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AudioCodes Reports Third Quarter 2008 Results
[November 03, 2008]

AudioCodes Reports Third Quarter 2008 Results


(GlobeNewswire Via Acquire Media NewsEdge)

Revenues Rise 15.3% Year-Over-Year, to Record $46.6 Million

GAAP Net Income Increases to $3.2 Million, or $0.08 Per Diluted Share

Non-GAAP Net Income Increases 72.3% Year-Over-Year to $4.8 Million,
or $0.11 Per Diluted Share

LOD, Israel, Nov. 3, 2008 (GLOBE NEWSWIRE) -- AudioCodes (Nasdaq:AUDC), a leading provider of Voice over Packet (VoP) technologies and Voice Network products, today announced financial results for the third quarter ended September 30, 2008.



Revenues for the third quarter were a record $46.6 million compared to $45.7 million for the second quarter ended June 30, 2008 and $40.4 million for the quarter ended September 30, 2007. Third quarter revenues grew 2.1% sequentially and increased 15.3% compared to the third quarter of 2007. Net income in accordance with U.S. generally accepted accounting principles (GAAP) was $3.2 million, or $0.08 per diluted share, for the third quarter of 2008 compared to net income of $1.6 million, or $0.04 per diluted share, for the second quarter of 2008 and a net loss of $72,000, or ($0.00) per diluted share, for the corresponding period last year.

Non-GAAP net income was $4.8 million, or $0.11 per diluted share, for the third quarter of 2008 compared to $3.6 million, or $0.09 per diluted share, for the second quarter of 2008 and $2.8 million, or $0.06 per diluted share, for the third quarter of 2007. Non-GAAP net income excludes (i) stock-based compensation expenses and (ii) amortization expenses related to the Nuera, Netrake and CTI Squared acquisitions. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.


"AudioCodes delivered excellent financial results for the third quarter of 2008, including record quarterly revenues, significant growth in operating margin to above 10% and bottom line profitability," stated Shabtai Adlersberg, Chairman of the Board, President and CEO of AudioCodes. "These results reflect solid and continuing momentum in our business for the sixth quarter in a row, despite the challenging global economic environment. The ongoing growth in our networking business of more than 20% year-over-year underscores our competitive position in the VoIP industry and is expected to allow us to do well in these challenging times and emerge a stronger leader when the economy recovers."

Mr. Adlersberg added, "Today we announced one of the most important milestones in our Company's history, AudioCodes' initiative for High Definition (HD) VoIP. With the growing adoption of broadband IP networks worldwide and the resulting larger bandwidth available for end-users, wideband speech codecs, which are at the heart of HD VoIP, deliver double the voice spectrum and unprecedented clarity and intelligibility while providing a better user experience. AudioCodes' products are already well known for providing best in class voice quality, and with HD VoIP, we are making another big step in excelling in voice quality. This opportunity is expected to translate into a substantial market and revenue opportunity for us on top of our current success in the VoIP communications market."

"Our continued focus on investing in new products and sales operations, our ability to improve our operational efficiency, and our proven success in executing our objectives and plans, provides a solid foundation for AudioCodes' future performance," concluded Mr. Adlersberg.

AudioCodes repurchased 626,417 of its ordinary shares during the third quarter of 2008 at an aggregate cost of $2.3 million. In the first nine months of 2008, AudioCodes repurchased a total of approximately 3.5 million ordinary shares at a total cost of $13.7 million. Under the current stock repurchase program, the Company is authorized to purchase up to 4,000,000 of its ordinary shares, or the equivalent of approximately 10% of the Company's outstanding ordinary shares prior to the commencement of the repurchase program.

Cash and cash equivalents, short-term and long-term marketable securities, short-term and long-term bank deposits were $158.7 million as of September 30, 2008, compared to $147.3 million as of June 30, 2008 and $134.2 million as of September 30, 2007. During the third quarter, AudioCodes borrowed $15.0 million from a bank.

Subsequent to September 30, 2008, the Company repurchased approximately $51.5 million in principal amount of its 2% Senior Convertible Notes Due 2024 for a total cost, including accrued interest, of $50.2 million. The Company issued $125.0 million in principal amount of these notes in November 2004.

