Financial Performance - Total revenues reached $61.1 million in 2Q'25, a 1.3% increase compared to $60.3 million in 2Q'24 [11] - Service revenues grew to $32.6 million in 2Q'25, up 1.9% from $32.0 million in 2Q'24 [12] - Non-GAAP gross margin was 64.5% in 2Q'25, compared to 65.8% in 2Q'24, impacted by $1 million tariff-related cost headwinds [12] - Non-GAAP operating margin stood at 7.2% in 2Q'25, versus 11.9% in 2Q'24 [12] - Non-GAAP EBITDA margin was 8.6% in 2Q'25, down from 13.8% in 2Q'24 [12] - Non-GAAP EPS was $0.14 in 2Q'25, compared to $0.18 in 2Q'24 [12] - Non-GAAP net income for the three months ended June 30, 2025, was $4.080 million, compared to $5.529 million for the same period in 2024 [32] - Non-GAAP diluted net earnings per share for the three months ended June 30, 2025, was $0.14, compared to $0.18 for the same period in 2024 [32] Business Segments - Microsoft Teams business experienced a 6.5% year-over-year increase [15] - Conversational AI business anticipates a strong growth outlook of 40%-50% for 2025 [15] - Live ARR increased by approximately 25% year-over-year [15]

Company Performance - AudioCodes reported quarterly earnings of $0.14 per share, missing the Zacks Consensus Estimate of $0.17 per share, and down from $0.18 per share a year ago, representing an earnings surprise of -17.65% [1] - The company posted revenues of $61.08 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.70%, compared to year-ago revenues of $60.3 million [2] - Over the last four quarters, AudioCodes has surpassed consensus EPS estimates just once, but has topped consensus revenue estimates three times [2] Stock Outlook - AudioCodes shares have increased by approximately 7.8% since the beginning of the year, while the S&P 500 has gained 8.6% [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $0.20 for the coming quarter and $0.74 for the current fiscal year [7] Industry Context - The Communication - Components industry, to which AudioCodes belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact AudioCodes' stock performance [5][6]

Core Insights - AudioCodes reported a revenue increase of 1.3% year-over-year for Q2 2025, reaching $61.1 million compared to $60.3 million in Q2 2024 [15] - The company experienced a decline in EBITDA, with GAAP EBITDA at $3.6 million for Q2 2025, down from $6.2 million in Q2 2024 [2][15] - Non-GAAP net income for Q2 2025 was $4.1 million, or $0.14 per diluted share, compared to $5.5 million, or $0.18 per diluted share in Q2 2024 [4][15] Financial Performance - Total revenues for the first half of 2025 were $121.5 million, compared to $120.4 million for the same period in 2024 [27] - The gross margin for Q2 2025 was 64.1% on a GAAP basis and 64.5% on a Non-GAAP basis [15] - Net cash provided by operating activities was $7.7 million for Q2 2025, with total cash and cash equivalents amounting to $95.3 million as of June 30, 2025 [6][15] Business Developments - The company launched the Live Platform, an integrated UCaaS and CX solution, enhancing its offerings in the unified communications market [9] - AudioCodes reported strong demand in UC, CX, and conversational AI, with a 6.5% increase in Microsoft business during the quarter [8] - The company’s Annual Recurring Revenues (ARR) reached $70 million, marking a 25% year-over-year increase [8] Shareholder Returns - During Q2 2025, AudioCodes repurchased 715,732 ordinary shares for a total of $6.6 million [13] - A cash dividend of $0.20 per share was declared, amounting to approximately $5.7 million, payable on August 28, 2025 [16] Operational Challenges - Increased operational expenses were noted due to new tariffs on US imports, adding $1 million in costs, alongside rising costs in the EMEA region due to currency fluctuations [11] - The company is making investments in product and sales to accelerate growth in its Conversational AI products and solutions [12]

