AudioCodes Q4 2024 Earnings Report

Coterra Energy EPS Results

• Actual EPS: $0.31
• Consensus EPS: $0.22
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: N/A

Coterra Energy Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $61.84 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Coterra Energy Announcement Details

• Quarter: Q4 2024
• Date: 2/4/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, February 4, 2025
• Conference Call Time: 8:30AM ET

Coterra Energy (NYSE:CTRA) is a US-based natural gas play headquartered in Houston, Texas. The company was formed in 1990 as Cabot Oil & Gas Company, a subsidiary of then-parent Cabot Corporation, and it went public later that same year. The spin-off concentrated Cabot Corporation’s energy assets into a single, stand-alone company so it could focus on the core business of chemical and specialty materials production.

By 1991 Cabot Oil & Gas Company was a 100% publicly-owned company with diversified energy operations. Over the years the company made several major acquisitions and divestitures that concentrated its assets in the natural gas exploration, production and sales business. The company’s proven reserves at the end of 2021 topped 2.89 billion barrels of crude oil equivalents which were 85% natural gas and about 8% natural gas liquids and other natural gas products. Only 7% of the reserves were crude oil.

The company acquired Cimarex Energy in 2021 resulting in the name change to Coterra Energy. Cimarex Energy is a specialist in shale oil & natural gas with operations in Texas and Oklahoma so was a natural fit for the company. Today, Coterra Energy operates as an independent oil and gas company focused on natural gas and natural gas liquids in the continental United States. Total revenue in 2021 topped $3.45 billion, the company employs about 935 people, and it is a member of the S&P 500.

Coterra’s largest holding is in the Permian Basin at approximately 234,000 multi-zone acres. The company’s 2nd largest holding is in the Marcellus Shale. It is approximately 177,000 acres situated in the dry gas window. The dry gas window produces the highest grade natural gas that has minimal liquids dissolved into it. Holdings in the Anadarko Basis top 182,000 acres and primarily in the Woodford Shale formation. Coterra also provides services to the natural gas industry in Texas. Coterra’s downstream operations are limited to industrial and bulk customers including natural gas distribution companies, top-tier energy companies, pipelines and public utilities.

Coterra’s Energy’s goal is to provide sustainable returns to its shareholders through a diversified business model. The company's diversified exposure to natural gas, natural gas liquids and crude is intended to help it weather ups and downs in the energy cycle. Portfolio quality is also key to the strategy by providing lower-cost-to-capture resources with higher resale prices. Returns are delivered in the form of dividends which have been paid every quarter since 2007. The company also aims to maintain a strong balance sheet as part of its strategy.

As part of the company’s commitment to sustainability and a lower-carbon future, it invests heavily in new technology. Technology currently in place allows for nearly 100% recycling of water used in production and exploration activities, no flaring except for safety reasons and the electrification of assets whenever possible. Natural gas is critical to the global shift toward greener energy because it is the most efficient use of hydrocarbons.

 

Coterra Energy Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the AudioCodes Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr.

[Operator]

Roger Chuchen, Vice President of Investor Relations. Sir, you may begin.

[Roger Chuchen, VP - Investor Relations at AudioCodes]

Thank you, operator. Hosting the call today are Sheftai Atlasberg, President and Chief Executive Officer and Niran Bruh, Vice President of Finance and Chief Financial Officer. Before we begin, I'd like to remind you that the information provided during this call may contain forward looking statements relating to AudioCode's business outlook, future economic performance, product introductions, 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 the term is defined under U. S. Federal Securities Law.

[Roger Chuchen, VP - Investor Relations at AudioCodes]

Forward looking statements are subject to various risks and 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 effects of global economic conditions in general and conditions in AudioCode's 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 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 AudioCode to successfully integrate the products and operations of acquired companies into AudioCode's business, possible adverse impact of the COVID-nineteen pandemic on our business results and operations. The effects of the current terrorist attacks by Hamas and the war on hostilities between Israel and Hamas and Israel and Hezbollah, as well as the possibility that this could develop into a broader regional conflict involving Israel with other parties may affect operations and may limit our ability to produce and sell our solutions.

[Roger Chuchen, VP - Investor Relations at AudioCodes]

Any disruption in our operations by the obligations of our personnel to perform military service as a result of current or future military actions involving Israel and other factors detailed in AudioCode's filings with the U. S. Securities and Exchange Commission. AudioCode assumes no obligation to update this information. In addition, during the call, AudioCode will refer to non GAAP net income and net income per share.

