AudioCodes Reports Fourth Quarter and Year End 2007 Results

Quarterly Revenues Rise 6.0 Percent Sequentially to $42.8 Million


LOD, Israel, Feb. 4, 2008 (PRIME NEWSWIRE) -- AudioCodes (Nasdaq:AUDC), a leading provider of Voice over Packet (VoP) technologies and Voice Network products, today announced financial results for the fourth quarter and fiscal year ended December 31, 2007.

Revenues for the fourth quarter ended December 31, 2007 were a record $42.8 million compared to $40.4 million for the quarter ended September 30, 2007 and $42.6 million for the quarter ended December 31, 2006. Fourth quarter revenues grew 6.0% sequentially and increased 0.5% compared to the fourth quarter of 2006. GAAP net income was $1.3 million, or $0.03 per diluted share, for the fourth quarter of 2007 compared to $225,000, or $0.01 per diluted share, for the third quarter of 2007 and $671,000, or $0.02 per diluted share, for the corresponding period last year.

Revenues for the year ended December 31, 2007 were a record $158.2 million compared to $147.4 million in 2006, a year-over-year increase of $10.9 million, or 7.4%. The Company reported a net loss of $1.8 million, or $0.04 per diluted share, for 2007 compared to net income of $6.9 million, or $0.16 per diluted share, for 2006.

Non-GAAP net income was $3.7 million, or $0.08 per diluted share, in the fourth quarter of 2007 compared to non-GAAP net income of $2.8 million, or $0.06 per diluted share, in the third quarter of 2007 and $3.6 million, or $0.08 per diluted share, in the fourth quarter of 2006. Non-GAAP net income in 2007 was $8.3 million, or $0.19 per diluted share, compared to non-GAAP net income of $16.6 million, or $0.37 per diluted share for 2006. Non-GAAP net income excludes (i) stock-based compensation expenses and (ii) amortization expenses related to the Nuera, Netrake and CTI Squared acquisitions. 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 release.

Cash flow from operating activities was $9.0 million in the fourth quarter of 2007, and totaled $12.4 million in 2007, compared to $6.6 million in 2006.

Cash and cash equivalents, short-term and long-term marketable securities, short-term and long-term bank deposits and structured notes were $143.0 million as of December 31, 2007 compared to $134.2 million as of September 30, 2007, and $133.6 million as of December 31, 2006. The year-over-year net increase was primarily attributable to positive cash flow from operations and financing activities.

"AudioCodes is pleased to report record quarterly and annual revenues and a third consecutive quarter of sequential top line growth driven primarily by the strength of our networking business," stated Shabtai Adlersberg, Chairman of the Board, President and CEO of AudioCodes. "With our networking business growing over 30% year over year for the third straight year, and surpassing $100 million in 2007, we remain confident in the continued expansion of our networking business in coming years. Leading the growth were sales of CPE devices and mid-density Media Gateways, both of which grew above 40% in 2007. In addition to growing revenues, we were successful in maintaining better control over operational expenses which allowed us to finish 2007 with efficiency gains that returned non-GAAP operating income margins back to 8% in the fourth quarter and contributed to $9.0 million of cash flow from operations in the last three months of 2007. Based on new customers and OEM design wins in 2007, the continued evolution of VoIP into the telecom mainstream, consolidation in our industry, increased investments in our sales and customer support worldwide and further investments in our technology and products, we believe we are well positioned for continued growth in 2008," concluded Mr. Adlersberg.

Conference Call & Webcast Information

AudioCodes will conduct a conference call on Tuesday, February 5, 2008 to discuss the fourth quarter and year end 2007 financial results, which will be simultaneously Webcast at 9:00 A.M. Eastern Time. Investors are invited to listen to the call live via Webcast at the AudioCodes corporate Website at www.audiocodes.com.

