Q4 2022 AudioCodes Ltd Earnings Call
Thank you for your patience and once again this conference will begin shortly.
[music].
Good morning, everybody.
Come to audio to its fourth quarter and full year 2022 earnings conference call. At this time all participants are in a listen only mode. A question answer session will follow the formal presentation.
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 Mr. Roger Zhou Chen Vice President of Investor Relations, Sir you may begin.
Thank you Jenny hosting the call today are shopped to Asbury, President and Chief Executive Officer, Iran, Baruch, Vice President Finance, and Chief Financial Officer, and Dmitry that as Chief strategy Officer, and head of corporate development before we begin I'd like to remind you that the information provided during this call may contain forward looking statements relating to.
Audio codes business outlook future economic performance product introductions plans and objectives related there too 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 a bearish.
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.
New products and the demand of 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 the additional financing.
We need to satisfy covenants in the company's loan agreements possible disruptions from acquisitions the.
<unk> of audio puts a successfully integrate the products and all.
Operations of acquired companies into audio codes business possible adverse impact of the COVID-19 pandemic on our business and results of operations and other factors detailed in <unk> filings with the U S Securities and Exchange Commission audio codes assumes no obligation to update this information. In addition, during the call what it feels we referred to.
non-GAAP net income and net income per share audio coats has provided 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.
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 shop that Shoutout. Please go ahead.
Yeah.
Thank you Roger good morning, and good afternoon everybody.
We'd like to welcome all to our fourth quarter 2022 Conference call with me. This morning is neuron Bull Chief Financial Officer, and Vice President of Finance for the codes, Iran was thought though by presenting a financial overview of the quarter. I will then review the business highlights and summary for the quarter and a year.
<unk> and discuss trends and developments in our industry and business. We will then turn it into the Q&A session Iran.
Uh huh.
Thank you Scott.
We won.
As usual 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 fourth quarter were $17 7 million, an increase of six 9% over the $66 1 million reported in the fourth quarter of last year.
Full year.
2022 revenues were $275 1 million, an increase of 10, 5% over the $248 9 million reported in 2021.
Services revenues for the fourth quarter were $28 6 million up 17, 2% over the year ago period.
Service revenues in the fourth quarter accounted for four.
45% of total revenues.
On an annual basis service revenues increased by 18, 1% compared to the previous year.
The amount of deferred revenues as of December 31, 22 was $79 4 million up from $76 5 million as of December 31, 2021.
Revenues by geographical region for the quarter were split as follows.
North America, 47% EMEA, 35%.
Pacific, 14% in Central and Latin America up 4%.
Our top 15 customers represented an aggregate of 57% of our revenues in the fourth quarter of <unk>.
42% was attributed to our 10 largest distributors.
GAAP results are as follows.
Gross margin for the quarter was 65, 3% compared to 67, 2% in Q4 2021.
Operating income for the quarter was $8 3 million or 11, 8% of revenues compared to $9 3 million or 14% of revenues in Q4, 2021.
Full year 2022, operating income was $31 3 million compared to operating income of $39 5 million in 2021.
Net income for the quarter was $7 5 million or <unk> 23 cents per diluted shares compared to $7 3 million or 22 cents per diluted share for Q4 2021.
Full year 2022 net income was $28 5 million or 88 cents per diluted shares.
Compared to $33 8 million or $1 per diluted share <unk> 21.
non-GAAP results are as follows.
non-GAAP gross margin for the quarter was 65, 8% compared to 67, 6% in Q4 2021.
non-GAAP operating income for the fourth quarter was $12 5 million or 17, 7% of revenue compared to $13 5 million or 24% of revenues in Q4, 2021.
Full year 2022, non-GAAP operating income was $47 2 million compared to operating income of $53 8 million in 2021.
non-GAAP net income for the fourth quarter was $11 9 million or 36 cents per diluted share compared to $13 4 million or 39 cents per diluted shares in Q4 2021.
Full year 2022 non-GAAP net income was $45 million or $1 35 per diluted share compared to 51 8 million or $1.50.
