AudioCodes Reports Third Quarter 2009 Results


LOD, Israel, Nov. 3, 2009 (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 third quarter of 2009, ended September 30, 2009.

Revenues for the third quarter ended September 30, 2009 were $32.1 million compared to $30.4 million for the second quarter of 2009 and $46.6 million for the quarter ended September 30, 2008. Net income in accordance with U.S. generally accepted accounting principles (GAAP) was $139,000, or $0.01 per share, for the third quarter of 2009 compared to a GAAP net loss of $891,000, or ($0.02) per share, for the second quarter of 2009, and GAAP net income of $2.3 million, or $0.06 per share, for the corresponding third quarter of 2008.

Non-GAAP net income was $1.6 million, or $0.04 per diluted share, for the third quarter of 2009 compared to non-GAAP net income of $614,000, or $0.02 per diluted share, for the second quarter of 2009, and non-GAAP net income of $4.8 million, or $0.11 per diluted share, for the third quarter of 2008.

Non-GAAP net income excludes (i) stock-based compensation expenses, (ii) amortization expenses related to the Nuera, Netrake and CTI Squared acquisitions 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 third quarter of 2009, AudioCodes generated $5.6 million from operating activities compared to $3.5 million in the second quarter of 2009 and $193,000 in the third quarter of 2008.

"We are pleased to report improved third quarter performance highlighted by sequential improvements in top line revenue, bottom line profitability, positive cash flow from operating activities and growing backlog. Our continued success in improving key financial metrics underlines our return to a consistent pattern of growth in our business," stated Shabtai Adlersberg, Chairman of the Board, President and CEO of AudioCodes. "Throughout the third quarter and into the beginning of the fourth quarter of 2009, we have witnessed a healthy VoIP market and increased partner and customer activities in both the enterprise and service provider markets. Capitalizing on our continued investments throughout the economic downturn, AudioCodes enters the final quarter of 2009, and looks ahead to 2010, with a robust pipeline of new product launches and initiatives," concluded Mr. Adlersberg.

Cash and cash equivalents, short-term and long-term bank deposits and short-term marketable securities were $116.4 million as of September 30, 2009, compared to $114.9 million as of June 30, 2009 and $158.7 million as of September 30, 2008. The year-over-year decline was primarily attributable to the repurchase of some of the Company's Senior Convertible Notes in the fourth quarter of 2008, offset, in part, by cash provided by operating activities.

Pursuant to the terms of the Indenture governing the Company's Senior Convertible Notes (the "Notes"), the Company is required to offer to repurchase the remaining $73.5 million in principal amount of the Notes in November 2009. As a result, on October 8, 2009, the Company notified holders of the Notes (CUSIP Nos. 050732AB2 and 050732AA4) that they have an option, pursuant to the terms of the Notes, to require the Company to purchase, promptly after November 9, 2009, all or a portion of such holders' Notes at a cash price equal to 100% of the aggregate principal amount of the Notes, together with any accrued and unpaid interest up to but not including November 9, 2009. The Company maintains funds on hand allocated for the repurchase of any or all of the outstanding Notes, as well as adequate working capital to support the Company's operations and capital expenditures.

Conference Call & Web cast Information

AudioCodes will conduct a conference call at 9:00 A.M., Eastern Time on Wednesday, November 4, 2009 to discuss the Company's third quarter operational 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 leader focused on VoIP communications, applications and networking elements, 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, Residential Gateways, IP Phones, Media Servers, Session Border Controllers (SBC), Security Gateways and Value Added Applications. AudioCodes underlying technology, VoIPerfectHD(TM), relies primarily 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 emerging Voice networks. 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 bankruptcy filing in January 2009 of AudioCodes' largest customer in 2008, 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/upgrades and the ability to manage changes in market conditions as needed; possible disruptions from acquisitions; the integration of acquired companies' products and operations into AudioCodes' business; the obligation to offer to repurchase the outstanding senior convertible notes in November 2009 and other factors detailed in AudioCodes' filings with the Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.

AudioCodes, AC, AudioCoded, Ardito, CTI2, CTI(2), CTI Squared, HD VoIP, InTouch, IPmedia, Mediant, MediaPack, NetCoder, Netrake, Nuera, Open Solutions Network, OSN, Stretto, TrunkPack, 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.