Conference Call & Web cast Information

AudioCodes will conduct a conference call at 9:00 A.M., Eastern Daylight Time on Tuesday, November 4, 2008 to discuss the third quarter 2008 financial results. 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. (Nasdaq:AUDC) provides innovative, reliable and cost-effective Voice over IP (VoIP) technology, Voice Network Products, and Value Added Applications to Service Providers, Enterprises, OEMs, Network Equipment Providers and System Integrators worldwide. AudioCodes provides a diverse range of flexible, comprehensive media gateway, and media processing enabling technologies based on VoIPerfect(tm) -- AudioCodes' underlying, best-of-breed, core media architecture. The company is a market leader in VoIP equipment, focused on VoIP Media Gateway, Media Server, Session Border Controllers (SBC), Security Gateways and Value Added Application network products. AudioCodes has deployed tens of millions of media gateway and media server channels globally over the past ten years and is a key player in the emerging best-of-breed, IMS based, VoIP market. The Company is a VoIP technology leader focused on quality and interoperability, with a proven track record in product and network interoperability with industry leaders in the Service Provider and Enterprise space. AudioCodes Voice Network Products feature media gateway and media server platforms for packet-based applications in the converged, wireline, wireless, broadband access, cable, enhanced voice services, video, and Enterprise IP Telephony markets. AudioCodes' headquarters and R&D are located in Israel with an additional R&D facility in the U.S. Other AudioCodes' offices are located in Europe, India, the Far East, and Latin America. 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 continuing products' demand; 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 disruptions from acquisitions and other factors detailed in AudioCodes' filings with the Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.

AudioCodes, AC, AudioCoded, Ardito, CTI2, CTI(2), CTI Squared, InTouch, IPmedia, Mediant, MediaPack, NetCoder, Netrake, Nuera, Open Solutions Network, OSN, Stretto, TrunkPack, VoicePacketizer, VoIPerfect, VoIPerfectHD, What's Inside Matters, 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.

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

Sept. 30, Dec. 31,
2008 2007
--------- ---------
(Unaudited)
--------- ---------
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 32,332 $ 75,063
Short-term bank deposits 109,743 *) 18,157
Short-term marketable securities and
accrued interest 9,515 17,244
Trade receivables, net 35,831 25,604
Other receivables and prepaid expenses 6,982 *) 6,500
Inventories 20,068 18,736
--------- ---------

Total current assets 214,471 161,304
--------- ---------

LONG-TERM INVESTMENTS:
Long-term bank deposits -- 32,670
Long-term marketable securities 7,107 --
Investments in companies 2,652 1,343
Deferred tax assets 2,058 2,058
Severance pay funds 11,766 9,799
--------- ---------

Total long-term investments 23,583 45,870
--------- ---------

PROPERTY AND EQUIPMENT, NET 7,210 7,094
--------- ---------

INTANGIBLE ASSETS, DEFERRED CHARGES AND
OTHER, NET 16,092 19,007
--------- ---------

GOODWILL 111,212 111,212
--------- ---------

Total assets $ 372,568 $ 344,487
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of long-term bank loans $ 6,000 $ --
Trade payables 10,508 8,849
Other payables and accrued expenses 27,780 28,780
Senior convertible notes 48,759 --
--------- ---------

Total current liabilities 93,047 37,629
--------- ---------

ACCRUED SEVERANCE PAY 13,078 11,168
--------- ---------

LONG-TERM BANK LOANS 23,250 --
--------- ---------

SENIOR CONVERTIBLE NOTES 72,579 121,198
--------- ---------

Total shareholders' equity 170,614 174,492
--------- ---------

Total liabilities and shareholders' equity $ 372,568 $ 344,487
========= =========
*) reclassified

AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------
In thousands, except per share data

Nine months ended Three months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited)
------------------ ------------------

Revenues $135,992 $115,395 $ 46,602 $ 40,408

Cost of revenues 59,655 50,512 20,535 17,631
-------- -------- -------- --------

Gross profit 76,337 64,883 26,067 22,777

Operating expenses:
Research and development,
net 29,135 30,620 9,155 10,239
Selling and marketing 34,459 32,082 11,116 10,332
General and administrative 7,047 7,200 2,226 2,474
-------- -------- -------- --------

Total operating expenses 70,641 69,902 22,497 23,045
-------- -------- -------- --------

