AudioCodes (AUDC) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenues were $60.2 million, nearly flat sequentially and down 2.2% year-over-year, with service revenues up 6.4% to $32.5 million.

• Services accounted for a record 53.9%–54% of total revenue, driven by Live managed services and conversational AI.

• Microsoft Teams Live business grew 21%–21.4% year-over-year, now 44–45% of Teams business.

• Conversational AI contract value increased about 50% year-over-year; Live ARR rose 40% year-over-year to $60 million.

• Net income was $2.7 million ($0.09 per diluted share), down from $3.8 million in Q2 and $4.3 million a year ago; non-GAAP net income was $4.9 million ($0.16 per share).

Financial highlights

• GAAP gross margin was 65.2%; non-GAAP gross margin was 65.6%, both slightly down from Q2.

• Non-GAAP operating margin was 11.7%; GAAP operating margin was 8.1%.

• Adjusted/Non-GAAP EBITDA was $7.9 million (13.1% margin), down from $8.3 million (13.8%) in Q2.

• Cash and equivalents totaled $88.4 million at quarter end; net cash from operations was $7.9 million.

• Deferred revenues were $78.6 million, down from $80 million in Q2.

Outlook and guidance

• 2024 revenue guidance reiterated at $240–$250 million; non-GAAP EBITDA expected at $33–$39 million.

• Management expects improved top-line growth in 2025, supported by recurring revenue and a strong pipeline in Microsoft, CX, and conversational AI.

• Conversational AI revenue projected to grow 30–40% in 2024, surpassing $10 million for the first time.

• Long-term targets: revenue growth 6%–12% YoY, non-GAAP gross margin 65%–68%, operating margin 15%–20%, EBITDA margin 17%–22%.

• Anticipates double-digit Microsoft business growth by 2026 as recurring Live services overtake declining CapEx sales.