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Summary of Risk Factors

The following is a summary of some of the principal risks we face. The list below is not exhaustive and, therefore, investors should read this “Risk Factors” section in its entirety.

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Risks Related to Our Business, Strategy and Industry

Epidemics, pandemics, global health crises, or other public health events, threats and concerns, including, but not limited to, the spread of COVID-19, could have a material adverse effect on our business, financial position, operating results and cash flows.

Epidemics, pandemics, global health crises, or other public health events, threats and concerns, including, but not limited to, the global spread of COVID-19, Ebola, the H1N1 flu virus, the Zika virus, Severe Acute Respiratory Syndrome and other highly communicable diseases, outbreaks of which have occurred fairly recently in various parts of the world in which we operate, could adversely impact our operations, the operations of our clients and the global economy, including the level of demand for our services.

In particular, a resurgence of COVID-19, including its highly contagious variants and sub-lineages, could present significant and additional challenges and risks to businesses around the world. Governmental authorities of many countries, including Israel and the United States, previously implemented, and could elect to re-implement, significant measures to control the spread (or resurgence) of COVID-19, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of businesses. In response to the COVID-19 pandemic, we previously implemented remote working and workplace protocols for our employees in Israel in accordance with Israeli Ministry of Health requirements and similar arrangements in other countries in which we operate.

The COVID-19 pandemic disrupted supply chains and affected production and sales across a range of industries, including the industry in which we operate. While we have previously managed, and will continue to actively manage, the business in an attempt to mitigate the impacts of the COVID-19 pandemic, we cannot at this time estimate the duration or full magnitude that the COVID-19 pandemic could ultimately have on our business, results of operations and financial condition.

Governmental reactions to the COVID-19 pandemic, lockdowns, including shelter-in-place orders, and social distancing policies adopted by governments worldwide to manage the COVID-19 pandemic led to an acceleration in the adoption of work from home (Work from Home or WFH) policies and technologies, a global trend that had already been gaining momentum in the past few years. To ensure business continuity, companies and contact centers were compelled to transition their employees quickly from a physical office to a Work from Home, or WFH environment. This in turn led to increased demand for UCaaS (UC as a Service) and video conferencing solutions, such as Microsoft Teams and Zoom, as well as WFH agent solutions for contact centers. As a result of these recent trends, we have experienced an increased demand for our related products and solutions.

In response to such increased demand, we previously launched WFH promotions and solutions aimed at helping companies offer reliable and high-quality voice communications for WFH employees and contact center agents. Businesses that previously were unable to transition to WFH, or faced challenges in their implementation of WFH arrangements due to aging or inappropriate communications solutions, have begun, and will likely continue, to adopt policies and technologies to better prepare them for future foreseeable and unforeseeable events that prevent employees from working in a physical on-site office, a trend which has provided a direct benefit to our business. While we believe that more businesses may ultimately decide to transition to WFH, either fully or partially, as a continuing alternative to the manner in which they conducted their operations before the COVID-19 pandemic, any material decreases to the use of WFH could have a material and adverse effect on our business, operations and financial condition.

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We are continuously monitoring our own operations and have taken, and intend to continue to take, appropriate actions to mitigate the risks arising from the COVID-19 pandemic to the best of our abilities. Nevertheless, there can be no assurances that we will be successful in doing so. The ultimate magnitude and effect of the continued spread of COVID-19 globally, and the resulting social, economic and labor instability attributable to COVID-19, cannot be predicted or estimated at this time. The discovery of any new strains of COVID-19, the development, availability and effectiveness of treatments or vaccines for COVID-19, and the general resuming of widespread economic activity could materially impact our business and operations. Therefore, we can give no assurances that the spread (or any resurgence) of COVID-19 will not have a material adverse effect on our financial position or results of operations in 2023 and beyond.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our ability to comply with the covenants contained in the agreements that govern our indebtedness or our ability to access additional capital should the need arise.

We have invested significant resources in developing products compatible with Microsoft Skype for Business, Microsoft Teams and related solutions of our other partners of ours.partners. If Microsoft or our other contact center, unified communications and ALL-IP project partners, such as Genesys, Zoom, Avaya or the BroadSoft division of Cisco, abandon their solutions compatible with our products, decide to promote products of our competitors instead of our own products (including as a result of acquiring one of our competitors), become unwilling to continue to recognize AudioCodes as a partner or fail to achieve the expected growth of solutions compatible with our products, our results of operations will be adversely affected.

We have invested significant resources in complying with Microsoft’s requirements for the purpose of becoming a Microsoft recognized partner for their unified communication solutions for the enterprise market, which are known as Microsoft Skype for Business (formerly known as Microsoft Lync) and Microsoft Teams. We have adapted some of our gateway products, IP phones, session border controllers, survivable branch applications, value added applications and professional services to operate in the Skype for Business and Teams environments. We believe that recognition as a Microsoft partner and having our products certified by Microsoft, when such a certification program exists, enhances our access to and visibility in markets relevant to our products. We depend on users of Skype for Business and Teams selecting our compatible products and purchasing them. If Microsoft abandons (oror significantly changes)changes Skype for Business and Teams, decides to promote our competitors’ products instead of ours (including as a result of an acquisition of one of our competitors such as Ribbon Communications (formerly Sonus Networks), Poly or Yealink)competitors), becomes unwilling to continue to recognize AudioCodes as a Skype for Business and Teams partner or fails to achieve the expected growth of Skype for Business or Teams, our results of operations will be adversely affected.

Similarly, we have invested in the development of products and capabilities and achieving certifications for the solutions of other partners of ours, such as Genesys and Avaya contact centers, Zoom phone or BroadSoft’s BroadWorks and BroadCloud (acquired by Cisco). If those partners decide to promote products of our competitors instead of our products, are unwilling to continue to recognize AudioCodes as a partner or fail to achieve the expected growth of solutions compatible with our products, our results of operations may be adversely affected.

Our gross margin could be negatively impacted by amortization expenses in connection with acquisitions, increased manufacturing costs and other factors. This could adversely affect our results of operations.

Our gross margin has fluctuated and been negatively affected in the past, and could continue to be negatively affected, by amortization expenses in connection with acquisitions, expenses related to share-based compensation, increases in manufacturing costs, a shift in our sales mix towards our less profitable products and services, increased customer demand for longer product warranties, fixed expenses that are applied to a lower revenue base and increased cost pressures as a result of increased competition. Acquisitions of new businesses could also negatively affect our gross margin. A decrease in our gross margin could cause an adverse effect on our results of operations.

Uncertain economic conditions may adversely affect our business.

In the past, uncertain global and local economic conditions have had a significant impact on the technology industry and our major customers and potential customers. Conditions may continue to be uncertain or may be subject to deterioration, which could lead to a reduction in consumer and customer spending overall and result in an adverse impact on sales of our products. A disruption in the ability of our significant customers to access liquidity could cause serious disruptions or an overall deterioration of their businesses, which could lead to a significant reduction in their orders of our products and the inability or failure on their part to meet their payment obligations to us, any of which could have a material adverse effect on our results of operations and liquidity. A significant adverse change in a customer’s financial and/or credit position could also require us to assume greater credit risk relating to that customer’s receivables or could limit our ability to collect receivables related to previous purchases by that customer. As a result, our allowance for doubtful accounts and write-offs of accounts receivable could increase.

We may need additional financing to operate or grow our business. We may not be able to raise additional financing for our capital needs on favorable terms, or at all, which could limit our ability to grow and to continue our longer term expansion plans.

We may need additional financing to operate our business, continue our longer term expansion plans or acquire other businesses. To the extent that we cannot fund our activities and acquisitions through our existing cash resources and any cash we generate from operations, we may need to raise equity or debt funds through additional public or private financings. We cannot be certain that we will be able to obtain additional financing on commercially reasonable terms, or at all. This could inhibit our growth, increase our financing costs or cause us severe financial difficulties.

We may desire to expand our business through acquisitions that could result in diversion of resources and extra expenses. This could disrupt our business and affect our results of operations.

Part of our strategy is to pursue acquisitions of, or investments in, businesses and technologies or to establish joint ventures to expand our business. The negotiation of acquisitions, investments or joint ventures, as well as the integration of acquired or jointly developed businesses or technologies, could divert our management’s time and resources. Acquired businesses, technologies or joint ventures may not be successfully integrated with our products and operations. The markets for the products produced by the companies we acquire may take longer than we anticipated to develop and to result in increased sales and profits for us. We may not realize the intended benefits of any acquisition, investment or joint venture and we may incur losses from any acquisition, investment or joint venture.

Acquisitions could result in:

If acquisitions disrupt our sales or marketing efforts or operations, our business may suffer.

If new products we introduce or expect to introduce in the future fail to generate the level of demand we anticipated, we will realize a lower than expectedlower-than-expected return from our investment in research and development with respect to those products, and our results of operations may suffer.

Our success is dependent, in part, on the willingness of our customers to transition or migrate to new products, such as our (i) expanded offering of cloud session border controller products, our multi service(ii) multi-service business routers, (MSBRs), ouror MSBRs, (iii) IP Phones, ourphones and meeting room solutions, (iv) management, (v) analytics and Voice.AI software solutions and value addedvalue-added application products, our(vi) services or (vii) expected future products. We are involved in a continuous process of evaluatingcontinually evaluate and assess changing market demands and customer requirements in order to develop and introduce new products, features and applications to meet changing demands and requirements. We need to be able to interpret market trends and the advancement of technology in order to successfully develop and introduce new products, features and applications. If potential customers defer transition or migration to new products, our return on our investment in research and development with respect to products recently introduced or expected to be introduced in the near future will be lower than we originally anticipated and our results of operations may suffer.

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Because of the rapid technological development in the communications equipment market and the intense competition we face, our products can become outmoded or obsolete in a relatively short period of time, which requires us to provide frequent updates and/or replacements to existing products. If we do not successfully manage the transition process to the next generation of our products, our operating results may be harmed. Furthermore, the Communication Platform as a Service (CPaaS) market is developing fast and it may negatively affect our Unified Communications as a Service (UCaaS) market which is one of our main sources of revenue.

The communications equipment market is characterized by rapid technological innovation and intense competition. Accordingly, our success depends in part on our ability to enhance our existing products and develop next generation products and product features in a timely and cost-effective manner. The development of new products is expensive, complex and time consuming.time-consuming. If we do not rapidly develop our next generation products ahead of our competitors and address the increasingly sophisticated needs of our customers, we may lose both existing and potential customers to our competitors. Further, if a competitor develops a new, less expensive product using a different technological approach to delivering informational services over existing networks, our products would no longer be competitive. Conversely, even if we are successful in rapidly developing new products ahead of our competitors, if we do not cost-effectively manage our inventory levels of existing products when making the transition to new products, our financial results could be negatively affected by write-offs as a result of high levels of obsolete inventory. If any of the foregoing were to occur, then our operating results would be harmed.

The increased adoption of IP networks may adversely affect the demand for media gateway products.

Media gateway products are primarily intended to transmit voice from traditional telephony networks to IP networks and vice versa. Along with the growth and adoption of IP networks, there has been an increase in the amount of information that is sent directly from one IP network to another IP network. This direct network communication potentially obviates the need to use a media gateway. A reduction in the demand for media gateways may adversely affect the demand for our media gateway products and, in turn, adversely affect our results of operations. This transition is ongoing and has resulted in a decline in our revenues from such products. Various regulators and service providers have announced planned deadlines for transition to all IPall-IP networks. While this transition could result in new sales opportunities, we believe the overall trend is a decline in revenues in the media gateway business.

The ongoing transition to the use of cloud-based software creates challenges for us.

Recently, our partners have started adopting cloud-based architecture or cloud-based software as a service, (SaaS)or SaaS, models. For example, Microsoft offers a cloud-based alternative to Skype for Business and Teams and has encouraged business customers to use that model instead of an on-premises alternative. Moreover, the successor for Skype for Business is Teams, which by definition is cloud-based only. Many of our products are intended for on premiseson-premises use with cloud architecture, but in some scenarios, cloud architecture introduces an alternative to on premiseson-premises use. Currently, our revenue is generated primarily from on premiseson-premises deployments. The transition to cloud-based delivery impacts the architecture and role of our products in the overall solution. We may not succeed in transitioning in time or at all to the new cloud-based technologies, products, solutions and services adopted by our partners and their customers. We may not succeed in aligning our solutions with our partners’ solutions and be unable to bring sufficient value to them or their end customers. Our inability to adapt to the ongoing transition to the use of cloud-based software could have an adverse effect on us. Furthermore, SaaS pay-per-use licensing models may have an adverse effect on our short-term revenue recognition.

New industry standards, the modification of our products to meet additional existing standards or the addition of features to our products may delay the introduction of our products or increase our costs.

The industry standards that apply to our products are continually evolving. In addition, since our products are integrated into networks consisting of elements manufactured by various companies, they must comply with a number of industry standards and practices established by various international bodies and industry forums. Should new standards gain broad acceptance, we will be required to adopt those standards in our products. We may also decide to modify our products to meet additional existing standards or add features to our products. Standards may be adopted by various industry interest groups or may be proprietary and nonetheless accepted broadly in the industry. It may take us a significant amount of time to develop and design products incorporating these new standards.

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Our original equipment manufacturer (OEM)OEM customers, potential customers or partners may develop or prefer to develop their own technical solutions, use their own internal resources as an alternative to our technical services, or purchase third partythird-party technology or services as an alternative to our technical services, and as a result, may not buy our products.

