Good morning, everyone, and welcome to the AudioCodes' second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode, and we will be opening for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Roger Choucroun, Investor Relations at AudioCodes. Roger, the floor is yours. 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' business outlook, future economic performance, product introductions, plans and objectives related thereto. S tatements 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 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. The effects of the current terrorist attacks by Hamas and the war and hostilities between Israel and Hamas, and Israel and Hezbollah, as well as the possibility that this could develop into a broader regional conflict involving Israel with other parties, 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 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 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. An archive 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. Thank you, Roger. Good morning and good afternoon, everybody. I would like to welcome all to our second quarter 2024 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance of AudioCodes. Niran will start off by presenting a financial overview of the quarter. I will then review the business highlights, in summary for the quarter, and discuss trends and developments in our business and industry. We will then turn it into the Q&A session. Niran? Thank you, Shabtai, and hello, everyone. Before I start my formal remarks, I would like to remind everyone that in conjunction with our earnings release this morning, we will post shortly on our investor relations website an 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 second quarter were $60.3 million, an increase of 0.5% over the $60 million reported in the second quarter of last year. Services revenues for the second quarter were $32 million, up 12.3% over the year ago period. Services revenues in the second quarter accounted for 53% of total revenues. The amount of deferred revenues as of June 30, 2024, was $80.3 million, compared to $77.7 million as of June 30, 2023. Revenues by geographical regions for the quarter were split as follows: North America, 47%; EMEA, 35%; Asia Pacific, 13%; and Central and Latin America, 5%. Our top 15 customers represented an aggregate of 56% of our revenues in the second quarter, of which 38% was attributed to our nine largest distributors. GAAP results are as follows: Gross margin for the quarter was 65.5%, compared to 64.1% in Q2 2023. Operating income for the quarter was $4.9 million, or 8.2% of revenues, compared to operating income of $2.3 million, or 3.8% of revenues in Q2 2023. EBITDA for the quarter was $6.2 million, compared to EBITDA of $2.9 million for Q2 2023. Net income for the quarter was $3.8 million, or $0.12 per diluted share, compared to net income of $1.1 million, or $0.03 per diluted share for Q2 2023. Non-GAAP results are as follows: Non-GAAP gross margin for the quarter was 65.8%, compared to 64.5% in Q2 2023. Non-GAAP operating income for the second quarter was $7.2 million, or 11.9% of revenues, compared to $5.7 million, or 9.5% of revenues in Q2 2023. Non-GAAP EBITDA for the quarter was $8.3 million, compared to non-GAAP EBITDA of $6.2 million in Q2 2023. Non-GAAP net income for the second quarter was $5.5 million, or $0.18 per diluted share, compared to $5.1 million, or $0.16 per diluted share in Q2 2023. At the end of June 2024, c ash equivalents, bank deposits, marketable securities, and financial investments totaled $93.7 million. Net cash used by operating activities was $2.9 million for the second quarter of 2024. Purchase of property and equipment was $8.8 million in the quarter, significantly higher than historical periods related to leasehold improvements of our new corporate headquarters in Israel. We expect CapEx to remain elevated in the third quarter, after which we expect this line item to return to historical levels. Days sales outstanding as of June 30, 2024, were 108 days. In July 2024, 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. This approval is valid through January 1, 2025. During the quarter, we acquired 116,000 of our ordinary shares for a total consideration of approximately $1.2 million. Earlier this morning, we also declared a cash dividend of $0.18 per share. The aggregate amount of the dividend is approximately $5.5 million. The dividend will be paid on August 29, 2024, to all of our shareholders of record at the close of trading of August 15, 2024. Business outlook. As it relates to our 2024 financials, we are reiterating our revenue guidance range of $240 million-$250 million. On the profitability side, we are adjusting our guidance practice for this year and going forward to non-GAAP EBITDA from non-GAAP net income per share. Effective second quarter of 2024, we have adjusted our tax expenses presentation is calculated in our non-GAAP earnings per share to include only the tax impact of the non-GAAP adjustment, as applicable, in relation to the GAAP tax expense. Prior to this quarter, our practice was to adjust non-cash deferred tax