Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AudioCodes Ltd (AUDC, Financial) reported a revenue increase of 0.5% year-over-year, reaching $60.4 million for the first quarter of 2025.
- The company's services revenue grew by 3.4% year-over-year, accounting for 54% of total revenues.
- AudioCodes Ltd (AUDC) achieved a gross margin of 64.8%, slightly higher than the previous year's 64.4%.
- The company is making significant progress in its transformation towards a cloud voice software and services company, with a focus on AI-powered voice services.
- AudioCodes Ltd (AUDC) has successfully attracted interest from large global system integrators for its conversational AI business voice services.
Negative Points
- The company has withdrawn its annual guidance due to the uncertainty surrounding tariffs and macroeconomic conditions.
- AudioCodes Ltd (AUDC) faces an estimated additional cost burden of $3 million to $4 million annually due to tariffs.
- Non-GAAP operating income for the first quarter decreased to $5.4 million from $6.3 million in Q1 2024.
- The company's non-GAAP net income per diluted share decreased to $0.15 from $0.17 in Q1 2024.
- The slow growth in services revenue this quarter is attributed to the timing of professional services project completion.
Q & A Highlights
Q: Do you plan to move manufacturing out of China due to tariffs, or will you wait for final tariff rates? Also, how are you considering price increases if tariffs remain high?
A: We have already taken steps to move the majority of our manufacturing out of China to other countries, including Asia Pacific and Israel. This move is expected to reduce the tariff impact from $10-$12 million to about $3-$4 million. (Shabtai Adlersberg, President, CEO)
Q: What trends are you seeing in the Microsoft ecosystem regarding Operator Connect versus Direct Routing, and how do these choices affect your business opportunities?
A: Operator Connect is becoming the preferred method over Direct Routing, as it is expected to become the dominant way of connecting SBCs. This transition is leading to mild growth in the market. (Shabtai Adlersberg, President, CEO)
Q: Regarding the Cisco opportunity, how do you plan to manage the go-to-market strategy and win these opportunities?
A: We have a strong presence in the service provider space and ongoing projects with them. Our brand and global deployment give us an advantage over smaller competitors, positioning us as a preferred solution provider. (Shabtai Adlersberg, President, CEO)
Q: Can you provide more details on the tariff impact and your mitigation strategies?
A: The tariff impact in Q1 was about $350,000. We are moving manufacturing out of China to reduce costs and expect a total tariff cost burden of $3-$4 million for 2025. (Shabtai Adlersberg, President, CEO)
Q: How is the conversational AI business performing, and what are your growth expectations?
A: The conversational AI business grew over 10% year-over-year, with a strong pipeline and new opportunities. We maintain a target of 50% growth for the full year as these opportunities mature. (Shabtai Adlersberg, President, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
