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AudioCodes Reports Fourth Quarter and Full Year 2019 Results
[January 28, 2020]

AudioCodes Reports Fourth Quarter and Full Year 2019 Results


LOD, Israel, Jan. 28, 2020 /PRNewswire/ --

Fourth Quarter and Full Year 2019 Highlights

  • Quarterly revenues increased by 15.3% year-over-year to $52.8 million;
    full 2019 year revenues increased by 13.7% to $200.3 million;
  • Quarterly service revenues increased by 15.9% year-over-year to $17.5 million;
    full 2019 year service revenues increased by 14.7% to $64.6 million;
  • Quarterly and full 2019 year UC-SIP revenues increased more than 20% year-over-year;
  • AudioCodes entered into a royalty buyout agreement with the Israel National Authority for Technology and Innovation ("IIA") in November 2019 (detailed below). The agreement provided for a payment of $32.2 million to the IIA. This required payment of $32.2 million is included in expenses in the GAAP results for the three months and full year ended December 31, 2019;
  • GAAP results:
    • Quarterly GAAP gross margin percentage was 3.9%;
    • Quarterly GAAP operating loss percentage was 49.2%;
    • Quarterly GAAP net loss was $8.2 million, or ($0.28) per diluted share;
    • Full 2019 year GAAP net income was $4.0 million, or $0.13 per diluted share;
  • Non-GAAP results:
    • Quarterly Non-GAAP gross margin percentage was 65.1%;
    • Quarterly Non-GAAP operating margin percentage was 15.7%;
    • Quarterly Non-GAAP net income was $8.1 million, or $0.26 per diluted share;
    • Full 2019 year Non-GAAP net income was $27.8 million, or $0.89 per diluted share; and
    • Net cash provided by operating activities was $2.4 million for the quarter and $23.2 million for the full year.

Details

AudioCodes (NASDAQ: AUDC), a leading vendor of advanced voice networking and media processing solutions for the digital workplace, today announced financial results for the fourth quarter and full year periods ended December 31, 2019.  

Revenues for the fourth quarter of 2019 were $52.8 million compared to $51.4 million for the third quarter of 2019 and $45.8 million for the fourth quarter of 2018. Revenues were $200.3 million in 2019 compared to $176.2 million in 2018.

Net loss was $8.2 million, or ($0.28) per diluted share, for the fourth quarter of 2019, compared to net income of $4.5 million, or $0.15 per diluted share, for the fourth quarter of 2018. Net income in 2019 was $4.0 million, or $0.13 per diluted share, compared to $13.5 million, or $0.45 per diluted share, in 2018.

On a Non-GAAP basis, net income was $8.1 million, or $0.26 per diluted share, for the fourth quarter of 2019 compared to $6.3 million, or $0.20 per diluted share, in the fourth quarter last year. Non-GAAP net income in 2019 was $27.8 million, or $0.89 per diluted share, compared to $20.0 million, or $0.65 per diluted share, in 2018.

Non-GAAP net income excludes: (i) share-based compensation expenses; (ii) amortization expenses related to intangible assets; (iii) expenses related to the payment required to be made pursuant to the royalty buyout agreement announced in November 2019 (detailed below); (iv) expenses or income related to revaluation of an earn-out liability in connection with the acquisition of Active Communications Europe; (v) financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies and (vi) non-cash deferred tax expenses (benefit). 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.

As announced in November 2019, the Company and one of its Israeli subsidiaries entered into a royalty buyout agreement (the "Royalty Buyout Agreement") with the Israel National Authority for Technology and Innovation ("IIA") relating to certain grants they had received from the IIA. The contingent net royalty liability to the IIA at the time of the Royalty Buyout Agreement with respect to these grants was approximately $49 million (the "Debt"), including interest to the date of the Royalty Buyout Agreement. As part of the Royalty Buyout Agreement, the Company agreed to pay approximately $32.2 million to the IIA (to settle the $49 million Debt in full) in three annual installments starting in 2019. Pursuant to the Royalty Buyout Agreement, AudioCodes eliminated all royalty obligations related to its future revenues with respect to these grants. The Royalty Buyout Agreement has a positive impact on Non-GAAP gross margin starting in the fourth quarter of 2019 and will have a positive impact on GAAP gross margin starting in the first quarter of 2020. The $32.2 million expense is included in the GAAP cost of revenues for the fourth quarter of 2019 and impacts GAAP results for the three months and full year ended December 31, 2019.

