Q4 2023 AudioCodes Ltd Earnings Call

Operator: Ladies and gentlemen, please remain on the line. Your conference will begin in just a moment on the line. Your conference will be at www.audiocodes.com Thank you for watching! Good morning everyone and welcome to the AudioCodes fourth quarter and full year 2023 earnings conference. At this time, all participants have been placed in a listen-only mode, and the floor will be open for questions after the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone.

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Operator: Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Roger Tuchin, Director of Investor Relations. You may begin.

Roger Tuchin: Thank you, Operator. Posting the call today are Shabtai Atlasberg, President and Chief Executive Officer, and Naran Baruch, Vice President of Finance and Chief Financial, Before we begin, I'd like to remind you that the information provided during this call may contain forward-looking statements relating to AudioCodes' business outlook, future economic performance, product introductions, plans, and objectives related thereto, and statements concerning assumptions made or expectations as to any future events, conditions, performance, or other matters are forward-looking statements as the term is defined under U.S. federal securities law. Forward-looking statements are subject to various risks and uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties, and factors include, but are not limited to, the effect of global economic conditions in general and conditions in AudioCodes' 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 AudioCodes 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 the 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.

Ladies and gentlemen, please remain on the line your conference will begin in just a few moments. Please remain on the line. Your conference will begin in just a few moments.

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Good morning, everyone and welcome to the audio codes fourth quarter and full year 2023 earnings conference call.

At this time, all participants have been placed in a listen only mode and the floor will be open for questions. After the presentation. If anyone should require operator assistance. During this conference. Please press star zero on your phone keypad. Please note. This conference is being recorded I will now turn the conference over to your house.

Mr. Roger Zhou Chen Investor Relations you may begin.

Thank you operator hosting the call today are shopped I wish Bergh, President and Chief Executive Officer, and neuron 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 audio coach business outlook future economic performance.

Vince 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 various risks and uncertainties and other factors that could cause actual results.

Roger Tuchin: Any disruptions in our operations due to 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. Before I turn the call over to management, I'd like to remind everyone that this call is being recorded, and archived webcasts will be made available on the investor relations section of the company's website at the conclusion of the call. With all that said, I'd like to turn the call over to Shabtai. Shabtai, please go ahead.

To differ materially from those stated in such statements. These risks uncertainties and factors include but are not limited to the effect of global economic conditions in general and conditions in audio codes industry and target markets in particular shifts in supply and demand market acceptance of new products and the demand for existing products the impact of compare.

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 the pandemic on our business and results of Bob.

<unk> the effects of the current terrorist attacks by Hamas and the war in 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 disruptions in our operations by the army.

Shabtai Atlasberg: Thank you, Roger. Good morning and good afternoon, everybody. I would like to welcome you all to a full score and full year 2023 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of Al Jazeera. Niran will start off by presenting a financial overview of the Corporation. I will then review the business highlights and summary for the Corporation and discuss trends and developments in our business and industry. We will then turn it into a Q&A session. Niran?

<unk> of our personnel to perform military service as a result of current or future military actions evolving Israel and other factors detailed in <unk> filings with the U S Securities and Exchange Commission <unk> assumes no obligation to update this information. In addition, during the call audio codes, we refer to non-GAAP net income and income per share.

<unk> has provided a full reconciliation of the non-GAAP net income and income per share to net income and net income per share. According to GAAP in the press release that is posted on its website before I turn the call over to management I would 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 <unk>.

Niran Baruch: 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 on our Investor Relations website an Earning Supplemental Date. 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.

Inclusion of the call with all that said I would like to turn the call over to Shopify, sometimes please go ahead.

Thank you Roger good morning, and good afternoon everybody.

I would like to welcome all to our fourth quarter and full year 2023 conference call.

With me. This morning gives me run below Chief Financial Officer.

First president of finance before because.

Niran Baruch: We will be comparing our fourth quarter 2023 results to the prior quarter as we believe it provides a better gauge of our financial performance. Revenues for the fourth quarter were $63.6 million, an increase of 3.2% over the $61.6 million reported in the third quarter of the current year. Full year 2023 revenues were $244.4 million, a decrease of 11.2% over the $275.1 million reported in 2020. Services revenues for the fourth quarter were $30.9 million, accounting for 48.6% of total revenue.

<unk> will start off by presenting a financial overview of the core will then review the highlights and summary for the quarter and discuss trends and developments in our business and industry. He will then turn it into the Q&A session, Iran.

Okay.

Thank you Shaun and Hello, everyone.

Before I start my full 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, and a link supplemental deck.

On today's call, we will be referring to both GAAP and Oh God financial results. Their earnings press release that we issued earlier. This morning contains a reconciliation of supplemental non-GAAP financial information.

Niran Baruch: On an annual basis, services revenues were $120.4 million, an increase of 8.7% over the $110.8 million reported in 2020. The amount of deferred revenues as of December 31st, 2023 was $82.8 million compared to $77.8 million as of September 30th, 2022. Revenues by geographical region for the quarter were split as follows: North America 44%, EMEA 37%, Asia-Pacific 14%, and Central and Latin America

We'll be discussing on this call.

We will be comparing our fourth quarter 2023 results to the prior quarter as we believe it provides a better gauge of our financial performance.

Revenues for the fourth quarter were $63 6 million an increase of three 2% over the 61 6 million reported in the third quarter of the current year.

Full year 2023, our revenues were $244 4 million a decrease of 11, 2% over the over the $275 1 million reported in 2022.

Services revenue for the fourth quarter, well third people 9 million accounting for 48, 6% of total revenue.

Niran Baruch: Our top 15 customers represented an aggregate of 61% of our revenues in the fourth quarter, of which 46% was attributed to our nine largest distributors. GAAP results are as follows. Gross margin for the quarter was 66.7% compared to 66.5% in Q3 2022. Operating income for the fourth quarter was $7.2 million, or 11.4% of revenues, compared to $5.8 million or 9.4% of revenues in Q3 2020. Full year 2023 operating income was $14.4 million compared to operating income of $31.3 million in 2020. Net income for the quarter was $3.7 million, or $0.12 per diluted share, compared to $4.3 million, or $0.14 per diluted share, for Q3 2022. The decrease was driven by $1.4 million in exchange rate differences expenses related to the revaluation of assets and liabilities denominated in non-dollar currencies, compared to $767,000 in exchange rate differences income in the previous quarter. This shift in exchange rate differences resulted in a 7 cents negative impact on GAAP earnings per diluted share, quarter over quarter.