We sell our products as components or building blocks to some potential customers, such as large OEMs, network equipment providers (NEPs),NEPs, enterprises and carriers. These customers incorporate our products into their product offerings, usually in conjunction with value-added services of their own or of third parties. These potential customers may prefer to develop their own technology or purchase third partythird-party technology. They could also manufacture their own components or building blocks that are similar to the ones we offer. Large customers have already committed significant resources in developing integrated product offerings. Customers may decide that this gives them better profitability and/or greater control over supplies, specifications and performance. Customers may therefore not buy components or products from an external manufacturer such as us. This could have an adverse impact on our ability to sell our products and, as a result, may reduce our revenues.

We have a limited order backlog. If revenue levels for any quarter fall below our expectations, our results of operations will be adversely affected.

We have a limited order backlog, which makes revenues in any quarter substantially dependent on orders received and delivered in that quarter. A delay in the recognition of revenue, even from one customer, may have a significant negative impact on our results of operations for a given period. We base our decisions regarding our operating expenses on anticipated revenue trends. Our expense levels are relatively fixed and require some time for adjustment. Because only a small portion of our expenses varies with our revenues, if revenue levels fall below our expectations, our results of operations will be adversely affected.

We generally sell to OEMs, NEPs, system integrators, carriers/service providers and distributors who function as intermediaries between us as an equipment supplier and the ultimate end-users of our products. As a result, we have less information with respect to the actual requirements of end-users and their utilization of equipment. We also have less influence over the choice of equipment by these end-users.

Generally, our customers are OEMs, NEPs, system integrators, carriers/service providers and distributors, rather than the end-users of equipment that we supply. These customers usually purchase equipment from several suppliers and may be trying to fulfill their end-user customers’ specific technical specifications. We rely heavily on these customers for sales of our products and to inform us about market trends and the needs of their end-user customers. We cannot be certain that this information is accurate. If the information we receive is not accurate, we may be manufacturing products for which no customer demand exists or fail to manufacture products that end-users want. Because we sell most of our products to customers who function as intermediaries rather than directly to end-users, we are heavily reliant on such intermediaries and have less control over the ultimate selection of products by end-users.

The markets we serve are highly competitive and several of our competitors have competitive advantages over us, which may make it difficult for us to maintain profitability.

Competition in our industry is intense and we expect competition to increase in the future. Our competitors currently sell products that provide similar benefits to those that we sell. There has been a significant amount of merger and acquisition activity, frequently involving major telecommunications equipment manufacturers acquiring smaller companies, as well as strategic alliances entered into by competitors. We expect that these activities will result in an increasing concentration of market share among these companies, many of whom are our customers.

Our principal competitors in the area of analog media gateways (2 to 24 ports) for access and enterprise are Grandstream, Natex, Iskratel, Zyxel, Adtran, Media5, Cisco, Sangoma, Innovaphone AG, Patton, Dialogic and Ribbon Communications.

In the area of low and mid density digital gateways we face competition from companies such as Ribbon Communications (formerly Sonus Networks), Huawei, Cisco, Dialogic, NewRock, Ribbon, Patton, Ferrari and Sangoma.

Our competitors in the area of MSBRs are companies such as Cisco, Juniper, Adtran, One-Access, Patton, Huawei, HP/3COM and Alcatel-Lucent.

Specifically in the area of enterprise class session border controller technology we compete withcontrollers include, among others, Oracle, Cisco, Avaya, Ribbon Communications, (formerly Sonus Networks)Metaswitch (acquired by Microsoft), MetaSwich, IngateTE-Systems and Ribbon.Ingate.

Our competitors in the Microsoft Skype for Business and TEAMS certified gateways, session border controller, survivable branch appliance, meeting room devices and the market for IP phones include Ribbon Communications (formerly Sonus Networks), Oracle, Poly, Yealink, Logitech and Crestron.

Our competitors in the area of contact center vendors arelow and mid-density digital gateways include, among others, Ribbon Communications, (formerly Sonus Networks)Cisco, Dialogic, NewRock, Patton, Ferrari and Sangoma.

Our competitors in the area of multi-service business routers include, among others, Cisco, Juniper, Adtran, One-Access (previously acquired by Ekinops), Oracle, PolyPatton, Huawei, HP/3COM and Yealink.Alcatel-Lucent.

Our competitors in the area of call recording are companies such asinclude, among others, Verint, NICE, ACS, Red Box, Teleware and Dubber.

Our competitors in the area of voiceapplications leveraging speech recognition and conversational AI technology include, among others, Twilio, Nuance (which was recently acquired by Microsoft) and IBM, as well as Contact Center vendors (including Genesys, NICE and Five9s). Some public cloud providers offer technology and services that partially overlap with ours and several smaller start-up companies are also developing competing solutions.

Our competitors in the area of Conversational IVR and Speech Attendants include companies such as Microsoft, Google, AmazonNuance, Parlance, and Nuance, and a groupother contact center vendors IVR solutions.

Table of startup companies.Contents

Our principal competitors in the salearea of signal processing chipsSmartTAP360 live which focuses mainly on compliance and quality recording in conjunction with Microsoft Teams are DSP Group, Broadcom, Octasiclisted in the certified list of Microsoft vendors although we mainly see in the mid-market projects ASC, Redbox, NICE and Mindspeed.Verint.

Our competitors in the area of Meeting Insights, which is focused on productivity enhancement and organization repository in the Microsoft environment, are Avoma, Otter and sometimes also Microsoft (with Stream or Teams premium).Our principal competitors in the area of IP phones and meeting room devices are comprised of “best-of-breed” IP phone vendors and end-to-end IP telephony vendors. “Best of breed” IP phone vendors sell standards-based SIP phones that can be integrated into any standards-based IP-PBX or hosted IP telephony system. These competitors include Poly (acquired by HPQ), Yealink, Grandstream, Yealink,Logitech, Crestron, VTEC (acquired SNOM)(which acquired Snom Technology) and many others. End-to-end IP telephony vendors sell IP phones that only work in their proprietary systems. These

Our competitors include Cisco, Avaya, Alcatel-Lucent, Siemens, Mitel and NEC. In the areas of Skype for Business/AudioCodes Live for Microsoft Teams our competitors are certified vendors – Yealinkcompanies that offer a variety managed services for business customers. These companies include systems integrators, service providers and Poly.some cloud-based solution providers. In certain cases, some companies buy AudioCodes products and/or services, and use them to offer managed services to their customers. AudioCodes sometimes works in partnership with such companies to complement their offering or even leverage some of their capabilities to offer managed services.

Our main competitor in the area of Live is the in-house implementation of projects (after buying products either directly or through an integrator). Competition is also in the form of system integrators such as Converge One in USA, NTT or BT and numerous others in various sizes and locations and specialties.

Some of our competitors are also customers of our products and technologies.

Many of our competitors have the ability to offer vendor-sponsored financing programs to prospective customers. Some of our competitorsThose with broad product portfolios may also be able to offer lower prices on products that compete with ours because of their ability to recoup a loss of margin through sales of other products or services. Additionally, voice, audio and other communications alternatives that compete with our products are constantly being continually introduced.

Some of our competitors are also customers of our products and technologies.

In the future, we may also develop and introduce other products or services with new or additional telecommunications capabilities or services. As a result, we may compete directly with voice over-IP, (VoIP)or VoIP, companies, system integrators, value-added resellers, or VARs, and other telecommunications infrastructure and solution providers, system integrators and value added resellers, some of which may be our current customers. Additional competitors may include companies that currently provide communication software products and services. The ability of some of our competitors to bundle other enhanced services or complete solutions with VoIP products could give these competitors an advantage over us.

Offering to sell directly to carriers or service providers may expose us to requirements for service which we may not be able to meet.

We also sell our products directly to telecommunications carriers, service providers or other end-users. We have traditionally relied on third partythird-party distributors and OEMs to test and/or sell our products and to inform us about the requirements of end-users. Telecommunications carriers and other service providers have great bargaining power in negotiating contracts. Generally, contracts with end-users tend to be more complex and impose more obligations on us than contracts with third partythird-party distributors. We may be unable to meet the requirements of these contracts. If we are unable to meet the conditions of a contract with an end-user customer, we may be required to pay liquidated damages or become subject to liabilities that could result in a material adverse effect on our results of operations.

Selling directly to end-users and Value Added Resellers (VARs)VARs may adversely affect our relationship with our current third partythird-party distributors upon whom we expect to continue to rely for a significant portion of our sales. LossThe loss of third partythird-party distributors and OEMs, or a decreased commitment by them to sell our products as a result of direct sales by us, could adversely affect our sales and results of operations.

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We rely on third-party subcontractors to assemble and original design manufacturersODMs to design and manufacture some of our products, and therefore do not directly control manufacturing costs, product delivery schedules or manufacturing quality.

Our products are assembled and tested by third-party subcontractors. As a result of our reliance on third-party subcontractors, we cannot directly control product delivery schedules. We have in the past experienced delays in delivery schedules. Any problems that occur and persist in connection with the delivery, quality or cost of the assembly and testing of our products could have a material adverse effect on our business, financial condition and results of operations. This reliance could also lead to product shortages or quality assurance problems, which, in turn, could lead to an increase in the costs of manufacturing or assembling our products.

In addition, we have engaged several original design manufacturers, or ODMs based in Asia to design and manufacture some of our products and may engage additional ODMs in the future. Any problems that occur and persist in connection with the delivery, quality, cost of the assembly or testing of our products, as well as the termination of our commercial relationship with an ODM or the discontinuance of the manufacturing of the respective products could have a material adverse effect on our business, financial condition and results of operations.

If a small number of third-party suppliers do not provide us with key components on a timely basis, we may not be able to deliver our products to our customers, and substantial reengineering costs may be incurred.

Texas Instruments Incorporated, suppliesDSPG and Rockchip, collectively,  supply all of the chips for our signal processor product line. Our signal processor line is used both as a product line in its own right and as a key component in our other product lines. Motorola and Cavium Networks manufacture all of the communications and network processors currently used in our embedded communications boards and network products.

We have not entered into any long-term supply agreements or alternate source agreements with our suppliers and, while we maintain an inventory of critical components, our inventory of chips would likely not be sufficient in the event that we had to engage an alternate supplier for these components.

An unexpected termination of the supply of the chips provided by Texas Instruments, DSPG, Rockchip or the communications processors supplied by Motorola or Cavium Networks or disruption in their timely delivery would require us to make a large investment in capital and personnel to shift to using chips or signal processors manufactured by other companies and may cause a delay in introducing replacement products. Customers may not accept an alternative product design. Supporting old products or redesigning products may make it more difficult for us to support our products.

We depend on other sole source suppliers to produce components for us without the benefit of long-term supply agreements or alternative source agreements.

Some of our sole source suppliers custom produce components for us based upon our specifications and designs while other of our sole source suppliers are the only manufacturers of certain components required by our products. We have not entered into any long-term supply agreements or alternative source agreements with our suppliers and while we maintain an inventory of components from single source providers, our inventory would likely not be sufficient in the event that we had to engage an alternate supplier of these single source components. In the event of any interruption in the supply of components from any of our sole source suppliers, we may have to expend significant time, effort and other resources in order to locate a suitable alternative manufacturer and secure replacement components. If no replacement components are available, we may be forced to redesign certain of our products. Any such new design may not be accepted by our customers. A prolonged disruption in supply may force us to redesign and retest our products. Any interruption in supply from any of these sources or an unexpected technical failure or termination of the manufacture of components could disrupt production, thereby adversely affecting our ability to deliver products and to support products previously sold to our customers.

In addition, if demand for telecommunications equipment increases, we may face a shortage of components from our suppliers. This could result in longer lead times, increases in the price of components and a reduction in our margins, all of which could adversely affect the results of our operations.

Our customers may require us to produce products or systems to hold in inventory in order to meet their “just in time,” or short lead time, delivery requirements. If we are unable to sell this inventory on a timely basis, we could incur charges for excess and obsolete inventory which would adversely affect our results of operations.

Our customers expect us to maintain an inventory of products available for purchase off the shelf subsequent to the initial sales cycle for these products. This may require us to incur the costs of manufacturing inventory without having a purchase order for the products. The VoIP industry is subject to rapid technological change and volatile customer demands, which result in a short product commercial life before a product becomes obsolete. If we are unable to sell products that are produced to hold in inventory, we will need to write-off all or a part of the inventory value of these products. Write-offs could adversely affect our operating results and financial condition. We wrote off inventory in an aggregate amount of $1.9 million in both 2017 and 2018 and $4.5 million in 2019. We have incurred write-offs as a result of slow moving items, excess inventories, discontinued products and products with net realizable value lower than cost.

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We have depended, and expect to continue to depend, on a small number of large customers. The loss of one of our large customers or the reduction in purchases by a significant customer or failure of such customer to pay for the products it purchases from us could have a material adverse effect on our revenues.

In 2017, 20182022, 2021 and 2019,2020, sales to ScanSource CommunicationsWestcon Group, our largest customer in 2022, accounted for 17.5%approximately 15.1%, 17.8%%15.4% and 16.0%13.0%, respectively, of our total revenues, and sales to WestconScanSource Communications Group accounted for 12.7%approximately 10.0%, 11.1%10.9% and 13.5%, respectively, of our total revenues. Both ScanSource and Westcon act as distributors or perform order fulfillment for smaller orders from other customers and do not purchase products for internal use. If we lose a large customer, or if purchases made by such customers are significantly reduced, or if a large customer fails to pay for the products it purchases from us, our revenues and results of operations could be adversely affected.

Our products generally have long sales cycles and implementation periods, which increase our costs in obtaining orders and reduce the predictability of our revenues.

