AudioCodes(US:AUDC)2024-03-27 15:29Product and Service Offerings - AudioCodes expanded its AudioCodes Live for Microsoft Teams portfolio, offering three subscription-based services: Live Teams Essentials, Live Teams Pro, and Live Teams Premium, aimed at simplifying Microsoft Teams integration for enterprise customers [98]. - The company introduced the AudioCodes Live Platform for Microsoft Teams, a managed service for service providers that reduces time-to-market for hosted Teams services, available in three variants: Hosted Essentials, Hosted Essentials+, and Hosted Pro [100]. - AudioCodes' Voice.AI business line focuses on AI and machine learning to provide insights and predictions based on gathered content, enhancing customer service experiences [102]. - The SmartTAP 360° Live solution captures and indexes all types of organizational interactions, integrating with Microsoft Teams for compliance recording and offering analytics features like sentiment analysis and keyword detection [103]. - The Voca CIC contact center solution integrates conversational AI with Microsoft Teams, allowing for a unified communications experience and enhancing customer interaction capabilities [106]. - Meeting Insights, an AI-powered solution, automates meeting content recording and analysis, providing summaries and action items, and is built on a new multi-tenant SaaS platform [110]. - AudioCodes continued to enhance its SBCs for security and capacity in cloud environments, adding video support for WebRTC Gateway [111]. - The company launched a new video collaboration bar for Microsoft Teams, catering to the increased demand for video solutions in remote work settings [111]. - AudioCodes developed a generic analytics platform based on Azure Synapse capabilities to provide insights and predictions from Microsoft Teams call data [112]. - AudioCodes is focusing on expanding its voice and AI capabilities to penetrate the contact center market, particularly with Microsoft Teams integration [125]. - The AudioCodes Live Platform for Microsoft Teams is expected to gain traction, offering subscription-based services without the need for capital investments [126]. - AudioCodes Live Platform is a SaaS solution that facilitates seamless migration to UCaaS solutions like Microsoft Teams and Zoom Phone, reducing initial investment for service providers [146]. Financial Performance - Total revenues decreased by 11.2% to $244.4 million in 2023 from $275.1 million in 2022 [192]. - Revenues from product sales decreased by 24.5% to $124.0 million, accounting for 50.7% of total revenues, down from 59.7% in 2022 [192]. - Revenues from service sales increased by 8.7% to $120.4 million, representing 49.3% of total revenues, up from 40.3% in 2022 [192]. - Gross profit margin slightly decreased to 64.8% in 2023 from 65.0% in 2022 [191]. - Operating income fell to $14.4 million, or 5.9% of total revenues, compared to $31.3 million, or 11.4% in 2022 [191]. - Net income decreased to $8.8 million, representing 3.6% of total revenues, down from 10.3% in 2022 [191]. - Cash and cash equivalents decreased to $106.7 million as of December 31, 2023, down from $124.3 million in 2022 [196]. - Operating activities generated approximately $14.9 million in cash in 2023, compared to $8.3 million in 2022 [200]. - Cash used in financing activities was $28.9 million in 2023, primarily for share repurchases of $18.3 million and cash dividends of $11.4 million [201]. Market Trends and Strategy - The demand for cloud UC services continued to grow in 2023, driven by the migration of businesses to cloud solutions, although at a slower rate compared to the pandemic [118]. - The contact center market is rapidly evolving, with increased automation and remote work capabilities, leading to a demand for omnichannel engagement solutions [119]. - The transition to all-IP networks is accelerating, with telecom operators completing migrations and seeking to replace legacy systems [121]. - The company anticipates increased sales of software-based solutions, although this may lead to lower revenues from hardware products [206]. - Demand for technology products is decreasing as customers migrate to integrated solutions, adversely affecting sales [206]. Research and Development - Research and development expenses were $57.169 million, or 23.4% of total revenues, compared to 21.8% in 2022 [191]. - The company has invested significantly in development to comply with Microsoft's requirements for unified communication solutions [181]. - The company received approximately $7.3 million in grants from the IIA for research and development projects related to its Israeli subsidiaries [204]. - The obligation to pay royalties to the IIA amounts to 3% to 5% of revenues from sales of products developed with IIA grants, contingent on actual sales [204]. - As of December 31, 2023, 330 employees were engaged in research and development on a full-time basis [204]. Employee and Executive Compensation - Total direct remuneration for the 16 key executives in 2023 was approximately $4.3 million, including $0.5 million allocated for pension and retirement benefits [216]. - Yehuda Herscovici, VP Products, received total compensation of $978,250, which includes a base salary of $210,772 and share-based compensation of $651,703 [213]. - Shabtai Adlersberg, President and CEO, had total compensation of $3,213,852, comprising a salary of $358,403 and share-based compensation of $2,091,942 [214]. - The company granted 287,500 options and RSUs in 2023, with an average exercise price of $2.09 [217]. - The total number of employees was 950, a decrease of 1.65% from 966 in 2022 [231]. - Research and development employees numbered 330, down from 339 in 2022, indicating a reduction of 2.65% [232]. Corporate Governance and Compliance - The company has not included a provision in its articles of association regarding the independence criteria for directors, as it complies with Nasdaq and SEC regulations [221]. - The audit committee consists of four members, including three independent directors, with Joseph Tenne designated as the "audit committee financial expert" [223]. - The compensation committee, which includes all outside directors, is responsible for recommending executive compensation policies and monitoring their implementation [226]. - The company adopted a Clawback Policy in August 2023, requiring the return of incentive compensation in case of financial statement restatements, approved by shareholders on October 24, 2023 [268]. Shareholder Information - As of March 20, 2024, Shabtai Adlersberg holds 4,600,253 shares, representing 15.2% of the ordinary shares [236]. - Major shareholders include Shabtai Adlersberg with 4,705,253 shares (15.5%), Leon Bialik with 2,311,704 shares (7.6%), and Senvest Management, LLC with 2,543,368 shares (8.4%) [243]. - The company received court approval in 2023 to pay dividends and repurchase shares despite the lack of statutory profits, valid until June 18, 2024 [254]. Taxation and Legal Compliance - The corporate tax rate in Israel is 23% effective from January 1, 2018, with potential reductions for companies qualifying as Industrial Companies [280]. - Non-residents of Israel can freely convert amounts received in Israeli currency from ordinary shares into non-Israeli currencies, subject to applicable taxes [277]. - The company waived its Beneficiary Enterprise status starting from the 2019 tax year [285]. - Tax deductions for R&D expenditures are allowed if approved by the relevant Israeli government ministry [287].