During the fourth quarter of 2019, the Company utilized the deferred tax asset recorded in 2016 and created a new deferred tax asset based on its earnings history and expected future operating results. The total deferred tax asset amounted to $20.5 million as of December 31, 2019. This deferred tax asset represents the approximate amount of the Company's net operating losses and temporary tax differences that the Company estimates it will utilize over the next few years. GAAP net income for the fourth quarter and full 2019 year reflect the effect of the tax benefit associated with the creation of this deferred tax asset. Non-GAAP net income excludes this non-cash deferred tax benefit.

Net cash provided by operating activities was $2.4 million for the fourth quarter of 2019 and $23.2 million for 2019. Both numbers were impacted by the $10.7 million payment made in December 2019 which was the first installment pursuant to the Royalty Buyout Agreement.

Cash and cash equivalents, long and short-term bank deposits and short-term marketable securities were $71.9 million as of December 31, 2019 compared to $65.4 million as of December 31, 2018. The increase in cash and cash equivalents, long and short-term bank deposits and short-term marketable securities was the result of cash provided by operating activities offset, in part, by the use of cash in 2019 for repurchasing of the Company's ordinary shares pursuant to its share repurchase program, payment of cash dividends and the payment related to the first installment pursuant to the  Royalty Buyout Agreement. 

"We are pleased to report record financial results for the fourth quarter and full year 2019," said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes.

"The year 2019 ended on a strong note, underscoring strong performance for the full year, our best year ever. Underlining our success is our continued leadership of the Enterprise Voice segment with our voice connectivity solutions, delivery of strong results for our voice networking business, and increased investment in two new developing markets: the meeting space and Voice.ai. Growing our top line revenue by 13.7% year-over-year, the second year in a row of double digit revenue growth, improving non-GAAP annual operating income to 14.1% from 11.7% in the prior year, and growing non-GAAP annual net income by 38.9% compared to 2018, all demonstrate the strength of our Company's performance.  A key factor driving this significant growth is the strength in our UC-SIP business which increased more than 20% year-over-year. Our success in growing our UC-SIP business is echoed in a strong industry position and successful execution in the markets we serve."

"In 2019 we continued to invest and develop technologies and solutions in the Voice.ai business unit which has demonstrated success in growing the number of project wins. In the second half of 2019 we have announced the launch of a new effort targeting a set of solutions and devices for the emerging meeting space. Coupling these new technologies with our strong position in the UC and UCaaS markets in the Microsoft Teams and Skype for Business ecosystem should further enhance our ability to expand our  business. Looking forward, and based on current business momentum, we are confident in our ability to continue to expand our business in 2020 and beyond. We plan to continue our investment in future offerings, and focus on the return on investment to our shareholders."

Share Buy Back Program and Cash Dividend 

In August 2019, AudioCodes received court approval in Israel to purchase up to an aggregate of $12 million ("Permitted Amount") of additional ordinary shares pursuant to its share repurchase program. The court approval also permitted AudioCodes to declare a dividend of any part of the Permitted Amount during the approved validity period. This court approval will expire on February 3, 2020.

In December 2019, the Company submitted a new application to the Israeli court, requesting approval of an additional repurchase program for $12 million of ordinary shares. The application also requested the court to permit AudioCodes to declare a dividend of any part of this amount. The new application was submitted to the court and a decision is expected during February 2020.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 8:30 A.M., Eastern Time today to discuss the Company's fourth quarter and full year of 2019 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 at http://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: AUDC) (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.

