AudioCodes Reports Second Quarter 2019 Results

LOD, Israel, July 23, 2019 /PRNewswire/ --

Second Quarter Highlights

    --  Quarterly revenues increased by 13.8% year-over-year to $49.5 million;
    --  Quarterly service revenues increased by 23.5% year-over-year to $16.7
        million;
    --  Quarterly UC-SIP revenues increased more than 20% year-over-year;
    --  Quarterly GAAP gross margin percentage was 63.3%; quarterly Non-GAAP
        gross margin percentage was 63.5%;
    --  Quarterly GAAP operating margin percentage was 11.9%; quarterly Non-GAAP
        operating margin percentage was 14.1%;
    --  Quarterly cash flow from operating activities was $8.4 million;
    --  Quarterly GAAP net income was $4.8 million, or $0.16 per diluted share;
    --  Quarterly Non-GAAP net income was $6.8 million, or $0.22 per diluted
        share;
    --  AudioCodes repurchased 473,235 of its ordinary shares during the quarter
        at an aggregate cost of $7.05 million.

Details

AudioCodes (NASDAQ: AUDC), a leading vendor of advanced voice networking and media processing solutions for the digital workplace, today announced financial results for the second quarter ended June 30, 2019.

Revenues for the second quarter of 2019 were $49.5 million compared to $46.6 million for the first quarter of 2019 and $43.5 million for the second quarter of 2018.

Net income was $4.8 million, or $0.16 per diluted share, for the second quarter of 2019 compared to $2.4 million, or $0.08 per diluted share, for the second quarter of 2018.

On a Non-GAAP basis, net income was $6.8 million, or $0.22 per diluted share, for the second quarter of 2019 compared to $4.1 million, or $0.14 per diluted share, for the second quarter of 2018.

Non-GAAP net income excludes: (i) share-based compensation expenses; (ii) amortization expenses related to intangible assets; (iii) expenses or income related to revaluation of an earn-out liability in connection with the acquisition of Active Communications Europe; (iv) financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies and (v) non-cash deferred tax expenses. A reconciliation of net income on a GAAP basis to a non-GAAP basis is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.

Net cash provided by operating activities was $8.4 million for the second quarter of 2019. Cash and cash equivalents, long- and short-term bank deposits and short-term marketable securities were $69.1 million as of June 30, 2019 compared to $65.4 million as of December 31, 2018. The increase in cash and cash equivalents, long- and short-term bank deposits and short-term marketable securities was the result of cash from operating activities offset, in part, by the use of cash for the continued repurchasing of the Company's ordinary shares pursuant to its share repurchase program and the payment of a cash dividend in the first quarter of 2019.

"We are pleased to report record financial results for the second quarter of 2019," said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes. "We continue to enjoy strong growth in the UC and UCaaS markets and a faster pace of migration of service providers to All-IP. Coupling these growth trends with strong execution across our business lines we continue to expand our business while demonstrating improved financial and operational efficiency. By surpassing our financial plan for the first half of 2019, we are confident in our ability to outperform our initial plan for the year and deliver higher revenues and profitability than previously announced."

"We continue to increase our investments in the Microsoft Teams space as this collaboration solution continues to gain traction in the market. We are confident in our ability to grow our business in this area in 2019 and beyond. At the same time, we continue to foster new partnerships with more leading players in the UCaaS and Contact Center markets, and make progress in our efforts and investments in the voice.ai area. We continue to prudently invest in our future offerings and remain focused on maximizing the return on investments for our shareholders," concluded Mr. Adlersberg.

Share Buy Back Program

As of June 30, 2019, AudioCodes had acquired an aggregate of 18.1 million of its ordinary shares since August 2014 for an aggregate consideration of $102.1 million. During the quarter ended June 30, 2019, AudioCodes acquired 473,235 of its ordinary shares under its share repurchase program for a total consideration of $7.05 million.

In January 2019, AudioCodes received court approval in Israel to purchase up to an aggregate of $12 million ("Permitted Amount") of additional ordinary shares pursuant to its share repurchase program. The court approval also permitted AudioCodes to declare a dividend of any part of the Permitted Amount during the approved validity period. This court approval expired on July 1, 2019.

