AudioCodes - Q1 2023

Transcript

Operator (participant)

Greetings. Welcome to the AudioCodes first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Roger Chuchen. You may begin.

Roger Chuchen (VP of Investor Relations)

Thank you, Holly. Hosting the call today are Shabtai Adlersberg, President and Chief Executive Officer, Niran Baruch, Vice President of Finance and Chief Financial Officer, and Dmitry Netis, Chief Strategy Officer and Head of Corporate Development. Before we begin, I would like to remind you that the 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. Statements concerning assumptions made or expectations as to any future events, conditions, performance, or other matters are forward-looking statements as the term is defined under U.S. 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 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 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 the 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. The ability of 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 and other factors detailed in AudioCodes 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 net income per share to its net income and net income per share according to GAAP in the press release stated 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 webcasts 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.

Shabtai Adlersberg (President and CEO)

Thank you, Roger. Good morning and good afternoon, everybody. I would like to welcome all to our first quarter 2023 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 review the business highlights and summary for the quarter and discuss trends and developments in our industry and business. We will turn it into the Q&A session. Niran?

Niran Baruch (VP of Finance and CFO)

Thank you, Shabtai Adlersberg, and hello, everyone. Before I start my formal remarks, I would like to remind everyone that we will make available shortly an earnings supplemental deck on our investor relations website. As usual, 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 $59.2 million, a decrease of 10.8% over the $66.4 million reported in the first quarter of last year. Services revenues for the first quarter were $13.5 million, up 10.8% over the year ago period. Services revenues in the first quarter accounted for 51.5% of total revenues.

The amount of deferred revenues as of March 31st, 2023, was $77.6 million, compared to $76.8 million as of March 31st, 2022. Revenues by geographical region for the quarter were split as follows: North America, 46%, EMEA, 31%, Asia Pacific, 17%, and Central and Latin America, 6%. Our top 15 customers represented an aggregate of 54% of our revenues in the first quarter, of which 40% was attributed to our 11 largest distributors. GAAP results are as follows. Gross margin for the quarter was 61.7% compared to 66.9% in Q1 2022. Operating loss for the first quarter was $0.8 million compared to operating income of $8.1 million in Q1 2022.

Net loss for the quarter was $0.2 million or $0.01 per diluted share, compared to operating income of $8.6 million or $0.26 per diluted share for Q1 2022. Non-GAAP results are as follows. Non-GAAP gross margin for the quarter was 62.1% compared to 67.2% in Q1 2022. Non-GAAP operating income for the first quarter was $2.9 million or 4.9% of revenue, compared to $11.9 million or 18% of revenue in Q1 2022. Non-GAAP net income for the first quarter was $2.7 million or $0.08 per diluted share compared to $11.2 million or $0.33 per diluted share in Q1 2022.

At the end of March 2023, cash equivalents, bank deposits, marketable securities and financial investment totaled $121.5 million. Net cash provided by operating activities was $3.2 million for the first quarter of 2023. Days sales outstanding as of March 31st, 2023 were 97 days. In January 2023, we received court approval in Israel to purchase up to an aggregate amount of $25 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 July 4, 2023. On February 7th, 2023, we declared a cash dividend of $0.18 per share. The dividend in aggregate amount of approximately $5.7 million was paid on March 7th, 2023.

Regarding headcount, on the heels of the addition of 112 position in 2021 and 81 position in 2022, we added 12 full-time employees in the first quarter of 2023. We ended the first quarter 2023 with 978 employees. To better align our cost structure to current business environment, we recently undertook action to reduce headcount by 6%, which should yield $8 million an-annualized saving with full run rate expected to be realized in the beginning of the third quarter. We plan to evaluate additional cost saving measures over the next six to 12 months.

We adjust our guidance for 2023 as follows: We now expect revenues in the range of $240 million-$250 million, down from $286 million-$300 million, and we now guide for non-GAAP diluted net income per share in the range of $0.50-$0.70, down from our prior outlook of $1.35-$1.50. I will now turn the call back over to Shabtai Adlersberg.