On an annual basis services revenues were $120 4 million, an increase of eight 7% over the hungrier than 10 8 million reported in 2022.

The amount of deferred revenues as of December 31st 2023 was 82.8 million compare to 77.8 million as of September 32023.

Revenues by geographical region for the quarter were flippers photos, North America, 44% EMEA, 37%.

Pacific, 14% Central and Latin America up 5%.

Our top 15 customers represent that they're not grew group of 61% of our revenues in the fourth quarter of which 46% was attributed to our nine largest distributors.

GAAP results are as follows gross margin for the quarter was 66, 7%.

Compared to 66, 5% in Q3 2023.

Operating income for the fourth quarter was $7 2 million or 11, 4% of revenues compared to $5 8 million.

Or nine 4% of revenues in Q3 clinically they pretty.

Full year 2023, operating income was $14 4 million compared to operating income of $31 3 million in 2022.

Net income for the quarter was $3 7 million or 12 cents per diluted share compared to $4 3 million an awful awful 10 cents per diluted shares for Q3 2022.

The decrease was driven by $1 4 million in exchange rate different various expenses.

Related to the revaluation of assets and liabilities denominated in non dollar currencies compared.

Niran Baruch: Full year 2023 net income was $8.8 million or $0.28 per diluted share compared to $28.5 million or $0.88 per diluted share in 2022. Non-GAAP results are as follows. Non-GAAP growth margin for the quarter was 67.6%, compared to 67.3% in Q3 2023. Non-GAAP operating income for the fourth quarter was $10.7 million, or 16.9% of revenues, compared to $9.6 million or 15.5% of revenues in Q3 2022. Full year 2023 non-GAAP operating income was $28.9 million compared to operating income of $47.2 million in 2020. Non-GAAP net income for the fourth quarter was $8.9 million or $0.28 per diluted share compared to $8.3 million or $0.25 per diluted share in Q3 2022. Full year 2023 non-GAAP net income was $25 million or $7. $0.77 per diluted share compared to $45 million or $1.35 per diluted share in 2020.

Compared to $767000 in exchange rate differences income in the previous quarter.

If the exchange rate differences resulted in a seven cents negative impact on GAAP earnings per diluted share quarter over quarter.

Full year 2023 and net income was 8.8 million or 28 cents per diluted share.

Compared to $28 5 million or eight eight cents per diluted share in 2022.

non-GAAP results are as follows non-GAAP gross margin for the quarter was 67, 6% compared to 67, 3% in Q3 2023.

non-GAAP operating income for the fourth quarter was 10.7 million or 16, 9% of revenues compared to $9 6 million or 15, 5% of revenues in Q3 2023.

Full year 2023, non-GAAP operating income was 28 point flying them, you know compared to operating income of $47 2 million early in 2022.

non-GAAP net income for the fourth quarter was $8 9 million or 28 cents per diluted share compared to $8 3 million or 25 cents per diluted share in Q3 2023.

Full year 2023, non-GAAP net income was 25 million or seven <unk>.

77 cents per diluted share compared to 45 million.

All dollar point 35 cents per diluted share in 2022.

At the end of December 'twenty, two 'twenty, three cash cash equivalents bank deposits marketable securities and financial investments totaled $106 7 million.

Niran Baruch: At the end of December 2023, cash, cash equivalents, bank deposits, marketable securities, and financial investments totaled $106.7 million. Net cash provided by operating activities was $9.3 million for the fourth quarter of 2023 and $14.9 million for the year 2022. Day sales outstanding as of December 31st, 2023 were 98 days.

Net cash provided by operating activities was $9 3 million for the fourth quarter.

Of 2023, and $14 9 million for the year 2023 days.

Day sales outstanding as of December 31, 2023 were 98 days.

Niran Baruch: In December 2023, 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 on any part of this amount. The approval is valid through June 18, 2024. Additionally, earlier this morning, we also declared a cash dividend of $0.18 per share. The aggregate amount of the dividend is approximately $5.5 million. The dividend will be paid on March 6, 2024, to all of our shareholders of record at the close of trading on February 20, 2024. During the quarter, we acquired 595,000 ordinary shares for a total consideration of approximately $6.3 million.

In December 'twenty, two 'twenty three we received court approval in Israel to purchase up to an aggregate amount of $20 million of additional ordinary shares their court approval also permit us to declare a dividend of any part of this amount.

The approval is valid through June 18, 2024.

Earlier. This morning, we also declared a cash dividend of <unk> 18 cents per share the aggregate amount of the dividend is approximately $5 5 million daus.

The dividend will be paid on March 5th 20 point before to all of our shareholders of record at the close of trading of February 'twenty 'twenty 'twenty four.

During the quarter, we acquired 595000 of our ordinary shares for a total consideration of approximately $6 3 million bullets.

Shabtai Atlasberg: As of December 31st, 2023, we had $19.2 million available under the approval of the repurchase of shares and or declaration of cash dividends. Our guidance for the full year 2024 is as follows. We expect revenues in the range of $252 million to $267 million and non-GAAP diluted net income per share of $1 to $1.15. I will now turn the call back over to Shepter. Thank you, Niran.

As of December 31st 2023, we had $19 $2 million available under the approval of the repurchase of shares and all of our declaration of special dividends.

Our guidance for the full year 'twenty 'twenty four is as follows.

We expect revenues in the range of 252 million to two Hong who had been 67 million.

And non-GAAP diluted net income per share of one golar.

The $1 15.

I will now turn the call back over to shop there.

Thank you and Iran.

Shabtai Atlasberg: We are pleased to cap off 2023 with a solid four score and with healthy growth in the strategic areas of our business, namely UCAS and customer experience. At the same time, we've seen important accelerated development and a nice rise in opportunities relating to conversational AI, which grew more than 50% year-over-year, and it's quickly becoming a new growth engine for success in the areas of Microsoft Teams and Salesforce. Altogether, when we combine the progress in our operation in the UCAS customer experience and conversational AI segments, it is clear that our focus on the enterprise space, where business reached a level of 90% of company revenues for the quarter and the full year, starts to bear fruit and drive continued business expansion in the enterprise space going forward, with continued focus in 2023 on shifting our business model into subscription-based recurring sales and the shift to higher-margin cloud software solutions and As in previous years, services revenue has evolved to contribute about 50% of our business.

We are pleased to cap off 2023, with a solid fourth quarter results and with healthy growth in the strategic areas, so far our business, namely ucas and customer experience.

