AudioCodes Ltd. Price & Performance (AUDC)

Any disruption in our operations by the obligations of our personnel to perform military service as a result of current or future military actions involving Israel. And other factors detailed in AudioCode's filings with the U. S. Securities and Exchange Commission. AudioCodes assumes no obligation to update this information. In addition, during the call AudioCodes will refer to non GAAP net income and net income per share. AudioCodes has provided a full reconciliation of the non GAAP net income and income per share to its net income and net income per share according to GAAP in the press release that is posted on its website. Before I turn the call over to management, I would like to remind everyone that this call is being recorded and archived webcast will be made available on the Investor Relations section of the company's website at the conclusion of the call. With all that said, I'd like to turn the call over to ShepTek. Thank you, Roger. Good morning and good afternoon everybody.

I would like to welcome all to our Q4 year end 20 24 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of AudioCodes. Niran will start off by presenting a financial overview of the quarter, I will then review the business highlights and summary for the quarter and discuss trends and developments in our business and industry. We will then turn it into the Q and A session. Niran? Thank you, Shabti, and hello, everyone. Before I start, my formal remarks, I would like to remind everyone that in conjunction with our earnings release this morning, we will post shortly on our Investor Relations website and earnings supplemental deck. On today's call, we will be referring to both GAAP and non GAAP financial results. The earnings press release that we issued earlier this morning contains a reconciliation of the supplemental non GAAP financial information that I will be discussing on this call. We will be comparing our Q4 2024 result to the prior quarter as we believe it provides a better gauge of our financial performance. Revenues for the 4th quarter were $61,600,000 an increase of 2.2 percent over the $60,200,000 reported in the Q3 of the current year.

Full year 2024 revenues were $242,200,000 a decrease of 0.9% over the $244,400,000 reported in 2023.

Services revenues for the 4th quarter were $34,200,000 an increase of 5.4% over the $32,500,000 reported in the third quarter of the current year. Services revenues in the 4th quarter accounted for 55.6 percent of total revenues On an annual basis, service revenues were $130,200,000 an increase of 8.2% over the 120 $400,000 reported in 2023. The amount of deferred revenues as of December 31, 2024 was 84,400,000 [indiscernible] to $78,600,000 as of September 30, 2024. Revenues by geographical region for the quarter were split as follows. North America 47%, EMEA [indiscernible] Asia Pacific, 14%, and Central and Latin America 5%. Our top 15 customers represented an aggregate of 64% of our revenues in the 4th quarter, of which 48% was attributed to our 10 largest GAAP results are as follows: Gross margins for the quarter was 66.2 percent compared to 65.2% in Q3 2024. Operating income for the 4th quarter was $4,100,000 or 6.7 percent of revenues compared to operating income of $4,900,000 or 8.1 percent of revenues [indiscernible] [indiscernible] Full year 2024 operating income was 17 $200,000 compared to operating income of 14 point $4,000,000 in 2023. EBITDA for the quarter was $5,200,000 compared to EBITDA of 5,900,000 for Q3 2024.

Full year 2024 EBITDA was $21,100,000 compared to EBITDA of $17,000,000 in 20 20 Net income for the quarter was $6,800,000 or $0.22 per diluted share compared to net income of $2,700,000 or $0.09 per diluted shares for Q3 2024. Full year netting full year 2024 net income was 15,300,000 dollars or $0.50 per diluted share compared to $8,800,000 or $0.28 per diluted share Non GAAP results are as follow. Non GAAP gross margin for the quarter was 66.5 percent compared to 65.6% in Q3 2024. Non GAAP operating income for the 4th quarter was $7,500,000 or 12.2 percent of revenues compared to $7,000,000 or 11.7 percent of revenues in Q3 [indiscernible] Full year 2024 non GAAP operating income was $28,100,000 compared to operating income of $28,900,000 in 2023. Non GAAP EBITDA for the quarter was $8,500,000 compared to non GAAP EBITDA of $7,900,000 for Q3 twenty twenty 4. Full year 2024 non GAAP EBITDA was $31,400,000 compared to non GAAP EBITDA of $31,000,000 in 2023. Non GAAP net income for the 4th quarter was $11,600,000 or $0.37 per diluted share compared to $4,900,000 or $0.16 dollars per diluted share in Q3 2024. Full year 2024 non GAAP net income was $27,300,000 dollars or 0.87 dollars per dollars per diluted share compared to 25,000,000 dollars or $0.77 per diluted shares in 2023.