expenses or income as part of our non-GAAP reconciliation. Specifically, this deferred tax non-GAAP adjustment derived mainly from the tax expenses recognized due to the realization of the company's net operating losses deferred tax asset. We believe this change in tax expense, in tax expense presentation, has no notable impact on the true cash generation of the business. With approximately $202.2 million of U.S. NOLs at the end of the second quarter of 2024, we believe that our actual tax payment will continue to be lower than the GAAP tax expenses for the foreseeable future. To elevate any potential confusion from the change in tax expense presentation during 2024, and to more readily highlight cash earnings potential of the business in the future, we believe it is reasonably prudent to provide guidance based on non-GAAP EBITDA in 2024 and for the foreseeable future. On that basis, our non-GAAP EBITDA guidance for 2024 is $33-$39 million, which is unchanged as implied in the non-GAAP EPS outlook previously provided on our first quarter 2024 earnings call. This 2024 non-GAAP EBITDA guidance compares to $31 million generated in 2023. I will now turn the call back over to Shabtai. Thank you, Niran. I'm pleased to report solid second quarter 2024 results, marked by the second consecutive quarter of positive top-line growth and ongoing momentum in our Microsoft and conversational AI business, with sequential uptick in the legacy gateway business. Within enterprise business, which represents about 90% of our revenue. Our UCaaS business continued to perform well, highlighted by Microsoft Teams business up 3.3% year-over-year for the quarter, and Microsoft Teams Live Managed Services annual recurring revenues growing 35% year-over-year. In the CX business, customer experience business, we made progress as planned, and our healthy pipeline continues to support a positive outlook for the second half and full year 2024. Conversational AI business revenue was up 10.5% year-over-year. Bookings grew over 50% year-over-year. Judging by the success we enjoyed in the development of emerging conversational AI business in the second quarter and the first half of 2024, provides us with strong conviction with regards to the potential of future success in this area, and positions conversational AI as a second strong leg and growth engine for the company next to our Microsoft Live Teams business. Our managed services business continues to evolve to become our key go-to market. Services business grew 12.7% and accounted to 53% of revenue in the second quarter, compared to 47% in the year ago quarter. What has fueled ongoing momentum in services is our Live managed services, which grew about 35% year-over-year and ended second quarter at $56 million annual recurring revenue, putting us on track to achieve our guidance of $64 million-$70 million exit 2024. Our focus and investment made in recent years are paving our growth for a strong recurring business, with strong legs deeply rooted in growing markets such as UCaaS, CCaaS, and conversational AI. The growth of two key business areas have contributed the most to the ongoing growing booking trends. First and foremost, our Live business. Live Teams Managed Services rely substantially on our Live platform, a mature voice services delivery portal and platform with unparalleled unique competitive scale and position for Teams Voice, which provide us an edge in the communications and collaboration market. The strength of Live Platform stems from the comprehensive large-scale services delivery it supports. Among these are connectivity services, where we hold about 70% market share; contact center services, which were added last year based on our Voca CIC AI-first contact center for Teams; recording, analytics, and inference services, and nowadays, conversational AI services. We are, thus, well- positioned to win a large portion of the Microsoft Teams value-add services. This can be seen through the rapid booking growth and adoption of Live services in the market, which again, as I've mentioned, grew 35% in 2024. Just to give you one of the most important numbers, which do not show in our financials and are not part of our balance sheet, our Live Managed Services backlog. Those are managed services that we sold but haven't yet invoiced in or delivered in full, was at the end of the second quarter, $67 million, compared to just $29 million at the end of second quarter 2023. This represents 133% year-over-year growth, and that speaks for the strength of the Microsoft Teams Live business. Second, and emerging in a big way in 2024, is the era of conversational AI services. We have already won several projects this year, starting from a low base in previous years. We saw about 50% growth in bookings in 2024, and we aim to end up above $10 million this year. As we all know, GenAI technology is fueling much modernization and innovation in the modern workplace applications in the enterprise space, due to its unique ability to support creation and new advanced services while cutting substantial costs and time to market. At AudioCodes, we enjoy a very unique position due to the fact that we own one of the