 AUDIOCODES LTD. AND ITS SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
 ------------------------------------------------------------------
 U.S. dollars in thousands

                                                Sept. 30,  Dec. 31,
                                                  2009       2008
                                                --------   --------
                                              (Unaudited) (Audited)
                                                --------   --------
   ASSETS

 CURRENT ASSETS:
   Cash and cash equivalents                    $ 70,444   $ 36,779
   Short-term bank deposits                       38,731     61,870
   Short-term marketable securities and
    accrued interest                               7,232     16,481
   Trade receivables, net                         22,623     29,564
   Other receivables and prepaid expenses          6,107      3,373
   Deferred tax assets                               972        972
   Inventories                                    16,430     20,623
                                                --------   --------

 Total current assets                            162,539    169,662
                                                --------   --------

 LONG-TERM INVESTMENTS:
   Investments in companies                        1,515      1,245
   Deferred tax assets                             1,255      1,255
   Severance pay funds                            12,002     10,297
                                                --------   --------

 Total long-term investments                      14,772     12,797
                                                --------   --------

 PROPERTY AND EQUIPMENT, NET                       5,299      6,844
                                                --------   --------

 GOODWILL, INTANGIBLE ASSETS, DEFERRED
   CHARGES AND OTHER, NET (1)                     39,537     41,001
                                                --------   --------

 Total assets                                   $222,147   $230,304
                                                ========   ========

   LIABILITIES AND EQUITY

 CURRENT LIABILITIES:
   Current maturities of long-term bank loans   $  6,000   $  6,000
   Trade payables                                  7,581     11,661
   Other payables and accrued expenses            22,333     24,189
   Deferred tax liability (1)                        266        735
   Senior convertible notes (1)                   73,130     70,670
                                                --------   --------

 Total current liabilities                       109,310    113,255
                                                --------   --------

 ACCRUED SEVERANCE PAY                            13,172     12,174
                                                --------   --------

 LONG-TERM BANK LOANS                             17,250     21,750
                                                --------   --------

 Total equity (1)                                 82,415     83,125
                                                --------   --------

 Total liabilities and equity                   $222,147   $230,304
                                                ========   ========

 (1)  December 31, 2008 amounts adjusted due to implementation of FSP
      APB 14-1.

 AUDIOCODES LTD. AND ITS SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 --------------------------------------------------------------------
 In thousands, except per share data

                               Nine months ended   Three months ended
                                 September 30,       September 30,
                               ------------------  ------------------
                                 2009      2008      2009      2008
                               --------  --------  --------  --------
                                  (Unaudited)         (Unaudited)
                               ------------------  ------------------

 Revenues                      $ 91,736  $135,992  $ 32,082  $ 46,602
 Cost of revenues                40,927    59,655    14,362    20,535
                               --------  --------  --------  --------

 Gross profit                    50,809    76,337    17,720    26,067

 Operating expenses:
   Research and
    development, net             22,697    29,135     7,245     9,155
   Selling and marketing         24,089    34,459     7,749    11,116
   General and administrative     5,857     7,047     1,931     2,226
                               --------  --------  --------  --------

 Total operating expenses        52,643    70,641    16,925    22,497
                               --------  --------  --------  --------

 Operating income (loss)         (1,834)    5,696       795     3,570
 Financial expenses, net (1)     (2,349)   (2,689)     (751)   (1,047)
                               --------  --------  --------  --------

 Income (loss) before
  taxes on income                (4,183)    3,007        44     2,523
 Taxes benefit, net (1)            (403)     (581)     (112)     (166)
 Equity in losses of
  affiliated companies               68     1,061        17       428
                               --------  --------  --------  --------

 Net income (loss)             $ (3,848) $  2,527  $    139  $  2,261
                               ========  ========  ========  ========

 Net loss attributable to
  the noncontrolling interest       553        --       191        --
                               --------  --------  --------  --------

 Net income (loss)
  attributable to AudioCodes   $ (3,295) $  2,527  $    330  $  2,261
                               ========  ========  ========  ========

 Basic net earnings (loss)
  per share                    $  (0.08) $   0.06  $   0.01  $   0.06
                               ========  ========  ========  ========

 Diluted net earnings (loss)
  per share                    $  (0.08) $   0.06  $   0.01  $   0.06
                               ========  ========  ========  ========

 Weighted average number of
  shares used in computing
  basic net earnings per
  share (in thousands)
                                 40,189    41,540    40,204    40,200
                               ========  ========  ========  ========

 Weighted average number of
  shares used in computing
  diluted net earnings per
  share (in thousands)
                                 40,189    41,967    40,309    40,517
                               ========  ========  ========  ========

 (1)  Amounts for three and nine months ended September 30, 2008
      adjusted due to implementation of FSP APB 14-1.