Our products are technologically complex and are typically intended for use in applications that may be critical to the business of our customers. Prospective customers generally must make a significant commitment of resources to test and evaluate our products and to integrate them into larger systems. Many of our customers are large organizations with complex and lengthy evaluation, decision making and negotiation processes. As a result, our sales process is often subject to delays associated with lengthy approval processes that typically accompany the design and testing of new communications equipment. The sales cycles of our products to new customers are approximately fourSix to twelve months after a design win, depending on the type of customer and complexity of the product. This time period may be further extended because of internal testing, field trials and requests for the addition or customization of features or acceptance testing. This delays the time until we realize revenue and results in significant investment of resources in attempting to make sales.

Long sales cycles also subject us to risks not usually encountered in a short sales span, including customers’ budgetary constraints, internal acceptance reviews and cancellation. In addition, orders expected in one quarter could shift to another because of the timing of customers’ procurement decisions. The time required to implement our products can vary significantly with the needs of our customers and generally exceeds several months; larger implementations can take multiple calendar quarters. This complicates our planning processes and reduces the predictability of our revenues.

Our proprietary technology is difficult to protect, and our products may infringe on the intellectual property rights of third parties. Our business may suffer if we are unable to protect our intellectual property or if we are sued for infringing the intellectual property rights of third parties.

Our success and ability to compete depend in part upon protecting our proprietary technology. We rely on a combination of patent, trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement, or to protect us from the claims of others.

Enforcement of intellectual property rights may be expensive and may divert attention of management and of research and development personnel away from our business. Intellectual property litigation could also call into question the ownership or scope of rights owned by us. Additionally, our products may be manufactured, sold, or used in countries that provide less protection to intellectual property than that provided under U.S. or Israeli laws or where we do not hold relevant intellectual property rights.

We believe that the frequency of third-party intellectual property claims is increasing, as patent holders, including entities that are not in our industry and that purchase patents as an investment or to monetize such rights by obtaining royalties, use infringement assertions as a competitive tactic and a source of additional revenue. Any intellectual property claims against us, even if without merit, could cost us a significant amount of money to defend and divert management’s attention away from our business. We may not be able to secure a license for technology that is used in our products and we may face injunctive proceedings that prevent distribution and sale of our products even prior to any dispute being concluded. These proceedings may also have a deterrent effect on purchases by customers, who may be unsure about our ability to continue to supply their requirements. We may be forced to repurchase our products and compensate customers that have purchased such infringing products. We may be forced to redesign the product so that it becomes non-infringing, which may have an adverse impact on the results of our operations.

In addition, claims alleging that the development, use, or sale of our products infringes third parties’ intellectual property rights may be directed either at us or at our direct or indirect customers. We may be required to indemnify such customers against claims made against them. We may be required to indemnify them even if we believe that the claim of infringement is without merit.

Multiple patent holders in our industry may result in increased licensing costs.

There are a number of companies besides us that hold patents for various aspects of the technology incorporated in our industry’s standards and our products. We expect that patent enforcement will be given high priority by companies seeking to gain competitive advantages or additional revenues. We have been sued a number of times in recent years for alleged patent infringement. If holders of patents take the position that we are required to obtain a license from them, we cannot be certain that we would be able to negotiate a license agreement at an acceptable price or at all. Our results of operations could be adversely affected by the payment of any additional licensing costs or if we are prevented from manufacturing or selling a product.

Changes in governmental regulations in the United States or other countries could slow the growth of the VoIP telephony market and reduce the demand for our customers’ products, which, in turn, could reduce the demand for our products.

VoIP and other services are not currently subject to all of the same regulations that apply to traditional telephony. Nevertheless, it is possible that foreign or U.S. federal or state legislatures may seek to impose increased fees and administrative burdens on VoIP, data, and video providers. The FCC requires VoIP service providers to meet various emergency service requirements relating to delivery of 911 calls, known as E911, and to accommodate law enforcement interception or wiretapping requirements, such as the Communications Assistance for Law Enforcement Act, or CALEA. In addition, the FCC may seek to impose other traditional telephony requirements such as disability access requirements, consumer protection requirements, number assignment and portability requirements, and other obligations, including additional obligations regarding E911 and CALEA. The cost of complying with FCC regulations or similar regulations in other countries could increase the cost of providing Internet phone service which could result in slower growth and decreased profitability for this industry, which would adversely affect our business.

The enactment of any additional regulation or taxation of communications over the Internet in the United States or elsewhere in the world could have a material adverse effect on our customers’ (and their customers’) businesses and could therefore adversely affect sales of our products. We do not know what effect, if any, possible legislation or regulatory actions in the United States or elsewhere in the world may have on private telecommunication networks, the provision of VoIP services and purchases of our products.

Use of encryption technology in our products is regulated by governmental authorities and may require special development, export or import licenses. Delays in the issuance of required licenses, or the inability to secure these licenses, could adversely affect our revenues and results of operations.

Growth in the demand for security features may increase the use of encryption technology in our products. The use of encryption technology is generally regulated by governmental authorities and may require specific development, export or import licenses. Encryption standards may be based on proprietary technologies. We may be unable to incorporate encryption standards into our products in a manner that will insure interoperability. We also may be unable to secure licenses for proprietary technology on reasonable terms. If we cannot meet encryption standards, or secure required licenses for proprietary encryption technology, our revenues and results of operations could be adversely affected.

We are subject to regulations that require us to use components based on environmentally friendly materials. We may be subject to various regulations relating to management and disposal of waste with respect to electronic equipment. Compliance with these regulations has increased our costs. Failure to comply with these regulations could materially adversely affect our results of operations.

We are subject to an increasing number of directives and regulations requiring the use of environmentally-friendly materials. For example, pursuant to a European Community directive, equipment suppliers are required to stop using specified materials that are not environmentally friendly. Some of our customers may also require products that meet higher standards than those required by the directive, such as complete removal of additional harmful substances from our products. We are dependent on our suppliers for components and sub-system modules, such as semiconductors and purchased assemblies and goods, to comply with these requirements. This may harm our ability to sell our products in regions or to customers that may adopt such directives. Compliance with these directives has required us to incur significant expenses with respect to meeting the basic requirements and the updates of those regulations and of implementing new similar regulations and directives. In addition, we may be required to pay higher prices for components that comply with those directives. We may not be able to pass these higher component costs on to our customers. Compliance with these directives has increased and could continue to increase our product design and manufacturing costs. New designs may also require qualification testing with both customers and government certification boards.

Some of our operations use substances regulated under various federal, state, local and international laws governing the environment, including laws governing the management and disposal of waste with respect to electronic equipment. We could incur substantial costs, including fines and civil or criminal sanctions, if we were to violate or become liable under environmental laws or if our products become non-compliant with environmental laws. We also face increasing complexity in our product design and procurement operations as we adjust to new and future requirements relating to the materials that compose our products. The European Union (EU) has enacted the Waste Electrical and Electronic Equipment Directive which makes producers of electrical goods financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. Similar legislation has been or may be enacted in other jurisdictions, including the United States, Canada, Mexico, China and Japan.

Our inability or failure to comply with these regulations could have a material adverse effect on our results of operations. In addition, manufacturers of components that do not meet the new requirements may decide to stop manufacturing those components prior to the required compliance date. These actions by manufacturers of components could result in a shortage of components that could adversely affect our business and results of operations.

We have a significant presence in international markets and plan to continue to expand our international operations, which exposes us to a number of risks that could affect our future growth.

We have a worldwide sales, marketing and support infrastructure that is comprised of independent distributors and value added resellers, and our own personnel resulting in a sales, marketing and support presence in many countries, including markets in North America, Western and Eastern Europe, the Asia Pacific region and Latin America. We expect to continue to increase our sales headcount, our applications development headcount, our field support headcount, our marketing headcount and our engineering headcount and, in some cases, establish new relationships with distributors, particularly in markets where we currently do not have a sales or customer support presence. As we continue to expand our international sales and operations, we are subject to a number of risks, including the following:

Any of these risks could adversely affect our international operations, reduce our revenues from outside of the United States or increase our operating costs, adversely affecting our business, results of operations and financial condition and growth prospects. There can be no assurance that all of our employees and channel partners will comply with the formal policies we have and will implement, or applicable laws and regulations. Violations of laws or key control policies by our employees and channel partners could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our software and services and could have a material adverse effect on our business and results of operations.

We face risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt our supply chain and impact our operating results.

Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations and operating results. In December 2019, a strain of novel coronavirus causing respiratory illness emerged in the city of Wuhan in the Hubei province of China. The Chinese government has taken certain emergency measures to combat the spread of the virus, including extension of the Lunar New Year holidays, implementation of travel bans and closure of factories and businesses. In addition, a substantial amount of business travel to China has been postponed or canceled, including as a result of the cancellation of flights to China by major airlines. Some of our materials and products are sourced from suppliers located in China and we manufacture most our products in China. We also sell some of our products in China and we have 53 employees in China. We expect the business disruptions caused by measures taken to contain the spread of the coronavirus to result in supply shortages, including shortages of components for our products, international transit of our products to and from China to be delayed, and economic uncertainty resulting from these challenges in doing business in China to affect customer purchasing decisions. While the full impact of the coronavirus outbreak is unknown at this time, we are closely monitoring the developments in China and continually assessing the potential impact on our business. Any prolonged disruption to our supply chain and our ability to conduct our business in China could negatively impact our sales and operating results and some research and development.

A data security or privacy breach could adversely affect our business and services.

The protection of customer, employee and company data is critical to us. Customers have a high expectation that we will adequately protect their personal or other information from cyberattack or other security breaches. A significant breach of customer, employee, or company data could damage our reputation and result in lost sales, fines, or lawsuits. Our business involves the receipt and storage of personal and other information about customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. Any such breach or attack could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate these methods or promptly implement preventative measures. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations and the services we provide to customers and damage our reputation, which could adversely affect our business, revenues and competitive position. In addition to taking the necessary precautions ourselves, we require that third-party service providers implement reasonable security measures to protect our customers’ identity and privacy. We do not, however, control these third-party service providers and cannot guarantee that no electronic or physical computer break-ins and security breaches will occur in the future.

Our use and handling of personally identifiable data is regulated at the international, federal and state levels. The regulatory environment surrounding information security and privacy is increasingly demanding. For example, the General Data Protection Regulation (GDPR), which came into effect on May 25, 2018, implemented stringent operational requirements for companies that are established in the EU or, where not established in the EU, offer goods or services to individuals in the EU or monitor the behavior of individuals in the EU. Failure to comply with the GDPR can result in fines of up to EUR 20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher.

The requirements of the GDPR include, for example, expanded disclosures about how personal data is processed, mandatory data breach notification requirements, a strengthened data subject rights regime and higher standards for obtaining consent from individuals to process their personal data (including in certain circumstances for marketing), all of which involve significant ongoing expenditure. The principle of accountability likewise requires us to put significant documentation in place to demonstrate compliance. While the GDPR in large part harmonizes data protection requirements across EU countries, some provisions allow EU Member States to adopt additional or different requirements, which could limit our ability to use and share personal data or could require localized changes. We may also be affected by legal challenges to the validity of EU mechanisms for transfers of personal data outside the EU, and our business could be impacted by changes in law as a result of future review of these mechanisms by European regulators under the GDPR, as well as current challenges to these mechanisms in the European courts.

In addition, existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. Due to the fact that privacy and information security laws and regulations are subject to change from time to time, our compliance with them may result in cost increases due to necessary systems changes and the development of new processes. If we fail to comply with these laws and regulations, we could be subjected to legal risk. Increasing costs associated with information security, such as increased investment in technology, the cost of compliance and costs resulting from consumer fraud could cause our business and results of operations to suffer materially.

The ongoing trade war between China and the United States and its potential escalation may have an adverse effect on our business operations and revenues.

Starting in April 2018, the United States imposed a 25% tariff on steel and a 10% tariff on aluminum imports from other countries. On July 6, 2018, the United States imposed 25% tariffs on $34 billion worth of Chinese goods. China instituted retaliatory tariffs on certain U.S. goods. In 2019, the United States and China implemented several rounds of tariff increases and retaliations. On January 15, 2020, the United States and China signed a Phase One trade deal pursuant to which, among other things, the U.S. will modify existing tariffs. Due to the dynamic nature of governmental actions and responses, we are subject to uncertainty as to whether and when proposed tariffs will come into effect. Since we operate in the U.S. and deliver products and services to customers in the U.S., the trade war has adversely affected us, and especially if and when it is escalated, may cause global economic turmoil and adversely impact the supply chain for our products, the cost of our products and the demand for our products and, thus, may have a material adverse effect on our business and results of operations.

The prices of our products may become less competitive due to foreign exchange fluctuations.

Although we have operations throughout the world, the majority of our revenues and our operating costs in 2019 were denominated in, or linked to, the dollar. Accordingly, we consider the dollar to be our functional currency. However, a significant portion of our operating costs in 2019 were incurred in New Israeli Shekel (NIS). During 2019, the NIS appreciated against the dollar, which resulted in an increase in the dollar cost of our operations in Israel. As a result of this differential, from time to time we may experience increases in the costs of our operations outside the United States, as expressed in dollars. If there is a significant increase in our expenses, we may be required to increase the prices of our products and may be less competitive. Currently, our international sales are denominated primarily in dollars. Therefore, any devaluation in the local currencies of our customers relative to the dollar could cause customers to decrease or cancel orders or default on payment.

Our sales to European customers denominated in Euros are increasing. Sales denominated in Euros could make our revenues subject to fluctuation in the Euro/ dollar exchange rate. If the dollar appreciates against the Euro, we may be required to increase the prices of our products that are denominated in Euros. In 2019, the Euro depreciated against the dollar, which resulted in an increase in the prices of our products that are denominated in Euros.

Our independent sales representatives may fail to market our products effectively.

