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'd like to remind you that the information provided during this call may contain forward-looking statements relating to AudioCodes Ltd.'s business outlook, future economic performance, product introductions, plans, and objectives. Related thereto, and statements concerning assumptions made or expectations of any future events, conditions, performance, or other factors are forward-looking statements as the term is defined under U.S. Federal securities law. 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 following: the effect of global economic conditions in general and conditions in AudioCodes Ltd.'s industry and target markets in particular, including governmental undertakings to address such conditions. Shifts in supply and demand, market acceptance of new products, the demand for existing products, the impact of competitive products and pricing on AudioCodes Ltd. and its customers' products and markets, timely product and technology development, upgrades, the advent of artificial intelligence, and the ability to manage changes in market conditions and evolving regulatory regimes as applicable. Possible need for additional financing, ability to satisfy covenants in AudioCodes Ltd.'s financing agreements, possible impacts and disruptions from AudioCodes Ltd.'s acquisitions, including the ability of AudioCodes Ltd. to successfully integrate the products and operations of acquired companies into AudioCodes Ltd.'s business, possible adverse impacts attributable to any pandemic or other public health crisis on our business and results of operations, the effects of the current and any future hostilities involving Israel, including in the regions in which we or our counterparties operate, which may affect our operations and may limit our ability to produce and sell our solutions. 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 any other factors described in AudioCodes Ltd.'s filings made with the U.S. Securities and Exchange Commission from time to time. AudioCodes Ltd. assumes no obligation to update the information. In addition, during the call, AudioCodes Ltd. will refer to non-GAAP net income and net income per share. AudioCodes Ltd. has provided a full reconciliation of the non-GAAP net income and net income per share to this 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. An 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 Shabtai. Shabtai, please go ahead.
I'm pleased to report another quarter of solid top-line growth in the fourth quarter of 2025. This performance shows our focused progress towards becoming an AI-driven hybrid cloud software and services company. 2025 marked a period of stabilization and growth for our company. After facing economic challenges in 2023 and 2024 that affected our legacy and hardware business lines, which led to a decline in revenue in previous years, we saw a recovery of our connectivity business in 2025. Over the course of 2025, we saw promising signs of top-line growth inflection. The rate of decline in legacy business has moderated and we saw the newly invested Voice AI strategic areas maintaining their robust upward trajectory. This momentum in our strategic business has been driven by our two primary growth engines, our live managed services and the emerging voice AI business. Combined, these two units contributed to $79 million in annual recurring revenue exiting 2025, representing growth of 22% year over year. While holding the line in our connectivity business, we executed well on our Voice AI initiative, growing revenues by 35% year over year. The transition in the overall company business trajectory is a result of deliberate actions. We are reallocating our product development investments and efforts to high market potential areas and investing in sales and marketing to build market awareness of these innovative solutions. Looking ahead to 2026, we plan to maintain this formula for success by improving revenue growth, driving steady margin expansion, and strengthening our leadership in AI-driven business applications for the UCaaS and CX markets. Now to highlight our business performance in the first quarter of 2025 and full year 2025. Fourth quarter total revenue grew, as Niran mentioned, 1.7% year over year. We have continued to build on the strength of our connectivity business and successfully leverage our enterprise customer base, installed base to drive cross-sell of GenAI business voice applications that make up our conversational AI operations. As discussed earlier, our solid fourth quarter results were marked again by strong traction in our dual growth engines: lab services delivery for UCaaS and CX, and conversational AI business lines. Specifically, during all the quarters of the previous year, our conversational AI business increased by over 50% year over year for both the first quarter of 2025 and also for the second half of 2025. Full year 2025 conversational AI revenues reached nearly $17 million and accounted for 7% of total revenues. As a result, we're growing ever more optimistic about the continued stronger near recurring revenues momentum for the coming years. This conviction is further reinforced by the growing backlog of live and managed services that we will convert to revenues in coming quarters. Exiting 2025, our backlog for live services reached a level of $75 million compared to $69 million at the end of 2024. Now let me provide more visibility into how we operate so that our overall company financial results are