Q3 2024 AudioCodes Ltd Earnings Call
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Speaker Change: Greetings welcome to audio codes third quarter 2024 earnings conference call.
At this time all participants are in a listen only mode.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker Change: Please note. This conference is being recorded I will now turn the conference over to your host Roger to Chin Vice President of Investor Relations you may begin.
Speaker Change: Thank you operator hosting the call today are <unk>, President and Chief Executive Officer, and neuron, Bruce Vice President of Finance and Chief Financial Officer.
Speaker Change: 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.
Speaker Change: 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 effects of global economic conditions in general and conditions in audio coach industry and target markets in particular.
Speaker Change: Shifts in supply and demand market acceptance of new products and the demand for existing products the impact of competitive products and pricing on audio codes and its customers products and markets timely product and technology development upgrades and the ability to manage changes in market conditions as needed possible need for additional financing the ability to satisfy covenants in the.
Speaker Change: Companys loan agreements possible disruptions from acquisitions the ability of body goes to successfully integrate the products and operations of acquired companies into audio goes business possible adverse impact of the COVID-19 pandemic on our business and results of operations the effects of the current terrorist attacks by Hamas and the war in hostilities between Israel, and Hamas and Israel.
Speaker Change: As well as the possibility that this could develop into a broader regional conflict involving Israel with other parties may affect our operations and may limit our ability to produce and sell our solutions any disruption in our operations by the obligations of our personnel to perform military service as a result of current or future military actions involving Israel and other factors detailed in Audi coats.
Speaker Change: With the U S Securities and Exchange Commission olive towards assumes no obligation to update this information. In addition, during the call audio codes refer to non-GAAP net income and net income per share.
Speaker Change: That's 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 them Ashwin I like to remind everyone that this call is being recorded an archived webcast will be made available on the investor Relations section of the company's website at the conclusion of the call.
Speaker Change: With all that said I would like to turn the call over to the shop that subtype. Please go ahead.
Speaker Change: Thank you Roger good morning, or good afternoon, everybody I would like to welcome all to our third quarter 2024 Conference call with me. This morning is Neil envelope, Chief Financial Officer, and Vice President of Finance the fuzzy codes.
Iran: Iran would start off by presenting a financial overview of the core I will then review the business highlights and summary for the quarter and discuss trends and developments in our business and industry. We will then turn it into the Q&A session.
Speaker Change: Ron.
Speaker Change: Okay.
Speaker Change: Okay.
Ron: Thank you, Sean and Hello, everyone.
Ron: Before I start my formal remarks, I would like to remind everyone that in conjunction with our earnings release. This morning, We will post shortly on our Investor relations website, earning supplemental deck.
Speaker Change: On today's call, we will be referring to both GAAP and non-GAAP financial results.
Speaker Change: 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.
Speaker Change: We will be comparing our third quarter of 2024 results to the to the prior quarter as we believe it provides a better gauge of our financial performance.
Speaker Change: Revenues for the third quarter were $60 2 million a decrease of 0.1% over the 63 million reported in the second quarter of the current year.
Speaker Change: Services revenues for the third quarter were $32 5 million, an increase of one 7% over the 32 million reported in the second quarter of the current tier services revenues in the third quarter accounted for 54% of total revenues.
Speaker Change: The amount of deferred revenues as of September 32024 was seven.
Speaker Change: $78 6 million compared to 18 million as of June 30, 'twenty 'twenty four.
Speaker Change: Revenues by geographical region for the quarter was split as follows North America, 47%, EMEA, 33% Asia Pacific, 13% in Central and Latin America, 7%.
Speaker Change: Our top 15 customers represented an aggregate of 56% of our revenues in the third quarter of which 39% was attributed to our 10 largest distributors.
Speaker Change: GAAP results are as follows gross margin for the quarter was 65, 2% compared to 65, 5% in Q2 'twenty plentiful.
Speaker Change: Operating income for the third quarter was $4 9 million or eight 1% of revenues compared to operating income of $4 9 million or eight 2% of revenues in Q2, 'twenty 'twenty four.
Speaker Change: That'd be down for the quarter was five points.
Speaker Change: Compared to EBITDA of $6 2 million for Q2 2024.
Speaker Change: Net income for the quarter was $2 7 million or nine cents per diluted share compared to net income of $3 8 million or 12 cents per diluted share for Q2 2024.