Shabtai Adlersberg (President and CEO)

Thank you, Niran. As we pre-announced earlier this quarter, our first quarter 2023 financial results were impacted materially by the slowing global economy and rising uncertainties worldwide. These macro trends have manifested in enterprise and service provider customers and partners, slowing decision cycles on product purchases, primarily in EMEA. We have also seen North America service providers manage their inventories more tightly as they focus on cash flow optimization and backlog reduction. Among the business lines that were mostly hurt is the service provider CPE line. Accounting for roughly 10% to 10% to 15% of our revenues annually, this line has declined roughly 20% in the quarter year-over-year. To provide some context around this, one of our North American carrier customers paused orders at the beginning of the quarter until the carrier has utilized much of the existing inventory in its warehouses.

Towards the end of the first quarter, product shipments to this customer have resumed. While the macroeconomic terms as seen today seem to persist for the rest of the year, we do not expect further decline beyond the first quarter of 2023. We thus expect service provider segment to decline roughly 20% in 2023, as the impact from inventory rationalization efforts from North American carriers to slowly subside over the course of the year. The other business line that has suffered decline was the IP phone line, which was mostly affected in Europe. We have seen channel partners halting purchasing for their inventories as a result of customers delaying product purchase decision for a second quarter in a row now. We saw similar such trends in North America.

On a brighter note, the backlog that has been pushed forward is very high at this stage and represents tens of millions of value that we could materialize when this crisis is over. One important point to make is that none of these lines discussed so far is perceived strategic to our business, and as such, the overall impact to our business going forward is of lesser importance. Now that we have discussed what went wrong in the first quarter, let me draw the call to progress made in the quarter and what went well. All in all, activity in our main lines of business remained intact and went well as planned in the UCaaS and CCaaS markets, though marginally affected by the overall deceleration of the UCaaS space in the first quarter of 2023.

It is important to emphasize that our results do not reflect a change in the enterprise customer's appetite to migrate to next generation UC platform such as Microsoft Teams and Zoom Phone, nor a change in the competitive dynamics. The competitive mode that we've built with our voice technology and expertise in the UC and CX business remains strong and intact. Rather, we attribute the softness to enterprises' cautious buying behavior as our customers are economizing in a tight budget environment. Following Microsoft's recent earnings results, discussing continued strength of E5 bundles in number of monthly active users to over 300 million, we believe our secular drivers remain strong as customers continue to consolidate to primary vendor platforms to drive cost effectiveness while doing more with less. We believe there are three potential reasons for the disconnect in our results.

The first one, potential lag in activation of foreign licenses as customers optimize networking budgets. Second, headwinds from the ongoing head count rationalizations. Third, migration from historical license and maintenance model, which is CapEx, to recurring or managed services model. All in all, I will point out that any CapEx deal in the past is now transformed into roughly 20% of value on an OpEx basis, which means that we do miss some of those recurring revenues due to the fact that the overall sale is now extended over several years. Leading growth in UCaaS and CX areas who are services, which have demonstrated growth of 10.8% year-over-year, with professional managed services growing 11.8% year-over-year. Service revenues or service business now represents 51.5% of our quarterly sales.

With increased focus on moving to recurring business sales, our managed services business Live and Live Cloud ended the quarter at $35 million annual recurring revenues, up over 60% year-over-year, with total contract value now at above $110 million. We now expect Live managed services to continue to grow at above 50% growth rate throughout 2023, and we target annual recurring revenues to reach between $46 million-$50 million by the end of this year. We don't see any reason for that growth rate to not continue in following years. We're talking about real growing business, very large. In the customer experience market, we saw healthy customer activity during the quarter with our direct enterprise customer experience business roughly flat year-over-year.

Now to the reduction in force and updated operating expenses budget for 2023. Given customer spending remains pressured by macroeconomic uncertainty near term, we have taken steps to adjust our cost structure and reduce our headcount and operating expenses. We plan for a reduction in force by approximately 8%-10% over the next six-12 months, with 6% of that effective immediately. Roughly talking about 60+ positions in our workforce worldwide. This reduction in force should provide OpEx relief starting in the beginning of the third quarter of 2023. The reduction in force was concentrated in R&D and sales functions globally, yielding $8 million of annualized OpEx savings, with full run rate expected to be realized in the beginning of third quarter.

