q4 2025 $3.7 million or 6% of revenues, compared to $4.1 million or 6.7% of revenues in Q4 2024. The decline is due to higher operating expenses related to investments in VoiceAI.

Full Year 2025 GAAP Operating Income $14 million compared to $17.2 million in 2024, reflecting increased investments in strategic growth areas.

GAAP Net Income for Q4 2025 $1.9 million or $0.07 per diluted share, compared to $6.8 million or $0.22 per diluted share in Q4 2024. The decline is attributed to higher operating expenses and lower gross margins.

Full Year 2025 GAAP Net Income $9 million or $0.31 per diluted share, compared to $15.3 million or $0.15 per diluted share in 2024, due to increased investments in VoiceAI and other strategic areas.

Non-GAAP Gross Margin for Q4 2025 65.9% compared to 66.5% in Q4 2024, a slight decline due to tariff-related costs.

Non-GAAP Operating Income for Q4 2025 $5.4 million or 8.6% of revenues, compared to $7.5 million or 12.2% of revenues in Q4 2024. The decline is due to higher operating expenses.

Full Year 2025 Non-GAAP Operating Income $21 million compared to $28 million in 2024, reflecting increased investments in VoiceAI and Live managed services.

Non-GAAP Net Income for Q4 2025 $4.5 million or $0.16 per diluted share, compared to $11.6 million or $0.37 per diluted share in Q4 2024. The decline is due to higher operating expenses and lower gross margins.

Full Year 2025 Non-GAAP Net Income $18.1 million or $0.61 per diluted share, compared to $27.3 million or $0.87 per diluted share in 2024, due to increased investments in strategic growth areas.

Cash and Financial Investments as of December 31, 2025 $75.7 million, reflecting strong cash management.

Net Cash Provided by Operating Activities for Q4 2025 $4.1 million, showing operational efficiency.

Net Cash Provided by Operating Activities for Full Year 2025 $29.4 million, reflecting strong cash flow generation.

Days Sales Outstanding as of December 31, 2025 117 days, indicating the time taken to collect receivables.

VoiceAI Business Revenue for Full Year 2025 $17 million, a 35% year-over-year growth, driven by strong adoption of VoiceAI solutions.

Live Managed Services and VoiceAI Annual Recurring Revenue Exit 2025 $79 million, representing a 22% year-over-year growth, driven by strong demand for these services.

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Operating Highlights

VoiceAI Business: Grew revenues by 35% year-over-year, reaching nearly $17 million in 2025, accounting for 7% of total revenues. Expected to grow 40%-50% annually in coming years, targeting $50 million revenue by 2028.

Live Managed Services: Contributed to $79 million annual recurring revenue in 2025, representing 22% year-over-year growth. Backlog for live services reached $75 million by the end of 2025.

Conversational AI: Revenue grew over 50% year-over-year in Q4 2025 and the second half of 2025. Full-year revenue reached nearly $17 million, accounting for 7% of total revenues.

Microsoft Teams Ecosystem: Continued growth with a 7% sequential increase in Q4 2025. Notable contracts include a 36-month deal with AT&T and a 60-month deal with a European equipment manufacturer.

Cisco Webex Calling: Expanded offerings to include certified voice solutions for Cisco Webex Calling, targeting a market of over 18 million users worldwide.

Revenue Growth: Total revenue grew 1.7% year-over-year in Q4 2025, with full-year revenue increasing by 1.4% to $245.6 million.

Profitability Metrics: Non-GAAP gross margin for Q4 2025 was 65.9%, within the long-term target range of 65%-68%. Adjusted EBITDA for Q4 2025 was $6.5 million, reflecting a 10.4% margin.

AI-Driven Transition: Focused on transitioning from connectivity solutions to AI-first, VoiceAI-led business applications. Investments in sales and marketing for VoiceAI and reallocation of product development efforts to high-potential areas.

Cloud Repatriation Trend: Introduced Mia OP solution for on-premise deployment, targeting government and defense markets. Secured Nimbus Layer 5 approval in Israel, expanding opportunities in regulated sectors.

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Risk or Challenges

Global Economic Conditions: The effect of global economic conditions, including governmental undertakings to address such conditions, could adversely impact AudioCodes' industry and target markets.

Market Acceptance and Demand: Shifts in supply and demand, as well as market acceptance of new products and demand for existing products, pose risks to the company's performance.

Competitive Pressures: The impact of competitive products and pricing on AudioCodes' products and markets could negatively affect the company's operations.

Technological Development: Timely product and technology development and upgrades are critical, and delays could hinder the company's strategic objectives.

Artificial Intelligence Integration: The advent of artificial intelligence and the ability to manage changes in market conditions and evolving regulatory regimes present challenges.