better understood. As stated in previous calls, we are now in a transition period from our main focus on connectivity solutions to expanding and building a new AI-first voice AI-led business application for enterprises. I believe this will also provide more clarity into our financials too. At this stage, the business can be generally broken down into two units. Our long-established connectivity business provides about 93% of the company's revenue. It is a mature, profitable business, which has run steadily over the past five years, and which has delivered an operating margin of above 14% in 2025. On a longer-term basis, we target these businesses to deliver 16% to 18% operating margin. Relying on our success in these meetings over the past ten years, we are confident in our ability to continue and drive long-term stable growth as we are the front runner in this connectivity business for both the UCaaS and the CX markets. The second business, the Voice AI business, focuses on a software as a service recurring business model, which provided about 7% of the company’s revenue in 2025, growing from over $12 million in 2024 to close to $17 million exiting 2025, yielding revenue growth of about 35% year over year. Now that several product lines have reached maturity and started to produce increasing annual revenue, we are confident in our ability to keep growing this business line at a rate of 40% to 50% annually in coming years, planning to reach a revenue level of $50 million in 2028. It should be noted that we are relying extensively on employing Chennai technology in the solutions to provide business voice application for the UCaaS and CX enterprise market. However, it is important to note that the Voice AI business is in investment mode currently, generating an annual budget burn of about $9 million to $10 million. With the 50% annual revenue growth plan for this business line, we believe we will reach breakeven two years from now. Before turning to detailed business line discussions, let me quickly shift to the fourth quarter's profitability metrics. As mentioned before, full score total revenue grew 1.7%. Our non-GAAP gross margin for the quarter of 65.9% is within our long-term target range of 65% to 68%, and a slight improvement sequentially from 65.8% last quarter. Fourth quarter rate-related cost headwinds accounted for $600,000 and aggregated $2.7 million for the full year 2025. We expect the tariff-based impact to approximately reach $2.3 million in 2026. Fourth quarter non-GAAP operating expense was $35.8 million compared to $34.7 million in the third quarter and $33.4 million from the year-ago period. On a year-over-year basis, the higher expenses are attributable to targeted investment in marketing and sales related to the Voice AI business, allowing it to grow further, along with impacts from the weakening US dollar against the euro in the full score. Full year 2025 non-GAAP operating expenses decreased slightly versus the year-ago period for identical reasons. In terms of workforce, we concluded 2025 with 981 employees, representing an increase from 961 the previous score, and 946 at the end of 2024. Adjusted EBITDA for the fourth quarter was $6.5 million reflecting a 10.4% margin compared to $6.9 million or 11.2% in the prior quarter. For the full year, adjusted EBITDA reached $24.8 million or 10.1% margin. Non-GAAP EPS was $0.16 in line with our plans, in the year-ago quarter. Net cash provided by operating activities was $4.1 million for the quarter, and $29.4 million for the full year 2025. On the guidance front, we expect 2026 to be a strong year. We expect February 2026 revenues of $247 million to $255 million in the year and non-GAAP EPS of $0.60 to $0.75. This projection assumes continued strong growth of 40% to 50% in the voice AI business and a stable connectivity outlook assuming no significant changes in the macroeconomic landscape. Our overall annual recurring revenues, which encompass our managed services for connectivity plus conversational AI, are expected to grow from $79 million exiting 2025, reaching a range of $92 million to $98 million in 2026. Now let's move to the actual business lines. First, let's talk about Microsoft. During the fourth quarter, our Microsoft business saw a sequential increase of 7%. This growth was largely driven by the continued strength of the connectivity franchise and rising attach rate for AI-first Evocus EAC, which is our team certified CCaaS solution. The total contract value signed in the fourth quarter remained consistent with previous scores. On an annual basis, total contract value grew by 5% year over year, reflecting steady progress. The Microsoft Teams Voice ecosystem continues to demonstrate a very healthy situation. Recently, it was disclosed that the number of PSTN users reached 26 million, up from 20 million stated in April 2024, indicating an annual growth rate of 16% to 17%. Although Teams phone users represent less than 10% of the total Teams monthly active worldwide user base, estimated at 320 million seats, there's a potential market of roughly 80 million to 100 million pre-licensing users, creating an immediate large addressable market. Looking ahead to 2026, we anticipate an additional increase of 3 to 4 million users supporting the evolution towards AI-powered workplaces, stated by Microsoft. One notable win was a thirty-six-month contract signed with AT&T to support a large public university, which provides a comprehensive range of services including a managed gateway, SBC, and calling