On May 28, 2019, the Board of Directors of AudioCodes approved the submission of a new application to the Israeli court, requesting approval of an additional repurchase program for $12 million of ordinary shares following the expiration of the existing program. The application also requests the court to permit AudioCodes to declare a dividend of any part of this amount. The new application was submitted to the court and a decision is expected during August 2019.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 8:30 A.M., Eastern Time today to discuss the Company's first quarter of 2019 operating performance, financial results and outlook. Interested parties may participate in the conference call by dialing one the following numbers:

United States Participants: +1 (877) 407-0778

International Participants: +1 (201) 689-8565

The conference call will also be simultaneously webcast. Investors are invited to listen to the call live via webcast at the AudioCodes investor website at http://www.audiocodes.com/investors-lobby

Follow AudioCodes' social media channels:

AudioCodes invites you to join our online community and follow us on: AudioCodes Voice Blog, LinkedIn, Twitter, Facebook, and YouTube.

About AudioCodes

AudioCodes Ltd. (NASDAQ: AUDC) (TASE: AUDC) is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. AudioCodes enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. AudioCodes offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.

For more information on AudioCodes, visit http://www.audiocodes.com.

Statements concerning AudioCodes' business outlook or future economic performance; product introductions and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements'' as that term is defined under U.S. Federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions in AudioCodes' industry and target markets in particular; shifts in supply and demand; market acceptance of new products and the demand for existing products; the impact of competitive products and pricing on AudioCodes' and its customers' products and markets; timely product and technology development, upgrades and the ability to manage changes in market conditions as needed; possible need for additional financing; the ability to satisfy covenants in the Company's loan agreements; possible disruptions from acquisitions; the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business; and other factors detailed in AudioCodes' filings with the U.S. Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.

©2019 AudioCodes Ltd. All rights reserved. AudioCodes, AC, HD VoIP, HD VoIP Sounds Better, IPmedia, Mediant, MediaPack, What's Inside Matters, OSN, SmartTAP, User Management Pack, VMAS, VoIPerfect, VoIPerfectHD, Your Gateway To VoIP, 3GX, VocaNom, AudioCodes One Voice and CloudBond are trademarks or registered trademarks of AudioCodes Limited. All other products or trademarks are property of their respective owners. Product specifications are subject to change without notice.

Summary financial data follows




       
              AUDIOCODES LTD. AND ITS SUBSIDIARIES



       
              CONDENSED CONSOLIDATED BALANCE SHEETS

    ---


       
              U.S. dollars in thousands




                                                      
        
       June 30,  December 31,


                                                                    2019          2018



                                                    
        
       (Unaudited)   (Audited)

                                                                                  ---


       
              ASSETS





       CURRENT ASSETS:


        Cash and cash equivalents                                $39,400       $31,503


        Short-term and restricted bank
         deposits                                                  7,385        12,381


        Short-term marketable securities
         and accrued interest                                     21,035        19,602



       Trade receivables, net                                    24,716        22,279


        Other receivables and prepaid
         expenses                                                  5,687         5,885



       Inventories                                               29,832        22,620




       Total current assets                                     128,055       114,270






       LONG-TERM ASSETS:


        Long-term and restricted bank
         deposits                                                 $1,294        $1,894



       Deferred tax assets                                        3,263         4,350


        Operating lease right-of-use
         assets                                                   32,253             -



       Severance pay funds                                       18,393        17,518




       Total long-term assets                                    55,203        23,762





        PROPERTY AND EQUIPMENT, NET                                4,522         3,865





        GOODWILL, INTANGIBLE ASSETS AND
         OTHER, NET                                               37,299        37,475





       Total assets                                            $225,079      $179,372






       
              LIABILITIES AND SHAREHOLDERS' EQUITY





       CURRENT LIABILITIES:


        Current maturities of long-term
         bank loans                                               $2,483        $2,487



       Trade payables                                             9,855         6,188


        Other payables and accrued
         expenses                                                 23,766        22,541



       Deferred revenues                                         29,542        23,727


        Short-term operating lease
         liabilities                                               8,513             -


        Total current liabilities                                 74,159        54,943






       LONG-TERM LIABILITIES:



       Accrued severance pay                                    $19,488       $18,728



       Long-term bank loans                                       2,442         3,687


        Deferred revenues and other
         liabilities                                               8,948         7,466


        Long-term operating lease
         liabilities                                              25,090             -



        Total long-term liabilities                               55,968        29,881





        Total shareholders' equity                                94,952        94,548



        Total liabilities and
         shareholders' equity                                   $225,079      $179,372



