AudioCodes Ltd (AUDC) 2024 Q1 法說會逐字稿

Good morning, everyone, and welcome to AudioCodes first-quarter 2024 earnings conference call.

At this time, all participants are in a listen-only mode and the floor will be open for questions after the presentation.

(Operator Instructions) Please note this conference is being recorded.

I will now turn the conference over to your host, Mr. Roger Chuchen.

Roger, over to you.

Thank you, operator.

Hosting the call today are Shabtai Adlersberg, President and Chief Executive Officer; and Niran Baruch, Vice President of Finance and Chief Financial Officer.

Before we begin, I would like to remind you that information provided during this call may contain forward-looking statements relating to AudioCodes' business outlook, future economic performance, product introductions, 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 US federal securities law.

Forward-looking statements are subject to various risks and 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 effects 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 the demand for existing products, the impact of competitive products and pricing on AudioCodes and its customers, products and markets.

Timely product and technology development, upgrades and ability to manage changes in market conditions as needed, possible need for additional financing, the ability to satisfy covenants in the company's loan agreements, possible disruptions from acquisitions, believe AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business, possible adverse impact of the COVID-19 pandemic on our business and results of operations.

The effects of the current terrorist attacks and buy from us and Warren hostilities between Israel Hamas and Israel and Hezbollah, as well as possibility that this could develop into a broader Asian conflict involving Israel with other parties may affect our operations and may limit our ability to produce and sell our solutions.

Any disruption in 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 AudioCodes' filings with the US 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 as provided a full reconciliation of the non-GAAP net income and net 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'd 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 after the conclusion of the call.

With all that said, I'd like to turn the call over to the Shabtai.

Shabtai, please go ahead.

Thank you, Roger.

Good morning, and good afternoon, everybody.

I would like to welcome all to our first quarter 2024 conference call.

With me this morning 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 in the industry.

We will then turn these into the Q&A session.

Niran?

Thank you, Shabtai, and hello, everyone.

Before I start my full 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.

Revenues for the first quarter were $60.1 million, an increase of 1.5% over the $59.2 million reported in the first quarter of last year.

Services revenues for the first quarter were $31.5 million, up 3.3% over the year-ago period.

Services revenues in the first quarter accounted for 52.5% of total revenues.

The amount of deferred revenues as of March 31, 2024 was $80.5 million compared to $77.6 million as of March 31, 2023.

Revenues by geographical region for the quarter were split as follows.

North America 43%, EMEA, 38% Asia Pacific 14% and Central and Latin America 5%.

Our top 15 customers represented an aggregate of 50% of our revenues in the first quarter, of which 38% was attributed to our 11 largest distributors.

GAAP results are as follows.

Gross margin for the quarter was 64.4% compared to 61.7% in Q1 2023.

Operating income for the first quarter was $3.3 million or 5.5% of revenues compared to operating loss of $0.8 million or 1.4% of revenues in Q1 2023.

Net income for the quarter was $2.1 million, or $0.07 per diluted share compared to net loss of $0.2 million or $0.01 cents per diluted share for Q1 2023.

Non-GAAP results are as follows.

Non-GAAP gross margin for the quarter was 65.2% compared to 62.1% in Q1 2023.

Non-GAAP operating income for the first quarter was $6.3 million or 10.5% of revenues compared to $2.9 million or 4.9% of revenues in Q1 2023.

Non-GAAP net income for the first quarter was $5.2 million or $0.17 per diluted share compared to $2.7 million or $0.08 per diluted share in Q1 2023.

At the end of March 2024, cash, cash equivalents, bank deposits, marketable securities and financial investment total $106 million.

Net cash provided by operating activities was $15 million for the first quarter of 2024.

Purchase of property and equipment was $6.8 million in the quarter, significantly higher than historical periods related to leasehold improvements of our new corporate headquarter in Israel.

We expect CapEx to remain elevated in the second quarter, after which we expect this line item to return to historical levels.

Days sales outstanding as of March 31, 2024 were 100 days.

In December 2023, we received court approval in Israel to purchase up to an aggregate amount of $20 million of additional ordinary shares.

The court approval also permits us to declare a dividend of any part of this amount.

The approval is valid through June 18, 2024.