Diluted shares in 2021.
At the end of December 2022, cash cash equivalents bank deposits financial investments and marketable securities totaled $124 3 million.
Net cash provided by operating activity.
0.4 million for the fourth quarter of 2022.
Eight.
$3 million for the full year of 2022.
Days sales outstanding as of December 31, 2020 to 90 days.
During the quarter, we acquired 145000, so far our ordinary shares for a total consideration of approximately $2 9 million.
In January 2023, 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 July four 2023.
Earlier. This morning, we also declared a cash dividend of <unk> 18.
Sure.
Irrigate the amount of the dividend is approximately $5 7 million.
The dividend will be paid on March seven 2023 to all of our shareholders of record at.
At the close of trading on February 21, 2023.
Regarding head count on the heels of the addition of 112 position in 2021 84.
In the nine months ended September 32022, there was no increase of full time employees in the fourth quarter of 2022.
We are in that 2022 with 966 employees.
Our guidance for the full year 2023 is as follows.
We expect revenues in the range of 286 million to $300 million.
And non-GAAP diluted net income per share of $1 35.
The $1.50.
I will now turn the call back over to Shanghai.
Thank you Ron.
Before I start my formal remarks, I would like to remind everyone in conjunction that in conjunction with earnings release. This morning, we have posted on our Investor Relations website, an earnings supplement deck.
I would like to start off by providing a recap of 2022, we entered the year with cautious optimism as we continue to leverage the multi year cycle of growth.
<unk> within the UC and <unk> segments that have fueled our business for several years now we successfully executed according to plan, having delivered 10, 5% revenue growth in 2022 within the range of four guidance.
I would like also to know that the late increase focus on enterprise AI and in view of foreign investment in the voice AI business since early 2019.
We see another major growth driver for our business in coming years.
Our primary growth engines during the year were.
Microsoft business, which ended up growing 18% year over year with Microsoft teams up 30% year over year.
Zoom business grew above 50% year over year.
CX business up.
3% year over year.
Smoothing lumpy OEM revenue.
Lloyds priority already a year ago on the OEM.
Segment.
CX <unk> direct enterprise customers grew 13% year over year.
<unk> opportunities and activities grew over 15% year over year.
Despite the macro uncertainty we face in the second half of the year, we believe long term secular growth drivers remain intact.
<unk> is well positioned to capitalize on the defense technologies, such as digital transformation to the cloud within our core you see in six markets and vendor consolidation favoring our primary partners.
Namely Microsoft Genesis Zone.
We further believe that our unique blend of strong profitability and balance sheet relative to our UCC X spears afford us the flexibility to continue investment in core strategic areas before our business, enabling us to leapfrog competition when the macro storm subsides.
On the operations front, we are pleased to have delivered improved non-GAAP gross and operating margins in.
In the first quarter I'll provide easing supply chain pressures.
Based on current trying to floor pressuring the supply chain operating margin should continue improving entering 2023.
This trend coupled with better FX hedging throughout 2020 trend continued prudent allocation of investments.
Give us increasing.
Confidence to deliver on our commitment to drive improved operating leverage and profitability in 2023.
Now shifting into some of the first quarter results stated in our press release earlier this morning.
<unk> momentum in both the UC and the CX market he drive.
First quarter of 'twenty, two came from Microsoft related business, which was up quarterly 12% year over year, a deceleration from prior quarters.
So longer.
Sales cycles.
Same on the other lines grew.
Above 50% year over year and in the quarter.
Although our base from a lower base.
It relates to LIFO team managed services, we ended the year with 31 million in error.
The target that we have laid out at the beginning of the year to reach over $30 million growth our execution of our strategic priority of migrating through additional capex to Opex is working well with total contract value growing above 25% quarter over quarter.
We ended the year with total contract value for wildlife exclusion exceeding $100 million up from $90 million.
In last quarter, providing us with increased level of revenue visibility, we expect strong momentum to continue in the live services in 2023.
Our CX segment grew sequentially as expected.
