AudioCodes Ltd.

Greetings and welcome to the Audiocode's third quarter 2025 earnings conference call. At this time all participants are on a listen only mode and the 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 and please note this conference is being recorded. I will now turn the conference over to your host Mr. Roger Chu Chen, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, Operator. Hosting your call today are Shabtai Allisberg, President and Chief Executive Officer, and Naran 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 AutoCo'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, 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 following. effect of global economic conditions in general and conditions in audio codes industry and target markets in particular, including governmental undertakings to address such conditions, 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 the event of artificial intelligence and the ability to to manage changes in market conditions and evolving regulatory regimes as applicable. Possible need for additional financing. The ability to satisfy covenants in audio codes financing agreements. Possible impacts and disruptions from audio codes acquisitions, including the ability of audio codes to successfully integrate the products and operations of acquired companies into audio codes business. Possible adverse impacts attributable to any pandemic or other public health crisis on a business and results of operations. the effects of the current and any future hostilities involving Israel, including in the regions in which we or our counterparties operate, which 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 any other factors described in AudioCode's filings made with the U.S. Securities and Exchange Commission from time to time. AudioCode assumes no obligation to update the information In addition, during the call, audio codes were referred to non-GAAP net income and net income per share. Audio codes have to provide a 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 and archived webcasts will be made available on the best 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 third quarter 2025 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance at Audiocodes. Niran will start off by presenting a financial overview of the quarter. I will then review the business highlights and summary for the quarter. 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 third quarter were $61.5 million, an increase of 2.2% over the $60.2 million reported in the third quarter of last year. Services revenues for the quarter were $30.9 million, a decrease of 4.8 percent over a year-ago period. Services revenues in the third quarter accounted for 50.3 percent of total revenues. The amount of deferred revenues as of September 30, 2025, was $81.6 million compared to $78.6 million as of September 30, 2024. Revenues by geographical region for the quarter were split as follows. North America, 48%, EMEA, 33%, Asia Pacific, 15%, and Central and Latin America, 4%. Our top 15 customers represented an aggregate of 53% of our revenues in the third quarter, of which 38% was attributed to our 10 largest distributors. In the third quarter of 2025, we experienced increased expenses due to the implementation of the new tariffs of U.S. imports accounting to approximately half a million dollars additional cost, which impacted on both GAAP and non-GAAP. GAAP results are as follows. Gross margin for the quarter was 65.5 percent, compared to 65.2 percent in Q3 2024. Operating income for the third quarter was 4.1 million or 6.6 percent of revenues compared to operating income of 4.9 million or 8.1 percent of revenues in Q3 2024. EBITDA for the quarter was 5.2 million compared to EBITDA of 5.9 million for Q3 2024. Net income for the quarter was $2.7 million or $0.10 per diluted share compared to net income of $2.7 million or $0.09 per diluted share for Q3 2024. Non-GAAP results are as follows. Non-GAAP gross margin for the quarter was 65.8 percent compared to 65.6 percent in Q3 2024. Non-GAAP operating income for the third quarter was 5.8 million or 9.5 percent of revenues compared to 7 million or 11.7 percent of revenues in Q3 2024. Non-GAAP EBITDA for the quarter was 6.9 million compared to non-GAAP EBITDA of 7.9 million for Q3 2024. Non-GAAP net income for the third quarter was 4.9 million or 17 cents per diluted share compared to $4.9 million or $0.16 per diluted shares in Q3 2024. At the end of September 2025, cash, cash equivalents, bank deposits, marketable securities, and financial investment totaled $79.7 million. Net cash provided by operating activities was $4.1 million for the third quarter of 2025. Day sales outstanding as of September 30, 2025 were In July 2025, we received court approval in Israel to purchase up to an aggregate amount of $25 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. we declared a cash dividend of $0.20 per share. The aggregate amount of the dividend was approximately $5.6 million. The dividend was paid on August 28, 2025 to our shareholders of record at the close of trading on August 14, 2025. During the quarter, we acquired 1,267,000 of our ordinary shares for a total consideration of approximately 12.7 million. Regarding the direct cost impact from the tariff announced since the beginning of 2025, we expect roughly 3 million of cost burdens for the full year 2025. Given the recent stabilization in the tariff developments, We are resuming our practice of providing full-year outlook. For 2025, we expect revenues of $244 million to $246 million and non-GAAP earning per share of $0.60 to $0.64. I will now turn the call over to Shabtai.

