AUDC - Earnings call transcript Q2 2022

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Operator

Greetings ladies and gentlemen and welcome to the AudioCodes' Second Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Roger Chuchen, VP of Investor Relations. Roger, the floor is yours.

Roger Chuchen

operator. you Thank and today Officer; call and Adlersberg, and Strategy President Financial Development. Hosting Niran are Baruch, Executive Officer Chief Netis, and and Finance of Vice Chief Corporate Officer; the Dmitry Shabtai Head President Chief of

conditions, like I objectives contain information performance, may remind you statements product future economic relating to Federal as introductions, thereto, or and Before provided term would that this assumptions and concerning during are any we statements other to performance, related events, begin, forward-looking made or matters outlook, to plans call is forward-looking the future expectations defined AudioCodes' business Securities statements as the under Laws. US

possible pandemic no update and Exchange US of filings for on business, of risks agreements, products risks, in and technology conditions Commission. need on limited to, statements detailed with include, in loan the the demand, those of materially conditions product, the other and AudioCodes' its possible financing, uncertainties additional the covenants business, AudioCodes this operations, industry not from ability and conditions into AudioCodes markets, manage of of to in the and products market impact results could to uncertainties, factors but and the target adverse in to are of company's and to the companies as developments, ability effect assumes acquisitions, products Forward-looking the in various and particular, customers' AudioCodes' factors and statements. to acquired such and general, differ timing integrate upgrades, needed, and products from subject changes stated pricing demand are factors These in possible and economic global cause COVID-XX and operations products, the to AudioCodes' for supply successfully competitive from the that acceptance in actual impact existing information. market obligation of satisfy disruptions and and AudioCodes' new Securities and the other ability markets, our shifts in results

call, net net In income reconciliation its has its non-GAAP to per GAAP the non-GAAP income and net in that and provided share press to and release addition, income during share. income on AudioCodes to per share net refer AudioCodes a net full income of is posted per will the website. income according the net

section website the be webcast is Before over call archived call. to like at I ahead. remind like An on being the call I that call please management, made conclusion would will Shabtai. to everyone of over all turn the company's to that Shabtai, of recorded. the I Investor Relations the available to go turn the would this said, With

Shabtai Adlersberg

Finance discuss review Niran the of business developments and presenting Thank for all trends XXXX a business our and of Vice then for Good I and call. morning me you, quarter in the afternoon Niran industry. this quarter. is financial morning highlights quarter summary AudioCodes. everybody. With welcome will second the by and and will to our President Roger. to like I and start-off overview Chief would good Baruch, conference Financial Officer

We then Q&A it session. will Niran? into turn the

Niran Baruch

hello, Thank Shabtai everyone. you, and

June Services press financial will non-GAAP referring reconciliation GAAP information last The $XX.X Revenues June revenues the The second of earlier to over of of $XX.X XX, quarter quarter amount on results. of of revenues morning period. financial we total Latin ago be XX.X% in a million, we today's year of by second second reported Services discussing deferred up XX%; X%. XX%; revenues. million the the an as geographical XX.X% usual, as million, the both for that Central EMEA, the accounted million Asia I were region XXXX, contains and revenues earnings America, $XX.X were issued $XX.X non-GAAP As over as were XX, Pacific, of $XX.X call, million, quarter XX.X% year. and follows, second in America, quarter XX%; and call. the from for that was quarter this will for XXXX. this North on for be release split the Revenues increase up supplemental the

in quarter Our are XX $XX.X June or XX.X% for compared QX our quarter the which million XX.X% compared XXXX. the $XX.X in per or million for of was to in as GAAP June results was compared revenues or million of diluted gross operating second by XXXX. the XXXX. XX.X% cash Net or to share for to equivalents, revenues the or of million compared of activities in XXXX. $XXX.X compared revenues Gross of were to totaled second in days. provided quarter of as cash customers million as was share top $X.XX quarter XXXX. attributed quarter, the deposits, Non-GAAP the of QX sales diluted operating compared QX was XX, million $X.XX income the distributors. Day income $X.XX per million $XX.X XX.X% quarter securities follows. an $X.X net for was aggregate to $XX.X XXXX, cash, was quarter bank our $X.XX per XX income revenues, represented XX% income the quarter to quarter share, was for second results $XX.X share, largest outstanding of $X.X million was XX.X% QX XXXX, million of or diluted XXXX. Non-GAAP per $X.X At or Non-GAAP marketable are margin XXXX. second Net million. XX.X% XX.X% second or for XXth QX end to of in Non-GAAP margin of follows. the $X.X revenues, diluted Operating for second the for XX.X% XX%