[Roger Chuchen, VP - Investor Relations at AudioCodes]

AudioCodes has provided a full reconciliation of the non GAAP net income and net income per share to its net income and net income per share according to GAAP in the press release that is posted on its website. Before I turn the call over to management, I would like to remind everyone that this call is being recorded. An archived webcast will be made available on the Investor Relations section of the company's website at the conclusion of the call. With all that said, I'd like to turn the call over to Shepta. Shepta, please go ahead.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Thank you, Roger. Good morning and good afternoon, everybody. I would like to welcome all to our fourth quarter and year end twenty twenty four conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of AudioCodes. Niran will start off by presenting a financial overview of the quarter.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

I will then review the business highlights and summary for the quarter and discuss trends and developments in our business and industry. We will then turn it into the Q and A session. Niran?

[Niran Baruch, CFO & VP of Finance at AudioCodes]

Thank you, Shabda, and hello, everyone. Before I start my formal remarks, I would like to remind everyone that in conjunction with our earnings release this morning, we will post shortly on our Investor Relations website and earnings supplemental deck. On today's call, we will be referring to both GAAP and non GAAP financial results. The earnings press release that we issued earlier this morning contains a reconciliation of the supplemental non GAAP financial information that I will be discussing on this call. We will be comparing our results to the prior quarter as we believe it provides a better gauge of our financial performance.

[Niran Baruch, CFO & VP of Finance at AudioCodes]

Revenues for the were $6,160,000,0.0 an increase of 2.2% over the $6,020,000,0.0 reported in the of the current year. Full year 2024 revenues were $24,220,000,0.0 a decrease of 0.9% over the $24,440,000,0.0 reported in 2023. Services revenues for the were $3,420,000,0.0 an increase of 5.4% over the $3,250,000,0.0 reported in the of the current year. Services revenues in the accounted for 55.6% of total revenues. On an annual basis, service revenues were $13,020,000,0.0 an increase of 8.2% over the $12,040,000,0.0 reported in 2023.

[Niran Baruch, CFO & VP of Finance at AudioCodes]

The amount of deferred revenues as of Dec. 31, 2024 was $8,440,000,0.0 compared to $7,860,000,0.0 as of Sept. 30, 2024. Revenues by geographical region for the quarter were split as follows: North America 40 7 Percent EMEA 30 4 Percent Asia Pacific 14 Percent and Central And Latin America 5 Percent. Our top 15 customers represented an aggregate of 64% of our revenues in the of which 48% was attributed to our 10 largest distributors.

[Niran Baruch, CFO & VP of Finance at AudioCodes]

GAAP results are as follows. Gross margin for the quarter was 66.2% compared to 65.2% in Operating income for the was $410,000,0.0 or 6.7% of revenues compared to operating income of $490,000,0.0 or 8.1% of revenues in Full year 2024 operating income was $1,720,000,0.0 compared to operating income of $1,440,000,0.0 in 2023. EBITDA for the quarter was 5200000.0 compared to EBITDA of $590,000,0.0 for Full year 2024 EBITDA was $2,110,000,0.0 compared to EBITDA of $17,000,000 in 2023. Net income for the quarter was $680,000,0.0 or $0,.22 per diluted share compared to net income of $270,000,0.0 dollars or $0,.09 per diluted share for Full year 2024 net income was $1,530,000,0.0 or $0.5 per diluted share compared to $880,000,0.0 or $0,.28 per diluted share in 2023. Non GAAP results are as follows.

[Niran Baruch, CFO & VP of Finance at AudioCodes]

Non GAAP gross margin for the quarter was 66.5% compared to 65.6% in Non GAAP operating income for the was $750,000,0.0 or 12.2% of revenues compared to $7,000,000 or 11.7% of revenues in Full year 2024 non GAAP operating income was $2,810,000,0.0 compared to operating income of $2,890,000,0.0 in 2023. Non GAAP EBITDA for the quarter was $850,000,0.0 compared to non GAAP EBITDA of 7900000.0 for Full year 2024 non GAAP EBITDA was $3,140,000,0.0 compared to non GAAP EBITDA of $31,000,000 in 2023. Non GAAP net income for the was $1,160,000,0.0 or $0,.37 per diluted share compared to $490,000,0.0 or $0,.16 per diluted share in Full year 2024 non GAAP net income was $2,730,000,0.0 or $0,.87 per diluted share compared to $25,000,000 or $0,.77 per diluted shares in 2023. At the December, 2024, cash, cash equivalents, bank deposits, marketable securities and financial investments totaled $9,390,000,0.0 Net cash provided by operating activities was $1,530,000,0.0 for the and $3,530,000,0.0 for the year sorry. Days sales outstanding as of Dec.