most comprehensive set of technologies, including telephony, networking, network and device management, security, cloud infrastructure, cognitive services, services practice, and more. At the same time, we invest in expanding our capabilities in the era of applying advanced GenAI and large language models, technologies for conversational AI technologies. As such, we have become a prime contractor for these GenAI-related projects, which are fairly complex and difficult to implement. That is our unique advantage. Let me take a step back now to provide a broader perspective on our business history and evolution in recent years and provide you with a basis for the outlook for 2025 and beyond. Decline in our legacy business relating to the service provider business during 2023 and the first half of 2024, coupled with our revenue model shift from CapEx sales into recurring business, were the main factors that drove a halt in our growth story during the years 2020 to 2022. However, these were also the years where we have worked hard to build our live platform and business in UCaaS, CCaaS, and invested in building our conversational AI business. As legacy business decline starts to moderate in 2024 and beyond, laying less impact on our overall results, and live and conversational AI service businesses keep growing double digits every year. We believe we will see growth reemerging as of 2025 and beyond. With growth in recurring business in UCaaS, CX, and CAI, and our favorable competitive position in our markets, we are confident in our ability to return to growth in both revenue and profits starting 2025 and beyond. Before turning to detail these lines discussions, let's quickly shift to second quarter profitability metrics. Our non-GAAP gross margin in the quarter came at 65.8%, within our 65%-68% long-term range, and compares to 65.2% in the first quarter of 2024, and second, second quarter 2023 levels of 64.5%. This year-over-year margin improvement is primarily attributable to a more favorable product mix, namely software and services. Second, non-GAAP OpEx, second quarter non-GAAP OpEx was $32.5 million, in line with our expectations, representing a small sequential decrease relating to our latest head count rationalization initiatives. As a reminder, we expect the bulk of $1.5 million quarterly expense initial reduction, of which about $1.2 million is still to be realized in the third quarter 2024, and thus to contribute to further reduction in the OpEx in third quarter 2024 and beyond. Reference head count, we ended the second quarter with head count of 940, down from 959 in the first quarter, and as compared to 946 employees in the second quarter of 2023. The year-over-year improvement in non-GAAP gross margin OpEx led to non-GAAP operating income of $7.2 million, or 11.9% margin versus year ago of $2.9 million, or 4.9% margin. On a guidance front, with steady performance in the second quarter and pipeline opportunities for strategic area of business remaining healthy, we are rewriting our 2024 revenue guidance of $204 million-$205 million. As explained earlier by Niran, we are introducing full-year non-GAAP EBITDA guidance of $33 million-$39 million, which is unchanged as implied from the non-GAAP EPS guidance provided during last quarter earnings call. In 2023, non-GAAP EBITDA was $31 million. Now, let's move to some of the business lines. Let's talk about Microsoft. In terms of our strategic business lines, Microsoft Teams business grew 3.3% in second quarter, year-over-year, with steady increase in the live managed services, which grew 35%. Second quarter live business growth puts us on track to land within our full year 2024 annual recurring revenue target range of $64 million-$70 million, representing an average approximately annual growth of 35%-40% compared to 2023. Revenue was led again by steady growth in the North American region. From a recurring versus CapEx perspective, our second quarter recurring live bookings mix accounted for 43%, compared to 39% in the year ago quarter, more than 10% year-over-year improvement. The one time or CapEx portion of Teams revenue was accordingly 57%, compared to 61% in the year ago quarter. As a reminder, and with Microsoft recent disclosure of over 20 million PSTN users, representing just a fraction of the over 320 million Teams monthly active users, we believe the low Teams Phone voice penetration is less than 10%, and thus provide us with ample multi-year runway to drive ongoing penetration gains. As such, UCaaS and Microsoft Teams remain with high potential. Microsoft now estimates that Teams Phone adoption growth is predicted to be about 30% year-over-year. Microsoft's last report in the previous quarter was that they are at about 3 million Teams Phone adds in the previous three quarters. We believe that the key driver to further or accelerated growth of Teams Phone is that nowadays, Microsoft's push on use of Copilot for meetings and calls analytics, so expect good market lying ahead. On a new area for us, meeting rooms with Teams, we saw good momentum and growth in revenue from our MTR business, where we are at the end of the second quarter, already at the same