AudioCodes (AUDC) 6 Nov 24 2024 Q3 Earnings call transcript
AInvestWednesday, Nov 6, 2024 9:30 pm ET
2min read
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AudioCodes, a leading provider of cloud software and services for unified communications (UC) and contact center (CC) solutions, recently held its third quarter 2024 earnings call, shedding light on the company's strategic priorities and financial performance. The call, hosted by Shabtai Adlersberg, President and CEO, and Niran Baruch, Vice President of Finance and CFO, provided insightful information on the company's journey towards transforming into a cloud software and services company.

Financial Highlights and Trends

The third quarter of 2024 saw a decrease in revenues by 0.1% compared to the previous quarter, amounting to $60.2 million. However, services revenues showed a positive trend, increasing by 1.7% to $32.5 million. The services sector accounted for 54% of total revenues, marking the highest percentage on record for the company. This growth can be attributed to the focus on Live managed services and conversational AI, which has led to a 40% year-over-year increase in annual recurring revenue (ARR) to $60 million.

The company's financial performance was also marked by a significant decline in CapEx-based Teams business, which accounted for 56% of Teams business in the third quarter. This trend is expected to continue, with a belief that Live services will eventually surpass CapEx Teams business, leading to double-digit growth in Microsoft business in the coming years.

Strategic Priorities and Growth Engines

AudioCodes' strategic priorities are centered around its Live family of managed services and conversational AI. The company's focus on these two areas is driven by the growing demand for cloud-based solutions and the potential for recurring revenues. The Live business, which includes Microsoft Teams services, has been instrumental in this growth, with a 21% increase in the third quarter. This growth is expected to continue, with the belief that Live services will eventually surpass CapEx Teams business.

The conversational AI business, another growth engine for AudioCodes, has shown promising signs, with a 50% increase in dollar value of contracts signed in the third quarter compared to the previous year. The company is investing heavily in this area, expecting a substantial return on investment in 2025.

Customer Wins and Market Trends

AudioCodes' success in the third quarter was highlighted by several notable wins, including a multinational bank and a foreign government, underscoring the company's expertise in delivering mission-critical services in the UCCX connectivity space. The company's land and expand strategy, which involves leveraging its connectivity services to cross-sell its conversational AI portfolio, has also been successful.

In the CX market, AudioCodes is seeing steady growth, with a focus on large enterprise migrations to cloud solutions. The company's Live CX business grew by 4.4% in the third quarter, driven by the increasing demand for managed services in the cloud migration journey.

Looking Ahead

The third quarter earnings call provided a comprehensive overview of AudioCodes' strategic priorities, financial performance, and future outlook. With a focus on cloud software and services, the company is well-positioned to capitalize on the growing demand for UCaaS, CCaaS, and CI solutions. The transition towards recurring revenues and the growth in services sector indicate a positive trajectory for AudioCodes, with the belief that Live services will eventually surpass CapEx Teams business. The company's investments in conversational AI and its success in the CX market further underscore its commitment to innovation and growth.

As AudioCodes continues to transform its business, investors and analysts will be closely watching its performance in the coming quarters. The company's ability to navigate the transition from license to subscription models and its success in capitalizing on the growing demand for cloud solutions will be key factors to watch. With a robust pipeline of opportunities and a clear strategic vision, AudioCodes is poised for continued growth and profitability in the coming years.

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