Audiocodes Ltd. — Interim / Quarterly Report 2013

Apr 29, 2013

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P R E S S R E L E A S E

Company Contacts IR Agency Contact Guy Avidan, Shirley Nakar, Erik Knettel, VP Finance & CFO Director, Investor Relations Grayling AudioCodes AudioCodes Tel: +1-646-284-9415 Tel: +972-3-976-4000 Tel: +972-3-976-4000 erik.knettel@grayling.com guy.avidan@audiocodes.com shirley@audiocodes.com

AudioCodes Reports First Quarter 2013 Results

Year-Over-Year Profitability Improvement Driven by Operational Efficiency and Growing Sales in Unified Communications and Enterprise SBC

Lod, Israel – April 29, 2013 – AudioCodes (NasdaqGS: AUDC) , a leading provider of Voice over IP (VoIP) technologies, products and services, today announced financial results for the first quarter ended March 31, 2013.

Revenues for the first quarter of 2013 were $32.3 million, compared to $32.8 million for the fourth quarter of 2012, and $32.3 million for the first quarter of 2012.

Net income in accordance with U.S. generally accepted accounting principles (GAAP) was, $71,000, or $0.002 per diluted share, for the first quarter of 2013, compared to GAAP net income of $524,000, or $0.01 per diluted share, for the fourth quarter of 2012, and a GAAP net loss of $1.6 million, or ($0.04) per diluted share, for the first quarter of 2012.

Non-GAAP net income for the first quarter of 2013 was $691,000, or $0.02 per diluted share, compared to non-GAAP net income of $1.1 million, or $0.03 per diluted share, for the fourth quarter of 2012, and a nonGAAP net loss of $827,000, or ($0.02) per diluted share, for the first quarter of 2012.

Non-GAAP net income (loss) excludes: (i) stock-based compensation expenses; and (ii) amortization expenses related to intangible assets. A reconciliation of net income (loss) 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.

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AudioCodes Reports First Quarter 2013 Results

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Net cash provided by operations for the first quarter of 2013 totaled $2.7 million. Cash and cash equivalents, bank deposits and marketable securities were $57.5 million as of March 31, 2013, compared to $58.5 million as of December 31, 2012 and $70.3 million as of March 31, 2012. AudioCodes used approximately $2.5 million in cash during the first quarter of 2013 for the repayment of loans.

In April 2013, AudioCodes entered into an asset purchase agreement with its affiliated company, MailVision. Mailvision is an Israeli company which develops, markets and licenses VoIP solutions for mobile, PC, web and tablet devices for telecom operators and service providers. As of December 31, 2012, AudioCodes owned 26.4% of the outstanding share capital of MailVison, or 24.1% of the share capital of the company on a diluted basis. The closing of the transaction is subject to customary conditions and is expected to occur during May 2013.

Pursuant to this agreement, AudioCodes has agreed to acquire certain of MailVision’s assets for the following consideration: (i) $233,000 to be payable 12 months following the closing date; and (ii) additional earn out payments will be paid to MailVision subject to the achievement of a certain level of net revenues from the sale of MailVision’s products. Payment can be made, at AudioCodes’ discretion, in either cash or ordinary shares. As additional consideration for the transaction, on closing, AudioCodes’ agreed to waive repayment of any outstanding loans made by the company to MailVision and to assume specified liabilities of MailVision in the aggregate amount of approximately $1.3 million.

“We are pleased to report financial results in line with our plan for the year. Our performance in the first quarter of 2013 is underlined by good progress in our key strategic initiatives and improved operational performance,” said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes. “Continuing the trend from the previous quarter, our networking business grew primarily in the areas of Unified Communication and enterprise SBC applications, both representing strategic directions for us. We saw a growing pipeline of opportunities developing for us in the Microsoft Lync marketplace, the SIP trunking business communication services market, and in enterprise VoIP networking. Growth trends in these market segments provide further support for our expected success in coming years.”

“Our proposed acquisition of MailVision assets will allow AudioCodes to extend our innovative development efforts in the area of mobile SIP real-time communication solutions for enterprise and service providers. We believe this investment in the over-the-top market positions AudioCodes in one of the most attractive

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AudioCodes Reports First Quarter 2013 Results

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growth segments of the communications market, and will assist us in maintaining our position as one of the leaders in the unified communications and real-time media communications solutions market,” concluded Mr. Adlersberg.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 9:00 A.M., Eastern Time today to discuss the Company’s first quarter 2013 operating performance, financial results and outlook. The conference call will be simultaneously Web cast. Investors are invited to listen to the call live via Web cast at the AudioCodes corporate website at www.audiocodes.com .