amount aggregate a us an to amount we approval a to court of million June XXX,XXX of of $X.X close a dividend per approval of to acquired share. XX, also $XX any purchase we August The on $X.XX additional consideration The be December permits The dividend all XX, During XXXX, approval trading of on dividend will amount. ordinary paid The of dividend XXXX shares. our declare In of of We for this shareholders the approximately at record approximately Israel valid XX, of aggregate of the court million. part million. is of is quarter, shares to XXXX. the total $X.X through up received in our cash ordinary declared August XXXX.

diluted in adjust headcount, follows. full-time revenues XXXX, of quarter in employees now as heels expect XX XX We XXXX altogether position XXXX in the position outsourced added guidance XX second for the quarter the range of position XX on we employees, in Regarding and first the XXX our XXXX. We down and net $X.XX. $XXX $XXX the $XXX of per million now we for will $X.XX million, back $X.XX to outlook Shabtai. to turn from of $XXX.X of over range to guide in prior done to share the to now income million call from I $X.XX previous million, and our non-GAAP

Shabtai Adlersberg

you, remind to start for conjunction release, Investor Niran. earnings providing on Thank that our like agenda today's we an discussion. to earnings I our by posted everyone would I would Relations have with supplement and like in deck. website

market. and First, Then I outlook half that business characteristics of the discuss to would in for and us strategy highlights our our second XXXX. I financial like will discuss differentiate

I Finally, of our discussions provide core will detailed business segments.

strong enable so to investors why to like topic, the first uncertain the foundation would environment. and outperform should macroeconomic far business remind address uncertainties the have the On we built during us I

software in deploy are trends customer our secular and labor the experience multiyear and communications drive growth productivity, Teams Customers the unified tight We notably in the leveraged space. Zoom relevant to inflationary which greater to and particularly and in environment. Microsoft market, is Phone services

consistent costs, basis, short-term XX.X%, our We have a which non-GAAP track supply chain amongst highest strong our record flow profitability On and industry. operating a margin generation. XX trailing is elevated the of months in despite cash was

flow. Over non-GAAP generated the we million cash also $XX.X same period, free

make Our our strong investments continue in profile competitive us our to differentiate enables financial from to further strengthen to mode us competition. and business prudent

sheet, of We quarter million net second $XXX.X ending with solid balance a have cash. the rock

macro actively transition in to for and a to time can not recurring dislocation of to on only our experienced strain to and our market add accelerate Pos leapfrog looking in turbulence, are franchise our and exerted the history, to managed our -- that survive strong extended expenses our have assets dislocations control each unique we've to position growth competition. We any market, we we portfolio great the revenues. Throughout long-term we are and capitalize

us. ascertain would to over I difficult macro While should the for to will it to be served that potential that we the remind time well past next has this not the fine-tune several strategy path execute. everyone difference years continue any and is us like of the term,

vendors. with experience and services unified and reach customer Zoom, and other the our expand customer teams, focus collaboration our of First, communication in on voice major experience solutions Genesis and enabling Microsoft core

Second, third, accelerated portfolio value software broad And and of transition services upselling inorganically. applications. by organically to increase and and customer subscription, a extended and voice

of the XX.X% services in Phone in company This momentum for return and services, in grew Teams UK year-over-year. and our Revenue as led revenue. of Live cloud to the top the to We're growth total Zoom pleased successfully Microsoft with on Microsoft our Experience and quarter by growing execution Customer model roughly Experience ongoing which managed revenue growth, year-over-year to financials. our proof year-over-year. XXX% company revenue. enterprise and the is the segment, XX.X% group accounted Service and Now recurring year-over-year XX.X% line Revenue XX.X% solid Zoom activity. results, XX% mainly report strategic transforming market, was grew Customer quarter of driven and by Teams, Phone by this for grew priority space which from strong the a revenue accounted AudioCodes of our