About AudioCodes

AudioCodes Ltd. (Nasdaq:AUDC), provides innovative, reliable and cost-effective Voice over IP (VoIP) technology, Voice Network Products, and Value Added Applications to Service Providers, Enterprises, OEMs, Network Equipment Providers and System Integrators worldwide. AudioCodes provides a diverse range of flexible, comprehensive media gateway, and media processing enabling technologies based on VoIPerfect -- AudioCodes' underlying, best-of-breed, core media architecture. The company is a market leader in VoIP equipment, focused on VoIP Media Gateway, Media Server, Session Border Controllers (SBC), Security Gateways and Value Added Application network products. AudioCodes has deployed tens of millions of media gateway and media server channels globally over the past ten years and is a key player in the emerging best-of-breed, IMS based, VoIP market. The Company is a VoIP technology leader focused on quality and interoperability, with a proven track record in product and network interoperability with industry leaders in the Service Provider and Enterprise space. AudioCodes Voice Network Products feature media gateway and media server platforms for packet-based applications in the converged, wireline, wireless, broadband access, cable, enhanced voice services, video, and Enterprise IP Telephony markets. AudioCodes' headquarters are located in Israel, with R&D in the U.S. Other AudioCodes' offices are located in Europe, India, the Far East, and Latin America. For more information on AudioCodes, visit 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; 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: 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, Ardito, AudioCoded, NetCoder, TrunkPack, VoicePacketizer, MediaPack, Stretto, Mediant, VoIPerfect and IPmedia, OSN, Open Solutions Network, What's Inside Matters, Your Gateway To VoIP, 3GX and Nuera, Netrake, InTouch, CTI(2) and CTI Squared are trademarks or registered trademarks of AudioCodes Limited. All other products or trademarks are property of their respective owners.



                     Summary financial data follows

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

                                               Dec. 31,    Dec. 31,
                                                 2007        2006
                                              ---------   ---------

 ASSETS

 CURRENT ASSETS:
  Cash and cash equivalents                   $  75,063   $  25,171
  Short-term bank deposits and structured
   notes                                         18,065      28,658
  Short-term marketable securities and
   accrued interest                              17,244      29,422
  Trade receivables, net                         25,604      30,501
  Other receivables and prepaid expenses          6,592       3,309
  Inventories                                    18,736      16,093
                                              ---------   ---------

 Total current assets                           161,304     133,154
                                              ---------   ---------

 LONG-TERM INVESTMENTS:
  Long-term bank deposits and structured
   notes                                         32,670      30,435
  Long-term marketable securities                    --      19,942
  Investments in companies                        1,343       3,999
  Deferred tax assets                             2,058       3,742
  Severance pay funds                             9,799       7,231
                                              ---------   ---------

 Total long-term investments                     45,870      65,349
                                              ---------   ---------

 PROPERTY AND EQUIPMENT, NET                      7,094       7,847
                                              ---------   ---------

 INTANGIBLE ASSETS, DEFERRED CHARGES AND
  OTHER, NET                                     19,007      21,853
                                              ---------   ---------

 GOODWILL                                       119,855     108,853
                                              ---------   ---------

 Total assets                                 $ 353,130   $ 337,056
                                              =========   =========

   LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES:
  Trade payables                              $   8,849   $   7,522
  Other payables and accrued expenses            28,780      28,139
                                              ---------   ---------

 Total current liabilities                       37,629      35,661
                                              ---------   ---------

 DEFERRED TAX LIABILITIES                         6,606       7,780
                                              ---------   ---------

 ACCRUED SEVERANCE PAY                           11,168       7,915
                                              ---------   ---------

 SENIOR CONVERTIBLE NOTES                       121,198     121,015
                                              ---------   ---------

 Total shareholders' equity                     176,529     164,685
                                              ---------   ---------

 Total liabilities and shareholders' equity   $ 353,130   $ 337,056
                                              =========   =========

 AUDIOCODES LTD. AND ITS SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 ----------------------------------------------------------
 U.S. dollars in thousands, except share and per share data

                                Year ended        Three months ended
                                December 31,         December 31,
                           --------------------  --------------------
                              2007       2006       2007       2006
                           ---------  ---------  ---------  ---------
                                                     (Unaudited)
                                                 --------------------

 Revenues                  $ 158,235  $ 147,353  $  42,840  $  42,613

 Cost of revenues             69,185     61,242     18,673     18,124
                           ---------  ---------  ---------  ---------

 Gross profit                 89,050     86,111     24,167     24,489

 Operating expenses:
  Research and
   development, net           40,706     35,416     10,086     10,701
  Selling and marketing       42,900     37,664     10,818     11,218
  General and
   administrative              9,637      8,766      2,437      2,530
                           ---------  ---------  ---------  ---------

 Total operating expenses     93,243     81,846     23,341     24,449
                           ---------  ---------  ---------  ---------

 Operating income (loss)      (4,193)     4,265        826         40
 Financial income, net         2,670      3,817        784        754
 Equity in losses of
  affiliated companies         1,097        916        346        244
                           ---------  ---------  ---------  ---------

 Income (loss) before
  taxes on income             (2,620)     7,166      1,264        550
 Taxes (tax benefit) on
  income (loss), net            (772)       289        (75)      (121)
                           ---------  ---------  ---------  ---------