At the same time, we've seen improvement accelerated development and a nice rising opportunities relating to conversational AI, which grew more than 50% year over year, and it's quickly becoming a new growth engine for success in the areas of Microsoft teams and see Caf.

Altogether, when we combined the progress you know operation and the Ucas customer experience in conversational AI segments. It is clear and it's our focus on the enterprise space, where business reached a level of 90% of company revenue for the quarter and the full year.

Towards the throat.

And drive continued business expansion in the enterprise space going forward with continued focus in 2023 on shifting our business model into subscription and recurring sales and the shift to higher margin cloud So for solutions and services, we are making significant progress.

Our transformation to become a sofa and services company.

As in previous years services revenue evolved contributes about 50% of our business. We have built throughout the past four years, a profitable minutes surfaces business exiting 2020 tree with 50% growth year over year enriching the level of 48 million.

Shabtai Atlasberg: We have built, throughout the past four years, a profitable managed services business, exiting 2023 with 50% growth year-over-year, enriching a level of $48 million annual recurring revenues for our live business. We expect continued live business growth in 2024, which is currently planned to grow on the order of another 40%. As a result, we've made significant progress in our strategic initiative to increase our software and service revenue mix to nearly 70% in 2023, up from 60% in 2022. Shifty car focus, in 23, to AI-first voice-related software and applications, and more so for 2024.

Annual recurring revenues for our life business, we expect continued life business growth in 'twenty 'twenty four which currently is planned to grow on the order of another 40% as a result, we've made significant progress in our strategic initiative to increase our software and services revenue mix.

Nearly 70% in 2023 up from 60% in 2022.

Shifting our focus.

In 'twenty three to a a first voice related silver and application and more so.

For 'twenty 'twenty four we're now adding a new strong leg informal so far as a service solution is a conversational AI space, which should further drive expansion for our business and profits in coming years to recap on our success in the past 15 years, we've built a very strong voice smoked.

Shabtai Atlasberg: We're now adding a new strong leg in the form of a software as a service solution in the conversational AI space, which should further drive expansions for our business and profits in the coming years. To recap on our success in the past 15 years, we've built a very strong voice mode position in the industry. Our partnership with leading application vendors, such as Microsoft in the UK space and Genesys in the customer experience market, is a testament to our success. Said success has been focused in the past on voice network infrastructure, and we have become a top connectivity player in both the gateway space and the enterprise SBC market. We are now shifting our focus towards AI-first business voice applications for the U.S. and CIS markets, which represent both a huge opportunity in terms of scale and ultimately hundreds of millions of seats to serve. Combining our assets and capabilities in the areas of telephony with the new emerging conversational AI solution, we believe we are creating a rather unique position in the industry, which we believe would be hard to compete with and or replicate by competitors. In 2023, we have already seen good signs of growth in this space, which should further pave the way for the future. The Future of Business Extension

Positioning the industry, our partnership with leading application vendors such as Microsoft maybe you could space in Genesis and the customer experience market is a testament to our success.

Said success has been focused in the past on voice network infrastructure, and we became top connectivity player in both the gateway space and the enterprise SBC market. We are now shifting our focus towards a first business voice application for the UK since weakest markets, which represent both huge opportunity.

Insurance offence and ultimately hundreds of millions of seats to serve.

<unk> of our assets and capabilities easier itself telephony voice networking infrastructure with the new emerging conversational AI solution. We believe we are creating a rather unique position in the industry, which we believe it would be hard to compete with N or replicated by competitors in 2023.

We've already seen good signs of growing fast in this space, which should further pave the future business expansion.

Shabtai Atlasberg: Another key accomplishment in 2023 relates to our growth in the customer experience market. We are now investing in two key areas. The first one is taking advantage of our strong offering of voice infrastructure for the customer experience, networks, and deployed solutions.

Another key accomplishment in 2022 relate to our growth.

Customer experience market, we are not betting in two key areas first one is taking advantage of our strong golf rank of voice infrastructure for the customer experience networks deployed solutions with so much success, working with leading CX vendors and helping to transform legacy on Prem solution, which are.

Shabtai Atlasberg: We saw much success working with leading CX vendors in helping to transform legacy on-prem solutions, which are gradually becoming less efficient and progressing, to new, evolving cloud-based modern CCAS solutions. In this space, we saw much success in our live CX services and enjoyed growth of about 20% year over year for the full year. Secondly, we saw huge success related to penetration of the customer experience market, winning new opportunities with our VOCA CAC product, our new leading initiative for AI-first Azure-native C-CAP solution for the Microsoft Teams environment. We saw initial large wins with enterprise customers in North America, among them being one of the largest units, and the second one being a Fortune 500 Global Manufacturer. In both cases, Rokka CAC's solution displayed an incumbent team-certified CICAS vendor, which serves both as proof points that Rokka CAC is ready for primetime.

Gradually becoming less efficient and progressing.

New evolving cloud based more than C cat solutions in this space with so much success in our lives CX services and enjoyed growth of about 20% year over year for the full year.

Secondly, so huge success related to.

The penetration of the customer experience market, winning new opportunities with or advocacy a C product or new living initiative for a first is your native C cap solution.

Microsoft teams environment.

Initial large wins with the enterprise with enterprise customers in North America, among them, who is one of the largest units right and the second one fortune 500 global Central Kansas.

Kansas also see AC solution is displaced an incumbent 35 figures vendor.

Sure Sir.

Proof points. The brokers gave he is ready for prime time, we expect these initiatives to further increase its market penetration 2024 and beyond.

Shabtai Atlasberg: We expect this initiative to further increase CICAS market penetration in 2024 and beyond. All in all, we ended the year with a full score in the CX area with a record business level of over 40% year-over-year and close to 20% for the full year. By 2023, customer experience revenue now represents more than 20% of our business going forward. As such, we have high confidence in the customer experience segment emerging as a second major growth pillow for our business, in addition to our Microsoft Teams UC Voice success. Now to UC.

All in all we ended full scoring the six area with record business level of over 40% year over year and close to 20% for the full year exit 2023 customer experience revenue now represents more than 20% of our business going forward.

As such we have high confidence in the customer experience segment emerging a second major growth pillar for our business. In addition to our Microsoft teams UC voice success.

Now what do you see.

Shabtai Atlasberg: Within Enterprise, our UCAS business continued to perform well. Business in Microsoft UC grew 5% year-over-year in the full score. Full-year Microsoft UC business increased 7%. Microsoft Teams business grew 10% year-over-year for the quarter and 13% for the full year. At the end of 2023, Teams business is now more than 95% of the Microsoft business. Council Business Revenue continues to decline in the full score, with related revenue declining above 40 percent for the full year, they declined approximately 8 million or 55 percent.

