Fourth Quarter and Full Year 2019 Highlights
- Quarterly revenues increased by 15.3% year-over-year to $52.8 million;
full 2019 year revenues increased by 13.7% to $200.3 million; - Quarterly service revenues increased by 15.9% year-over-year to $17.5 million;
full 2019 year service revenues increased by 14.7% to $64.6 million; - Quarterly and full 2019 year UC-SIP revenues increased more than 20% year-over-year;
- AudioCodes entered into a royalty buyout agreement with the Israel National Authority for Technology and Innovation (“IIA”) in November 2019 (detailed below). The agreement provided for a payment of $32.2 million to the IIA. This required payment of $32.2 million is included in expenses in the GAAP results for the three months and full year ended December 31, 2019;
- GAAP results:
- Quarterly GAAP gross margin percentage was 3.9%;
- Quarterly GAAP operating loss percentage was 49.2%;
- Quarterly GAAP net loss was $8.2 million, or ($0.28) per diluted share;
- Full 2019 year GAAP net income was $4.0 million, or $0.13 per diluted share;
- Non-GAAP results:
- Quarterly Non-GAAP gross margin percentage was 65.1%;
- Quarterly Non-GAAP operating margin percentage was 15.7%;
- Quarterly Non-GAAP net income was $8.1 million, or $0.26 per diluted share;
- Full 2019 year Non-GAAP net income was $27.8 million, or $0.89 per diluted share; and
- Net cash provided by operating activities was $2.4 million for the quarter and $23.2 million for the full year.
Details
Lod, Israel – January 28, 2020 - AudioCodes (NASDAQ: AUDC) Press Release
AudioCodes, a leading vendor of advanced voice networking and media processing solutions for the digital workplace, today announced financial results for the fourth quarter and full year periods ended December 31, 2019.
Revenues for the fourth quarter of 2019 were $52.8 million compared to $51.4 million for the third quarter of 2019 and $45.8 million for the fourth quarter of 2018. Revenues were $200.3 million in 2019 compared to $176.2 million in 2018.
Net loss was $8.2 million, or ($0.28) per diluted share, for the fourth quarter of 2019, compared to net income of $4.5 million, or $0.15 per diluted share, for the fourth quarter of 2018. Net income in 2019 was $4.0 million, or $0.13 per diluted share, compared to $13.5 million, or $0.45 per diluted share, in 2018.
On a Non-GAAP basis, net income was $8.1 million, or $0.26 per diluted share, for the fourth quarter of 2019 compared to $6.3 million, or $0.20 per diluted share, in the fourth quarter last year. Non-GAAP net income in 2019 was $27.8 million, or $0.89 per diluted share, compared to $20.0 million, or $0.65 per diluted share, in 2018.
Non-GAAP net income excludes: (i) share-based compensation expenses; (ii) amortization expenses related to intangible assets; (iii) expenses related to the payment required to be made pursuant to the royalty buyout agreement announced in November 2019 (detailed below); (iv) expenses or income related to revaluation of an earn-out liability in connection with the acquisition of Active Communications Europe; (v) financial income or expenses related to exchange rate differences in connection with revaluation of assets and liabilities in non-dollar denominated currencies and (vi) non-cash deferred tax expenses (benefit). A reconciliation of net income on a GAAP basis to a non-GAAP basis is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.
As announced in November 2019, the Company and one of its Israeli subsidiaries entered into a royalty buyout agreement (the “Royalty Buyout Agreement”) with the Israel National Authority for Technology and Innovation (“IIA”) relating to certain grants they had received from the IIA. The contingent net royalty liability to the IIA at the time of the Royalty Buyout Agreement with respect to these grants was approximately $49 million (the “Debt”), including interest to the date of the Royalty Buyout Agreement. As part of the Royalty Buyout Agreement, the Company agreed to pay approximately $32.2 million to the IIA (to settle the $49 million Debt in full) in three annual installments starting in 2019. Pursuant to the Royalty Buyout Agreement, AudioCodes eliminated all royalty obligations related to its future revenues with respect to these grants. The Royalty Buyout Agreement has a positive impact on Non-GAAP gross margin starting in the fourth quarter of 2019 and will have a positive impact on GAAP gross margin starting in the first quarter of 2020. The $32.2 million expense is included in the GAAP cost of revenues for the fourth quarter of 2019 and impacts GAAP results for the three months and full year ended December 31, 2019.