Thank you, Niran. I'm pleased to report solid third consecutive core of top line growth in the third quarter and execution of our strategic objectives amidst our long term transformation to an AI driven hybrid cloud software and services company. In the core, we continue to build on the strengths of our UCaaS and CCaaS connectivity business, accounting now for over 90% of our revenue and successfully leveraged our enterprise customer base to drive cross-sell of our fast-growing GenAI business applications that make up our conversational AI division. In fact, in many ways, we can say that as of now, Audiocode has put voice AI front and center going forward in our operations in terms of sustained growth. Our solid third-quarter results were marked by strong traction in our dual growth engines, namely the live family of unified communication and collaboration, and customer experience connectivity services, and conversational AI business line. In fact, our conversational AI business increased 50% in the quarter, putting us on track to reach the 40% to 50% growth for the full year 2025. Together, these two units drove our annual recurring revenue exit third quarter to $75 million, or up 25% year-over-year, which positioned us to reach a full-year target of $78 to $82 million. We are growing ever more optimistic about the continued strong AR momentum and growth prospects for the overall company, fueled by a strong pipeline of opportunities catalyzed by recent launch of the next GenLive platform and the growing demand for productivity enhancing GenAI value-add services. This is further reinforced by the growing backlog of live and managed services that will convert to revenue in the coming course. We ended third quarter backlog at 76 million, growing 13.4% over the year ago backlog of 67 million. Let me share some key developments in our strategic business lines that underscore our growing confidence in our growth prospects. We have seen growing demand from partners for our live platform and all-in-one cloud software stack that empowers them to seamlessly integrate connectivity with GenAI-powered business voice applications. To that end, in the third quarter, we signed a live platform agreement with a global T1 system integrator This strategic landmark deal calls for alignment and coordination of all sales aspects from initial opportunity pursuit to post-sales delivery. This comprehensive approach ensures customer satisfaction and success. The initial scope of the agreement provides managed SBC and gateway service in support of major UC and CX platforms for greenfield deployments and for existing customers looking to transition their legacy infrastructure to the cloud. Where applicable, the partner will also cross-sell our award-winning TIMSS-certified VOCA contact center, delivering a unified UCCX experience. Based on the currently committed services, we anticipated low single-digit millions in recurring revenue during the first year of operation in this agreement. This strategic agreement represents a clear win-win for both parties. For the Tier 1 system integrator, our all-in-one UCCX conversational AI stack simplifies operations, reduces costs to serve, and enhances end customer experience. For us, it significantly expands our market reach and scales our go-to-market execution in the enterprise space. Together with our long-standing successful partnership with AT&T in North America, this announcement reinforces our market credibility and position us as a partner of choice for all AI-infused UCCX services. We are seeing strong interest from other T1 system integrated prospects who recognize the transformative potential and cost efficiencies of our integrated platform. We look forward to sharing additional updates on new partnerships with global system integrators in coming quarters. Now to conversational AI. In addition to both through of conversational AI from live platform partners, we are seeing broad-based interest in our GenAI-powered voice application from end customers. Specifically, I would like to highlight the progress we are making in our newest service, Meeting Insights On-Prem, which we call MIA-OP. This is our unique GenAI-powered meeting intelligence platform, providing transcription, summarization, automation, and connectivity to other leading enterprise IT applications that is completely detached from the Internet and that is tailored for regulated and security-sensitive industries. Launched earlier this year, we have gained significant traction in the Israeli market, mainly in the government space, all through a word of mouth. Recently, our leading position in the Israeli market was further cemented when we were officially awarded the contract under Project Nimbus, the Israeli government's multi-year cloud migration initiative. As the exclusive provider of meeting intelligence services in the non-SAS category for calendar year 2026, this award streamlines procurement for all Israeli agencies, both civilian and military, allowing them to activate MIA-OP without the lengthy tender process. We are also actively marketing this solution outside of Israel, and initial customer responses in APAC and North America have been