Earnings call transcript: AudioCodes Q2 2025 misses EPS forecast, revenue beats

AudioCodes Ltd (AUDC) reported its Q2 2025 financial results, revealing a mixed performance. The company posted a revenue of $61.1 million, slightly exceeding expectations, but earnings per share (EPS) fell short at $0.14 compared to the forecasted $0.18. This EPS miss resulted in a negative surprise of 22.22%, influencing a pre-market stock price drop of 3.05% to $10.18. The stock continued to decline, trading at $9.03, down 1.43% from the last close. According to InvestingPro analysis, the company maintains a "FAIR" overall financial health score, with particularly strong cash flow and relative value metrics. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued.

[Discover 10+ exclusive InvestingPro Tips for AUDC, including insights on shareholder returns and financial strength. Start your InvestingPro trial today.]

Key Takeaways

• AudioCodes’ EPS miss of 22.22% contrasts with a slight revenue beat.
• The stock price experienced a decline of over 4% post-earnings.
• Growth noted in Microsoft Teams connectivity and conversational AI.
• Tariff-related costs and postponed financial outlook raise concerns.

Company Performance

AudioCodes demonstrated a mixed performance in Q2 2025. While revenue grew by 1.3% year-over-year, reaching $61.1 million, the company faced challenges with its EPS, which fell short of market expectations. The company’s strong position in the Microsoft Teams phone market and innovations in AI technologies were notable, yet tariff-related cost concerns and a postponed financial outlook have tempered investor enthusiasm.

Financial Highlights

• Revenue: $61.1 million (1.3% YoY increase)
• EPS: $0.14 (missed forecast of $0.18)
• Services Revenue: $32.6 million (1.9% YoY growth)
• Cash and Equivalents: $95.3 million

Earnings vs. Forecast

AudioCodes’ Q2 2025 EPS of $0.14 missed the forecasted $0.18 by 22.22%. Revenue, however, slightly exceeded expectations at $61.1 million compared to the anticipated $60.43 million, marking a 1.11% positive surprise.

Market Reaction

Following the earnings announcement, AudioCodes’ stock price dropped by 3.05% in pre-market trading, reflecting investor disappointment with the EPS miss. The stock continued to decline, closing at $9.03, down 1.43% from the previous day, amidst broader market caution.

Outlook & Guidance

AudioCodes postponed its full financial outlook due to tariff uncertainties but targets 40-50% growth in its conversational AI segment for 2025. The company also anticipates services revenue growth in the latter half of the year and aims to achieve $17-18 million in Annual Recurring Revenue (ARR).

Executive Commentary

CEO Shabtai Atlasberg stated, "We are operating from a position of strength, supported by a fortress balance sheet, a dominant connectivity franchise, and a growing conversational AI segment." He emphasized the company’s technology ownership as a unique advantage.

Risks and Challenges

• Tariff-related costs projected at $3-4 million for the year.
• EPS miss raises concerns about profitability.
• Postponed financial outlook due to market uncertainties.
• Competitive pressures in the UC and CX markets.

Q&A

During the earnings call, analysts questioned the impact of tariffs on customer demand, to which executives assured minimal disruption. Discussions also centered on the company’s conversational AI growth strategy and early opportunities with Cisco Webex.

Full transcript - AudioCodes Ltd (AUDC) Q2 2025:

Conference Operator: Greetings. Welcome to AudioCodes Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in 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, Roger Chuchin, VP of Investor Relations. You may begin.

Roger Chuchin, VP of Investor Relations, AudioCodes: Thank you, operator. Hosting the call today are Shabtai Atlasberg, President and Chief Executive Officer and Niran Baruch, Vice President of Finance and Chief Financial Officer. Before we begin, I’d like to remind you that 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. 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 audio codes 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 possible adverse impact of the COVID-nineteen pandemic on our business and results of operations, the effects of the current terrorist attacks by Hamas and the war and 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 our operations and may limit our ability to produce and sell our solutions.

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 AudioCodes’ filings with the U. S. Securities and Exchange Commission. AudioCodes assumes no obligation to update this information. In addition, during the call, AudioCodes will refer to non GAAP net income and net income per share.