level of the entire revenue for the MTR business throughout 2023. Just to remind or talk about one key win in the quarter, we signed a 36-month contract with a multinational consumer goods firm, providing Live Essentials services to initial 20,000 Teams users, Voice add, with plans to rise to over the next two years to reach nearly 100,000 users, as the customer continues to migrate to Teams from its legacy PBX vendor. Winning marquee enterprise accounts with complex requirements takes time. Also, initial contract win may not be meaningful. So long term, building trust and with customers and executing on our land and expand strategy by leveraging broad portfolio of products and services, have proven to be effective recipe to generating material revenue contribution with these accounts over time. Now let's move to the customer experience business. In the CX business, our healthy pipeline continues to support a positive outlook for the second half and full year 2024. Revenue declined about 10% year-over-year in the quarter, impacted by push out of a large deal owing to customer-specific circumstances, and that's related to material changes in the macro environment. We do expect a portion of this deal to close in the third quarter, with the balance in the fourth quarter. Pipeline generation of opportunities remains healthy, and we have good visibility in this segment for the rest of the year. We see a growing number of large contact center migration to cloud projects, choosing our services and products to refresh their voice infrastructure. This quarter, we closed several large deals with banking, financial services, and insurance organizations in North America, Asia Pacific, and EMEA. Live CX is our voice services suite for contact center, and now is delivered using our Live Platform, which generalizes the way the services are delivered and allow us to offer additional services to complete our value proposition to partners and large customers. Just to mention some of the customer experience live services, I'll mention just four. The first one is our bring your own carrier solution or SIP connection. This is our core competency, which is tied up to our SBC business, and where we deliver superior voice quality for large global contact centers. We know that at this stage, only about 20% of the contact center global contact center have migrated, so very long runway ahead. We forecast that in each of the next three years, our revenues from this application will grow about 25% a year. Second service is our omni voice channel solution, or as we call it, Click-to-Call. In this area, we expect high growth. We are sharpening our go-to-market and shaping it, but we believe that within the next three years, this will help to add more than $20 million of revenues going forward. Then we can talk about a call regarding call security, and then we can talk about enhanced voice service and analytics. I'll not provide more details. We can definitely provide those details in calls after the call. In terms of revenues, just to tell you, give you some idea about the way the Live CX revenue has evolved. We started with about $2 million in 2022. In 2023, revenue grew to $6.8 million, with more than 30 projects, compared to just 15 the year before. In 2024, we had about $3.1 million in booking the first half, and then we have a very interesting win with a large financial institution in the U.S. We see increasing number of projects with financial institutions migrating to the cloud. Naturally, these large projects require longer decision cycles that may be, that may delay signature. In third quarter, we won a project with U.S. Bank that ordered our new call security service, adding additional 30% on top of the voice connectivity revenue. Now let me move to the, conversational AI business. Shifting to that business, revenue was, as I've mentioned, 10.5% year-over-year. Booking grew above 50% for the quarter. We expect it to become the second most important growth engine for the company going forward, with total contract value expected to cross $10 million this year. We expect total contract value to grow for this line at least 30%-50% year-over-year in each of the coming years, so definitely key activity. To provide more color on our investment in conversational AI, I'll point out the following. First, again, as I've mentioned before, we believe that the majority of business to be done in CAI relates to AI project implementation, where GenAI plays a critical role. However, most of the value lies in the integrated solution. While GenAI and conversational AI are key to the delivery of solution, the ability to compete and be successful in providing, you know, full working software solution to the enterprise space, is highly dependent on system and cloud services, where we have an edge over the competition. This is where our AudioCodes shine. We own extensive experience in multitude of technology areas, including telephony, networking device management, security, cloud infra, cognitive services, services practice, and more. At the same time, we invest in fine-tuning GenAI applied research for this project. I'll mention that out of, in our R&D