©2020 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





December 31,


December 31,


2019


2018


(Unaudited)


(Audited)

ASSETS








CURRENT ASSETS:




Cash and cash equivalents

$ 64,773


$ 31,503

Short-term and restricted bank deposits

6,416


12,381

Short-term marketable securities and accrued interest

-


19,602

Trade receivables, net

27,501


22,279

Other receivables and prepaid expenses

5,626


5,885

Inventories

28,275


22,620

Total current assets

132,591


114,270





LONG-TERM ASSETS:




Long-term and restricted bank deposits

$ 694


$ 1,894

Deferred tax assets

20,466


4,350

Operating lease right-of-use assets

29,250


-

Severance pay funds

19,370


17,518

Total long-term assets

69,780


23,762





PROPERTY AND EQUIPMENT, NET

4,392


3,865





GOODWILL, INTANGIBLE ASSETS AND OTHER, NET

37,123


37,475





Total assets

$ 243,886


$ 179,372





LIABILITIES AND SHAREHOLDERS' EQUITY








CURRENT LIABILITIES:




Current maturities of long-term bank loans

$ 2,473


$ 2,487

Trade payables

6,628


6,188

Other payables and accrued expenses

46,191


22,541

Deferred revenues

33,538


23,727

Short-term operating lease liabilities

8,579


-

Total current liabilities

97,409


54,943





LONG-TERM LIABILITIES:




Accrued severance pay

$ 20,313


$ 18,728

Long-term bank loans

1,200


3,687

Deferred revenues and other liabilities

9,831


7,466

Long-term operating lease liabilities

22,659


-

Total long-term liabilities

54,003


29,881





Total shareholders' equity

92,474


94,548

Total liabilities and shareholders' equity

$ 243,886


$ 179,372


 

 

 

AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


U.S. dollars in thousands, except share and per share data


Year ended


Three months ended


December 31,


December 31,


2019


2018


2019


2018


(Unaudited)

(Audited)


(Unaudited)

Revenues:








Products

$ 135,646


$ 119,887


$ 35,271


$ 30,650

Services

64,641


56,336


17,526


15,127

Total Revenues

200,287


176,223


52,797


45,777

Cost of revenues:








Products

59,022


51,878


15,340


13,450

Services

14,129


13,739


3,215


3,668

Expense related to royalty buyout agreement with the IIA

32,178


-


32,178


-

Total Cost of revenues

105,329


65,617


50,733


17,118

Gross profit

94,958


110,606


2,064


28,659









Operating expenses:








Research and development, net

41,199


34,661


10,941


9,035

Selling and marketing

51,535


49,335


13,650


11,958

General and administrative

11,778


10,251


3,424


2,538

Total operating expenses

104,512


94,247


28,015


23,531









Operating income (loss)

(9,554)


16,359


(25,951)


5,128

Financial income (expenses), net

(1,761)


228


231


42

Income (loss) before taxes on income

(11,315)


16,587


(25,720)


5,170

Tax benefit (taxes on income)

15,292


(3,094)


17,487


(640)









Net income (loss)

$ 3,977


$ 13,493


$ (8,233)


$ 4,530









Basic net earnings (loss) per share

$ 0.14


$ 0.47


$ (0.28)


$ 0.16









Diluted net earnings (loss) per share

$ 0.13


$ 0.45


$ (0.28)


$ 0.15









Weighted average number of shares used in

computing basic net earnings (loss) per share (in

thousands)

29,252


28,928


29,423


29,147









Weighted average number of shares used in

computing diluted net earnings (loss) per share (in

thousands)

30,800


30,220


29,423


30,525










 

 

AUDIOCODES LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME


U.S. dollars in thousands, except per share data


Year ended


Three months ended


December 31,


December 31,


2019


2018


2019


2018


(Unaudited)

(Audited)


(Unaudited)

GAAP net income (loss)

$ 3,977


$ 13,493


$ (8,233)


$ 4,530

GAAP net earnings (loss) per share

$ 0.13


$ 0.45


$ (0.28)


$ 0.15

Cost of revenues:








Share-based compensation (1)

183


186


62


48

Amortization expenses (2)

272


667


68


145

Expense related to royalty buyout agreement with the IIA (3)

32,178


-


32,178


-


32,633


853


32,308


193

Research and development, net:








Share-based compensation (1)

937


651


289


206









Selling and marketing:








Share-based compensation (1)

2,171


1,238


811


377

Amortization expenses (2)

60


60


15


15


2,231


1,298


826


392









General and administrative:








Share-based compensation (1)