During the quarter, we acquired 302,000 of our ordinary shares for a total consideration of approximately $3.6 million.

As of March 31, 2024, we had $10.2 million available under the approval for the repurchase of shares and our declaration of cash dividends.

On February 6, 2024, we declared a cash dividend of $0.18 per share, the dividend in aggregate amount of approximately $5.5 million was paid on March 6, 2024.

We have recently impaired on the second phase of cost reduction plans that involves the reduction of our headcount by approximately 6%.

This program is expected to result in $6 million annualized cost saving with full run rate expected in the beginning of the third quarter 2024, we are updating our guidance for full year 2024 as follows.

We now expect revenues in the range of $240 million to $250 million, and non-GAAP diluted net income per share of $0.85 to $1.

I will now turn the call back over to Shabtai.

Thank you, Niran.

A first quarter 2024 results were highlighted by healthy revenue growth of 1.5% year over year.

An executing on our strategic plan to evolve the company to become a leader in voice services in the UCaaS and CCaaS markets.

We continued the transition of our business to a recurring revenue model and transformation from a network equipment vendor to software and services company.

On the other end, while growing nicely and strategic business lines such as Microsoft Teams, the customer experience market in conversational AI applications, we saw continued decline in our legacy gateway networking business in the first quarter '24, similar to trends seen in 2023.

As reported by other communication equipment vendors, we believe that the high interest rate environment continues to have an impact on muted business spending, especially when it relates to hardware products.

These two factors, transition to a recurring business model, and larger and earlier than anticipated decline in legacy gateway business of above 20% -- 25% year over year, led to sequential quarterly revenue decline of 5.5%, about 2.5% lower than anticipated earlier in the year.

Coming back to discuss the positive developments in the quarter, we enjoyed a very substantial positive cash flow from operations, $15 million and strengths in our Live managed services operation, in which annual recurring revenue grew 45% in the quarter.

We have also enjoyed increased services backlog.

These developments in the quarter provided us with a conviction about our growth prospects and puts us solidly on track to successfully transform efforts to focus on software and services in our markets.

In terms of key growth areas, a first quarter Microsoft and Teams business grew 8% and 9.6%, respectively, year over year.

Customer Experience business grew 15% year over year, and conversational AI bookings grew around 50% year over year.

Another sign of continued strength in core areas where we focus is the marked increase in our pipeline or created opportunities.

For example, within Microsoft ecosystem, which makes up close to 60% of our business.

A pipeline reached an all-time record, up over 30% year over year and over 20% sequentially.

We believe the secular trend of Unified Communication customer experience convergence is amending our already strong competitive moat in UC voice and driving additional opportunities in customer experience within the Microsoft Teams ecosystem.

We are now the leading Microsoft Teams phone partner to lead a quote, unquote, complete Microsoft Teams calling and contact center combined offerings.

A lot of you already know this we are the number one Microsoft Teams fund partner, enabling a significant share of the current $20 million-plus Teams phone

[PSC handsets].

Would make it less clear what -- I'm sorry, what may be less clear is that Voca CIC or Team space Contact Center as a Service platform is now recognized to be best in class, having recently been awarded the Best Microsoft Teams contact center solution by CX today, based on majority votes of customer experience industry experts.

Our unique team space [UCCX] offering is increasingly getting more market awareness as evidenced by the buzz we receive about our complete Microsoft Teams calling and contact center offering at Enterprise Connect in March 2024, one of the largest, UCCX industry tradeshow events.

Regarding the weakness in top line in the quarter and why we believe it is short-term in nature, I'd like to know the following.

Ongoing sulfur spending due to macro uncertainty and continued elevated interest rates likely cause enterprises and service levels to underspend in the context of annual budget in the early part of the year.

The surface spending impacted mainly legacy and hardware portions of our business, whereas sales of legacy products such as gateways, declined above 25% year over year.

We believe that this is similar phenomenon to what we saw in 2023, in which our first quarter 2023 gateway business was slow out of the gate with stronger spending to come over the course of the year, as customers looked to put the unallocated annual budget to work.

As discussed, growth in strategic major business such as Microsoft customer experience in conversational AI continues to be healthy.

We believe that our growth in silver and services, then conversational AI related solution was true again above 50% year over year should fully offset declines in the legacy pieces of the business starting in 2025.