A significant portion of our marketing and sales involves the aid of independent sales representatives that are not under our direct control. We cannot be certain that our current independent sales representatives will continue to distribute our products or that, even if they continue to distribute our products, they will do so successfully. These representatives are not subject to any minimum purchase requirements and can discontinue marketing our products at any time. In addition, these representatives often market products of our competitors. Accordingly, we must compete for the attention and sales efforts of our independent sales representatives.

Our products could contain defects, which would reduce sales of those products or result in claims against us.

We develop complex and evolving products. Despite testing by us and our customers, undetected errors or defects may be found in existing or new products. The introduction of products with reliability, quality or compatibility problems could result in reduced revenues, additional costs, increased product returns and difficulty or delays in collecting accounts receivable. The risk is higher with products still in the development stage, where full testing or certification is not yet completed. This could result in, among other things, a delay in recognition or loss of revenues, loss of market share or failure to achieve market acceptance. We could also be subject to material claims by customers that are not covered by our insurance.

Obtaining certification of our products by national regulators may be time-consuming and expensive. We may be unable to sell our products in markets in which we are unable to obtain certification.

Our customers may expect us to obtain certificates of compliance with safety and technical standards set by national regulators, especially standards set by U.S. or European regulators. There is no uniform set of standards, and each national regulator may impose and change its own standards. National regulators may also prohibit us from importing products that do not conform to their standards. If we make any change in the design of a product, we are usually required to obtain recertification of the product. The process of certification may be time-consuming and expensive and may affect the length of the sales cycle for a product. If we are unable to obtain certification of a product in a market, we may be unable to sell the product in that market.

We depend on a limited number of key personnel who would be difficult to replace.

The success of our business depends in large part upon the continuing contributions of our management and key personnel. Specifically, we rely heavily on the services of Shabtai Adlersberg, our President and Chief Executive Officer, and Lior Aldema, our Chief Business Officer. Both are also directors. If our President and Chief Executive Officer or our Chief Business Officer is unable or unwilling to continue with us, our results of operations could be materially and adversely affected. We do not carry key person insurance for our key personnel.

The success of our business also depends upon our continuing ability to attract and retain other highly-qualified management, technical, sales and marketing personnel. We need highly-qualified technical personnel who are capable of developing technologies and products and providing the technical support required by our customers. We experience competitive pressure with respect to retaining and hiring employees in the high technology sector in Israel. If we fail to hire and retain skilled employees, our business may be adversely affected.

If we do not manage our operations effectively, our results of operations could be adversely affected.

We have expanded our operations in the past and may continue to expand them in the future. This expansion has required, and may continue to require, the application of managerial, operational and financial resources. We cannot be sure that we will continue to expand, or that we will be able to expand our operations successfully. In particular, our business requires us to focus on multiple markets, including the VoIP, wireline, cable, enterprise unified communications and wireless markets. In addition, we work simultaneously with a number of large OEMs and network equipment providers each of which may have different requirements for the products that we sell to them. We may not have sufficient personnel, or may be unable to devote this personnel when needed, to address the requirements of these markets and customers. If we are unable to manage our operations effectively, our revenues may not increase, our cost of operations may rise and our results of operations may be adversely affected.

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The growth in our product portfolio means that we have to service and support more products. This may result in an increase in our expenses and an adverse effect on our results of operations.

The size of our product portfolio has increased and continues to increase. As a result, we are required to provide product support to our customers. Customers have requested that we provide a contractual commitment to support a product for a specified period of time. This period of time may exceed the working life of the product or extend past the period of time that we may intend to manufacture or support a product. We are dependent on our suppliers for the components (hardware and software) needed to provide support and may be unable to secure the components necessary to satisfy our service commitments. We do not have long-term contracts with our suppliers, and they may not be obligated to provide us with products or services for any specified period of time. We may need to purchase an inventory of replacement components and parts in advance in order to try to provide for their availability when needed. This could result in an increased risk of write-offs with respect to our replacement component inventory to the extent that we cannot accurately predict our future requirements under our customer service contracts. If any of our component suppliers cease production, cease operations or refuse or fail to make timely delivery of orders, we may not be able to meet our contractual commitments for product support. We may be required to supply enhanced components or parts as substitutes if the original versions are no longer available. Product support may be costly and any extra service revenues may not cover the hardware and software costs associated with providing long-term support.

As part of our go to market strategy, we have become certified solution partners of technological leaders such as Microsoft, Genesys and BroadSoft (acquired by Cisco). These companies change their go to market strategy and product mix and technology requirements often and do so on reasonably short notice. We may be unable or unwilling to change our products in time and as may be required in order to remain a certified partner.

In recent years we have invested heavily in our product offerings that meet the requirements of the Microsoft Skype for Business and Microsoft Teams ecosystems. The nature of this Microsoft solution is undergoing major change and, as part of this change, we are witnessing a shift from on-premises solutions to cloud-based or hybrid on-premises and cloud-based solutions. This directly impacts the suitability of our products to end-users and impacts end-user demand for products in a changing technical environment. In 2018, Cisco completed the acquisition of BroadSoft. This acquisition has impacted BroadSoft’s directions and future developments, and, as a result, our investment in compatibility with the BroadSoft BroadWorks and BroadCloud solutions. These changes have affected, and may continue to affect, the revenues we derive from selling into BroadSoft/Cisco solutions. Genesys, a long-term partner of ours, is also in the process of shifting from on-premises solutions to cloud-based or hybrid on-premises and cloud-based solutions, with potential impact on the suitability and demand of our products in Genesys contact center deployments. We have little control and influence over the third parties with whom we engage, and therefore, any alterations or changes made by such third-party partners can negatively impact the results of our operations on reasonably short notice. We may be unable to recover or adapt to such changes.

Growing emphasis by the investment community, regulators and other stakeholders on environmental, social and governance-related matters could impact our business and operations.

As members of the investment community have started to heavily factor in a company’s commitment to environmental, social and governance, or ESG related initiatives and sustainability performance as part of their overall investment thesis and strategy, such investors could elect to eventually forego their investment in us to the extent we fail to satisfy such metrics. Moreover, the increased focus by investors, regulators and other stakeholders on ESG related practices and disclosures has created, and will likely create for the foreseeable future, increased pressure regarding the enhancement of, and modification to, our disclosure and governance practices. Additionally, the SEC has exhibited a growing emphasis on each company’s ESG disclosure practices, including through the establishment of a Climate and ESG Task Force in the Division of Enforcement.  As a result of the foregoing, we currently face, and are likely to continue to face, increasing pressure regarding our ESG-related disclosures, practices, initiatives and sustainability performance in the near- and long-term.

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Financial and Economic Risks

High rates of global inflation and the occurrence of a recession could have a material and adverse impact on our business, results of operations and financial condition.

During 2022, the global markets experienced, and continue to experience, higher rates of inflation as a result of several market factors, including in the form of increased costs pertaining to labor, materials, shipping and overhead. As a result of these inflationary pressures, governments in many countries have implemented tighter monetary policies, which could slow the growth rate of local economies and restrict the availability of credit. We believe that our financial condition and results of operations have thus far not been materially impacted by inflationary pressures. However, to the extent the current rates of inflation and shifts in fiscal and monetary policy result in prolonged and slower growth or a recession, it could have a material and adverse effect on the demand for our products and services and, in the process, our business, results of operations and financial condition as a whole, including with respect to general and administrative expenses as a percentage of total revenue. Moreover, in the event that a global recession was to occur, it could adversely impact the critical counterparties that we engage, including in the form of a decrease in the products and services they seek to obtain from us.

Material and adverse developments impacting the financial services industry at large, including the occurrence of actual (or widespread concerns regarding the potential occurrence of) defaults, illiquidity, operational failures and non-performance by financial institutions and critical counterparties, could have a material and adverse effect on our business, financial condition and results of operations.

The occurrence of actual (or widespread concerns regarding the potential occurrence of) illiquidity, operational failures, defaults, non-performance or other material and adverse developments that impact financial institutions and transactional counterparties, or other entities within the financial services industry at large, have previously caused, and could continue to cause, market-wide liquidity issues, bank-runs and general contagion across the global financial industry. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation, or the FDIC, was subsequently appointed as a receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each placed into receivership. We did not maintain accounts with either bank. While the U.S. Federal Reserve Board, the FDIC and the U.S. Department of Treasury collectively agreed to guarantee all deposits, above and beyond the limit on insured deposits of $250,000 at these financial institutions, there can be no assurance that there will not be additional bank failures or issues in the broader financial system. Likewise, there is no guarantee that any of the U.S. Department of Treasury, the FDIC or the Federal Reserve Board will provide access to any additional uninsured funds in the future in the event of the closure or failure of any other banks or financial institutions, or that they would do so promptly or in a timely fashion. Additionally, substantial and rapid increases in interest rates and inflation have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. While the U.S. Department of Treasury, Federal Reserve Board and the FDIC have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, the liquidity needs of financial institutions, including as a result of widespread demands for customer withdrawals, may exceed the capacity of such program.

Furthermore, we and other parties with whom we conduct business and engage commercially may be unable to access critical funds in deposit accounts or other accounts held with a closed or failing financial institution or pursuant to lending arrangements with such financial institutions. Accordingly, in such instance, our ability to pay our obligations, and any of our counterparties’ ability to pay their respective obligations, or enter into new commercial arrangements requiring additional payments, could be materially and adversely affected. Counterparties to SVB credit agreements and arrangements, and third parties such as beneficiaries of letters of credit, among others, could experience direct and indirect impacts from financial institutions in the future and uncertainty remains over liquidity concerns in the broader financial services industry. Any material and adverse effects from the foregoing could additionally impact the broader capital markets and, in turn, our ability to access those markets.

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Our customers may require us to produce products or systems to hold in inventory in order to meet their “just in time,” or short lead time, delivery requirements. If we are unable to sell this inventory on a timely basis, we could incur charges for excess and obsolete inventory which would adversely affect our results of operations.

Our customers expect us to maintain an inventory of products available for purchase off the shelf subsequent to the initial sales cycle for these products. This may require us to incur the costs of manufacturing inventory without having a purchase order for the products. The VoIP industry is subject to rapid technological change and volatile customer demands, which result in a short product commercial life before a product becomes obsolete. If we are unable to sell products that are produced to hold in inventory, we will need to write-off all or a part of the inventory value of these products. Write-offs could adversely affect our operating results and financial condition. During the year ended December 31, 2022, the Group's inventory write off was immaterial. We wrote off inventory in an aggregate amount of $1.7 million in 2021 and $4.2 million in 2020. We have incurred write-offs as a result of slow-moving items, excess inventories, discontinued products and products with net realizable value lower than cost.

Theright of our customers to return products and their right to exchange products may affect our ability to recognize revenues, which could adversely affect our results of operations.

Some of our customers expect us to permit them to return some or all of the products they purchase from us. If we contractually agree to allow a customer to return products, the customer may be entitled to a refund for the returned products or to receive credit for the purchase of replacement products. If we agree to this type of contractual obligation, it could affect our ability to recognize revenues. In addition, if we are not able to resell any products that are returned, we would have to write-off this inventory. This could adversely affect our results of operations.

We may need additional financing to operate or grow our business. We may not be able to raise additional financing for our capital needs on favorable terms, or at all, which could limit our ability to expand and to continue our long-term expansion plans.

We may need additional financing to operate our business, continue our longer-term expansion plans or acquire other businesses. To the extent that we cannot fund our activities and acquisitions through our existing cash resources and any cash we generate from operations, we may need to raise equity or debt funds through additional public or private financing. We cannot be certain that we will be able to obtain additional financing on commercially reasonable terms, or at all. This could inhibit our growth, increase our financing costs or cause us severe financial difficulties.

We have a limited order backlog and, therefore, if revenue levels for any quarter fall below our expectations, our results of operations will be adversely affected.

We have a limited order backlog, which makes revenues in any quarter substantially dependent on orders received and delivered in that quarter. A delay in the recognition of revenue, even from one customer, may have a significant negative impact on our results of operations for a given period. We base our decisions regarding our operating expenses on anticipated revenue trends. Our expense levels are relatively fixed and require some time for adjustment. Because only a small portion of our expenses varies with our revenues, if revenue levels fall below our expectations, our results of operations will be adversely affected.

Our gross margin could be negatively impacted by amortization expenses in connection with acquisitions, increased manufacturing costs and other factors, any of which could adversely affect our results of operations.

Our gross margin has fluctuated and been negatively affected in the past, and could continue to be negatively affected, by amortization expenses in connection with acquisitions, expenses related to share-based compensation, increases in manufacturing costs, a shift in our sales mix towards our less profitable products and services, increased customer demand for longer product warranties, fixed expenses that are applied to a lower revenue base, exchange rate fluctuations and increased cost pressures as a result of increased competition. Acquisitions of new businesses could also negatively affect our gross margin. A decrease in our gross margin could cause an adverse effect on our results of operations.

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Uncertain economic conditions may adversely affect our business.

In the past, uncertain global and local economic conditions have had a significant impact on the technology industry and our major customers and potential customers. Conditions may continue to be uncertain or may be subject to deterioration, which could lead to a reduction in consumer and customer spending overall and result in an adverse impact on sales of our products. A disruption in the ability of our significant customers to access liquidity could cause serious disruptions or an overall deterioration of their businesses, which could lead to a significant reduction in their orders of our products and the inability or failure on their part to meet their payment obligations to us, any of which could have a material adverse effect on our results of operations and liquidity. A significant adverse change in a customer’s financial and/or credit position could also require us to assume greater credit risk relating to that customer’s receivables or could limit our ability to collect receivables related to previous purchases by that customer. As a result, our allowance for credit losses and write-offs of accounts receivable could increase.

The ongoing trade war between China and the United States and its potential escalation may have an adverse effect on our business operations and revenues.

