Greetings, and welcome to the AudioCodes Second Quarter 2016 Earnings Conference Call. At this time all participants are 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. It is now my pleasure to introduce your host Elizabeth Parker, Director of Investor Relations, thank you, you may begin.

Thank you, Christine. I would like to welcome everyone to the AudioCodes second quarter 2016 earnings conference call. Hosting the call today are Shabtai Adlersberg, President and Chief Executive Officer, and Niran Baruch, Vice President, Finance, and Chief Financial Officer. Before beginning, we'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, and plans and objectives related thereto. And statements concerning assumptions made or expectations as to any future event, conditions, performance, or other matters are forward-looking statements as the term is defined under US 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 global current 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 developments, upgrade in the ability to manage changes in market conditions as needed, possible need for additional financing, the ability to satisfy covenants in Company's loan agreements, possible disruptions from acquisitions, the ability of AudioCodes to successfully integrate the products and operations from acquired companies into AudioCodes' business, and other factors detailed in AudioCodes' filings with the SEC, the US Securities and Exchange Commission. AudioCodes assumes no obligation to update the 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. Before I turn the call over to management, I'd like to remind everyone that this call is being recorded and an archived webcast will be made available on the Investor Relations section of the company's website at the conclusion of the call. The call will also be archived on our Investor Relations app, which is available for free from the iTunes App Store and the Google Play market. With that said, I would now like to turn the call over to Shabtai Adlersberg. Shabtai, please go ahead.

Thank you, Elizabeth. Good morning and good afternoon, everybody. I would like to welcome all to our second quarter 2016 conference call. With me this morning is Niran Baruch, with -- being promoted as of this morning to the position of Chief Financial Officer and Vice President of Finance for AudioCodes. On behalf of myself and the Board of Directors, I would like to take this opportunity and congratulate Niran on his contribution and achievement at AudioCodes for the past 11 years and with his promotion to the CFO position. Good luck, Niran. Niran will start off by presenting a financial overview of the quarter. I will then review the business highlights and summary for the quarter and discuss trends and developments in our business and industry. We will then turn it into the Q&A session. Niran?

Thank you, Shabtai, and hello, everyone. As usual, we will be referring to both GAAP and non-GAAP numbers on the call. The non-GAAP P&L metrics exclude recurring noncash items. Today's earning press release contains a reconciliation of supplemental non-GAAP financial information. Revenues for the second quarter were $35.9 million, up 3.2% from the prior quarter. Services revenues for the second quarter were $10.4 million, accounting for 29% of total revenues. Revenues by geographical region for the quarter were split as follows. North America, 42%, Central and Latin America, 6%, EMEA, 32% and Asia-Pacific, 20%. Our top 15 customers in aggregate represented 55% of revenues in the quarter, of which 49% are attributed to our 12 largest distributors. Gross margin for the quarter was 60.5%, compared to 60.3% in Q1, 2016. Non-GAAP gross margin for the quarter was 61.4% compared to 61.3% in Q1, 2016. Operating income for the quarter was $1.3 million, compared to an operating income of $0.9 million in Q1, 2016. On a non-GAAP basis, quarterly operating income was $2.5 million or 6.9% of revenues, compared to an operating income of $2 million in Q1, 2016. Net income for the quarter was $0.7 million or $0.02 per share. On a non-GAAP basis, quarterly net income was $2.4 million, or $0.06 per share compared to net income of $1.6 million or $0.04 per share in Q1, 2016. Our balance sheet remains strong. At the end of June 2016, cash, cash equivalents and marketable securities totaled $78.1 million. Subsequent to the end of the quarter, we used approximately $13.1 million of our cash in connection with the purchase of shares pursuant to our cash self-tender offer. Days sales outstanding as of June 30 was 57 days compared to 60 days in the prior quarter. Operating cash flow generated during the…

Thank you, Niran. We’re very pleased to report strong financial results and continued business momentum for the second quarter of 2016. As reported, we met the top line and the earnings targets for the quarter, in line with our guidance earlier this year. While we enjoyed growth and prosperity across the majority of our business lines, the most noteworthy ongoing thing is our success in the turnaround of the company and reemerging the growing company in the old era space. The transformation of the company from a gateway centric company to an all-IP era is now in full gear and the transition to a focus on cloud based unified communication and contact center services and SIP tracking is well on track. We are moving to becoming a solution and services cloud based company, focused on cloud operations. Another not a simple development in the second quarter is that we are now fairly close to the point where the UC-SIP business is roughly equal in size to our existing gateway business. The UC-SIP business now represents close to 40% of our quarterly revenues. In the second quarter 2016, we grew 10.1% over the previous quarter and above 25% over the year ago quarter. Assuming we continue the strength of growth, UC-SIP should be comparable in size to our gateways business in the second half of 2016 and should pass it early 2017. Within this category of business, progress has been made across business lines, including the Microsoft Skype for Business market, the SBC business line, the emerging IP phone business, our One Voice Operations Center network management services and more. Key to our success are two major activities. The migration to cloud based services and the evolution to a solution and services company. Regarding our activity that relates to cloud operation,…

[Operator Instructions] Thank you. Our first question comes from the line of Rich Valera with Needham & Co. Please proceed with your question.