I should point out that 2024 is the year in which we can -- our continuing strong growth in our life business for Microsoft Teams, which grew around 45% year over year in the quarter.

In addition, with our new Voca CIC solution enabling us to be the first in the industry to offer a complete Microsoft Teams calling and contact center combined offering.

We're looking to proactively cross-sell or subscription based Voca CIC team certified CCaaS to already significant Microsoft Teams installed base of customers.

The other factor contributing to muted growth at this stage is the shift in our revenue model, which trends increasingly towards recurring revenue in lay of historical CapEx model.

This obviously impacts on near-term revenue growth and creates headwinds.

I should mention, though, that this shift is clearly accretive to our long-term top line growth.

Shifting gears to services, services revenue overall accounted for 52.5% of revenues, it grew 2% year over year, on top of strong services revenue generation in the year ago period.

Importantly, our professional services booking remained strong and up 24% year over year, which portend a reacceleration of services growth over the balance of the year.

What has fueled our ongoing momentum in services is headlined by our live subscription business, which ended first quarter at $53 million annual recurring revenue, putting us on track to achieve our guidance for the year of $64 million to $70 million exiting 2024.

Another positive development for the Live services front is the emergence of new Live CX services, so that -- [pass to treat course], this new area of activity for us in the CX market, fifth represent growing potential kinetic to the continued shift of enterprises to CCaaS in the CX Industries.

Other positive developments in the quarter were continued strength in our SBC product line, which grew 15% year over year and were we kept our top leading position with more than 25% market share in enterprise space.

Most notably growth came mainly from increasing our SBC managed services, it should further cements our strengths in this market.

And then we saw very nice progress in the conversational AI business, live bookings grew above 50%, and basically we see that growth in the future.

Reference of profitability metrics first quarter 2024 non-GAAP EPS was $0.17, which was below our internal budget, primarily on lower revenues.

And non-GAAP gross margin in quarter was came at 65.2% lower than the 65% to 68% longer long-term range, and compared to 67.6% in the fourth quarter of '23 and 62.1% in first quarter of '23.

The sequential margin decline is primarily attributable to less favorable product mix.

First quarter non-GAAP OpEx was $32.9 million, in line with our planning and expectations.

Net cash provided by operating activities was $15 million.

We ended the quarter with headcount of 959 employees, up from 950 employees fourth quarter and compares to 978 employees in the first quarter '23.

We expect our headcount figures to come down from current levels.

So our second phase of cost reduction, our initiative takes effect in second and third quarter '24.

Now to budget streaming, let me discuss steps we have already initiated and are taking as part of our long-term commitment to drive significant margin expansion and operating leverage.

In the first quarter of '24, operating expenses were in line with the original budget for the year.

Anticipating now further industry muted business spending in 2024 and continued transition in our revenue model from CapEx into recurring business model, we took budget cuts steps to adjust our operation expenses to lower forecast, low iforecast of revenues in 2024.

We have recently initiated the second phase of the cost reduction measures that we previously communicated a few quarters ago.

This current phase in CapEx at counters inflation of more than 6%, primarily related to R&D functions dedicated to legacy areas such as gateways and multi-service business

[strongers].

Once fully implemented, which is expected to occur by mid third quarter 2024, this program is expected to yield $1.5 million of quarterly run rate savings or $6 million annually.

This action does not impact R&D spending on core strategic areas of our business, such as Microsoft Teams, CX and conversational AI, which continued to be robust.

In fact, while reducing positioning in legacy related R&D, we kept hiring and growing our R&D product management, marketing and sales resources in our lives and conversational AI operations.

On the guidance front, as near as suggested in view of the continued decline in our legacy gateway revenue and market outline -- outlook I'm sorry, for the rest of 2024 in our market segments, we are updating our 2024 guidance as earlier stated by Niran.

We believe that the continued shift to software and services, coupled with cost cutting measures we took already in first quarter '24, should allow us to continue to expand our margins and grow earnings by about 15% compared to 2023.

The top-line outlook assumes continued success in our UCaaS, CCaaS and conversational AI operations in line with the growth that we have demonstrated already throughout the whole of 2023 during the first quarter of 2024.