At the end of December 2024, [indiscernible] cash equivalents, bank deposits, marketable securities and financial investments totaled $93,900,000 dollars Net cash provided by operating activities was $15,300,000 for the 4th quarter of 2024, and $35,300,000 for the year 2023. [indiscernible] Day sales outstanding as of December 31, 2024 were 106 days. During the quarter, we acquired 635 1,000 of our ordinary shares for a total consideration of approximately 6,000,000 dollars In December 2024, we received court approval in Israel to purchase up to an aggregate amount of $20,000,000 of additional ordinary shares. The court approval also permit us to declare a dividend of any part of this amount. The approval is valid through June 14, 2025. Earlier this morning, we also declared a cash dividend of $0.18 per share the aggregate amount of the dividend is approximately 5,300,000 dollars The dividend will be paid on March 6, 2025, to all of our shareholders of record at the close of trading of February 20 2025. Our guidance for the full year 2025 is as follows: We expect revenues in the range of $246,000,000 to 200 $54,000,000 non GAAP EBITDA in the range of 34,000,000 dollars to 38,000,000 dollars. I will now turn the call back over to Shabtai.

Thank you, Niran. I'm pleased to report solid 4th quarter performance. With healthy growth in key business lines. Now before I delve into reporting the 4th quarter financial and business, I would like to start off by offering a perspective on our journey over the recent years, on our past, current position and our future direction.

First, let's take a moment to acknowledge the achievements of 22 It was an exceptional year for us with revenue reaching a record level of 275,000,000 and profits at $45,000,000 non GAAP EPS.

However, in 2023, our business experienced a slowdown The challenging economic, environmental and global crisis had a significant impact on sales of our hardware products primarily due to the high interest rates environment from potential sales to a recurring business model driven by shift towards cloud services. This has resulted in 11% decrease in revenue, a notable decline in earnings. [indiscernible] Then turning to 24, While we anticipated similar trends continuing, I'm pleased to report that year 2024, a significant value stabilization in comparison to the drop off phase in 2023. With a minimal revenue decline of about 1% and a comparable effect on earnings. 35 of net cash flow from operations further underlines our success in 2024. Furthermore, in 2024, we began a new journey driven by combining the power of AI and business force application to explore new opportunities for the company. As you will hear shortly, we are embarking on a new direction gradually shifting our focus from connectivity business AI powered value added services business. This area appears to hold significant potential for our growth. Consequently, we are optimistic that 2025 will mark a year of reversal. With plans in place for renewed revenue growth and increased profits.

More importantly, we aim to establish a leading position in the emerging market focused on AI driven value added services within the UCaaS and CX segments. Now to full quarter results. Our enterprise UCaaS and CX business did very well in the quarter. Related revenue accounted for 92% of revenues 4th quarter, highlighted by Microsoft Business at 13%, up 30% in the quarter. This represents the highest quarterly growth rate this year. Full year Microsoft Business increased 6%. In the Customer Experience business, we made progress as planned and our growth in our CXLive business and healthy pipeline for CXLive services supports positive outlook for 2025. We also did very well in our services business. Overall services grew 10.9% year over year and accounted for 54.5 percent of revenues. Professional Managed Services grew percent year over year. With the U. K. Market continued growth of above 15% CAGR for coming years. We expect our live managed services growth to continue at such rates in coming years. Going back to enterprise, live teams grew 30% in the quarter and accounted for 47% of the overall Microsoft business. Full year 2024 Live Teams increased 33% and represented 47% of Microsoft Business. This growth coupled with 30% growth in VoiceAI Business for the full year 2024 contributed to us ending 2024 with an annual recurring revenue at 65,000,000 dollars representing 35 percent year over year. [indiscernible] It is important to note that at this stage, the majority of revenue from the UCaaS and CX markets are associated with our connectivity year.

