AudioCodes(US:AUDC)2024-07-30 18:29Financial Data and Key Metrics Changes - Revenues for Q2 2024 were $60.3 million, a 0.5% increase from $60 million in Q2 2023 [9] - Services revenues increased by 12.3% year-over-year to $32 million, accounting for 53% of total revenues [9][10] - GAAP gross margin improved to 65.5% from 64.1% in Q2 2023 [10] - Operating income rose to $4.9 million (8.2% of revenues) compared to $2.3 million (3.8% of revenues) in Q2 2023 [10] - Non-GAAP net income for Q2 2024 was $5.5 million, or $0.18 per diluted share, compared to $5.1 million, or $0.16 per diluted share in Q2 2023 [11] Business Line Data and Key Metrics Changes - The enterprise business, representing about 90% of total revenue, saw the UCaaS business grow by 3.3% year-over-year, with Microsoft Teams live minute services annual recurring revenues growing 35% year-over-year [16][25] - The Customer Experience (CX) business revenue declined by about 10% year-over-year due to a large deal push-out, but a healthy pipeline supports a positive outlook for the second half of 2024 [28] - Conversational AI business revenue increased by 10.5% year-over-year, with bookings growing over 50% [16][32] Market Data and Key Metrics Changes - Revenue by geographical regions: North America (47%), EMEA (35%), Asia-Pacific (13%), and Central and Latin America (5%) [10] - The top 15 customers accounted for 56% of revenues, with 38% attributed to the nine largest distributors [10] Company Strategy and Development Direction - The company is focusing on growth in recurring business models, particularly in UCaaS, CCaaS, and conversational AI, with expectations of returning to growth in revenue and profits starting in 2025 [22][23] - Investments in the live platform and managed services are seen as key drivers for future growth, particularly in the Microsoft Teams ecosystem [19][25] - The company is also expanding its capabilities in conversational AI, leveraging its comprehensive technology stack to deliver integrated solutions [21][32] Management Comments on Operating Environment and Future Outlook - Management noted that the decline in legacy business is moderating, and they expect growth to resume in 2025 as recurring business models take precedence [54][55] - The impact of global economic conditions on enterprise spending is acknowledged, but management remains optimistic about the long-term growth potential driven by advancements in Gen AI technology [62][64] Other Important Information - The company declared a cash dividend of $0.18 per share, totaling approximately $5.5 million, to be paid on August 29, 2024 [12][13] - The company received court approval to purchase up to $20 million of additional ordinary shares, valid through January 1, 2025 [12] Q&A Session Summary Question: What are the key drivers of growth in the service business? - Management highlighted the strength of the live and Microsoft Teams managed services business, which has seen significant growth due to the development of a comprehensive service platform [43][44] Question: What types of customers are adopting conversational AI products? - Customers from various sectors, including finance, government, and healthcare, are adopting conversational AI solutions, with projects already in place demonstrating significant operational improvements [48][49] Question: When does management expect growth to re-emerge? - Management anticipates that growth will return by the second quarter of 2025, driven by a shift to recurring business models [54][55] Question: Have there been any changes in UCaaS and CCaaS spending due to macroeconomic conditions? - Management noted that while UCaaS growth has slowed, contact center activity remains strong, and they expect improvements as economic conditions stabilize [62][64] Question: What feedback has been received from customers regarding conversational AI? - Customers have reported significant operational efficiencies and improved decision-making capabilities due to the implementation of AI solutions, justifying the investment [65][66]