Core Insights - AudioCodes reported modest revenue growth in Q4 and full year 2025, with a strategic shift towards becoming an "AI-driven hybrid cloud software and services company" [4][6][13] Financial Performance - Q4 gross margin was 65.6%, down from 66.2% year-over-year; operating income decreased to $3.7 million (6% of revenue) from $4.1 million (6.7%) [1] - Q4 revenue was $62.6 million, a 1.7% increase from $61.6 million a year earlier; full-year 2025 revenue reached $245.6 million, up 1.4% from $242.2 million in 2024 [3][7] - GAAP net income for Q4 fell to $1.9 million ($0.07 per diluted share) from $6.8 million ($0.22) in the same quarter last year; full-year GAAP net income was $9.0 million ($0.31 per diluted share), down from $15.3 million in 2024 [1][7] Revenue Breakdown - Services revenue in Q4 was $34.6 million, representing 55.3% of total revenue, and increased 1% year-over-year; full-year services revenue totaled $130.7 million, slightly up from $130.2 million in 2024 [3] - Revenue by geography in Q4: 47% North America, 35% EMEA, 13% Asia Pacific, and 5% Central and Latin America; top 15 customers accounted for 58% of revenue [2] Strategic Initiatives - The company is focusing on VoiceAI and managed services, with annual recurring revenue (ARR) from these segments reaching $79 million, a 22% year-over-year growth; VoiceAI revenue grew approximately 35% to around $17 million in 2025 [6][14] - AudioCodes aims for VoiceAI to achieve $50 million in revenue by 2028, targeting 40% to 50% annual growth [6][14] Operational Metrics - The company ended 2025 with $75.7 million in cash and a $75 million backlog for Live services, up from $69 million a year earlier [5][22] - Non-GAAP gross margin was 65.9%, within the long-term target range of 65% to 68% [15] Customer Engagement - The Microsoft business increased 7% sequentially in Q4, driven by connectivity strength; total contract value signed grew 5% year-over-year [18] - A significant contract was signed with AT&T for a public university migration to Teams Voice, alongside a deal with a European equipment manufacturer [19] Workforce and Investments - The company employed 981 individuals at the end of 2025, with a notable increase in R&D personnel focused on VoiceAI [17] - Non-GAAP operating expenses rose 6.2% year-over-year, attributed to investments in sales and marketing for the VoiceAI business [16]

Financial Data and Key Metrics Changes - Revenues for Q4 2025 were $62.6 million, a 1.7% increase from $61.6 million in Q4 2024. Full year 2025 revenues were $245.6 million, up 1.4% from $242.2 million in 2024 [8][10] - Services revenues for Q4 2025 were $34.6 million, accounting for 55.3% of total revenues, with a 1% increase year-over-year. Annual services revenues reached $130.7 million, a 0.4% increase from $130.2 million in 2024 [8][10] - GAAP gross margin for Q4 2025 was 65.6%, down from 66.2% in Q4 2024. Operating income for Q4 was $3.7 million, or 6% of revenues, compared to $4.1 million, or 6.7% of revenues in Q4 2024 [9][10] - Full year 2025 net income was $9 million, or $0.31 per diluted share, down from $15.3 million, or $0.15 per diluted share in 2024 [10][11] Business Line Data and Key Metrics Changes - The connectivity business accounted for approximately 93% of total revenue, maintaining a stable operating margin above 14% in 2025, with a long-term target of 16%-18% [18][19] - The Voice AI business generated about 7% of total revenue, growing from over $12 million in 2024 to nearly $17 million in 2025, representing a 35% year-over-year increase [19][30] - Annual recurring revenue from the combined live managed services and Voice AI business reached $79 million at the end of 2025, reflecting a 22% growth year-over-year [15][16] Market Data and Key Metrics Changes - Revenue by geographical region for Q4 2025: North America (47%), EMEA (35%), Asia Pacific (13%), and Central and Latin America (5%) [9] - The backlog for live services reached $75 million at the end of 2025, compared to $69 million at the end of 2024 [17] Company Strategy and Development Direction - The company aims to transition from a focus on connectivity solutions to an AI-first, Voice AI-led business application model, targeting significant growth in the Voice AI sector [15][19] - Continued investment in sales and marketing for Voice AI is expected to drive further growth, with a goal of reaching $50 million in revenue by 2028 [19][30] - The company plans to maintain revenue growth and margin expansion while strengthening its leadership in Voice AI-driven applications for UCaaS and CX markets [15][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the connectivity business and the growth trajectory of the Voice AI segment, with expectations of continued strong annual recurring revenue momentum [14][15] - The company anticipates revenues for 2026 to be in the range of $247 million to $255 million, with