Speaker Change: non-GAAP results are as follows.
Speaker Change: non-GAAP gross margin for the quarter was 65, 6% compared to 65, 8% in Q2 'twenty 'twenty four.
Speaker Change: non-GAAP operating income for the quarter towards the third quarter was 7 million or 11, 7% of revenues compared to $7 2 million or 11, 9% of revenues in Q2, 'twenty 'twenty four.
Speaker Change: non-GAAP EBITDA for the quarter was seven 9 million compared to non-GAAP EBITDA of $8 3 million for Q2, 'twenty 'twenty four.
Speaker Change: non-GAAP net income for the third quarter was $4 9 billion or 16 cents per diluted share compared to $5 5 million or 18 cents per diluted share in Q2, 'twenty 'twenty four.
Speaker Change: At the end of the September 'twenty 'twenty, four cash cash equivalents bank deposits marketable securities and financial investment lengths totaled $88 4 million.
Speaker Change: Net cash provided by operating activities was seven 9 million for the third quarter 'twenty plenty of plenty plenty for.
Speaker Change: Day sales outstanding as of September 30, bringing 24, where Honda than 12 days.
Speaker Change: In July 'twenty 'twenty four we received court approval in Israel to purchase up to an aggregate amount of $20 million of additional ordinary shares.
Speaker Change: The approval also permits us to declare a dividend of any part of the same on the approval is valid through January 1st 2025.
Speaker Change: On July 30, 'twenty 'twenty four we declared a cash dividend of 18 cents per share the aggregate amount of the dividend was approximately $5 4 million on the dividend was paid on August 29th plenty plenty floor to our shareholders of record at the close of trading of August 15 2024.
Speaker Change: During the quarter, we acquired 333000, so following ordinary shares for total consideration of approximately 3.6 million.
Speaker Change: We reiterate our guidance for revenues for 'twenty 'twenty, four 2 billion to a range of 240 million to 250 million and.
Speaker Change: And non-GAAP EBITDA in the range of 33 million to 39 million.
Speaker Change: I will now turn the call back over to Shanghai.
Shanghai: Thank you and then Aaron I'm pleased to report successful execution against our strategic priorities in the quarter.
Speaker Change: We continue our journey to transform the company to a ucas and seek S cloud software and services company, who performed as expected and are keeping a separations related to Voip networking and connectivity and we're able to make substantial progress on our efforts to advance our main growths.
Speaker Change: The conversational AI business in our key business area third quarter, Microsoft business grew 8% sequentially highlighted by steady growth in North America and in the region Micros.
Speaker Change: Microsoft EMS business in the third quarter was up nine 2% sequentially well services business kept evolving in the third quarter third quarter services revenue grew six 4% year over year and accounted for 54% of revenues the highest on record for us feeling the strength.
Speaker Change: Our services revenue stream, so primary growth engine, while I've managed services and conversational AI, specifically lives teams business grew 21% year over year and accounted for 44% of total Microsoft business compares to adjust certain.
Speaker Change: 7% a year ago also our success in building live minutes services and recurring revenue stream that's translated to.
Speaker Change: Strong year over year annual recurring revenue growth of 40%, adding third core at 60 million annual recurring revenue up from 48 million exiting 2023.
Speaker Change: This success is owed to the trust we have built throughout the years with partners and enterprise customers the voice services space.
Speaker Change: There's no better proof than our long term standing multiyear partnership with AT&T, you North America, leveraging our expertise in providing secure voice connectivity to help their business customers on board to Microsoft teams. This truthful partnership has contributed multimillion.
Speaker Change: Annual recurring revenues over the last several years.
Speaker Change: And then underscoring growth you know a lot of business is the growth of backlog of the contract signed.
Speaker Change: We ended third quarter with 24 was alive.
Speaker Change: And minutes services backlog at 67 million as compared to just 27 million in the year ago quarter. This represents close to 150 year over year growth, which bodes well for a strong stream of revenues in coming years. If that's once we're combining the growth in backlog of lives.
Speaker Change: This was a record as recognized revenue for the third quarter, we get a very positive result for the quarter and outlook going forward.
Speaker Change: On conversational AI.
Speaker Change: Seth core a dollar value of contract signed in crude roughly 50% versus the year ago period speaking golf conversational AI strung up with operational momentum continues.
Speaker Change: <unk> by long term tailwind of infusing AI into UC and CX workflows in customers' growing demand to drive ongoing productivity gains.