by on evidenced firm, Quantifying to our Stanley report three XX% users, have coning. dynamic percentage phone based years. increase today system over says XX% analysis our third this as particularly believe XXX and rate to of forecast by business. increases which a recent with We are confidence million play. further this -- executives, in Team's at aggregate adopting we Teams, adopted PSC There several monthly only next multiyear CIO Team's adoption party in active where about the Teams which to business, roughly Research, Microsoft organization compound growth Morgan in enterprises. our to XXXX, grow opportunity, Wainhouse of Teams supports through standardized market in on momentum, our cited runway large the over This is that, fuel XX% Microsoft that's Teams for with large will Microsoft As XX% low-single-digit expected and

continues is Our our quarter over a in has the after healthy closing Zoom being market strong Phone, And Strong I'm XXXX XX% spending with strong above of to prior up line, and Equally second well second momentum grow. netback strong deal large grew the for ongoing ecosystem quarter. Microsoft Customer which that of XX%. CX Contact remains the and propelled back slipped Center pleased over gears results a in segment, to year-over-year. routing in share environment the report the application Experience to strategic within is quarter quarter. the in prior in down were X.X% XX%, Shifting by

progress continue AI where Contract We over our quarter the Total during grew business, conversational great to see XXX% signed year-over-year. with Value

portfolio XX% are XXXX our We in year. well previous to above compared the positioned to grow in

revenues AudioCodes XXXX. Importantly, AI on the from $XX exited and to see services target ARR June, track We putting rate, over in conversational recurring million of to and segments, achieve doubling for offering for our managed $XX of our a million CX over the annual XXXX us strong $XX Live, month run the million to momentum. UCC continue

engagement line cloud, top to infrastructure across business, OpEx. of solution core of hybrid work margin secular experience, by areas powered continues discussion of customer by supported and migration expand and Our AI. trends to Shifting our enhanced voice to long-term and

as in corporate the a than ago versus for our ago was non-GAAP figures, a influenced accounted quarter. This margin average this sales carry And Our in greater the mix, typically came by margins. at versus lower were year gross quarter quarter. several XX.X% percentage year of XX.X% they product

for the accounted of margin the difference. gross costs chain supply our balance Second,

non-GAAP quarter, quarter we versus mentioned higher Specifically, previous $X.X $X.X the year of by supply XXX million quarter. in in cost gross impact ago million second which our the chain higher about the margin was we basis costs the lower We than estimate points. on component the incurred

third Excluding now the XX.X%. our impact, temporary, substantially have impact we believe believe been in should this is margin lower We quarter. which

was investment previous primarily While in in our quarter driven the to our we non-GAAP growth down OpEx strategic have in in XX% macroeconomic slowed this the growth, areas of in OpEx slowdown. position. quarter. The we invest to The growth global XX% continue year-over-year, business, second by the still slowed to comparing view adding

was year-over-year. XX.X% year have product XXX period, activity. chain XX.X% increased ago new which costs operating the hiring our technology mix, and investments was supply in product We in by Non-GAAP development, increased added and positions impacted margin versus

heels of we quarter earnings in to of budget. in the per the second headcount, compares On This non-GAAP line this with $X.XX, Niran at our came XXXX. as have in development, to mentioned, regard speaks itself With in XX of in share second full-time employees, That internal our grow $X.XX to continue prosper. for employees outsourced to the confidence added altogether, XX XXXX. ability in our of position XX our and quarter terms and

macro of in business as and XXXX, to of environment. prudently we continue OpEx quarter of XXXX, uncertain added in XX our while heels position light in added the the areas On XXX managing strategic of invest in position first

the headcount in growth continued expect XXXX. third quarter of We in

guidance. updated our to Now

believe strong chain in in the XXXX. our the short-term is of macroeconomic and While we see headwinds to fundamentals, momentum to prudent supply elevated and view update continue we it business guidance cost

our stated, follows. As Niran already we as guidance adjust

$XXX On original guidance to our for from original lower to range in the we in side, $X.X January. year -- annual of $XXX.X the million be the of down provided revenue million, about revenue million, one plan X% the now by range

Touching income on back non-GAAP As range financial year-over-year of the our original There guide non-GAAP XX% earnings, no EPS million, in quarter, a $X.XX quarter. XX%, be growing which good margin. been XX% guidance to $XXX to long-term is $XXX. very working $X.XX to to by change in we to to the from the operating remain down in to has to range the targets, of now sales and get by to this of XX% to

a in that North We by sales keeps have we strong America XX%. in have -- our and targets developing plans outperform channel our

