AudioCodes Ltd. (AUDC)

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AudioCodes (AUDC)

Q4 2012 Earnings Call

January 30, 2013 09:00 PM ET


Erik Knettel - IR

Shabtai Adlersberg - Chairman, President and CEO

Guy Avidan - VP, Finance and CFO


Andrew Uerkwitz - Oppenheimer and Company

Rich Valera - Needham & Company



Greetings and welcome to the AudioCodes Fourth Quarter 2012 Earnings Conference Call. At this time all participants are in listen only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Erik Knettel, Investor Relations for AudioCodes. Thank you, Mr. Knettel you may begin.

Erik Knettel

Thank you, Melissa. I'd like to welcome everyone to the AudioCodes Fourth Quarter and full year 2012 Earnings Conference Call. Let me begin the call today with a brief Safe Harbor statement. Statements concerning AudioCodes' business outlook, 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 Law.

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 current global economic conditions and conditions in general and 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 the market conditions as needed, 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 that information.

In addition during the call, AudioCodes will refer to non-GAAP net income and net income per share. AudioCodes has provided a reconciliation of non-GAAP net income and net income per share to its net income and net income per share according to GAAP in its press release and on its website.

Joining us today from AudioCodes we have Shabtai Adlersberg, Chairman, President and Chief Executive Officer and Guy Avidan, Vice President of Finance and Chief Financial Officer.

I would now like to turn the call over to Shabtai Adlersberg. Mr. Adlersberg, please go ahead.

Shabtai Adlersberg

Thank you, Erik. Good morning and good afternoon everybody. I would like to welcome all to our fourth quarter and year end 2012 conference call. With me this morning is Guy Avidan, Chief Financial Officer and Vice President of Finance. Guy will start off by presenting a financial overview of the quarter.

I will then review the business highlights and summary and then discuss developments in our business and in the industry and plans for 2013. We will then turn it into the Q&A session. Guy.

Guy Avidan

Thank you Shabtai and good morning everyone. Before beginning the financial overview of the quarter, I would like to note that the following discussion will include GAAP numbers as well as non-GAAP pro forma numbers.

Our fourth quarter non-GAAP pro forma results reflect adjustment for the following two non-cash items, stock-based compensation expenses which totaled $332,000 and amortization expenses relating to the acquisitions of Nuera, Netrake and CTI, which totaled $282,000.

The full reconciliation of the non-GAAP results discussed on this call to GAAP results is currently available for review on our website and in the press release issued earlier today.

Getting to the numbers, our fourth quarter results are in line with our previous revenue and profit guidance discussed on our conference call on October 4, 2012 and include the completion of the restructuring plan to reduce annual operating expenses as our announcement on July 11.

As announced in July, the restructuring plan is generating estimated annualized saving of approximately 10% of company's operational expenses. At the end of the fourth quarter, we managed to reduce headcount by 9% compared to the end of the second quarter. The implementation of the cost reduction plan was completed this quarter. Fourth quarter revenue were 32.8 million which represent a 4.6% increase from sequential third quarter of 2012.

We saw solid demand for our Core Networking Equipment Group business especially in the unified communication and contact centers market which was partially offset by some anticipated headwind we experienced during this quarter in our Technology Group and OEM business.

As a percentage of revenues, sales in the Americas accounted for 53%, Europe, the Middle East and Africa 38%, and Asia Pacific 9%. Revenues associated with our growing Manage and Technical Services business line grew to exceed 20% of total revenue or $6.7 million in the fourth quarter of 2012.

Managed Services provide another revenue driver, which helps further bind AudioCodes high value relationship with its customers. Service revenues are also beneficial in that they are typically characterized by high gross margin and are based on the extensive experience and knowhow accumulated in the company.

Our top 15 customers accounted for 58% of our revenue compared to 53% in the previous quarter. In the fourth quarter, we had a single distributor in North America that accounted for 17% of revenues compared to 13% in the previous quarter. The increase in business with this distributor is derived from the sequential increase in our revenues in the United States.

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