Starting in April 2018, the United States imposed a 25% tariff on steel and a 10% tariff on aluminum imports from other countries. On July 6, 2018, the United States imposed 25% tariffs on $34 billion worth of Chinese goods. China instituted retaliatory tariffs on certain United States goods. In 2019, the United States and China implemented several rounds of tariff increases and retaliations. On January 15, 2020, the United States and China signed a Phase One trade deal pursuant to which, among other things, the United States will modify existing tariffs. Due to the dynamic nature of governmental actions and responses, we are subject to uncertainty as to whether and when proposed tariffs will come into effect. Since we operate in the United States and deliver products and services to customers in the United States, the trade war has adversely affected us, and especially if and when it is escalated, may cause global economic turmoil and adversely impact the supply chain for our products, the cost of our products and the demand for our products and, thus, may have a material adverse effect on our business and results of operations.

The prices of our products may become less competitive due to foreign exchange fluctuations.

Although we have operations throughout the world, the majority of our revenues and our operating costs in 2022 were denominated in, or linked to, the dollar. Accordingly, we consider the dollar to be our functional currency. However, a significant portion of our operating costs in 2022 (including our cost of revenues) were incurred in NIS. During 2022, the NIS depreciated against the dollar, which resulted in a decrease in the dollar cost of our operations in Israel. As a result of this differential, from time to time we may experience increases in the costs of our operations outside the United States, as expressed in dollars. If there is a significant increase in our expenses, we may be required to increase the prices of our products and may be less competitive. Currently, our international sales are denominated primarily in dollars. Therefore, any devaluation in the local currencies of our customers relative to the dollar could cause customers to decrease or cancel orders or default on payment.

Our sales to European customers denominated in Euros are increasing. Sales denominated in Euros could make our revenues subject to fluctuation in the Euro/dollar exchange rate. If the dollar appreciates against the Euro, we may be required to increase the prices of our products that are denominated in Euros. In 2022, the Euro depreciated against the dollar, which resulted in an increase in the prices of our products that are denominated in Euros.

The ongoing conflict in Ukraine, including the actual (or perceived threat of an) expansion or exacerbation of such conflict, and the actions undertaken by western nations (and their allies) in response to Russia’s actions, has resulted, and could continue to result in, significant impacts on the global markets for the foreseeable future.

In February 2022, Russia launched a large-scale invasion of Ukraine, and Russia and Ukraine continue to engage in active and armed conflict. Such conflict has resulted, and will likely continue to result in, significant destruction of Ukraine’s infrastructure and substantial casualties amongst military personnel and civilians. As a result of Russia’s invasion of Ukraine, the governments of several nations have implemented commercial and economic sanctions against Russia (as well as certain banks, companies, government officials, and other individuals in Russia and Belarus). In addition to governmental entities, actors in the private sector, including, among others, tech firms, consumer brands and major manufacturers, have stopped, or publicly announced that they intend to stop, operations in Russia and cease their partnerships with Russian firms, and shippers, insurance companies and refiners have similarly indicated that they will no longer purchase or ship crude oil from Russia.

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In March 2022, Israel’s then Foreign Minister Mr. Yair Lapid indicated that Israel would not function as a route to bypass sanctions imposed on Russia by the United States and other western countries, and Israeli banks have elected to sever relationships with sanctioned Russian banks. Israel has not, as of the date of this Annual Report, imposed explicit sanctions on Russia or Belarus; however, it has publicly rejected Russia’s annexation of the four occupied regions of Ukraine and voiced support for Ukraine’s sovereignty and territorial integrity. Moreover, Israeli companies that have ties to the United States, the United Kingdom and the European Union could be indirectly subject to the measures imposed by such nations.

While it is not possible to predict or determine the ultimate consequences and impact of the conflict in Ukraine, such conflict could result in, among other things, significant regional instability and geopolitical shifts, and material and adverse effects on global macroeconomic conditions, financial markets, exchange rates and supply chains. To the extent negotiations between Russia and Ukraine are ultimately unsuccessful, the conflict in Ukraine could have a lasting impact in the near- and long-term on the financial condition, business and operations of our business (and the businesses of the counterparties with whom we engage), and the global economy at large.

Macroeconomic changes, including political disturbances, geopolitical instability, and trade wars, may adversely impact our business and operations.

Changes in regional and global politics are leading to changes in the globalization and harmonization trends that prevailed in recent decades. Threats of trade barriers, customs and duties and other political considerations, including mass strikes, wars, escalating or outbreak of armed hostilities, and other crises, are causing instability in the accepted world order and the stability of financial markets. This may impact both our ability to manufacture and sell our products and services which would affect our results of our operations and may also affect the price of our ordinary shares. Our business and operations are subject to uncertain macroeconomic changes, any of which could result in suspended operations, business interruptions, and impediments to our business. Moreover, we are subject to risks of hostilities, confiscation, deprivation of assets or military action that may directly or indirectly impact our operations, assets or financial performance in the areas where we operate. Most recently, for example, the conflict in Ukraine has resulted in, among other things, significant regional instability and geopolitical shifts, and material and adverse effects on global macroeconomic conditions, financial markets, exchange rates and supply chains. It is not possible at this time to predict or determine the ultimate consequences of the conflict in Ukraine, which could include, among other things, greater regional instability, geopolitical shifts and other material and adverse effects on macroeconomic conditions, currency exchange rates, supply chains and financial markets.

Terrorist attacks, or the threat of such attacks, may negatively impact the global economy which may materially adversely affect our business, financial condition and results of operation and may cause our share price to decline.

Financial, political, economic and other uncertainties following terrorist attacks throughout the world may negatively impact the global economy. As a result, many of our customers and potential customers have become much more cautious in setting their capital expenditure budgets, thereby restricting their telecommunications procurement. Uncertainties related to the threat of terrorism have had a negative effect on global economy, causing businesses to continue slowing spending on telecommunications products and services and further lengthen already long sales cycles. Any escalation of these threats or similar future events may disrupt our operations or those of our customers, distributors and suppliers, which could adversely affect our business, financial condition and results of operations.

Macroeconomic changes and trade wars mayAny shortages in, or increased costs of, semiconductors (and other components) could adversely impact our business.

Changes in regionalbusiness and global politics are leading to changesfinancial condition, including in the globalizationform of reduced revenues and harmonization trends that prevailedincreased costs and expenses.

Since the onset of COVID-19, the semiconductor industry has experienced, and continues to experience, significant shortages in recent decades. Threats of trade barriers, customs and duties and other political considerations are causing instabilitycapacity, which has resulted in the accepted world order andelongation of the stabilitylead time required to produce semiconductors. Given that semiconductors are a key component in our business, the inability to receive sufficient amounts of financial markets. This maysemiconductors on an expedited basis could impact both our ability to manufacture and selldeliver our products and services which would affect our resultsto third parties on a timely basis or could lead to an increase in the costs of our operationsinventory and may also affect theoverall purchase price of components. In the event that the capacity shortage in the semiconductor industry (and other components) continues for an extended period of time in the future, it could, among other things, have a material and adverse impact on (i) our ordinary shares.

As part ofmanufacturing capabilities, (ii) our go to market strategy, we have become certified solution partners of technological leaders such as Microsoft, Genesys and BroadSoft (acquired by Cisco). These companies change their go to market strategy and product mix and technology requirements often and do so on reasonably short notice. We may be unable or unwilling to changecustomer relationships, (iii) demand for our products in time and as may be required in order to remain a certified partner.

In recent years we have invested heavily in our product offerings that meet the requirements of the Microsoft Skype for Businessservices and Microsoft Teams ecosystems. The nature of this Microsoft solution is undergoing major change(iv) revenue and as part of this change, we are witnessing a shift from on-premises solutions to cloud-based or hybrid on-premises and cloud-based solutions. This directly impacts the suitability of our products to end-users and impacts end-user demand for products in a changing technical environment. In 2018, Cisco completed the acquisition of BroadSoft. This acquisition is likely to impact BroadSoft’s future directions and, as a result, our investment in compatibility with the BroadSoft BroadWorks and BroadCloud solutions. These changes may affect the revenues we derive from selling into BroadSoft/Cisco solutions. Genesys, a long-term partner of ours, is also shifting from on-premises solutions to cloud-based or hybrid on-premises and cloud-based solutions with potential impact on the suitability and demand of our products in Genesys contact center deployments. Changes by our third party partners, over which we have little control and influence, can negatively impact the results of our operations on reasonably short notice. We may be unable to recover or adapt to such changes.

We are subject to taxation in several countries. Tax matters, including changes in tax laws or rates, adverse determinations by taxing authorities and imposition of new taxes could adversely affect our results of operations more generally. In the event that the semiconductor shortage improves in the near-term, such industry is historically cyclical and financial condition.

Because we operateis characterized by rapid and recurring changes in several countries,technology, price erosion, short product life cycles, fluctuations in supply and demand, and product obsolescence. Therefore, another material shortage could occur in the future. Given the current uncertainty of the global markets, we are subjectnot able at this time to taxation in multiple jurisdictions, including Israel,estimate the United States and certainultimate long-term impact that the shortage of semiconductors (or other countries where wecomponents) will have operations. We are required to report to and are subject to local tax authorities in the countries in which we operate. In addition,on our income that is derived from sales to customers in one country might also be subject to taxation in other countries. We cannot be sure of the amount of tax we may become obligated to pay in the countries in which we operate. The tax authorities in the countries in which we operate may not agree with our tax position. Our tax benefits from carryforward tax losses and other tax planning benefits such as Israeli Technological Preferred Enterprise and Approved Enterprise programs, may prove to be insufficient due to Israeli tax limitations, or may prove to be insufficient to offset tax liabilities from foreign tax authorities. Foreign tax authorities may also use our gross profit or our revenues in each territory as the basis for determining our income tax, and our operating expenses might not be considered for related tax calculations, which could adversely affect our results of operations.business.

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Risks Related to Operations in Israel

Conditions in Israel affect our operations and may limit our ability to produce and sell our products or raise finance and instability in the Middle East may adversely affect us.

We are incorporated under the laws of the State of Israel, and our principal executive offices and principal research and development facilities are located in the State of Israel. Political, economic and military conditions in Israel directly affect our operations. There has been an increase in unrest and terrorist activity in Israel, which has continued with varying levels of severity for many years through the current period of time. This has led to ongoing hostilities between Israel, the Palestinian Authority, other groups in the West Bank and the Gaza Strip, and the northern border ofwith Lebanon, as well as in the Golan Heights. The future effect of these conflicts on the Israeli economy and our operations is unclear. The Israeli-Palestinian conflict may also lead to political instability between Israel and its neighboring countries. Ongoing violence between Israel and the Palestinians, as well as tension between Israel and its neighboring countries, may have a material adverse effect on our business, financial conditions and results of operations.

Political events in various countries in the Middle East, such as Syria, Iraq, Iran and Egypt, have weakened the stability of those countries, and have allowed extreme terrorists organizations, such as ISIS, to operate in certain territories in the Middle East. This instability may lead to deterioration of the geo-political conditions in the Middle East. In addition, this instability has affected the global economy and marketplace through fluctuations in oil and gas prices. Our headquarters and research and development facilities are located in the State of Israel. Any events that affect the State of Israel may impact us in unpredictable ways. For example, recent activities of the global movement for a campaign of Boycott, Divestment and Sanctions (BDS) against Israel may adversely affect our sales in certain countries. We have contingentcontingency plans for alternative manufacturing and supply sources, but these plans may prove to be insufficient. Should our operations be impacted in a significant way, this may materially and adversely affect the results of our operations.

We cannot predict the effect on us of an increase in these hostilities or any future armed conflict, political instability or violence in the region. Additionally, some of our officers and employees in Israel are obligated to perform annual military reserve duty and are subject to being called for additional active duty under emergency circumstances. Some of our employees live within conflict area territories and may be forced to stay at home instead of reporting to work. We cannot predict the full impact of these conditions on us in the future, particularly if emergency circumstances or an escalation in the political situation occur. If many of our employees are called for active duty, or forced to stay at home, our operations in Israel and our business may be adversely affected.

A number of countries and organizations continue to restrict or ban business with Israel or Israeli companies or companies doing business with Israel or Israeli companies, which may limit our ability to make sales in those countries. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Such actions, particularly if they become more widespread, may adversely impact our ability to sell our products.

We could also be materially and adversely impacted by the ongoing political climate in Israel. For example, in response to the Israeli government’s recently proposed plan to overhaul the Israeli judiciary, Israeli labor unions have launched nationwide strikes, and airports, ports, major retailers and other public areas have been temporarily grounded as a result. We are unable at this time to determine the ultimate impact that these labor strikes and other developments relating to such policies will have on our business, operations and the Israeli economy at large.  Furthermore, the Israeli government is currently pursuing extensive changes to Israel’s judicial system. In response to the foregoing developments, certain leading international financial institutions, including investment banks, investors and key economists, have indicated several causes for concern, including that such proposed changes, if adopted, may cause a downgrade to Israel’s sovereign credit rating and Israel’s international standing, which would adversely affect the macroeconomic condition in which we operate, and also potentially deter foreign investment into Israel or Israeli companies, which may, among other things, hinder our ability to raise additional funds, if deemed necessary by our management and board of directors.

We are adversely affected by the changes isin the value of the dollar against the NIS and could be adversely affected by the rate of inflation in Israel.

Israel, and we may incur losses as a result of our forward contracts and other hedging activities.

We generate most of our revenues in dollars and, in 2019,2022, a significant portion of our expenses, primarily salaries, related personnel expenses and the leases of our buildings in Israel, were incurred in NIS. We anticipate that a significant portion of our expenses will continue to be denominated in NIS.