non-GAAP diluted earnings per share projected at $0.60 to $0.75 [13][24] Other Important Information - The company declared a cash dividend of $0.20 per share, totaling approximately $5.4 million, to be paid on March 6, 2026 [12] - The company ended 2025 with 981 employees, an increase from 946 at the end of 2024 [22] Q&A Session Summary Question: Is the 40%-50% annual growth for conversational AI intended to be a CAGR through 2028? - Management expects growth to come from both new customer acquisition and increased spending per customer, with significant investments in R&D for Voice AI [42][44] Question: How has the shift in market expectations around AI impacted pipeline visibility? - Management noted improved visibility and size of the pipeline as customers move from testing to broader adoption of voice AI products [46] Question: What impact from tariffs should be considered for 2026 financials? - Tariff impacts are expected to decrease from $2.7 million in 2025 to approximately $2.3 million in 2026, with gross margins anticipated to improve due to a shift towards software and services [47][49]

Financial Data and Key Metrics Changes - Revenues for Q4 2025 were $62.6 million, a 1.7% increase from $61.6 million in Q4 2024. Full year 2025 revenues were $245.6 million, up 1.4% from $242.2 million in 2024 [8][10] - Net income for Q4 2025 was $1.9 million, or $0.07 per diluted share, compared to $6.8 million or $0.22 per diluted share in Q4 2024. Full year 2025 net income was $9 million, or $0.31 per diluted share, down from $15.3 million or $0.15 per diluted share in 2024 [10][11] - Non-GAAP gross margin for Q4 2025 was 65.9%, slightly down from 66.5% in Q4 2024. Non-GAAP operating income for Q4 was $5.4 million, or 8.6% of revenues, compared to $7.5 million or 12.2% in Q4 2024 [11][20] Business Line Data and Key Metrics Changes - Services revenues for Q4 2025 were $34.6 million, accounting for 55.3% of total revenues, with a 1% increase year-over-year. Annual service revenues were $130.7 million, up 0.4% from $130.2 million in 2024 [8][10] - The VoiceAI business grew revenues by 35% year-over-year, reaching nearly $17 million in 2025, which accounted for 7% of total revenues [16][19] - The connectivity business, which provides about 93% of total revenue, maintained an operating margin of above 14% in 2025, with a long-term target of 16%-18% [18][19] Market Data and Key Metrics Changes - Revenue by geographical region for Q4 2025: North America 47%, EMEA 35%, Asia Pacific 13%, and Central and Latin America 5% [9] - The backlog for live services reached $75 million at the end of 2025, compared to $69 million at the end of 2024, indicating strong demand for managed services [17] Company Strategy and Development Direction - The company aims to transition from a focus on connectivity solutions to an AI-first, VoiceAI-led business application model, targeting significant growth in the UCaaS and CX markets [15][18] - The strategy includes reallocating product development investments to high-potential areas and enhancing sales and marketing efforts to build market awareness [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the connectivity business and the growth trajectory of the VoiceAI segment, expecting continued momentum in 2026 [14][40] - The company anticipates revenues in the range of $247 million to $255 million for 2026, with non-GAAP diluted earnings per share projected at $0.60 to $0.75 [13][24] Other Important Information - The company declared a cash dividend of $0.20 per share, totaling approximately $5.4 million, to be paid on March 6, 2026 [12] - The company ended 2025 with 981 employees, an increase from 946 at the end of 2024, reflecting growth in operations [22] Q&A Session Summary Question: Is the 40%-50% annual growth intended to be a CAGR growth rate through 2028? - Management expects growth from both new customer acquisition and increased spending per customer, with significant investments in R&D for VoiceAI [42][44] Question: How has the shift in market expectations around AI impacted pipeline visibility? - Management noted improved visibility and size of the pipeline due to easier-to-use SaaS applications and compelling capabilities [46] Question: What impact from tariffs should be considered for 2026 financials? - Tariff impact is expected to decrease to approximately $2.3 million in 2026, with gross margins anticipated to remain in the range of 65%-68% [49][50]