plans, as well as IP phones, facilitating the migration to Teams Voice from Cisco. Another key contract was a sixty-month deal with an international equipment manufacturer based in Europe; the engagement began with the live premium managed service for an initial phase of 2,000 users, marking the start of a full migration to Teams Voice from Cisco. Upon completion of the migration, the focus will shift to cross-selling additional business voice applications such as VocaC AC. In the fourth quarter, we have been engaged in further extending and expanding our efforts in the US market. So, on all the UCaaS fronts, yesterday we announced that we now offer an end-to-end push portfolio of certified voice solutions for Cisco Webex calling, from CloudConnect PSTN connectivity, analog gateways, and desk phones. Webex calling is Cisco’s cloud phone system, a cloud PBX that provides enterprise telephony business calling features and PSTN connectivity, delivered and managed through the Webex cloud. For 2025, Cisco publicly stated in November that Webex Calling now serves more than 18 million users worldwide. So, for us, this new evolving cooperation with Cisco represents a major new opportunity in expanding our connectivity and devices business for UCaaS in the coming years. Now to our conversational AI activity. In the last eighteen months, conversational AI moved from experimentation to expectation. In both UCaaS and customer experience, buyers are no longer asking if they should use AI; they are asking, which AI? Where does it run? Who controls the data? And how fast can we scale it? That is exactly why we have been investing in the past years in developing a rich portfolio of solutions. Across UCaaS, it's about turning conversations into business assets, meetings into decisions, and voice interactions into actions. Across CX, it is about moving from basic self-service bots to real automation, voice agents that can summarize, comply, and improve over time. Pivoting towards a more intelligent enterprise, our conversational AI portfolio is already built for this reality. Our solutions, including Voice AI Connect, Live Hub, LocustCIC, Meeting Insights Cloud Edition, and Meeting Insights on-prem, are all designed to connect voice and conversation enterprise systems and support multiple models and deployment options. But let me challenge one assumption. I see here in the market that AI value comes from the model. True, the large language model matters. However, durable value comes from orchestration, security, integration, and governance. By combining our vast telephony technology base with our conversational AI portfolio, we aim to bring a 'bring your own AI' approach to deploying solutions in various UCaaS and CX environments. It's our way to meet customers where they are, make adoption faster, reduce risk, and expand what partners can deliver. To summarize the quarter, as mentioned earlier, in the fourth quarter of 2025, conversational AI revenue grew over 50% year over year. Now let's start with the leading line which is the Voice AI Connect Live Hub line. This discussion focuses on the conversational AI platform market and the emerging voice AI agent sector, which gained significant traction over the past two years. Leading research firms estimate that the market for Voice AI agents will reach between $8 billion to $15 billion by 2028, with the expectation that it will double by 2030. Regarding our business activities, both Voltia Connect and the Live Lab business delivered robust results in 2025. For the full year, this segment achieved growth exceeding 50% compared to 2024, driven by consistent acquisition of new clients across the US, Europe, and APAC, as well as considerable expansion within our existing customer base. The Live Hub service, our Voice CPaaS self-service cloud platform, empowers voice bot developers to build solutions such as conversational IVR, voice agents, agent assist, and real-time translation services. In late third quarter of 2025, we announced enhancements to the Live App Voice CPaaS offering, notably the integration of newly developed voice AI agents. By year-end 2025, Live App experienced a substantial increase in both the number of developers and platform usage in minutes, while monthly recurring revenue approached a 150% increase compared to the fourth quarter of 2024. Notably, many existing VoiceThera Connect Live Hub customers have accelerated their consumption rates beyond initial projections, reinforcing our belief that the adoption of Gen AI-enabled virtual agent applications is entering a phase of rapid growth. A significant achievement in the fourth quarter of 2025 was securing an initial order with a tier-one international carrier adopting our voice AI connect service to support their call summarization solution. The deployment initially targets enterprise fixed line customers, with plans to expand to the entire mobile consumer and enterprise user base in late 2026. We view this contract as an important entry point with substantial potential for further expansion as the service is scaled across current clients and new use cases are developed. Now to Vocacy CIC: the agent range recorded another quarter of strong revenue growth for both the fourth quarter and full year. Revenue for the year grew over 55% compared to the previous year. 2025 was very proactive in terms of progress in the VOCA business line. During the year, we developed cooperation with regional channel partners as well as with global system integrators. The activity has