AudioCodes Ltd. (AUDC)
Q4 2007 Earnings Call
February 05, 2008 9:00 am ET
Andrea Costa - Global Consulting Group
Shabtai Adlersberg - Chairman, President and CEO
Nachum Falek - VP, Finance and CFO
Ben Rabinowitz - VP and GM of Session Border Controllers and Media Server Business Lines
Carter Driscoll - Stanford Group
Ittai Kidron – Oppenheimer
Dan Sherwin - Merrill Lynch
Irit Jakoby - Susquehanna Financial Group
Troy Jensen - Piper Jaffray and Co.
Ted Jackson - Cantor Fitzgerald
Eric Kainer – ThinkEquity
Jonathan Kreizman - Oscar Gruss
Greetings and welcome to the AudioCodes fourth quarter 2007 Earnings Call. (Operator Instructions).
It is now my pleasure to introduce your host, Ms. Andrea Costa of Global Consulting Group. Thank you. You may begin.
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These 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 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 product 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 the market conditions as needed, possible disruption from acquisitions, the ability of AudioCodes to successfully integrate the products and operations of acquired companies and to AudioCodes' business and other factors detailed in AudioCodes filings with the Securities and Exchange Commission. AudioCodes assumes no obligation to update that information.
In addition during the call we will refer to non-GAAP net income. We have provided a reconciliation of non-GAAP net income to our net income according to GAAP in our press release and on our website.
Joining us today from AudioCodes we have Shabtai Adlersberg, Chairman, President and Chief Executive Officer; Nachum Falek, Vice President, Finance and Chief Financial Officer; and Ben Rabinowitz, Vice President and General Manager of Session Border Controllers and Media Server Business Lines.
I would now like to turn the call over to Shabtai Adlersberg. Mr. Adlersberg, please go ahead.
Thank you, Andrea. Good morning and good afternoon everybody. I would like to welcome all to our fourth quarter 2007 conference call. With me this morning are Nachum Falek, Vice President, Finance and Chief Financial Officer and Ben Rabinowitz, Vice President and General Manager of Session Border Controllers business.
Nachum will start by presenting a financial overview of the quarter, I will then review the business highlights for the third quarter and then turn it to Ben to cover the trends in the Voice over IP market and developments in our business. We will then turn it into the Q&A session. Nachum?
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 and pro forma numbers.
Our fourth quarter pro forma results reflect adjustments for the following two non-cash items; Stock-based compensation expenses which totaled $1.8 million in the fourth quarter of 2007 and amortization expenses relating to the acquisition of Nuera, Netrake and CTI, which totaled $600,000 net of taxes in the reported quarter.
Full reconciliation of the pro forma results discussed on this call to GAAP results is currently available for review on our website and in the press release issued yesterday.
Getting to our quarterly results. In the fourth quarter, revenues were $42.8 million which represent 6% increase from the last quarter. As a percentage of our revenues, sales in America accounted for 55%, Europe 25%, Asia Pacific 13% and Israel 7%. We had one customer above 10%. Our top 15 customers accounted for 49% of our revenues compared to 51% in the previous quarter.
In terms of revenues by business groups, in the fourth quarter, our technology business group accounted for 32% of revenues compared to 35% in the previous quarter, and our networking business group accounted for 68% of revenues compared to 65% in the previous quarter.
In the fourth quarter of 2007, pro forma gross margin was 58.1% similar to the third quarter pro forma gross margin. On a GAAP basis, gross margin was 56.4%.
Our total pro forma operating expenses increased from the third quarter levels to approximately $21.4 million in the fourth quarter of 2007. On a GAAP basis, operating expenses for the fourth quarter were $23.4 million. Headcount increased this quarter by 11 employees, which brings us to a total of 688 employees.
Pro forma net income for the fourth quarter was $3.6 million or $0.08 per share. GAAP net income for the fourth quarter was $1.4 million or $0.03 per share. Short-term and long-term cash balances were $143 million compared to $134 million last quarter.
The increase in cash balances is attributed mainly to a positive cash flow from operations and financing activities which were offset by a negative cash flow related to investment activities. DSO came in at 64 days compared to last quarter DSO of 68 days.