AudioCodes Reports Second Quarter 2010 Financial Results

LOD, Israel, July 28, 2010 (GLOBE NEWSWIRE) -- AudioCodes Ltd. (Nasdaq:AUDC), a leading provider of Voice over IP (VoIP) technologies and Voice Network products, today announced financial results for the second quarter 2010, ended June 30, 2010.

Revenues for the second quarter 2010 were $36.5 million compared to $34.8 million for the first quarter of 2010 and $30.4 million for the second quarter of 2009.

Net income in accordance with U.S. generally accepted accounting principles (GAAP) was $2.1 million, or $0.05 per share, for the second quarter of 2010 compared to GAAP net income of $1.7 million, or $0.04 per share, for the first quarter of 2010, and a GAAP net loss of $1.1 million, or ($0.03) per share, for the second quarter of 2009.

Non-GAAP net income for the second quarter of 2010 was $2.8 million, or $0.07 per diluted share, compared to $2.5 million, or $0.06 per diluted share, for the first quarter of 2010 and $614,000, or $0.02 per diluted share, for the second quarter of 2009.

Non-GAAP net income excludes (i) stock-based compensation expenses, (ii) amortization expenses related to intangible assets, and (iii) an adjustment to expenses related to the Company's Senior Convertible Notes due to implementation of FASB Staff Position APB 14-1. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.

During the second quarter of 2010, AudioCodes generated $1.6 million in cash from operating activities compared to $3.4 million in the second quarter of 2009.

Cash and cash equivalents, short-term and long-term deposits and short-term marketable securities were $54.5 million as of June 30, 2010, compared to $54.7 million as of March 31, 2010 and $114.9 million as of June 30, 2009. The year-over-year decline in this amount was attributable to the repurchase of approximately $73.1 million in principal amount of the Company's Senior Convertible Notes in the fourth quarter of 2009, offset, in part, by cash provided by operating activities.

"We are pleased to report another sequential quarter of growing revenues and earnings. The strength of our second quarter 2010 financial results were highlighted by double-digit year-over-year top line growth, a 22.2 percent improvement in GAAP net income compared to the first quarter of 2010 and continued positive cash flows from operations. Building on our efforts in past quarters, our focus on partnering with world leading solution partners and continued investment in growing our global network of value add resellers is proving itself," said Shabtai Adlersberg, Chairman of the Board, President and CEO of AudioCodes. "While we generally enjoyed good industry activity across our core networking business, we also experienced increased activity in the Mobile VoIP area and in SIP Trunking and Session Border Controller applications for the enterprise market segment where we achieved more wins and success compared to previous quarters. These market activities are expanding our addressable markets and should support continued growth in 2010 and beyond," concluded Shabtai Adlersberg.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 9:00 A.M., Eastern Time on July 28, 2010 to discuss the Company's second quarter 2010 operating and financial results. The conference call will be simultaneously Web cast. Investors are invited to listen to the call live via Web cast at the AudioCodes corporate website at www.audiocodes.com

About AudioCodes

AudioCodes Ltd. (Nasdaq:AUDC) designs, develops and sells advanced Voice over IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises. AudioCodes is a VoIP technology market leader focused on converged VoIP & data communications and its products are deployed globally in Broadband, Mobile, Cable, and Enterprise networks. The company provides a range of innovative, cost-effective products including Media Gateways, Multi-Service Business Gateways, Session Border Controllers (SBC), Residential Gateways, IP Phones, Media Servers and Value Added Applications. AudioCodes' underlying technology, VoIPerfectHD™, relies on AudioCodes' leadership in DSP, voice coding and voice processing technologies. AudioCodes High Definition (HD) VoIP technologies and products provide enhanced intelligibility and a better end user communication experience in Voice communications. For more information on AudioCodes, visit http://www.audiocodes.com

Statements concerning AudioCodes' business outlook or future economic performance; product introductions and 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 that term is defined under U.S. Federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions in AudioCodes' industry and target markets in particular; the ability of AudioCodes to raise additional financing; shifts in supply and demand; market acceptance of new products and continuing products' demand; the impact of competitive products and pricing on AudioCodes' and its customers' products and markets; timely product and technology development and upgrades and the ability to manage changes in market conditions as needed; possible disruptions from acquisitions; the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business; and other factors detailed in AudioCodes' filings with the Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.

© 2010 AudioCodes Ltd. All rights reserved. AudioCodes, AC, AudioCoded, Ardito, CTI2, CTI², CTI Squared, HD VoIP, HD VoIP Sounds Better, InTouch, IPmedia, Mediant, MediaPack, NetCoder, Netrake, Nuera, Open Solutions Network, OSN, Stretto, TrunkPack, VMAS, VoicePacketizer, VoIPerfect, VoIPerfectHD, What's Inside Matters, Your Gateway To VoIP and 3GX are trademarks or registered trademarks of AudioCodes Limited. All other products or trademarks are property of their respective owners. Product specifications are subject to change without notice.

