AudioCodes Ltd. (NASDAQ:AUDC) Q2 2023 Earnings Call Transcript

Shabtai Adlersberg: Right. So, yeah, actually, we enjoy quite a success in the second quarter. We won and have described we own a multi-million deal of seven, eight years with a large system integrator moving a large logistics company from an on-prem vendor who seems to be losing steam into a cloud contact center solution. Our hall of fame is our voice capabilities. We — well, providing a solution to a fairly complex voice network that may include 200 different sites in 100 different countries, different locations, different — that’s definitely a difficult task. And yes, I think that capability of ours has not gone discovered by some of the large contact center names that you have mentioned. So, yes, we do have a fairly close discussion with some of these partners that see us as a strong partner who can help them in solving all kind of issues.

I’ve mentioned business continuity solution. There are some switching and first-mile solutions. So, yes, we are in a very strong discussion with players in the field.

Ryan Koontz: That’s great. Thanks very much. Appreciate it.

Shabtai Adlersberg: Sure.

Operator: Your next question is coming from Tal Liani at Bank of America.

Tal Liani: Hey, I hope you can hear me.

Shabtai Adlersberg: Hi, Tal. We can hear you.

Tal Liani: I want to ask you about the environment in the context of last quarter, Microsoft was weaker. This quarter, Microsoft is better. Does it mean that the environment is getting better, meaning the visibility has improved, or any better signed deals, did they work through inventories? Kind of when you look at last quarter that was pretty dire. And this quarter, when you look beneath surface, you can see some signs of I don’t know if it’s stability or even some growth. I want to understand if it means something, or it’s not, just if you can tell us about spending. Thanks.

Shabtai Adlersberg: Sure. So, I’ve mentioned that we feel second quarter was better in terms of the overall environment and willingness, I would say, of management of cooperations to start spending more on modernizing their communication and collaboration solutions. And in that regard, I’ve mentioned that Teams users, we have overall worldwide 300 million. Voice have been applied to less than $20 million at this stage. I mean, Teams phone. So, there’s a huge, huge runaway in front of us. And I think that once the climate is better economically, we do see the environment better. So, yeah, we see it quite stable, and we’ll be able to further grow in coming quarters and years.

Tal Liani: Now, there is expected acceleration in the second half. Is it based on contracts you already have? Or is it just normal seasonality? I’m trying to understand the risk in the acceleration.

Shabtai Adlersberg: Well, so far, we have not met any such risk. If you take our annual recurring revenue, which basically tells you that is the most important parameter for us. We’re stepping fairly steadily. Just like an ARR solutions that growths, we grew 100% a year, then declined to 80%. This year, we will grow 60%. We’re talking about tens of different projects. So, all in all, the statistic is there. The coverage is nice. By the way, one very important thing is that we’re starting to see, as I’ve mentioned on the call, some very high total contract value projects, which could range from $1 million to $3 million over 36 months. All in all, very stable and promising environment for live deals in Microsoft Teams environment.

Tal Liani: Got it. Last question. Sorry, I’m taking too much time. I think there was a question about it before me, but maybe it wasn’t. One of the problems we have in the industry is two things. Number one is channel inventory that companies just bought too much. And number two is too much backlog. So, even when you see growth, it’s coming from backlog, it’s not coming from orders. Can you refer to these two things?