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’d 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 Shabtai. Shabtai, please go ahead.

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Thank you, Roger. Good morning and good afternoon, everybody. I would like to welcome all to our second quarter twenty twenty five 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.

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, Vice President of Finance and Chief Financial Officer, AudioCodes: Thank you, Shaftai, 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 an 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. Revenues for the second quarter were $61,100,000 an increase of 1.3% over the $60,300,000 reported in the second quarter of last year.

Services revenues for the quarter were $32,600,000 up 1.9% over the year ago period. Services revenues in the second quarter accounted for 53.3% of total revenues. The amount of deferred revenues as of 06/30/2025, was $82,700,000 compared to $80,300,000 as of 06/30/2024. Revenues by geographical region for the quarter were split as follows: North America, 48% EMEA, 34% Asia Pacific, 14% and Central And Latin America 4%. Our top 15 customers represented an aggregate of 54% of our revenues in the second quarter, of which 34% was attributed to our nine largest distributors.

In the 2025, we experienced increased expenses due to the implementation of new tariffs on The U. S. Imports, accounting to approximately $1,000,000 additional cost, which impacted on both GAAP and non GAAP results. GAAP results are as follows: gross margin for the quarter was 64.1% compared to 65.5% in Q2 twenty twenty four. Operating income for the second quarter was $2,600,000 or 4.3% of revenues compared to operating income of $4,900,000 or 8.2% of revenues in Q2 twenty twenty four.

EBITDA for the quarter was $3,600,000 compared to EBITDA of $6,200,000 for Q2 twenty twenty four. Net income for the quarter was $300,000 or $01 per diluted share compared to net income of $3,800,000 or $0.12 per diluted share for Q2 twenty twenty four. Non GAAP results are as follows: Non GAAP gross margin for the quarter was 64.5% compared to 65.8% in Q2 twenty twenty four. Non GAAP operating income for the second quarter was $4,400,000 or 7.2% of revenues, compared to $7,200,000 or 11.9 percent of revenues in Q2 twenty twenty four. Non GAAP EBITDA for the quarter was $5,200,000 compared to non GAAP EBITDA of $8,300,000 for Q2 twenty twenty four.

Non GAAP net income for the second quarter was $4,100,000 or $0.14 per diluted share compared to $5,500,000 or $0.18 per diluted share in Q2 twenty twenty four. At the June 2025, cash, cash equivalents, bank deposits, marketable securities and financial investment totaled $95,300,000 Net cash provided by operating activities was $7,700,000 for the 2025. Day sales outstanding as of June 30 were one hundred and twelve days. During the quarter, we acquired 7 and 15,000 of our ordinary shares for a total consideration of approximately $6,600,000 In July 2025, 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 permits us to declare a dividend of any part of this amount.

The approval is valid through 12/30/2025. Earlier this morning, we also declared a cash dividend of $0.20 per share. The aggregate amount of the dividend is approximately $5,700,000 The dividend will be paid on August 28 to all of our shareholders of record at the close of trading on August 14. Regarding the direct cost impact from tariff announced since the beginning of 2025, we continue to expect $3 to $4,000,000 of cost burden for full year 2025. As discussed last quarter, we will look to resume practice of providing annual outlook when we have better visibility on the final tariff rate.

I will now turn the call back over to Shabtai.

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Thank you, Nuran. I’m pleased to report second consecutive quarter of top line growth in second quarter and execution of our strategic objectives. Another quarter of making progress towards a long term transformation to an AI driven hybrid cloud software and services company. Our second quarter twenty twenty five performance demonstrates our success in navigating a dynamic market environment, While continuing to build on strength in our connectivity franchise, which accounts for above 90% of our revenues, we continued to drive traction in our portfolio of fast growth AI powered business applications and voice services. Second quarter twenty twenty five is the second quarter in a row where we saw stabilization in the connectivity space as compared to the decline we have witnessed during the years 2023 and 2024.