Still down 7% for the year year.
Our year periods, owing largely to the lumpiness from OEM customer as stated earlier, we have shifted our focus away from the OEM business and no.
Focus.
Largely on direct enterprise accounts.
Enterprise CX business grew 13% in the quarter importantly, we continue to see strong pipeline of opportunities in life, CX, which capital. So our advanced SBC solutions is a strong managed services delivery.
We now enjoy close alignment with contact center accounts planning migration from on premise implementation to cloud solution deployments.
Additive to our growth in the quarter.
In this area.
Well the ongoing strength in our service provider CPE market.
Which is related to the carrier all IP transformation in PSTN shutdown projects, our service provider business grew for the third consecutive quarter and was up 12% year over year and we continue to see healthy pipeline in this segment in 2023.
Shifting gears to margins and EPS discussion, we are pleased to see a snapback in non-GAAP gross margins to 65, 8% in the quarter.
Up from 63, 2% in the previous quarter. The increase was influent influenced by two primary factors first is in supply chain costs, we secured.
500, thousands of our company and costs in the fourth quarter, which is which compares to $1 2 million spend in the third quarter.
Lower supply chain costs relative to prior quarter accounted for roughly half of the sequential improvement in our non-GAAP gross margin.
Ken.
Mix accounted for the balance of the sequential gross margin improvement with our percentage of sales coming from.
Managed services.
Full year 2022, non-GAAP gross margin came in at 65, 4% versus 69 in 2021 with a 160 basis points of the change related to supply chain inefficiencies and the balance of the product mix.
So.
Fourth quarter at 22 was the first square in 2022, well, we enjoyed higher U S dollar our Israeli shekel conversion rate compared to the year ago quarter. It's a result of our edge activity.
This favorable hedge ratio to persist in 2023.
Our gross margin and tight Opex management translated to sequential improvement in non-GAAP operating margin to $17 seven up from 15, 5% in the third quarter.
Compared to the year ago.
Period.
Which was 20% operating margin the margin difference can be explained primarily by the change in gross margin and to a lesser extent the higher opex.
Growth rising from all hiring activity in 2022.
Ed Count we ended first score with head count of 966 employees down slightly from 969 employees in the third quarter Opex ended up growing 9%.
In the first quarter capping our investment in 2003 and view of the worsening double economy headcount is expected to grow at a very.
In a more moderate rate in 2023 main driver for incremental hiring is our continued investment in enterprise voice AI.
Voice AI will go.
To that topic in a few slides.
Now getting back to the outlook provided.
For the year.
So given the global economy business outlook for 2023, our guidance is provided earlier is as follows.
Guidance for the full year would be.
Revenue range of 286 million to $300 million, that's about 4% to 9% growth.
<unk>.
non-GAAP diluted net income per share.
One the 35 to $1 50, which is growth from 2022.
As for the first quarter, we believe we will see growth year over year, albeit lower than the range anticipated for the full year 2023, which is roughly 4% to 9%.
Also I would like to mention that while December 2022 was sort of weak when compared to the October .
In November 2022 period.
January 2023 was fairly normal or even a stronger.
On par with the November 2022.
Activity.
Now diving into our core business engines, let's go first to Microsoft Microsoft business delivered 12% growth the fourth quarter, making up over 50% of our business now.
Games grew over 15% year over year in the quarter.
While growing more than 30% for the full year.
Skype for business declined roughly 10% year over year and accounting is now accounting for less than 10% of our quarterly Microsoft business. We had another strong quarter for Microsoft teams account additions, we added 279 accounts versus 229 accounts in the year ago.
Great.
Speaks to the ongoing healthy adoption of teams and our growing pipeline.
For the full year, we achieved $145 million of revenue.
At the high end of our guidance the business grew 18% in the year, we expect another year of growth in 2023 from our Microsoft business, albeit at a more moderate pace than in 2022, given the macroeconomic.
Uncertainty and longer say second as we've been discussing.
The long term opportunity has not changed given Microsoft priority two shifts a growing percentage of their 280 million monthly active teams.