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Our NIS related costs, as expressed in dollars, are influenced by the exchange rate between the dollar and the NIS. During 20172022, the NIS depreciated against the dollar, which resulted in a decrease in the dollars cost of our operations in Israel and 2019,during 2021 and 2020, the NIS appreciated against the dollar, which resulted in an increase in the dollar cost of our operations in Israel, and during 2018, the NIS depreciated against the dollar, which resulted a decrease in the dollars cost of our operations in Israel. To the extent the dollar weakens against the NIS, we could experience an increase in the cost of our operations, which are measured in dollars in our financial statements, which could adversely affect our results of operations. In addition, in periods in which the dollar appreciates against the NIS, we bear the risk that the rate of inflation in Israel will exceed the rate of such devaluation of the NIS in relation to the dollar or that the timing of such devaluations were to laglags considerably behind inflation, which will increase our costs as expressed in dollars.

A decrease in value of the dollar in relation to the NIS could have the effect of increasing the cost in dollars of these expenses. Our dollar-measured results of operations were adversely affected in 20172021 and 20192020 when the NIS appreciated substantially against the dollar. This could happen again if the dollar were to decrease in value against the NIS.

In order to manage the risks imposed by foreign currency exchange rate fluctuations, from time to time, we enter into currency forward and put and call options contracts to hedge some of our foreign currency exposure. We can provide no assuranceWhile we have sought to hedge certain exposures to changes in foreign currency exchange rates through the use of such instruments, we cannot assure that foreign currency fluctuations will not have a material and adverse effect on our hedging arrangements will be effective. In addition,financial condition, results of operations and business. Our use of derivative transactions, including forward contracts, could additionally expose us to the risk of financial loss upon unexpected or unusual variations in the macroeconomy. Likewise, if we wish to maintain the dollar-denominated value of our products in non-U.S. markets, devaluation in the local currencies of our customers relative to the dollar may cause our customers to cancel or decrease orders or default on payment.

We can provide no assurance that our hedging arrangements will be effective nor that the strategies underlying these arrangements will be successful, if at all. If any of the strategies we utilize to manage our exposure to various types of currency exchange risk is not effective, we may incur additional losses.

Because exchange rates between the NIS and the dollar fluctuate continuously, exchange rate fluctuations have an impact on our profitability and period-to-period comparisons of our results of operations. For example, in 2022, the value of the dollar increased in relation to the NIS by 13.2% and the inflation rate in Israel was 5.3%. In 2019,2021, the value of the dollar decreased in relation to the NIS by 7.8% and the deflation rate in Israel was 0.6%. In 2018, the value of the dollar increased in relation to the NIS by 8.1%3.3% and the inflation rate in Israel was 0.8%2.8%. In 2017,2020, the value of the dollar decreased in relation to the NIS by 9.8%7.0% and the deflation rate in Israel was 0.4%0.7%. Our results of operations may be adversely affected in case of a decrease in the value of the dollar to the NIS.

The government grants we have received for research and development expenditures limit our ability to manufacture products and transfer technologies outside of Israel and require us to satisfy specified conditions. If we fail to comply with or satisfy these conditions, we may be required to refund grants previously received together with interest and penalties.

penalties and/or be charged with a criminal offense.

In connection with research and development grants we received from the Israel NationalInnovation Authority, for Technology and Innovation (“IIA”),or the IIA, we must pay royalties to the IIA on the revenue derived from the sale of products, technologies and services developed with the grants from the IIA. The terms of the IIA grants and the law pursuant to which grants are made restrict our ability to manufacture products or transfer technologies outside of Israel if the IIA grants funded the development of the products or technology, without special approvals from the IIA. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with the IIA funding (such as a merger or similar transaction) may be reduced by anyan amount of up to six times of the amounts of grants that we are required to pay IIA.received from the IIA the plus interest, less any royalties that we already paid. These restrictions may limit our ability to enter into agreements for such transactions without the IIA approval. We cannot be certain that any approval of the IIA will be obtained on terms that are acceptable to us, or at all.

As of December 31, 2019,2022, we have a contingent obligation to pay royalties in the amount of approximately $16.5$20.1 million, related to historical grants received by two of our subsidiaries.

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It may be difficult to enforce a U.S. judgment against us, our officers and directors, assert U.S. securities law claims in Israel or serve process on substantially all of our officers and directors.

We are incorporated in Israel. Most of our executive officers and directors are nonresidents of the United States, and a majority of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult to enforce a judgment obtained in the United States against us or any such persons or to effect service of process upon these persons in the United States. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing these matters. Additionally, there is doubt as to the enforceability of civil liabilities under the Securities Act and the Exchange Act in original actions instituted in Israel.

Israeli law and provisions in our articles of association may delay, prevent or make difficult a merger with or an acquisition of us, which could prevent a change of control and therefore depress the price of our shares.

Provisions of Israeli law may delay, prevent or make undesirable a merger or an acquisition of all or a significant portion of our shares or assets. Israeli corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving significant shareholders and regulates other matters that may be relevant to these types of transactions. These provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. These provisions may limit the price that investors may be willing to pay in the future for our ordinary shares. In addition, our articles of association contain certain provisions that may make it more difficult to acquire us, such as a staggered board, the ability of our board of directors to issue preferred stock and limitations on business combinations with interested shareholders. Furthermore, IsraelIsraeli tax considerations may make potential transactions undesirable to us or to some of our shareholders.

The rights and responsibilities of our shareholders are governed by Israeli law which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in United States corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting of shareholders on certain matters, such as an amendment to a company’s articles of association, an increase of a company’s authorized share capital, a merger of a company and approval of related party transactions that require shareholder approval. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an office holder in a company or has another power with respect to a company, has a duty to act in fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. Some of the parameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of United States corporations.

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Regulatory, Legal and Tax Risks

Risks RelatingChanges in governmental regulations in the United States or other countries could slow the growth of the VoIP telephony market and reduce the demand for our customers’ products, which, in turn, could reduce the demand for our products.

VoIP and other services are not currently subject to all of the Ownershipsame regulations that apply to traditional telephony. Nevertheless, it is possible that foreign or U.S. federal or state legislatures may seek to impose increased fees and administrative burdens on VoIP, data, and video providers. The FCC requires VoIP service providers to meet various emergency service requirements relating to delivery of 911 calls, known as E911, and to accommodate law enforcement interception or wiretapping requirements, such as the Communications Assistance for Law Enforcement Act, or CALEA. In addition, the FCC may seek to impose other traditional telephony requirements such as disability access requirements, consumer protection requirements, number assignment and portability requirements, and other obligations, including additional obligations regarding E911 and CALEA. The cost of complying with FCC regulations or similar regulations in other countries could increase the cost of providing Internet phone service which could result in slower growth and decreased profitability for this industry, which would adversely affect our business.

The enactment of any additional regulation or taxation of communications over the Internet in the United States or elsewhere in the world could have a material adverse effect on our customers’ (and their customers’) businesses and could therefore adversely affect sales of our Ordinary Shares

The priceproducts. We do not know what effect, if any, possible legislation or regulatory actions in the United States or elsewhere in the world may have on private telecommunication networks, the provision of VoIP services and purchases of our ordinary sharesproducts.

Use of encryption technology in our products is regulated by governmental authorities and may fluctuate significantly.

The market price for our ordinary shares, as well as the prices of shares of other technology companies, has been volatile. Between January 1, 2015 and February 18, 2020, the trading price of our shares on Nasdaq has fluctuated from a low of $2.69 to a high of $28.73. The following factors may cause significant fluctuationsrequire special development, export or import licenses. Delays in the market priceissuance of required licenses, or the inability to secure these licenses, could adversely affect our ordinary shares:revenues and results of operations.

In addition, stock pricesGrowth in the demand for security features may increase the use of manyencryption technology companies fluctuate significantly for reasons thatin our products. The use of encryption technology is generally regulated by governmental authorities and may require specific development, export or import licenses. Encryption standards may be unrelatedbased on proprietary technologies. We may be unable to incorporate encryption standards into our products in a manner that will ensure interoperability. We also may be unable to secure licenses for proprietary technology on reasonable terms. If we cannot meet encryption standards, or disproportionate to operating results. The factors discussed above may depress or cause volatility ofsecure required licenses for proprietary encryption technology, our share price, regardless of our actual operating results.

Our quarterlyrevenues and results of operations have fluctuatedcould be adversely affected.

Our proprietary technology is difficult to protect, and our products may infringe on the intellectual property rights of third parties. Our business may suffer if we are unable to protect our intellectual property or if we are sued for infringing the intellectual property rights of third parties.

Our success and ability to compete depend in part upon protecting our proprietary technology. We rely on a combination of patent, trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement, or to protect us from the pastclaims of others.

Enforcement of intellectual property rights may be expensive and may divert attention of management and of research and development personnel away from our business. Intellectual property litigation could also call into question the ownership or scope of rights owned by us. Additionally, our products may be manufactured, sold, or used in countries that provide less protection to intellectual property than that provided under U.S. or Israeli laws or where we do not hold relevant intellectual property rights.

We believe that the frequency of third-party intellectual property claims is increasing, as patent holders, including entities that are not in our industry and that purchase patents as an investment or to monetize such rights by obtaining royalties, use infringement assertions as a competitive tactic and a source of additional revenue. Any intellectual property claims against us, even if without merit, could cost us a significant amount of money to defend and divert management’s attention away from our business. We may not be able to secure a license for technology that is used in our products and we expect these fluctuationsmay face injunctive proceedings that prevent distribution and sale of our products even prior to continue. Fluctuations inany dispute being concluded. These proceedings may also have a deterrent effect on purchases by customers, who may be unsure about our ability to continue to supply their requirements. We may be forced to repurchase our products and compensate customers that have purchased such infringing products. We may be forced to redesign a product so that it becomes non-infringing, which may have an adverse impact on our results of operationsour operations.

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In addition, claims alleging that the development, use, or sale of our products infringes third parties’ intellectual property rights may disappoint investors andbe directed either at us or at our direct or indirect customers. We may be required to indemnify such customers against claims made against them. We may be required to indemnify them even if we believe that the claim of infringement is without merit.

Multiple patent holders in our industry may result in increased licensing costs.

There are a declinenumber of companies besides us that hold patents for various aspects of the technology incorporated in our share price.industry’s standards and our products. We expect that patent enforcement will be given high priority by companies seeking to gain competitive advantages or additional revenues. We have been sued a number of times in recent years for alleged patent infringement. If holders of patents take the position that we are required to obtain a license from them, we cannot be certain that we would be able to negotiate a license agreement at an acceptable price or at all. Our results of operations could be adversely affected by the payment of any additional licensing costs or if we are prevented from manufacturing or selling a product.

We are subject to regulations that require us to use components based on environmentally friendly materials. We may be subject to various regulations relating to management and disposal of waste with respect to electronic equipment. Compliance with these regulations has increased our costs. Failure to comply with these regulations could materially adversely affect our business and results of operations.

We have experiencedare subject to an increasing number of directives and expectregulations requiring the use of environmentally-friendly materials. For example, pursuant to a European Community directive, equipment suppliers are required to stop using specified materials that are not environmentally friendly. Some of our customers may also require products that meet higher standards than those required by the directive, such as complete removal of additional harmful substances from our products. We are dependent on our suppliers for components and sub-system modules, such as semiconductors and purchased assemblies and goods, to comply with these requirements. This may harm our ability to sell our products in regions or to customers that may adopt such directives. Compliance with these directives has required us to incur significant expenses with respect to meeting the basic requirements and the updates of those regulations and of implementing new similar regulations and directives. In addition, we may be required to pay higher prices for components that comply with those directives. We may not be able to pass these higher component costs on to our customers. Compliance with these directives has increased and could continue to experience significant fluctuationsincrease our product design and manufacturing costs. New designs may also require qualification testing with both customers and government certification boards.

Some of our operations use substances regulated under various federal, state, local and international laws governing the environment, including laws governing the management and disposal of waste with respect to electronic equipment. We could incur substantial costs, including fines and civil or criminal sanctions, if we were to violate or become liable under environmental laws or if our products become non-compliant with environmental laws. We also face increasing complexity in our quarterlyproduct design and procurement operations as we adjust to new and future requirements relating to the materials that compose our products. The European Union, or the EU, has enacted the Waste Electrical and Electronic Equipment Directive which makes producers of electrical goods financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. Similar legislation has been or may be enacted in other jurisdictions, including the United States, Canada, Mexico, China and Japan.

Our inability or failure to comply with these regulations could have a material adverse effect on our results of operations. In some periods,addition, manufacturers of components that do not meet the new requirements may decide to stop manufacturing those components prior to the required compliance date. These actions by manufacturers of components could result in a shortage of components that could adversely affect our operatingbusiness and results may be below public expectations or below revenue levelsof operations.

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Our use of open source software could materially and operating results reachedadversely affect our ability to offer our products, subject us to actual and threatened litigation, and cause substantial harm to our financial condition and operations, generally.

We have used, and could continue to use, open source software in prior quarters orconnection with the development and deployment of our software products. To the extent we continue to utilize open source software in the corresponding quartersfuture, it could in some instances subject us to certain unfavorable conditions, including requirements that we offer our products that incorporate the open source software for no cost, that we make publicly available all or part of the previous year. If this occurs,source code for any modifications or derivative works we create based upon, incorporating or using any such open source software, or that we license such modifications or derivative works under the market priceterms of our ordinary shares could decline.

The following factorsthe particular open source license. Companies that have affected our quarterly results of operations in the past and are likelyelected to affect our quarterly results of operations in the future:

Therefore, the results of any past periods may not be relied upon as an indication of our future performance.

Our actual financial results might varyincorporate open source software into their products have, from our publicly disclosed financial forecasts.