Enterprise, our UK business continued to perform well because this is the Microsoft UC grew 5% year over year in the fourth score.

Full year, Microsoft UC business increased 7%.

Microsoft teams business grew 10% year over year for the quarter and 13% for the full year at the end of 2023. It seems that business is now more than 95% of the Microsoft business.

Skype for business revenue continued to decline in the fourth quarter by <unk>.

With related revenue declining above 40% for the full year, they declined approximately $8 million or 55%.

Shabtai Atlasberg: So, exiting 2023, Skype for Business's business declined to less than $1 million in the full score, which means that Skype for Business revenue will no longer weigh on the markets going forward, and thus, we shall see the full impact of Steam's growth in terms of expansion. On the services side, we continue to experience continuous strong momentum for our AudioCodes Live Managed Services business, mainly in the Microsoft Teams environment, with annual recurring revenue growing 50% year over year, ending the quarter at $48 million, consistent with our expectations. On the SBC product line front, we enjoyed a very strong fourth quarter ending with above $35 million in revenues. For the full year, we ended the year with revenues close to $130 million.

So exiting 2023, Skype for business business declined to less than $1 million at the full score which means that.

Skype for business revenue would no longer way on the Microsoft business going forward and that we should see the full impact of themes growth insurance of expansion on that.

Services side, we continued to experience continued its strong momentum for <unk> live minutes services is this mainly in the Microsoft <unk> environment.

Annual recurring revenue growing 50% year over year, ending the quarter at 48 million are consistent with our expectations.

On the SBC product client front, we enjoyed a very strong fourth score and being about 35 million of revenue for the full year. We ended the year with revenue of close to 130 million.

Shabtai Atlasberg: In December 2023, research firm Omdia ranked AudioCodes as the market leader for enterprise SBCs for the third quarter of 2023 with a worldwide revenue share of 23.2% in its enterprise SBC and voice over IP gateway market track. Our MediantSBC line is keen to win Microsoft Teams direct business. Again, getting back to where I stopped, our mid and SBC line is key in winning Microsoft in direct route business and for connectivity in more market areas such as Zoom Phone, Genesys Cloud TX, Microsoft Dynamics 365, and other leading UKS and CKS solutions. We're growing nicely in the enterprise space. We have witnessed rather soft business in the service provider space. During the fourth quarter, business in this space declined above 50% year-over-year and over 40% for the full year.

In December 2023 research from Dr ranked all because as the market leader.

For enterprises. This is for the third quarter of 2023 with a worldwide revenue share of 23, 2%.

Enterprises and voice over IP gateway markets record.

Well, our mediant SBC line, he's keen winning Microsoft teams the rig business.

Again getting back to where I stopped our maiden SBC line is key in winning Microsoft teams Dark road business and food.

Connectivity more market areas, such as zoom phone Genesis clouds. He acts Microsoft dynamics 365, another leading U K F ETF solutions.

Well growing nicely on the enterprise space, we have witnessed strides itself business in the service provider space during the fourth score business in this space declines above 50% year over year and over 40% for the full year.

Shabtai Atlasberg: With an economic slowdown across the board in 2023, the effect of growing inflation coupled with high interest rates has affected materially sales of hardware-related products, which in turn had an impact on sales of equipment gear provided to service providers worldwide. It is important to understand that, though, in the longer-term plans, and definitely with the shift we are making towards more software and services, this decline was anticipated to occur over the period of the next three to five years. Due to the accelerated economic slowdown in early 2023, we saw an acceleration of this trend and thus have seen a major impact already in 2023, which should have occurred anyway in the coming years.

Economic slow down across the board in 2023 effect of growing inflation, coupled with high interest rates, it's affected materially sales of hydro related products, which in return it in and then impact on says perfect weapon gear provider to service providers worldwide. It is important to understand that.

Though in.

The longer term plans and definitely with the shift we are making towards more software and services is decline was anticipated to occur over the periods over the next three to five years due to the accelerated economic slowdown in early 2023, we saw acceleration of this trend <unk> seen major impact.

Already in 2023, which would have occurred anyway in coming years as such we believe that the pressure and impact on our growth from the decline in the service provider space early 2023 will be substantially relieved in 2024 and beyond.

Shabtai Atlasberg: As such, we believe that the pressure and impact on our growth from the decline in the service provider space in early 2023 will be substantially relieved in 2024 and beyond. While visibility in this segment remains limited, revenues did stabilize sequentially in the quarter, which may point to a better 2024. On the operations side, I'm glad to report solid progress in non-gap gross margin, which has recovered from early first quarter with 62.1% in 2023 to reach 67.6% in the fourth quarter. Coupled with disciplined expense management, non-gap operating margin has also improved dramatically from 4.9% earlier in the year to reach 16.9% in the quarter, which is in the range we define for our long-term financial model. We continue We expect operation margin to keep inching forward in the coming years. On the cash flow side, we have witnessed a very successful quarter. Operating cash flow grew to $9.3 million in the quarter and $14.9 million for the full year.

While visibility in this segment remains limited revenues did stabilize sequentially in the quarter.

Which may point to a better 2024.

On the operation side I'm glad to report solid progress in non-GAAP gross margin, which has recovered from early first quarter was 62.1% in 2020 to treat the rich enforced score of 67, 6%.

Coupled with disciplined expense management non-GAAP operating margin is also improved dramatically from 4.9 earlier in the year to reach 16, 9% in the quarter, which is in the range of redefine for our long term financial model.

With continued focus on shifting our business model to subscription and recurring sales and shift to higher margin cloud software solutions, we expect operating margin to keep inching forward in coming years.

Well the cash flow side, we have witnessed a very successful quarter operating cash flow grew to $9 3 million this quarter.

And at $14 9 million for the full year.

Shabtai Atlasberg: Regarding ad count, all in all, we are fully disciplined in hiring, mainly in our networking business. However, we are adding select positions in the growing areas of customer experience and conversational AI. We entered the fourth quarter with 950 employees compared to 938 employees in the previous quarter.

Regarding edge count headcount all in all we are fairly disciplined hiring mainly in our networking business. However, we are adding select position into growing areas of customer experience and conversational AI. We ended the fourth quarter was 950 employees compared to 900.

38 employees in the previous quarter.