In terms of our key business line, I'll touch a few areas, Microsoft, as discussed previously, Microsoft business increased 8% year over year in the first quarter.

Microsoft Teams business grew higher, reaching 9.6 growth year over year.

Scaffold will continue to decline close to 20% or rather very low level of about $1 million in the core.

As such solutions for Microsoft Teams consist now 97% of Microsoft quarterly revenue.

Exit first quarter '24, Live for team's annual recurring revenues reached a level of $53 million, in line with our plans, were thus confident that we are on track to achieve our stated goal of achieving annual recurring revenue of $64 million to $70 million for the whole year.

Live managed services with Teams represent now nearly 45% of Microsoft Teams business compared to just 25% in the year ago quarter.

And thus, we believe that the impact of the shift to recurring revenue models should ease in coming quarters.

They've also enjoyed growth in total contract value of Live services, which grew about 45% year over year.

From a geo perspective, EMEA bookings registered modest growth for the first time in multiple course, while North America experienced steady growth.

Given the robust growth in our pipeline of greater opportunities, we remain optimistic about the long-term growth potential for Microsoft business.

In addition to the multiyear opportunity of Teams phone connectivity, we can see clear signs of growing potential for a new source of revenue based on voice related business application.

Among these, they include components such as Voca CIC as a contact center solution for the Teams environment SmartTAP 360 as a compliance recording solution for the Teams environment and meeting [UCaaS], this is central hub solution for capturing and sharing meeting information across the organization.

Moving to CX and conversational AI, first quarter contact center business grew 15% year over year, led by North America and the Asia Pacific regions.

Conversational AI as I've mentioned before, conversational AI bookings grew over 50% year over year.

Voice services for enterprise CCaaS deployments continued to be the center of our activity.

With the integration of Live platform into these opportunities, we see a steady rise of revenues associated with our live CX activity.

We now see strengths in the CXCAI on all fronts, emanating from sales of our solution in support of enterprise customers from leading vendors of customer experience platform and cross-sell for own AI first Voca CIC contact center platform to the Team's phone installed base.

Staying on the topic of Voca CIC of the past 12 months we've significantly stepped up our product development resources and investment into the Teams contact center solution, highlighted by a recent addition of the omnichannel capabilities.

We are thrilled that the industry analysts and markets alike our starting to notice as evidence by us.

Having recently being awarded by CX today, the best Microsoft Teams contact center solution based on the evaluation of 16 top industry experts.

Well, still a small portion, still a small percentage of our business, we expect Voca CIC to be a major growth catalyst, a growth pillar for CX and overall long-term future arising from both direct revenue contribution and pull through of the rest of the concession AI business science such as SmartTAP compliance recording and close summarization.

Now let's quickly go through highlights of other conversation AI business segments, first on Meeting Insights just a reminder us all meeting insights for Teams is an enterprise grade software as a service solution that enables organization to capture, analyze and share this meeting information across the company.

It provides a comprehensive set of tools and compositional AI technology for recording for scribing, indexing and analysis, making it easy to search and retrieve information from past meetings.

This meeting insights users can quickly find and review key points and decision from previous meetings for improving collaboration and decision-making across the organization.

The first quarter of 2024, we have achieved the key development milestone where the solution was upgraded to become a cloud base true SaaS solution providing multi-tenant service to enterprises.

Roadmap for this solution in 2024 includes among others editions of automation capabilities more languages, European languages, enhanced mobile operation and extend sending the function of meeting insight to more UCaaS solutions.

Yes, for sales we have seen nice growth in new accounts in the UK and US adopting the tool for their ongoing Italy operations.

On smart app in second quarter 2024, we plan to launch smart app also as a SaaS solution for enterprises, a platform that will expand our go-to-market opportunities, enabling service providers and resellers to offer their own branded recording services powered by articles.

This new platform shares the same infrastructure as meeting insights, and we have plans to unify the services in 2024, given growing synergies between these two business lines.

To wrap up our discussion, relying on the nice progress we see in our strategic clients around Microsoft Teams, CX and conversational AI and despite the slower than expected start to the year due to legacy decline, we have strong conviction about our long-term business fundamentals and have made significant progress in our transformation to a software and services company with strong profitability.