Users onto our <unk> licenses, which includes seems fone license for PSTN micros.
Microsoft recently disclosed in July 2022, since PSC end users, reaching over $12 million and more recently in January 2023, adding 5 million more users, implying only low digit.
Gross penetration and suggesting a significant multiyear runaway ads.
Frankly, our market share within Microsoft ecosystem remains strong and is well above 50%.
Then.
Our most important activity. These days in the Microsoft space is the development of live cloud.
<unk> cloud as a team phone voice platform, which provides SBC direct routing on top of that.
Adds value add services, such as recording can recessional IV, our device management analytics.
Management, and then all digital cloud postal.
<unk> cloud facilitates the onboarding of midsize and small businesses accounts into team for service providers.
Efficient way and can be used for Microsoft operator, connect and facilitates faster and very efficient onboarding by.
By the end of the fourth quarter of 2022.
The three year total contract value of five clouds reached a level of $10 million more than tripling the year ago total contract value.
Now to CX.
We saw healthy customer activity during the quarter and the customer experience market.
On a quarterly quarterly basis, the whole activity.
<unk> declined six 5%, however, more important to us contact center Derek account for Enterprise grew 13%. This is where we focus our efforts for the full year and excluding declining OEM revenue, which we will focus less going forward, our direct enterprise CX business grew 30.
10%, we've already introduced so our entry level Microsoft teams now.
Native conversation a first contact center application for the CX market and plan to significantly significantly expand this effort in 2023 overall voice applications grew above 15% year over year.
Looking out to 2023, we see growing adoption of new products and services launched during the past 12 months and we expect them to our boost revenue growth among them out of count alive CX.
Trevor T C click to call application voice App connect conversation I V R and regarding solution.
Mark them Smart pen meeting insights.
Talking about what's happening in the space we've seen.
The transition from on Prem to cloud.
Moving I add but with pains.
Talking about some of the living.
Manufacturing vendors in this field.
Looking on Genesis and Avaya, both both vendors customers, so nervous about the future and need a migration path from the on Prem solution. The currently used to the cloud and we know and we have seen several of them.
Looking for a trusted partner that can execute this migration and solve their complexity the definitely there to enjoy that opportunity to take advantage of it recent announcement from Genesis.
Discontinue genesee.
Genesis engaged metal out of their customers unhappy and for us that is definitely a field for us to.
Two invest same goes for a certain number of Sofia customers with their on Prem solution.
Now to voice AI. So we have seen lately increased focus on enterprise AI first was the announcement in November of <unk> by open AI and then the Microsoft investment in up NII yesterday, Google announced Bart lesser century into the field of advanced Chatbot for search in fact.
We're seeing increased activity on all fronts, and cognizant services, including in the areas of virtual agents intelligent assistant conversational IV iron more I'm glad to say that voice AI was a key investment area for us in 2020 to an area, where we started back in January 2019 glad to see.
Growing global awareness to embedding gas technologies into the CX and enterprise applications.
We intend to keep growing investment in voice AI. This year, we now start to bear fruits in 2022, we saw an increase of more than 15% in the voice business and we expect this activity to grow by more than 70% in 2023 and keep growing at similar rates in.
The years beyond.
And the vast AI.
Connect area, we grew above 70% in bookings and registered growth of more than 100% in new opportunities created.
In our compliance recording business, we so growth of above 15% in both bookings and invoicing our meeting insights application for teams.
Was deployed earlier in 2002 has got warm reception in the market already handling around 250 meetings, a day and few thousands meetings every month, we now have a list of.
<unk>.
Customer that the joining and see the value in <unk>.
The recording transcribing and creating a vocal interaction repository for the organization. This is an area, where we're going to focus in a big way going forward.
Lastly, vica, our virtual agent technologies handling close to 100000 calls today, nor medical AI routing services more to come now I'd like to focus on one very important point, which is we believe that these days we are among a very few I would count less than.
You know one and.
Off play.
Players who can provide.
<expletive>.