Operating income (loss) 5,696 (5,019) 3,570 (268)
Financial income, net 1,162 1,886 267 616
-------- -------- -------- --------

Income (loss) before taxes on
income 6,858 (3,133) 3,837 348
Taxes on income 480 1,043 196 202
Equity in losses of
affiliated companies 1,061 751 428 218
-------- -------- -------- --------

Net income (loss) $ 5,317 $ (4,927) $ 3,213 $ (72)
======== ======== ======== ========

Basic net earnings (loss) per
share $ 0.13 $ (0.12) $ 0.08 $ (0.00)
======== ======== ======== ========

Diluted net earnings (loss)
per share $ 0.13 $ (0.12) $ 0.08 $ (0.00)
======== ======== ======== ========

Weighted average number of
shares used in computing
basic net earnings per share 41,540 42,572 40,200 42,885
======== ======== ======== ========

Weighted average number of
shares used in computing
diluted net earnings per
share 41,967 42,572 40,517 42,885
======== ======== ======== ========

AUDIOCODES LTD. AND ITS SUBSIDIARIES
NON-GAAP PROFORMA STATEMENTS OF OPERATIONS
--------------------------------------------------------------
In thousands, except per share data

Nine months ended Three months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited)
------------------ ------------------

Revenues $135,992 $115,395 $ 46,602 $ 40,408

Cost of revenues *) **) 57,778 48,119 19,955 16,948
-------- -------- -------- --------

Gross profit 78,214 67,276 26,647 23,460

Operating expenses:
Research and development,
net *) 27,825 28,239 8,942 9,444
Selling and marketing *) **) 31,945 28,601 10,414 9,238
General and administrative *) 6,563 6,561 2,140 2,191
-------- -------- -------- --------

Total operating expenses 66,333 63,401 21,496 20,873
-------- -------- -------- --------

Operating income 11,881 3,875 5,151 2,587
Financial income, net 1,162 1,886 267 616
-------- -------- -------- --------

Income before taxes on income 13,043 5,761 5,418 3,203
Taxes on income **) 480 337 196 202
Equity in losses of
affiliated companies 1,061 751 428 218
-------- -------- -------- --------

Non-GAAP net income $ 11,502 $ 4,673 $ 4,794 $ 2,783
======== ======== ======== ========

Non-GAAP diluted net earnings
per share $ 0.27 $ 0.11 $ 0.11 $ 0.06
======== ======== ======== ========

Weighted average number of
shares used in computing non-
GAAP diluted net earnings
per share 44,195 43,668 47,198 43,677
======== ======== ======== ========

*) Excluding stock-based compensation expenses related to options granted to employees and others as a result of the adoption of SFAR 123R as of January 1, 2006

**) Excluding amortization of intangible assets related to the acquisitions of Nuera and Netrake during the third quarter of 2006 and to the acquisition of CTI Squared during the second quarter of 2007.

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 as well.

AUDIOCODES LTD. AND ITS SUBSIDIARIES
RECONCILIATION BETWEEN GAAP NET INCOME AND NON-GAAP NET INCOME
--------------------------------------------------------------
In thousands, except per share data

Nine months ended Three months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited)
------------------ ------------------
GAAP Net income (loss) $ 5,317 $ (4,927) $ 3,213 $ (72)
======== ======== ======== ========
GAAP Diluted earnings (loss)
per share $ 0.13 $ (0.12) $ 0.08 $ (0.00)
======== ======== ======== ========

Cost of revenues:
Stock-based compensation
(*) 278 482 50 151
Amortization expenses(**) 1,599 1,911 530 532
-------- -------- -------- --------
1,877 2,393 580 683
Research and development,
net:
Stock-based compensation
(*) 1,310 2,381 213 795

Selling and marketing:
Stock-based compensation
(*) 1,731 2,698 441 833
Amortization expenses(**) 783 783 261 261
-------- -------- -------- --------
2,514 3,481 702 1,094
General and administrative:
Stock-based compensation
(*) 484 639 86 283

Income tax effect(**) -- 706 -- --
-------- -------- -------- --------

Non- GAAP Net income $ 11,502 $ 4,673 $ 4,794 $ 2,783
======== ======== ======== ========
Non-GAAP Diluted earnings
per share $ 0.27 $ 0.11 $ 0.11 $ 0.06
======== ======== ======== ========

*) Stock-based compensation expenses related to options granted to employees and others as a result of the adoption of SFAR 123R as of January 1, 2006.

