Greetings, and welcome to the AudioCodes Fourth Quarter and Full Year 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I'd now like to turn the conference over to Mr. Erik Knettel, Investor Relations for AudioCodes. Thank you, Mr. Knettel. You may begin.

Thank you, Manny. I'd like to welcome everyone to the AudioCodes fourth quarter and full year 2013 earnings conference call. Let me begin the call today with a brief Safe Harbor statement. Statements concerning AudioCodes' business outlook, future economic performance, product introductions and plans and objectives related thereto and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters are forward-looking statements as that term is defined under U.S. Federal Securities 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 effect of current global economic conditions and conditions in general and 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 the 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 and other factors detailed in AudioCodes' filings with the U.S. Securities and Exchange Commission. AudioCodes assumes no obligation to update that information. In addition, during the call AudioCodes will refer to non-GAAP net income and net income per share. AudioCodes has provided a reconciliation of non-GAAP net income and net income per share to its net income and net income per share according to GAAP in its press release and on its website. Joining us today from AudioCodes, we have Shabtai Adlersberg, President and Chief Executive Officer, and Guy Avidan, Vice President, Finance and Chief Financial Officer. I would now like to turn the call over to Shabtai Adlersberg. Mr. Adlersberg, please go ahead.

Thank you, Erik. Good morning, and good afternoon everybody. I'd like to welcome all to our fourth quarter 2013 conference call. With me this morning is Guy Avidan, our Chief Financial Officer and Vice President of Finance. Guy will start off by presenting a financial overview of the quarter and guidance for next year. I'll then review the business highlights and summary for the quarter, and discuss some of the trends and developments in our business and in the industry. We will then turn it into the Q&A session. Guy?

Thank you, Shabtai, and good morning everyone. Before beginning the financial overview of the quarter, I would like to note that the following discussion will include GAAP numbers as well as non-GAAP pro-forma numbers. Our fourth quarter non-pro-forma results reflect adjustment for the following three non-cash items, stock-based compensation expenses which totaled $522,000, amortization expenses relating to the acquisitions of Nuera, Netrake, CTI and Mailvision assets which totaled $339,000. And non-cash deferred tax benefits in the amount of $1.8 million. The full reconciliation of the non-GAAP results discussed and disclosed to our GAAP results is currently available for review on our website and in the press release issued earlier today. Getting to the numbers, our fourth quarter results are in line with our previously upgraded revenue and profit guidance discussed on our conference call on October 30th 2013. This quarter revenues were $36.3 million which represent a year-over-year increase of 10.5%. Looking at the sequential comparison, revenues rose 3.5% from the third quarter of 2013. We saw continuing demand for our Core Networking Equipment business with an increase of 16.7% in revenues compared to the year ago quarter. Sales of our Unified Communication, Enterprise SBC, Multi-service Business Router and our Service offering continued to drive the increase following the growing demand for Lync Unified Communications and SIP Trunk Services. In terms of revenue by business group, in the fourth quarter our networking business group accounted for 85% of revenue and our technology business group accounted for 16% of revenue, compared to 82% in our networking business group and 18% in our technology business group in the third quarter of 2013. Revenues from our networking business group in the fourth quarter grew significantly by 7% compared to the third quarter of 2013. Revenues associated with our growing managed and technical service…

Thank you, Guy. We're very pleased to report a strong financial performance for the full year of 2013 in our six consecutive quarter of growing revenue than earnings. In 2013, we have made great steps to reposition the company to continue growth and success in 2014 and beyond. We have returned to growing our top line revenues. We have recovered from last and previous year to nice earnings, and we have generated significant cash flow from operations. On our networking business line, where we applied most of our investments is now 85% of revenues. It is planned now to grow at a rate of 10% to 15% for the year in each of the next three years. And thus as provided in our guidance for 2014, we are confident in our ability to continue this trend of success this year and beyond. Our strategy to focus on assets and networks, unlike wide area of voice networking and on partnering with market leaders has proven highly efficient in 2013. And it will help maintain our leadership in this space going forward. We mostly depend on a range of very unique voice technologies not found in other companies including among other technologies such as connectivity, security, routing, voice quality management and insurance mobility and more. And this is a clear competitive advantage in our industry. As we evolve the consistency deck from our growing base of customers and partners is that we provide them with the highest value when we provide end-to-end voice network solution and services rather than focusing on a best of breed product approach as we did in the past. We also believe that our increased focus on software products, solutions and services are expected to provide further strength to improve our margins in coming years. And so, as…

Thank you. (Operator Instructions) Our first question is from Rich Valera of Needham & Company. Please go ahead. Rich Valera - Needham & Co.: Thank you. Good morning, gentlemen. First question on gross margin, so nice sequential uptake in gross margin, and I think you mentioned in your prepared remarks that you saw a gross margin sustainable around that level. I just wondered -- Guy, if you could give a little more color on gross margin expectations relative to that 58% you saw in 4Q. Thank you.

Hi, Rich. We discussed this issue before. So there are actually two components into this very nice growth in gross margins. The first one is there is like 20 to 30 basis point based on this $1 million growth in revenue and the rest is based on favorable product mix. We expect that level to continue going forward in 2014. Rich Valera - Needham & Co.: Around that sort of 58%?