overwhelmingly positive. Now to a more successful GenAI-powered business line in the core VoiceAI Connect and LiveHub. Leading our revenue growth in the conversational AI business is the VoiceAI Connect and LiveHub connectivity. and orchestration services business, which grew north of 50% year-over-year. We deliver a standout core with strong performance across the board, highlighted by exceptional third-core booking growth that puts us on track to exceed our full-year target. This momentum was fueled by high volume of new logo wins across the United States, Europe, and APAC, along with significant expansion within our existing install base. Driving this rapid growth is the emergence of the voice box market, which is experiencing robust growth, driven by advancement in Gen AI and NLP. Market analysis projects that the voice box market size will reach above $25 billion in 2034, up from just $4.3 billion in 2024, with a compound annual growth rate of 20%. Now to the voice AI connect. space. A key highlight was a high six-figure voice success project license agreement aligned with leading agentic platform, AI agentic platform, that's supporting virtual agent and agent-assist use cases for its large enterprise clients. We view this initial engagement as the foundation for a strong and mutually beneficial partnership. On the expansion front, we renew the strategic agreement with a long-standing VoiceAI Connect customer, a leading multinational healthcare company. The expanded contract reflects a substantial increase in total value driven by the customer's growing demand for virtual agent and assist capabilities as part of the digital transformation. Additionally, we secured a significant follow-on order from one of the largest credit unions in the US, which is deploying our VoiceAI Connect solution for conversational IVR use case. Following the successful implementation of initial order in the first core of 25, focused on internal HR and helpdesk, the customer expanded rollout to its IVR disk core, enabling sales service option for its end customers. Moving on to LiveHub, offered as a software as a service. LiveHub is a cloud-native sales service platform This helps voice board developers for enterprise and service provider connect, orchestrate, and enrich the voice communication collaboration stride across various channels and systems. During the third quarter, another exciting milestone was the introduction of agentic AI capabilities within our live app platform. This pivotal enhancement delivers an end-to-end solution pairing text-to-speech, speech-to-text, and LLM-powered bot development with related best-in-class connectivity services, all tailored to service small to medium-sized customers. Importantly, our live hub financial momentum continues with ARR growing above 30% sequentially and substantially above 100% versus the year-ago period. Now, before turning to the detailed business line discussion, let me quickly shift the third quarter profitability metrics outlook we perform outperform on top line with revenue growing 2.2 percent year over year our non-gap gross margin for the quarter was 65.8 which is above our previous score of 64.5 the sequential improvement in our non-gap gross margin is attributed mainly to more favorable product mix and lower tariff related cost headwinds of about half a million versus prior expense of above a million in the second quarter of 2025. We expect full quarter 2025 tariff costs to be in a similar range to this recent third quarter. Third quarter non-GAAP operating expenses of $34.7 million compared with $35 million in the second quarter and $32.5 million in the year-ago quarter. On a year basis, the IR expenses are attributed mostly to targeted investment in growing the conversational AI business and higher impact from the weakening US dollars against the euro in the third quarter. Non-GAAP operating margin reached 9.5% compared to 7.2% in the previous quarter and 11.2% in the year-ago quarter. Non-GAAP EBITDA margin was 11.2%, Again, an improvement compared to 8.6 in the previous quarter. Non-gap earning per share was 17 cents compared to 14 cents in the previous quarter and 16 cents in the year-ago quarter. In terms of ad count, we ended the quarter with 961 employees, essentially flat across the first three quarters of 2025 and compared to 935 employees in the year-ago period. Net cash provided by operating activities was $4.1 million for the quarter and $25.2 million for the first three quarters of 2025. The key takeaway from these financial results is that our business remains strong and is expected to grow steadily through 2026 and beyond across our two primary sectors. Looking ahead to the upcoming year, we expect a noticeable shift in our top-line performances. Specifically, we project that 2025 will demonstrate both change and growth compared to 2024. This improvement is significant as it will mark a reversal of the declining annual revenue trend experience in 2023 and 2024. So we're moving to positive trend and we believe that 2026 will be even higher. Firstly, the UCAS and CX connectivity business has stabilized compared to 2023 and 2024. Additionally, two significant developments in this third