[Niran Baruch, CFO & VP of Finance at AudioCodes]

31, 2024 were 106. During the quarter, we acquired 635,000 of our ordinary shares for a total consideration of approximately 6,000,000. In December 2024, we received court approval in Israel to purchase up to an aggregate amount of $20,000,000 of additional ordinary shares. The court approval also permit us to declare a dividend of any part of this amount. The approval is valid through June 14, 2025.

[Niran Baruch, CFO & VP of Finance at AudioCodes]

Earlier this morning, we also declared a cash dividend of $0,.18 per share. The aggregate amount of the dividend is approximately $530,000,0.0 The dividend will be paid on March 6, 2025 to all of our shareholders of record at the close of trading of Feb. 20, 2025. Our guidance for the full year 2025 is as follows. We expect revenues in the range of $2.46,000,000 dollars to $2.54,000,000 dollars and non GAAP EBITDA in the range of $34,000,000 to $38,000,000 I will now turn the call back over to Shabday.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Thank you, Niran. I'm pleased to report solid performance with healthy growth in key business lines. Now before I delve into reporting the financial and business, I would like to start off by offering a perspective on our journey over the recent years, reflecting our past, current position and our future direction. First, let's take a moment to acknowledge the achievements of 2022. It was an exceptional year for us with revenue reaching a record level of $2.75,000,000 dollars and profits at $45,000,000 non GAAP EPS.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

However, in 2023, our business experienced a slowdown. The challenging economic, environmental and global crisis had a significant impact on sales of our hardware products, primarily due to the high interest rates environment in our transition from perpetual sales to a recurring business model driven by shift towards cloud services. This has resulted in 11% increase in revenue and notable decline in earnings in 2023. Then turning to 2024, while we anticipated similar trends continuing, I'm pleased to report that year 2024 has significantly stabilized a stabilization in comparison to the Tropo phase in 2023 with a minimal revenue decline of about 1% and a comparable effect on earnings. 35% of net cash flow from operations further underlines our success in 2024.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Furthermore, in 2024, we began a new journey driven by combining the power of AI and business voice application to explore new opportunities for the company. As you will hear shortly, we are embarking on a new direction, gradually shifting our focus from connectivity business to a new AI and generative AI powered value added services business. This area appears to hold significant potential for our growth. Consequently, we are optimistic that 2025 will mark a year for reversal with plans in place for renewed revenue growth and increased profits. More importantly, we aim to establish a leading position in the emerging market focused on AI driven value added services within The U.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

K. S. And CX segments. Now to results. Our enterprise UCaaS and CX business did very well in the quarter.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Related revenue accounted for 92% of revenues in the highlighted by Microsoft business at 13%, up 30% in the quarter. This represents the highest quality growth rate this year. Full year Microsoft business increased 6%. In the customer experience business, we made progress as planned, and our growth in our CX Live business and healthy pipeline for CX Live services supports positive outlook for 2025. We also did very well in our services business.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Overall services grew 10.9% year over year and accounted for 54.5% of revenues. Professional managed services grew 23.1% year over year. With The U. S. Market continued growth of above 15% CAGR for coming years.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

We expect our live managed services growth to continue at such rates in coming years. Going back to enterprise, live teams grew 30% in the quarter and accounted for 47% of the overall Microsoft business. Full year 2024 live teams increased 33% and represented 47% of Microsoft business. This growth coupled with 30% growth in voice AI business for the full year 2024 contributed to us ending 2024 with an annual recurring revenue at $65,000,000 representing 35% year over year growth. It is important to note that at this stage, the majority of revenue from The U.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

K. S. And CX markets are associated with our connectivity year. What's been developing already in 2024 and we should see more of it growing in the years ahead is a shift in the market demand to focus on complementary value add services for the same U. K.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

S. And CX markets. Just to name a few such services, this include the mount guarders, call analytics, contact center solutions, recording solution, meeting room solutions, CRM connectivity and more. As such, with the shift in our focus to offer business voice applications coupled with value added services, we expect to see a rise in demand for our voice AI applications. We are preparing to launch services based on live services platform, a SaaS unified service delivery platform that has been in development in our company for the past three years.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