Summary financial data follows
AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
     
  June 30, December 31,
  2010 2009
  (Unaudited) (Audited)
ASSETS    
CURRENT ASSETS:    
Cash and cash equivalents $ 41,029 $ 38,969
Short-term bank deposits 13,516 13,902
Trade receivables, net 24,836 18,522
Other receivables and prepaid expenses 4,102 2,754
Deferred tax assets 1,053 1,053
Inventories 15,066 13,516
     
Total current assets 99,602 88,716
     
LONG-TERM INVESTMENTS:    
Investments in companies 1,530 1,510
Deferred tax assets 1,174 1,174
Severance pay funds 12,930 12,235
     
Total long-term investments 15,634 14,919
     
PROPERTY AND EQUIPMENT, NET 4,333 4,956
     
GOODWILL, INTANGIBLE ASSETS, DEFERRED CHARGES AND OTHER, NET 38,174 38,942
     
Total assets $ 157,743 $ 147,533
     
LIABILITIES AND EQUITY    
CURRENT LIABILITIES:    
Current maturities of long-term bank loans $ 6,000 $ 6,000
Trade payables 14,110 8,609
Other payables and accrued expenses 22,594 19,550
     
Total current liabilities 42,704 34,159
     
LONG-TERM LIABILITIES:    
Accrued severance pay $ 13,767 $ 13,336
Long-term bank loans 12,750 15,750
Senior convertible notes 353 403
Other payables 1,118 --
Total Long-Term liabilities   27,988 29,489
     
Total equity 87,051 83,885
     
Total liabilities and equity $ 157,743 $ 147,533
 
AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except share and per share data
         
  Six months ended Three months ended
  June 30, June 30,
  2010 2009 2010 2009
  (Unaudited) (Unaudited)
         
Revenues $ 71,282 $ 59,654 $ 36,478 $ 30,357
         
Cost of revenues 31,831 26,565 16,260 13,657
         
Gross profit 39,451 33,089 20,218 16,700
         
Operating expenses:        
Research and development, net 15,086 15,452 7,730 7,241
Selling and marketing 16,212 16,340 8,148 7,726
General and administrative 4,031 3,926 2,063 1,873
         
Total operating expenses 35,329 35,718 17,941 16,840
         
Operating income (loss) 4,122 (2,629) 2,277 (140)
Financial expenses, net 201 1,598 122 884
         
Income (loss) before taxes on income 3,921 (4,227) 2,155 (1,024)
Income taxes, net 134 130 68 78
Equity in losses of an affiliated companies  --  51 4 11
         
Net income (loss) $ 3,787 $(4,408) $ 2,083 $(1,113)
         
Net loss attributable to non-controlling Interest  111  209  20  30
         
Net income (loss) attributable to AudioCodes $ 3,898 $(4,199) $ 2,103 $(1,083)
         
Basic net earnings (loss) per share $ 0.10 $(0.10) $ 0.05 $(0.03)
         
Diluted net earnings (loss) per share $ 0.10 $(0.10) $ 0.05 $(0.03)
         
Weighted average number of shares used in computing basic net earnings per share (in thousands)  40,369  40,182  40,437  40,182
         
Weighted average number of shares used in computing diluted net earnings per share (in thousands)  40,772  40,182  40,813  40,182
 
AUDIOCODES LTD. AND ITS SUBSIDIARIES
NON-GAAP PROFORMA STATEMENTS OF OPERATIONS
In thousands, except share and per share data  
  Six months ended Three months ended
  June 30, June 30,
  2010 2009 2010 2009
  (Unaudited) (Unaudited)
         
Revenues $ 71,282 $ 59,654 $ 36,478 $ 30,357
         
Cost of revenues (1) (2) 31,175 25,869 15,932 13,311
         
Gross profit 40,107 33,785 20,546 17,046
         
Operating expenses:        
Research and development, net (1) 14,886 15,119 7,634 7,081
Selling and marketing (1) (2) 15,756 15,665 7,920 7,399
General and administrative (1) 3,825 3,804 1,960 1,817
         
Total operating expenses 34,467 34,588 17,514 16,297
         
Operating income (loss) 5,640 (803) 3,032 749
Financial expenses, net (3) 201 11 122 46
         
Income (loss) before taxes on income 5,439 (814) 2,910 703
Income taxes, net 134 130 68 78
Equity in losses of an affiliated companies  --  51 4 11
         
Net income (loss) $ 5,305 $(995) $ 2,838 $ 614
         
Net loss attributable to non-controlling Interest  111  209  20  30
         
Net income (loss) attributable to AudioCodes $ 5,416 $(786) $ 2,858 $ 644
         
Diluted net earnings (loss) per share $ 0.13 $(0.02) $ 0.07 $ 0.02
         
Weighted average number of shares used in computing diluted net earnings per share (in thousands)  41,008  40,182  41,036  40,206
 
(1) Excluding stock-based compensation expenses related to options granted to employees and others.
(2) Excluding amortization of intangible assets related to the acquisitions of Nuera, Netrake and CTI Squared.
(3) Excluding adjustments to interest expense with respect to Senior Convertible Notes, due to implementation of FSP APB 14-1.  

