AudioCodes Ltd.

Greetings. Welcome to Audio Code's second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Roger Chuchin, VP of Investor Relations. You may begin.

Thank you, Operator. Hosting the call today are Shabtai Atlasberg, 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 that differ materially from those stated in such statements. These risks, uncertainties, and factors include, but are not limited to, the effects 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 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 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 by 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 Audio Codes has provided full reconciliation of the non-GAAP net income and net income per share to its 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. An archived webcast 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 second CORE 2025 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of Aldi Codes. Niran will start off by presenting a financial overview of the CORE. I will then review the business highlights and summary for the CORE 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 second quarter were $61.1 million, an increase of 1.3% over the $60.3 million reported in the second quarter of last year. Services revenues for the quarter were $32.6 million, up 1.9 percent over the year-ago period. Services revenues in the second quarter accounted for 53.3 percent of total revenues. The amount of deferred revenues as of June 30, 2025, was $82.7 million compared to $80.3 million as of June 30, 2024. Revenues by geographical region for the quarter were split as follows. North America, 48%, EMEA, 34%, Asia Pacific, 14%, and Central and Latin America, 4%. Our top 15 customers represented an aggregate of 54% of our revenues in the second quarter, of which 34% was attributed to our nine largest distributors. In the second quarter of 2025, we experienced increased expenses due to the implementation of new tariffs on the U.S. imports, accounting to approximately $1 million additional cost, which impacted on both GAAP and non-GAAP results. GAAP results are as follows. Gross margin for the quarter was 64.1% compared to 65.5% in Q2 2024. Operating income for the second quarter was $2.6 million or 4.3% of revenues compared to operating income of $4.9 million or 8.2% of revenues in Q2 2024. EBITDA for the quarter was $3.6 million compared to EBITDA of $6.2 million for Q2 2024. Net income for the quarter was $0.3 million or $0.01 per diluted share compared to net income of $3.8 million or $0.12 per diluted share for Q2 2024. Non-GAAP results are as follows. Non-GAAP gross margin for the quarter was 64.5% compared to 65.8% in Q2 2024. Non-GAAP operating income for the second quarter was 4.4 million or 7.2% of revenues compared to 7.2 million or 11.9% of revenues in Q2 2024. Non-GAAP EBITDA for the quarter was 5.2 million compared to non-GAAP EBITDA of 8.3 million for Q2 2024. Non-GAAP net income for the second quarter was 4.1 million or 14 cents per diluted share compared to 5.5 million or 18 cents per diluted share in Q2, 2024. At the end of June, 2025, cash, cash equivalents, bank deposits, marketable securities and financial investment total 95.3 million. Net cash provided by operating activities was 7.7 million for the second quarter of 2025. Day sales outstanding as of June 30 were 112 days. During the quarter, we acquired 715,000 of our ordinary shares for a total consideration of approximately 6.6 million. In July 2025, 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 December 30, 2025. Earlier this morning, we also declared the cash dividend of 20 cents per share. The aggregate amount of the dividend is approximately 5.7 million. The dividend will be paid on August 28 to all of our shareholders of record at the close of trading on August 14. Regarding the direct cost impact from tariff announced since the beginning of 2025, we continue to expect 3 to 4 million of cost burden for full year 2025. As discussed last quarter, we will look to resume practice of providing annual outlook when we have better visibility on the final tariff rate. I will now turn the call back over to Shabtai.

Thank you, Niren.