 Net income (loss)         $  (1,848) $   6,877  $   1,339  $     671
                           =========  =========  =========  =========
 Basic net earnings
  (loss) per share         $   (0.04) $    0.16  $    0.03  $    0.02
                           =========  =========  =========  =========
 Diluted net earnings
  (loss) per share         $   (0.04) $    0.16  $    0.03  $    0.02
                           =========  =========  ---------  ---------
 Weighted average number
  of shares used in
  computing basic net
  earnings (loss) per
  share (in thousands)        42,699     41,717     43,080     42,079
                           =========  =========  =========  =========
 Weighted average number
  of shares used in
  computing diluted net
  earnings (loss) per
  share (in thousands)        42,699     43,689     43,938     42,846
                           =========  =========  =========  =========

 AUDIOCODES LTD. AND ITS SUBSIDIARIES
 NON-GAAP PROFORMA STATEMENTS OF OPERATIONS
 ----------------------------------------------------------
 U.S. dollars in thousands, except share and per share data

                             Year ended          Three months ended
                            December 31,            December 31,
                       ---------------------   ---------------------
                          2007        2006        2007        2006
                       ---------   ---------   ---------   ---------
                            (Unaudited)             (Unaudited)
                       ---------------------   ---------------------

 Revenues              $ 158,235   $ 147,353   $  42,840   $  42,613

 Cost of revenues
  *) **)                  66,079      59,381      17,960      17,277
                       ---------   ---------   ---------   ---------

 Gross profit             92,156      87,972      24,880      25,336

 Operating expenses:
  Research and
   development, net *)    37,695      32,363       9,456       9,873
  Selling and marketing
   *) **)                 38,380      33,514       9,779       9,827
  General and
   administrative *)       8,770       7,360       2,209       2,215
                       ---------   ---------   ---------   ---------

 Total operating
  expenses                84,845      73,237      21,444      21,915
                       ---------   ---------   ---------   ---------

 Operating income          7,311      14,735       3,436       3,421
 Financial income, net     2,670       3,817         784         754
 Equity in losses of
  affiliated companies     1,097         916         346         244
                       ---------   ---------   ---------   ---------

 Income before taxes on
  income                   8,884      17,636       3,874       3,931
 Taxes on income, net        561         994         224         293
                       ---------   ---------   ---------   ---------

 Non-GAAP net income   $   8,323   $  16,642   $   3,650   $   3,638
                       =========   =========   =========   =========

 Non-GAAP diluted net
  earnings per share   $    0.19   $    0.37   $    0.08   $    0.08
                       =========   =========   =========   =========

 Weighted average
  number of shares used
  in computing non-GAAP
  diluted net earnings
  per share (in
  thousands)              43,740      50,605      43,955      50,466
                       =========   =========   =========   =========

*) Excluding stock-based compensation expenses related to options granted to employees and others as a result of the adoption of SFAR 123R as of January 1, 2006

**) Excluding amortization of intangible assets related to the acquisitions of Nuera and Netrake during the third quarter of 2006 and to the acquisition of CTI Squared during the second quarter of 2007.

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

                                 Year ended        Three months ended
                                December 31,          December 31,
                            -------------------   -------------------
                              2007       2006       2007       2006
                            --------   --------   --------   --------
                                (Unaudited)           (Unaudited)
                            -------------------   -------------------

 GAAP Net income (loss)     $ (1,848)  $  6,877   $  1,339   $    671
                            ========   ========   ========   ========
 GAAP Diluted net earnings
  (loss) per share
                            $  (0.04)  $   0.16   $   0.03   $   0.02
                            ========   ========   ========   ========
 Cost of revenues:
  Stock-based
   compensation (*)              613        620        131        200
  Amortization
   expenses(**)                2,493      1,241        582        647
                            --------   --------   --------   --------
                               3,106      1,861        713        847
 Research and development,
  net:
  Stock-based
   compensation (*)            3,011      3,053        630        828

 Selling and marketing:
  Stock-based
   compensation (*)            3,476      3,628        778      1,124
  Amortization
   expenses(**)                1,044        522        261        267
                            --------   --------   --------   --------
                               4,520      4,150      1,039      1,391
 General and
  administrative:
  Stock-based
   compensation (*)              867      1,406        228        315

 Income tax effect(**)        (1,333)      (705)      (299)      (414)
                            --------   --------   --------   --------

 Non-GAAP Net income        $  8,323   $ 16,642   $  3,650   $  3,638
                            ========   ========   ========   ========
 Non-GAAP Diluted net
  earnings per share
                            $   0.19   $   0.37   $   0.08   $   0.08
                            ========   ========   ========   ========

*) Stock-based compensation expenses related to options granted to employees and others as a result of the adoption of SFAR 123R as of January 1, 2006.