About AudioCodes

AudioCodes Ltd. (NasdaqGS: AUDC) designs, develops and sells advanced Voice over IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises. AudioCodes is a VoIP technology market leader focused on converged VoIP and data communications and its products are deployed globally in Broadband, Mobile, Enterprise networks and Cable. The Company provides a range of innovative, cost-effective products including Media Gateways, Multi-Service Business Routers, Session Border Controllers (SBC), Residential Gateways, IP Phones, Media Servers and Value Added Applications. AudioCodes' underlying technology, VoIPerfectHD(TM), relies on AudioCodes' leadership in DSP, voice coding and voice processing technologies. AudioCodes' High Definition (HD) VoIP technologies and products provide enhanced intelligibility and a better end user communication experience in Voice communications. 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.

©2013 AudioCodes Ltd. All rights reserved. AudioCodes, AC, HD VoIP, HD VoIP Sounds Better, IPmedia, Mediant, MediaPack, OSN, SmartTAP, VMAS, VoIPerfect, VoIPerfectHD, Your Gateway To VoIP and 3GX 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

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AudioCodes Reports First Quarter 2013 Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands

ASSETSCURRENT ASSETS:Cash and cash equivalentsShort-term and restricted bank depositsShort-term marketable securities and accrued interestTrade receivables, netOther receivables and prepaid expensesInventoriesTotal current assetsLONG-TERM INVESTMENTS:Long-term and restricted bank depositsLong-term marketable securitiesInvestments in an affiliated companyDeferred tax assetsSeverance pay fundsTotal long-term assetsPROPERTY AND EQUIPMENT, NETGOODWILL AND INTANGIBLE ASSETS, NETTotal assetsLIABILITIES AND EQUITYCURRENT LIABILITIES:Current maturities of long-term bank loansTrade payablesOther payables and accrued expensesDeferred revenuesTotal current liabilitiesLONG-TERM LIABILITIES:Accrued severance payLong-term bank loansSenior convertible notesDeferred revenues and other liabilitiesTotal long-term liabilitiesTotal equityTotal liabilities and equity	March 31,2013Unaudited$ 15,1339,92419,51025,1338,24715,53193,478$ 8,7904,1041,6783,56516,44734,5843,39134,676$166,129$ 6,9365,29115,5056,29734,029$ 17,22513,5003531,84832,92699,174 $166,129	December 31,2012
		Audited
		$ 15,21910,3307,96624,4137,27416,797
		81,999
		$ 9,25115,7621,0843,56515,772
		45,434
		3,619
		34,952
		$166,004
		$ 8,4366,81715,0625,086
		35,401
		$ 16,28414,4773531,192
		32,306
		98,297
		$166,004

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AudioCodes Reports First Quarter 2013 Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands, except per share data

Revenues:ProductsServicesTotalRevenuesCost of revenues:ProductsServicesTotalCost of revenuesGross profitOperating expenses:Research and development, netSelling and marketingGeneral and administrativeTotal operating expensesOperating income (loss)Financial income (expenses), netIncome (loss) before taxes on incomeTaxes on income, netEquity in profit (losses) of an affiliated companiesNet income (loss)Basic net earnings (loss) per shareDiluted net earnings (loss) per shareWeighted average number of shares used incomputing basic net earnings (loss) per share (inthousands)Weighted average number of shares used incomputing diluted net earnings (loss) per share (inthousands)	Three months endedMarch 31,	Three months endedMarch 31,
	20132012(Unaudited)	2012
	26,1716,097$32,26811,7941,53813,33218,9367,3109,2142,03918,563373(203)170(78)(21)$71$0.00$0.0038,00938,577	26,8185,495
		$32,313
		11,9711,481
		13,452
		18,861
		8,11810,4961,959
		20,573
		(1,712)228
		(1,484)(84)10
		$ (1,558)
		$ (0.04)
		$ (0.04)
		40,270
		40,270