quarter. One, signing the service agreement with the leading global system integrator and increasing engagement with Cisco, which is the second largest shareholder in the UCAS market, involving all types of services, including Cloud Connect, offering devices and more. The two developments give us confidence that this connectivity business will perform well in coming years. And secondly, as anticipated, we expect strong growth, exceeding 40% annually in our conversation business over the coming years. Now to some of the major business lines, starting with Microsoft. Our third quarter Microsoft business was almost flat year over year, impacted by seasonality and late purchase order push into the fourth quarter. For the first nine months of the year, Microsoft grew 4%, driven by our connectivity business, coupled with increasing the touch rate of sales of devices, Voca CIC, or Team Certified CCaaS, and other conversational business applications and services. Importantly, our pipeline of creative opportunities remained robust in the third quarter, up 20% year-over-year, and up 8% for the first nine of 2025. again compared to the year-ago core. Market service and partner inputs continue to support a growth story for Teams Phone business, driven by the Microsoft Operator Connect program, where adoption in the market continues to show healthy growth. Teams Phone usage is also strongly supported by Microsoft's efforts to drive Copilot as a central, capable chatbot for the Teams Phone meetings and calls. All this points to a strong market today and for coming years and further supports business expansion and dominance in the connectivity area. Before wrapping up on Microsoft business discussion, let me share details of some representative wins. One is a very large, greater than a million defense information system agency. Here we have signed $1.1 million total contract value over the next 36 months through AT&T, covering the expansion of additional managed SBC services and calling plans in a new region. Second wind is with a financial services company operating internationally. It is a provider of investment management services outside to the U.S. This is a $1 million TCV contract over 36 months to renew all prior services and purchased at a modest increase in value. Third is a win with one of the largest pediatric hospitals in the U.S., again close to a million TCV over 36 months, covering live pro-managed services and gateways, enabling full migration from legacy PBX systems to Microsoft Teams. Now turning to the contact center or customer experience market, CX grew by 13% year-over-year in the core, benefiting from growth in connectivity for CCaaS and connectivity services. We continue to see growing customer and partner interest in LiveCX, which is an integral component of the live platform and targets applications such as cloud migration of contact center, replacing traditional 1.800 services with click-to-call functionality and enabling conversational AI through voice AI connect and live app connectivity. As discussed in my earlier remarks, during the third quarter, we signed a landmark live platform agreement with a global T1 system integrator where live CX was a critical element of the broad-based agreement. Expanding our network of global T1 integrators remains a key strategic initiative as it significantly broadens our addressable market. These partners focus on mid-sized customer experience customers, a segment traditionally underserved by our direct sales team. Importantly, our pipeline of opportunity remains robust and gives us confidence about our growth prospects for the balance of 2025 and into 2026. Now to Conversational AI. Other lines, as we've said previously, Conversational AI business grew 50% in the quarter. Key in the growth for the business line of Voice AI Connect and Live App, which we just discussed. Let's now discuss highlights of additional business lines that make up the Conversational AI segment. First, VOCA CAC. We recorded another record quarter of strong year-over-year investing and booking growth for VOCA. Key highlights include major winning aviation. We signed a deal to deploy our team-certified omni-channel contact center at a major APAC, Asia Pacific Airport, one of the busiest airports in the world, beating out a couple of well-known premium CCAS vendors. We won based on our ability to leverage our broad portfolio, offering a tightly integrated Teams-based phone and CCAS service, along with mobile app call-enabled onto contact center via our via our click-to-call solution. Ongoing momentum in higher education. We continue to make solid progress in this vertical, adding another university score that selected our best-in-class Team 35 contact center solution alongside our live Teams and managed UC services. We now serve 12 university accounts in North America with VOCA, including the second-largest university in the U.S. and the largest school network on the East Coast. Microsoft unified certification. Loca became the second vendor worldwide to receive certification. We have distanced ourselves from competition as the only vendor with real-world enterprise production-grade experience with this stack thanks to