Lee: Lee we have seen significant pick up in pipeline activities across our entire conversational AI suites, including broker T. A C or a first CX solution for Microsoft teams first recording solutions, such as making insights and interaction recording and voice that connect just as we did in.
Speaker Change: 2023, we are investing into 2024 and this new growth engine for US this year revenue will.
Lee: Grow above 30, 40% and we'll cross the for the first time to 10 meter level.
Lee: S. We are in an investment mode. In this conversational AI business, we already Kieran glasses in that specific line about 9 million in 2023 and they're all in the same figure in 2020 for glad.
Lee: I'm glad to say that the investments are already showing good potential and results and substantial growth with the number of business voice projects an application for you Catherine C gas markets image.
Lee: Overall, we delivered on our business priorities in the quarter was the strength in our life business reinforcing the house the overall pipeline for our major practice, such as Microsoft business see accent conversational AI, we believe that this bodes well for a thing improve top line growth performance.
Lee: As we head into 2025 and beyond.
Lee: Let me discuss some of the notable wins in the quarter. The first one relates to a multinational bank that added both or connectivity gear of the last several years to deliver a UC and CX does there over 30 country operations operating with a tight budget and managing complex IP infrastructure.
Lee: With the needs to meet service level expectations. The company prefer to move with us to share its subscription service model in live capital spending we are one of the many RFP respondents issued.
Lee: 12 months ago. Among this war some of several of the world's largest global system integrators I want to make mention names, we wanted mainly due to our long.
Lee: Standing relationship and goodwill built with the customer as well as the trust in the quality of our solutions. They missed their contract signed with total contract value in the low seven figures range over multiple years for voice infrastructure management. This win demonstrates our success in transitioning from.
Lee: A point product solution player to a trusted vendor of mission critical services.
Lee: You see see excellent activity and leveraging that to successfully cross sell aren't going to recession lab portfolio.
Lee: And then another opportunity we signed a 36 month contract with a multinational industrial equipment dealer, providing life bra manage gateway and device as a service in North America and the U K. Its initial phase of a broader multi quarter global Kims voice rollout.
Lee: Third when we signed the contract with a foreign government, putting volcker see I see.
Lee: To be in the pole position to be the de facto theme space C gas platform as the legacy CX contracts with various government agencies came up for renewal.
Lee: These examples are a testimonial to the success of our land and expense strategy well, we follow suit on our connectivity services business with our new growing portfolio of voice application part by Jenny I enact cabela's capabilities the potential for Upselling. These same accounts is a big potential for food.
Lee: Or business growth.
Lee: Before turning to a detailed business line discussion, let's quickly shift to the third quarter of profitability metrics. Our non-GAAP gross margin of course came at 65, 6% was in the 65 to 68 long term range plan.
Lee: Plans for the business and compare it to last score levels of 65, 8% third quarter non-GAAP Opex was $32 5 million in line with second quarter levels and higher than our initial budget planning for the year key factor in maintaining your larger budgets.
Lee: It relates to the initial success, we're enjoying are evolving, especially a business and the need to support larger investment and growing number of projects in this space.
Lee: Before current conversation of activity, which I'll cover in the following we intend to announce two new solutions in coming weeks and months.
Lee: Regarding edge count we ended the second quarter or was that kind of 935 full time employees down from 940 employees.
Lee: Second quarter and compared to 938 employees in the first quarter of 2023.
Lee: Third quarter, adjusted EBITDA of $7 9 million or 13.1% margin compares to last quarter, 11th of $8 3 million or 13 points, 8% again, all as a result of our investment in growing our conversational AI business, which should present nice return on.
Lee: <unk> already in 2025.
Lee: Net cash provided by operating activities was seven 9 million, which alludes to our house the nature of the business.
Lee: Now to our Microsoft business, our third quarter, Microsoft business grew 8% sequentially.
Lee: <unk> very steady growth in North America, and deduct region insurance to Foster a district business line, Microsoft Tim's business in the third quarter. It was up nine 2% sequentially well in line with our planning recurring themes live business grew 21, 4% year over year accounting now to 45%.
Lee: This team's business compared to just 37% in the year ago quarter.
Lee: Five minutes services and recurring revenue stream.
Lee: Related to strong year over year annual recurring revenue growth of 40% and then third quarter is 60 million are up from 48 million exiting 2023 at the same time Capex base business was down 12, 7% in the core accounting now for 56.
