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Audiocodes Ltd. — Earnings Release 2018
Oct 23, 2018
6659_rns_2018-10-23_2671e832-b652-4acb-a3c2-79513a5f848d.pdf
Earnings Release
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PRESS RELEASE
Company Contacts IR Agency Contact Niran Baruch, VP Finance & Chief Financial Officer AudioCodes Tel: +972-3-976-4000 [email protected]
Shirley Nakar, Director, Investor Relations AudioCodes Tel: +972-3-976-4000 [email protected]
Philip Carlson KCSA Strategic Communications Tel: +1-212-896-1233 [email protected]
AudioCodes Reports Third Quarter 2018 Results
Lod, Israel – October 23, 2018 - AudioCodes (NASDAQ: AUDC) Press Release
Third Quarter Highlights
- Quarterly revenues increased by 13.5% year-over-year to \$44.5 million;
- Quarterly service revenues increased by 10.8% year-over-year to \$14.1 million;
- Revenues related to UC-SIP business increased more than 30% compared to the third quarter of 2017;
- Quarterly GAAP gross margin was 62.2%; quarterly Non-GAAP gross margin was 62.7%;
- Quarterly GAAP operating margin was 11.2%; quarterly Non-GAAP operating margin was 13.5%;
- Quarterly cash flow from operating activities was \$3.5 million;
- Quarterly GAAP net income was \$4.1 million, or \$0.14 per diluted share; quarterly Non-GAAP net income was \$5.8 million, or \$0.19 per diluted share;
- AudioCodes repurchased approximately 133,000 of its ordinary shares during the quarter at an aggregate cost of \$1.1 million.
- AudioCodes declared an annual cash dividend of 20 cents per share. The dividend, in the aggregate amount of \$5.8 million, was paid on August 20, 2018.
Details
AudioCodes, a leading vendor of advanced voice networking and media processing solutions for the digital workplace, today announced financial results for the third quarter ended September 30, 2018.
Revenues for the third quarter of 2018 were \$44.5 million compared to \$43.5 million for the second quarter of 2018 and \$39.2 million for the third quarter of 2017.
Net income was \$4.1 million, or \$0.14 per diluted share, for the third quarter of 2018 compared to \$1.0 million, or \$0.03 per diluted share, for the comparable period last year.
On a Non-GAAP basis, net income was \$5.8 million, or \$0.19 per diluted share, for the third quarter of 2018 compared to \$3.4 million, or \$0.10 per diluted share, for the comparable period last year.
Non-GAAP net income excludes: (i) share-based compensation expenses; (ii) amortization expenses related to intangible assets; (iii) expenses related to deferred payments and expenses due to revaluation of an earn-out liability, each in connection with the acquisition of Active Communications Europe; and (iv) non-cash deferred tax benefit or expenses. A reconciliation of net income on a GAAP basis to a non-GAAP basis is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.
Net cash provided by operating activities was \$3.5 million for the third quarter of 2018. Cash and cash equivalents, longand short-term bank deposits and long- and short-term marketable securities were \$56.7 million as of September 30, 2018 compared to \$58.7 million as of December 31, 2017. The decrease in cash and cash equivalents, long- and short-term bank deposits and long- and short-term marketable securities was the result of the use of cash to pay a dividend to shareholders in the aggregate amount of \$5.8 million and for the continued repurchasing of the Company's ordinary shares offset, in part, by cash provided by operating activities.
"We are pleased to report record financial results for the third quarter of 2018," said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes.
"In the third quarter we continued to execute on our strategic plan to grow our leadership in the Enterprise and Service Providers telephony and Voice business. Supporting our strategy for secular multi-year growth are the strong trends of moving to a digital workplace in the enterprise and the transitioning to all-IP networks in the service providers market. This has resulted in 13.5% growth in revenue and strong net income compared to the year ago quarter. Key to this strong performance was our UC-SIP business which grew over 30% compared to the third quarter of 2017. This is now
the third quarter in a row in 2018 with above 30% growth in our UC-SIP business over the respective quarters in 2017. We now predict annual revenue growth of above 11.5% for the full year 2018 compared to 7.7% growth in revenue in 2017. We also forecast that non-GAAP net income in 2018 will grow more than 50% compared to 2017, on the heels of close to 30% growth in net income in 2017. Steady evolution in the underlying market segments we serve coupled with our strong execution and leadership should support continued business momentum in coming quarters".