What's been developing already 2024 and we should see more of it growing in the year as in the years ahead is a shift in the market demand to focus on complementary value add services for the same UCaaS and CX markets. Just to name a few such services, this include among others, call analytics, Contact Center Solutions recording solution, meeting room solutions, CRM connectivity, and more. As such, with the shift in our focus to offer business voice applications coupled with value added services, we expect to see a rise in demand for our voice AI applications. We are preparing to launch service based on Live Services Platform, a SaaS Unified Service Delivery Platform that has been in development in our company for the past 3 years. This platform integrates connectivity, management and value add services into a single AudioCodes solution which we believe positions us with a competitive market advantage. As previously mentioned, our land and expense strategy supported by our leading SBC Connectivity solution and complemented by additional solution and services has consistently demonstrated our potential of growth. We are now moving into the 2nd phase of this strategy. Utilizing our strong network of enterprise customers, to cross sell value add services, specifically within the realm of voice application that we classify broadly as conversational AI.

To provide some context, our investment in Conversational AI began back in 2018 with the establishment of our VoiceAI Business Unit. [indiscernible] well before With the introduction of GenAI, we have observed a notable increase in customer interest and expansion of use cases, which has justified a significant portion approximately 1 third of our R and D budget dedicated to this area. We believe that our voice AI portfolio has reached a level of maturity and is now receiving increased market recognition for our solution leading us to expect accelerated revenue growth starting in 2025 and continuing thereafter. Consequently, we approach 2025, we will concentrate our internal operation on managing 2 distinct business units. [indiscernible] [indiscernible] I will provide an overview and outline some financial criteria characteristics of these 2 business units to enhance investors' understanding of the AudioCodes current operations. [indiscernible] Starting with our connectivity business. This business encompasses our traditional voice infrastructure solution and service operations which are designed for large enterprises in the UC and CX markets. In 2024, this segment has generated approximately 95% of the company's [indiscernible] Operating for the past 15 years, this is a well established ecosystems. In achieving attractive non GAAP operating margins, that are between 16% 18%.

Solid mature and solid business continues to grow roughly at above 10% annually. As a leading player in this area, we anticipate consistent long term growth in the years ahead. With the advancement of cloud services, we have adapted our voice infrastructure solution, shifting from hardware focused products to software solution and services. Transitioning from traditional capital expenditures or perpetual sales through recurring managed services model is expected to improve both revenue visibility and stability while supporting sustained long term growth. Consequently, we view this business as highly profitable with promising growth potential and significant cash flow from operation. Which will allow us to invest and fund the evolution for our value added services and Voice AI. Now let's discuss our VoiceAI business. We initiated investment in this area back in 2018. From an operational standpoint, we are still in investment phase as a number of voice AI applications we support is rapidly increasing in value added services sector, largely due to the emergence of Gen AI Technology launched by OpenAI back in November 2022. In 20232024, we allocated around $8,000,000 to $10,000,000 of investment each year which has influenced the company's overall financial performance and bottom line. The VoiceAI business saw growth of approximately 30% in 2024 and contributing [indiscernible] about 5% to total revenue.

We expect that this continuous annual investment will further facilitate annual growth rate of 30% to 50% for the VoiceAI business in coming years. As the VoiceAI business offers its voice application and SaaS solution, we foresee an increasing growth in gross margin that will exceed the current company average. Resulting in enhanced gross margin over the next few years. Over the last year, VoiceAI business lines have gone to multiple industry accolades. Including Avoca CIC winning the award for the best Microsoft Teams contact center solution from CX today in February 2024, recognition for best use of AI by the Meeting Insight solution by UC Today in July 2024 and just yesterday an award for meeting insight from Frost and Sullivan for competitive strategy leadership in the AI Business Meeting market. Why we believe we will emerge a leader in the conversational AI field among established players and startups, are uniquely positioned to succeed due to several key factors. First, we possess extensive domain expertise in VoIP telephony network [indiscernible] 18, we have made significant investment in cognitive services technology and AI. Our team is vast experience in developing and delivering SaaS cloud and on premises services. We have proven record in U. K. S. And CCaaS managed services and we have extensive experience in deploying AI solutions further.

That will further strengthen our position. Moreover, the brand trust Worthy, our voice solution are deployed in mission critical UCCX voice infrastructure of 65 out of the Fortune 100 Companies. And 4 out of the top 10 multinational banks. We believe these strengths collectively position us favorably within the competitive landscape of conversational AI for BIM's voice application. Now before turning it to more detailed business line discussion, let me quickly shift into the Q4 profitability metrics. Our non GAAP gross margin for the quarter was 66.5 percent falling within our long term target range of 65% to 68% and an improvement from the previous quarter of 65.6%. In the 4th quarter, non GAAP operating expenses rose to 33.4 $1,000,000 up from $32,500,000 in the 3rd quarter. This increase is mainly attributed to increased investment in marketing, travel and cloud services aimed at bolstering business growth as we move towards 2025. The hiking expenses can be primarily linked to enhanced team in higher travel costs, all focused on driving revenue growth especially in Live Minute Services and VoiceAI. In terms of workforce, we concluded 2 2024 with 946 employees, an increase from 9.35 in the Q3, but a slight decline from 9.50 in the 4th quarter 2023.