Our enterprise UC and CX revenue again accounted for above 90% of revenues in the quarter, highlighted by ongoing strength in Microsoft Teams business, which grew 6.5% year over year. Key development in the core is the official certification as a Cisco Webex Cloud Connect enablement provider. With this milestone, we now enable connectivity services of all major UC platforms, including Microsoft Teams, Zoom, and Webex. More on the significance of this development later. In the CX business, we made progress as planned, and our healthy pipeline continues to support a positive outlook for the second half and full year 2025.

On the conversational AI practice, we are seeing substantial robust demand, which supports our plan for 40% to 50% growth outlook for the segment in 2025. Noteworthy is the success we experienced with the newly launched Meeting Insights on premise service, targeting regulated industries and enterprises seeking the utmost level of privacy and security. Overall, services accounted for 53% of revenues and grew 1.9% year over year. First half twenty twenty five services invoicing were in line with our budget plans. Based on services bookings and inherent visibility in this line item, we expect second half twenty twenty five services revenue growth to further improve.

Within services, our Life Managed Services year over year growth remained robust, up 25% year over year to end the quarter at $70,000,000 annual recurring revenues. Backlog of live managed services exit second quarter twenty twenty five was $73,000,000 compared to $67,000,000 at the end of the year ago quarter. As as previewed last quarter, we officially launched our next generation live platform, a major milestone in our managed services strategy. With the recent addition of Cisco Webex Calling certification, the platform now fully integrates our comprehensive unified communication customer success capability. What sets this platform apart is its ability to empower our channel partners, service providers, and system integrators to seamlessly layer Gen AI powered business voice application and third party solution on top of their core connectivity offering.

Live platform is a cloud native, fully automated platform for launching and scaling voice services, especially around Microsoft Teams and Operator Connect deployments. The platform supports also Zoom Phone and Cisco Webex Calling. It enables zero touch automation, session border control,

Roger Chuchin, VP of Investor Relations, AudioCodes: as

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: a service, routing, billing, reporting, and provisioning workflows, all integrated into one system to reduce deployment time and operational complexity. Feedback from partners across all sizes has been overwhelming positive. Since showcasing the platform, we have seen a measurable uptick in our pipeline and an noticeable acceleration in sales cycles, including with several Tier one service providers. At the mid to new product momentum, we continue to enhance the value proposition and stickiness of our platform with new innovations. As an example, we are developing a new AI powered real time analytics system that offers strategic insights into the CX Business Manager.

While it may take time for these live platform wins to be material revenue contributors, we are super excited about its potential to drive stronger footprint in the market, recurring revenue growth, and improve our overall revenue mix. A great example is AT and T North America, one of our earliest live platform partners, which uses our solution to onboard end customers to Microsoft Teams. Our secure and scalable solution has provided AT and T North America with significant operational flexibility and resulted in multimillion dollar of annual recurring revenue over the past few years. On the conversational AI front, we have experienced increased interest all around our activity. Progress has been made in most of the leading product categories, such as the Vocus Customer Interaction Center for the Microsoft Teams environment, Meeting Insights serving as an enterprise meeting intelligence platform, and the newly developed and introduced AI Agents technology for voice bots.

As a case in point, we recently introduced Meeting Insights on prem, extending the Gen AI enabled meeting productivity and intelligence benefits to regulated and security sensitive environments and industries. This industry first solution has already garnered important customer interest, as evidenced by robust pipeline. We expect a number of proof of concept opportunities to further scale over the rest of the year. Two weeks ago, we have introduced meeting insights on prem internationally in the APAC region. The audience feedback was better than our elevated expectation.

Common takeaways from these meetings is that this service is exactly what security sensitive managements and customers, such as government banks, are looking for, unleashing the power of Gen AI without compromising our security. This viewpoint mirrors customer feedback in Israel, our initial market launched several months ago. Before turning to detailed baseline discussion, let’s quickly shift to second quarter profitability metrics. On the top line, we performed as planned, with revenue growing 1.3% year over year. Our non GAAP gross margin, as Niran mentioned, for the quarter was 64.5%, slightly below our long term target range of 65% to 68%, and compares to 65.8% in the year ago quarter.

Our second quarter non GAAP gross margin absorbed roughly about $1,000,000 of tariff related cost headwinds. We continue to expect close to $4,000,000 of tariff related costs burden for the full year. Assuming tariff rates for the various countries settle shortly, which we hope will happen in the summer, we will be working to reduce the heat in the 2025. Additionally, we incurred several 100 of those headwinds from weaker U. S.