I'm pleased to report second consecutive quarter of top-line growth in second quarter and execution of our strategic objectives. Another quarter of making progress towards a long-term transformation to an AI-driven hybrid cloud software and services company. Our second quarter 2025 performance demonstrates our success in navigating a dynamic market environment. While continuing to build on strength in our connectivity franchise, which accounts for above 90% of our revenues, we continued to drive traction in our portfolio of fast growth AI-powered business applications and voice services. Second quarter 25 is the second quarter in a row where we saw stabilization in the connectivity space as compared to the decline we have witnessed during the years 2023 and 2024. Our enterprise UC and CX revenue again accounted for above 90% of revenues in the core, highlighted by ongoing strength in Microsoft Teams business, which grew 6.5% year-over-year. Key development in the core is the official certification as a Cisco Webex Cloud Connect enablement provider. With this milestone, we now enable connectivity services of all major UC platforms, including Microsoft Teams, Zoom, and WebEx. More on the significance of this development later. In the CX business, we made progress as planned, and our healthy pipeline continues to support a positive outlook for the second half and full year 2025. On the conversational AI practice, we are seeing substantial robust demand which supports our plan for 40% to 50% growth outlook for the segment in 2025. Noteworthy is the success we experienced with the newly launched Meeting Insights on-premise service, targeting regulated industries and enterprises seeking the utmost level of privacy and security. Overall, services accounted for 53% of revenues and grew 1.9% year over year. First half 2025 services invoicing were in line with our budget plans. Based on services bookings and inherent visibility in this line item, we expect second half 2025 services revenue growth to further improve. Within services or live managed services, year-over-year growth remained robust, up 25% year-over-year to end the quarter at $70 million annual recurring revenues. Backlog of live managed services exit second quarter 2025 was 73 million compared to 67 million at the end of the year ago quarter. As previously, as previewed last quarter, we officially launched our next generation live platform, a major milestone in our managed services strategy. With the recent addition of Cisco WebEx calling certification, the platform now fully integrates our comprehensive unified communication, customer success capability. What sets this platform apart is its ability to empower our channel partners, service providers, and system integrators to seamlessly layer GenAI-powered business voice application and third-party solution on top of their core connectivity offering. Live Platform is a cloud-native, fully automated platform for launching and scaling voice services, especially around Microsoft Teams, and operator-connect deployments. The platform supports also Zoom Phone and Cisco Webex Calling. It enables zero-touch automation, session border control as a service, routing, billing, reporting, and provisioning workflows, all integrated into one system to reduce deployment time and operational complexity. Feedback from partners across all sizes has been overwhelming positive. Since showcasing the platform, we have seen a measurable uptick in our pipeline and an accessible acceleration in sales cycles, including with several tier one service providers. Amidst the new product momentum, we continue to enhance the value proposition and stickiness of our platform with new innovations. As an example, we are developing a new AI-powered real-time analytics system that offers strategic insights into the CX Business Manager. While it may take time for these live platform wins to be material revenue contributors, we are super excited about its potential to drive stronger footprint in the market, recurring revenue growth, and improve our overall revenue mix. A great example is AT&T North America, one of our earliest live platform partners, which uses our solution to onboard end customers to Microsoft Teams. Our secure and scalable solution has provided AT&T North America with significant operational flexibility and resulted in multi-million dollar of annual recurring revenue over the past few years. On the conversational AI front, we have experienced increased interest all around our activity. Progress has been made in most of the leading product categories such as the focus Customer Interaction Center for the Microsoft Teams environment, Meeting Insights serving as an enterprise meeting intelligence platform, and the newly developed and introduced AI Agents technology for voicebots. As a case in point, we recently introduced Meeting Insights on-prem, extending the GenAI-enabled meeting productivity and intelligence benefits to regulated and security-sensitive environments and industries. This industry-first solution has already garnered important customer interest as evidenced by robust pipeline. We expect a number of proof-of-concept opportunities to further scale over the rest of the year. Two weeks ago, we have introduced some meeting insights on-prem internationally in the APAC region. The audience feedback was better than our elevated expectation. Common takeaways from these meetings is that these services exactly what security-sensitive management and customers, such as government, banks are looking for, unleashing the power of Gen-AI without compromising our security. This viewpoint mirrors customer feedback in Israel or initial market launched several months ago. Before turning to detailed baseline discussion, let's quickly shift to second core profitability metrics. On the top line, we performed a splint with revenue growing 1.3% year-over-year. Our non-GAAP gross margin, as Niran mentioned, for the quarter was 64.5, slightly below our long-term target range of 65 to 68, and compressed