Financial Data and Key Metrics Changes - Revenues for Q4 2025 were $62.6 million, a 1.7% increase from $61.6 million in Q4 2024. Full year 2025 revenues were $245.6 million, up 1.4% from $242.2 million in 2024 [8] - Services revenues for Q4 2025 were $34.6 million, a 1% increase year-over-year, accounting for 55.3% of total revenues. Annual service revenues were $130.7 million, a 0.4% increase from $130.2 million in 2024 [8] - GAAP gross margin for Q4 2025 was 65.6%, down from 66.2% in Q4 2024. Operating income for Q4 was $3.7 million, or 6% of revenues, compared to $4.1 million, or 6.7% of revenues in Q4 2024 [9][10] - Full year 2025 net income was $9 million, or $0.31 per diluted share, down from $15.3 million, or $0.15 per diluted share in 2024 [10][11] Business Line Data and Key Metrics Changes - The connectivity business accounted for approximately 93% of total revenue, maintaining an operating margin above 14% in 2025, with a long-term target of 16%-18% [20] - The Voice AI business grew revenues by 35% year-over-year, reaching nearly $17 million in 2025, which accounted for 7% of total revenues [21][18] - The combined annual recurring revenue from live managed services and Voice AI was $79 million at the end of 2025, representing a 22% year-over-year growth [15] Market Data and Key Metrics Changes - Revenue by geographical region for Q4 2025: North America (47%), EMEA (35%), Asia Pacific (13%), and Central and Latin America (5%) [9] - The Microsoft Teams voice ecosystem saw a significant increase in PSTN users, reaching 26 million, up from 20 million in April 2024, indicating a 16%-17% annual growth rate [27] Company Strategy and Development Direction - The company is transitioning to an AI-driven hybrid cloud software and services model, focusing on Voice AI and managed services as primary growth engines [15] - The strategy includes reallocating product development investments to high-potential areas and enhancing sales and marketing efforts to build market awareness [15] - The company aims to maintain revenue growth and margin expansion while strengthening its leadership in Voice AI-driven business applications for UCaaS and CX markets [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the connectivity business and the growth trajectory of the Voice AI segment, expecting continued momentum in 2026 [42] - The company anticipates revenues for 2026 to be in the range of $247 million to $255 million, with non-GAAP diluted earnings per share projected at $0.60 to $0.75 [13][25] - Management noted that the impact of tariffs is expected to decrease from $2.7 million in 2025 to approximately $2.3 million in 2026 [50] Other Important Information - The company declared a cash dividend of $0.20 per share, totaling approximately $5.4 million, to be paid on March 6, 2026 [12] - The company ended 2025 with 981 employees, an increase from 946 at the end of 2024 [24] Q&A Session Summary Question: Is the 40%-50% annual growth intended to be a CAGR growth rate through 2028? - Management expects growth from both new customer acquisition and increased spending per customer, with a significant increase in the number of potential customers anticipated [44][46] Question: How has the shift in market expectations around AI impacted pipeline visibility? - Management noted improved visibility and size of the pipeline due to easier-to-use SaaS applications and compelling capabilities being introduced [48] Question: What impact should be expected from tariffs on 2026 financials? - Management expects gross margins to improve as the product mix shifts more towards software and services, with a lower tariff impact anticipated in 2026 [50]

Core Insights - AudioCodes reported a revenue increase of 1.7% year-over-year for Q4 2025, reaching $62.6 million, and a full-year revenue increase of 1.4% to $245.6 million [2][7] - The company experienced a decline in both GAAP and Non-GAAP net income for Q4 2025 compared to Q4 2024, with GAAP net income at $1.9 million ($0.07 per diluted share) and Non-GAAP net income at $4.5 million ($0.16 per diluted share) [4][5] - Annual Recurring Revenue (ARR) grew by 22% year-over-year to $79 million, driven by strong performance in managed services and conversational AI [10][11] Financial Performance - Q4 2025 EBITDA was $4.9 million, down from $5.2 million in Q4 2024, while full-year EBITDA decreased to $18.3 million from $21.1 million [3] - Non-GAAP EBITDA for Q4 2025 was $6.5 million, compared to $8.5 million in Q4 2024, with full-year Non-GAAP EBITDA at $24.8 million, down from $31.4 million [3] - The company reported a gross margin of 65.6% for Q4 2025 on a GAAP basis and 65.9% on a Non-GAAP basis [7] Shareholder Returns - AudioCodes repurchased 667,193 ordinary shares for $6.1 million during Q4 2025, with a total of $20.6 million available for further repurchases or dividends as of December 31, 2025 [12][13] - A cash dividend of $0.20 per share was declared, amounting to approximately $5.4 million, payable on March 6, 2026 [14] Strategic Focus - The company is transitioning towards becoming a Voice AI-focused hybrid cloud software and services provider, with significant growth in its conversational AI portfolio, which saw over 50% revenue growth in Q4 2025 [9][11] - Investments in Live services and conversational AI are expected to contribute to sustained growth in the coming years [11]