       
                AUDIOCODES LTD. AND ITS SUBSIDIARIES



       
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    ---


       
                U.S. dollars in thousands, except share and per share data




                                                                                         Six months ended                   Three months ended


                                                                                         June 30,                   June 30,

                                                                                                          ---

                                                                                   2019       2018             2019       2018

                                                                                                                        ---

                                                                                        (Unaudited)                   (Unaudited)

                                                                                                          ---


       Revenues:



       Products                                                                $65,296    $58,775          $32,843    $30,012



       Services                                                                 30,782     27,152           16,656     13,490

                                                                                                                        ---


       
                Total Revenues                                              96,078     85,927           49,499     43,502

    ---                                                                                                                 ---


       Cost of revenues:



       Products                                                                 28,150     25,014           14,372     13,119



       Services                                                                  7,385      6,658            3,813      3,287

                                                                                                                        ---


       
                Total Cost of revenues                                      35,535     31,672           18,185     16,406

    ---                                                                                                                 ---


       Gross profit                                                             60,543     54,255           31,314     27,096

                                                                                                                        ---


       Operating expenses:



       Research and development, net                                            19,659     17,343           10,179      8,710



       Selling and marketing                                                    25,220     25,357           12,659     12,369



       General and administrative                                                5,263      5,311            2,592      2,730

                                                                                                                        ---


       Total operating expenses                                                 50,142     48,011           25,430     23,809

                                                                                                                        ---


       Operating income                                                         10,401      6,244            5,884      3,287



       Financial income (expenses), net                                        (1,079)       223            (280)      (20)

                                                                                                                        ---


       Income before taxes on income                                             9,322      6,467            5,604      3,267



       Taxes on income, net                                                    (1,479)   (1,639)           (810)     (873)

                                                                                                                        ---


       Net income                                                               $7,843     $4,828           $4,794     $2,394

                                                                                                                        ===


       Basic net earnings per share                                              $0.27      $0.17            $0.16      $0.08

                                                                                                                        ===


       Diluted net earnings per share                                            $0.26      $0.16            $0.16      $0.08

                                                                                                                        ===

        Weighted average number of shares used in computing basic net
         earnings per share (in thousands)                                       29,214     28,884           29,214     28,609

                                                                                                                        ===

        Weighted average number of shares used in computing diluted
         net earnings per share (in thousands)                                   30,737     30,041           30,744     29,733

                                                                                                                        ===



       
                AUDIOCODES LTD. AND ITS SUBSIDIARIES



       
                RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

    ---


       
                U.S. dollars in thousands, except per share data






                                                                                      Six months ended                   Three months ended


                                                                                      June 30,                   June 30,

                                                                                                       ---

                                                                                 2019       2018            2019          2018

                                                                                                                        ---

                                                                                      (Unaudited)                   (Unaudited)

                                                                                                       ---


       GAAP net income                                                        $7,843     $4,828          $4,794        $2,394

                                                                                                                        ===


       GAAP net earnings per share                                             $0.26      $0.16           $0.16         $0.08

                                                                                                                        ===


       Cost of revenues:



       Share-based compensation (1)                                               66         87              30            48



       Amortization expenses (2)                                                 136        348              68           174


                                                                                  202        435              98           222



       Research and development, net:



       Share-based compensation (1)                                              422        264             210           151



       Selling and marketing:



       Share-based compensation (1)                                              754        554             421           280



       Amortization expenses (2)                                                  30         30              15            15

                                                                                                                        ---

                                                                                  784        584             436           295



       General and administrative:



       Share-based compensation (1)                                              739        540             373           271



       Revaluation of earn-out liability (3)                                    (23)       200                          200



                                                                                  716        740             373           471



       Financial expenses:



       Exchange rate differences (4)                                           1,258                       358             -





       Income taxes:



       Deferred tax (5)                                                        1,088      1,168             544           584

                                                                                                                        ---


       Non-GAAP net income                                                   $12,313     $8,019          $6,813        $4,117

                                                                                                                        ===


       Non-GAAP diluted net earnings per share                                 $0.40      $0.26           $0.22         $0.14

                                                                                                                        ===

(1) Share-based compensation expenses related to options and restricted share units granted to employees and others.

(2) Amortization of intangible assets related to the acquisitions of Mailvision and Active Communications Europe assets.