to 65.8% in the year-ago quarter. Our second quarter non-GAAP gross margin absorbed roughly about $1 million of the risk-related cost add-ins. We continue to expect close to 4 million of tariff-related costs burdened for the full year. Assuming tariff rates for the various countries settle shortly, which we hope will happen in the summer, we will be working to reduce the heat in the first quarter of 2025. Additionally, we incurred several hundred of those headwinds from the weaker US dollars against the euro in the second quarter. Second quarter non-gap operating expenses rose to $35 million, up from $32.5 million in the year-ago period. The higher expenses are primarily attributable to higher investments in marketing and sales resources as part of our conversational AI investment. In terms of ad count, we entered the quarter with 963 employees, roughly flat from the prior quarter and compared to 940 in the year-ago period. Adjusted EBITDA for the second quarter was $5.2 million. We continue to generate healthy amounts of cash flow with net cash from operating activity at $7.7 million for the quarter. This robust cash flow generation provides strong backing to our ability to keep investing and expanding our business moving forward. As to the guidance, as mentioned in our previous quarter's discussion, we will postpone issuing a financial outlook until we have better and clearer understanding of the resolution regarding tariff rates. The key takeaways from these financial results at the bottom is that our business remains solid and is on an upward trajectory. It is several years now that we experienced nice growth in our highly profitable connectivity segment, particularly in the UCaaS and CX market. In parallel, we are successfully expanding our promising voice-centric AI and Gen-AI-powered business applications. As for the general market, despite the presumably recent volatile business landscape stemming from the tariff challenges, we have not observed any shift in customer purchasing behavior. The pipeline for opportunities remains strong as we approach the latter part of 2025. Now to the markets of business. Market service and partner inputs continue to support the growth story for Teams Phone, where adoption in the market continues well at over 20% annual growth. Teams Phone usage is also strongly supported by Microsoft efforts to drive Copilot as a central capable chatbot for Teams Phone meetings and calls. Key to continued Teams Phone growth is facilitating connectivity for large enterprises network. In this regard, with Microsoft Operator Connect getting more mature and growing, in addition to the already successful direct route connectivity, this provides further stimulus to Teams' fund growth. All this points to a strong market today and for coming years and further supports business expansion and dominance in this connectivity area. Our Microsoft business grew 6.5% year-over-year, fueled by ongoing strength for our connectivity business coupled with increasing the touch rate of focus CAC or team certified CCAS and our conversational AI business application services. Key to our success is our live managed services with annual recurring revenues reaching 70 million exit second quarter representing approximately 25% growth year over year. Booking of new launch multi-million contract value opportunities increased about 6% in second quarter. And the opportunities total credit value grew more than 10% in the quarter. Noteworthy to our growth story is the latest certification of live platform for Microsoft Operator Connect for partners in EMEA and soon to be certified in the US. To put some color on the progress made in the second quarter, here are some examples of wins in the quarter. We enjoyed much success in the US higher education vertical. in which we have secured several multi-million key wins and contracts in the sector. One example is our win with a large state university valued at more than $2 million total contract value, of which about $800,000 came from a 36-month contract of LivePro Team's many services and related professional services. Second example is a large follow-on order. We recently closed amounting to over 1.5 million total contract value from a private university in the Midwest. We had won the initial deal in second half 2024 as part of its initial phase of UCCX modernization. And given the successful completion of the first phase, the university decided to standardize on other code services for all of its campuses. Our success can be explained by having the industry's most complete portfolio and best-in-class UCCX capability, strong track record of delivering customer satisfaction, and a referenceable list of marquee clients. We have built much credibility in the sector, and we are now getting inbound leads from other prospective university customers looking to modernize their UCCX. Further on the success in the UK area, I'll talk about two other entities. First, AT&T. AT&T is our largest partner channel for Microsoft Teams in the US. Second quarter was very successful. Invoicing and booking grew above 10% in the quarter sequentially, with new logos turning into the core. While traditional managed services business continued to grow, second quarter was a pleasant surprise in terms of rising number of PSTN shut down projects in various U.S. states, embarking on POTS replacements. This trend should support further continued revenue growth in coming years. And then to our new activity with Cisco in the U.S. market, we announced our certifications for WebEx Connect in June 2025. During the second quarter, we've seen initial pipeline built with service providers in EMEA, with opportunities created representing potential of new multi-million dollars. We intend to increase marketing and sales efforts in the WebEx calling space in coming years. Turning to CX, we have made progress as planned in the quarter, and our LC pipeline continues to support positive outlook for the second half of the full year. We've seen growing customer and partner