Thank you good morning gentlemen. Shabtai, it sounds like a nice growth quarter for your UC-SIP business, you said 25% plus year-over-year growth there. And I think you were at around 20% year-over-year growth in the first quarter. And I think last quarter you talked about that being kind of a 15% long-term growth business for you, is that still how you’re thinking about that or do you there could be upside to that long-term growth target for the UC-SIP business?

Right, we do witness huge growth, we definitely think we can maintain at least 15% a year, we should be able do several quarters growing to 20% year-over-year. We need to remember that the UC-SIP is a combination of several business lines, and while one is clearly advanced and mature like the SBC and it is growing 20% a year. There are smaller lines which grow above that, IP phones and the network management grow 50%. However there is another line, the multiservice business routers, which is not growing that fast for any specific industry market segment. So just to be on the safe side, we will deliver I believe at least 15% annually, we target to do 20% annually, we will probably do somewhere in the middle in several quarters.

That’s helpful color, thank you. And I was hoping you could elaborate on your Cloud Connect solution that you referenced for Skype For Business and just want to understand is that exclusively for deployment of Skype For Business Cloud PBX option and what you actually provide in that solution?

The Cloud Connect addition appliance is sold only for the markets of Skype for Business online solution or Cloud PBX, the solution - the appliance comprises of markets of provided software that is embedded on our Mediant 800 and other series appliances. We do provide few more elements on this. So we always try to come up with a more comprehensive solution just that their actual business solution and this is what we do. So we [indiscernible] SBC allows it to connect breakout to the service provider IP network and in some cases we will provide more but that is what we do.

That's great helpful thank you. And then Niran question for you and by the way congratulation on your promotion. But wanted to get the best estimate of the current share count, obviously you bought back I think 400 K shares and that probably wasn't fully reflected in the ending share count and then you bought back 3 million after the end of the quarter. So wanted to get your best estimate of kind of where the share count today and maybe roughly what we would expect to see for a third quarter share count? Thank you.

You are right about the 400 K that we purchased this quarter that most of it is already reflected in the number of shares represented for Q2. With regards to the 3 million shares which we bought part of the tender offer, two third will be reflected this quarter and the remaining 1 million will be reflected in Q4. This is due to the closing date on July 20, so you can estimate 2 million shares less for Q3.

Better that’s that's great. And then just one final one, you mentioned that UC-SIP it sounds it’s closed 40% revenue. Can you give us a sense of where the gateway business is as a percent of revenue is that also around 40% of revenue now, just wanted to get a sense of the relative size of those few businesses?

Yes, roughly in the second quarter of 2016 there were apart by only about 3% or 4%, so yes gateway business is now down to somewhere around 43% give or take.

[Operator Instructions] Our next question comes from the line of Michael Latimore with Northland Capital. Please proceed with your question.

Within the UC-SIP is the multiservice router or the SBC, the larger subsegment, how do you see for something else?

Yeah. The largest contributor to UC-SIP is the SBC business, which is roughly I would say 40 to 45% of the overall mix of UC-SIP.

And then on the pay for business opportunity you've been highlighting, how much of that is driven by kind of pay for business hybrid where there is on-premise and a cloud options combined versus sort of the pure Cloud PBX?

Okay so far in terms of sales, all sales are related to Cloud One 365 and it is being sold for several quarters now. The CCE is fairly new, just been announced, we believe we will see samples being sold in the third quarter, we will not see pickup in volume before the latter part of the year.

You may have given this, but what percent of revenue was UC-SIP in fiscal ‘15 overall?

Well, I think I gave the number, I will give you, UC-SIP business was about 46 to 47 million in 2016, so you can do together the math divided by 140 [ph] like 35% plus.

You're not going to be breaking out technology versus network anymore?

It doesn't make sense, I can give you technology, I believe was shy of 10% this second quarter but networking really is a combination of gateways and UC-SIP and while gateways declined and UC-SIP grows, makes no sense to use networking anymore. So we will break out in the future mainly to UC-SIP to gateways, technology and legacy, we have a very small part that applies to application, I’ve not mentioned it on this call but we have like three application we sold, today the level is nothing more than 1 million a quarter, that is roughly the division.

And maybe just – can you just touch on some of the trends in – among your other important partner ecosystems like [indiscernible], Interactive Intelligence, Genesis, any kind of notes, anything worth nothing there?

Well, I can tell you that in the same quarter, we have actually increased, I did not touch that on the call, but we have much more activity with several of our logics partners among the market like Genesis, Interactive and others. So, yes there was definitely, I think our value as a partner to allowing our partner to provide a complete system solution is becoming more and more clear and we become much more important to our partner, so that’s an activity that grows on an ongoing basis.

Thank you. It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Thank you operator, I would like to thank you everyone who attended our conference call today. Based on a good business momentum and execution on our plans in the second quarter of 2016 and first six months of 2016, we believe we are on track to achieve another year of growth and progress and continue to be growing profitable business for coming years. We look forward to have you on our next quarter call. Thank you very much. Have a nice day. Bye-bye.