(3) Expenses or income related to revaluation of an earn-out liability in connection with the acquisition of Active Communications Europe.

(4) Financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies.

(5) Non-cash deferred tax expenses.

Note: Non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. The Company believes that non-GAAP information is useful because it can enhance the understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information.



       
                AUDIOCODES LTD. AND ITS SUBSIDIARIES



       
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



       
                U.S. dollars in thousands




                                                                                                                      Six months ended                    Three months ended


                                                                                                                      June 30,                    June 30,



                                                                                                                 2019      2018              2019       2018



                                                                                                                      (Unaudited)                    (Unaudited)




       
                Cash flows from operating activities:

    ---


       Net income                                                                                             $7,843    $4,828            $4,794     $2,394



       Adjustments required to reconcile net income to net cash provided by operating activities:



       Depreciation and amortization                                                                             980     1,105               506        565



       Amortization of marketable securities premiums and accretion of discounts, net                             79       188                23         85



       Increase in accrued severance pay, net                                                                  (115)    (139)            (276)     (186)



       Share-based compensation expenses                                                                       1,981     1,445             1,034        750



       Decrease in deferred tax assets, net                                                                      953     1,126               528        563


        Decrease (increase) in accrued interest and exchange rate effect of loans, marketable securities and
         bank deposits                                                                                            159      (15)              170       (30)



       Changes in operating leases, net                                                                        1,350                      1,783



       Decrease (increase) in trade receivables, net                                                         (2,623)  (2,895)            2,237    (3,284)



       Decrease (increase) in other receivables and prepaid expenses                                             203   (1,070)              457        664



       Increase in inventories                                                                               (7,256)  (2,086)          (4,357)   (1,115)



       Increase in trade payables                                                                              3,667       458             3,040        296



       Increase (decrease) in other payables and accrued expenses                                              2,065       881           (2,401)     1,962



       Increase (decrease) in deferred revenues                                                                7,431     6,656               884      (468)



       Net cash provided by operating activities                                                              16,717    10,482             8,422      2,196




       
                Cash flows from investing activities:

    ---


       Investment in short-term deposits                                                                                (399)                      (399)



       Proceeds from short-term deposits                                                                       5,971



       Proceeds from long-term deposits                                                                          600                        300



       Proceeds from redemption of marketable securities                                                      19,385     1,577            12,094        850



       Purchase of marketable securities                                                                    (21,035)                  (21,035)



       Purchase of property and equipment                                                                    (1,361)    (616)            (245)     (336)




       Net cash provided by (used in) investing activities                                                     3,560       562           (8,886)       115



       
                AUDIOCODES LTD. AND ITS SUBSIDIARIES



       
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    ---


       
                U.S. dollars in thousands




                                                                                        Six months ended                   Three months ended


                                                                                        June 30,                   June 30,



                                                                                   2019        2018           2019          2018



                                                                                        (Unaudited)                   (Unaudited)




       
                Cash flows from financing activities:

    ---


       Purchase of treasury shares                                             (8,002)   (10,511)       (7,051)      (3,287)



       Repayment of bank loans                                                 (1,237)    (1,262)         (619)        (626)



       Cash dividends paid to shareholders                                     (3,218)



       Payment related to the acquisition of ACS                                 (410)      (151)



       Proceeds from issuance of shares upon exercise of options and warrants    1,462       1,677            348           231




       Net cash used in financing activities                                  (11,405)   (10,247)       (7,322)      (3,682)






       Net increase (decrease) in cash, cash equivalents, and restricted cash    8,872         797        (7,786)      (1,371)



       Cash, cash equivalents and restricted cash at beginning of period        31,503      31,181         48,161        33,349




       Cash, cash equivalents and restricted cash at end of period             $40,375     $31,978        $40,375       $31,978



       
                Company Contacts                                                                                
     
                IR Agency Contact



       Niran Baruch,                                           
     Shirley Nakar,                                     
     Rob Fink,



       VP Finance & Chief Financial Officer                    
     Director, Investor Relations                       
     Hayden IR



       AudioCodes                                              
     AudioCodes                                         
     Tel: +1-646-415-8972



       Tel: +972-3-976-4000                                    
     Tel: +972-3-976-4000                                                             audc@haydenir.com



                                    Niran.baruch@audiocodes.com                               shirley@audiocodes.com

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SOURCE AudioCodes Ltd.