interest in LiveCX, which is an important part of the live platform. It targets application areas such as, one, the migration of contact centers to cloud and providing SIP connectivity for CKF. Second, click-to-call application is a replacement for traditional 1.1.800 service for contact centers. And third, Voicera Connect and LiveHub providing connectivity for cognitive services. In second core, we signed a Tier 1 system integrator for LiveCX and Voice AI Connect that will serve as connectivity backbone in support of new customers. We have another Tier 1 prospect in the pipeline. Signing up more Tier 1 system integrators is an important initiative as it effectively scales our addressable market. These partners target mid-sized CX customers that are historically not targeted by our direct sales team. Now to conversational AI or CHI. Let's talk about highlights of what happened in the second quarter. As contemplated earlier in the year, we saw strong demand and opportunity wins, supporting our 40% to 50% segment growth outlook for 2025. We have experienced increased activity across all of our business lines. process has been made in our leading product categories such as the focus CAC for the Microsoft Teams environment. Then we saw success in the meeting intelligence platform space with two leading solutions. One, the first one, meeting insight and enterprise SaaS application, which targets enterprise-wide deployments and has demonstrated growth of above 200% year-over-year in terms of number of accounts and proof of concepts and use of Gen AI for meeting summarization and inference. Second, we recently introduced Meeting Insights On-Prem, or MIA-OP, extending the GenAI-enabled meeting productivity and intelligence benefits to regulated industries and security-sensitive environments. This industry-first solution provides AI-enabled meeting summarization and intelligence and is completely detached from the cloud and or the Internet. Now let's talk about VocalCIC. In the second quarter, VocalCIC continued its strong momentum, with booking growing by 150% compared to the same period last year. We also established a robust pipeline of opportunities for the latter part of the year. VocalCIC benefits from the increased attach rate through its involvement in TeamSwan migration project at Audiocodes S, especially within the higher education sector as noted earlier. Revenue growing second quarter 25 remains strong, bringing us closer to our goal of surpassing 50% year-over-year growth. Highlighting our achievements, CX Today publication recently recognized us with the Best Customer Experience Deployment Award for the successful contact center migration at the University of Central Florida, one of the largest public universities in the United States. This project includes included merging over 40 help desks in a single centralized contact center serving 70,000 students. Furthermore, we secured second place in the best CX partnership category for work with AT&T on the worker CAC partnership, which delivered a market-oriented integrated UCAS and CCAS solution for Microsoft Teams. Moving on to Meeting Eastside, Meeting Eastside Cloud Edition maintains strong momentum, the score with continued growth in new customer acquisition and key metrics such as the number of meetings and unique active users reaching record levels. On the product development side, customer feedback has been positive regarding the launch of our mobile app, which brings our generative AI transcription and summary features to in-person meetings anywhere, not only in company facilities. Additionally, we have developed custom GenAI-based templates and prompts and are now working on workflow solutions designed for specific industries. Moving on to MIAOP, turning now to the solution that's going to be deployed on-premise. Since its launch a few months ago in the Israeli market, we have observed strong interest from customers across multiple sectors, including defense, government, healthcare, and media. Meeting Insight on-prem uses Gen-AI on a local service in order to assist organizations in regulated and security-sensitive industries by automatically producing secure, accurate, and efficient meeting recaps without the use of cloud or internet services. Meeting Insight appears to be a key beneficiary of the cloud repatriation trend. With rapid adoption of generative AI, customers now recognize that certain workloads are better suited for on-premise environments due to factors such as high cloud costs, latency issues, and security demands. Launched earlier this year, we have already close to 10 customers in production and more than 20 proof-of-concept projects, all arising from word-of-mouth recommendations. The solution has already been demonstrated lately outside of Israel and has garnered much interest. In past week, MEOP has been reviewed and received positive feedback from leading industry analysts. We work to expand market reach and awareness to more markets, including the U.S. in coming months. So to wrap up my presentation, in second quarter 25, we continue to make solid progress in our long-term transformations on hybrid cloud and voice services business application company. We deliver it against our strategic objective in that One, we had second consecutive quarter of top-line growth. We made the necessary R&D and sales marketing investment, particularly in our conversational activities that fueled our robust pipeline of opportunities in the second half of the year. And third, we executed well to our playbook of leveraging our strong connectivity install base in driving successful cross-sales value-added services. We are operating from a position of strength supported by a fortress balance sheet a dominant connectivity franchise, and a growing conversational AI segment that enhances enterprise intelligence and productivity. We believe these factors position us well to navigate the potential into the following years. And with that, I've completed my presentation. I'd like to hand over the session to our host.