Dollars against the euro in the second quarter. Second quarter non GAAP operating expenses rose to $35,000,000 up from $32,500,000 in the year ago period. The higher expenses are primarily attributable to higher investments in marketing and sales resources as part of our conversational AI investment. In terms of headcount, we ended the quarter with nine sixty three employees, roughly flat from the prior quarter and compared to nine forty in the year ago period. Adjusted EBITDA for the second quarter was $5,200,000 We continue to generate healthy amount of cash flow with net cash from operating activity at $7,700,000 for the quarter.

This robust cash flow generation provides strong backing to our ability to keep investing and expanding our business moving forward. As to the guidance, as mentioned in our previous quarter’s discussion, we will postpone issuing a financial outlook until we have better and clearer understanding of the resolution regarding tariff rates. The key takeaways from these financial results at the bottom is that our business remains solid and is on an upward trajectory. It is several years now that we experienced nice growth in our highly profitable connectivity segment, particularly in the UCaaS and CX market. In parallel, we are successfully expanding our promising voice centric AI and GenAI powered business applications.

As to the general market, despite the presumably recent volatile business landscape stemming from the tariff challenges, we have not observed any shift in customer purchasing behavior. The pipeline for opportunities remains strong as we approach the latter part of 2025. Now to the Microsoft business. Market service and partner inputs continue to support the growth story for Teams Phone, where adoption in the market continues well at over 20% annual growth. Teams Phone usage is also strongly supported by Microsoft efforts to drive CoPilot as a central capable chatbot for Teams Phone meetings and calls.

Key to continued Teams phone growth is facilitating connectivity for large enterprises network. In this regard, with Microsoft Operators Connect getting more mature and growing, in addition to the already successful direct route connectivity, this provides further stimulus to Teams phone growth. All these points to a strong market today and for coming years, and further supports business expansion and governance in this connectivity area. Our Microsoft business grew 6.5% year over year, fueled by ongoing strength of our connectivity business, coupled with increasing attach rate of VocacyAC, or TIM certified CCaaS and other conversational AI business application services. Key to our success is our live managed services with annual recurring revenues reaching $70,000,000 exit second quarter, representing approximately 25% growth year over year.

Booking of new large multimillion contract value opportunities increased about 6% in second quarter, and new opportunities total credit value grew more than 10% in the quarter. Not to worry to our growth story, the latest certification of live platform for Microsoft operator Connect for partners in EMEA, and soon to be certified in The US. To put some color on the progress made in the second quarter, here are some examples of wins in the quarter. We enjoyed my success in The US higher education vertical, in which we have secured several multimillion key wins and contracts in the sector. One example is our win with a large state university valued at more than 2,000,000 total contract value, of which about $800,000 came from thirty six months contract of LivePro managed services and related professional services.

Second example is the large follow on order we recently closed, amounting to over 1,500,000.0 total contract value from a private university in the Mid East Midwest, I’m sorry. We had won the initial deal in second half twenty twenty four as part of its initial phase of UCCX modernization. And given the successful completion of the first phase, the university decided to standardize on AudioCode services for all of its campuses. Our success can be explained by having the industry most complete portfolio and best in class UCCX capability, strong track record of delivering customer satisfaction, and referenceable list of marquee clients. We have built much credibility in the sector, and we are now getting inbound leads from other prospective university customers looking to modernize their UCCX.

Further on the success in The UK’s area, I’ll talk about two other entities. First, AT and T. AT and T is our largest partner channel for Microsoft Teams in The U. S. Second quarter was very successful.

Invoicing and booking grew above 10% in the quarter sequentially, with new logos turning into the core. While traditional managed services business continued to grow, second quarter was a pleasant surprise in terms of rising number of PSTN shutdown projects in various U. S. States embarking on parts replacements. This trend should support further continued revenue growth in coming years.

And then to our new activity with Cisco in The U. K. Market, we announced our certifications for Webex Connect in June 2025. During the second quarter, we have seen initial pipeline built with service providers in EMEA with opportunities created representing potential of new multimillion dollars. We intend to increase marketing and sales efforts in the Webex Calling space in coming years.