This platform integrates connectivity, management and value add services into a single audio code solution, which we believe positions us with a competitive market advantage. As previously mentioned, our land and expand strategy supported by our leading SBC connectivity solution and complemented by additional solution and services has consistently demonstrated our potential for growth. We are now moving into the second phase of this strategy, utilizing our strong network of enterprise customers to cross sell value add services, specifically within the realm of voice application that we classify broadly as conversational AI. To provide some context, our investment in conversational AI began back in 2018 with the establishment of our voice AI business unit, well before the rise of GenAI. With the introduction of GenAI, we've observed a notable increase in customer interest and expansion of use cases, which has justified a significant portion, approximately one third of our R and D budget dedicated to this area.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

We believe that our voice AI portfolio has reached a level of maturity and is now receiving increased market recognition for our solution, leading us to expect accelerated revenue growth starting in 2025 and continuing thereafter. Consequently, as we approach 2025, we will concentrate our internal operation on managing two distinct business units, connectivity and value add services. Now I will provide an overview and outline some financial characteristics of these two business units to enhance investors' understanding of the AudioCode's current operations. Starting with our connectivity business. This business encompasses our traditional voice infrastructure solution and service operations, which are designed for large enterprises in the UC and CX markets.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

In 2024, this segment has generated approximately 95% of the company revenue. Operating for the past fifteen years, this is a well established operation that holds a strong market position, particularly within the markets of Teams and Genesis ecosystems and achieving attractive non GAAP operating margins that are between 1618%. Fully mature and solid business, which continues to grow roughly at above 10 annually. As a leading player in this area, we anticipate consistent long term growth in years ahead. With the advancement of cloud services, we have adopted our voice infrastructure solution, shifting from hardware focused products to software solution and services.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Transitioning from traditional capital expenditures or perpetual sales to recurring managed services model is expected to improve both revenue visibility and stability, while supporting sustained long term growth. Consequently, we view this business as highly profitable with promising growth potential and significant cash flow from operation, which will allow us to invest and fund the evolution for our value added services and voice AI. Now let's discuss our voice AI business. We initiated the investment in this area back in 2018. From an operational standpoint, we are still in investment phase as the number of voice AI applications we support is rapidly increasing in value added services sector, largely due to the emergence of GenAI technology launched by OpenAI back in November 2022.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

In 2023 and 2024, we allocated around $8,000,000 to $10,000,000 of investment each year, which has influenced the company's overall financial performance and bottom line. The voice AI business saw growth of approximately 30% in 2024 and contributing about 5% to total revenue. We expect that this continuous annual investment will further facilitate annual growth rate of 30% to 50% for the voice AI business in coming years. As the voice AI business offers its voice application and SaaS solution, we foresee an increase in gross margins that will exceed the current company average, resulting in enhanced gross margin over the next few years. Over the last year, our voice AI business lines have gone on multiple industry accolades, including Voca CRC winning the award for the best Microsoft Teams contact center solution from CX today in February 2024, recognition for best use of AI by the Meeting Insight solution by UC Today in July 2024 and just yesterday, an award for Meeting Insight from Frost and Sullivan for competitive strategy leadership in the AI business meetings market.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

While we believe we will emerge a leader in the conversational AI field among established players and startups, we are uniquely positioned to succeed due to several key factors. First, we possess extensive domain expertise in VoIP telephony networking built over the past twenty years. Also since 2019, we have made significant investment in cognitive services technology and AI. Our team has vast experience in developing and delivering SaaS cloud and on premises services. We have proven record in UCaaS and CCaaS managed services and we have extensive experience in deploying AI solution further that will further strengthen our position.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Moreover, the brand trust that we have established with major enterprises is noteworthy, a voice solution or deployed in mission critical UCCX voice infrastructure of 65 out of the Fortune 100 companies and four out of the top 10 multinational banks. We believe these strengths collectively position us favorably within the competitive landscape of conversational AI of BINSWERIX application. Now before turning into more detailed business line discussion, let me quickly shift into the profitability metrics. Our non GAAP gross margin for the quarter was 66.5% falling within our long term target range of 65% to 68% and an improvement from the previous quarter of 65.6%. In the non GAAP operating expenses rose to 33400000.0 up from $3,250,000,0.0 in the This increase is mainly attributed to increased investment in marketing, travel and cloud services aimed at bolstering business growth as we move towards 2025.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