<unk> and contribution from two different fields, one is the voice over IP networking area and the one the other one is the conversational AI technology area are very few companies have got to.
Yes, it's great to have those very advanced.
Cognitive services deployed in the cloud, but at the end of the day enterprise customers' needs fully working solution to take they take care of everything that's needed in order to implement a solution. Let me give you 111, such project, which exemplifies exactly our advantage.
We have.
A project that was implemented towards the Red Cross in Israel and is now working more than a year.
Actually ill give you. Some details you know this is a service you know this is an emergency 911 call to Red Cross in 2018.
19, I'm sorry in 2019 have handled more than 2 million calls a year. These days.
And basically at the end of 2020, they have added more than 8 million a huge growth.
As a group from like 50 agents to like 400 agents instead of a call coming in every 15 seconds. It calls coming in every four seconds. So that means you know more than 10000 calls per day now we have implemented for them a very.
Sophisticated solution that allows treatment of incoming calls to the contact center and in order to implement that basically every call. This coming game. These rooted to various places, including recording including two real time.
Speech to text.
Our transcription.
And then operating kind of Abbotts two.
Basically have.
Have insights from that call so to build such a system.
Read to you the list of.
Technological solutions that we are employing in order to provide the full solution. So we've used our sbcs and gateways for connectivity we've used our smart app for recording we use our voice AI connect.
Convert telephony.
Media into cognitive services.
We have developed.
<unk> developed and deployed speech to text technology text to speech.
We have employed management of our our one voice operations set of management and then on top of that we have applied analytics now that gives you an idea about the complexity of those project coming to happen and they need basically to mats are both votes Europe .
And conversational AI solution and are thinking that there will definitely excel and I think that really gives you a taste for the potential we have on our end going forward.
And with that I've concluded my.
Talk in Orlando over the call to the operator, thank you.
Thank you very much we will now be opening the floor for questions. If you would like to ask a question. Please press star one on your keypad a confirmation tone will indicate your line is in the question Keith.
Press Star two if you'd like to remove your question from Nicky.
Anyone using speaker equipment, it may be necessary to pick up your handset before pressing one whilst we poll for questions.
Thank you. Your first question is coming from Ryan Macwilliams from Barclays.
Ryan Your line is life.
Hi, Thanks for the question. This is Ian Coughlan on for Ryan up volumes.
Just quickly.
Macro impacted article it's at this point any how.
Highlighted some uncertainty.
This year in <unk>.
What expectations do you have for the year in 'twenty three.
Baked into your guidance are you seeing any differences in your deal pipeline.
And then if I could.
Should we think about potential operating margin improvement for 2023 and.
Maybe what margin levers.
Could you have improvement from here.
Yes.
Sure Okay, so I'd like to take it from the point where.
We filed remind all of US you know the revenue level, we achieved in each of.
The course of 2022, so the first of course ended up growing to $12 nine and 12 four 9% in the third quarter. We grew 10% in the fourth quarter. We grew six 9%. So I think that tells you the story of the global economy.
That basically tells us that our growth has been.
Celebrate it.
And going forward.
With the outlook provided by other players in the field like Microsoft and few more companies. It is obvious that you know.
The growth in 2003, it will be below 10% now it all depends on how 2023 will develop will know better assuming in few months, but still I need to say that we're very encouraged by the fact that January started very nicely.
Another area from which we can take our numbers is Microsoft so within the Microsoft space, we've been able to grow in each of the first three quarters by 18% to 20% in the fourth quarter. We grew only 12% think that gives us kind of a measure as to what to expect.
Microsoft still we do believe that we're a very dominant in that area.
Not so much competition and as I've mentioned earlier, you know or you know big investment definitely in the platform the lives cloud platform, which should automate.
Many of the functions needed to deploy voice and the team's fone environment that should help bring up more customers. So all in all you know.
Our if I had to bet I'll bet on a 10% to 15% growth in 2023 now to operating margin.
We believe that.
No.
Comparing to 2022, there are two areas, where we will improve definitely one is now the cost of components.