I in regions We America, well some would All-in-all, that pass have and in. EMEA we original that territories and in plan. areas performed few say the North

Now into let's business our dive core engines.

had Teams accelerating for we provides, grown another speaks quarter that's million period added further year-over-year, to new it again, business. company new coming impact we the that adoption growing the Teams full $XXX in coming and created in above and the Business additions, mentioned set quarter, for Microsoft year-over-year our in see being we of about decline strong X% growth Skype grew in the be accounts XX% pipeline. Microsoft down year-over-year. business Teams, the Also, which in Teams, decline the to be only First it's quarter, for in overall million in declined XX% over continued this We previously, quarter XX% year basis of our of par which Teams and of business which year-over-year. $XXX will up record Skype versus activity account the ago -- for in XX% No foremost, $XXX and quarters, prior has on look now the the quarters. readability XX% as Business Microsoft, for question will every quarterly growth negligible to with here, and versus has a

drive future. growing to demand with that ability annual enable business of to grow we developments deliver in of substantially in we should growth. after all devices to XXXX. now. we We've in opportunity is nicely. We've saw to growth, thus, phone XXXX cores the IP to our overall the space, Microsoft continuing substantial are have when and we pandemic. XXX, This that shortage confidence have again phone several Also, strength increasing major Microsoft had work by similar activity. and becomes Microsoft our while level COVID-XX key if received, business I quarter delivery at our that, was installation a limited our Microsoft decline on we business topic some that in we the in to IP Microsoft. seen continued the to by is we That shows business though our a have ability We and revenue about has above seen and with which the And great up and XXXX that XXXX, on the already at XX% were note the seen probably XX% end XX% XX% in year-to-date, We the of July return we increase efforts, we for a now the our third compared of point in growing end and growing growth. of service mention about IP the high combine mention meeting speaks a the hand, of plan across purchase probability business phone deliver. Another would orders of in rooms. equipment with growth with To really

We Cloud activity expect second product and launch in we product operations. to half offer with those meant a new who's in a in provider XXXX. space have tedious of Teams the enable Connect. services Operator on this out quickly to the and seen in board we Microsoft service Those are Live build Microsoft and going meeting to platform market new get acting Also, services, the this deliver solutions we to to and are have through increased

And order closely have cloud operations. so accelerate partners other live in we been and Microsoft with some to working

we have to Just two, space. three in accounts that mention that

a APAC international X.X contract XX-month selling have and with signed in large provider, So service a expansion. X,XXX migration X for from investment for is for service Alcatel covers EMEA total Voice the a AudioCodes working value. million with we contract Teams firm, Live This to Tier Services deal employees

value. Teams migration from Voice contract signed employees provider, XX,XXX of AudioCodes working Alcatel XX-month for with million selling European The XXXX. cover to live Services close multinational by contract win to we another had in energy Another end of with the Live company, service Europe, $X total of a services X Tier we

solution this potential portfolio. of our in hopeful additional in project upselling are and expansion We

alongside working Cisco contract company, migration provides US the SBC system from and as signed this to Third, a with X,XXX managed for services from million an contract leading addition, for we The total in value. services APAC. international Live operations of AudioCodes Teams about energy part time Services deal the the integrator, such various selling XX-month changing $X.X the Voice employees plus

run AudioCodes, dive for AudioCodes space, business Live space. portfolio Now Live. had services in us important second managed million the $XX over the portfolio. Microsoft and in our most which of ended at Teams achieve Microsoft last track execution to on rate, $XX keeping we XXXX at live target subscription quarter, We line let's services stands AudioCodes million have $XX up the to We from million. quarter excellent is over

we AudioCodes we and in seamless benefit process Teams migration total the from value XX fact in from Importantly, complexity live quarters, of total have and June success to Live removes from added quarter legacy ended enterprises. sign than over up visibility XXX% often this last contract multiyear sometimes revenue We Teams. Actually, year-over-year. the integration of for each customers in over cost-effective from as more of stems XX-month XX contracts. value, million sometimes XX, rapid million stream $XX Microsoft enterprise the with the Microsoft that provide a and telephony contract it three with

of million. above total XXX last value value, our just signed teams, of $XX amount live of than we have at to quarter, each the information. contract million of contributed each the a the repeat the before, for as is total three contract total contracts total value And second end quarter. In now more Regarding mentioned quarters, I've

our to above revenues in XX%. space. success the Zoom activity the move quarter, in In space grew the Let's Phone second Zoom from

still be million to of close million. XXX% year this range will XX grow will the X compared in to We year, previous to

in Second created. new were quarter quarter which record XXXX opportunities was also a