Turning to CX. We have made progress as planned in the quarter, and our LC pipeline continues to support positive outlook for the second half of the full year. We have been growing we have seen growing customer and partner interest in Live CX, which is an important part of the Live platform and targets application areas such as: one, the migration of contact centers to cloud and providing SIP connectivity for CCaaS. Second, click to call application as a replacement for traditional one eight hundred service for contact centers. And third, VoiceAI Connect and Live Hub providing connectivity for cognitive services.

In second quarter, we signed a tier one system integrator for Live CX and VoiceAI Connect that will serve as connectivity backbone in support of new customers, with another Tier one prospect in the pipeline. Signing up more Tier one system integrators is an important initiative as it effectively scales our addressable market. These partners target mid sized CX customers that are historically not targeted by our direct sales team. Now to conversational AI or CHI. Let’s talk about highlights of what happened in the second quarter.

As contemplated earlier in the year, we saw strong demand and opportunity wins, supporting our 40% to 50% segment growth outlook for 25%. We have experienced increased activity across all of our business lines. Process has been made in our leading product categories, such as the Vocus CIC for the Microsoft Teams environment. Then we saw success in the meeting intelligence platform space with two leading solutions: One, the first one, Meeting Insights, an enterprise SaaS application, which targets enterprise wide deployments and has demonstrated growth of above 200 year over year in terms of number of accounts and proof of concepts, and use of GenAI for meeting summarization and inference. Second, we recently introduced Meeting Insights on prem, or MIA OP, extending the GenAI enabled meeting productivity and intelligence benefits to regulated industries and security sensitive environments.

This industry first solution provides AI enabled meeting summarization and intelligence, and is completely detached from the cloud and or the Internet. Now let’s talk about Voca CIC. In the second quarter, Voca CIC continued its strong momentum, with bookings growing by 150% compared to the same period last year. We also established a robust pipeline of opportunities for the latter part of the year. LOCA CAC benefits from the increased attach rate through its involvement in the TIMSS ONE migration project that AudioCodes has, especially within the higher education sector, as noted earlier.

Revenue growth in second quarter twenty twenty five remained strong, bringing us closer to our goal of surpassing 50% year over year growth. Highlighting our achievements, CX Today publication recently recognized us with the Best Customer Experience Deployment award for the successful contact center migration at the University of Central Florida, one of the largest public universities in The United States. This project includes merging over 40 help desks in a single centralized contact center serving 70,000 students. Furthermore, we secured second place in the best CX partnership category for a work with AT and T on the VocaCIC partnership, which delivered a market oriented integrated UCaaS and CCaaS solution for Microsoft Teams. Moving on to Meeting ESAN.

Meeting ESAN’s cloud edition maintains strong momentum this quarter with continued growth in new customer acquisition and key metrics such as the number of meetings and unique active users reaching record levels. On the product development side, customer feedback has been positive regarding the launch of our mobile app, which brings our generative AI transcription and summary features to in person meetings anywhere, not only in company facilities. Additionally, we have developed custom Gen AI based templates and prompts, and are now working on workflow solutions designed for specific industries. Moving on to MIA OP, turning now to the solution that’s going to be deployed on premise since its launch a few months ago in the Israeli market. We have observed strong interest from customers across multiple sectors, including defense, government, health care, and media.

Meeting Insights on prem uses general and local service in order to assist our organization in regulated security sensitive industries by automatically producing secure, accurate and efficient meeting recaps without the use of cloud or Internet services. Meeting Insights appears to be a key beneficiary of the cloud repatriation trend. With rapid adoption of generative AI, customers now recognize that certain workloads are better suited for on premise environments due to the factors such as high cloud costs, latency issues, and security demands. Launched earlier this year, we have already close to 10 customers in production and more than 20 proof of concept projects, all arising from word-of-mouth recommendations. The solution has already been demonstrated lately outside of Israel and has garnered much interest.

