AudioCodes Reports Second Quarter 2020 Results

Rhea-AI Summary

AudioCodes reported strong financial results for Q2 2020, with revenues of $53.5 million, an 8.1% increase year-over-year. Service revenues reached $17.1 million, up 3%. GAAP net income was $6.6 million ($0.21 per diluted share), while non-GAAP net income rose to $10.5 million ($0.32 per diluted share). Operating cash flow stood at $10.7 million. The company raised $85.4 million through a public offering, enhancing liquidity to $170.4 million in cash and equivalents. Notably, revenues from Microsoft Teams grew over 300% year-over-year.

Positive

• Quarterly revenues increased by 8.1% year-over-year to $53.5 million.
• Net income rose to $6.6 million, up 37.5% from Q2 2019.
• Non-GAAP net income increased by 54.1% year-over-year to $10.5 million.
• Cash and cash equivalents reached $170.4 million, up from $71.9 million in December 2019.
• Revenue related to Microsoft Teams grew more than 300% year-over-year, exceeding $10 million.

Negative

• None.

LOD, Israel, July 28, 2020 /PRNewswire/ --

Second Quarter Highlights

• Quarterly revenues increased by 8.1% year-over-year to $53.5 million;
• Quarterly service revenues increased by 3% year-over-year to $17.1 million;
• Quarterly UC-SIP revenues increased more than 20% year-over-year;
• GAAP results:
  - Quarterly GAAP gross margin percentage was 66.7%;
  - Quarterly GAAP operating margin percentage was 16.5%; 
  - Quarterly GAAP net income was $6.6 million, or $0.21 per diluted share;
• Non-GAAP results:
  - Quarterly Non-GAAP gross margin percentage was 66.9%;
  - Quarterly Non-GAAP operating margin percentage was 20.1%;
  - Quarterly Non-GAAP net income was $10.5 million, or $0.32 per diluted share;
• Net cash provided by operating activities was $10.7 million for the quarter;
• $85.4 million in new capital, net of expenses of the offering, raised through public offering of ordinary shares.

Details

AudioCodes (NASDAQ: AUDC), a leading vendor of advanced communications software, products and productivity solutions for the digital workplace, today announced financial results for the second quarter ended June 30, 2020.

Revenues for the second quarter of 2020 were $53.5 million compared to $52.0 million for the first quarter of 2020 and $49.5 million for the second quarter of 2019.

Net income was $6.6 million, or $0.21 per diluted share, for the second quarter of 2020, compared to $4.8 million, or $0.16 per diluted share, for the second quarter of 2019.

On a Non-GAAP basis, net income was $10.5 million, or $0.32 per diluted share, for the second quarter of 2020 compared to $6.8 million, or $0.22 per diluted share, for the second quarter of 2019.

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.

During the second quarter of 2020 the Company raised approximately $85.4 million in net proceeds from the public offering of 2,600,000 ordinary shares at a purchase price of $35 per share. 

Net cash provided by operating activities was $10.7 million for the second quarter of 2020. Cash and cash equivalents and long- and short-term bank deposits were $170.4 million as of June 30, 2020 compared to $71.9 million as of December 31, 2019. The increase in cash and cash equivalents and long- and short-term bank deposits was primarily a result of the receipt of the net proceeds of the public offering in June 2020, as well as due to cash provided by operating activities.

"We are pleased to report strong financial results for the second quarter of 2020," said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes. "Work-from-home (WFH) has become the new normal in recent months and UCaaS and Collaboration have taken center stage in the transition of many enterprises to a digital workplace. As a result, we experienced good business momentum across most of the market segments we participate in, most notably in the UCaaS and the Contact Center market segments. Coupling this favorable sales momentum with lower than anticipated operating expenses resulting from the COVID-19 pandemic, we continued to improve our financial performance year-over-year. Underscoring our financial success were improved gross margin, which increased to 66.9% in the second quarter from 63.5% in the year-ago quarter, and the substantial increase in operating income to 20.1% from 14.1% in the second quarter of 2019. As a result, net income increased above 50% year-over–year and we have generated strong cash flow from operations. Continuing the sales trend of the first quarter of 2020, we experienced increased market activity and demand for Microsoft Teams. Revenue related to the MS Teams ecosystem grew more than 300% from the year-ago quarter, reaching a level of above $10 million. In addition, newly created opportunities related to MS Teams have doubled year over year in the second quarter."