Core Insights - AudioCodes' Voca Conversational Interaction Center (Voca CIC) has been awarded the 2025 CX Today Award for Best CX Deployment for its implementation at the University of Central Florida (UCF) [2][6] - The partnership with AT&T Business was recognized as Highly Commended in the Best CX Partnership category, highlighting the integrated UCaaS and CCaaS offering for Microsoft Teams [2][3] Company Achievements - The deployment at UCF consolidated over 40 helpdesks into a single contact center, serving 70,000 students and 10,000 staff, showcasing significant scalability and reliability [3][6] - This marks the second consecutive year that Voca CIC has received recognition at the CX Awards, following its 2024 win for Best Microsoft Teams Contact Center Solution [4][6] Product Features - Voca CIC is certified for Microsoft Teams and built on Azure, utilizing Azure Communication Services to deliver scalable, AI-first customer experience across multiple channels [4][9] - The solution allows new customers to build a conversational contact center quickly, including AI and omnichannel features, with a 30-day free trial available [5][6] Strategic Partnerships - The collaboration with AT&T Business enhances the offering of Voca CIC, integrating AT&T Cloud Voice to support enterprise migrations to Microsoft Teams Phone [3][9] - This partnership is positioned to simplify and modernize customer engagement as UCaaS and CCaaS integration accelerates across the industry [3][9]

Core Viewpoint - AudioCodes is set to release its financial results for the Second Quarter of 2025 on July 29, 2025, before the market opens on NASDAQ, covering the period ended June 30, 2025 [1] Financial Results Announcement - The financial results will be disseminated via news wires and will also be available on the corporate website [1] - A conference call to discuss the results will take place on July 29, 2025, at 8:30 a.m. Eastern Time, hosted by the President and CEO, Shabtai Adlersberg, and the CFO, Niran Baruch [2] Conference Call Details - Investors can join the call by dialing 888-506-0062 in the USA or +1 973-528-0011 internationally, or via webcast on the AudioCodes investor website [3] - A replay of the call will be accessible on the investor website approximately two hours after the conference call concludes [3] Company Overview - AudioCodes Ltd. is a global leader in unified communications, voice, contact center, and conversational AI services, enhancing customer and employee experiences through improved communication and collaboration [5] - The company offers a wide range of products and SaaS services that ensure interoperability with major UCaaS and CCaaS platforms, including Microsoft Teams, Webex, Zoom, and Genesys [5] - AudioCodes serves enterprises worldwide, including 65 Fortune 100 companies, focusing on productivity, collaboration, business process automation, compliance, and customer interaction [5]

Core Insights - AudioCodes has achieved multiple certifications for Cloud Connect for Webex Calling, allowing service providers to offer reliable services to customers [2][3] - The AudioCodes Live Platform is a white-label, multi-tenant SaaS solution that simplifies the delivery of cloud-based voice services [4][6] - AudioCodes' session border controller (SBC) technology ensures reliable, scalable, and secure voice connectivity for Webex Calling [4][6] Company Overview - AudioCodes is a global leader in unified communications, voice, contact center, and conversational AI services, enhancing customer and employee experiences [8][9] - The company serves enterprises worldwide, including 65 Fortune 100 companies, by providing seamless interoperability with leading UCaaS and CCaaS platforms [8][9] - AudioCodes' solutions are designed to improve productivity, collaboration, and business process automation for enterprises [8][9]