In past week, MEOPA has been reviewed and received positive feedback from leading industry analysts who work to expand market reach and awareness to more markets, including The U. S, in coming months. So to wrap up my presentation, in second quarter ’twenty five, we continued to make solid progress in our long term transformation zone hybrid cloud and voice services, a business application company. We delivered against our strategic objective in that, one, we had second consecutive quarter of top line growth. We made the necessary R and D and sales marketing investment, particularly in our conversational AI activities that have fueled our robust pipeline of opportunities in the second half of the year.

And third, we executed well to our playbook of leveraging our strong connectivity installed base in driving successful cross sell of value added services. We are operating from a position of strength, supported by a fortress balance sheet, a dominant connectivity franchise, and a growing conversational AI segment that enhance enterprise intelligence and productivity. We believe these factors position us well to navigate the potential into following years. And with that, I’ve completed my presentation. I’d like to hand over the session to our host.

Thank you.

Conference Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Your first question for today is coming from Joshua Riley with Needham.

Joshua Riley, Analyst, Needham: All right. Thanks for taking my questions. Maybe just starting off on the tariff impact here. What are you seeing in terms of customer demand for virtual SBCs versus physical hardware following the tariffs being implemented? What are your thoughts on pricing?

Have you adjusted your pricing? Are you thinking about it? Or what should investors be considering here?

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Okay. So, usually, you know, SVCs are designed into specific, you know, well designed solution and architecture. So, you know, if the design is for a cloud virtual SVC and or for an, on prem data center physical device, that’s something that is not changing that fast. Okay? We also believe, I mean, we believe that software will go through those months of instability, we believe at the end of the day, things will settle.

We also believe that we have obviously taken steps to make sure that our margins are not hurt by the increasing cost by raising the price for those devices. So all in all, we don’t really see much impact on the business from that. That’s a temporary, you know, extra cost that we are, you know, incurring, you know, during, you know, this second, third quarter, but we believe that there’s no real effect on the actual business and or decision which SBC to use or not.

Joshua Riley, Analyst, Needham: Got it. That’s helpful. And then if you look at the Microsoft business, you know, that seemed to be a bit above a growth rate above my expectations for the quarter. Maybe you can just give us some more color on what’s driving that strength in particular.

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Yeah, I think actually, you know, as I’ve mentioned, you know, the underneath infrastructure is the fact that TIM SON continues to grow at least 20% a year. Now, the fact is, A, that we are a very dominant player there. I think at this stage, more than 60 or 70% market share. Actually, we have heard about one competitor, you know, leaving the space. What’s happening is that, I believe in many cases, it’s word-of-mouth, is the fact that, you know, customers acknowledge Audit Code’s dominance in the Teams phone, you know, managed services space.

And then, you know, we enjoy the fact that we are signing in the second quarter. We’ve signed first quarter and second quarter. We’ve signed some very large multi million total contract value projects with large companies. So, for us, that’s going to be, you know, a growth area for many years. And the fact that we’ve got that dominance and we don’t see any rush of other new entrants to the market, you know, we will enjoy also the fact that we are improving, you know, the platform we’re using to deploy those services.

So we just mentioned, you know, on the call live platform, which we are automating a substantial part of the processes more and more every year. So our ability to deploy successfully good performing solution growth. With that, I think that affects the overall success of that business.

Joshua Riley, Analyst, Needham: Got it. That’s very helpful. And then last question from me is, if you look at the pipeline for the WebEx opportunities, have you won any of those deals yet? Would you expect to win any in 2025? Or just give us a sense of how you would expect trajectory of those opportunities to come into the model Right.

Over the next couple years.

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Right. That’s still we’re very early in the game. We just completed the certification in second quarter. But, as I mentioned on the call, we have, at this stage, I believe, between five and ten new opportunities. We need to do a lot of work with Cisco partners because we have not been in that market, so it will take a while for that to catch up.

So in terms of revenue, we won’t see much impact in ’twenty five, but I can tell you that we see a lot of interest. Actually, there’s one big Tier one service provider in Asia Pacific that’s already talking to us for a few months about deploying live platform supporting Cisco Webex Calling. So, all in all, we do expect to see a rise, but the majority of it will come in ’26.

Joshua Riley, Analyst, Needham: Understood. Thank you.