"On the financial front, we have demonstrated good control of operating expenses resulting in record financial performance. Non-GAAP operating margin for the third quarter of 2018 was 13.5% compared to 8.8% in the third quarter of 2017. EBITDA was \$6.4 million compared to \$3.8 million in the third quarter of 2017. Non-GAAP net income reached \$5.8 million compared to non-GAAP net income of \$3.8 million in the third quarter of 2017. Net cash provided by operations was \$3.5 million and has reached \$14.0 million for the nine months ended September 30, 2018. As such, we remain confident in improved performance in the coming quarters as we enjoy continued good business momentum," concluded Mr. Adlersberg.
Dividend
On July 24, 2018, the Company declared an annual cash dividend of 20 cents per share. The dividend, in the aggregate amount of \$5.8 million, was paid on August 20, 2018 to all of the Company's shareholders of record on August 6, 2018.
Share Buy Back Program
During the quarter ended September 30, 2018, AudioCodes acquired approximately 133,000 of its ordinary shares under its share repurchase program for a total consideration of \$1.1 million. As of September 30, 2018, AudioCodes had acquired an aggregate of 17.3 million of its ordinary shares since August 2014 for an aggregate consideration of \$91.3 million.
In June 2018, AudioCodes received court approval in Israel to purchase up to an additional \$20 million ("Permitted Amount") of its ordinary shares. The court approval also permits AudioCodes to declare a dividend out of any part of the Permitted Amount during the approved validity period. As of September 30, 2018, \$12.7 million remained available to the Company under this court approval. The current court approval will expire on December 14, 2018.
Conference Call & Web Cast Information
AudioCodes will conduct a conference call at 8:00 A.M., Eastern Time today to discuss the Company's third quarter operating performance, financial results and outlook. Interested parties may participate in the conference call by dialing one the following numbers:
United States Participants: +1 (877) 407-0778
International Participants: +1 (201) 689-8565
The conference call will also be simultaneously webcast. Investors are invited to listen to the call live via webcast at the AudioCodes investor website athttp://www.audiocodes.com/investors-lobby
Follow AudioCodes' social media channels:
AudioCodes invites you to join our online community and follow us on: AudioCodes Voice Blog, LinkedIn, Twitter, Facebook, and YouTube.
About AudioCodes
AudioCodes Ltd. (NASDAQ, TASE: AUDC) is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. AudioCodes enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. AudioCodes offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.
For more information on AudioCodes, visit http://www.audiocodes.com.
Statements concerning AudioCodes' business outlook or future economic performance; product introductions and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements'' as that term is defined under U.S. Federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions in AudioCodes' industry and target markets in particular; shifts in supply and demand; market acceptance of new products and the demand for existing products; the impact of competitive products and pricing on AudioCodes' and its customers' products and markets; timely product and technology development, upgrades and the ability to manage changes in market conditions as needed; possible need for additional financing; the ability to satisfy covenants in the Company's loan agreements; possible disruptions from acquisitions; the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business; and other factors detailed in AudioCodes' filings with the U.S. Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.
©2018 AudioCodes Ltd. All rights reserved. AudioCodes, AC, HD VoIP, HD VoIP Sounds Better, IPmedia, Mediant, MediaPack, What's Inside Matters, OSN, SmartTAP, User Management Pack, VMAS, VoIPerfect, VoIPerfectHD, Your Gateway To VoIP, 3GX, VocaNom, AudioCodes One Voice and CloudBond are trademarks or registered trademarks of AudioCodes Limited. All other products or trademarks are property of their respective owners. Product specifications are subject to change without notice.