Note: Non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. The Company believes that non-GAAP information is useful because it can enhance the understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information as well.
 
AUDIOCODES LTD. AND ITS SUBSIDIARIES
RECONCILIATION BETWEEN GAAP NET INCOME AND NON-GAAP NET INCOME
In thousands, except per share data
         
  Six months ended Three months ended
  June 30, June 30,
  2010 2009 2010 2009
  (Unaudited) (Unaudited)
         
GAAP net income (loss) $ 3,787 $(4,408) $ 2,083 $(1,113)
         
GAAP net income (loss) per share $ 0.10 $(0.11) $ 0.05 $(0.03)
         
Cost of revenues:        
Stock-based compensation (1) 39 70 19 34
Amortization expenses (2) 617 626 309 312
  656 696 328 346
Research and development, net:        
Stock-based compensation (1) 200 333 96 160
         
Selling and marketing:        
Stock-based compensation (1) 305 499 152 239
Amortization expenses (2) 151 176 76 88
  456 675 228 327
General and administrative:        
Stock-based compensation (1) 206 122 103 56
         
Financial expenses:        
FSP APB 14-1 adjustment (3) -- 1,587 -- 838
         
Non-GAAP net income (loss) $ 5,305 $(995) $ 2,838 $ 614
         
Non-GAAP Diluted net income (loss) per share $ 0.13 $(0.02) $ 0.07 $ 0.02
 
(1) Stock-based compensation expenses related to options granted to employees and others.
(2) Amortization of intangible assets related to the acquisitions of Nuera, Netrake and CTI Squared.
(3) Adjustments to interest expense with respect to Senior Convertible Notes, due to implementation of FSP APB 14-1.  

Note: Non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. The Company believes that non-GAAP information is useful because it can enhance the understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information as well understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information.
 
AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
U.S. dollars in thousands
         
  Six months ended Three months ended
  June 30, June 30,
  2010 2009 2010 2009
  ( Unaudited) ( Unaudited) ( Unaudited) ( Unaudited)
         
Cash flows from operating activities:        
Net income  $ 3,787  $ (4,408)  $ 2,083  $ (1,113)
Adjustments required to reconcile net income to net cash provided by operating activities:    --     -- 
Depreciation and amortization  2,024  2,647  991  1,286
Amortization of marketable securities premiums and accretion of discounts, net  --   84  --   89
Equity in losses of affiliated companies and interest on loans to affiliated company  (20)  51  (7)  11
Decrease in accrued severance pay, net  (264)  (415)  (521)  (277)
Stock-based compensation expenses  750  1,024  370  489
Amortization of senior convertible notes discount and deferred charges  --   1,648  --   868
Increase in accrued interest on marketable securities, bank deposits and structured notes  --   (449)  --   (214)
Decrease (increase) in trade receivables, net  (6,314)  8,574  (3,650)  334
Decrease (increase) in other receivables and prepaid expenses  (1,446)  (166) 145  1,497
Decrease (increase) in inventories  (1,550)  1,299  (579)  2,788
Increase (decrease) in trade payables  5,501  (835)  656  (1,436)
Increase (decrease) in other payables and accrued expenses  2,400  (5,588)  2,122  (882)
         
Net cash provided by operating activities  4,868  3,466  1,610  3,440
         
Cash flows from investing activities:        
Proceeds of marketable securities  --   1,000  --   1,000
Proceeds from sale of short-term deposits  30,126  21,705  16,224  10,206
Investment in affiliated companies  --   (249)  --   (149)
Purchase of property and equipment  (633)  (769)  (304)  (429)
Investment in short-term deposits  (29,740)  (34,018)  (13,516)  (18,205)
         
Net cash provided by (used in) investing activities  (247)  (12,331)  2,404  (7,577)
 
AUDIOCODES LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
U.S. dollars in thousands
         
  Six months ended Three months ended
  June 30, June 30,
  2010 2009 2010 2009
  ( Unaudited) ( Unaudited) ( Unaudited) ( Unaudited)
Cash flows from financing activities:        
Bank loan refund  (3,000)  (3,000)  (1,500)  (1,500)
Payment of acquisition of NSC  (74)  --   (74)  -- 
Proceeds from issuance of shares upon exercise of options, warrants and employee stock purchase plan  513  --   128  -- 
         
Net cash used in financing activities  (2,561)  (3,000)  (1,446)  (1,500)
         
Increase (decrease) in cash and cash equivalents  2,060  (11,865)  2,568  (5,637)
Cash and cash equivalents at the beginning of the period  38,969  36,779  38,461  30,551
         
Cash and cash equivalents at the end of the period  $ 41,029  $ 24,914  $ 41,029  $ 24,914
CONTACT:  AudioCodes Ltd.          Guy Avidan, VP Finance & CFO            +972-3-976-4000            guy.avidan@audiocodes.com          Shirley Nakar, Director, Investor Relations            +972-3-976-4000            shirley@audiocodes.com                   Grayling          IR Agency Contact          Erik Knettel          +1-646-284-9415          erik.knettel@grayling.com

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