The hike in expenses can be primarily linked to enhanced participation in marketing events and expanded sales team in higher travel costs, all focused on driving revenue growth, especially in live managed services and voice AI. In terms of workforce, we concluded 2024 with nine forty six employees, an increase from nine thirty five in the but a slight decline from 9.5% in the Adjusted EBITDA for the was $850,000,0.0 reflecting a 13.7% margin compared to $790,000,0.0 or 13.1% in the previous quarter. For the entire year, adjusted EBITDA reached $3,140,000,0.0 Lastly, in a positive development, net cash from production activities was $53,000,000 for the quarter and $3,530,000,0.0 for the full year 2024. Clearly, this robust cash flow generated supports our positive outlook regarding our capacity to keep investing in and expanding our business moving forward. Now to the guidance front.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Concerning our growth strategies for connectivity and value add services sector in 2025, We aim to sustain growth of 20% to 26% in the connectivity sector with a target annual recurring revenue of $78,000,000 to $82,000,000 In the value added services sector, we anticipate booking will increase by over 40% year over year to exceed $17,000,000 In light of this planning, along with operational momentum and strong pipeline in our Live managed services and voice AI, we are setting our guidance, as Yaron mentioned earlier, to revenue guidance of $2.46,000,000 dollars to $2.54,000,000 dollars for 2025 with full year non GAAP EBITDA guidance of $34,000,000 to $38,000,000 These projections take into account continued strong growth in the conversational AI space and stable connectivity outlook, assuming no significant changes in the macroeconomic landscape. Let me move a bit to give more background on Microsoft's business. Regarding strategic business segments, as previously noted, Microsoft Teams experienced 13% increase year over year in the marking the highest core growth of the year. The full year growth for Microsoft business was 6%. Looking at the recurring versus capital expenditure aspects, our live booking in surged by 30% year over year with live booking constituting 47%, an increase from 40% in the same year last year.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Consequently, this time CapEx segment of the teams accounted for 52% down from 60% in the previous year quarter. The activity regarding new life teams contracts remain robust in with total contract value booking exceeding $20,000,000 For the entirety of 2024, we observed annual contract value growth surpassing 25% compared to prior year. A significant factor in success within this domain is the live services platform, which combines connectivity management and value added services. This platform facilitates faster development for large enterprises large enterprise accounts on one end and then enables quick onboarding for small and medium sized businesses. As we look ahead to 2025 and beyond, market forecast indicated The U.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

K. Market will likely continue to expand its rates exceeding 20% throughout 2027. The market of Teams phone ecosystem has shown robust growth adding over 3000000 new seats in the past year, reaching a total of about 22000000, which is small fraction of the estimated $300,000,000 potential for TIMSSIT. Also, I'm pleased to share that we have recently been focusing on creating a valuable opportunity for ourselves as we prepare to offer a comparable successful connectivity solution for the Cisco WebEx calling program. With an estimated 16000000 seats and an additional 3000000 seats in the past year, we view this new market segment as an excellent chance to expand our market presence.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

In a previous discussion, we highlighted the ongoing strengths of the Microsoft ecosystem, especially within the education sector. I'm happy to report that this momentum has not only persisted, but has also intensified. Here are a few significant achievements from the core. The first success involves a major state university system comprising of over 50 campuses. Recently, we finalized a master agreement with the IT administration, which designates us as the preferred communication partner as the campus's aim to enhance their UCCX infrastructure in coming years.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

In the we secured contracts value in the low single digit million, which includes LivePro managed services, professional services and capital expenditures for IP phones. Notably, this figure represents the initial commitment from nine campuses only out of the 50 and is just a small part of the total number university available. We anticipate that more campuses will join us in upcoming months. Getting to our CX business. In revenue increased by 12% compared to the Throughout the we successfully finalized several significant agreements with partners and clients across North America, CALA and India.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Despite the challenges associated with migrating call center voice infrastructure to the cloud, many customers are choosing our Live CX service. During we secured a contract exceeding $1,000,000 for Live CX in Brazil with a banking institution to assist in their network migration to the cloud. In North America, we established multiple Live CX agreements in with leading banking and financial organizations. By beginning of we established a CX partnership with an Indian BPO to transition their multi bridge and voice infrastructure to the cloud. They went live within few weeks using our live service delivery platform, which typically takes months with traditional deployment methods.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Our efforts to encourage partners to adopt our live platform resulted in a new contract with the North American Tier one SI system integrator that has measured Genesys and Cisco CX practices. We will continue working to onboard more partners onto our platform to expand the reach of our live CX service. Now moving to details about voice AI business. Voice AI business, as mentioned before, grew 30%, twenty four %, contributing nicely to the overall company revenue growth, development of Gen AI technologies and increasing customer demand for AI driven business voice application play significant role in adoption of voice application. With new opportunities emerging in this sector and booking nearly reaching 15,000,000 in 2024, It is anticipated that demand will remain steady and this segment is projected to grow by 40% to 50% in 2025.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Let me make quick run through two or three, the businesses in the Voice AI area. The first is the Voice AI Connect, a primary target or large enterprises in North America and Europe that develop and deploy multiple custom voice boats and agent assist solution to serve contact center solutions. Following over three, four years of developments, the solution, which is SBC based, has reached a mature stage and is highly appealing to large corporation. Additionally, we've created a derivative product, a cloud self-service application named LiveHub. This platform enables both developers to rapidly test or onboard both applications within minutes, making it highly attractive to develop a sub bot solution.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Another exciting development is our recent soft launch of our real time translation capability in We have seen strong market interest resulting in multiple proof of concepts with existing new customers. In 2024, sales grew by over 30% and we anticipate maintaining the same growth rate in 2025. Turning to Voca CRC, this is our AI first Azure based contact center solution for Microsoft Teams. When combined with our calling solution for Microsoft Teams phone, Voca CRC offers a comprehensive and advanced calling and contact center solution. In 2024, we successfully delivered an expanded deployment with large enterprises in North America, EMEA and APAC.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