Industry Overview - The Zacks Communication - Components industry is facing challenges due to raw material price volatility, high capital expenditure for 5G infrastructure, and supply chain issues, which have negatively impacted profitability [1][4][6] - The industry primarily includes companies providing telecom products and services for scalable network architecture, video solutions, and broadband access equipment [3] Current Challenges - High operating costs are driven by a shortage of chips, elevated raw material prices due to geopolitical tensions, and technological obsolescence [4][6] - Demand erosion is occurring as customers shift to lower-priced alternatives in response to increased fees for network upgrades, compounded by trade restrictions affecting credibility [7] Future Prospects - Companies like Harmonic Inc., Ooma, Inc., and AudioCodes Ltd. are expected to benefit from rising demand for scalable infrastructure driven by IoT, fiber densification, and accelerated 5G rollout [2] - The industry is positioned for growth through a software-driven, data-centric approach that enhances cloud architecture and user experience [5] Performance Metrics - The Zacks Communication - Components industry has outperformed the S&P 500 and the broader Zacks Computer and Technology sector, with a 34.1% increase over the past year compared to 9.2% and 7.2% for the S&P 500 and sector, respectively [11] - The industry currently trades at a trailing 12-month price-to-book (P/B) ratio of 3.11X, below the S&P 500's 7.81X and the sector's 8.63X [14] Key Companies - **Harmonic Inc.**: Specializes in video delivery solutions and has a strong earnings outlook with a 67.9% earnings surprise on average over the last four quarters [17][18] - **Ooma, Inc.**: Offers cloud-based communication solutions and has shown an 18% earnings surprise on average, focusing on small business customers [21][23] - **AudioCodes Ltd.**: Provides advanced communication solutions and aims to leverage partnerships to strengthen its market position, with a 0.4% earnings surprise on average [26][27]

Financial Performance - Total revenues reached $60.4 million, a 0.5% increase compared to $60.1 million in 1Q'24[10] - Service revenues increased to $32.6 million, a 3.4% rise from $31.5 million in 1Q'24[10] - Non-GAAP gross margin remained stable at 65.2% compared to 1Q'24[10] - Non-GAAP operating margin decreased to 8.9% from 10.5% in 1Q'24[10] - Non-GAAP EBITDA margin declined to 10.2% from 11.2% in 1Q'24[10] - Non-GAAP EPS decreased to $0.15 from $0.17 in 1Q'24[10] - Non-GAAP EBITDA was $6.2 million in 1Q'25 compared to $6.7 million in 1Q'24[22, 25] Business Segments - Microsoft Teams business experienced a 7% year-over-year increase[13] - Customer Experience (CX) business grew by 2% year-over-year[14] - Conversational AI business saw an increase of over 10% year-over-year[14] - Live ARR increased by approximately 25% year-over-year[14]

Financial Data and Key Metrics Changes - Revenues for Q1 2025 were $60.4 million, a 0.5% increase from $60.1 million in Q1 2024 [8] - GAAP gross margin for the quarter was 64.8%, up from 64.4% in Q1 2024 [10] - Net income for the quarter was $4 million or $0.13 per diluted share, compared to $2.1 million or $0.07 per diluted share in Q1 2024 [10] - Non-GAAP operating income for Q1 was $5.4 million or 8.9% of revenues, down from $6.3 million or 10.5% in Q1 2024 [11] Business Line Data and Key Metrics Changes - Services revenues for the quarter were $32.6 million, up 3.4% year-over-year, accounting for 54% of total revenues [9] - The Enterprise UC and CX business accounted for 90% of revenues, with a 7% year-over-year growth in the Microsoft business [17] - The Conversational AI business grew over 10% year-over-year, with a strong pipeline of new wins and bookings [18] Market Data and Key Metrics Changes - Revenues by geographical region were: North America 8%, EMEA 30%, Asia Pacific 14%, and Central and Latin America 4% [9] - The top 15 customers represented 52% of total revenues, with 36% attributed to the nine largest distributors [9] Company Strategy and Development Direction - The company is focusing on two key strategic initiatives: growing the connectivity business and investing in conversational AI initiatives [16] - The goal for the conversational AI sector is to achieve 50% growth for the full year as opportunities mature [17] - The company is transitioning towards AI-powered voice services, with a strong emphasis on integrating advanced GenAI technologies [15] Management's Comments on Operating Environment and Future Outlook - Management noted that while tariffs have introduced uncertainty, they have not observed significant changes in customer buying patterns [21] - The company plans to withdraw previously provided annual guidance until tariff rates are finalized [23] - Management expressed confidence in navigating potential market challenges due to a strong balance sheet and a dominant connectivity franchise [42] Other Important Information - The company acquired 500,000 ordinary shares for approximately $5.2 million and declared a cash dividend of $0.18 per share [12] - The estimated tariff-related cost impact for 2025 is between $3 million to $4 million, with proactive steps taken to move manufacturing out of China [13][22] Q&A Session Summary Question: Tariff impact and proactive steps for manufacturing - Management confirmed plans to move manufacturing out of China to mitigate tariff impacts, expecting a reduced burden of $3 million to $4 million [47][48] Question: Trends in Microsoft ecosystem regarding Operator Connect vs Direct Routing - Management indicated a transition towards Operator Connect as the preferred method for connecting SBCs, with mild growth expected [50] Question: Strategy for Cisco opportunity and managing go-to-market dynamics - Management highlighted their long-standing relationships in the service provider space and ongoing projects, positioning them favorably against smaller competitors [52][53]

