AudioCodes Ltd. (NASDAQ:AUDC) Q3 2018 Earnings Conference Call Transcript

Oct 23, 2018 • 08:00 am ET

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AudioCodes Ltd. (NASDAQ:AUDC) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Greetings, and welcome to the AudioCodes Third Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Allison Soss with KCSA. Thank you. You may begin.

Executive
Allison Soss

Thank you, Melissa. I would like to welcome everyone to the AudioCodes Third Quarter 2018 Earnings Conference Call. Hosting the call today are Shabtai Adlersberg, President and Chief Executive Officer; and Niran Baruch, Vice President, Finance and Chief Financial Officer.

(Forward-Looking Cautionary Statements)

In addition, during the call, AudioCodes will refer to non-GAAP net income and net income per share. AudioCodes has provided a reconciliation of non-GAAP net income and net income per share to its net income and net income per share according to GAAP in its press release and on its website.

Before I turn the call over to management, I would like to remind everyone that this call is being recorded, and an archived webcast will be made available on the Investor Relations section of the company's website at the conclusion of this call. The call will also be archived on our Investor Relations app, which is available for free in the iTunes App Store and the Google Play market.

With that said, I would now like to turn the call over to Shabtai Adlersberg. Shabtai, please go ahead.

Executive
Shabtai Adlersberg

Thank you, operator. Good morning, and good afternoon, everybody. I'd like to welcome all to our third quarter 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 quarter. I will then review the business highlights and summary for the third quarter 2018, discuss trends and developments in our business and industry and the outlook for the fourth quarter of 2018. We will then turn it into the Q&A session.

Niran?

Executive
Niran Baruch

Thank you, Shabtai, and hello, everyone. As usual, we will be referring to both GAAP and non-GAAP numbers on the call. The non-GAAP P&L metrics exclude recurring non-cash items. Today, the earnings press release contains a reconciliation of supplemental non-GAAP financial information.

Revenues for the third quarter were $44.5 million, up 2.3% from the prior quarter and up 13.5% compared to the third quarter in 2017. Services revenues for the third quarter were $14.1 million, accounting for 32% of total revenues. Deferred revenues balance as of September 30, 2018, was $44.2 million compared to $42.6 million as of June 30, 2018.

Revenues by geographical region for the quarter were split as follows: North America, 45%; Central and Latin America, 5%; EMEA, 34%; and Asia Pacific, 16%. Our top 15 customers in aggregate represented 59% of revenues in the quarter, of which 47% are attributed to our 10 largest distributors.

Gross margin for the quarter was 62.2% compared to 62.8% in Q3 2017. Non-GAAP gross margin for the quarter was 62.7% compared to 63.2% in Q3 2017. Operating income for the quarter was $5 million