Yes, around 58. Rich Valera - Needham & Co.: ,:

Yes, that is correct. We are planning for 50% increase in 2015. I believe that majority of this growth is coming from two key elements. One is the closest association we have with some of our partners, and with sales substantially in our partner's ecosystem including Microsoft, BroadSoft, Genesys, Avaya and others. Also as I've mentioned before key of the fact that now we have a full line of (facilities), hardware and software densities from the lowest to the highest. We're now for the first time since we began selling in debt market or next (12) years. So, we have some -- that is the plan for 2014. Rich Valera - Needham & Co.: Okay. And then with respect to your software base SBC, I know that's pretty new into the market, but I was wondering if you could give any color on what you are seeing with respect to how and where that's deployed and what kind of traction you expect with that going forward?

Right. Initially, in 2015, I believe that we will see deployments mainly in datacenters, which are used for hosted PBX services. And among them, it will basically be an (accessory). We do expect though that we will see going forward also deployments in datacenter at on-prem and with much lower densities. Now, part of that is our -- are the long-term relationship with some of the manufacturers in debt market for which a software implementation would fit very well for their IP-PBX strategy. Rich Valera - Needham & Co.: That's great. And then, with respect to Microsoft Lync, very impressive sort of growth target there, I think you said you expected your Lync business to grow at around 40% at least in '14, if not beyond. I'm wondering if you can give any sense of the drivers of that on kind of a product category. I know you've got a number of things that comprise that from services to branch routers, SBCs and software. Just any color on the drivers of that impressive Lync growth would be helpful, Shabtai.

Sure. So, basically we see adoption, faster adoption of Microsoft Lync. It's now the fourth year that the product is available. I think several of Microsoft customers are now beyond the first stages of trials and proof of concept and initial deployments. I know I believe of two large companies we worked with is now planning much more in massive or expensive deployments in 2014. So, A), we will see more deployments, more companies jumping on that bandwagon. Second is our ability to provide a very broad range of the on-prem devices from gateways to Session Border Controllers to SBAs. As I've mentioned before, the large capacity Mediant 9000 will now allow us to deploy Session Border Controller in high capacity situation in company's (inaudible). So we expect an increase there. Also, while we started to deploy services or sales services in 2013, we see an increased income trend in end users often to buy these services from us, all within our partnership with the global system integrator. So it's all done in cooperation with our partners. But more services and phones, we just got certified about three months ago. We now start to see more. And as we gradually add more and more features and functionality, we believe it's our approach of One Voice, which (thaws) for a complete solution. That is, most of the time much more preferred, and end user are using several partners. One more important announcement that I have mentioned before, that will be made in next three weeks, we have basically developed a suite of servers, which allow for very efficient network operation. Basically the intent is that platform will be part of our AudioCodes One Voice portfolio. It will significantly help to improve operational expenses and budgets. Our IT manager will operate a large scale global Lync network, among other things which will control all the various components in the metric. And I don't know of any other company offering a management solution that manages IP Phone or Session Border Controllers, gateways, SBAs, etcetera. On top of that we will add routing capability. We will add session (externals) management capability, all integrated in one package. And I believe that would be a major efficient factor in turning projects towards us. Rich Valera - Needham & Co.: Okay, that's helpful color. Thank you.

Sure.

Thank you. The next question is from Dmitry Netis of William Blair. Please go ahead.

Good morning, gentlemen. Just a quick clarification, I thought I heard you -- if I heard you correctly, the new products and the One Voice for Lync categories, would they roughly -- well, what is it, let's say, 15% of revenue for both?

No, not One Voice for Lync, all of our sales in the Lync environment represent about 15% of the company revenues, but not One Voice. One Voice is a smaller percentage of that.

Okay. And then, what -- the new products were opposite --

New product is basically meant to provide a comprehensive suite of management, quality monitoring, security, network management for large scale deployments.

No, I understand, but I thought there was a category called new products which included Session Border Controllers --

No, no, no. The new product -- no, the new product category at this stage comes on the Session Border Controllers, IP Phones and the multi-service routers. That product is still not closed, and not included in this category.

And where was that as a percent of revenues this quarter?

We do not give numbers. I can tell you that we have seen another growth quarter on the new product front. All in all, I think we've mentioned before, that in 2013 we more than doubled 2012 revenues.

Okay. All right, I'll pick the offline to get a better color on the split there. I also wanted to sort of get a sense on that legacy plus technology group that you mentioned, which I think I heard you say represents now 50% of revenues, is that correct?

Correct.

Okay. And so, can you give us some puts and takes in that group? How that's there just specifically in this quarter? And also maybe if you could relate to the mix between the enterprise and service provider as it stands at this juncture, what that mix is and what are some of the growth drivers or secular growth drivers in each of those categories and how that affects your business?

So, Dmitri, generally we do not have accurate numbers and we do not strike the division of our revenues between enterprise and service providers. But I can tell you that I would estimate it to be like 60/40, 60% in enterprise and 40% in services providers.