Financial Covenants: The ability to satisfy covenants in AudioCodes' financing agreements is a potential risk.

Acquisition Integration: Possible impacts and disruptions from acquisitions, including the ability to successfully integrate acquired companies' products and operations, could affect performance.

Public Health Crises: Adverse impacts from pandemics or other public health crises could disrupt business operations and results.

Geopolitical Risks: Hostilities involving Israel, where AudioCodes operates, may affect operations and limit the ability to produce and sell solutions. Obligations of personnel to perform military service due to military actions could also disrupt operations.

Currency Exchange Rates: The weakening U.S. dollar against the euro has increased operating expenses, impacting profitability.

VoiceAI Business Investment: The VoiceAI business is currently in investment mode, generating an annual budget burn of $9-10 million, with breakeven expected in two years.

Tariff-Related Costs: Tariff-related cost headwinds amounted to $2.7 million in 2025 and are expected to continue at approximately $2.3 million in 2026.

Cloud Repatriation Trend: The trend towards cloud repatriation due to data sovereignty concerns in European markets and regulated sectors could impact the adoption of cloud-based solutions.

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Guidance & Outlook

Revenue Guidance for 2026: Expected revenues in the range of $247 million to $255 million.

Non-GAAP EPS Guidance for 2026: Expected non-GAAP earnings per share (EPS) of $0.60 to $0.75.

VoiceAI Business Growth: Projected annual revenue growth of 40% to 50%, aiming to reach $50 million in revenue by 2028.

Annual Recurring Revenue (ARR) Growth: Expected ARR to grow from $79 million at the end of 2025 to a range of $92 million to $98 million in 2026, representing a 20% growth.

Connectivity Business Outlook: Stable outlook with no significant changes expected in the macroeconomic landscape.

VoiceAI Business Breakeven Timeline: Expected to reach breakeven in two years, with current annual budget burn of $9 million to $10 million.

Tariff-Related Cost Impact for 2026: Expected tariff-related costs to be approximately $2.3 million.

Microsoft Teams Voice Ecosystem Growth: Anticipated increase of 3 million to 4 million users in 2026, supporting the evolution towards AI-powered workplaces.

Live Managed Services Backlog: Backlog for live services expected to grow, with $75 million at the end of 2025 compared to $69 million at the end of 2024.

Mia OP Deployment: Expected deployment in more countries starting in the second quarter of 2026, with support for 10 languages by the first quarter.

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Shareholder Return Plan

Dividend Declaration: Earlier this morning, we also declared a cash dividend of $0.20 per share. The aggregate amount of the dividend is approximately $5.4 million. The dividend will be paid on March 6, 2026 to all of our shareholders of record at the close of trading of February 20, 2026.

Share Buyback Program: In October 2025, we received court approval in Israel to purchase up to an aggregate amount of $25 million of additional ordinary shares. The court approval also permits us to declare a dividend of any part of this amount. The approval is valid through April 27, 2026. During the quarter, we acquired 667,000 of our ordinary shares for a total consideration of approximately $6.1 million.

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Key Q&A

Q:Is the 40% to 50% annual growth for conversational AI intended to be a CAGR growth rate through 2028? What will drive this growth: customer growth or higher spend per customer?

A:Yes, the 40% to 50% annual growth is intended to be a CAGR growth rate through 2028. Growth will be driven by both customer growth and higher spend per customer. The company expects a dramatic increase in the number of customers as they add more capabilities and features, and invest in sales operations. Additionally, per-customer spending is expected to grow due to the introduction of new capabilities and features.

Q:How has the shift in market expectations around AI positively impacted pipeline visibility and size?

A:The shift in market expectations around AI has improved pipeline visibility and size. The company is increasing its sales force and expanding operations into more countries. SaaS applications allow for quick testing and proof of concept within 30 to 60 days, leading to faster adoption. This provides better visibility compared to larger networking or connectivity deals, which take longer to close.

Q:What is the expected impact of tariffs on the 2026 financials and gross margin?

A:Gross margin is expected to improve due to a shift in the product mix towards software and services, maintaining a range of 65% to 68%. Tariffs, which were $2.7 million in 2025, are estimated to decrease slightly to around $2.3 million in 2026.

Q:Review of Unclear Management Responses

A:None of the questions appeared to be avoided or lacked clarity. All responses were detailed and addressed the questions directly.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

AUDC Transcript

AudioCodes Ltd. (AUDC) Q4 2025 Earnings Call Transcript

Positive2-3

AudioCodes Ltd. (AUDC) Q3 2025 Earnings Call Transcript

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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.

AudioCodes Ltd. (AUDC) Q2 2025 Earnings Call Transcript

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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.

AudioCodes Ltd. (NASDAQ:AUDC) Q1 2025 Earnings Call Transcript

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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.

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