This optimism is supported by record pipeline of credit opportunities in the first quarter 2024, particularly in the Microsoft contact center environments, growing momentum of Voca CIC as a major long-term growth driver for the company and ongoing strong annual recurring revenue growth, through the Live managed services for the company.

And with that, I've concluded my section of the call.

I'd like to turn over the call to the operator.

Thank you very much.

We will now be conducting our question and answer session.

(Operator Instructions)

Samad Samana, Jefferies.

Hi, this is Mason Marion for Samad.

Thanks for taking our questions.

So I wanted to start with guidance of the $15 million reduction to the full year revenues.

What amount is from lower than expected gateway revenue?

And did you lower revenue expectations for any other products or services as well?

Okay.

Well, we've seen about $3 million, decline in first quarter.

As you know, on just relying on the experience we had from 2023, we believe that we will not see major improvements throughout the year.

So taking you $3 million for quarter, we took $12 million for the full year for the gateway decline.

And then based on our assessment of the ongoing continued slowdown in the market and muted spending in the market, we left room for another $3 million.

Understood that you said, Shabtai.

And then so you've been talking about this transition towards more recurring revenue for several years now, are we reaching an inflection point?

How big is your legacy business still?

And when could we start to see your total revenue growth more closely reflect your recurring revenue growth?

Right.

Okay, so let me repeat some of the stat I mentioned before.

The most important business when you tried to analyze in our recurring business versus CapEx, is Microsoft Teams.

Now what I've stated is in this first quarter of 2024, teams recurring revenues reached 45% compared to just 25% a year ago.

So Mike's our expectation are that within the next two, three months, you know, the decline of I would say CapEx streams will be substantially less meaningful.

So in general we view 2023, 2024 and probably the first half of '25, as the years of transitioning in our revenues from a CapEx model to an OpEx model.

So we do expect that this quarter, maybe another quarter of two will still suffer from that.

But think entering towards the end of this year and early '25, I think we'll have a very strong base of ongoing accumulated in pipeline for our recurring revenues.

And therefore, I believe that we should be safe from that point now.

All right.

Thank you.

Sure.

Ryan MacWilliams, Barclay's.

Hey, thanks for taking the question.

This is Pete Newton on for Ryan MacWilliams.

Just I'm trying to look into what dynamics you're seeing right now in terms of CCaaS versus UCaaS driven demand?

And how would you characterize those demands for both and if that's similar to what you saw in 2023?

So actually, we do see a shift.

I mean, I think the turning point was probably somewhere in the beginning of 2023 until then, I think UCaaS was primarily the biggest market and CCaaS was less, we all believe and I think anybody who attends industry trade shows and events such as enterprise connect and figure out that UCaaS is kind of taking slower growth path of those still big and strong.

However, the majority of the interest and I think this is mainly due to the impact of AI and GenAI and conversational AI technologies.

We definitely see substantially more opportunities in CCaaS.

Also, the fact that the biggest market is substantially more fragmented compared to UCaaS.

UCaaS, you just said the top three accounts it's Microsoft Teams and Cisco Webex and Zoom.

And maybe you have another one player or two that comprise about 70%, 80% of the market.

So the opportunity there are becoming kind of narrow and limited, while the CX industry is growing fast, substantially higher, right.

And it's substantially more fragmented and substantially also broken into different functionalities and solution.

So our ability to take or, deep technology base and experience and expertise in many networking and cognitive services and conversational AI technologies, this will allow us to substantially be more creative and successful.

So for us, starting 2023 and this year, more definitely the CCaaS industry is much more interesting for us and this is where we will put most of our efforts.

Great.

Very helpful.

Thank you, Shabtai.

And then just maybe following up. -- How should we think about the shape of product and service revenue for the rest of FY24, just given the commentary around the legacy business and then also the service pipeline looking good.

Just anything you can talk about in terms of shape of revenue for product and services for the rest of this year.

So just like on the heels of 2023, we believe services will continue growing.

Last year, I think we ended around 50%, this year will probably grow probably towards, the 52% to 55%.

Product portion of our sales will always come down.

Also, due to the fact that the still very high impact for from the high interest rates.

So we may see further products declined, but in essence, we have cross the line where our products are as important as they were back in our history.

Services is now, -- any new project we are initiating based in UCaaS, in CCaaS as a conversational AI tends to be services and long-term bookings.