In some of these deployments, we were successfully displacing and winning against key competitors. In its third year of operation, this business bookings grew by approximately 35%. We're now planning for a growth of 50% in 2025. Now turning into Meeting Insights. This has been an event for past few months for Meeting Insights on all fronts.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

First, we are thrilled to have Frost and Sullivan present us with Best Practices Competitive Strategy Leadership Award in the AI for Business Meetings market. The announcement was made yesterday and will make it public in Camp Days. We believe this validates the vision of serving a centralized organizational knowledge hub, breaking down silos by unlocking valuable insights from meetings across major UC platforms. Even before this recognition, we already saw step function increase in customer interest in meeting insights across all geos with full quarter proof of concept trials at nearly 2.5 times the level from the previous quarter. Jan.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

0 proof of concepts off to a new good start and so would expect another record for proof of concept in the In terms of product development, professional updates, I'll name a few. We recently unveiled intelligent room solution by powering populating our own video conference devices with meeting insights such that all meeting participants will automatically receive auto generated AI meeting summaries. This move enhances value proposition to users by bringing to bear the full capabilities of our portfolio and can spare further interest in adoption of meeting insights. We're also adding bring your own storage option, which expands a dropsable market to customers who are required to have the recording storage on their preferred or private cloud. Since the announcement of Zoom meeting support in we have seen a good number of meetings contacted in Zoom environment validating our vision and value proposition of centralized knowledge repository.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

In the next few weeks, we will look to offer integrated of major CRM platforms starting with Salesforce to meeting insight. We believe this will be a very important functionality meeting high demand in the market. We have announced a week ago a new and quite exciting solution in Israel. You're talking about operating Meeting eSight on prem. This is a meeting solution for organizations seeking highly secured environment for meeting solution and complete disconnect from the Internet.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

First stages it is in first stages of evolution, already selling in ice in the government application area in Israel, and we intend to operate in international markets in coming months. Very unique offering, we have seen high demand for the solution. It touches the most sensitive areas for management in the government, defense, finance and healthcare markets. To wrap up my presentation, we exited 2024 with good operational momentum, particularly with the continued strong growth in our two primary engines, our live family of managed services and voice AI. With the progress we are making and increasing our recurring revenues and that live currently nearing half of Microsoft Teams bookings, we believe we have laid the foundation to support sustainable and healthy top line and margin expansion in 2025 and beyond.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

And with that, I've concluded my presentation. I'd like to move over to the Q and A session.

[Operator]

Thank Thank you. Our first question is coming from Ryan McWilliams with Barclays. Your line is live.

[Analyst]

Hey guys, this is Damian Coggan on from Ryan McWilliams. Thanks for taking the question. Great to see solid growth in services revenue in the quarter. Can you help us understand what is driving your confidence for improved top line growth in 2025 and beyond? Are customers more optimistic about their spend in 2025 or this being driven by AudioCode's AI opportunity?

[Analyst]

Thanks.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

As I've mentioned in my previous presentation, we have seen a pickup in the in new projects and bookings. And I believe in the we saw a record backlog of total contract value signed for more than $20,000,000 that compares roughly to an average of $15,000,000 throughout the year. So we've seen nice pickup in the Again, we believe that with the advent of Gen AI and CoPilot technology, there will be more reason for enterprises to adopt AI and Gen AI to deal with Teams meetings and Teams calls. And therefore, we believe that there will be more deployments of Microsoft Teams phone in the market.