**) Amortization of intangible assets related to the acquisitions of Nuera and Netrake during the third quarter of 2006 and to the acquisition of CTI Squared during the second quarter of 2007.

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



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

                              Year ended          Three months ended
                              December 31,           December 31,
                         --------------------    --------------------
                           2007        2006        2007        2006
                         --------    --------    --------    --------
                                                     (Unaudited)
                                                 --------------------
 Cash flows from
  operating activities:
 ----------------------
  Net income (loss)      $ (1,848)   $  6,877    $  1,339    $    671
  Adjustments required
   to reconcile net
   income to net cash
   provided by
   operating
   activities:
   Depreciation and
    amortization            7,789       5,543       1,867       1,916
   Net loss from sale
    of marketable
    securities                 --          15          --          --
   Amortization of
    marketable
    securities premiums
    and accretion of
    discounts, net             39         225         (11)         52
   Equity in losses of
    affiliated
    companies               1,097         916         346         244
   Increase (decrease)
    in accrued
    severance pay, net        356         203         152         (30)
   Stock-based
    compensation
    expenses                7,967       8,707       1,767       2,467
   Amortization of
    senior convertible
    notes discount and
    deferred charges          203         199          52          50
   Increase in accrued
    interest on
    marketable
    securities, bank
    deposits and
    structured notes         (519)       (130)        (92)       (476)
   Decrease (increase)
    in deferred tax
    assets                  1,684        (298)      2,020        (255)
   Decrease (increase)
    in trade
    receivables, net        5,014      (9,751)      3,987      (4,440)
   Decrease (increase)
    in other
    receivables and
    prepaid expenses       (1,504)      1,457        (867)      1,796
   Increase in
    inventories            (2,643)     (1,954)       (970)       (265)
   Increase (decrease)
    in trade payables       1,263      (2,671)      2,085      (1,591)
   Increase (decrease)
    in other payables
    and accrued
    expenses               (5,181)     (2,005)     (2,413)        732
   Decrease in deferred
    tax liabilities        (1,331)       (703)       (298)       (414)
                         --------    --------    --------    --------

 Net cash provided by
  operating activities     12,386       6,630       8,964         457
                         --------    --------    --------    --------

 Cash flows from
  investing activities:
 ----------------------
  Investment in short-
   term bank deposits     (18,065)         --     (18,065)         --
  Investment in long-
   term bank deposits     (11,000)    (20,000)         --          --
  Proceeds from sale
   and maturity of
   marketable
   securities              31,600       9,979       9,000       5,000
  Proceeds from bank
   deposits                28,700      51,300          --          --
  Investments in
   companies               (1,003)     (3,453)         --      (1,802)
  Payment for
   acquisition of
   Nuera*)                     --     (82,520)         --          --
  Payment for
   acquisition of
   Netrake*)                   --     (13,836)         --          --
  Payment for
   acquisition of CTI
   Squared*)               (4,897)         --          --          --
  Purchase of property
   and equipment           (2,629)     (3,067)       (574)     (1,352)
  Proceeds from sale of
   property and
   equipment                   --          --          --          --
  Proceed from
   structured notes
   called by the bank      10,000          --      10,000          --
                         --------    --------    --------    --------

 Net cash provided by
  (used in) investing
  activities               32,706     (61,597)        361       1,846
                         --------    --------    --------    --------
 Cash flows from 
  financing activities:
 ----------------------
  Proceeds from issuance
   of shares upon exercise
   of options and employee
   stock purchase plan      4,800      9,181         158        216
                         --------   --------    --------   --------

 Net cash provided by
  financing activities      4,800      9,181         158        216
                         --------   --------    --------   --------

 Increase (decrease) in
  cash and cash
  equivalents              49,892    (45,786)      9,483      2,519
 Cash and cash 
  equivalents at the 
  beginning of the
  period                   25,171     70,957      65,580     22,652
                         --------   --------    --------   --------

 Cash and cash 
  equivalents
  at the end of the 
  period                 $ 75,063   $ 25,171    $ 75,063   $ 25,171
                         ========   ========    ========   ========

*) Excluding cash and cash equivalents



            

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