Shabtai Atlasberg: As for the guidance that Niran provided earlier, we are initiating 2024 revenue guidance of $252 to $267 million for the full year. We anticipate mid-range revenue growth of about 6% compared to 2023. Non-GAAP EPS guidance of $1 to $1.15, that anticipates mid-range earnings growth of about 40%.

That's what the guidance didn't you run provided earlier very initiating 2020 for revenue guidance of $250 million to $267 million for the full year.

We anticipate needs range revenue growth of about 6% compared to 2023, non-GAAP EPS guidance of.

$1, one point 15, golar that anticipating.

Midrange, earning growth of about 40% the topline outlook builds in.

Shabtai Atlasberg: The top line outlook bills, in a continued conservative enterprise spending environment and assumes modest growth in networking and high double-digit percentage growth in concessional AI backed by ongoing healthy pipelines, has two key wins in the core. We've signed a 36-month live contract with one of the world's largest PBX companies, enabling the vendor to use AudioCode as a de facto solution when provisioning its end assignments with Microsoft Teams. We have signed a 36-month contract with one of the largest U.S. universities, providing VOCA CAC, Azure Native Teams Certified Contact Center solution, and SmartTab Compliance Recording as competitive displacement of a team's CKS incumbent. We also signed a 60-month contract with a Fortune 500 global manufacturer providing VOCA CAC, Azure Native, Team Certified Contact Center Solution, and Smart App Compliance Recording. Again, it's a competitive displacement of the team's CKF income.

<unk> continued our conservative enterprise spending environment and assumes modest growth in networking and high double digits.

Census growth in conversational AI backed by ongoing healthy pipeline funnel.

That's the key wins in the core with sign a 36 month life contract with one of the worlds largest PBX companies.

And that brings the vendor to use the article that said that the fact the solution when provisioning it and after months with Microsoft teams voice.

We have signed a 36 month contract with one of the largest U S universities provide.

I think Rocco CIC as your own native teams certified contact center solution and smart that compliance recording its competitive displacement of Atms see Cas incumbent.

We also signed a 60 months contract with Fortune 500 global manufacturer, providing brokers see I see as your native teams certified contact center solution and smarter compliance recording.

But again, it's a competitive displacement of PMC guess incumbent.

Shabtai Atlasberg: To wrap up my introduction, we had a solid fourth quarter and strength across the board in strategic areas of our business, having navigated well in an ongoing difficult market condition. We are gaining market share against our primary competitors, having scored multiple land market deals in both the U.C. and the CX space, which serves as validation of the successful execution of our land and expense strategy. Yes, the sector of capital, with core business leading indicators such as Pathline remaining robust, gives us conviction that we have the right strategy in place and on the right path to execute on our commitment of returning to revenue growth and driving operating margin improvement in 2024. With increased focus and investments in technologies and services for the UCAS customer experience and conversation AI markets, backed by strong live booking, mainly in Teams, LiveCX, and VocaCAC, we believe we are on the right path to execute on our plan to achieve revenue growth and drive improved profitability in 2024. And with that, I've concluded my introduction. I'd like to move over to the code for the operator.

Yeah.

To wrap up my introduction, we had solid fourth score and strength across the board in strategic areas of our business, having navigated welding and the ongoing difficult market conditions.

We are gaining market share against our primary competitors, having scores multiple end market deals in both the UC and the CX space, which serves as validation of the successful execution of our land and expense strategy.

Yes.

Sector of coupled with core business, leading indicators such as pipeline remaining robust gives us conviction that we have the right strategy in place and on the right path to execute on our commitment of returning to revenue growth and driving operating margin improvement in 2024.

Increased focus and investments in technology and services for the Ucas.

Customer experience and concessionary markets backed by strong live bookings, mainly in the teams Leipzig Jacksonville cause C. H C. We believe we are on the right path to execute on our plan to achieve revenue growth and drive improved profitability in 2024.

And with that I've concluded my introduction.

Like to move or the call to the operator.

Operator: Thank you very much. We will now be conducting our question and answer session. Please press star 1 on your, and the Confirmation Tone will indicate that you're live.

Thank you very much we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question you May press star two if you'd like to remove your question from Nicky.

Eamon Cobbin: You may press star 2 if you'd like to remove www.audiocodes.com. Your first question is coming from Ryan McWilliams. Ryan, you're live. Hey guys, this is Eamon Cobbin on for Ryan McWilliams. Thanks for taking the question. How is your pipeline visibility now compared to what it was in 3Q? Were there any green shoots that you could point to for improving demand trends leaving the quarter? Ryan, this is Shep.

Using speaker equipment, it might be necessary to pick up your handset before pressing the keys. Please hold them in the monthly poll for questions.

Thank you. Your first question is coming from Ryan Macwilliams of Barclays. Ryan Your line is live.

Hey, guys. This is Damon carbon authorized and that's why I'm, saying for taking the question how does your pipeline visibility now compared to what it was in three Q, where there any green shoots that you could point to for improving demand trends even in a quarter.

Ryan This is shop that I'm sorry.

Shabtai Atlasberg: I'm sorry, you know; it was hard to hear. Can you please repeat the question? There's just a question about your pipeline visibility, how that compares now to the end of 3-2 on the last earnings call, and just if you were seeing any green shoots leaving the quarter. Yeah, well... Largely, I would say that there is not much difference, although I must point out that, usually, a full score is the strongest score in the year.

But it was hard to hear you can you. Please repeat the question.

Yes.

It was just a question on on your pipeline visibility how that compares now to the end of <unk> at the last earnings call in and just if you were seeing any green shoots of living in the quarter.

Yeah well.

Largely I would say that there's no much difference, although I must point out that usually full score is the strongest quarter in the year I think that in 2023 that phenomena as kind of you know been emphasized because budgets were less use earlier in the year.

Shabtai Atlasberg: I think that in 2023 that phenomenon has kind of been emphasized because budgets were less used earlier in the year due to the slowdown and delay of projects, so I think we enjoyed a strong full score. I therefore expect that the first quarter will, just like in many previous years, probably be down like 2 or 3%, but all in all, the pipeline looks good. I didn't mention that, but we had a very high score of bookings done in 2023 compared to 2022, so all in all, we believe we are fully effective. I would also add.

Due to the slow down and delay of projects. So I think we enjoyed a strong fourth core I. Therefore expect that you know first quarter. It will be just like in many previous years will be probably down like two or 3%, but all in all I'm the pipeline looks good.

We have I didn't mention that but with a very high score off bookings done in 2023 compared to 2022. So all in all we believe we're absolutely.

Effective.

Also at.