Summary financial data follows
AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| 2018 2017 (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and cash equivalents \$ 21,320 Short-term and restricted bank deposits 6,245 |
\$ 24,235 2,739 7,087 22,059 4,693 16,563 |
|---|---|
| Short-term marketable securities and accrued interest 25,710 |
|
| Trade receivables, net 26,454 |
|
| Other receivables and prepaid expenses 8,244 |
|
| Inventories 21,900 |
|
| Total current assets 109,873 |
77,376 |
| LONG-TERM ASSETS: | |
| Long-term and restricted bank deposits 3,394 |
4,207 |
| Long-term marketable securities - |
20,475 |
| Deferred tax assets 4,933 |
6,685 |
| Severance pay funds 18,654 |
20,138 |
| Total long-term assets 26,981 |
51,505 |
| PROPERTY AND EQUIPMENT, NET 3,892 |
3,835 |
| GOODWILL, INTANGIBLE ASSETS AND OTHER, NET 37,640 |
38,222 |
| Total assets \$ 178,386 |
\$ 170,938 |
| LIABILITIES AND EQUITY | |
| CURRENT LIABILITIES: | |
| Current maturities of long-term bank loans \$ 2,497 |
\$ 2,519 |
| Trade payables 6,627 |
5,639 |
| Other payables and accrued expenses 23,621 |
20,786 |
| Deferred revenues 22,995 |
16,417 |
| Total current liabilities 55,740 |
45,361 |
| LONG-TERM LIABILITIES: | |
| Accrued severance pay 19,787 |
21,228 |
| Long-term bank loans 4,322 |
6,237 |
| Deferred revenues and other liabilities 7,257 |
5,731 |
| Total long-term liabilities 31,366 |
33,196 |
| Total shareholders' equity 91,280 |
92,381 |
| Total liabilities and shareholders' equity \$ 178,386 |
\$ 170,938 |
AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
| Nine months ended September 30, |
Three months ended September 30, |
|||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| (Unaudited) | (Unaudited) | |||
| Revenues: | ||||
| Products | \$ 89,237 | \$ 79,450 | \$ 30,462 | \$ 26,522 |
| Services | 41,209 | 35,871 | 14,057 | 12,686 |
| Total Revenues | 130,446 | 115,321 | 44,519 | 39,208 |
| Cost of revenues: | ||||
| Products | 38,428 | 35,241 | 13,414 | 11,909 |
| Services | 10,071 | 8,359 | 3,413 | 2,692 |
| Total Cost of revenues | 48,499 | 43,600 | 16,827 | 14,601 |
| Gross profit | 81,947 | 71,721 | 27,692 | 24,607 |
| Operating expenses: | ||||
| Research and development, net | 25,626 | 22,222 | 8,283 | 7,686 |
| Selling and marketing | 37,377 | 36,549 | 12,020 | 12,151 |
| General and administrative | 7,713 | 6,537 | 2,402 | 2,176 |
| Total operating expenses | 70,716 | 65,308 | 22,705 | 22,013 |
| Operating income | 11,231 | 6,413 | 4,987 | 2,594 |
| Financial income (expenses), net | 186 | (6) | (37) | 97 |
| Income before taxes on income | 11,417 | 6,407 | 4,950 | 2,691 |
| Taxes on income, net | (2,454) | (3,049) | (815) | (1,642) |
| Net income | \$ 8,963 | \$ 3,358 | \$ 4,135 | \$ 1,049 |
| Basic earnings per share | \$ 0.31 | \$ 0.11 | \$ 0.14 | \$ 0.03 |
| Diluted earnings per share | \$ 0.30 | \$ 0.10 | \$ 0.14 | \$ 0.03 |
| Weighted average number of shares used in computing basic earnings per share (in |
||||
| thousands) | 28,855 | 31,500 | 28,797 | 30,918 |
| Weighted average number of shares used in computing diluted earnings per share (in |
||||
| thousands) | 30,118 | 32,534 | 30,272 | 31,959 |
AUDIOCODES LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
U.S. dollars in thousands, except per share data
| Nine months ended | Three months ended | |||||
|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||
| 2018 | 2017 | 2018 | 2017 | |||
| (Unaudited) | (Unaudited) | |||||
| GAAP net income | \$ 8,963 | \$ 3,358 | \$ 4,135 | \$ 1,049 | ||
| GAAP earnings per share | \$ 0.30 | \$ 0.10 | \$ 0.14 | \$ 0.03 | ||
| Cost of revenues: | ||||||
| Share-based compensation (1) | 138 | 59 | 51 | 17 | ||
| Amortization expenses (2) | 522 | 522 | 174 | 174 | ||
| 660 | 581 | 225 | 191 | |||
| Research and development, net: | ||||||
| Share-based compensation (1) | 445 | 278 | 181 | 97 | ||
| Deferred payments expenses (3) | - | 136 | - | 63 | ||
| 445 | 414 | 181 | 160 | |||
| Selling and marketing: | ||||||
| Share-based compensation (1) | 861 | 779 | 307 | 239 | ||
| Amortization expenses (2) | 45 | 90 | 15 | 30 | ||
| 906 | 869 | 322 | 269 | |||
| General and administrative: | ||||||
| Share-based compensation (1) | 854 | 565 | 314 | 219 | ||
| Revaluation of earn-out liability (4) | 200 | - | - | - | ||
| 1,054 | 565 | 314 | 219 | |||
| Income taxes: | ||||||
| Deferred tax (5) | 1,752 | 2,560 | 584 | 1,496 | ||
| Non-GAAP net income | \$ 13,780 | \$ 8,347 | \$ 5,761 | \$ 3,384 | ||
| Non-GAAP diluted earnings per share | \$ 0.45 | \$ 0.25 | \$ 0.19 | \$ 0.10 |
(1) Share-based compensation expenses related to options and restricted share units granted to employees and others.