been fairly positive. By now, VOCA CIC has more than 200 enterprise customers worldwide, and we were extremely successful in the education space, especially in North America, the UK, and other regions where Microsoft Teams is dominant in the vertical. We have now acquired over 15 universities accounts in 2025. We have introduced new out-of-the-box practical AI experiences such as agent insights, the AI receptionist, some of which extend beyond the Microsoft Teams installed base. We have productized an on-prem survival version of Vocus AIC to act as a backup in case of cloud outages. Key highlights for the quarter include extending our momentum in the higher education market, not only in the US but also outside. We can talk about a large university in South Africa that selected CIC contact center as part of their overall Microsoft Teams UCCX deployment. Success. Another major win is the successful launch scale enterprise deployment with a top-five global BPO provider. During the call, we issued a press release highlighting the deployment of Vocus EC with Aptento on a deal won in the Pricor. The new conversational AI voice solution supports more than 500 concurrent AI voice agents for a large healthcare organization and was delivered in just a few weeks compared to the typical three to six-month deployment timeline for a project of this scale. The new product was introduced, Agent Insights, as discussed earlier, which brings GenAI into the Vocus AIC platform. Agent Insights provides contact centers with customizable AI summaries, sentiment analysis, and one-click CRM updates built natively into agent workflows. Looking ahead, we expect 2026 to be another year of strong revenue growth driven by continued traction in both direct sales and channel partnerships. Moving on to Meeting Insights Cloud Edition. Meeting Insights Cloud Edition maintained impressive momentum throughout this quarter, seeing consistent increases in new customer acquisitions. Record numbers were again achieved in metrics such as total meetings and unique active users, leading to substantial year-over-year monthly recurring revenue growth as of December 2025. This strong performance was driven by continued product innovation boosting demand both across wider markets and within custom workflow solutions designed for specific verticals such as higher education, local governments, HR, finance, and more. Meeting Insights now works independently of any particular UC systems, expanding its flexibility. In the fourth quarter of 2025, support was added for Google Meet, and we expect integration with Cisco Webex in the current quarter, adding to the existing compatibility we have with Microsoft Teams and Zoom. These updates enable GenAI meeting summaries for interactions on major UC platforms, both for in-person meetings. Beyond allowing customers to customize prompts for their precise requirements, the platform now offers prebuilt templates created for specific enterprise roles and personas, including those in legal and HR. This feature is expected to further streamline how efficiently customers can extract useful insights from meetings. Additionally, the platform's mobile app enables on-demand recording, action item management, meeting preparations, and chat-based search of meeting records. Its features make the meeting user mobile app essential for daily office operations. Now to another derivative of the Meeting Insights solution, which we call Mia OP, Mia on prem. Let's talk first about the cloud repatriation trends emerging. The proportion of businesses planning to retain users on-premise jumped from 5% to 15% over two years, driven primarily by data sovereignty concerns in European markets and regulated sectors such as legal, finance, and defense. Even cloud-committed enterprises now scrutinize where data is hosted and processed. This trend validates hybrid deployment capabilities and positions data residency controls as competitive differentiators, countering the pure cloud narrative that dominated previous market cycles. In the fourth quarter of 2025, we continued to make good progress with the newly introduced MiaOP solution, with a growing number of wins in the government and defense market in Israel. This positions our business line to account for growth in our conversational AI segment in 2026. Following last quarter's Israeli Nimbus contract award, which streamlines procurement to form meeting intelligence services for all Israeli government ministries and agencies, we have already signed our first deal and are currently engaged in several more additional proof of concept engagements across various ministries. We also received Nimbus Care 5 approval, certifying that our solution meets the highest standards of security and compliance under the Nimbus framework. We expect this designation to expand both the number of agencies we can serve and the range of services we can provide. The MiaLP solution currently supports the English (US) and Hebrew languages. We expect to substantially grow that number of supported languages to tens, and we aim to deploy MiaLP in more countries in the second quarter and beyond. To wrap up my presentation, we exit 2025 with good operational momentum. The connectivity business has stabilized in the second half of the year. The voice AI business grew 35% on a yearly basis and about 50% in the second half of the year. With the continued pace of investment in our live managed services activity and in the voice AI area, we expect continued momentum in 2026 and beyond.