And of market US market is north by from Phone and more a opportunity the that X% Phone that expected which the importance in Zoom you and quarter, New XXXX. on gain a know XX% Zoom about is as XXXX, tells about big in out developing Zoom the in the grew of solution share stated, arena. to We publicly. potential this XXX% in that's year creation the to it's a Zoom for really report October strategic XX% we more focusing know

Just million sits to $XXX talking US everybody, remind about a we're market.

targeted up connectivity products We a Phone and in projects with are solution coming increase phones, gateways, of environment. Zoom cooperating invest and number some on devices, MSBR to of with resiliency, We several lot more. the conference solutions and Zoom for the a devices in

with strategic believe also all, are in all progress the business next customer in So US the we market. that experience. nice making we Zoom segment The is

we up are which quarter, over prior left a and continued of see $X of by in connectivity the to the second integrator We services after European to a a XX% particular this that closing that transformation global fueled deal digital are large SBC the down a deal on deal, On quarter large This prior quarter. healthy EMEA being roughly has to the with pleased initiative. adoption infrastructure return in quarter. Growth financial strong growth, was embarked in million is value. large worth was in working XX-months provide X.X% a system contract of of institution, in [ph]

growing voice that connect to As it's products or the solution, future mention during and number voice conversational in chat solution long-term you product are I'll see here, contract CC we and two, Among adoption original years, tells the connectivity and for that for are past including and intelligent paving five three to even forward. related months revenue we ourselves we box high and [ph], you going success years, expect we increasingly new building of the experience. growth. which Voice.AI them, boost assistance. enables solution, the and web value then XX Voice.AI agent past customer can Also, see IVR just two services sometimes of and the which during growing launched

America, that with activity, EMEA directly seen Genesis. a APAC. relationship we had our in is traditionally users. enrolled have in we pickup time, this strong nice in And North that activity activity both to to and have We've end – related addition So where long-term are

quarter mentioned, Global the of is 'XX, our business. XX% growing services for have really In our we me our Services. of to Services, second become Global pillar as let revenues. talk grew Lastly, about

we quarter, result altogether, and we've grew contract half. this from is XX% the Growth in support Specifically, year-over-year. first in quarter if and we quarter a then and grown And second first in in was second moving X.X% combine from about mild XX% X.X% maintenance good selling simply services selling over then more mode really with to services, a in substantially. support in from professional recurring North professional be We in pass On the and mode, services our to coming quarter XX% year-over-year, America because transactions. grew our mainly CapEx grew second we EMEA.

services quarter In half growth in new North the at AudioCodes globally Professional we won and services customers. America fact, a professional as highest North then live to recent America. of on and North in in year-over-year America, XX% record XX managed services just first mention, above

all all, above services I the now bringing that, turn federal concluded customer with to my XXX. introduction, count So and And Americas contracted to I to will Q&A. in have managed Operator? fashion

Operator

you Shabtai. much, [Operator Instructions]. Thank very

Go Company. Your Sidoti Please ask & Greg of question. your first is from Burns coming ahead. question

Greg Burns

morning. Good

So just revised first guidance. the on

expecting guidance, In what second your terms in the EPS margins of half terms improvement margins to year? of should the assumptions the from EPS, remain under you gross decrease we Are back are for or the the quarter the pressure? any expect in of

Shabtai Adlersberg

in down think it additional I down. see for I quarter. seen going we second will cost believe generally, components that a bit Generally, Yes. going the We've

expect the decline We third in quarter. higher

about that's So, think I hope we return to cross-margin XX%. I all a in to have all, as mentioned

Greg Burns

Okay.

operational I our think about margin

Shabtai Adlersberg

right. Yes.