Shabtai Atlasberg: You know, one more point, which I have not mentioned in my introduction, that we do intend to add in the first half of 2023 new software as-a-service additions, new cloud multi-tenant solutions for recording services in the form of compliance recording and meeting space. And we believe that our live... platform will become substantially more competitive. We do not see any close competition with such capabilities. All in all, we believe that the pipeline and visibility for 24 should be good. I got it.

One more point, which I have not mentioned in my introduction that we do intend to ads in the first half of 2023.

New software as a service additions new cloud multi tenant solution for recording services in the form of compliance for clothing and meeting space.

And we believe that's our our live platform would become substantially.

More competitive we do not see any close competitor so with such a capability. So all in all we believe that planned pipeline and visibility for 'twenty four it should be good.

Got it. Thank you and then how did see cast demand fare in the quarter and are you seeing any increased attention for buyers on voice AI.

Shabtai Atlasberg: Thank you. And then how did CCAS demand fair in the quarter? And are you seeing increased attention for buyers on Boys AI? Thanks. Yes, definitely.

<unk>.

Yes, it's definitely actually we do see a rise in number of opportunities in the secrets space or focus here I see product, we actually it's I've mentioned, one two large deals I want that's close to a million one that's you know above.

Shabtai Atlasberg: Actually, we do see a rise in the number of opportunities in the CQS space for our VOCA CIC product. We actually, as I've mentioned, won two large deals, one that's close to a million, and one that's above half a million in North America. We have a range of more opportunities coming up. Also, we plan on an analyst day in about a month from today, or six weeks from today, dedicated primarily to VOCA CIC. Obviously, we will present that at Enterprise Connect in March. So, a lot of activity in the CX space. Got it. Thanks, Chetai. I'll go back in the queue.

A million in North America, we have or a range of more opportunity coming up also we left we'll have a and we plan on an analyst day in about a month from today or more six weeks from today are.

Dedicated primarily to Oh, Volcker, CIC and obviously, we'll present that that's enterprise connect in March so a lot of activity in the CX space.

Got it thanks, Jeff Hi, I'll go back in the queue.

Greg Burns: Thank you. Our next question is coming from Greg Burns of Sedosa. Greg, you're live.

Thank you very much.

Our next question is coming from Greg Burns of Sidoti and company Greg Your line is live.

Shabtai Atlasberg: Morning. The growth rates from Microsoft have slowed a little bit from where they were maybe a year ago. Can you just talk about what's driving that? Mix with Live gaining greater traction, or is it macro because it seems like in the CX market you're still posting solid growth there, a little stronger than what you're seeing on the UCAS side of the business.

Good morning, the growth rates from from Microsoft have slowed a little bit from where they were maybe a year ago can you just talk about what's what's driving that is it.

Mix with live I'm getting greater traction or is it macro because it seems like in the CX market you're still.

Posting solid solid growth there a little stronger than what youre seeing on the ucas side of the business. Thank you.

Right, Yeah, I think Europe is the observation when I E.

Is correct, well I think that the the moderated growth results, partly a as we all know from the slowdown in global economic so projects have been pushed et cetera. However, you know our specific business in this space relates directly to the <unk>.

Shabtai Atlasberg: I think the moderated growth results partly, as we all know from the slowdown in global economics, so projects have been pushed, etc. However, our specific business in the space directly relates directly to the success of what we call Microsoft Teams phone, which is the connection of enterprises to the public network. We believe that up to now, there was limited benefit from adding the phone functionality over other functionalities of Microsoft Teams, such as chat, presence, conferences, etc.

Excess of what we call Microsoft teams phone, which is the connection of.

The enterprises to the public network now we believe that up to now there was limited.

Benefits from adding the phone functionality over other functionalities of Microsoft teams, such such as chat presence.

Presence you know conference.

[noise] et cetera, we do believe that you know in 2003, we started to see the impact of.

Shabtai Atlasberg: We do believe that in 2003 we started to see the impact of conversational AI on the use of Teams phone. We have seen obviously generative AI technology being put to work. Our solutions, including meeting insights, are making use of generative AI, which in order to provide benefit in the Microsoft phone space, you really need to have a Teams phone license. Similar, you know, to the introduction of Microsoft Teams, of Copilot, and Teams Premium. And you can see a lot of more applications. So, once again.

Conversational AI on the use of teams phone right are we all have seen obviously, a generative AI technology being put to work or our solutions, including meeting insights he's making gives us a generic D V I, which you know there's two.

Provide benefits in the Microsoft space, you really need to have a phone it seems fone license. Some of our you know the introduction of Microsoft a flaw copilot and Tim's premium and you can see a lot of more application. So once.

Shabtai Atlasberg: There will be new business voice applications that will provide value on the show. I would say emerging adoption of Meeting Insights, recording of meetings, and co-pilot, we will definitely see a rise. So we believe that's kind of a belly in 2023, but we should see and expect to see growth coming back in 2024 and beyond. OK, so what are the penetration rates of voice licensing in the teams environment now? Is it still? Less than 15% of the timber

There will be new business voice application that would provide value.

On top of the team's Fone license, we will start to see increase in.

You know our business and we believe that we've already seen a sense for it at the end of 'twenty, three and we believe that going forward with the.

Uh huh.

I would say our emerging adoption of meeting insights a recording of meetings.

You know co pilot we.

We will see definitely you're right. So so we believe that's kind of a badly in 2023, but we should see and expect to see growth coming back in 'twenty four and beyond.

Okay. So what are the penetration rates of voice licensing and the teams environment now is it still.

Less than 15% or 10%.

Shabtai Atlasberg: Yeah, well, the last numbers that you know, I remember being caught were that around July 23, I believe the number that was quoted was about 17 or 18 million, you know, PSN breakout. That's just, I mentioned 17 or 18 million. The runaway is obviously substantially larger, right?

Yeah, well the last numbers that you know I remember being quad where that around July of 'twenty. Three I believe the number that was quoted was about 17 or 18 million you know I'm, a PSA and breakouts that's just.

I've mentioned in 17 or $18 million.

The runaways, obviously substantially larger rights, Microsoft 365 state licenses are close to 400 million seems.

Shabtai Atlasberg: You know, Microsoft 365 paid licenses are close to 400 million, and as a whole, without the phone, it's quoted to be at least $80 million. So there's a huge, huge run where I expected. So again...

That's a hole you know without the phone is is nowadays cause it to be at least 80 million. So does huge huge runway expected so again.