our long-standing partnership with Microsoft. Now to a new product update. Later in the full score, we plan to launch Agent Insights, which brings advanced conversational AI and generative AI to the VOCA CAC platform. Powered by LLMs, it transforms recorded teams' interactions into structured insights, including AI summaries, sentiment analysis, and one-click CRM updates. Each contact center desk can define custom summary prompts, ensuring precision and compliance across use cases. Strategically, Agent Insights aligns with our unified integration model with Teams 1, adding a critical AI layer to the Microsoft Teams CX ecosystem, and strengthening Vocal CAC as the role as the intelligent engagement layer driving efficiency and quality of business value. Now, needless to say that Agent Insight is based on our technology developing the meeting insight, and therefore we are in a good position to make great value and benefit from a technology in different areas. Overall, our achievements are gaining recognition from leading industry analysts, culminating in a recent award from the UC Today for best Microsoft Teams contact center, representing back-to-back win for the second year in a row in this category. Moving to meeting insights. Meeting Insights Cloud Edition maintains strong momentum in this quarter with continued growth in new customer acquisitions. Other key metrics include the number of meetings and unique active users reached record levels, contributing to continued growth in the monthly recurring revenue. In addition to our broad market focus, we have developed workflow solution tailored to specific verticals, adding Automation and connectivity to other leading enterprise IT solutions aimed at leveraging GenAI to enhance meeting productivity and accelerate business outcomes. Early traction has been promising. One example involves the University of Central Florida, one of the largest universities in the U.S., which amongst a broad portfolio of solutions customers take from us, they deployed also meeting insights to generate AI-powered summaries and transcripts of interaction between counselors and students. Working closely with the customer, we perform analytics such as sentiment analysis and speaker-to-listen ratio, displaying key metrics in a custom dashboard available to the counselor's supervisors to support student wellness and improve graduation rates. This is just one example of our vertical solution of transforming data into actionable insights and support workflows optimizing outcomes. We look forward to sharing more in the coming future. Moving on to MIAOP. Since second quarter, we've made significant strides in Israel and globally that are expected to drive growth in organizationalized segments. In addition to the exciting contract award under Project Nimbus, we discussed earlier Our momentum in Israel is extending beyond the government vertical. We are now in the final stages of several large tenders in other verticals, such as healthcare and utilities, reflecting growing demand across various industries. We also witness customer interest outside of Israel when customers understand the uniqueness of MIA-OP's solution that unlocks meeting intelligence at the edge computing level. Fresh from the debate of MIA-OP in Israel, Asia Pacific and early third core, we are now engaging with several government opportunities in APAC countries in setting up a proof-of-concept trials. In late third core, we also showcased our solution in the United States, and customer response was overwhelmingly positive. We are currently in conversation with several U.S. federal and civilian agencies through a mix of collaboration with partners and direct engagements. We ended the third quarter with close to 10 customers in production and about 15 proof of concept projects, all arising from word of mouth recommendation. Based on our exceptional pipeline of opportunities, we expect our momentum in MIA-OP to further accelerate in full score and into 2026. So to wrap up our call, in third quarter 25, we continue to make solid progress in our long-term transformation to hybrid cloud and voice services, and GenAI business application company. We delivered against our strategic objectives in that, A, we have a third consecutive quarter of revenue growth, B, we executed well to our playbook of leveraging our strong connectivity install base in driving successful cross-sell of value-add services, and third, the R&D and sales marketing investments we have made over the past several quarters have led to record conversational AI bookings in the quarter, and importantly, pipeline runs very healthy. This is the basis for belief that we will grow in the next coming years more than 40% to 50% on an annual basis in the conversational AI business. We are operating from a position of strength, supported by a footless balance sheet, a dominant connectivity franchise, and a growing conversational AI segment that enhances enterprise intelligence and productivity. We believe that these factors position us well for the rest of 2025 and increase growth in top line and earnings into 2026. And with that, I've concluded my presentation and I'll move the call to the operator.