Adjusted EBITDA for the 4th quarter was 8,500,000 reflecting a 13.7% margin compared to $7,900,000 or 13.1 in the previous quarter. For the entire year, adjusted EBITDA reached $31,400,000 Lastly, in a positive development, net cash from Russian activities was 53 [indiscernible] For the core, 35.3 $1,000,000 for the full year 2024. Clearly, this robust cash flow generated supports our positive outlook regarding our capacity to keep investing in and expanding our business moving forward. Now to the guidance front. Concerning our growth strategies for connectivity and value add, services sector in 2025, We aim to sustain growth of 20% to 26% in the connectivity sector with a target annual recurring revenue of $78,000,000 to $82,000,000 In the value added services sector, anticipate booking will increase by over 40% year over year to exceed $17,000,000 dollars In light of these [indiscernible] along with operational momentum and strong pipeline in our Live managed services and VoiceAI, We are setting our guidance as Euron mentioned earlier to revenue guidance of $246,000,000 to 2 $154,000,000 for 2025 with full year non GAAP EBITDA guidance of $34,000,000 to $38,000,000 This projections take into account continued strong growth in the conversational AI space and stable connectivity outlook.

Assuming no significant changes in the macroeconomic landscape, Let me move a bit to give more background on Microsoft's business. Regarding Strategic Business Segments, as previously noted, Microsoft Teams experienced 13% increase year over year in the 4th quarter marking the highest quarter growth of the year. The full year growth for Microsoft Business [indiscernible] Looking at the recurring versus capital expenditure Aspects, our live booking in 4th quarter search by 30% year over year with live booking constituting 47% an increase from 40% in the same year last year. Consequently, this time CapEx segment of the teams accounted for 53%, down from 60% in the previous year quarter. The activity [indiscernible] With total contract value booking exceeding 20,000,000 dollars for the entirety of 2024, we observed annual contract value growth surpassing 25% compared to prior year. A significant factor in success within this domain is the live services platform, which combines connectivity management and value added services. This platform facilitates faster development for large enterprises large enterprise accounts on one end and then enables quick onboarding for small and medium sized. Businesses. As we look ahead to 2025 and beyond, market forecast indicated the UKAS market will likely continue to expand its rights exceeding 20% throughout 2027.

The market softens phone ecosystem has shown robust growth adding over 3,000,000 new seats in the past year reaching a total of about 22,000,000 which is small fraction of the estimated $300,000,000 potential for Teams seats. Also, I'm pleased to share that we have recently been focusing on creating a valuable opportunity for ourselves as we prepare to offer a comparable successful connectivity solution for the Cisco Webex Calling Program. With an estimated 16,000,000 seats and an additional 3,000,000 seats in the past year. We view this new market segment as an excellent chance to expand our market In the previous discussion, We highlighted the ongoing strength of the Microsoft ecosystem especially within the education sector. I'm happy to report that this momentum has not only persisted but has also intensified. Here are a few significant achievements from the core. The first success involves a major state university system comprising of over 50 campuses. Recently, we finalized a master communication partner at the campuses aim to enhance their UC infrastructure in coming years. In the Q4 alone, We secured contracts value in the low single digit million which includes LivePro managed services, professional services and capital expenditures for high performance.

Notably, this figure represents the initial commitment from 9 campuses only out of the 50 and is just a small part of the total number university available. We anticipate that more Getting to our CX business in 4th quarter CX revenue increased by 12% compared to the 3rd quarter. Throughout the 4th quarter, we successfully finalized several significant agreements with partners and clients across North America, Kala and India. Despite the challenges associated with the marketing call center voice infrastructure to the cloud. Many customers are choosing our Live CX service. During Q4, we secured a contract exceeding 1,000,000 for LifeCx in Brazil. With a banking institution to assist in their network migration to the cloud. In North America, we established multiple LiveCx agreements in Q4 with leading banking and financial organizations. By [indiscernible] CX partnership with an Indian BPO to transition their multiregion voice infrastructure to the cloud. They went live within a few weeks using our live service delivery platform, which typically takes months with traditional deployment methods. Our efforts to encourage partners to adopt our live platform resulted in a new contract with the North American Tier 1 SI System Integrator that has major Genesys and Cisco CX practices.