force h ead count of about 350 engineers and software developers. We currently employ more than 100% in the voice AI activities, which is close to one third of it. Growth of UCaaS and CCaaS is heavily dependent these days on the application of CAI, GenAI. Microsoft Copilot growth clearly depicts this dependency, and thus, we believe we have an edge and are building a strong baseline for future business expansion. Key activity increasing mainly in the verticals of finance, healthcare, and government. Talking about solutions, we have now in production three SaaS applications, which provide multi-tenant operation over Azure. Leading is Voca CIC, our AI-first Azure native contact center for Microsoft Teams. Then we have an interaction recording application called SmartTAP 360°, which provides compliance recording and enterprise recording. Then we have Meeting Insights, an enterprise-grade meeting collaboration tool. We do intend to expand the activity in CAI by providing, going forward, an on-prem solution for Meeting Insights and interaction analytics for contact centers, add more automation on top of the Meeting Insights, and more custom projects. Turning a bit to Voca CIC. Voca CIC is our, as I've mentioned, AI-first contact center solution for Teams. It plays well into the company overall live business and strategy, where we enjoy the benefit of upsell to existing customer base. Bookings are already at 75% at the end of second quarter compared to last year. We expect them to close to double this year. Revenues are already 130% above the entire 2023. We expect to almost triple them in 2024. To mention a few more data points, Voca CIC pipeline increased 35%, quarter-over-quarter, sequential quarter. We won additional education account in North America, now serving five educational customers in the U.S. in total. We have continued momentum with channel partners in education. We signed five additional channel partners this quarter. We onboarded our first-ever omni-channel contact center with a leading Fortune 500 manufacturer, with a contact center with more than 300 agents. We won a large migration project of more than 200 IVRs. Again, this is in EMEA, moving a customer from Zoom to Teams. T hen, we have Voca CIC largest deployment to date, now handling 2.5 million calls a month. Turning to Meeting Insights. Meeting Insights is a SaaS application and an organizational enterprise solution that captures, analyzes, and organizes every Microsoft Teams meeting in organization, allowing company-wide information sharing and enabling substantial better decision-making for managers and company managements, using information delivered in meetings across the organization. At AudioCodes, we use Meeting Insights for more than two years now, and processing nowadays more than 150 meetings a day. Needless to say, we experience very high productivity pickup based on this, using the application. AudioCodes Meeting Insights is part of a growing portfolio of SaaS application and services in the conversational AI domain, which unleash the power of AI by transforming Teams meeting into business insights, delivering efficient use of information and data exchange throughout the meeting, and accelerates business productivity and organizational decision-making intelligence. Glad to inform that as of the end of last week, a leading online publication, UC Today, has selected AudioCodes Meeting Insights as a winner of its Best Use of AI category in its UC Award 2024. The awards judges recognized Meeting Insights ability to leverage conversational AI to enhance user productivity and overall communication experience. Just to mention some data points. We've seen we have completed the deployment of a SaaS solution throughout the first quarter. We've seen tremendous growth in second quarter, more than 30%. We now expect to grow very fast. The use of AI in Meeting Insights will probably double month-over-month. We see many organizations starting to use LLM technology and insights and prompts from Meeting Insights. Going forward, we plan to expand the Teams solution into providing a solution for the Zoom, Google Meet, and Cisco Webex environments. We intend also to provide a solution for storage to be on-prem rather than just cloud. We do intend, on top of the Hebrew and U.S. and U.K. English, to provide a few more European languages already next month, August, providing German, French, Dutch, Italian, Spanish, and more. So we expand rapid growth. We expanded that business that is just few thousand dollars in 2024 to deliver millions, few millions in 2025. Just to again mention that we're working to expand the solution in many areas. I mentioned, we'll add automation on top of it, very unique features that will allow to improve productivity, just such as, you know, prepare me for my next meeting. You'll get a message on your mobile, and you'll be ready to meet, to deal with anyone that you had meeting with and an action item with. We'll add more integration into CRMs and meeting notification. With that, I'll wrap up. So we have delivered on our business priorities in the core, fostering growth in strategic areas of our business, while successfully executing on cost reduction initiatives. We believe this lays the foundation to support healthy top-line growth long-term, while driving significant margin expansion in 2024 and beyond. With that, I have concluded my presentation, and we'll move the session to Q&A. Thank you, operator. Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Thank you. Your first question is coming from Ryan McWilliams of Barclays. Ryan, your line is live. Hey, guys. This is Damien Cosgrove from Ryan McWilliams. Thanks for taking my question. Great to see improved service business growth year-over-year in the quarter. Can you help us understand what the key drivers of growth were in the quarter, and how we should think about growth in the product versus service business lines in the back half of the year? Yeah, actually, again, you know, anyone who wants to understand, you know, the prospects of our business should pay attention to two key business lines. One is the Live and Microsoft Teams, which is the managed services business, which is now about 53%, growing nicely year-over-year. This is where we put most of our energy and resources. We have built. I think the strength comes from the fact that we have developed throughout, you know, several years, a platform. The platform is called Live Platform, and it's based on connectivity services for which we are known, right? Both our gateway and SBC. But then throughout the years, we have added, you know, more services, first and foremost, management services, so we can manage addition, deletion of user sites. We then added on top of that, you know, the contact center Teams application, which provides for, you know, contact center applications. We've added recording solutions. Nowadays, recording and, you know, transcription and inference become key in the evolution of both, you know, UCaaS and CCaaS solutions. So, adding those services further strengthen. So, our, you know, strategy here is land and expand. So we usually land with our connectivity services, where we consider to be, you know, the dominant leader in the market. T hen we simply, you know, tunnel and sell, do an upsell of, you know, voice-related business application to each such account. So, using... And, and Catherine, you know, we had the last, a win, very important win with UCF, University of Central Florida, right? One of the top three universities in the U.S. They've been using our SBCs for a long time, and because they recognize us as a trusted, reliable supplier, when we offered them to evaluate our contact center solution, they took on it, and you know, last year we you know, signed the contract. So it's you know, again, it's land and expand and the addition of more services, and you can expect, right? I was talking about you know, Meeting Insights. I was talking about new coming solution. Let's talk about interaction analytics for contact center, et cetera. So we see a long runway for voice-related business application in the Live Teams environment a nd this is why we believe that you know, having this integrated platform is you know, is very high integration to it. You know, I believe that that puts us substantially above any scalable competition. So we've kind of built a moat, if you will, for the Microsoft Teams phone business a nd with the long runway, we're fully confident that that growth will continue. So that's one leg. The other one, which is just a new, you know, substantially smaller leg, which is the CAI, Conversational AI. Here, again, you know, we bring our, you know, many years, 25 years experience in multitude of technologies, as I've mentioned. We believe not too many organizations may have this type of, you know, comprehensive set of technologies, you know, resources from telephony, networking, management, you name it. N ow, since we are... We have a group that is specializing in evaluating and optimizing large language models in Gen AI. So we are basically marrying, you know, the old system and software and cloud services abilities with the new Gen AI activity that the internal group is handling, right? We're working with OpenAI, LLM, and with, you know, Cloud and evaluating several more. So we definitely expect that our ability to deliver end-to-end full solution based on these capabilities will become a very strong driver for success in the future. So those are the two key elements that, you know, upon which we base our business going forward. Got it. Thank you, Shabtai. Great to see the continued improvement in the conversational AI product. Can you help us understand what kind of customers are adopting that product a nd is customer appetite for adopting AI use cases better than your expectations? Yes. So we have, well, my strategy was always to set up here in Israel, next to Edcor, where we have got great access to a lot of businesses. So we have few projects running already and completely delivered, both in the financial sector, in the government sector, and in the healthcare sector. So for example, you know, we completed a project with the Israeli Red Cross Ambulance Service back in 2021, that's working for three years now. We have delivered two projects for the government space. We have