Greg Burns

users Microsoft Teams. mentioned XX million on they And had Okay. had PSTN

like -- that And you're what users number rate those your in in adoption efforts number, their are teams? the are of are of are that a touching, gauge you kind they're increase that reporting of where if voice is to adoption? to the terms seeing -- services good what to that that -- is So

Shabtai Adlersberg

Okay. Good point.

So yes, our I'll in some of quote Microsoft teams-- statement.

So users A right? of not include €XXX Teams phone. we does million announced uses Teams

understand many are, if So phone million. XX stayed they how Teams users to want you

who out Teams phone, million Now the outside with of communicated people use XX not are all those world.

a last now a mentioned XX PSTN announced, have in important call have ago. have we this an X year announcement, just indeed the they compared million that week users and ago So million is with they of

SBC on Every growth here embarked using what's Teams [ph]functionality, So been work we point on can acquired specific solution. that to okay? -- any internally has without the organization

However, to outside with either in to need in functionality. you add PSTN code order dial SBC acquired the receive the to communicate or to

you it north we As million right see that. heard using we in sets saying growth tell I such that big state that of XX the control we these and field we of in just can XX% see and that. we now, the sets

base that the yes, So is us. future see as we estimation data to important ahead that potential point of an to our

Greg Burns

Thank you. Great. Okay.

Shabtai Adlersberg

Sure.

Operator

you. Thank

Samana Samad, Your your next question of is coming from Jefferies, Samad ask please question.

Samad Samana

in implied Hi. morning. the Great. XXXX on the of it year. half back to, think comps XXXX. half Good deceleration first top kind follow of half I versus but of suggested half numbers, guidance guess in let's the And easier back call the it, as I the XX% question, wanted about the are on up I about from to of line. the just back the

led smaller top the to deal projects? what cycles reduction? line you maybe driving I'm understand longer? seeing you're guess you that trying I said seeing but Are people scale is do I you know to So just the specifically dollar are guidance macro, revision? get What seeing

Shabtai Adlersberg

Right.

that the update on on I okay? that, So side, update I'll probably really just changed my the due have say initially done update would earnings to If to the have would not target we revenue. -- not update was our

year. we've provide -- to As guided from take a going we we're XX% growth initially down update, said, we to okay, an

be year. it's Now, a XX% to going

see decisions. the bit a time. question, uptick, in that projects we a So right? major longer It's taking your yeah, either don't To some a of as we see do delay

No. gave is initially see before. the runs and impact all. about that's previous the has prudent in to developing is know that take in estimate more months, We see is guidance, not been everything X% projects, but There longer be in are just positive. worldwide. world as some crisis headwinds. the the how last I income think we okay, is But say, just I questioning months, the we some delays, and this

Samad Samana

And about move behavior you're trends over seeing Teams, more Okay. quickly you're Like, from when any are moving Zoom moving of the That's – terms in guess, entire to cloud? change base convert in once? Microsoft over or seeing then Phone there? they in Like of helpful. I Business with you're the at seeing they as for conversions customers in of terms you cloud doing you what you to over – as that seeing being customers what how are terms they're the methodical are Skype how to maybe to just are the footprint? over environment? helping Are

Niran Baruch

We a Business at just of Business was That for Business or of Skype about XX the – right, moving Sky ago, quarter in quarter, a down was online to X%. see it Teams. to and quarter the versus ago think X Skype second I trend about million, million numbers, Yeah. talk all accounts definitely strong to very X.X% year of

know the we decline know that, fairly So I of rapid. that, kind is it's costly.

then would for You such as to that, three costly solutions, for Business, Skype Online different, I maintain Skype application Teams. infrastructure, can for assume Business and it's Microsoft say,

because substantially time, dwarf Teams goes in $X.X even almost And scatter the X%. mentioned take I Business. customers But Skype we that it Microsoft think the interest million – for are this nothing. growth less with than is decline process. to before than fact, it really that So fact I've a not that more of to will of up a of quarter, as that aware low will year, again, – expected amount aware that and And it's of speed business

Samad Samana

Thank Great. taking for my question. you

Operator

you. Thank

Company. question. coming Ryan, Your your next question Ryan from Koontz of & is Needham ask please

Ryan Koontz

question. Thanks for the

characterize product On would Live Where subscription? of that from $XX terms million the the sales this here are in what inning strong new Narin of over Thanks. you with we ARR, to transition today migration your services new on growth AudioCodes in sales?