Components will come down so we expect about 4 million of higher profits in 2023 simply because we will not be cured those.
Excessive costs, so $4 million for that another 2 million will come from.
Better conversion rate of the U S does versus the Israeli shekel. So all in all I think we've seen a good improvement in that add to it. The fact that we intend to keep growing in income as I've mentioned between 4% to 9%, but still have a heavy end on expenses, we try to capture.
Hum.
We will add few position just to enhance the voice AI and conversational AI area, but we do not expect that to be a major part so all in all we see those three areas.
It shows affecting better operating margin.
Appreciate the color. Thanks.
Thank you very much. Your next question is coming from Samad Samana of Jefferies.
Life.
Hi, great. Thanks for taking my questions I wanted to follow up maybe in a similar vein just.
As I think about the Microsoft revenue specifically in team could you maybe help us understand what the linearity in the December quarter look like our customer trends.
<unk> revenue.
Up or down from the third quarter and dollar levels.
Help us maybe understand what the trends look like through the quarter and what the final number okay.
Yeah. So December was a bit.
<unk> unique.
But.
One can understand why you know the first two months is in the core with good strong actually November are represented.
The largest revenue.
Weighted.
In that months. However, you know usually in the fourth quarter you know our sales force is focused substantially more in closing deals rather than generating new ones.
I think that that has affected our ability to.
Generate more new opportunities in December .
Neuron can you add to that.
Yeah sure in terms of your question about the.
Doyle, our Q4 versus the Q3 total Microsoft grew.
By 10% quarter over quarter to a level of approximately $41 million out of it.
Microsoft teams is about 90% of this amount.
Okay, great. Thank you and then.
As I think about it.
Think about the guidance on the I know you touched on margins that tie back.
Should we think about balancing growth being maybe slower than expected in 2023 versus growth investments or do you feel like the company's at.
I know it head count and growth in the fourth quarter.
But just how should we think about maybe the investment framework or is there a possibility that maybe.
Your pull back on the Opex or cut expenses and make sure that there is additional margin leverage in 2023.
With regard to Opex you know we ended the fourth quarter at a level of.
$34 million, just compared to the first quarter of 2022, where we are.
Being at $32.6 million.
Going forward.
We believe although we had the $34 million or we will do.
This.
The amount will be increased over the next quarters to a level of $34 million to $35 million.
Because as I said we.
We'll continue to invest at this stage.
So if you need to model it I would take it never extra $35 million.
For 2023 each quarter.
Okay, great. Thanks for that additional color appreciate it.
Thank you very much. Your next question is coming from Greg Burns of Sidoti <unk> Company, Greg Your line is life.
Thanks.
So just to.
Follow up again on the leverage for next year. So just looking at the guidance.
No there's not.
Much earnings leverage so it's about low single or mid single digit revenue growth mid single digit.
<unk> growth so is the expectation here that margins.
Build throughout the year do you have an expectation of where.
Margins will be at the end of the year versus at the beginning of the year.
Yes so.
First with regard to the gross margin we ended 2022 at 65 four.
Our long term target is 67% to 70% I would assume.
Assuming this is our estimation for the model estimation that we will we will be at the low end of this long term target or even less.
I would take 66%.
Of gross margin.
Opex I told you we will be somewhere at 35 and an average all in all with regards to operating margin. We ended the 2022 at 17, 1%.
Yes.
Even if we will be at the low end of our revenues.
The which is $296 million, we believe that the operating margin should be at 17% at this level and thats, how we come to the $1 35.
Low.
EPS guidance.
So all in all for 2023, we will be.
Somewhere between 17% to 19%.
Operating margin.
<unk> said that the first quarter.
We will be at the low end of this range and.
During the second half of 2023, we will we believe we will be at the iron.
Okay.
And then.
For the CX business what percent is that OEM related revenue that I guess.
Declining now.
This quarter it was declined to 10% of total revenues.
Okay.
Compared to 20%.
A year ago.
Okay.
And then the mix of Microsoft sales.