During the fourth quarter of 2019, the Company utilized the deferred tax asset recorded in 2016 and created a new deferred tax asset based on its earnings history and expected future operating results. The total deferred tax asset amounted to $20.5 million as of December 31, 2019. This deferred tax asset represents the approximate amount of the Company’s net operating losses and temporary tax differences that the Company estimates it will utilize over the next few years. GAAP net income for the fourth quarter and full 2019 year reflect the effect of the tax benefit associated with the creation of this deferred tax asset. Non-GAAP net income excludes this non-cash deferred tax benefit.
Net cash provided by operating activities was $2.4 million for the fourth quarter of 2019 and $23.2 million for 2019. Both numbers were impacted by the $10.7 million payment made in December 2019 which was the first installment pursuant to the Royalty Buyout Agreement.
Cash and cash equivalents, long and short-term bank deposits and short-term marketable securities were $71.9 million as of December 31, 2019 compared to $65.4 million as of December 31, 2018. The increase in cash and cash equivalents, long and short-term bank deposits and short-term marketable securities was the result of cash provided by operating activities offset, in part, by the use of cash in 2019 for repurchasing of the Company’s ordinary shares pursuant to its share repurchase program, payment of cash dividends and the payment related to the first installment pursuant to the Royalty Buyout Agreement.
"We are pleased to report record financial results for the fourth quarter and full year 2019,” said Shabtai Adlersberg, President and Chief Executive Officer of AudioCodes.
“The year 2019 ended on a strong note, underscoring strong performance for the full year, our best year ever. Underlining our success is our continued leadership of the Enterprise Voice segment with our voice connectivity solutions, delivery of strong results for our voice networking business, and increased investment in two new developing markets: the meeting space and Voice.ai. Growing our top line revenue by 13.7% year-over-year, the second year in a row of double digit revenue growth, improving non-GAAP annual operating income to 14.1% from 11.7% in the prior year, and growing non-GAAP annual net income by 38.9% compared to 2018, all demonstrate the strength of our Company’s performance. A key factor driving this significant growth is the strength in our UC-SIP business which increased more than 20% year-over-year. Our success in growing our UC-SIP business is echoed in a strong industry position and successful execution in the markets we serve.”
"In 2019 we continued to invest and develop technologies and solutions in the Voice.ai business unit which has demonstrated success in growing the number of project wins. In the second half of 2019 we have announced the launch of a new effort targeting a set of solutions and devices for the emerging meeting space. Coupling these new technologies with our strong position in the UC and UCaaS markets in the Microsoft Teams and Skype for Business ecosystem should further enhance our ability to expand our business. Looking forward, and based on current business momentum, we are confident in our ability to continue to expand our business in 2020 and beyond. We plan to continue our investment in future offerings, and focus on the return on investment to our shareholders."
Share Buy Back Program and Cash Dividend
In August 2019, AudioCodes received court approval in Israel to purchase up to an aggregate of $12 million (“Permitted Amount”) of additional ordinary shares pursuant to its share repurchase program. The court approval also permitted AudioCodes to declare a dividend of any part of the Permitted Amount during the approved validity period. This court approval will expire on February 3, 2020.
In December 2019, the Company submitted a new application to the Israeli court, requesting approval of an additional repurchase program for $12 million of ordinary shares. The application also requested the court to permit AudioCodes to declare a dividend of any part of this amount. The new application was submitted to the court and a decision is expected during February 2020.
Conference Call & Web Cast Information
AudioCodes will conduct a conference call at 8:30 A.M., Eastern Time today to discuss the Company's fourth quarter and full year of 2019 operating performance, financial results and outlook. Interested parties may participate in the conference call by dialing one the following numbers:
- United States Participants: +1 (877) 407-0778
- International Participants: +1 (201) 689-8565
The conference call will also be simultaneously webcast. Investors are invited to listen to the call live via webcast at the AudioCodes investor website at www.audiocodes.com/investors-lobby