This step will allow us to stabilize our operation and financials for the rest of 2023, as it helps to balance our need to maintain investment in strategic areas of our business while meaningfully improving near-term profitability. We do expect that this reduction in force plan will help substantially improve 2024 financial results, where we plan to see a return to revenue growth coupled with reduced OpEx to improve earnings for 2024 by more than 50% as compared to this year. We will continue to evaluate additional cost-cutting initiatives based on changes in our business environments. To some of our key business line. Let's talk about Microsoft. Microsoft business declined 3% year-over-year in the quarter, with Teams up 5% while Skype for Business down over 50%.

Skype for Business is now to a very not meaningful level of between $1 million-$1.5 million a quarter. The same factors that influenced our total revenue impacted our Microsoft business, namely cautious enterprise customer spending behavior, leading to order push-outs and downsizing of scope and contracts assigned, with the weakness particularly acute in the EMEA region. Importantly, we have not seen any project cancellations as existing projects already in motion are continuing as planned. Should also mention that we really do not see any competitive pressure in this area, which is our key business area.

We added above 250 new Teams accounts in the quarter, up from 256 added in the year-ago period, which is an indication that despite difficult macro conditions, customers continue to migrate from legacy telephony systems to next generation Teams platform, all better to more budget-based. Our long-term opportunity with Microsoft Teams remains unchanged. Teams remains the leading collaboration platform, with Microsoft having recently disclosed over 300 million monthly active users, up from over 280 million last quarter. Teams Phone PSTN attach rate at the low single-digit percent of overall monthly active users provide us ample multi-year runway to drive ongoing penetration gains.

While Live annual recurring revenue primarily consists of managed services sold to large enterprises and customers, I would like to call out increasing momentum from our Live Cloud, our white-labeled voice connectivity and application platform. This self-service SaaS platform is available for a multi-vendor UC and CX environment such as Teams, Webex, Zoom, and target service provider and system integrators worldwide. We have scored some notable wins globally. We now have over 50 customers on the platform, adding by a number of tier one carrier. This ramp-up is continuing, and we believe as we add on functions to Live Cloud, this platform automated solution for connecting businesses to Teams and other UCaaS solutions, will pick steam and will drive much of our revenues in the future. Overall, we expect strong momentum in Live Services to continue in 2023.

Now to the global services business. Invoicing was pretty strong. We saw healthy new service opportunity created worldwide. While total invoicing for the first quarter for total services was about 8.4% growth year-over-year, we saw 12.5% growth in the professional services year-by-year. AudioCodes Live and Managed Service backlog at the end of the first quarter of 2023 was $52 million. That's compared to $26 million at the end of the first quarter 2022. This represents roughly 96% year-over-year growth, which tells a lot about the strength and the appeal of our Live Managed services with Teams customers. Now let me move to the Voice AI business. This is becoming a more important business in our overall future.

Actually, I would say that while we keep strong on the networking business, we invest a lot in terms of budget in the Voice AI business. The business was up 5% year-over-year on the back of ongoing momentum seen in Voice AI Connect and Voca CIC products. We are projecting strong growth in this business over the long haul. Among leading solution and product in that business are the Voice AI Connect connectivity solution, Meeting Insights, and our intelligent virtual agent solutions. Let me go one by one. Voice AI Connect was pretty successful in the first quarter. Invoicing grew 75% year-over-year. Booking was strong. Actually, we saw here more than 10% growth year-over-year. We could have grown further. Unfortunately, we had some delays in project of some of our major customers.

Newly created opportunities grew above 30% in the quarter. All in all, a very successful product. We don't see any competition to it. The product allows SIP telephony to be connected to cognitive services, and if you will, ChatGPT type solution. Very successful product. Let's move to Voca CIC. Voca CIC is our entry-level Microsoft Teams native AI-first contact center application for the CX market, and it has generated growing interest over 2022, and we plan to step up our efforts in this area. Voca is a modern, lightweight contact center solution designed to provide the latest integration with Microsoft Teams Voice, allowing companies to effectively deliver a top-notch service experience for callers over their existing Teams Voice infrastructure.