Between kind.
Kind of a capex model on the new live model how has that been trending are you seeing more.
More customers gravitate towards.
Life.
Okay.
Most of the revenues.
Also at the teams and.
Actually it.
Total order cuts our revenues is capex.
Yes.
With regards to the fourth quarter, if we see the.
Team the lives teams versus the Capex.
The deals it's about one third the life and two thirds cut.
Opex deals.
And the kind of the trajectory of that mix is it moving more towards LIBOR or is it just kind of.
I guess staying at that.
Those ranges.
And now it's moving more to live and we are very focused on this transition.
Okay.
Alright, let me just add.
Craig just let me add that you know on a year by year basis live teams grew 35% while the Capex teams grew only eight 9%. So the trend is definitely towards the lives teams.
Okay perfect. Thank you.
Sure.
Thank you very much. Your next question is coming from Ryan Koontz of Needham and company Ryan Your line is live.
Thanks for the question I wanted to ask about CX.
Certainly understand the OEM decline there.
Understand what what sort of.
Mark and motions in partnership there to shore up that growth.
<unk>.
<unk>.
The cloud based contact center players, whether it's <unk>.
Yeah.
License contract or a $5 nine have some pretty durable growth.
How do you attach yourselves.
Those sorts of companies a little closer in.
Whats the competitive landscape there.
Do you view your share I guess in the cloud contact centers I guess my question. Thanks.
Sure well a regarding OEM. This is really an all business related mainly to a.
911 services and Nextgen Nextgen 911, so that is declining those are the majorities SPC itself and so that is coming down as far as our contact center is concerned I mean, we all know about the the trend of moving from on Prem to cloud.
However, one needs to realize that it's pretty complex to do that.
Large company May take you know four to five years just to implement that transition now you need to.
I understand that within that period of time one needs to.
Implement and operate two different.
<unk> solutions at the same time that provides a lot of complexity.
So the fact that you need to deploy new technologies such as <unk>.
No we're about to see and and managed the SBC and on top of that you know there's disruption coming from so think about the disruption coming from.
Call It automation and self service you know once the you know the vendors such as Genesys announced end of development for the on Prem solution. It means that those customers with hundreds and thousands of agents really lack.
This type of solution right because the vendor will not offer them. Obviously, we've got an opportunity in this area. So.
Mainly focusing on the migration from the on Prem solution to the cloud for a vendor that moves to a different vendor cloud environment and the application of self service solution that represents a big opportunities for us and we definitely see a momentum in this field.
Alright, great thanks for that color and on the on.
On the zoom front sounds like.
Trends remained very strong.
How would you view your share in this enterprise environment as it is it relatively high today.
Is that a big.
Bigger growth driver for the company.
So yeah. So yeah, we enjoyed a good year regarding zoom business, which grew more than 50% still you know when comparing to the zoom business in the enterprise to Microsoft teams business. It is relatively smaller so yeah. We do anticipate to have a lot of going on in terms of.
No cooperation and supporting you know new deployments of new zoom is coming out with <unk>.
<unk> service for service providers similar to the Microsoft Operator connect we are embedded in that are they look for adding a.
Our resilience to their branch to the branch offices is there a solution. We are involved in there with them you know some of our more advanced IP phone and meeting room solution. So yeah, we do support zoom.
But all in all it is still fairly small part of our business.
Got it thanks for that.
Sure. Thank you very much.
Gentlemen, do you still have any questions. Please press star one on your <unk>.
Thank you Pat.
Okay. We appear to have reached the end of our question answer session I'll now hand, the call back over to management.
Remarks.
Thank you operator, I would like to thank everyone, who attended our conference call today with continued good business momentum in the fourth quarter of 2022 and <unk>.
Strong underlying market trends in our industry entering 2023, we believe we are on track to grow.
This year definitely are fairly excited about the role of a I N. The enterprising this year in coming years. So we look forward to your participation of our next quarterly conference call. Thank you all have a nice day.
Thank you everybody. This does conclude today's conference you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.