Lee: <unk> business again, that's compared to over 63% in the year ago quarter. So with the continued focus on live games to recurring business and declining Capex themes business, we expect to see a return to growth of double digit Microsoft business in coming years.
Lee: Importantly, our pipeline of greatest opportunity remains robust up 12% sequentially and 19% year over year, which bodes well for continued growth in this Microsoft ecosystem with just over 20 minutes seems phone PSA and uses a fraction of what.
Lee: 320 million monthly active users today, we believe there is long runaway for teams voice adoption in our life business side of us what could further spur adoption of teams on incoming gears is there isn't working in cooperation with Microsoft Co pilot and G&A I features supporting.
Lee: Microsoft teams phone system and as a result, a rising demand for the life business.
Lee: Another important trend in the UK market any of the Microsoft teams phone space.
Lee: As the emerging search for a business supposed to application. It may provide added value. Its applications include among others contact center applications recording applications analytics application and CRM integration, all representing upsell opportunities for us According to a Saturday.
Lee: Published by research from the demand for value added services is bound to grow substantially in coming years, which will further support our land and expand strategy for the Microsoft teams segments.
Lee: Now moving to see acts third quarter 2024, it's been this grew 4.4%.
Lee: By continued steady growth in North America, and ongoing strength in life CX in terms of booking for line six.
Lee: We grew above 100% from 2022 to 2023 and now we expect to grow another 30% to 40% and 24 compared to 23, the strong momentum in life CX is driven by secular trends of large enterprises embarking on their cloud migration journey.
Lee: Given the complexity associated with migrating from legacy system and the mission critical nature of the contract Center infrastructure. These enterprises are increasingly turning to trusts managed service provider like as it goes to support them in this endeavor.
Lee: It's directly a large majority of our lives sex contracts wins arose from direct sales contribution we have been working diligently to develop this channel to help us better scale and loves CX I'm glad to report that these efforts are paying off for example over the past several years, we have been working closely with a partner.
Lee: In the color region on multiple projects totaling over $8 million in contract signing we're now in a process to add additional partners in the near future.
Lee: Okay.
Lee: Now to come to recessionary, I conversational AI circle or a dollar value of contract signing in cruise is roughly 50% versus the year ago period. The strong operational momentum is it shows the boost to the long term tailwind of infusing AI into UCC acts workflows and customers.
Lee: Rising demand to drive ongoing productivity gains as enterprises increasingly look to do more with the <unk>.
Lee: Find out the amount of resources is exhausted us core we expect conversational AI to be our second major long term grow Spiro meriting the disproportionate amount of our R&D resources. We are now investing into this business line.
Lee: Let me walk you through some highlights of the individual business lines with the conversation with a a portfolio.
Lee: First of all I see I see representing this the fruits of this R&D investment is like a C. A C or a first steam 75 country contact center platform leveraging our teams voice dominance in the UC World and it's the secular trend of UCC ex convergence.
Lee: Just to give you some idea about the growth we are experiencing when looking at the combined.
Lee: Revenue from <unk> for the first Street course in the year, we grew above 50% in 2024 campaign compared to 2023 growing substantially and number of bookings with regards to our activities in the book I see I see activity in the third quarter, we want a contract with the government.
Lee: Office in West Europe, replacing an on Prem leading legacy on Prem vendor book I see I see was selected as the go to seek us solution for the entire group of the government of the country.
Lee: Following the on boarding of University of Central Florida, The second largest university in the U S.
Lee: 'twenty three we continued to show good momentum in the Education, North America space with six universities signed in total out of which four signed during 2024 so far.
Lee: So we see some oh very nice growing pipeline are we see growth so far north of 130% year over year in the number of the greatest opportunities and we're so close to 200 growth in pipeline.
Lee: Our Mt.
Lee: With the release of the callback capability for that product work I see I see if rich full feature parity with virtually any fully fledged contact center solution.
Lee: Is centered around the voice, we believe that with the feature parity, Iran voice combined with our capabilities of conversational AI and Omnichannel sits.
Lee: Situations that place us in the leading back of the TMC Caf space and the Microsoft environment.
Lee: Moving onto meeting insights, we have now a mature and stable product. The product has been launched in March of this year, we've deployed the product in seven countries, so far and now adding gains for square.