2,001


1,212


797


358

Revaluation of earn-out liability (4)

(23)


200


-


-


1,978


1,412


797


358

Financial expenses:








Exchange rate differences (5)

2,172


-


(158)


-









Income taxes:








Deferred tax (6)

(16,099)


2,334


(17,731)


582









Non-GAAP net income

$ 27,829


$ 20,041


$ 8,098


$ 6,261

Non-GAAP diluted net earnings per share

$ 0.89


$ 0.65


$ 0.26


$ 0.20











 

(1)  Share-based compensation expenses related to options and restricted share units granted to employees and others.
(2)  Amortization of intangible assets related to the acquisitions of Mailvision and Active Communications Europe assets.
(3)  Expense related to royalty buyout agreement with the IIA.
(4)  Expenses or income related to revaluation of an earn-out liability in connection with the acquisition of Active Communications Europe.
(5)  Financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies.
(6)  Non-cash deferred tax expenses (benefit).

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



Year ended


Three months ended



December 31,


December 31,



2019


2018


2019


2018



(Unaudited)

(Audited)


(Unaudited)

Cash flows from operating activities:









Net income (loss)


$ 3,977


$ 13,493


$ (8,233)


$ 4,530

Adjustments required to reconcile net income (loss)
to net cash provided by operating activities:









Depreciation and amortization


2,044


2,309


522


643

Amortization of marketable securities premiums and
accretion of discounts, net


79


353


-


82

Increase (decrease) in accrued severance pay, net


(267)


120


(391)


77

Share-based compensation expenses


5,292


3,287


1,959


989

Decrease (increase) in deferred tax assets, net


(16,282)


2,251


(17,763)


562

Decrease (increase) in accrued interest and exchange
rate effect of loans, marketable securities and bank
deposits


140


(32)


20


47

Changes in operating leases, net


1,988


-


1,603


-

Decrease (increase) in trade receivables, net


(5,609)


2,979


(3,603)


7,374

Decrease (increase) in other receivables and prepaid
expenses


143


(330)


(339)


2,803

Decrease (Increase) in inventories


(5,809)


(6,991)


1,868


(1,491)

Increase (decrease) in trade payables


440


549


(1,191)


(439)

Increase (decrease) in other payables and accrued
expenses


24,691


(835)


23,267


(3,596)

Increase in deferred revenues


12,342


8,427


4,694


35










Net cash provided by operating activities


23,169


25,580


2,413


11,616










Cash flows from investing activities:









Investment in short-term deposits


-


(8,436)


-


(4,936)

Proceeds from short-term deposits


10,962


-


-


-

Proceeds from long-term deposits


1,200


1,107


300


300

Proceeds from redemption of marketable securities


29,413


7,577


10,028


6,000

Purchase of marketable securities


(10,025)


-


(19)


-

Purchase of property and equipment


(1,949)


(1,340)


(273)


(362)










Net cash provided by (used in) investing activities


29,601


(1,092)


10,036


1,002




















 

 

AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


U.S. dollars in thousands



Year ended


Three months ended



December 31,


December 31,



2019


2018


2019


2018



(Unaudited)

(Audited)


(Unaudited)

Cash flows from financing activities:









Purchase of treasury shares


(8,002)


(14,321)


-


(2,752)

Repayment of bank loans


(2,470)


(2,508)


(617)


(621)

Cash dividends paid to shareholders


(6,720)


(5,761)


-


-

Payment related to the acquisition of ACS


(410)


(151)


-


-

Proceeds from issuance of shares upon exercise of
options and warrants


3,102


5,521


869


938










Net cash provided by (used in) financing activities


(14,500)


(17,220)


252


(2,435)










Net increase in cash, cash equivalents, and restricted
cash


38,270


7,268


12,701


10,183

Cash, cash equivalents and restricted cash at beginning
of period


31,503


24,235


57,072


21,320










Cash, cash equivalents and restricted cash at end of period


$ 69,773


$ 31,503


$ 69,773


$ 31,503











                                                                                                                       

Cision View original content:http://www.prnewswire.com/news-releases/audiocodes-reports-fourth-quarter-and-full-year-2019-results-300994142.html

SOURCE AudioCodes


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