So the shift is occurring.

So I would expect, just as we provided in our guidance that we will either keep or even grow beyond where we are in the first quarter.

Thank you very much.

(Operator Instructions)

Ryan Koontz, Needham & Company.

Thanks for the questions.

Let me ask about generally the exposure to service providers here, your traditional service providers, weakness in gateways I assume is due to that exposure and beyond just their weakness in cloud and sort of their weakness in CapEx.

They're also putting up some pretty awful growth numbers in there for wholesale and business services that just seems to be an accelerating decline.

So I assume that that's also an impact on your on the gateway business there.

Can you confirm?

Yes, that is indeed.

As hurt to our Gateway business back in 2023 and now in essence, we definitely view on the giants in the software industry capable of investing and growing their offering, therefore, spending more and allowing enterprise to the beneficial.

Service provider, according to what we see are playing a very safe and minimal play trying to hold what they are, but we cannot see any growth from that side of the business.

Okay.

And then when it comes to teams, it seems like their growth numbers on PSTN ads are continue to be real healthy.

If anything, accelerating that 20 million subscriber or seat number.

How do you read your attach rate there for the Team's ads?

Is it primarily through service provider solutions where they're struggling a bit to stay relevant relative to the new teams deployments?

Okay.

So, well, Microsoft Teams phone business seems to be growing nicely, about a few millions every year.

We are definitely enjoying that trend.

When we cite growth in our lives managed services growth of 45% growth that is attached to business in Microsoft phone business.

And therefore, we can definitely benefit from that.

We actually see growth, our backlog is growing, our live services are growing, bigger companies who just did the first step of declining a project now enter a more meaningful phase of moving.

\

We also believe the GenAI, Copilot and others will drive more use of Teams phone simply because once you get those great analytics capabilities from copilot on meetings and calls that will definitely drive.

We believe, phone users from legacy, telephony systems to move to Teams phone in order to be able to benefit from the capabilities copilot bring.

So, we believe Team's phone is growing nicely or businesses attached to it.

And I can definitely see a very long runway for this activity.

That's helpful.

And one last quick one, if I could.

On our Voca for teams.

What are you seeing as your use cases there?

Is this primarily in the kind of Tier 2 use cases.

A lot of companies, your peers that roll out early contact center products, early regeneration products are using or seeing internal use cases and kind of second Tier use cases, is that's similar for Voca or what sort of use cases are you seeing?

Thank you.

Indeed, with Voca CIC being a new entrant, obviously, we need to go for the lower hanging fruit.

So yes, a lower number of seats in our contact centers that serve in our internal desks in or a small offices but then I can tell you we just won at the end of 2023, a huge project who is one of the leading universities in the US.

This University as you know, tens of thousands, more than 50,000 student.

All in all with staff and other functionalities on the campus.

I think they all in all have like above 150,000 users.

But that means that contact center is going to be used in a variety of application within that campus.

And in many cases, -- many, -- let's say one application that is serving about 25 contact center out of a substantially larger number in that campus.

So Voca definitely serves the need.

We are investing.

We just said, as I've mentioned, omnichannel capabilities on top of voice, why we already achieved 90% coverage of what's needed.

So yes, we are gaining a lot of, the fact is that, due to the fact that we are in such a very large installed base of customers in Microsoft Teams.

And because the solution is Azure native relies heavily on the state of the art, the deepest level of technology available for Microsoft Azure, which is not available in other contact center solution in the market makes our solution for Microsoft Teams in Azure substantially more advanced and preferred.

So the solution is very unique in that environment and we believe we're gaining a lot of traction in that space.

Thank you very much.

That appears to be the end of our question-and-answer session.

I will now hand back over to Shabtai for any closing comments.

Well, thank you, operator.

I would like to thank everyone who attended our conference call today.

With continued good business momentum in your enterprise operations and good underlying market trends in the UCaaS, CCaaS and GenAI growing.

We believe we are transitioning the business towards continued growth and prosperity in the future.

We look forward to your participation in our next quarterly conference calls.

Thank you very much for being here with us today and have a nice day.

Thank you very much, Shabtai.

This does conclude today's conference.

You may disconnect your phone lines at this time and have a wonderful day.

Thank you for your participation.