Using powerful automation capability, Voca allows easy no-code configuration of self-service IVR flows that combine built-in conversational AI with CRM and Database Dips, together with smart routing to queues, agents, departments, and company contracts, empowering e-employee ex-experience using CX capability. The Voca solution integrates the Microsoft Teams using with Power Model, the latest and newest integration method powered by Azure Communication Services. Q1 2023 marked another peak of performance period for the Voca solution, with booking of above half a million, which is equivalent to the overall booking level of 2022. New opportunity creation was at 92 newly created opportunities in the first quarter. That is three times as big when compared to the first quarter 2022 creation of opportunities.

As of today, Voca CIC has 47 accounts worldwide, out of which 37 were acquired in the past year alone. To Meeting Insights. Meetings are the lifeblood of every organization, where valuable company information is shared among participants. AudioCodes Meeting Insights is an enterprise meeting management solution designed to unlock this mountain of information treasure. Summarize and analyze the information relating these meetings and share it across the organization to substantially improve productivity and information sharing among managers and employees. Leveraging AudioCodes' vast Voice AI expertise and state-of-the-art Voice AI technology, together with integrating it with LLM technologies, large language model models and technologies such as ChatGPT and other advanced cognitive services, Meeting Insights easily captures and organizes all meeting generated content from team collaboration and training session to sales and recruitment calls.

It generates automatic meeting summaries and insights, creates organizational data repository, and makes important organizational information searchable and accessible like never before, using notification and mobile client technology. We already have taken steps to adopt ChatGPT and LLM models in our Meeting Insights solution to enable advanced AI summarization and speech analytics. We plan to deploy in coming weeks the first such implementation. We expect Voice AI is now actually running in Alpha and we do plan to ship it to beta customers in less than a month from today. We expect Voice AI to achieve acceleration in the rest of 2022 and beyond to further expand our success in the UCX and CX markets. With that, I'm coming to the end of my introduction.

While results were impacted in the quarter by difficult market conditions causing a change in customer spending, decision, and behavior, and expanded sales cycles, we are confident that our secular growth drives and competitive position remain intact. We continue to see ample opportunity for innovation in the conversational AI business and transition to Live services at customers undergoing digital transformation to cloud with our core UCX/CX segment. With that, I would like to turn the call back to the operator for the Q&A session.

Operator (participant)

At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Your first question for today is coming from Greg Burns at Sidoti & Company.

Greg Burns (Research Analyst)

Morning. Can you just walk us through the $50 million decline in the full-year revenue outlook, the buckets of revenue driving those declines? What, you know, what parts of the business are accounting for that?

Shabtai Adlersberg (President and CEO)

Okay. Basically, you know, we really took a cautious position, basically saying that due to the fact that the market trends are not changing as we step into the second quarter, and we did roughly $60 million in the first quarter, it was natural for us to basically plan for a year that would be either flat or slowly growing. The lines that went down primarily, as I've mentioned in the call, are, you know, CPEs mainly sold to service providers, and also products sold in the IP phone product line. Also, we had to took some of the growth we expected for other areas. You know, let's mention, you know, the meeting rooms in the Microsoft Teams space where we, you know, prior to 2000...

January 2023, we envisioned substantially larger growth, and that has not happened. Also, you know, if we watch, you know, the trends in the Microsoft camp, while we were growing 10%-15% year-over-year in the prior years, in the first quarter, we were about 3% down. We need to take all these factors into account when we plan for the full annual forecast, and that was the result.

Greg Burns (Research Analyst)

Okay. Thank you. How big is your IP phone business? What % of your revenue is IP phones and other, hardware like that? I guess that would also include, your meeting room applications.

Shabtai Adlersberg (President and CEO)

Right. IP phone business was roughly above 10% last year. We believe that this year it will not reach more than, you know, 60%-70% of that. Unfortunately, just to tell you that, as I've mentioned, we have a huge backlog of opportunities to supply. We are in a stage where it's already the second quarter in a row where, you know, purchases are being pushed to the next one. You know, March was really very clear in that trend. You know, things looked rather okay in January and February. In March, we saw several deals being pushed. That is the second quarter in a row. That's what's happening.