Shabtai Atlasberg: When there are more applications that drive value on top of the Teams Phone license, I think you'll see an increase in the number of seats using Teams Phone. Okay. And Niran, the cash conversion for this year, do you expect it to be stronger than what it has been for the last two years? Yes, you saw the operating cash flow in the fourth quarter, which was close to $10 million, an improvement from the previous few quarters, and we believe the operating cash flow for 2024 will be better than for 2023. OK, great, thank you. Brian.

When there will be more application to drive value on top of the team's fone license I think you'll see you know increase in number of seats using phone.

Okay.

And neuron the cash conversion for this year do you expect it to be stronger than what has been the last two years.

Yes, you saw the operating cash flow in the fourth quarter, which was the key.

Close to $10 million, an improvement from previous few quarters and we.

We believe the operating cash flow for 2024 will be better than in 2023.

Okay, great. Thank you.

Yeah.

Thank you very much. Your next question is coming from Ryan <unk> of Needham and company Ryan Your line is live.

Niran Baruch: Thanks for the question and nice quarter on the margins, particularly there, really great to see that. I hope we could circle back to contact center and your CX there. You talk about a really nice inflection to 40% growth. Dmitry Latimore, Dmitry Netis, AudioCodes, product improvements, is it focused on go-to-market with some of your key partners, seeing an inflection on sales growth. Any of those would

Thanks for the question.

Nice nice quarter on the margins, particularly they're really great to see that.

Well, if I could circle back to contact center and your CX. There you talk about a really nice inflection to 40% growth.

Can we drill in there and what's behind that is it is it product improvements is it focused on go to market is it some of your key partners.

An inflection on sales gross.

Shabtai Atlasberg: And just a quick follow-up. Can you clarify what those winds were again? The audio was breaking up a little bit on your two CXs. Thank you. Right. Thank you, Ryan.

Those would be helpful. And then just a quick follow up can you can you clarify what those wins were again audio was breaking up a little bit on the <unk> you mentioned thank you.

Right. Thank you, Brian so on the CX space as I've mentioned, there are two key activities, one which is.

Shabtai Atlasberg: So in the CX space, as I've mentioned, there are two key activities, one which is, you know, um, supporting the deployment of voice networks. The world of contact centers is moving from on-premise to cloud. There's a need to basically shift from the old networks to new networks which are global in nature, different architectures. So we are usually providing SBC gear and managed services and more components in order to enable the transition from on-premises to CCAS. The large growth in CCAS, in CX, I'm sorry, is related to participating in several such large deployments of large CX vendors. So take a leader in CX who now wins against an incumbent that's kind of legacy and less powerful when you move from an old supplier architecture that's on-prem to a new cloud-based vendor. There's a whole huge network, you're talking about hundreds of locations around the world, and in order to achieve that with high quality, high security, and efficiency, our SBCs and managed services like CX come into play. So that's...

You know.

For clothing in deployment of voice network. That's as you know there was a phone contact center is moving from on Prem to cloud, there's a need to Hum basically shift from the old networks to new networks, which are you know global in nature different architecture.

So we are providing usually SBC gear and managed services and more components in order to enable the transition from on Prem to see Caf.

The large growth in C cats in C ask I'm, sorry is it related to participating in several such large deployments of large CX vendors, so take a a a a.

A leader in CX will now wins against an incumbent that's kind of legacy and less thoughtful.

When you move from an old.

Supply our architecture, it's on prime to a new cloud based vendor does a whole huge network, you're talking about hundreds of locations around the world and in order to achieve that with high quality.

Hi, security and efficiency.

Nowhere is this season managed services like six come into play so that explain you know the success with jewelry and and it's they're trying to moving from on Prem to cloud continues I believe with this we will continue to win such.

Shabtai Atlasberg: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com.au. The trend of moving from on-prem to cloud continues, and I believe that we will continue to win such projects. As to the two wins that I've mentioned, the first one is a very large university in the U.S. who used VOCA CAC in our compliance recording to replace incumbent solutions at that time. That specific transaction was close to a million bookings.

Project and so the two wins that I've mentioned, so the first one who as you know a very large university in the U S. We used our Oh I see I see in our compliance or clothing.

To replace you know incumbents solution at the time that a specific transaction.

It's close to a million booking second one with a large.

Shabtai Atlasberg: The second one was a large manufacturer, one of the F&P 500 companies, who again chose to use our VOCA CAC and replace an incumbent certified solution in the Microsoft Teams account. All right, great. Thanks. That's somewhat helpful. I mean, I guess prem-to-cloud is not really a new trend. It's been going on for many years, so... Commentary and why you're specifically seeing, in terms of your efforts in that market, which has been humming along pretty healthy for years. Yeah, it's definitely a healthy market, and we actually have seen, you know, expansion in that segment.

Manufacturer, who you know one of the S&P 500 companies, who again chose to use our volcker CIC and replace an incumbent certified solution is it.

Microsoft teams space.

Alright, great. Thanks, it's somewhat helpful. I mean, I guess prem to cloud is not really a new trend going on for many years. So any commentary on why you're specifically seeing this inflection for growth for audio codes in terms of your efforts in that market, which is.

Been humming along pretty healthy for years.

Yeah, it's definitely a healthy market and we've actually seen you know expansion in that segment actually and then we just discussed you know prospect for the first quarter of 2024. It seems that it continues I believe that with probably will.

Shabtai Atlasberg: Actually, you know, we just discussed the prospects for the first quarter of 2024. It seems that, you know, it continues. I believe that probably with, you know, more maturity and reliability of contact center operation from the cloud, that may become an incentive for end users to move. Also, I would add that usually we're talking about contracts that last several years, and usually when such a contract is coming to an end, this is the time when transition from on-premises to the cloud will occur. So that is an ongoing process, and as the world of CKS matures and becomes more successful, we believe that we'll see more projects like this. That's really helpful.

As you know more maturity and reliability of our contact center operation from the cloud.

That may become an incentive for end users to move also I would add that usually are we're talking about contracts that last several years and usually when such a contract is becoming too and this is the time when transition from on Prem to cloud will occur.

So that is an ongoing process and as the world of CK matures and becoming more successful we believe that we will see more projects like this.

Great. That's that's real helpful. Just a quick follow up you've talked about zoom phone in a while any quick commentary on Sam in terms of.

Shabtai Atlasberg: Just a quick follow-up. You haven't talked about Zoom phone in a while. Any quick commentary on Zoom in terms of their progress with their phone product and your selling? Are you seeing much traction with Live?

Progress with their with their phone product and you're selling opportunity or are you seeing much traction with lives there.