Billy Fitzsimmons, Analyst, Jefferies: Sure.

Conference Operator: Your next question for today is from Samad Samana with Jefferies.

Billy Fitzsimmons, Analyst, Jefferies: Hey, guys. This is Billy Fitzsimmons on for Samad. Maybe to start, Shantanu, you talked about how conversational AI remains a key area of growth supporting the 40% to 50% segment growth for 2025. First off, did you guys disclose the second quarter growth rate? I knew it grew, I think, 10% plus in the first quarter.

And just trying to better figure out how that product is kind of ramping into the back half.

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Right. So we didn’t disclose, you know, the growth for second quarter. One thing needs to be understood. Okay. We’re talking about a set of application, you know, at this stage, four, five application, which are each, you know, either, you know, in its first phase of selling and or getting mature.

And therefore, you know, we do expect not a linear growth here, but really much more kind of hyperbolic in the second half. So, just to give you an idea, with MIOP that produced almost none in first half in terms of, you know, real revenues, we do expect very substantial uptick from more than a million or more in the second half. And same goes for the other one. So, it’s really the maturity will basically cause growth to be more hyperbolic than linear. So, we do expect, you know, keep up with our plan for 40 to 50% growth in ’25.

Billy Fitzsimmons, Analyst, Jefferies: And then maybe a little more high level. I I think investors are trying to look at this voice AI landscape and and trying to figure out the lines of demarcation between vendors and and what drives differentiation vendor to vendor. So, Shabtai, can can you talk about AudioCode’s underlying technology there and then how you differentiate yourself in the conversational AI market?

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Yes. Definitely. So, you know, A, we are obviously not among the list of companies providing cognitive services technologies in the cloud. Right? So we’re not vendors of large language models or not selling to other people services such as speech to text and text to speech and machine learning, etcetera.

Our focus really is on applications. Okay? Application, end to end application. Now we know that and this here I think we’ve got an advantage over, you know, the majority of the players in the market. Why?

Because even if you have the best STT, you know, or one of the best LLM, and you connect them, you still need to connect to the actual real world. Now in order to connect to the real world, you need to connect to CRM solutions, you need to connect to telephony, you need to connect to contact centers, you need to apply management, so recording services, etcetera. Now, because of our heritage of more than ten, fifteen, and already goes to twenty years, so for developing all those components at AudioCodes, we do have a very rich, you know, I would say, set of capabilities and portfolio that helps us to deploy easily. MiaOP now deploys in a matter of a day. If you’ll talk to other companies, first we do not know many such, or even small number of such competing solution.

And if you go with such a solution to a new facility or a new customer, usually it will take other companies which lack the amount of infrastructure that we have. It will take them, I would say, at least weeks or months. We can deploy in days. So our special source, if you will, is the fact that we own all of the technology. We also, by the way, we do improve them.

So just to make that MEOP solution, you know, we had to go into some of the tools we have, some open source tools, and we’re tweaking them. So we have a very strong team here that’s developing specialized speech to text. If you want a medical application, we can fine tune the database, just to make sure that medical discussion will come as good as other discussions. So we have the ability to internally tweak all those technologies and basically connect them all into a fully working, fully integrated solution. And I think that sets us apart from many other companies.

And that explain why, you know, we do not have a track record of failing projects. Okay? We are capable of deploying them rather fast, but now we simply need time. And the time is, you know, growing those applications, etcetera. So we believe that this year we’ll end up as we planned in the year of 17,000,000 to $18,000,000 of ARR.

But we believe that as we go forward, you’ll see very substantial higher growth in ’twenty six, ’twenty seven, and beyond.

Billy Fitzsimmons, Analyst, Jefferies: Perfect. Thank you so much.

Shabtai Atlasberg, President and Chief Executive Officer, AudioCodes: Sure.

Conference Operator: We have reached the end of the question and answer session, and I will now turn the call over to Shabtai for closing remarks.

Shabtai Atlasberg, President and Chief Executive Officer, 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 UCaaS, CCaaS and CHI, we believe we are transitioning the business towards growth and better profitability in coming years. We look forward to your participation in our next quarterly conference call. Thank you all.

Have a great day.

Conference Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.