AudioCodes Reports Fourth Quarter and Full Year 2008 Results
Full Year 2008 Revenues Rise 10.4% Year-Over-Year, to Record $174.7 Million
Lod, Israel – February 11, 2009 – AudioCodes Ltd. (NasdaqGS: AUDC), a leading provider of Voice over IP (VoIP) technologies and Voice Network products, today announced financial results for the fourth quarter and year ended December 31, 2008.
Revenues for the fourth quarter of 2008 were $38.8 million compared to $42.8 million for the fourth quarter ended December 31, 2007, a year-over-year decline of $4.1 million, or 9.5%. Revenues for the full year 2008 were $174.7 million compared to $158.2 million in 2007, a year-over-year increase of $16.5 million, or 10.4%. Revenues for the fourth quarter of 2008 do not include $1.7 million of revenues which were recorded as unpaid deferred revenues as a result of the Nortel Group seeking creditor protection in January 2009.
During the fourth quarter, the Company recognized a non-cash impairment charge of $86.1 million with respect to goodwill, long-lived assets and investment in an affiliate. The charge, which is subject to change based on completion of valuation procedures, was identified in connection with the Company’s annual impairment tests and reflects market conditions. Net loss in accordance with U.S. generally accepted accounting principles (GAAP) was $86.7 million, or ($2.16) per diluted share, for the fourth quarter of 2008 compared to GAAP net income of $1.0 million, or $0.02 per diluted share, for the corresponding fourth quarter of 2007. The Company reported a GAAP net loss of $81.3 million, or ($1.97) per diluted share, for 2008 compared to a GAAP net loss of $3.9 million, or ($0.09) per diluted share, for 2007.
Non-GAAP net income was $776,000, or $0.02 per diluted share, for the fourth quarter of 2008 compared to non-GAAP net income of $3.7 million, or $0.08 per diluted share, for the fourth quarter of 2007. Non-GAAP net income for 2008 was $12.3 million, or $0.29 per diluted share, compared to non-GAAP net income of $8.3 million, or $0.19 per diluted share, for 2007. Non-GAAP net income does not include $1.7 million which were recorded as unpaid deferred revenues as a result of the Nortel Group announcement in January 2009.
Non-GAAP net income excludes (i) stock-based compensation expenses, (ii) amortization expenses related to the Nuera, Netrake and CTI Squared acquisitions and (iii) the non-cash impairment charge with respect to goodwill, long-lived assets and investment in an affiliate. 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. Cash flow from operating activities was $9.4 million in the fourth quarter of 2008, and was $16.4 million for 2008, compared to $9.0 million in the fourth quarter last year and $12.4 million for 2007.
“In 2008 AudioCodes has significantly strengthened its leading position in the VoIP networking market. The improvement in 2008 revenues and in non-GAAP net income and operating margin reflect the success of our networking strategy to innovate and deploy leading-edge VoIP network products,” stated Shabtai Adlersberg, Chairman of the Board, President and CEO of AudioCodes. “While we are disappointed with the decrease in revenues and earnings during the fourth quarter of 2008 and the uncertain outlook for 2009 due to the global economic crisis, we are encouraged with the increased level of customer activity and our ability to continue to generate positive operating cash flow.”
“AudioCodes has always been synonymous with superior voice quality and in 2008 we put in motion a range of new product initiatives aimed at extending our leadership position for long-term growth. As the demand for more integrated VoIP solutions has grown, we have launched our new Mediant™ 1000 Multi-Service Business Gateway (MSBG). Our High Definition (HD) VoIP strategy, and recent launch of our new HD VoIP enabled IP Phones, set the stage for substantially enhanced voice quality across the network, and we are very pleased with the favorable feedback from potential partners and customers,” commented Mr. Adlersberg.
In January 2009, Nortel, AudioCodes’ largest customer, announced that it would seek creditor protection for the company and some of its subsidiaries. As of December 31, 2008, a total of $1.7 million of sales to the Nortel Group was recorded as unpaid deferred revenues which reduced trade receivables in the Company’s balance sheets.
During the fourth quarter, the Company repurchased approximately $51.5 million in principal amount of its 2% Senior Convertible Notes due 2024 for a total cost, including accrued interest, of $50.2 million.
The Company issued $125.0 million in principal amount of these notes in November 2004.
Cash and cash equivalents, short-term and long-term marketable securities, short-term and long-term bank deposits were $115.1 million as of December 31, 2008, compared to $158.7 million as of September 30, 2008 and $143.1 million as of December 31, 2007. The year-over-year decline was attributable to the repurchase of the Senior Convertible Notes.
As of December 1, 2008 AudioCodes began consolidating the financial results of Natural Speech Communication Ltd. (NSC), an Israeli based company engaged in speech recognition, into AudioCodes’ financial results. As of December 31, 2008, AudioCodes owned 56.6% of the outstanding share capital of NSC (51.0% of the share capital of NSC on a fully diluted basis). During the fourth quarter, NSC revenues were $83,000 and it had a net loss of $625,000. AudioCodes included $73,000 of NSC revenues in AudioCodes’ revenues for the fourth quarter. NSC results will be fully consolidated into AudioCodes income statement in 2009 since AudioCodes holds the majority of risk with respect to NSC.
Conference Call & Web cast Information
AudioCodes will conduct a conference call at 9:00 A.M., Eastern Daylight Time on Thursday, February 12, 2009 to discuss the fourth quarter and full year 2008 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