I think all in all, if you know, both phones and CPE or CapEx type of sales, while you could see that, you know, the recurring business sales really did not suffer as much as the CapEx. I think this is part of what we saw, you know, in the first quarter.

Greg Burns (Research Analyst)

Okay, thank you.

Operator (participant)

Your next question for today is coming from Samad Samana at Jefferies.

Mason Marion (VP, Equity Research)

Hi, this is Mason Marion on for Samad. Thanks for taking our questions. If I look at your EPS guidance, how should we think about your product growth margins going forward? Should we assume that your 1Q level is a fair range?

Shabtai Adlersberg (President and CEO)

Yeah. With regard to growth margin, this quarter, we ended 62.1%, which is a major decline compared to last year. Part of it relates to product mix, and the other relates to the reduction in total revenues, because part of the COGS is actually a fixed cost. All in all, we believe, growth margins should improve, slightly, in the next few quarters, mainly at the second half of the year.

Mason Marion (VP, Equity Research)

Okay. Understood. If we think about the channel partners kind of destocking, are you seeing any signs that that's going to normalize? How should we think about kind of the seasonality throughout the year? Should we just assume kind of 1Q levels are a fair way to think about it?

Shabtai Adlersberg (President and CEO)

Okay. Well, unfortunately, you know, with, you know, the outlook going forward, you know, on the economic side is not changing. You know, we don't see any change to the behavior. You know, I think it's all, you know, we all know that it's all tied to the inflation rate and the interest rate. As long as those, you know, are, you know, in the same level, and we don't see a change in those, I would not expect, you know, and especially when the cost of money is that high, I would not expect that stocking will resume, you know, sooner than a change in the overall economy.

Mason Marion (VP, Equity Research)

Thank you.

Shabtai Adlersberg (President and CEO)

Sure.

Operator (participant)

Your next question for today is coming from Tal Liani at Bank of America.

Tal Liani (Managing Director, Senior Research Analyst)

Hi, guys. I want to take maybe a step back and think about the macro. We're seeing other companies dealing with channel inventory and inventory in the hands of the customers, that's why orders are coming down. We're also seeing companies dealing with high backlogs, that's why also orders are coming down. The question is, when you look at your weakness, what's the source of it? Is it coming because projects are getting canceled, or is it coming because there is channel inventory and backlog, but the deployments continue to be at the same rate? I'm trying to understand if the weakness, how temporary, how much visibility you have to a recovery, meaning how temporary is the weakness.

Shabtai Adlersberg (President and CEO)

We do believe that, you know, we have not seen that phenomenon in previous quarters up until the end of 2022. I think the worsening conditions earlier in the year really caused service providers and channels to basically hold purchases and do better inventory control. now, as we have mentioned, you know, we gave one example in the call of one big service provider customer that halted all purchasing, you know, in January. As soon as it has, you know, used a lot of its backlog, you know, in its warehouses, in the month of March, we saw him coming back to purchasing.

I think, you know, the amount of backlog that was sitting in warehouses hopefully, you know, diminished to a level where from now on, we will not see any impact from that side. However, there's still the impact of, you know, customers, you know, rationalizing their expenses and pushing products and/or, you know, making them smaller as they, you know, lay off employees. These are the two factors. As long as, you know, the economic situation is not changing, you know, we do not see any abrupt changes to what already happened in Q1. On the other side, you know, we can't see yet any improvement in that respect.

Tal Liani (Managing Director, Senior Research Analyst)

When you I don't know how much visibility you have to end projects? When you look at your big customers, do they continue to deploy at the same rate? If they have inventory and it's just inventory adjustment, it means that they continue to deploy the same rate. Do they continue to deploy the same rate, or do you see slowdown in the rollout of projects, that projects are being slowed down or canceled or pushed out? And I'm talking about the end customers, end customers, kind of.