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AudioCodes Reports First Quarter 2013 Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES NON-GAAP PROFORMA STATEMENTS OF OPERATIONS U.S. dollars in thousands, except per share data

Revenues:ProductsServicesTotalRevenuesCost of revenues:ProductsServicesTotalCost of revenues (1) (2)Gross profitOperating expenses:Research and development, net (1)Selling and marketing (1) (2)General and administrative (1)Total operating expensesOperating income (loss)Financial income (expenses), netIncome (loss) before taxes on incomeTaxes on income, netEquity in profit (losses) of an affiliated companiesNet income (loss)Diluted net earnings (loss) per shareWeighted average number of shares used incomputing diluted net earnings (loss) per share (inthousands)	Three months endedMarch 31,	Three months endedMarch 31,
	20132012(Unaudited)	2012
	26,1716,097$32,26811,6241,49913,12319,1457,2179,0331,90218,152993(203)790(78)(21)$691$0.0238,896	26,8185,495
		$32,313
		11,7811,442
		13,223
		19,090
		7,98210,2981,791
		20,071
		(981)228
		(753)(84)10
		$ (827)
		$ (0.02)
		40,270

(1) Excluding stock-based compensation expenses related to options and restricted stock units granted to employees and others.

(2) Excluding amortization of intangible assets related to the acquisitions of Nuera, Netrake and CTI Squared.

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.

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AUDIOCODES LTD. AND ITS SUBSIDIARIES - RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON GAAP NET INCOME (LOSS) U.S. dollars in thousands, except per share data

GAAP net income (loss)GAAP netearnings (loss)per shareCost of revenues:Stock-based compensation (1)Amortization expenses (2)Research and development, net:Stock-based compensation (1)Selling and marketing:Stock-based compensation (1)Amortization expenses (2)General and administrative:Stock-based compensation (1)Non-GAAP net income (loss)Non-GAAP Diluted net earnings (loss) per share	Three months endedMarch 31,	Three months endedMarch 31,
	20132012(Unaudited)	2012
	$71$0.0092002099310576181137$691$0.02	$ (1,558)
		$ (0.04)
		23206
		22913612276
		198168
		$ (827)
		$ (0.02)

(1) Stock-based compensation expenses related to options and restricted stock units granted to employees and others.

(2) Amortization of intangible assets related to the acquisitions of Nuera, Netrake and CTI Squared.

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.

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AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS U.S. dollars in thousands

Cash flows from operating activities:Net income (loss)Adjustments required to reconcile net income tonet cash provided by operating activities:Depreciation and amortizationAmortization of marketable securities premiumsand accretion of discounts, netEquity in profit (losses) of affiliated company andinterest on loans to affiliated companyIncrease (decrease) in accrued severance pay, netStock-based compensation expensesDecrease in accrued interest on marketablesecurities, bank deposits and structured notesDecrease (increase) in trade receivables, netIncrease in other receivables and prepaid expensesDecrease in inventoriesDecrease in trade payablesIncrease in deferred revenuesIncrease in other payables and accrued expensesNet cash provided by operating activitiesCash flows from investing activities:Short-term deposits, netNet loans provided to affiliated companyProceeds from long-term bank depositsPurchase of property and equipmentNet cash provided by (used in) investing activities	Three months endedMarch 31,	Three months endedMarch 31,
	20132012( Unaudited)	2012
	$ 71782107212663447(720)(640)1,266(1,526)1,8678382,683406(615)461 (278)(26)	$ (1,558)706108(10)(105)44934,348(1,433)428(5,267)2,273 681
		623
		1,807-600 (651)
		1,756

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AUDIOCODES LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) U.S. dollars in thousands

Cash flows from financing activities:Purchase of treasury stockRepayment of long-term bank loansPayment for acquisition of NSC non-controllinginterestProceeds from issuance of shares upon exercise ofoptions, warrants and employee stock purchaseplanNet cash used in financing activitiesDecrease in cash and cash equivalentsCash and cash equivalents at the beginning of theperiodCash and cash equivalents at the end of the period	Three months endedMarch 31,	Three months endedMarch 31,
	20132012( Unaudited)	2012
	-(2,477)(395)129 (2,743)(86)15,219 $15,133	(2,513)(2,355)(336)35
		(5,169)
		(2,790) 28,257
		$25,467

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AudioCodes Reports First Quarter 2013 Results