"The progress made in our Voice.ai business was also noteworthy. We saw continued progress in the introduction of Meeting Insights, a productivity enhancement software tool for group collaboration. In the voice.ai gateway (VAIG) business we saw an increase in opportunities relating to adding voice and telephony channels to virtual agents and enterprise intelligent assistants, a rapidly growing use these days. Looking forward, we expect that Collaboration and WFH will continue to take hold as mainstream market trends for coming years. While the full impact of COVID-19 is still uncertain and may remain a global challenge for the next few years, we believe in our ability to respond to new developments and challenges in our markets. We plan to continue our investment in future product offerings and focus on the return on investment to our shareholders," concluded Mr. Adlersberg.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 8:30 A.M., Eastern Time today to discuss the Company's second quarter of 2020 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 communications software, products and productivity 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; possible adverse impact of the COVID-19 pandemic on our business and results of operations; 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.

©2020 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, AudioCodes Meeting Insights, AudioCodes Room Experience 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.

Company Contacts
Niran Baruch,
VP Finance & Chief Financial Officer
AudioCodes
Tel: +972-3-976-4000
Niran.baruch@audiocodes.com

Shirley Nakar,
Director, Investor Relations
AudioCodes
Tel: +972-3-976-4000
shirley@audiocodes.com

IR Agency Contact
Brett Maas,
Managing Director
Hayden IR
Tel: +1-646-536-7331
brett@haydenir.com

Summary financial data follows

                                                                             

AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
	June 30,		December 31,
	2020		2019
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$ 163,849		$ 64,773
Short-term and restricted bank deposits	5,965		6,416
Trade receivables, net	30,144		27,501
Other receivables and prepaid expenses	7,419		5,626
Inventories	29,469		28,275
Total current assets	236,846		132,591
LONG-TERM ASSETS:
Long-term and restricted bank deposits	$ 544		$ 694
Deferred tax assets	17,311		20,466
Operating lease right-of-use assets	26,489		29,688
Severance pay funds	18,783		19,370
Total long-term assets	63,127		70,218
PROPERTY AND EQUIPMENT, NET	4,294		4,392
GOODWILL, INTANGIBLE ASSETS AND OTHER, NET	36,957		37,123
Total assets	$ 341,224		$ 244,324
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term bank loans	$ 1,836		$ 2,473
Trade payables	4,611		6,628
Other payables and accrued expenses	25,335		24,692
IIA settlement liability	10,780		10,750
Deferred revenues	35,770		33,538
Short-term operating lease liabilities	8,332		8,579
Total current liabilities	86,664		86,660
LONG-TERM LIABILITIES:
Accrued severance pay	$ 20,350		$ 20,313
Long-term bank loans	600		1,200
IIA settlement liability	10,780		10,749
Deferred revenues and other liabilities	10,777		9,831
Long-term operating lease liabilities	19,859		23,097
Total long-term liabilities	62,366		65,190
Total shareholders' equity	192,194		92,474
Total liabilities and shareholders' equity	$ 341,224		$ 244,324

 

AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
	Six months ended				Three months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(Unaudited)				(Unaudited)
Revenues:
Products	$ 70,701		$ 65,296		$ 36,367		$ 32,843
Services	34,843		30,782		17,155		16,656
Total Revenues	105,544		96,078		53,522		49,499
Cost of revenues:
Products	27,793		28,150		14,031		14,372
Services	7,774		7,385		3,793		3,813
Total Cost of revenues	35,567		35,535		17,824		18,185
Gross profit	69,977		60,543		35,698		31,314
Operating expenses:
Research and development, net	22,806		19,659		11,224		10,179
Selling and marketing	25,586		25,220		12,317		12,659
General and administrative	6,578		5,263		3,313		2,592
Total operating expenses	54,970		50,142		26,854		25,430
Operating income	15,007		10,401		8,844		5,884
Financial income (expenses), net	454		(1,079)		(852)		(280)
Income before taxes on income	15,461		9,322		7,992		5,604
Taxes on income, net	(3,558)		(1,479)		(1,353)		(810)
Net income	$ 11,903		$ 7,843		$ 6,639		$ 4,794
Basic net earnings per share	$ 0.40		$ 0.27		$ 0.22		$ 0.16
Diluted net earnings per share	$ 0.38		$ 0.26		$ 0.21		$ 0.16
Weighted average number of shares used in computing basic net earnings per share (in thousands)	30,017		29,214		30,493		29,214
Weighted average number of shares used in computing diluted net earnings per share (in thousands)	31,554		30,737		32,062		30,744

 