From time to time, we publicly disclose financial forecastsbeen subject to claims challenging the use of such open source software and other performance metrics. Our forecasts reflect numerous assumptions concerning our expected performance, as well as other factors which are beyond our control and which might not turn out to be correct. As a result, variations from our forecastscompliance with the terms of such use. Accordingly, we could be material. Our financial results are subjectmade party to numerous risksa lawsuit by a third party claiming ownership of what we believe to constitute open source software or otherwise asserting noncompliance with the terms of such use. While we seek to monitor and uncertainties, including those identified throughout this “Risk Factors” sectiontrack our use of open source software in an attempt to mitigate the risk of needing to disclose any proprietary source code, or that would otherwise breach the terms of any open source agreement, we cannot guarantee that our efforts will be successful and elsewhere in this Annual Report. Ifthat all open source software has been, or will be, reviewed prior to its incorporation into our actual financial results are worse than our financial forecasts,products.

Given the pricelack of our ordinary shares may decline. A large portion of our salesjudicial precedent and guidance regarding each specific open software license type, there is made during the last month of each quarter. As a result, any delay in our receipt of orders could affect our results for a quarter and the accuracy of our forecasts.

It is our policyrisk that open source software licenses that we will generally notutilize could be interpreted in a manner that imposes unanticipated conditions and restrictions on our ability to offer, provide quarterly forecastsand market our products and services. If we are ultimately found to have breached or failed to comply with any of the results of our operations. This policyterms and conditions associated with any open source software license, we could affect the willingness of analysts to provide research with respect to our ordinary shares, which could affect the trading market for our ordinary shares.

It is our policy that we will generally not provide quarterly forecasts of the results of our operations. This could result in the reduction of research analysts who cover our ordinary shares. Any reduction in research coverage could affect the willingness of investors, particularly institutional investors, to invest in our shares which could affect the trading market for our ordinary shares and the price at which our ordinary shares are traded.

As a foreign private issuer whose shares are listed on Nasdaq, we follow certain home country corporate governance practices instead of certain Nasdaq requirements.

As a foreign private issuer whose shares are listed on Nasdaq, we are permitted to follow certain home country corporate governance practices instead of certain requirements contained in the Nasdaq listing rules. We do not comply with the Nasdaq requirement that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain share-based compensation plans. Instead, we follow Israeli law and practice which permits the establishment or amendment of certain share-based compensation plans to be approved by our board of directors without the need for a shareholder vote, unless such arrangements are for the compensation of directors or the chief executive officer, in which case they also require compensation committee and shareholder approval.

As a foreign private issuer listed on the Nasdaq, we may also elect in the future to follow home country practice with regardsubject to, among other things, director nominations, compositioninfringement claims and others forms of liability, or be required to obtain costly licenses from third parties to continue to provide our products and services on terms that are not economically advantageous or feasible, if at all. Additionally, use of open source software generally carries greater legal risks than does the use of third-party commercial software, and therefore, any open source software utilized will generally be provided without any contractual protections, warranties or other support. Any of the boardforegoing risks could materially and adversely affect our financial condition, results of directorsoperations and quorumbusiness.

We must comply with continually evolving privacy-related laws regulations in multiple jurisdictions.

Our use and handling of personally identifiable data is regulated at shareholders’ meetings,the international, federal and state levels. The regulatory environment surrounding information security and privacy is increasingly demanding. For example, the General Data Protection Regulation (GDPR), which came into effect on May 25, 2018, implemented stringent operational requirements for companies that are established in the EU or, where not established in the EU, offer goods or services to individuals in the EU or monitor the behavior of individuals in the EU. Failure to comply with the GDPR can result in fines of up to EUR 20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher.

The requirements of the GDPR include, for example, expanded disclosures about how personal data is processed, mandatory data breach notification requirements, a strengthened data subject rights regime and higher standards for obtaining consent from individuals to process their personal data (including in certain circumstances for marketing), all of which involve significant ongoing expenditure. The principle of accountability likewise requires us to put significant documentation in place to demonstrate compliance. While the GDPR in large part harmonizes data protection requirements across EU countries, some provisions allow EU Member States to adopt additional or different requirements, which could limit our ability to use and share personal data or could require localized changes. We may also be affected by legal challenges to the validity of EU mechanisms for transfers of personal data outside the EU, and our business could be impacted by changes in law as a result of future review of these mechanisms by European regulators under the GDPR, as well as not obtain shareholder approval for certain dilutive events.current challenges to these mechanisms in the European courts.

Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate governance rules.

Our ordinary shares are listed for trading in more than one marketIn addition, existing privacy-related laws and this may result in price variations.

Our ordinary shares are listed for trading on Nasdaq and on the Tel Aviv Stock Exchange (“TASE”). Trading in our ordinary shares on these markets is made in different currencies (dollars on Nasdaq and NIS on TASE), and at different times (resulting from different time zones, different trading days and different public holidaysregulations in the United States and Israel). Actual trading volume on the TASE is generally lower than trading volume on Nasdaq,other countries are evolving and as such could beare subject to higher volatility. The trading prices of our ordinary shares on these two markets often differ resulting from the factors described above, as well as differences in exchange rates. Any decrease in the trading price of our ordinary shares on one of these markets could cause a decrease in the trading price of our ordinary shares on thepotentially differing interpretations, and various U.S. federal and state or other market.

There can be no assurance that we will continue to declare cash dividendsinternational legislative and regulatory bodies may expand or continue repurchases of our ordinary shares.

In July 2018, January 2019, August 2019enact laws regarding privacy and February 2020, our Board of Directors declared cash dividends on our ordinary shares. Priordata security-related matters. Due to the declaration of these dividends, we had never declared a cash dividend. Under the Israeli Companies Law, 1999, or the Companies Law, we may pay dividends only out of our profits as determined for statutory purposes, unless court approval is granted for the payment of dividends despite the lack of statutory profits. Accordingly, the declarationfact that privacy and payment of future dividends isinformation security laws and regulations are subject to the Board’s discretion and will be dependent upon future earnings, cash flows, the requirements of the Companies Law, the receipt of court approval, if required, and other factors. There can be no assurance that we will continue to declare cash dividends on our ordinary shares.

In addition, since 2014, we have received court approvals each year for share repurchases up to specified amounts. Our share repurchases have and will take place in open market transactions or in privately negotiated transactions and may be madechange from time to time, depending on market conditions, share price, trading volumeour compliance with them may result in cost increases due to necessary systems changes and the development of new processes. If we fail to comply with these laws and regulations, we could be subjected to legal risk.

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We are subject to taxation in several countries. Tax matters, including changes in tax laws or rates, adverse determinations by taxing authorities and imposition of new taxes could adversely affect our results of operations and financial condition.

Because we operate in several countries, we are subject to taxation in multiple jurisdictions, including Israel, the United States and certain other factors.countries where we have operations. We are required to report to and are subject to local tax authorities in the countries in which we operate. In addition, our income that is derived from sales to customers in one country might also be subject to taxation in other countries. We cannot be sure of the amount of tax we may become obligated to pay in the countries in which we operate. The repurchase program doestax authorities in the countries in which we operate may not require usagree with our tax position. Our tax benefits from carryforward tax losses and other tax planning benefits, such as Israeli Technological Preferred Enterprise and Approved Enterprise programs, may prove to purchase a specific numberbe insufficient due to Israeli tax limitations or may prove to be insufficient to offset tax liabilities from foreign tax authorities. Foreign tax authorities may also use our gross profit or our revenues in each territory as the basis for determining our income tax, and our operating expenses might not be considered for related tax calculations, which could adversely affect our results of shares and may be suspended from time to time or discontinued. There can be no assurance that we will continue to seek court approval of or that we will complete additional share repurchases.operations.

U.S. shareholders face certain income tax risks in connection with their acquisition, ownership and disposition of our ordinary shares. In any tax year, we could be deemed a passive foreign investment company, which could result in adverse U.S. federal income tax consequences for U.S. shareholders.

Based on the composition of our gross income, the composition and value of our gross assets and the amounts of our liabilities for each taxable year from 20042005 through 2019,2022, we do not believe that we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes during any of such tax years. There can be no assurance that we will not become a PFIC in the current tax year or any future tax year in which, for example, the value of our assets, as measured by the public market valuation of our ordinary shares, declines in relation to the value of our passive assets (generally, cash, cash equivalents and marketable securities). If we are a PFIC for any tax year, U.S. shareholders who own our ordinary shares during such year may be subject to increased U.S. federal income tax liabilities and reporting requirements for such year and succeeding years, even if we cease to be a PFIC in such succeeding years. A U.S. holder of our ordinary shares will be required to file an information return containing certain information required by the U.S. Internal Revenue Service for each year in which we are treated as a PFIC with respect to such holder.

We urge U.S. holders of our ordinary shares to carefully review Item 10.E. – “Taxation – 10.E, “Additional Information—Taxation—U.S. Federal Income Tax Considerations” in this Annual Report and to consult their own tax advisors with respect to the U.S. federal income tax risks related to owning and disposing of our ordinary shares and the consequences of PFIC status.

If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly, or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated as a “United States shareholder” with respect to us and each “controlled foreign corporation” in our group (if any). Because our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations (regardless of whether or not we are treated as a controlled foreign corporation). A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we or any of our non-U.S. subsidiaries is treated as a controlled foreign corporation or whether any investor is treated as a United States shareholder with respect to us or any such controlled foreign corporation or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our ordinary shares.

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We are subject to ongoing costs and risks associated with complying with extensive corporate governance and disclosure requirements.

As a foreign private issuer subject to U.S. federal securities laws, we spend a significant amount of management time and resources to comply with laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, regulations promulgated by the United States Securities and Exchange Commission, (“SEC”) regulationsor the SEC, and Nasdaq listing rules. While we have developed and instituted corporate compliance programs and continue to update our programs in response to newly implemented or changing regulatory requirements, we cannot provide assurance that we are or will be in compliance with all potentially applicable corporate regulations. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, fines or other sanctions or litigation. In connection with our compliance with the internal control provisions of Section 404 and the other applicable provisions of the Sarbanes-Oxley Act, our management and other personnel devote a substantial amount of time, and may need to hire additional accounting and financial staff, to assure that we comply with these requirements. The additional management attention and costs relating to compliance with the Sarbanes-Oxley Act, the Dodd-Frank Act and other corporate governance requirements could materially and adversely affect our financial results.

The internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act may not prevent or detect misstatements because of certain of its limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. As a result, even effective internal controls may not provide reasonable assurances with respect to the preparation and presentation of financial statements. We cannot provide assurance that, in the future, our management will not find a material weakness in connection with its annual review of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We also cannot provide assurance that we could correct any such weakness to allow our management to assess the effectiveness of our internal control over financial reporting as of the end of our fiscal year in time to enable our independent registered public accounting firm to state that such assessment will have been fairly stated in our Annual Report on Form 20-F or state that we have maintained effective internal control over financial reporting as of the end of our fiscal year. Discovery and disclosure of a material weakness in our internal control over financial reporting could have a material impact on our financial statements and could cause our stock price to decline.

Risks Relating to the Ownership of our Ordinary Shares

The price of our ordinary shares may fluctuate significantly.

The market price for our ordinary shares, as well as the prices of shares of other technology companies, has been volatile. Between January 1, 2018 and April 18, 2023, the trading price of our shares on Nasdaq has fluctuated from a low of $6.62 to a high of $44.94. The following factors may cause significant fluctuations in the market price of our ordinary shares:

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In addition, stock prices of many technology companies fluctuate significantly for reasons that may be unrelated or disproportionate to operating results. The factors discussed above may depress or cause volatility of our share price, regardless of our actual operating results.

Our quarterly results of operations have fluctuated in the past and we expect these fluctuations to continue. Any actual or anticipated fluctuations in our results of operations could require that we issue revised guidance, and the failure to meet the expectations of our investors or analysts could have a material and adverse impact on our share price.

We are also subjecthave experienced, and expect to SEC disclosure obligations relatingcontinue to experience, significant fluctuations in our usequarterly results of so-called “conflict minerals” - columbite-tantalite, cassiterite (tin), wolframite (tungsten)operations. For example, in April 2023, we announced that the guidance we previously issued for 2023 (with respect to revenues, net cash and gold. These minerals are present in a significant number of our products;net income per share) is to be lower than previously anticipated by us as a result of lower than expected revenues in the first quarter of 2023. In some periods, our operating results may be significantly below public expectations or below revenue levels and operating results reached in prior quarters or in the corresponding quarters of the previous year. If this occurs, the market price of our ordinary shares could be materially and adversely impacted. Accordingly, comparisons of our revenues and operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.

The following factors, among others, have affected our quarterly results of operations in the past and are likely to affect our quarterly results of operations in the near- and long-term:

Accordingly, our operating results have been and may continue to be difficult to predict, even in the near term, and consequently, the results of any past periods should not be relied upon as an indication of our future performance.

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Our actual financial results might vary from our publicly disclosed financial forecasts.

From time to time, we publicly disclose financial forecasts and other performance metrics. Our forecasts reflect numerous assumptions concerning our expected performance, as well as other factors which are beyond our control and which might not turn out to be correct. As a result, variations from our forecasts could be material. Our financial results are subject to numerous risks and uncertainties, including those identified throughout this “Risk Factors” section and elsewhere in this Annual Report. If our actual financial results are worse than our financial forecasts, the price of our ordinary shares may decline. A large portion of our sales is made during the last month of each quarter. As a result, any delay in our receipt of orders could affect our results for a quarter and the accuracy of our forecasts.

It is our policy that we will generally not provide quarterly forecasts of the results of our operations. This policy could affect the willingness of analysts to provide research with respect to our ordinary shares, which could affect the trading market for our ordinary shares.