(2) Excluding amortization of intangible assets related to the acquisitions of Mailvision and Active Communications Europe assets.
(3) Excluding expenses related to deferred payments in connection with the acquisition of Active Communications Europe.
(4) Revaluation of earn-out liability in connection with the acquisition of Active Communications Europe.
(5) Non-cash deferred tax expenses.
Note: Non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. The Company believes that non-GAAP information is useful because it can enhance the understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information.
AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| Nine months ended September 30, |
Three months ended | ||||
|---|---|---|---|---|---|
| September 30, | |||||
| 2018 | 2017 | 2018 | 2017 | ||
| (Unaudited) | (Unaudited) | ||||
| Cash flows from operating activities: | |||||
| Net income | \$ 8,963 | \$ 3,358 | \$ 4,135 | \$ 1,049 | |
| Adjustments required to reconcile net income to net cash provided by operating activities: |
|||||
| Depreciation and amortization | 1,666 | 1,859 | 561 | 599 | |
| Amortization of marketable securities premiums | |||||
| and accretion of discounts, net | 271 | 475 | 83 | 146 | |
| Increase in accrued severance pay, net | 43 | 232 | 182 | 284 | |
| Share-based compensation expenses | 2,298 | 1,681 | 853 | 572 | |
| Decrease (increase) in accrued interest and exchange rate effect of loans, marketable |
|||||
| securities and bank deposits | (79) | 251 | (64) | 36 | |
| Decrease in long- term deferred tax assets | 1,689 | 2,497 | 563 | 1,475 | |
| Decrease (increase) in trade receivables, net | (4,395) | 851 | (1,500) | 960 | |
| Decrease (increase) in other receivables and | |||||
| prepaid expenses | (3,133) | (1,789) | (2,063) | 2,398 | |
| Increase in inventories | (5,500) | (98) | (3,414) | (488) | |
| Increase (decrease) in trade payables | 988 | (2,315) | 530 | 386 | |
| Increase (decrease) in other payables and accrued | |||||
| expenses | 2,761 | 1,594 | 1,880 | (63) | |
| Increase (decrease) in deferred revenues | 8,392 | 809 | 1,736 | (1,160) | |
| Net cash provided by operating activities | 13,964 | 9,405 | 3,482 | 6,194 | |
| Cash flows from investing activities: | |||||
| Proceeds from short-term deposits, net | - | 496 | 400 | 161 | |
| Investment in short-term deposits, net | (3,500) | - | - | - | |
| Proceeds from long-term bank deposits | 807 | 900 | 300 | 300 | |
| Proceeds from redemption of marketable securities | 1,577 | 5,350 | - | 4,500 | |
| Purchase of property and equipment | (978) | (1,041) | (362) | (395) | |
| Net cash provided by (used in) investing activities | (2,094) | 5,705 | 338 | 4,566 |
AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| Nine months ended September 30, |
Three months ended September 30, |
|||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| (Unaudited) | (Unaudited) | |||
| Cash flows from financing activities: | ||||
| Purchase of treasury shares | (11,569) | (16,548) | (1,058) | (6,366) |
| Repayment of bank loans | (1,887) | (2,878) | (625) | (953) |
| Cash dividends paid to shareholders | (5,761) | - | (5,761) | - |
| Payment related to the acquisition of ACS | (151) | - | - | - |
| Proceeds from issuance of shares upon exercise of options and warrants |
4,583 | 2,012 | 2,906 | 479 |
| Net cash used in financing activities | (14,785) | (17,414) | (4,538) | (6,840) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash |
(2,915) | (2,304) | (718) | 3,920 |
| Cash, cash equivalents and restricted cash at beginning of period |
24,235 | 24,344 | 22,038 | 18,120 |
| Cash, cash equivalents and restricted cash at end of period |
\$ 21,320 | \$ 22,040 | \$ 21,320 | \$ 22,040 |