Thank you. At this time we'll be conducting our 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 and you may press star 2 if you would like to remove your question 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. Thank you. We have a question from Joshua Riley with Needham. Your line is live.

All right. Thanks for taking my questions today. Nice job on the quarter here. On the global tier one system integrator win, maybe you could give us some more color on what helped you win that deal from a product perspective or any other factors that you think would be relevant to give to investors here.

Right. Well, I need to go back to the significance of our live platform, which is a service delivery platform for UCS and CX. I think by now, this is the only platform that allows large system integrators, which serve large enterprises around the world, deliver all of the different services that are needed in order to move to modernizing the enterprise and to move to enhanced, I would say, communication and collaboration. Starting from connectivity, which connects all of the sides of a company across the globe, and then adding on top of that management, management of users, management of sites, and then on top of that, a list of business applications, and among them, an advanced and AI-first contact center, recording solution, meeting intelligence platform, and now we're coming with voice bots and Gen AI applications. So all in all, this is the most advanced platform these days. And for a large system integrator that operates globally, it would be a great, you know, services delivery platform to serve its customers. And I think from that, you know, stamps the recognition and the importance of that platform.

Got it. That's helpful. And then, you know, you're obviously building a lot of these kind of adjacent AI solutions, you know, for the communication landscape. You know, if you look at the, you know, the older products that you have in the market, whether it's SPCs or some of the gateways and all the older products that you sell, those are typically in pretty price-sensitive markets. What are you seeing with some of these new AI solutions and your ability to drive pricing power relative to the UCaaS market, which is historically a pretty price-sensitive market?

Right. Well, you know, voice AI is an emerging technology. you know, market. And therefore, you know, those organizations which, you know, are early adopters and quick to implement, you know, workflows and solutions that will substantially enhance their productivity are not less, you know, concerned with the cost. So we do not see any price pressure at this point on the Voice AI business application. And we believe that as we will continue to enhance and add more features and make the solution substantially richer, we can still keep that. So you have identified correctly the difference between the legacy business, which is price sensitive, but again, there we enjoy the fact that competition is becoming less and less powerful, but then we enjoy relatively convenient price you know, environment, I would say, for voice AI business application.

Got it. That's helpful. And then on the Microsoft business, I believe last quarter it grew 6% year-over-year, and I think you said it was flat this quarter. Is there any change in the trends there, or is that just really around the year-over-year comparison dynamics for the growth rate?

Right. So I think, you know, overall U.K.' 's market, It's kind of flattening out in recent 12 months. We've seen that trend. It's been fairly strong up until 2022, 2023. Then it becomes the expansion rate really decreased. It's a good market. It's a great market. Just take into account that if you go back to 15 years ago and you talk about 400 million endpoints, overall in the enterprise world, you know, served in the past by PBX. So these days, you know, UCAS, I believe is serving less than 100 million. So a lot of room to grow. And again, you know, we all need to acknowledge that the majority of the growth occurred more in the US, UK, Western Europe, Canada, Australia, maybe etc. But There's a huge, actually above 50% of the 400 million market that's still served by the old PBX technology. So there's a lot of room to grow. But pricing is such that I would assume that UCAS will grow, but our services should be applied to the non-UCAS market at a lower range. And I think that would be basically the driver for increased growth going forward.

Got it. And then last question for me is if you look at the mix of revenue in the quarter, I would say that the product revenue was pretty strong above what my estimate was and what I would have expected. Can you just help us understand maybe what outperformed on the product revenue side in the quarter?

Yeah, as you've seen, first we had a great quarter in terms of product-recognized revenues.

It was driven mainly at the software, which is part of the voice AI solution.

So that's where the product growth came from.

Got it. Thank you very much. Thanks, Eric.

Thank you. As we have no further questions on the lines at this time, I'd like to turn the call back over to Mr. Adelsberg for any closing remarks.

Okay. Thank you, operator. I would like to thank anyone who attended our conference call today. With continued good business momentum in our UCAS and CCAS operations and continuing growth in our emerging voice AI business, We believe we are on track to grow revenue and profitability in the next coming years. We look forward to your participation in our next quarterly conference calls. Thank you all. Have a nice day.

Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.