We will continue working to onboard more partners onto our platform to expand the reach of our LiveCX service. Now moving to details about Voice AI Business. Voice AI Business, as mentioned before, before, grew 30% 24%, contributing nice to the overall company revenue growth. Development of [indiscernible] customer demand for AI driven business [indiscernible] With new opportunities emerging in this sector and booking nearly reaching in 'twenty four. It is anticipated that demand will remain steady and this segment is projected to grow by 40% to 50 percent in 2025. Let me make quick run through 2 or 3, the businesses in the VoiceAI area. The first is the VoiceAI Connect, Our primary target of large enterprises in North America and Europe that develop and deploy multiple custom voicebots and agent assist solution to serve contact center solutions. Following over 3, 4 years of developments, the solution which is SBC based has reached mature stage and is highly appealing to large corporation. Additionally, we created a derivative product, a cloud sales services application named Livehub. This platform enables both developers to rapidly test or onboard both application within minutes, making it a highly attractive to develop a software solution.

Another exciting development is our recent soft launch of our real time translation capability in mid November. We have seen strong market interest resulting in multiple proof of concepts with existing and new customers. 2024, sales grew by over 30% and we anticipate maintaining the same growth rate in 25 Turning to Vocus CIC, this is our AI First Azure based contact center solution for Microsoft Teams. When combined with our calling solution for Microsoft Teams Phone, Locus CACO offers a comprehensive and advanced calling and contact center solution. In 2024, we successfully delivered an expanded deployment with large enterprises in North America, EMEA and APAC. In some of these deployments, we were successfully displacing and winning against key competitors. [indiscernible] this business bookings grew by approximately 35%. We're now planning for a growth of 50% in 2025. Now turning into Meeting Insights. This has been an eventful past few months for Meeting Insights. On all fronts. First, we are thrilled to have Frost and Sullivan present us with Best Practices Competitive Strategy Leadership Award in the AI for Business Meetings market. The announcement was made yesterday and will make it public income. Days. We believe this validates the vision of serving a centralized organizational knowledge hub.

Breaking down silos by unlocking valuable insights from meetings. Across major UC platforms. Even before this recognition, we already saw step function increase in customer interest in meeting ESAT across all geos with full quarter proof of concept trials at nearly 2.5 times the level from the previous quarter. January proof of concepts off to a new good start and so would expect another record proof of concept in the Q1 of 2025. In terms of product development, production updates, I'll name a few. Recently unveiled intelligent room solution by powering populating our own video conference devices with Meeting ESAN such that all meeting participants will automatically receive auto generated AI meeting summaries. This move enhances value proposition to users by bringing to bear the full capabilities of our portfolio and can spare further interest and adoption of meeting insights. We're also adding bring your own storage option which expands the addressable market to customers who are required to have the recording storage on their preferred or private cloud. Since the announcement of Zoom Meeting Support in late October, we have seen a good number of meetings contacted in Zoom. Environment validating our vision and value proposition of centralized knowledge repository.

In the next few weeks, we will look to offer integrated major CRM platforms starting with Salesforce to Meeting Insight. We believe this will be a very Input and functionality meeting high demand in the market. We have announced a week ago a new and quite exciting solution in Israel You're talking about operating meeting, is that on prem? This is a meeting solution for organizations seeking highly secured environment for meeting solution. And complete disconnect from the Internet. 1st stages, it is in 1st stages of evolution. Already selling nice in the government application area in Israel. And we intend to operate in international markets in coming months. Very unique offering. We have seen high demand for the solution since it touches the most sensitive areas for management in the government, defense, finance and healthcare markets. To wrap up my presentation, we exited 2024 with good operational momentum. Particularly with the continued strong growth in R2 primary engines, our live family of managed services and voice AI. With the progress we are making in increasing our recurring revenues, and that live currently nearing half of Microsoft Teams bookings, we believe we have laid the foundation to support sustainable and asset top line and margin expansion in 2025 and beyond.