Lee: The three countries first operation are already active in Israel U S and U K and we have launched MEO in Europe in September of this year with full countries, Germany, France, Italy, and Netherlands in October we launched support for zoom meetings. In addition.
Lee: Through the support for the Microsoft teams meetings.
Lee: We intend to make the application you cats Ignostic and support all of the major U S application, including Cisco Webex and Google meet now.
Lee: More than we have now in product in they're running more than 100 proof of concepts.
Lee: About two thirds are already paying customers and planning to on board a few more tensed accounting fourth quarter at 24.
Lee: Just to give you some highlights in the third quarter. We grew 50% in terms of number of meetings. We grew 50% sequentially. So that's represents huge growth mainly due to the fact that we are using a generous T V. I in a major way to provide value to our customers.
Lee: With active users we have grown substantially in a number of few of those are more than 40% among others.
Lee: So to wrap up my presentation, we have made good progress in the quarter on our long term objective to transform into a cloud software and services company with increasing mix of recurring revenues.
Lee: Through fostering growth so far two primary or engines or life family of managed services and conversational AI.
Lee: With the progress, we're making in increasing our recurring revenues and it was alive nearing half Microsoft teams bookings. We believe we have laid the foundation to support sustainable and athletes topline and margin expansion over the long term.
Lee: I'll turn the call now back to the operator.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: This time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Lee: You May press Star two if you would like to remove your question from the queue.
Lee: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Lee: One moment, please while we poll for questions.
Speaker Change: Your first question for today is from Ryan Macwilliams with Barclays.
Damon: Hey, guys. This is Damon.
Damon: Thanks, Dan the question just curious how your customers are thinking about AI investments for next year.
Damon: Budgets for next year generally getting healthier in your conversations.
Lee: Yeah well.
Lee: As I've mentioned and you know in my President and we see increased interest.
Lee: Interest in demand we have now actually we have to go to markets. One which is you know our SASSA application, including Vogue C. A C meeting insights we have smart app, which is a compliance recorder, we will announce a very interesting new product in coming weeks.
Lee: And on the other side, we have projects because in the AI space when you're talking about implementing a solution usually you face in.
Lee: Increasing demand for customization.
Lee: Connectors to a project management utility applications.
Lee: Curious to the CRM.
Lee: And a few more and as such you know, we definitely see huge huge uptick in in.
Lee: Many areas one area, that's very active as the government space. So yes, there's a lot of interesting in a solution for that space.
Speaker Change: Got it thanks, Jeff Die and then how should we think about growth of product and service revenue in <unk> and 'twenty five it seems like audio codes is making shy to become a cloud software and services company first so just curious how we should think about the revenue breakdown in the near term.
Speaker Change: Right. So you know I've been speaking mainly about the growth in our key lines, which are alive services in conversational AI or however, you know of the face at the same time, we're facing you know two to this to kind of I would say restraint rooster.
Speaker Change: <unk> got factors. One is you know, it's a girl with with live services, we witness drop in Capex in you know perpetual sales of teams.
Speaker Change: So that is kind of impacting or having some some hum.
Lee: Layer on top of our growth. So that that is goes you know there's a I would say the muted growth you're seeing right now we believe that this life life now is about 44% of revenues and in Capex is about 56. So as we move forward with you know another out three or four of course all of this.
Speaker Change: Picture will reverse and therefore, you know lives life has grown 20% in the core meaning that S week cross that part in three or four of course, you'll start to see nice growth and actually I expect you know in 2020 six to see Microsoft business grows. So that's on that the other factor of that.
Speaker Change: Impacts our revenues, but less this score actually is the decline of the legacy gateway and SBC business, which usually we face it dropped mainly from the fourth score. So the first one in the inner ear and then you know and this was the phenomenon also in the third quarter.
Speaker Change: It <unk> the year, we see slightly you know uptick in that business. So.
Speaker Change: Just to give you some idea about the you know in moving from 'twenty two to 'twenty three.
Speaker Change: You know we were hit by 15 million drop.
Speaker Change: I think we will end up.
Speaker Change: 24, with another I would say 10 11 million drop I expect the speaker again too.
Speaker Change: The visibility and twenty-five but now you know probably somewhere between five and 10, which means that you know the impact of that decline of legacy will be substantially weaker. So those are the trends you know an honest with nicely growing business in live and conversational AI and we still you know.
Speaker Change: Suffering from you know.