Financial Data and Key Metrics Changes - Revenues for Q1 2025 were $60.4 million, an increase of 0.5% compared to $60.1 million in Q1 2024 [7] - GAAP gross margin for the quarter was 64.8%, up from 64.4% in Q1 2024 [9] - Net income for the quarter was $4 million or $0.13 per diluted share, compared to $2.1 million or $0.07 per diluted share in Q1 2024 [9] - Non-GAAP net income for Q1 2025 was $4.7 million or $0.15 per diluted share, down from $5.2 million or $0.17 per diluted share in Q1 2024 [10] - Cash, cash equivalents, and marketable securities totaled $95.7 million as of March 2025 [10] Business Line Data and Key Metrics Changes - Services revenues for the quarter were $32.6 million, up 3.4% year over year, accounting for 54% of total revenues [8] - The Enterprise UC and CX business accounted for 90% of revenues, with a 7% year-over-year growth in the Microsoft business [16] - The CX connectivity business increased by 2% year over year [17] - The Conversational AI business grew above 10% year over year, with a strong pipeline of new opportunities [17] Market Data and Key Metrics Changes - Revenues by geographical region were split as follows: North America 8%, EMEA 30%, Asia Pacific 14%, and Central and Latin America 4% [8] - The top 15 customers represented 52% of total revenues, with 36% attributed to the nine largest distributors [8] Company Strategy and Development Direction - The company is focused on two key strategic initiatives: growing the connectivity business and investing in conversational AI initiatives [15] - The goal for the conversational AI sector is to achieve 50% growth for the full year as opportunities mature [16] - The company is transitioning towards AI-powered voice services, with a strong emphasis on integrating advanced GenAI technologies [14] Management's Comments on Operating Environment and Future Outlook - Management noted that while gross margin and profitability were lower than planned due to tariffs and increased R&D investments, the company is operating from a position of strength [41] - The company has withdrawn its previously provided annual guidance due to the fluidity of the tariff situation and plans to resume providing an outlook once rates are determined [12][21] - Management expressed confidence in achieving growth and profitability in the coming years, supported by a strong balance sheet and a dominant connectivity franchise [42] Other Important Information - The company acquired 500,000 ordinary shares for approximately $5.2 million and declared a cash dividend of $0.18 per share [11] - The estimated tariff-related cost impact for 2025 is approximately $3 million to $4 million, down from an initial potential impact of $10 million to $12 million [47] Q&A Session Summary Question: Plans regarding tariff impact and manufacturing relocation - The company plans to proactively move manufacturing out of China to mitigate tariff impacts, with steps already taken to shift production to other countries [46] Question: Trends in Microsoft ecosystem regarding Operator Connect vs Direct Routing - The market is transitioning towards Operator Connect, which is expected to become the preferred method for connecting SBCs [48] Question: Strategy for Cisco opportunity and managing go-to-market dynamics - The company has a long-standing presence in the service provider space and is confident in gaining market share due to its established relationships and competitive advantages [50][52]