And with that, I've concluded my presentation and I'd like to move over to the Q and A session. Thank you.

Ladies and gentlemen, at this time, we will be conducting a question and answer session. Our first question is coming from Ryan McWilliams [indiscernible] Your line is live. Hey, guys. This is Damian Coggin on for Ryan O'Killiams. Dave, I've seen the question. Great to see solid growth in services revenue in the quarter. You help us understand what is driving your confidence for top line growth in 2025 and beyond Are customers more optimistic about their spend in 2025 or this being driven by AudioCodes AI opportunity?

As I've mentioned in my previous presentation, we have seen a pickup in the 4th quarter in new projects and booking. I believe in the Q4 we saw a record backlog of total contract value signed for more than $20,000,000 that compares roughly to an average $15,000,000 throughout the year. So we have seen nice pickup in the 4th quarter. Again, we believe that with the advent of Genai and Copilot [indiscernible] there will be more reason for enterprises to adopt AI and Gen AI to deal with TIM's meetings and TIM's calls. And therefore, we believe that there will be more deployments of Microsoft Teams phone in the market.

Great. Thanks, Avtai. And then for the CCAS demand in the quarter, how did that fair compared to 3Q? And then are you seeing increased attention from buyers on voice AI?

So the answer is is It's yes. But first, we are substantially increasing the capacity of the LiveCX services we're offering. Prior to moving to cloud, enterprises were usually aided by partners who really took care of most of the installation and operations day 2 and on. With the move to cloud, much of these partners were left with no ability to support the enterprises. And therefore, that support needs to come from the vendors themselves, which created kind of a gap in the market. We have identified that [indiscernible] 2024 now have a substantially fuller portfolio of FlyCX services. And I think we just had a very substantial win. I think I've mentioned it. It is with a large one of the largest North American system integrator that deals with CX projects mainly in the Genesys and Cisco environment. So that offering really represents substantially faster deployments of voice networks within the move the migration from on prem to cloud. And this is where we find a lot of Interest also as you have mentioned, there's a trend of applying AI to contact center recordings. [indiscernible] analysis and analytics of all those calls just to find out more information.

So analysts that will be analyzing agent calls be able to hand over to management trends and more important insights into what's going on. And we're not talking about single sessions, but also when you talk about multitude of sessions, you can talk about tens and hundreds of session where Gena AI helps you to identify [indiscernible] Great. Thanks, guys. Sure. Thank you. Our next question is coming from Ryan Kuntz Needham and Company. Great. Thanks for the question.

Great to the traction on Microsoft picking up there around Teams and what kind of trends you're seeing relative to operator voice connections into Teams, is it are you seeing a trend over toward this new [indiscernible] or still a lot of direct routing and how does that impact your attach rate for [indiscernible] Thank you.

Right. Well, we've seen [indiscernible] the encouragement of using Operator Connect over a direct route. So We do see organization small organization mainly interested more. Is it an overall [indiscernible] We've not been exposed to such trends. So yes, the movie the trend is moving from SBC's aircraft to operator connect. But at this stage, we still do not see a big increase in usage in the market.

Got it. Great. And just at a high level, you talked about some big customer wins here in Brazil and the systems integrator North America. I wonder if you're seeing a trend toward larger, fewer larger customer wins or are you seeing more activity down market where you maybe have a higher number of smaller customer opportunities in the pipeline?

Thanks.

Okay. Thanks. The question because that really allows me to elaborate a bit about segmenting the market into 2 key areas. On the enterprise space, we see here a [indiscernible] trend of large enterprises. Adopting TIMES year by year. And as I've mentioned before, we believe that the advent of AI and Copilot solution will drive more enterprise seats towards using [indiscernible] meetings and calls. So but in this space, we are generally very dominant leader and we do not see much competition. So here, the growth is well. Now touching the SMB space, as you alluded to it, There's definitely competition over there, right? I mean, We know that Cisco is leading the space with its our relationship with the world largest service providers. And then you have Zoom playing in that area and Teams Microsoft Teams also trying There I believe it's going to be more more competition. However, we believe that the platform we will be introducing 2nd core, the live platform delivery delivering value add services with so many unique AI driven applications such as contact center, recording, meeting solution, analytics, CRM Connection, and stuff, we believe that being very strong technologically we do have an advantage with coming up with one of the best platform you'll see in the market.