[Analyst]

Great. Thanks, Avtai. And then for the CCaaS demand in the quarter, how did that fare compared to And then are you seeing increased attention from buyers on voice AI?

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

So the answer is yes. But first, we are substantially increasing the capacity of the live CX services we're offering. Prior to moving to cloud, enterprises were usually aided by partners who really took care of most of the installation and operations day two and on. With the move to cloud, much of these partners were left with no ability to support the enterprises. And therefore, that support needs to come from the vendors themselves, which created kind of a gap in the market.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

We have identified that the Now we have a substantially fuller portfolio of Fly CX services. And I think we just had a very substantial win. I think I've mentioned it. It is with a large one of the largest North American system integrator that deals with CX projects mainly in the Genesis and Cisco environment. So that offering really represent substantially faster deployments of voice networks within the move, the migration from on prem to cloud.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

And this is where we find a lot of interest. Also as you have mentioned, there's a trend of applying AI to contact center recordings. Gen AI technology allows analysis and analytics of all those calls just to find out more information. So analysts that will be analyzing agent calls will be able to hand over to management trends and more important insights into what's going on. And we're not talking about single sessions, but also when you talk about multitude of sessions, you can talk about tens and hundreds of sessions where Gen AI helps you to identify personal and trends.

[Analyst]

Great. Thanks guys.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Sure.

[Operator]

Thank you. Our next question is coming from Ryan Coons with Needham and Company. Your line is live.

[Ryan Koontz, Senior Analyst at Needham & Company]

Great. Thanks for the question.

[Ryan Koontz, Senior Analyst at Needham & Company]

We hear the traction on Microsoft picking up there around Teams. And

[Ryan Koontz, Senior Analyst at Needham & Company]

what kind

[Ryan Koontz, Senior Analyst at Needham & Company]

of trend you're seeing relative to operator voice connections into Teams? Are you seeing a trend over toward this new operator connect capability or still a lot of direct routing and how does that impact your attach rate for Teams? Thank you.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Right. Well, we've seen a shift in the encouragement of using OperatorConnect over a diacrout. So we do see organization, small organization mainly interested more. Is it an overwhelming trend? We've not been exposed to such trends.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

So yes, the movie the trend is moving from SBC's aircraft to operator connect. But at this stage, we still do not see a big increase in usage in the market.

[Ryan Koontz, Senior Analyst at Needham & Company]

Got it. Great. And just at a high level, you talked about some big customer wins here in Brazil and the systems integrator North America. I wonder if you're seeing a trend toward larger fewer larger customer wins or are you seeing more activity down market where you maybe have a higher number of smaller customer opportunities in the pipeline? Thanks.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Okay. Thanks for the question because that really allows me to elaborate a bit about segmenting the market into two key areas. On an enterprise space, we see here a continued trend of large enterprises adopting teams year by year. And as I've mentioned before, we believe that the advent of AI and Copilot solution will drive more enterprise seats towards using Teams meetings and calls. So but in this space, we are generally a very dominant leader and we do not see much competition.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

So here the growth is well. Now touching the SMB space, as you allude

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

to

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

it, there's definitely competition over there, right? I mean, we know that Cisco is leading the space with our relationship with the world largest service providers and then you have Zoom playing in that area and Teams Microsoft Teams also trying. There I believe it's going to be more competition. However, we believe that the platform we will be introducing second core, the live platform delivering value add services with so many unique AI driven applications such as contact center, recording, meeting solution, analytics, CRM connection and stuff. We believe that being very strong technologically, we do have an advantage with coming up with one of the best platform you'll see in the market.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

And therefore, we believe that we will be a strong player in that. So all in all, I mean, we have a two pronged strategy and we believe we will be successful in both.

[Ryan Koontz, Senior Analyst at Needham & Company]

Great. Thanks, Shanta.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Thank you.

[Operator]

Thank you. Our next question is coming from Samad Samana with Jefferies. Your line is live.

[Billy Fitzsimmons, VP - Equity Research at Jefferies]

Hey guys, this

[Billy Fitzsimmons, VP - Equity Research at Jefferies]

is Billy Fitzsimmons on for Samad. Maybe to start a couple of months back you announced support for AudioCodes meeting insights for Zoom meetings. Obviously, Zoom also has their internal AI companion. Shantai, can you just talk about differentiation between your solution and Zoom's in house solution and maybe traction you're seeing since launch with customers?