Thank you.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question for today is coming from Joshua Riley with Needham.

All right. Thanks for taking my questions. Maybe just starting off on the tariff impact here. What are you seeing in terms of customer demand for virtual SBCs versus physical hardware following the tariffs being implemented? And what are your thoughts on pricing? Have you adjusted pricing? Excuse me, have you adjusted your pricing? Are you thinking about it? Or, you know, what should investors be considering here?

Okay. So, usually, you know, SBCs are designed into specific, you know, well-designed solution architecture. So, you know, if the design is for a cloud virtual SBC and or for an, you know, on-prem data center physical SBC, that's something that is not changing that fast. We also believe that after we go through those months of instability, we believe at the end of the day, things will settle. We also believe that we have obviously taken steps to make sure that our margin of error by increasing costs, by raising the price for those devices. So all in all, we don't really see much impact on the business from that. That's a temporary extra cost that we are incurring during this second, third quarter, but we believe that there's no real effect on the actual business or decision which SVC to use or not.

Got it. That's helpful. And then if you look at the Microsoft business, you know, that seemed to be a bit above a growth rate above my expectations for the quarter. Maybe you can just give us some more color on what's driving that strength in particular.

Yeah, I think actually, you know, as I've mentioned, you know, the underneath infrastructure is the fact that Tim's phone continues to grow at least 20% a year. Now, the fact is that we are a very dominant player there. I think at this stage, more than 60% or 70% market share. Actually, we have heard about one competitor leaving the space. What's happening is that I believe in many cases it's word of mouth, is the fact that customers acknowledge Audiocode's dominance. in the team's phone, you know, managed services space. And then, you know, we enjoy the fact that we are signing in the second, we've signed first quarter and second quarter. We've signed some very large multi-million total contract value projects with, you know, large companies. So for us, that's going to be, you know, a growth area for many years. And the fact that we've got that dominance and we don't see any rush from of other new entrants to the market. You know, we will enjoy also the fact that we are improving, you know, the platform we're using to deploy those services. So we just mentioned, you know, on the call live platform, which we are automating substantial part of the processes more and more every year. So our ability to deploy, you know, successfully you know, good performing solution growth. And with that, I think that that affects the overall success of that business.

Got it. That's very helpful. And then last question from me is, if you look at the pipeline for the WebEx opportunities, have you won any of those deals yet? Would you expect to win any in 2025? Or just give us a sense of how you would expect the trajectory of those opportunities. to come into the model over the next couple of years.

Right. That's still very early in the game. We just completed the certification in second quarter. But as I mentioned on the call, we have at this stage, I believe, between five and ten new opportunities. We need to do a lot of work with Cisco partners because we have not been in that market. So it will take a while for that to catch up. So in terms of revenue, we won't see much impact in 2025, but I can tell you that we see a lot of interest. Actually, there's one big T1 service provider in Asia Pacific that's already talking to us for a few months about deploying a live platform supporting Cisco WebEx calling. So all in all, we do expect to see a rise, but the majority of it will come in 2026.

