AudioCodes(AUDC) - 2025 Q4 - Earnings Call Transcript

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]