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,
	2020		2019		2020		2019
	(Unaudited)				(Unaudited)
GAAP net income	$ 11,903		$ 7,843		$ 6,639			$ 4,794
GAAP net earnings per share	$ 0.38		$ 0.26		$ 0.21			$ 0.16
Cost of revenues:
Share-based compensation (1)	99		66		49			30
Amortization expenses (2)	136		136		68			68
	235		202		117			98
Research and development, net:
Share-based compensation (1)	490		422		247			210
Selling and marketing:
Share-based compensation (1)	1,623		754		864			421
Amortization expenses (2)	30		30		15			15
	1,653		784		879			436
General and administrative:
Share-based compensation (1)	1,264		739		657			373
Revaluation of earn-out liability (3)	-		(23)		-			-
	1,264		716		657			373
Financial expenses:
Exchange rate differences (4)	(453)		1,258		829			358
Income taxes:
Deferred tax (5)	3,154		1,088		1,124			544
Non-GAAP net income	$ 18,246		$ 12,313		$ 10,492			$ 6,813
Non-GAAP diluted net earnings per share	$ 0.57		$ 0.40		$ 0.32			$ 0.22

(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 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 STATEMENT OF CASH FLOWS
U.S. dollars in thousands
		Six months ended				Three months ended
		June 30,				June 30,
		2020		2019		2020		2019
		(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net income		$ 11,903		$ 7,843		$ 6,639		$ 4,794
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,119		980		551		506
Amortization of marketable securities premiums and accretion of discounts, net		-		79		-		23
Increase (decrease) in accrued severance pay, net		624		(115)		312		(276)
Share-based compensation expenses		3,476		1,981		1,817		1,034
Decrease in deferred tax assets, net		3,127		953		1,110		528
Increase in accrued interest and exchange rate effect of loans, marketable securities and bank deposits		1		159		13		170
Decrease in operating lease right-of-use assets		3,898		4,063		2,022		2,159
Increase (decrease) in operating lease liabilities		(4,184)		(2,713)		60		(376)
Changes in IIA settlement liability, net		61		-		667		-
Decrease (increase) in trade receivables, net		(2,643)		(2,623)		(1,868)		2,237
Decrease (increase) in other receivables and prepaid expenses		(17)		203		58		457
Increase in inventories		(1,408)		(7,256)		(2,695)		(4,357)
Increase (decrease) in trade payables		(2,017)		3,667		(742)		3,040
Increase (decrease) in other payables and accrued expenses		369		2,065		2,278		(2,401)
Increase in deferred revenues		3,206		7,431		508		884
Net cash provided by operating activities		17,515		16,717		10,730		8,422
Cash flows from investing activities:
Proceeds from short-term deposits		451		5,971		301		-
Proceeds from long-term deposits		150		600		-		300
Proceeds from redemption of marketable securities		-		19,385		-		12,094
Purchase of marketable securities		-		(21,035)		-		(21,035)
Purchase of property and equipment		(641)		(1,361)		(293)		(245)
Net cash provided by (used in) investing activities		(40)		3,560		8		(8,886)

 

AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
U.S. dollars in thousands
		Six months ended				Three months ended
		June 30,				June 30,
		2020		2019		2020		2019
		(Unaudited)				(Unaudited)
Cash flows from financing activities:
Purchase of treasury shares		-		(8,002)		-		(7,051)
Repayment of bank loans		(1,238)		(1,237)		(619)		(619)
Cash dividends paid to shareholders		(3,866)		(3,218)		-		-
Payment related to the acquisition of ACS		-		(410)		-		-
Proceeds from issuance of shares, net		85,654		-		85,654		-
Proceeds from issuance of shares upon exercise of options and warrants		1,051		1,462		703		348
Net cash provided by (used in) financing activities		81,601		(11,405)		85,738		(7,322)
Net increase (decrease) in cash, cash equivalents, and restricted cash		99,076		8,872		96,476		(7,786)
Cash, cash equivalents and restricted cash at beginning of period		69,773		31,503		72,373		48,161
Cash, cash equivalents and restricted cash at end of period		$ 168,849		$ 40,375		$ 168,849		$ 40,375

                                                                                                                       

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SOURCE AudioCodes

FAQ

What were AudioCodes' Q2 2020 revenues?

AudioCodes reported revenues of $53.5 million for Q2 2020, an 8.1% increase year-over-year.

How much was AudioCodes' net income in Q2 2020?

The net income for AudioCodes in Q2 2020 was $6.6 million, or $0.21 per diluted share.

What was the impact of Microsoft Teams on AudioCodes' revenue?

Revenues related to Microsoft Teams increased over 300% year-over-year, reaching above $10 million in Q2 2020.

How much capital did AudioCodes raise in their recent public offering?

AudioCodes raised approximately $85.4 million in net proceeds from a public offering of ordinary shares.

What was AudioCodes' cash position as of June 30, 2020?

As of June 30, 2020, AudioCodes had $170.4 million in cash and cash equivalents.