Niran Baruch

Okay. compared if Yes, rapid very products with say, our AudioCodes keep a let's I XX%, give our that moved of revenue products. -- transition. selling to because transaction actually close above need a you it's service great XX% stage, from we good is question I now, live, maybe are XX XX% you I core. approximately to an At CapEx this above think, know, – items. think still or already know, bank Already estimate, recurring

of of in the Many move managed competence. -- again, their But is and very actually, to This this companies them to with of far market the see We to one think many of this because would actually, part I solution the modernization new solution recurring. deal the accepted difficulties in the XXX% do to talents grow tell have in simply of of rapid. are inability I lack so most space and you think, current well in we core all at large using the not a often is it's -- is life the them I of open chronic to the services are is think, alleviates a deploying very deal or federal accepted of shown because So year-over-year lot that issues, I our very when a because system. to not it time with and with professional this its ability services.

will the will see years, year. between continued every to three we in next would growth growth, if tend year. a yes, we XX% and not I think XXX% So that XXX% see

Ryan Koontz

helpful. services your in Super And versus managed you of your us the difference margin corporate gross can average? remind

Niran Baruch

margin deal. Actually, more higher services the with than onetime because live there is and it's the CapEx

Ryan Koontz

I update to as particularly there, SBCs? Got it. Any environment own on Microsoft's quick the a for just could. it solutions And competitive internal follow-up relates if

Shabtai Adlersberg

Yes.

Metaswitch this discussed really ramp-up the to deal Microsoft They is And I so of space think, far sales a there all. actually to before, not acquired for. try substantial enterprise I last relates mentioned connect. from operator in did everything business. we SBC the at

an So from stage that. our this to business do impact at see we not

Ryan Koontz

That’s hear. Thank to I had. all you. Good

Shabtai Adlersberg

Thank you.

Operator

Okay.

question America. Tal is of the from over Liani coming you. Your of next Tal, Bank to

Tal Liani

Hi. you. the Thank question. afternoon. Shabtai, Hi, Good previous Good answer on I understand morning. didn't your previous, guys.

it I'll a in way. but So different ask again,

least you Actually, are customers? that We've guidance then on it saying heavy, You lines And decline next constraints orders last was seen heavy decline, from specific if -- a why side? is for at is constraints. revenue lowered the the or or in the it seen most there stabilized. concern, elaborate Can quarters. two has the on throughout It but improve, companies on a Is customers. specific where where supply product four And supply quarters, stabilized. Is it margins, didn't revenue based it? you've based on now? it

it now why more So than are you flying before?

Shabtai Adlersberg

Okay.

first. So manufacturers, question the issues. them three use, in of our we which quarter, this and market towards solve supply, that two second delivery costs of get the A, answer the second the or most our and let watch tell me we their ability to I end can you

the that believe not using. not So using we're we forward. going volume companies large are this sure I'm same

that the third volume, quarter, So improvement. actually, with be in be will that will quarter a told And we nice I'm our it minimal. believe fourth

is question, internally remind the… So AudioCodes. that's first on you at seeing this here regarding we're Can what what your

Tal Liani

Yes. revenue -- for from next next this drives you where quarters. the related or guidance to guidance customers question in the the The for order Is the Is see the lower weakness you lower two you drives is, do it the simple what revenue two specific that quarters? coming specific terms, products? to cuts, to

Shabtai Adlersberg

Okay.

getting the with cuts. difficult, revenues. no account and simply the we specific had velocity and this services think okay, was ago anywhere No providing and side, experienced right? the second we revenue two in customers. products we It's in in And that to I taking situation seen On picture more into specific headwinds have quarter world. the years order all

mentioned guidance. it updating revenue, that updated Simply, reason precautious. some with is that providing -- for I've into just account. an again, the more -- take guidance, have This will since being just not we that's should this So,

being X%. slower Not simply et as we project it specific. longer decision And cetera. than by taken so It's lowered before,

Tal Liani

where -- And you do right.

Shabtai Adlersberg

Right.