Understood. Thank you.

Sure.

Your next question for today is from Samad Samana with Jefferies.

Hey, guys. This is Billy Fitzsimmons for Samad. Maybe to start, Shamta, you talked about how conversational AI remains a key area of growth supporting the 40% to 50% segment growth for 2025. First off, did you guys disclose the second quarter growth rate? I knew it grew I think 10% plus in the first quarter and just trying to better figure out how that product is kind of ramping into the back half.

Right. So we didn't disclose, you know, the growth for second quarter. One thing needs to be understood. Okay. We're talking about a set of application, you know, at this stage, full five application, which are each, you know, either, you know, in its first phase of selling and, or, getting mature and therefore you know we do expect not the linear growth here but really much more kind of hyperbolic in the second half so just give you an idea with meOP that produced almost none in first half in terms of you know real revenues we do expect very substantial uptick from more than a million or more in the second half and same goes for the other one so it's really the maturity will basically cause growth to be more hyperbolic than linear. So, yeah, we do expect to keep up with our plan for 50% growth in 2025.

And then maybe a little more high level, I think investors are trying to look at this voice AI landscape and trying to figure out the lines of demarcation between vendors and what drives differentiation vendor to vendor. So, Shabtai, can you talk about audio codes underlying technology there and then how you differentiate yourself in the conversational AI market?

Yes, definitely. So, you know, A, we are obviously not among, you know, the list of companies providing, you know, cognitive services technologies in the cloud, right? So we're not vendors of large language models and or, you know, not selling to other people, you know, services such as speech-to-text and text-to-speech and machine learning, et cetera. Our focus really is on applications, okay, application, end-to-end application. Now, we know that, and this, here I think we've got an advantage over, you know, the majority of the players in the market. Why? Because even if you have the best STT, you know, or, one of the best LLM, and you connect them, you still need to connect to the actual real world. Now, in order to connect to the real world, you need to connect to CRM solutions, you need to connect to telephony, you need to connect to contact centers, you need to apply management, so recording services, et cetera. Now, because of our, you know, heritage of, you know, more than 10, 15, and already goes to 20 years of developing all those components, you know, We do have a very rich set of capabilities and portfolio that helps us to deploy easily. MeOP now deploys in a matter of a day. If you talk to other companies, first, we do not know many such or even a small number of such competing solutions. And if you go with such a solution to a new facility or a new customer, usually it will take other companies which lack technology the amount of infrastructure that we have. It will take them, I would say, at least weeks or months. We can deploy in days. So our special source, if you will, is the fact that we own all of the technology. We also, by the way, we do improve them. So just to make that MEOP solution, we had to go into some of the tools we have, some open source tools, and we're tweaking them. So we have a very strong team here that's developing specialized speech to text. If you want a medical application, we can fine-tune the database just to make sure that medical discussion will come as good as other discussions. So we have the ability to internally tweak all those technologies and basically connect them all into a fully working, fully integrated solution. And I think that sets us apart from many other companies. And that explains why we do not have a track record of failing projects. We are capable of deploying them rather fast, but now we simply need time. And the time is growing those applications, et cetera. So we believe that You know, this year we'll end up, you know, as we planned in the year of 17 to 18 million of, you know, ARR. But we believe that as we go forward, you'll see very substantial higher growth in 26, 27 and beyond.

Perfect. Thank you so much. Sure.

We have reached the end of the question and answer session, and I will now turn Nicole over to Shabtai for closing remarks.

Thank you, operator. I would like to thank everyone who attended our conference call today. With continued good business momentum in our enterprise operations and good underlying market growth strength in UCAS, CCAS, and CHI, we believe we are transitioning the business towards growth and better profitability in coming years. We look forward to your participation in our next quarterly conference call. Thank you all. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.