delivered already the, you know, the Israeli largest medical service organization. It's called Clalit. It has 4.5 million subscribers. We have, you know, a solution for call steering, and now we have for, you know, setting calls. It's running like 100,000 calls a day. So at this stage, I would say that we have, you know, close to 10 different applications which are not based on the standard products, right? It's not Voca CIC, and it's not Meeting Insights. It's projects where you need to connect to a contact center, you need to connect to a cellular phone environment, you need to do management of elements, you need to transcribe, to extract, to infer, record, deliver reports, analytics. So a lot of areas where we can shine. Thank you, Shabtai. I'll hop back in the queue. Appreciate it. Sure. Thank you, Ryan. Thank you very much. Your next question is coming from Ryan Koontz of Needham & Company. Ryan, your line is live. Great, thanks. I wanted to take a different cut at the last question about the transition from license over subscription. If we think about this over a multi-year view, you know, at what point do you expect growth to reinflate as y ou see this transition from product over to service? Do you have an idea? Can you set any kind of goalposts out there when you think you might see this return to revenue recognition growth again, you know, approaching high single digit or maybe double digit? Yeah. I believe that, you know, the decline of legacy is moderating. A t the same time, you know, we see managed services picking up and CAI services at the same time. Based on, you know, our, you know, visibility, you know, we should talk about 2-3 quarters going forward. So I expect that actually either first quarter or second quarter of 2025, we are definitely going into growth. I believe that now that our business will be primarily based on recurring business and not, you know, one-time sale business, you know, chances for decline, such as happened to us back in 2023 and this year, will not repeat themselves. So we expect growth to come back, you know, a second quarter of 2025 and beyond. That's really helpful. Thank you for that. On the recovery and the legacy gateways, anything going on there? I mean, it just doesn't seem like the operators are particularly investing a lot these days, so wondering what's behind your recovery in legacy gateway shipments. Yeah, you know, when we looked into, you know, the history of gateway sales, we saw that, you know, back in 2023, first quarter and this quarter, this first quarter of 2024, there was a sharp decline between fourth quarter to the fourth. The last quarter in a year to the first quarter in the year, and then it stabilized for the rest of the year. So, we do expect that, you know, gateway business will not continue to decline, or it will definitely moderate its decline throughout 2024. All in all, I believe that we already, you know, just give you a quick think. All in all, if I'll sum up the totals, you know, back in the end of 2022, our combined gateway business was roughly about $90 million. At the end of this quarter, I think we got somewhere to like $60 million. I don't believe we will see a decline of more than another $10-$15 million. So throughout the coming quarter. So all in all, I think we already experienced the largest drop, and so it will moderate and, you know, will vanish. Helpful. Just a quick housekeeping one here. On the higher cash use in the quarter, you mentioned the headquarters modernization investments there, and that will continue in third quarter. Any other puts and takes on the cash use in the quarter? Yeah, I did see that the accounts receivable was up and things like this, but anything else you'd call out on the cash flow that drove you guys to have a higher use in the quarter? Hi, Ron, this is Nir. So, you know, we had a very nice cash flow, operating cash flow in the first quarter. It was $50 million, so no dramatic change during this quarter, although we saw a slight increase in our accounts receivables. But there is no issues with the collection or a doubtful allowance with regards to the accounts receivables. We managed to lower the inventory level, so all in all, we believe we will back to all positive operating cash flow at the third quarter and then after. With regards to the capital expenditures, yes, it relates to our new headquarters. We will have a few more million invested at the third quarter, and then we will back to the regular level that we used to have before. Got it. Thanks, Niran. That's all I've got. Appreciate it. Thank you very much. Your next question is coming from Samad Samana of Jefferies. Samad, your line is live. Hey, guys. This is Billy Fitzsimmons on for Samad. Maybe first question. There are a lot of conflicting narratives right now on the macro front and what this means for the UCaaS and CCaaS vendors. Would be curious if you guys have seen any material changes in either UCaaS or CCaaS spending from a macro backdrop perspective, quarter-over-quarter, or as you look out to the third quarter. Thank you. Okay. Well, all in all, I believe, and we also, you know, you know, review information provided by analysts