 AUDIOCODES LTD. AND ITS SUBSIDIARIES
 NON-GAAP PROFORMA STATEMENTS OF OPERATIONS
 --------------------------------------------------------------------
 In thousands, except per share data

                               Nine months ended   Three months ended
                                 September 30,       September 30,
                               ------------------  ------------------
                                 2009      2008      2009      2008
                               --------  --------  --------  --------
                                  (Unaudited)         (Unaudited)
                               ------------------  ------------------
 Revenues                      $ 91,736  $135,992  $ 32,082  $ 46,602
 Cost of revenues (1) (2)        39,897    57,778    14,028    19,955
                               --------  --------  --------  --------

 Gross profit                    51,839    78,214    18,054    26,647

 Operating expenses:
   Research and development,
    net (1)                      22,230    27,825     7,111     8,942
   Selling and
    marketing (1) (2)            23,113    31,945     7,448    10,414
   General and
    administrative (1)            5,696     6,563     1,892     2,140
                               --------  --------  --------  --------

 Total operating expenses        51,039    66,333    16,451    21,496
                               --------  --------  --------  --------

 Operating income                   800    11,881     1,603     5,151
 Financial income, net (3)           65     1,162        76       267
                               --------  --------  --------  --------

 Income before taxes
  on income                         865    13,043     1,679     5,418
 Income taxes, net (3)              236       480       106       196
 Equity in losses of
  affiliated companies               68     1,061        17       428
                               --------  --------  --------  --------

 Non-GAAP net income           $    561  $ 11,502  $  1,556  $  4,794
                               ========  ========  ========  ========

 Non-GAAP diluted net
  earnings per share           $   0.01  $   0.27  $   0.04  $   0.11
                               ========  ========  ========  ========

 Weighted average number of
  shares used in computing
  non-GAAP diluted net
  earnings per share
  (in thousands)
                                 40,248    44,195    40,331    47,198
                               ========  ========  ========  ========

   (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, and related income tax expense, 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

                               Nine months ended   Three months ended
                                 September 30,       September 30,
                               ------------------  ------------------
                                 2009      2008      2009      2008
                               --------  --------  --------  --------
                                  (Unaudited)         (Unaudited)
                               ------------------  ------------------

 GAAP Net income (loss)        $ (3,848) $  2,527  $    139  $  2,261
                               ========  ========  ========  ========
 GAAP Diluted earnings
  (loss) per share
                               $  (0.08) $   0.06  $   0.01  $   0.06
                               ========  ========  ========  ========

 Cost of revenues:
   Stock-based
    compensation (1)                 94       278        24        50
   Amortization expenses (2)        936     1,599       310       530
                               --------  --------  --------  --------
                                  1,030     1,877       334       580
 Research and
  development, net:
   Stock-based
    compensation (1)                467     1,310       134       213

 Selling and marketing:
   Stock-based
    compensation (1)                725     1,731       226       441
   Amortization expenses (2)        251       783        75       261
                               --------  --------  --------  --------
                                    976     2,514       301       702
 General and administrative:
   Stock-based
    compensation (1)                161       484        39        86

 Financial expenses:
   FSP APB 14-1
    adjustment (3)                2,414     3,851       827     1,314

 Income Taxes:
   FSP APB 14-1
    adjustment (3)                 (639)   (1,061)     (218)     (362)
                               --------  --------  --------  --------


 Non-GAAP Net income           $    561  $ 11,502  $  1,556  $  4,794
                               ========  ========  ========  ========
 Non-GAAP Diluted
  earnings per share
                               $   0.01  $   0.27  $   0.04  $   0.11
                               ========  ========  ========  ========

   (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, and related income tax expense, 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