And therefore, we believe that we will be a strong player in that. So all in all, I mean, we have a 2 pronged strategy and we believe we will be successful in both. Great. Thanks, Shetai.

Thank you.

Thank you. Our next question is coming from Samad Samana with Jefferies. Your line is live. Hey, guys. This is Billy Fitzsimmons on for Samad.

Maybe to start, a couple of months back, you announced support for AudioCodes Meeting Insights for Zoom meetings. Obviously, Zoom also has their internal AI companion Shyamtak, can you just talk about differentiation between your solution and Zoom? In house solution? And maybe traction you're seeing since launch of customers.

Right.

So meeting ESAT is targeting to become a UC agnostic solution, meaning that our solution is an enterprise level solution and in every enterprise you have no no matter what type of you see solution that enterprise has adopted, it takes us as an example. We are using Microsoft Teams. We have often a lot of Zoom calls we are called in and or sometimes when we need to talk to the government here in Israel, it's a Google Meet session. So you want 1 centralized solution, enterprise solution that should be able to basically contain all of the different sessions from both Microsoft Teams Cisco Webex calling, [indiscernible] Meetings and Google Meet Meetings. And therefore, our solution will allow that. Anyone using just Zoom will simply not be able to add to it costs coming from different environments. So that is a major strategy in our solution of becoming use agnostic. And also, we believe that the fact that we are dealing with larger enterprises, which have a finer requirements And you can find executives with different research and market and business driven questions that we can answer within Meeting ESAT because we use custom prompts We believe that we will see that less in other solution.

One of them could be Zoom. AI companion. So we believe that the fact that we're dealing with large enterprises will make our solution substantially more extensive and providing more detailed solutions.

And then more broadly, obviously, the business has been going through this kind of subscription transition shift to more recurring ratable revenue. Can you just help us think a little bit more next year about kind of the revenue mix In the longer term, is there a point where the product revenue and some of the legacy stuff in there should start to bottom Or should we expect perennial declines there for this services support side to make up for that in terms of growth.

Right. [indiscernible] earlier in the call, we're glad that in 2024 we saw the drop in legacy business drop stabilizing. Meaning, contrary to the 11% drop in 'twenty three, we went down only 1% in 20 4. We believe that the trend will continue in 'twenty five, meaning we'll have less and less a drop in legacy gears such as gateways and hardware based routers and SBCs. So on that front, the business will stabilize. We then see increased use of services And as I mentioned before, it's I think we're stepping into a new era of business voice application, which is all software and cloud services, SaaS solutions. And for example, we added 2024 with VoiceAI revenues at about I believe it was $12,000,000 and we're targeting $18,000,000 in So we're targeting 50%. And quite frankly, I believe that we are not yet in a phase where those solutions are mature enough. So as those solution gets more and more mature, I believe that the growth rates will intensify. So we're building much upon our ability to [indiscernible] revenues. So combining the 2, halt of the drop decline in legacy and emerging of VoiceAI. And obviously, as we've said before, the live business which is growing 35% a year I think we set for a good year in 25 And then if I could sneak in one follow-up [indiscernible] You guys obviously guided to EBITDA for next year, but could you maybe go a step further and just help us think even the high level about kind of the individual OpEx lines next year where are you making kind of the incremental headcount investments and maybe where are you kind of pairing back spending Obviously, there have been a lot of AI products, but R and D spend is actually down over the past couple of years.

We expect that line, for example, to pick up a little bit next year in terms of OpEx spending?

Yes. In terms of OpEx, we are planning to invest more only at the area of sales and marketing. Definitely not at the G and A and the R and D. And all in all, [indiscernible] $31,000,000 We believe for 2025 and that's how we budgeted it, the growth topics will be 1% maybe 2%, not more. And it's mainly will be at the sales and marketing area.

Awesome. Super helpful. Thank you, Shantanu and Niran. Appreciate the answers.

Thank you. As we have no further questions at this time, I would like to turn the call back over to Mr. Adelesberg for any closing remarks.

I would like to thank everyone who attended our conference call today. With continued good business momentum in our enterprise operations, and good underlying market growth trends in the UK, CX and VoiceAI. We believe we are transitioning the business towards growth and growing profitability in coming years. We look forward to your participation in our next quarterly conference call. Thank you all. Have a nice day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.