in the space. Contact center activity doesn't seem to stop. Actually, it continues. You know, if you'll take Enterprise Connect back in March of this year, it was, you know, fully active and intensive on all contact center application. That's growing a nd no impact from the global economy. UCaaS is growing less, however, still very strong. We've not seen... Well, there's definitely an impact of the economic situation on enterprises, you know, investing in, modernizing their networks. I believe that that will come back, you know, when that situation ends, hopefully next year. I'll just say that again, as I've mentioned, that the appearance of GenAI technology, Copilot and, and likes, will definitely give a push to the UCaaS case, use case, simply because now there's you know ample you know actually excellent technology that allows to provide substantially more value from analyzing meetings and calls in the enterprise. So while we've been using data, you know, messages, email messages and or files, digital files, to derive our you know intel from, nowadays, there's the information exchange in meetings, which is, you know, we sit on meetings all day, so there's huge amount of new information that has not been captured so far, has not been used to generate you know good intelligence. So we do expect that, GenAI, Copilots, and few more chatbots technology will definitely help to increase the use of UCaaS. So all in all, we are optimistic that in 2025, we'll see better, behavior. Got it. T hen conversational AI grew 50% year-over-year, and Shabtai, you provided some customer examples of conversational AI adopters. Maybe digging a little deeper there, can you just relay some anecdotes from customers on kind of the sales motion and what initial feedback on the product has been like? How are customers justifying the cost increase? What are getting those deals over the finish line? Any, any color there would be helpful. Yeah. Very simply, I mean, let's talk about a corporation that needs to be highly operational and effective in it, in running its operation in, in diverse, you know, locations and sites. You know, one organization that we work with was usually recording its meetings, but however, he had a turnaround time of about three weeks before they got back the transcription, and then were able to distribute it. Nowadays, if you have some time pressure to solve issues at the end of the meeting, you're getting a full, you know, transcribed summary, action items that can be distributed and sent over immediately over, you know, the communication line. So it takes an operation that was really non-efficient, you know, very slow to an operation that's fully real-time operated, and that's a big, big plus. Think also about a contact center that, you know, was working. However, you know, management and analysts had no idea about, you know, what was going on in all those calls. Now we have tools such as, you know, summarization and insights extraction, that allows analysts and data scientists to inform managers, you know, where the focus is, what application and/or operation is hot and which is not, and where management should invest its resources. So many such, I can tell you that we have plenty of use cases all around. Give you an example, employee leaving your organization, knowledge retention. If you have a talent that's, you know, has left your organization, you're at loss. It will take you four months to recruit, you know, a replacement. All the experience and knowledge that the previous employees were gone usually, and it's a blow. You know, many years ago, we lost several design engineers. We made a calculation that the departure of each cost us about $70,000 in total. Nowadays, if you use a meeting summary and insights tool for each meeting, all you need to do is, you know, you tell your employees to include that capability in each of their meetings. Now, when somebody leaves, you know, the new employee that comes and replaces him, all of a sudden, he has got, you know, tens and hundreds of recordings and summarization and insight in text from this person experience. So all of a sudden it can become fully productive and effective within a matter of, you know, a week or two. So that's definitely three different examples, which tells you why organization will spend a lot of money to take advantage of the use of AI. Super helpful. Thank you very much. Sure. Thank you very much. Just a reminder, if anyone has any remaining questions, you can press star one on your phone keypad now. Okay, we appear to have reached the end of our question- and- answer session. I will now hand back over to Shabtai for any closing remarks. Thank you, operator. I would like to thank everyone who attended our conference call today. With continued good business momentum in our enterprise operation and good underlying market growth trends in UCaas, CCaaS, and CAI, we believe we are transitioning the business towards growth and growing profitability in coming years. We look forward to your participation in our next quarterly conference call. Thank you all. Have a nice day. Thank you very much. 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.