                               Nine months ended   Three months ended
                                 September 30,       September 30,
                               ------------------  ------------------
                                 2009      2008      2009      2008
                               --------  --------  --------  --------
                                  (Unaudited)         (Unaudited)
                               ------------------  ------------------
 Cash flows from
  operating activities:
 ----------------------------
   Net income (loss) (1)       $ (3,848) $  5,317  $    139  $  3,213
   Adjustments required to
    reconcile net income to
    net cash provided by
    operating activities:
     Depreciation and
      amortization                3,825     5,676     1,178     1,821
     Net loss from sale of
      marketable securities          --        --        --        --

     Amortization of
      marketable securities
      premiums and accretion
      of discounts, net             152        23        68        39
     Equity in losses of
      affiliated companies           56     1,061         5       428
     Decrease (increase)
      in accrued severance
      pay, net                     (707)      (57)     (292)       62
     Stock-based compensation
      expenses                    1,447     3,803       423       790

     Amortization of senior
      convertible notes
      discount and deferred
      charges                     2,509       153       861        51

     Decrease (increase) in
      accrued interest on
      marketable securities,
      bank deposits and
      structured notes            2,024      (794)    2,473      (787)
     Decrease (increase) in
      trade receivables, net      6,938   (10,227)   (1,636)   (6,123)

     Decrease (increase) in
      other receivables and
      prepaid expenses           (1,304)   (1,280)   (1,138)     (982)
     Decrease (increase) in
      inventories                 4,193    (1,332)    2,894       (73)
     Increase (decrease) in
      trade payables             (4,080)    1,659    (3,245)   (1,621)

     Increase (decrease) in
      other payables and
      accrued expenses           (1,628)    4,000     3,962     3,375
     Decrease in deferred
      tax liabilities (1)          (468)       --       (49)       --
                               --------  --------  --------  --------

 Net cash provided by
  operating activities            9,109     8,002     5,643       193
                               --------  --------  --------  --------

 Cash flows from investing
  activities:
 ----------------------------
   Proceeds from sale and
    maturity of marketable
    securities                    9,000    17,000     8,000     4,000
   Proceeds from sale of
    bank deposits                70,530    34,639    48,825    16,545
   Investments in companies        (326)   (2,370)      (77)   (1,054)
   Payment for acquisition
    of CTI Squared                   --    (5,000)       --        --
   Purchase of property
    and equipment                  (863)   (2,893)      (94)     (726)
     Investment in short-term
      deposit                   (49,318)  (92,109)  (15,300)  (22,005)
     Investment in marketable
      securities                     --   (16,795)       --   (16,795)
     Investment in long-term
      deposit                        --      (255)       --        --
                               --------  --------  --------  --------

 Net cash provided (used) by
  (in) investing activities      29,023   (67,783)   41,354   (20,035)
                               --------  --------  --------  --------


 AUDIOCODES LTD. AND ITS SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Cont.)
 --------------------------------------------------------------------
 U.S. dollars in thousands

                                Nine months ended  Three months ended
                                 September 30,       September 30,
                               ------------------  ------------------
                                 2009      2008      2009      2008
                               --------  --------  --------  --------
                                  (Unaudited)         (Unaudited)
                               ------------------  ------------------
 Cash flows from financing
  activities:
 ----------------------------
   Repurchase of shares              --   (13,747)       --    (2,339)

   Increase in current
    maturities of long-term
    bank loans                       --     6,000        --     3,000
   Long-term bank loans
    received                         --    24,000        --    12,000
   Repayment of loan from bank   (4,500)     (750)   (1,500)     (750)
   Proceeds from issuance
    of shares upon exercise
    of options and employee
    stock purchase plan              33     1,547        33       247
                               --------  --------  --------  --------

 Net cash provided (used) by
  (in) financing activities      (4,467)   17,050    (1,467)   12,158
                               --------  --------  --------  --------

 Increase (decrease) in cash
  and cash equivalents           33,665   (42,731)   45,530    (7,684)
 Cash and cash equivalents
  at the beginning of
  the period                     36,779    75,063    24,914    40,016
                               --------  --------  --------  --------

 Cash and cash equivalents at
  the end of the period        $ 70,444  $ 32,332  $ 70,444  $ 32,332
                               ========  ========  ========  ========

 (1)  Amounts for nine and three months ended September 30, 2008
      adjusted due to implementation of FSP APB 14-1.


            

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