AudioCodes Ltd.

Please note this conference is being recorded. I will now turn the conference over to your host, Roger Tuchin, Investor Relations. Roger, the floor is yours. Thank you, Operator. Hosting the call today are Shabtai Aliceberg, President and Chief Executive Officer, and Niran Baruch, Vice President of Finance and Chief Financial Officer. Before we begin, I'd like to remind you that the information provided during this call may contain forward-looking statements relating to AudioCode's business outlook, future economic performance, product introductions, 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 the term is defined under U.S. federal securities law. Forward-looking statements are subject to various risks and 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 audio codes 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 audio codes and its customers' products and markets. Timely product and technology development upgrades and the ability to manage changes in marketing 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 audio codes to successfully integrate the products and operations of acquired companies into audio codes business. Possible adverse impact of the COVID-19 pandemic on our business and results of operations. The effects of the current terrorist attacks on Hamas and the war and hostilities between Israel and Hamas and Israel and Hezbollah, as well as the possibility that this could develop into a broader regional conflict involving Israel with other parties may affect our operations and may limit our ability to produce and sell our solutions. Any disruption in our operations by the obligations of our personnel to perform military service as a result of current or future military actions involving Israel and other factors detailed in AudioCodes filings with the U.S. Securities and Exchange Commission. AudioCodes assumes no obligation to update this information. In addition, during the call, AudioCodes will refer to non-GAAP net income and net income per share. AudioCodes has provided full reconciliation of the non-GAAP net income and net income per share to net income and net income per share according to GAAP in the press release that is posted on its website. Before I turn the call over to management, I'd like to remind everyone that this call is being recorded, and archived webcasts will be made available on the investor relations section of the company's website at the conclusion of the call. With all that said, I'd like to turn the call over to Shabtai. Shabtai, please go ahead.

Thank you, Roger. Good morning and good afternoon, everybody. I would like to welcome all to our first quarter 2025 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of Audiocodes. Niran will start off by presenting a financial overview of the Corps. I will then review the business highlights and summary for the Corps and discuss trends and developments in our business and industry. We will then turn it into the Q&A session. Niran?

Thank you, Shabtai, and hello, everyone. Before I start my formal remarks, I would like to remind everyone that in conjunction with our earnings release this morning, we will post shortly on our investor relations website an earnings supplemental deck. On today's call, we will be referring to both GAAP and non-GAAP financial results. The earnings press release that we issued earlier this morning contains a reconciliation of the supplemental non-GAAP financial information that I will be discussing on this call. Revenues for the first quarter were $60.4 million, an increase of 0.5 percent over the $60.1 million reported in the first quarter of last year. Services revenues for the quarter were $32.6 million, up 3.4 percent over the year-ago period. Services revenues in the first quarter accounted for 54 percent of total revenues. The amount of deferred revenues as of March 31, 2025, was $81.3 million, compared to $80.5 million as of March 31, 2024. Revenues by geographical region for the quarter were split as follows. North America, 48 percent. EMEA, 34 percent. Asia Pacific, 14%, and Central and Latin America, 4%. Our top 15 customers represented an aggregate of 52% of our revenues in the first quarter, of which 36% was attributed to our nine largest distributors. GAAP results are as follows. Gross margin for the quarter was 64.8% compared to 64.4% in Q1 2024. Operating income for the first quarter was 3.6 million or 6% of revenues compared to operating income of 3.3 million or 5.5% of revenues in Q1 2024. EBITDA for the quarter was $4.6 million, compared to EBITDA of $3.8 million for Q1 2024. And net income for the quarter was $4 million, or $0.13 per diluted share, compared to net income of $2.1 million, or $0.07 per diluted share for Q1 2024. Non-GAAP results are as follows. Non-GAAP gross margin for the quarter was 65.2%, compared to 65.2% in Q1 2024. Non-GAAP operating income for the first quarter was 5.4 million or 8.9% of revenues compared to 6.3 million or 10.5% of revenues in Q1 2024. Non-GAAP EBITDA for the quarter was 6.2 million compared to non-GAAP EBITDA of 6.7 million for Q1 2024. Non-GAAP net income for the first quarter was $4.7 million, or $0.15 per diluted share, compared to $5.2 million, or $0.17 per diluted share, in Q1 2024. At the end of March 2025, cash equivalents, bank deposits, marketable securities, and financial investment totaled $95.7 million. Net cash provided by operating activities was $13.5 million for the first quarter of 2025. Day sales outstanding as of March 31, 2025, were 107 days. During the quarter, we acquired 500,000 of our ordinary shares for a total consideration of approximately $5.2 million. In December, 2024, we received court approval in Israel to purchase up to an aggregate amount of $20 million of additional ordinary shares. The court approval also permits us to declare a dividend of any part of this amount. The approval is valid through June 14, 2025. On February 4, 2025, we declare the cash dividend of 18 cents per share, the dividend in aggregate amount of approximately 5.5 million, was paid on March 6, 2025. Regarding recent tariff headlines, we have not observed thus far any material changes to our revenues or business activity. Addressing the direct cost impact from tariffs announced since the beginning of 2025, we estimate approximately $3 million additional cost burden for the full year 2025 or approximately 4 million annually on a run rate basis. Note that these estimated amounts do not consider price increase actions we have taken across the affected product lines. Given the fluidity of the tariff situation and associated macroeconomic uncertainty, we have decided to withdraw the previously provided annual guidance. We plan to resume the practice of providing an annual outlook once the tariff rates are finally determined. I will now turn the call back over to Shabtai.