Shabtai Atlasberg: Well, we do continue to work with Zoom. We have enjoyed, you know, a few opportunities, but at this stage, I would not say that we believe Zoom will become a growth engine for us in the UK space. All right, I'll pass it.

Well, we do continue to work with whom we have enjoyed you know a few opportunities but at this stage I would not say that though we believe zoom will become a growth engine for us instead of your cost base.

Alright, I'll pass it on thank you. Thank you.

Shabtai Atlasberg: Thank you very much. Summit, your life. Hey guys, this is Billy Fitzsimmons on for Samad.

Sure. Thank you very much.

Next question is coming from Samad Samana from Jefferies. Your line is live.

Hey, guys. This is belief at citizens on for some odd maybe backing up and taking a higher level view here can you guys remind us what your what youre seeing on the macro front, how did things like lead times and close rates evolve over the course of 2023 and do they get better or worse in the fourth quarter any customer verticals looking for.

Billy Fitzsimmons: Maybe backing up and taking a higher level view here. Can you guys remind us what you're seeing on the macro front? How did things like lead times and close rates evolve over the course of 2023? And did they get better or worse in the fourth quarter?

Shabtai Atlasberg: Any customer verticals looking particularly strong or weak at this point? And then I want to double-click on what's kind of assumed a macro in terms of the 2024 gap. Right. Actually, it's a great question for CEOs and CFOs. 2024 is still kind of foggy, and we have not seen any dramatic change from the end of 2023. We've seen good trends, as I've mentioned before. Q4 was strong, but it's the last quarter of a year, so that's kind of expected.

Particularly strong or weak at this point.

And then I wanted to double click on what what's kind of assumed on macro in terms of the 'twenty 'twenty four guide.

Right actually it's great question with Ceos and Cfos you know our 2024 is still you know kind of foggy, we've not seen any any dramatic change from the end of 2020.

We've seen you know good pipeline as I've mentioned before Q4 was strong.

It's a you know the last quarter in a year. So that's kind of expected. So no change at this stage, it's hard to make a call as to you know what our 2024 will be a substantial.

Shabtai Atlasberg: So, no change. At this stage, it's hard to make a call as to whether 2024 will be substantially better or worse than 2023. But all in all, I think for us as a company, you know, while we have put aside the whole issue of service providers, which has impacted our operations early 2023, we're glad to focus on Contact Center, which is growing, Conversational AI, which is very fast growing these days, other opportunities, and also UCATS, which again, we believe that Conversational AI will contribute to the growth of our business. So all in all, we believe that I got it.

Substantially better or better than 2023, but all in all I think you know for us as a company you know while we have put aside the whole issue of service providers, which has impacted our operations early 2023, well glad to focus on contact center, which is.

Growing conversational AI, which is a very fast growing these days the other pumps.

And then also your.

Your cats, which again, we believe that conversational AI will contribute.

The growth of our business. So all in all you believe enterprise space will be good than not.

No other indications at this stage.

Shabtai Atlasberg: And then it's probably still early, but on the strong conversational AI bookings demand, can you relay some of the initial feedback? See and hear from customers, any color on the initial, and how should we think about the materialization of that offering on the revenue line going forward? We live in a world where, on the one end, there are some very strong, big technology providers such as Microsoft, Google, and AWS on the other end; so, lots of technology out there in the cloud. On the other end, you have every successful enterprise company adopting fast AI to improve its operational productivity. So in the middle, you need solutions that will tunnel the AI to those end users. Usually, that's done by applications. You can take Copilot, you can take Salesforce, you can take other known Google applications, but then there are specific implementations that require a combination of a lot of those technologies.

Got it and then it's probably still early but on the strong conversational AI bookings demand can you relay. Some of the initial feedback you are seeing and hearing from customers any color on the initial wins and how should we think about the materialization of that that that offering it on the revenue line going forward.

Right. So so we do focus again I mean, we live in a World War on one hand, there are you know some very strong big you know technology providers such as Microsoft.

And in an AWS and want it so well.

Lots of technology out there in the cloud on the yards aren't you have every company every successful enterprise company.

No adopting fast you know AI to improve its you know operation productivity. So into me, though you need solutions that will kind of D. A.

Gear to those end users usually that's done by applications such as you know you can take copilot, which you can take salesforce. It can take other unknown Google application, but then there are you know specific.

Implementation, which require the combination of.

A lot of those technologies. So give you. An example, we have implemented.

Shabtai Atlasberg: So I'll give you an example. We have implemented a very important solution for an emergency service that needs to pick up. Calls in real time to record them and transcribe them, derive insights from them, and act on them......apply information, and then display and send alerts. You're basically talking here about a new breed of applications that will be AI-first enabled, and which combine a lot of areas including telephony, networking, and cognitive services. This is where we shine when we combine all of these technologies that we have developed over the years. These days, with hostility everywhere in the world, there's an increased need to understand what's being said, where, for what purpose, and act upon it. That is a rising application in many areas, and that is something that S-Budget is for. Those are the types of solutions that we see currently.

A very.

Important solution for a a an emergency service that needs to pick up.

Calls in real time, you know record them.

Transcribe them derive insights from them and act upon apply automation on top of it and display and sent there Larry so.

You basically it definitely hear about the new breed of applications that will be a first enabled.

And which combined a lot of areas, including telephony networking and cognitive services.

And this is where we shine when you bring a combination of all of these technologies that we have developed around three years right. There's another you know these days with austerity everywhere in the world because the needs increase needs to understand you know what's.

Being said were for what purpose and act upon it.

The rising application in many areas.

And that is something that as budgets for so those are the type of solution.

Evolution that we see currently.

Perfect. Thanks, guys.

Shabtai Atlasberg: Perfect. Thanks, guys. Thank you very much. We are here to have reached the end of our conversation. I want to, Thank you, operator. I would like to thank everyone who attended our conference call today. On the heels of recovery in our business in the second half of 2023, we have high confidence in our ability to successfully expand our business in 2024 and the years ahead. We look forward to your participation in our next quality conference call. Thank you very much. Have a nice day. Thank you very much, everyone. Thank you.

Thank you very much.

We appear to have reached the end of our question and answer session I will now hand, it back over to Shanghai for any closing comments.

Thank you operator, I would like to thank everyone, who attended our conference call today.

So for recovery in our business in the second half of 2023, we have high confidence in our ability to successfully expand our business in 2024 and following years, we look forward to your participation in our next quarterly conference call. Thank you very much have a nice day.

Right.

Thank you very much everyone. 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.