Speaker Change: Lining up some legacy business, both connectivity and.
Speaker Change: Teams Capex.
Speaker Change: Got it thanks guys.
Speaker Change: Your next question for today is from Ryan Koontz with Needham and company.
Ryan Koontz: A question here.
Ryan Koontz: You know with the kind of saw in topline as you talked about here this transformation from license to subscription.
Ryan Koontz: So what what what Kpis are you using internally to detract a you.
Ryan Koontz: The continued momentum there in your subscription bookings are a preferred.
Ryan Koontz: <unk> business are you looking at that bookings can you reflect on those or maybe RPE or air or any any other kpis that you have an eye on that might.
Ryan Koontz: Might shed a light on.
Speaker Change: On that subscription business. Thanks.
Speaker Change: Right. So yeah actually with few such Kpis as you have mentioned the most important for us.
Speaker Change: Uh Huh the monthly recurring revenue and then.
Speaker Change: The annual recurring revenue, which at the end of the day translate into the revenue we.
Speaker Change: Recognize and report so that's one K P. I the other one by the way which is for me even more important is the bookings because obviously if you just take a you know analogy from let's say the semiconductor business talk about book to Bill.
Speaker Change: Our book to Bill on booking versus recognition is substantially higher so we definitely track a booking gets I've mentioned on the call. You know backlog now is that the six to 7 million versus 27 million a year ago. So we have a steady flow of bookings of about.
Speaker Change: You know $15 million a quarter and that's debt that's what really drives the business I mean, we you know all of the Air Force So really.
Speaker Change: Pointing towards increasing bookings and even in a cup of fashion for off White Salesforce. You know bookings is very meaningful you know side by side of course, we are meeting their revenues are targets.
Speaker Change: Great.
Speaker Change: Composition of that backlog as it is is that dominantly your subscription contracts or are there.
Speaker Change: Substantial piece of Oh.
Speaker Change: License maintenance and that backlog.
Speaker Change: Yeah. The majority of it if it relates to a Microsoft teams managed services.
Speaker Change: Which is a very sound business actually we see some acceleration I mean, we all know that the U K industry as it has been growing faster than previous years and now it seems to take a a lighter trend but.
Speaker Change: Let's not forget when whenever we report about to win.
Speaker Change: We basically when you're talking about large companies you know thousands of seats or 10 thousands of seats. They usual contract. You know initial contract is for you know hum hundreds and a few thousands. So it means that you have mentioned you know right now the same spaces trend in 20 million seems fone is Oh P. S N.
Speaker Change: It is just 20 minutes. So there's huge runaway ahead of us and therefore, you know I believe that you know.
Speaker Change: Have you know a space that could range 10, and 20 years, you know, it's a gradual move and let's not forget that you know the self spending you know in 'twenty three 'twenty four due to the economical crisis. So I don't know that we're very optimistic that you know just we.
Speaker Change: No.
Speaker Change: The growing live lines, you know outpacing the declining Capex line, you know you you'll see us growing in revenues.
Speaker Change: Great and one follow up if I could around.
Speaker Change: What you're seeing in the CX market, maybe with renewals are you seeing any seat pressures in these renewals in terms of more productivity from agents around around AI for USB C's there at all.
Speaker Change: No no I think you know, we see fairly stable and steady market for US no no. We don't see any kind of pressure at this stage.
Speaker Change: Got it alright, thanks, that's all I got.
Speaker Change: Sure.
Speaker Change: Your next question for today is from Samad Samana with Jefferies.
Speaker Change: Hey, guys. This is actually the only fitzsimmons on for some odd <expletive> I'm, telling you you expressed confidence in the Microsoft business returning to double digit growth next year, just to just to double click on that can you expand on what gives you confidence there and kind of what you're seeing in your pipeline. It sounds like the pipeline there for a kind of a.
Speaker Change: The biggest opportunities if I'm understanding correctly is up 12% sequentially and 19% over a year.
Speaker Change: Year over year can you just breakdown you know.
Speaker Change: Who those customers are maybe maybe how we should think about pipeline versus maybe what occurred in the third quarter.
Speaker Change: Yeah, so well.
Speaker Change: Well, we actually you know in the life business, we released two to the U S largest enterprises and you know we cannot quote names samad.
Speaker Change: Some are public I mean, now you know I've mentioned for the CX space of Michigan University of Florida that was close to them you know the value contract with.