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Right. So Meeting eSight is targeting to become a UC agnostic solution, meaning that our solution is an enterprise level solution. And in every enterprise you have no matter what type of UC solution that enterprise has adopted takes us as an example. We are using Microsoft Teams. We have often a lot of Zoom calls, we are called in and or sometimes when we need to talk to the government here in Israel, it's a Google Meet session.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

So you want one centralized solution, enterprise solution that should be able to basically contain all of the different session from both Microsoft Teams, Cisco WebEx calling, Zoom meetings and Google Meet meetings. And therefore, our solution will allow that. Anyone using just Zoom, you know, will simply not be able to add to it calls coming from different environments. So that is a major strategy in our solution of becoming use agnostic. And also we believe that the fact that we are dealing with larger enterprises, which have a finer requirements and you can find executives with different research and market and business driven questions that we can answer within MeetingInsight because we use custom prompts.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

We believe that we will see that less in other solution. One of them could be Zoom AI companion. So we believe that the fact that we're dealing with large enterprises will make our solution substantially more extensive and providing more detailed solutions.

[Billy Fitzsimmons, VP - Equity Research at Jefferies]

And then more broadly, obviously, the business has been going through this kind of subscription transition, shift to more recurring, ratable revenue. Can you just help us think a little bit more next year about kind of the revenue mix? And in the longer term, is there a point where the product revenue and some of the legacy stuff in there should start to bottom? Or should we expect perennial declines there for this services support side to make up for that in terms of growth?

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Right. So as mentioned earlier in the call, we glad that in 2024, we saw the drop in legacy business drop stabilizing. Meaning, contrary to the 11% drop in 2023, we went down only 1% in 2024. We believe that the trend will continue in 2025, meaning we'll have less and less drop in legacy gears such as gateways and hardware based routers and SBCs. So on that front, the business will stabilize.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

We then see increased use of services. And as I mentioned before, it's I think we're stepping into a new era of business voice application, which is all software and cloud services, SaaS solutions. And for example, we ended 2024 with voice AI revenues at about, I believe it was $12,000,000 and we're targeting $18,000,000 so we're targeting 50% and quite frankly, I believe that we are not yet in a phase where those solutions are mature enough. So as those solutions gets more and more mature, I believe that the growth rates will intensify. So we're building much upon our ability to drive voice AI business revenue.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

So combining the two, halt of the drop decline in legacy and emerging of voice AI. And obviously, as we stated before, the live business, which is growing 35% a year, I think we set for a good year in 2025.

[Billy Fitzsimmons, VP - Equity Research at Jefferies]

And then if I could sneak in one final question. You guys obviously guided to EBITDA for next year, but could you maybe go a step further and just help us think even high level about kind of the individual OpEx lines next year? Where are you making kind of incremental headcount investments and maybe where are you kind of pairing back spending? Obviously, there have been a lot of AI products, but R and D spend is actually down over the past couple of years. Could we expect that line, for example, to pick up a little bit next year in terms of OpEx spending?

[Niran Baruch, CFO & VP of Finance at AudioCodes]

Yes. In terms of OpEx, we are planning to invest more only at the area of sales and marketing, definitely not at the G and A and the R and D. And all in all, OpEx at 2024, we ended $131,000,000 We believe for 2025, and that's how we budgeted it, the growth at OpEx will be 1%, maybe 2%, not more. And it's mainly will be at the sales and marketing area.

[Billy Fitzsimmons, VP - Equity Research at Jefferies]

Awesome. Super helpful. Thank you, Shantae and Niran. Appreciate the answers.

[Operator]

Thank you. As we have no further questions at this time, I would like to turn the call back over to Mr. Adlersberg for any closing remarks.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Thank you, operator. I would like to thank everyone who attended our conference call today. With continued good business momentum in our enterprise operations and good underlying market growth trends in The UKFCX and voice AI, we believe we are transitioning the business towards growth and growing profitability in coming years. We look forward to your participation in our next quarterly conference call. Thank you all.

[Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes]

Have a nice day.

[Operator]

Thank you. This concludes today's conference and you may disconnect your lines at this time. And we thank you for your participation.

Participants

Analysts

• Roger Chuchen, VP - Investor Relations at AudioCodes
• Shabtai Adlersberg, Co-Founder, President, CEO & Director at AudioCodes
• Niran Baruch, CFO & VP of Finance at AudioCodes
• Analyst
• Ryan Koontz, Senior Analyst at Needham & Company
• Billy Fitzsimmons, VP - Equity Research at Jefferies