Shabtai Adlersberg (President and CEO)

Right. Yeah, our primary customers, you know, those who we target usually, and we're talking roughly on either Microsoft and our contact center customers. We're talking about large companies. Large companies, you know, may slow down a bit projects, but all in all, we have not seen major pushouts of complete project or delays by more than a year. What we are seeing is the, you know, delayed decision on the expense. When you're talking about, you know, Live projects, just, you know, we gave you a number. I mean, we grew 60% year-over-year, meaning that as long as the project is of a managed services type, there's little chance that it will be, you know, canceled and pushed out completely.

However, when it's a CapEx deal where you need to spend, you know, half a million or more than a million in a opportunity, then maybe due to financial conditions, you may decide you want to push it. That gives you kind of an idea. Overall, you know, we see good customer behavior. Yes, you know, on the, on the tail, we've seen some project being... that's not a phenomena. The strong companies, the large companies keep deploying and we're just, you know, if you, we have mentioned on our website, we have one big company in Japan that is assigned with us to deploy, you know, a global project. We have another U.S.-based retail company, large retail company who's also started signed with us then started to deploy.

The projects are there. It's only maybe a slower deployment cycle or whatever, but that's the whole difference.

Tal Liani (Managing Director, Senior Research Analyst)

Sorry, last question. Is there a change in the pricing environment as a result? Is there a change in the competitive environment? Do you see competitors, other competitors getting more aggressive because of the slowdown?

Shabtai Adlersberg (President and CEO)

None. None. We do not see any competition in our markets. You know, some people sometimes make a mistake and compare us to another company that's active in the SBC space. I will tell you that, you know, we do not see any competition in the Microsoft space. You know, there's no pressure at all. It's really more our ability to add more services and more application. As I have mentioned, you know, if you think about, you know, us being able to deploy IVR solution in our contact center solution, in our Meeting Insight solution, in that environment, we just improve our ability to get, you know, increased ARPU from those customers. We have not seen pressure on the competitive side.

Tal Liani (Managing Director, Senior Research Analyst)

Thank you.

Shabtai Adlersberg (President and CEO)

Sure.

Operator (participant)

Your next question is coming from Ryan MacWilliams at Barclays.

Pete Newton (Equity Research Analyst)

Hi, thanks. Taking the question. This is Pete Newton on for Ryan MacWilliams. Just the first question is, are you seeing any slowing on planned phone deployments at the enterprise level due to macro? Also, what does your outlook look like for contact center? It sounds like it's something that business is pretty healthy.

Shabtai Adlersberg (President and CEO)

Right. As I mentioned, you know, I think the bottom line is that, you know, while last year we grew about 15% year-over-year on the large enterprises in the Microsoft space, we will see this year, you know, lower rate of growth. You know, in the first quarter, it was 3% down, but we do expect that it will keep up going on. Also the fact that, you know, Skype business really went almost to zero and Teams grew. Teams grew 5%. We believe that we will see in the Microsoft space, you know, a growth, maybe 5%-10%, you know, as compared to 6% last year. That's all, you know, a, you know, a result of the economic situation.

Pete Newton (Equity Research Analyst)

Okay, perfect. Then just any thoughts on your Teams versus Zoom in your product portfolio and any differences you're seeing?

Shabtai Adlersberg (President and CEO)

We haven't mentioned Zoom in this call, but yes, we do have, you know, good business with Zoom. We worked with them on several projects. Yeah, we have not seen any major, you know, change in the behavior of, you know, our ability to win project with Zoom, you know, in the first quarter.

Pete Newton (Equity Research Analyst)

Okay. Thanks for taking the question.

Shabtai Adlersberg (President and CEO)

Sure.

Operator (participant)

Once again, if there are any questions or comments, please press star one on your telephone keypad. We have reached the end of the question and answer session. I will now turn the call over to management for closing remarks.

Shabtai Adlersberg (President and CEO)

Thank you, operator. I would like to thank everyone who attended our conference call today. With more focused planning for the rest of 2023, better control for our expenses to be aligned with revenues this year, and strong underlying market trends in our industry in coming years, we have high confidence in our ability to expand our business in coming years. We look forward to your participation in our next quarterly conference call. Thank you very much. Have a nice day.

Operator (participant)

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.