Speaker Change: Several such.
Speaker Change: The thing gets us photos.
Speaker Change: Maybe I should repeat them you know the numbers.
Speaker Change: Alive is now is now 44.
Speaker Change: <unk> of business, but growing 21%.
Speaker Change: Capex is now a 56%, but declining 12% so that those trends will continue and when it will just cross over and and you know growing our lives will take over that that is the source of confidence I know you know our ability to come back to that.
Speaker Change: <unk> digit growth I'm not sure that there's going to be seen already in 'twenty five, but you'll see Oh, you know the continued improvement in and I'm confident that in 'twenty six we would definitely we will see double digit growth in Microsoft business.
Speaker Change: Got it that's helpful. And then if I can ask another one we talked about this a little bit during the prepared remarks, but can you just give us some anecdotes of customer wins with conversational AI, what did customers like about your product and for what region reason or are they purchasing your product there over over competitors.
Speaker Change: Oh, okay well.
Speaker Change: Great. So are our solution is is is quite unique in the sense that it is an organizational solution. Now there are a few you know no takers in the market. You know you know the names. So you can take whatever you can take a bummer you can take Firefly a few more names all our you know.
Speaker Change: Personal you know productivity no takers. So you know the person would use that the application for himself, but but that's about it.
Speaker Change: Our product really touches and enterprise that can give you articles as an example, we have close to 1000 employees. We have daily 400 of those employees using meeting insights for meetings.
Speaker Change: And they use us for various reason you know take pharma.
Speaker Change: We all heard about fear of missing out right, but was meeting he said theres no falling anymore. Because any meeting goes do you have missed you have full access to it you can listen to the call you can identify exactly what was said who said what it's being summarized it can be shared okay. It does give you. An example last week Thursday.
Speaker Change: I had a call with a large European a system integrator and with just one sales person on the line as we completed the call you know and you know to get and you know it.
Speaker Change: Person I talked to was interested in in moving on in the discussion I. These forward that meeting to five of my colleagues want in the sales Department one in the business. One is the partners and they all know could understand exactly what was the essence of my discussion was that you know system integrator man.
Speaker Change: So that's just one example think about you know knowledge retention you know one of your best employees. You know Unfortunately. It tells you is living it no in order to replace them unit, you know just to get somebody into either choose the.
Speaker Change: The tide.
Speaker Change: Not if you would have add meeting each site S. A tool that's used daily and all of these you know guy.
Speaker Change: Calls and meetings were recorded throughout the past two or three years, so any any new guy coming out on the job you know it's capable of you know fairly you know get up quickly to the knowledge and experience that the other guy ads before them and I can give you now at least you know 20 different application.
Speaker Change: So it's being using municipalities its being used in health organization, it's being used in defense of our organization.
Speaker Change: Our belief that in two years from today you know most of the companies. We know we'll use it I mean, it just like you know justice to use outlook for messages and you don't read them, all but you get to that message you need when you need it the same would be with the customer I know project kind of a product okay. Yeah. It's all of those.
Speaker Change: Meeting going to be recording is that going to be placing two of your oppose it already within the company and whenever you now suppose we have now a new project with let's say a Siemens so all I need to do is you know we have in a natural language reason application, which will allow us to identify those meetings in the past III.
Speaker Change: It was six months or 12 months, that's occurred with Siemens being mentioned and the group of managers that they have to deal with the subject in and provide a solution that will immediately be able to.
Speaker Change: You know core are using either co pilots or I know, the chatbot and get responses.
Speaker Change: Plenty of use cases, and and we are up by at this stage you know probably one of the best you know organizational that's the main difference between us and the other guys and even with that when you compare it to Cisco I'm sorry to Microsoft.
Speaker Change: Stream, that's exactly the case, we all they all do call summarization, but not much beyond that we do all of the organizational work that ups you you know get the most relevant information.
Speaker Change: Helpful. Thank you very much.
Speaker Change: Sure.
Speaker Change: We have reached the end of our question and answer session and I will now turn the call over to Guy for closing remarks.
Guy: Okay. Thank you operator, I would like to thank everyone, who attended our conference call today.
Speaker Change: With continued good business momentum in our enterprise operation and good underlying market growth trends and you Kathy gifts and C. I. We believe we are transitioning the business towards growth and growing profitability in coming years, we look forward to your participation in our next quarterly conference call. Thank you all have a nice day.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.