Tal Liani

I'm customers, certain the year, quarters? more two it take X% projects expect just you for this you be the where where Is it for or X% -- Is from, the certain Is And services? of do but of it for kind shipments? the do it's next understand to it it Is kind it's weakness where product? expect is two the you if because general to greater math. trying place? next to or about And quarters -- -- it of all think if the over

Shabtai Adlersberg

I'll Listen, specific the you any to we're reason area. mean, idea, give about to you I tied for it, an it's give just deals. right? not talking

in in a Center that Contact $X size, could size. that million could be take $X.X million If deal, be you

So, with a feel removal just mean, replanning. we close quarter. of XX one to project of revenue a project million or a I

have I environment change. But basically are of if So, the to here not Microsoft misses take be not need probably revenue say to chances such it It's center. specific I not I to space for provider estimate, difficult the made to -- to there. to service in assume we tied It's that's that It's to the I account, contrary be of all-in-all, XXXX, to and not I to all, and XXXX, any middle leave that the ability area. space. environment, into on overall at achieve specifically the to want contact to if beginning why more target top tied tied it's would harder going to that the

Tal Liani

project already and but that some be And you're from you following your cautiousness from your cautious anything or year? you could guidance in, involved that on customers see I know shouldn't for projects we suggest about don't customers the with pushouts provide XXXX, discussions do the

Shabtai Adlersberg

Actually, that I can projects second No. I'll already behind in the July can that very you -- tell that you tell us. discussed July is you I we in really. have quarter, strong. tell in pickup Not we

another is We very XXXX case you Microsoft Microsoft Well, They are they the right? have down. want to take taking not are Think for week limiting projection believe, decrease keeps that, mentioned even announcement hiring including in ago, one intend trends growing. cautious, they they've heard that if was more a I going I in certain Phase to to the need areas, hiring think of X. I announcement before. where there relate rate to our And right? in May,

taking no estimate right? makes different than So, account me Microsoft, that make into that we're

Tal Liani

are Got And to how workforce, it. own own your the environment? do kind and your Last question, what about hiring of plans? Shabtai, you your adjust

Shabtai Adlersberg

XX So, mean, XX about position, we this have we hiring. XX I we in stated employees positions. keep full-time that quarter, outsourced and did

weekly and that We you request. continue daily to I'm sitting hire. new can I with tell

business approach, services to Our add people. need we

our We have because more to like business nicely, position. XX growing very we in have positions. Asia-Pacific and We will increase it's would

So, hire. of all continue to all, in we how simply but we we will grow, in be control to need

Tal Liani

you. Thank Great.

Shabtai Adlersberg

Sure.

Operator

Thank you much. very

Brian, from Your please next ask your [ph] is question coming question. from McWilliams Barclays. Brian

Unidentified Analyst

Thanks Hi, on this for Jack is for Brian. the taking question.

to CX the the this quarter's off versus to third? in the into point growth the coming this we continue decline. inflection return strong should quarter, Thanks. business a hit year-over-year momentum first After first expect you So,

Shabtai Adlersberg

tell will good and continue the that we a grow growth to you we are in all disruption can and growing you conversational in position contact third fast in that call what see of I up. already that the will in see yes, quarter, Well, And Yes. tell center from market in solution, all, we to whole third the quarter. I automation the

Unidentified Analyst

the then first so market there global on second the of Thanks. agent discussed the any of sort bringing Great. you year. here? in update in quarter, And covers, half Is virtual of the

Niran Baruch

contracts conversation that for can about quarter the got solution to tell IVR. no I can about. big of in that the that there's you market talking new talk a we're second So, progress, but I we

And -- product we strong with since reception. we in the market, right being in cover now receiving it to product. five XX new can the is now between seems that very a And new and be We are the -- that trialed are accounts. gap

Unidentified Analyst

That's it All for right. me. Thanks.

Niran Baruch

Brian. you, Thank

Operator

[Operator appear closing? back hand have questions We the in Would for to like Instructions] no Okay. to further you me queue. over

Shabtai Adlersberg

on XXXX. all. We our and you Thank Have industry. we trends call. the operator. track today. forward quarterly This nice next another quarter participation of underlying conference of second conference We thank our momentum market I would continued strong our believe, call day. you, look XXXX in in in like year who are a your everyone growth to to attended thank good in business Well,

Operator

This and gentlemen. Thank conclude you, ladies call. conference today's does

phone for your time, disconnect wonderful day. participation. may your Thank you have lines this a and You at

AudioCodes (AUDC) 2 Aug 222022 Q2 Earnings call transcript