**) Amortization of intangible assets related to the acquisitions of Nuera and Netrake during the third quarter of 2006 and to the acquisition of CTI Squared during the second quarter of 2007.

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 STATEMENT OF CASH FLOWS
--------------------------------------------------------------------
U.S. dollars in thousands

Nine months ended Three months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited)
------------------ ------------------
Cash flows from operating
activities:
-------------------------
Net income (loss) $ 5,317 $ (4,927) $ 3,213 $ (72)
Adjustments required to
reconcile net income to
net cash provided by
operating activities:
Depreciation and
amortization 5,676 5,922 1,821 1,873
Net loss from sale of
marketable securities -- -- -- --
Amortization of marketable
securities premiums and
accretion of discounts,
net 23 50 39 (3)
Equity in losses of
affiliated companies 1,061 751 428 218
Increase (decrease) in
accrued severance pay, net (57) 204 62 (23)
Stock-based compensation
expenses 3,803 6,200 790 2,062
Amortization of senior
convertible notes discount
and deferred charges 153 151 51 51

Increase in accrued
interest on marketable
securities,bank deposits
and structured notes (794) (535) (787) (216)
Decrease (Increase) in
deferred tax assets -- (336) -- 11
Decrease (increase) in
trade receivables, net (10,227) 1,027 (6,123) (4,099)
Decrease (increase) in
other receivables and
prepaid expenses (1,280) (526) (982) 107
Decrease (increase) in
inventories (1,332) (1,673) (73) 2,056
Increase (decrease) in
trade payables 1,659 (822) (1,621) (1,254)
Increase (decrease) in
other payables and accrued
expenses 4,000 (2,768) 3,375 2,045
Increase in deferred tax
liabilities -- 706 -- --
Other -- 1 -- (4)
-------- -------- -------- --------

Net cash provided by
operating activities 8,002 3,425 193 2,752
-------- -------- -------- --------

Cash flows from investing
activities:
-------------------------
Proceeds from sale and
maturity of marketable
securities 17,000 22,600 4,000 6,000
Proceeds from sale of bank
deposits 34,639 28,700 16,545 3,700
Investments in companies (2,370) (1,006) (1,054) (468)
Payment for acquisition of
CTI Squared*) (5,000) (4,897) -- --
Purchase of property and
equipment (2,893) (2,055) (726) (703)
Investment in short-term
deposit (92,109) -- (22,005) --
Investment in marketable
securities (16,795) -- (16,795) --
Investment in long-term
deposit (255) (11,000) -- --
-------- -------- -------- --------

Net cash provided by (used
in) investing activities (67,783) 32,342 (20,035) 8,529
-------- -------- -------- --------

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

Nine months ended Three months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited)
------------------ ------------------
Cash flows from financing
activities:
-------------------------
Repurchase of shares (13,747) -- (2,339) --
Increase in current
maturities of long-term bank
loans 6,000 -- 3,000 --
Long-term bank loans received 24,000 -- 12,000 --
Repayment of loan from bank (750) -- (750) --
Proceeds from issuance of
shares upon exercise of
options and employee stock
purchase plan 1,547 4,642 247 1,912
-------- -------- -------- --------

Net cash provided by financing
activities 17,050 4,642 12,158 1,912
-------- -------- -------- --------

Increase (decrease) in cash
and cash equivalents (42,731) 40,409 (7,684) 13,193
Cash and cash equivalents at
the beginning of the period 75,063 25,171 40,016 52,387
-------- -------- -------- --------

Cash and cash equivalents at
the end of the period $ 32,332 $ 65,580 $ 32,332 $ 65,580
======== ======== ======== ========

*) Excluding cash and cash equivalents

CONTACT: AudioCodes
Nachum Falek, VP Finance & CFO
nachum@audiocodes.com
Shirley Nakar, Director, Investor Relations
shirley@audiocodes.com
+972-3-976-4000

Grayling Global
IR Agency Contact
Erik Knettel
+1-646-284-9415
eknettel@hfgcg.com

Copyright ? 2008 GlobeNewswire, Inc.

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