Okay. That's good enough. Okay, thanks. And then on the -- the other question as far as the kind of how the legacy products potentially faired within each of those segments, or what the expectation was --

So, actually we -- technology is really excluded from being (inaudible). It goes into a completely different set of customers. And we -- I've no idea as to --

I understood. Let's exclude technology and just maybe focus on media gateway.

Yeah, media gateway is again it's not legacy, it's a very vivid market. Just to mention again this is a good opportunity that we sell gateways primarily in the enterprise market for Unified Communication and contact centers. And actually we've seen slight growth in 2013. We've seen a single-digit growth. And we believe that if Unified Communications continues to develop, we will not see any decrease in media gateway sales in enterprise. Drop usually relates substantially more into service provider between naturally active in debt market in the core market. So it really does not affect us now.

Okay. I appreciate that. And then last question will be on the mix between the three growth drivers you mentioned. I think you said UC business services and contact center. Business services actually being closer to 20% of the business now. With the other two categories, what's the rough mix and where does that shape out in 2014?

So, in our Unified Communications, Microsoft Lync is the primary application. I've indicated before we're trying to grow more than 40%. I do not have with me breakdown of the growth projection for contact center and business services, but we're investing (inaudible) services market, our collaboration and go-to-markets to the large Tier 1 service provider, so I expect that to take off naturally in 2014. I do not have any estimate at this stage for what we would see in the contact center. But the process there is substantially on, TDM links are replaced by IP links and the movement to cloud will all again will support growth in debt markets.

And I'd guess your relationship with Interactive Intelligence was one of your largest distributors and that into that protocol or into that segment is continuing well?

Yes, correct. Two of our largest customers in this space are Genesys and Interactive Intelligence, yes.

Okay, great. Thank you for that color, I appreciate it.

Sure.

Thank you. The next question is from Andrew Uerkwitz of Oppenheimer & Company. Please go ahead. Andrew Uerkwitz - Oppenheimer & Co.: Hey, thanks guys. I appreciate the color in the press release around un-earned revenue growth. Can you give a little bit more color on that mix between services, products, how much of that do you think is driving your forecast for '14 and how much do you think that can grow in '14?

Andrew, so as we mentioned before Q4, the breakdown was like 20% on services and 80% on hardware. And we're seeing better gross margin on services than our average. If you look at our deferred revenue numbers, you can realize that we're expecting growth in our services in the coming quarters. Still it is not the largest portion of our revenues. So, we cannot really build our guidance based on revenue or based on services only, but the portion of services are growing constantly quarter-over-quarter. Andrew Uerkwitz - Oppenheimer & Co.: Great, and that's appreciated. When I look at your service revenues on a quarterly basis, it kind of bounced around a little bit, in the gross margins obviously too as well. I'm assuming those are correlated?

And again, the ups and downs in terms of revenue are always related to revenue recognition. We're selling services for one, between one to three years. And revenue recognition obviously makes fluctuation, especially when you talk about smaller numbers. Gross margin always is pretty steady in services. Andrew Uerkwitz - Oppenheimer & Co.: Okay, perfect. I think that's all I got, I appreciate you guys. Thank you.

Sure. Thanks, Andrew.

Thank You. The next question is from Les Sulewski of Sidoti & Company. Please go ahead. Les Sulewski - Sidoti & Co.: Good afternoon, gentlemen. Thank you for taking my questions. One quick one regarding, you mentioned hiring in 2013, addition of some people. I just want to see where that's concentrated, is it on professional services side or sales role, and then typically how long do you expect the hires to become productive?

Right. We're fairly confident in our business momentum in this stage. And the addition of people would be really across the company. We have a plan that's depending on also in funding by the Government of Israel, if that's going to be approved, we'll see more investment being done. So, all in all, it's all across the board, customer facing positions, sales, marketing (inaudible) and R&D. Les Sulewski - Sidoti & Co.: Okay. And then just curious on the strength of Lync, is that consistent across all regions?

At this stage, the key activity goes on in the U.S, majority of the markets in several large countries in Europe. We have seen signs in Asia Pacific, also on places like Australia. We believe two year also that in China we will see Lync starting to be deployed this year. We feel very good about that. Les Sulewski - Sidoti & Co.: Okay. That's all from me. Thank you.

Sure.

Thank you. The next question is from (Todd Kauffman of Concourse). Please go ahead.

Thank you very much. Just earlier question, I think you didn't answer, what percent of your SBCs represented your total revenue?

We're not giving that number. We have never provided that number. It is an important part, but still not that important for our revenues.

And then, just a clarification as you called it out, how big was that one large distributor in the percent of total revenue?

22%.

Thank you very much, good luck.

Thanks, Todd.

Thank you. We have no further questions in queue at this time. I would like to turn the call back over to management for any closing remarks.

Thank you, operator. I'd like to thank everyone who attended our conference call today. Based on current business momentum, we believe we are on track to continue our trail of growth and success in the year end 2015 and continue to build a sustainable profitable operation for coming years. We look forward to having you on our next quarterly conference call. Thank you very much. Bye-bye.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.