It is our policy that we will generally not provide quarterly forecasts of the results of our operations. This could result in the reduction of research analysts who cover our ordinary shares. Any reduction in research coverage could affect the willingness of investors, particularly institutional investors, to invest in our shares which could affect the trading market for our ordinary shares and the price at which our ordinary shares are traded.

As a foreign private issuer whose shares are listed on Nasdaq, we follow certain home country corporate governance practices instead of certain Nasdaq requirements.

As a foreign private issuer whose shares are listed on Nasdaq, we are requiredpermitted to file a conflicts minerals reportfollow certain home country corporate governance practices instead of certain requirements contained in the Nasdaq listing rules. We do not comply with the SECNasdaq requirement that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain share-based compensation plans. Instead, we follow Israeli law and practice which permits the establishment or amendment of certain share-based compensation plans to be approved by our board of directors without the need for a shareholder vote, unless such arrangements are for the compensation of directors or the chief executive officer, in which case they also require compensation committee and shareholder approval.

As a foreign private issuer listed on an annual basis by Maythe Nasdaq, we may also elect in the future to follow home country practice with regard to, among other things, director nominations, composition of each year.the board of directors and quorum at shareholders’ meetings, as well as not obtain shareholder approval for certain dilutive events. Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate governance rules.

Our ordinary shares are listed for trading in more than one market and this may result in price variations.

Our ordinary shares are listed for trading on Nasdaq and on the Tel Aviv Stock Exchange Ltd., or the Tel Aviv Stock Exchange, or the TASE, under the Israeli regulatory “dual listing” regime that provides companies whose securities are listed both on Nasdaq and the TASE certain reporting leniencies. Trading in our ordinary shares on these markets is made in different currencies (dollars on Nasdaq and NIS on TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). Actual trading volume on the TASE is generally lower than trading volume on Nasdaq, and as such could be subject to higher volatility. The preparationtrading prices of our report is dependent uponordinary shares on these two markets often differ resulting from the implementation and operationfactors described above, as well as differences in exchange rates. Any decrease in the trading price of our systems and processes and information supplied byordinary shares on one of these markets could cause a decrease in the trading price of our suppliersordinary shares on the other market.

While our ordinary shares are currently listed on the TASE, there is no guarantee as to how long such listing will be maintained.

We plan to continuously examine the advisability of productsmaintaining our listing on the TASE. We may in the future voluntarily delist our securities from the TASE, provided we furnish notice thereof at least 90 days in advance of such delisting. If our ordinary shares are delisted, some holders of our ordinary shares that contain,are traded on the TASE may be required or potentially contain, conflict minerals. We have incurred andwill choose to sell their shares, which could result in a decrease in the trading price of our ordinary shares.

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There can be no assurance that we will continue to incurdeclare cash dividends or continue repurchases of our ordinary shares.

Since July 2018, our Board of Directors have elected to declare cash dividends on our ordinary shares each year. Prior to the declaration of these dividends, we had never declared a cash dividend. Under the Israeli Companies Law, 1999, or the Companies Law, we may pay dividends only out of our profits as determined for statutory purposes, unless court approval is granted for the payment of dividends despite the lack of statutory profits. Accordingly, the declaration and payment of future dividends is subject to the Board’s discretion and will be dependent upon future earnings, cash flows, the requirements of the Companies Law, the receipt of court approval, if required, and other factors. There can be no assurance that we will continue to declare cash dividends on our ordinary shares.

In addition, since 2014, we have received court approvals each year for share repurchases up to specified amounts. Our share repurchases have and will take place in open market transactions or in privately negotiated transactions and may be made from time to time depending on market conditions, share price, trading volume or other factors. The repurchase program does not require us to purchase a specific number of shares and may be suspended from time to time or discontinued. There can be no assurance that we will continue to seek court approval of, or that we will complete, additional share repurchases.

General Risk Factors

We have a significant presence in international markets and plan to continue to expand our international operations, which exposes us to a number of risks that could affect our future growth.

We have a worldwide sales, marketing and support infrastructure that is comprised of independent distributors and value-added resellers, and our own personnel resulting in a sales, marketing and support presence in many countries, including markets in North America, Western and Eastern Europe, the Asia Pacific region and Latin America. We expect to continue to increase our sales headcount, our applications development headcount, our field support headcount, our marketing headcount and our engineering headcount and, in some cases, establish new relationships with distributors, particularly in markets where we currently do not have a sales or customer support presence. As we continue to expand our international sales and operations, we are subject to a number of risks, including the following:

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Any of these risks could adversely affect our international operations, reduce our revenues from outside of the United States or increase our operating costs, associated with complyingadversely affecting our business, results of operations and financial condition and growth prospects. There can be no assurance that all of our employees and channel partners will comply with the supply chain due diligence proceduresformal policies we have and will implement, or applicable laws and regulations. Violations of laws or key control policies by our employees and channel partners could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our software and services and could have a material adverse effect on our business and results of operations.

We depend on a limited number of key personnel who would be difficult to replace.

The success of our business depends in large part upon the continuing contributions of our management and key personnel. Specifically, we rely heavily on the services of Shabtai Adlersberg, our President and Chief Executive Officer, and Lior Aldema, our Chief Business Officer. Mr. Adlersberg is also a director. If our President and Chief Executive Officer or our Chief Business Officer are unable or unwilling to continue with us, our results of operations could be materially and adversely affected. We do not carry key person insurance for our key personnel.

The success of our business also depends upon our continuing ability to attract and retain other highly-qualified management, technical, sales and marketing personnel. We require highly-qualified technical personnel who are capable of developing technologies and products and providing the technical support required by our customers. We experience competitive pressure with respect to retaining and hiring employees in the SEC.high technology sector in Israel. In 2022, Israel faced a shortage of qualified technical personnel with the requisite experience in the industry in which we operate. Specifically, there was a notable shortage of engineers who were familiar with the intricacies and bespoke aspects of our products and services. To the extent that such trends continue in 2023 (and beyond) and we fail to hire and retain skilled employees, our business may be adversely affected, including our ability to deliver products and services on a timely basis. Moreover, to the extent we are able to successfully recruit and retain additional technical personnel, we may be required to incur significant costs due to steep salary increases. Given the substantial demand for such services, we may be unsuccessful in attracting and retaining an adequate number of technical personnel to support our current operations and the potential expansion of our business.

Rising wages and other labor-related costs could materially and adversely affect our business.

The ability to execute our strategic plans is highly dependent on our ability to promote, retain and recruit a sufficient number of qualified personnel. Given the competition for qualified talent and rising wages in the technology industry in Israel, we face significant challenges in finding, hiring and retaining qualified and highly-trained personnel. The tight labor market has resulted in higher labor-related costs, increased attrition rates and fundamental changes in the labor market and expectations of employees. In particular, our desire to hire superior talent may require us to pay higher wages and provide enhanced benefits, which could cause us to incur higher labor-related costs as compared to our competitors. We expect wages to continue to rise in Israel in the near-term, which will continue to impact our overall financial condition, cash flows and operations. We cannot be assured that we will be successful in hiring, retaining, training and promoting our personnel at current wage rates given that we are currently operating in a highly competitive labor market and further increases in market compensation could adversely impact our business.

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A data security or privacy breach could adversely affect our business and services.

The protection of customer, employee and company data is critical to our business and operations. Customers and other stakeholders have a high expectation that we will adequately protect and safeguard their personal data or other information from cyberattack or other security breaches. We rely on the information technology system that we receive frommanage, and those that are managed by third parties with whom we engage, to conduct our suppliers is inaccurate or inadequate orbusiness and operations, and these systems are subject to cybersecurity risks, potential attacks and breaches due to human error. We are additionally increasingly incorporating open source software into our processesproducts and there may be vulnerabilities in obtainingopen source software that information do not fulfillmay make our products susceptible to cyberattacks. Moreover, given the SEC’s requirements,nature of cyberattacks, breaches and infiltration of our internal systems (or the systems of the third parties with whom we engage) could face both reputationalgo unnoticed for extended periods of time and SEC enforcement risks. In addition,materially disrupt our efforts to comply with the disclosure rules and to otherwise implement conflict-free sourcing policiesoperations, which could result in changesa material loss of revenue, substantial downtime and loss of critical information and data. We may incur higher costs in order to remediate or correct the effect of any such incidents. Likewise, because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate these methods or promptly implement preventative measures. Any such access, disclosure or other loss of information could therefore result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our supply chainoperations and the services we provide to customers and damage our reputation, which could adversely affect our business, revenues and competitive position. In addition to taking the necessary precautions ourselves, we require that third-party service providers implement reasonable security measures to protect our customers’ identity and privacy. We do not, however, control these third-party service providers and cannot guarantee that no electronic or physical computer break-ins and security breaches will occur in the future.

Furthermore, a breach of customer, employee, or company data could also significantly damage our reputation and result in lost sales, fines, or lawsuits. Despite our security measures, our information technology and infrastructure and/or our products may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. Any such breach or attack could compromise our networks, or customer networks in whole or in part, and the information stored there could be accessed, publicly disclosed, lost or stolen.

Certain macroeconomic and geopolitical conditions, which are outside of our control, may also make us more susceptible to a cybersecurity attack. For example, growing tensions between Russia and several western nations (and their respective allies) in connection with Russia’s invasion of Ukraine, in February 2022, could result in retaliatory actions being undertaken by supporters of Russia, including in the form of espionage, phishing campaigns and other forms of cyber-attacks. Moreover, pro-Russian ransomware cybercriminals and gangs have recently publicly threatened to augment their hacking efforts in response to the implementation of sanctions and other responsive actions taken by western countries (and their allies). Increasing costs associated with information security, such as increased investment in technology, the cost of compliance and costs resulting from consumer fraud could cause our business and results of operations to suffer materially.

We may desire to expand our business through acquisitions that could result in diversion of resources and extra expenses. This could disrupt existing supply sourcesour business and affect our results of operations.

Part of our strategy is to pursue acquisitions of, or cause more uncertaintyinvestments in, businesses and technologies or to establish joint ventures to expand our business. The negotiation of acquisitions, investments or joint ventures, as well as the integration of acquired or jointly developed businesses or technologies, could divert our management’s time and resources. Acquired businesses, technologies or joint ventures may not be successfully integrated with respectour products and operations. The markets for the products produced by the companies we acquire may take longer than we anticipated to our supply chain.develop and to result in increased sales and profits for us. We may not realize the intended benefits of any acquisition, investment or joint venture and we may incur losses from any acquisition, investment or joint venture.

Acquisitions could result in:

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If acquisitions disrupt our sales or marketing efforts or operations, our business may suffer.

If we do not manage our operations effectively, our results of operations could be adversely affected.

We have expanded our operations in the past and may continue to expand them in the future. This expansion has required, and may continue to require, the application of managerial, operational and financial resources. We cannot be sure that we will continue to expand, or that we will be able to expand our operations successfully. In particular, our business requires us to focus on multiple markets, including the VoIP, wireline, cable, enterprise unified communications and wireless markets. In addition, we work simultaneously with a number of large OEMs and network equipment providers each of which may have different requirements for the products that we sell to them. We may not have sufficient personnel, or may be unable to devote our personnel when needed, to address the requirements of these markets and customers. If we are unable to manage our operations effectively, our revenues may not increase, our cost of operations may rise and our results of operations may be adversely affected.

As we grow, we may need new or enhanced systems, procedures or controls. The transition to such systems, procedures or controls, as well as any delay in transitioning to new or enhanced systems, procedures or controls, may seriously harm our ability to accurately forecast sales demand, manage our product inventory and record and report financial and management information on a timely and accurate basis.

ITEM 4.         INFORMATION ON THE COMPANY

AudioCodes Ltd. was incorporated in 1992 under the laws of the State of Israel. We initially concentrated on low-bit-rate speech compression technology, later moving into voice over packet, or VoP, chips, VoIP communication modules, blades and boards. In 2001, we released an analog media gateway based on blade and chip technologies. This was followed by a family of VoIP media gateways combining analog and digital telephony interfaces. We then began developing high density VoIP media gateways and media servers. As the decade progressed, we expanded our product portfolio with session border controllers (2006), multi-service business routers and gateways (2008) and IP phones (2011).

Over the last decade, AudioCodes has developed a range of software-based voice productivity solutions through our Voice.AI business line. These include the Voca range of conversational artificial intelligence, or AI, related solutions that incorporate voice recognition, AI and machine learning technologies, SmartTAP 360° Live, an intelligent, secure enterprise compliance recording solution, Meeting Insights, an innovative tool for easily capturing and organizing all meeting-generated content and Voice.AI Connect a cloud-based solution that simplifies the integration of any cognitive voice service and bot framework with any voice or telephony channel to deliver an enhanced customer service experience.

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The advent of communications products running as software in virtualized environments or in the cloud required us to adapt our VoIP and digital signal processing, or DSP, technologies – including media processing, call signaling and management suite – to run on COTS servers and become cloud-friendly and elastic, while maintaining the real-time characteristics needed for voice communications. In line with this trend, we adapted many of our products to the virtualized datacenters and cloud, including Mediant session border controllers, or SBCs, and management applications, allowing for rapid deployment and true elasticity in private and public clouds.

In addition to SBCs and Voice.AI solutions, our varied software offerings include the One Voice Operations Center, or OVOC, for network and device configuration, monitoring and management, the Device Manager for administering business phones and meeting room solutions, and the AudioCodes Routing Manager, or ARM, for handling call routing in complex VoIP networks. In addition, the User Management Pack™ 365 simplifies user lifecycle and identity management across Microsoft Teams and Skype for Business deployments.

Today, we supply end-to-end solutions for the enterprise, contact center and service provider markets, with a strong focus on accelerating the voice-enablement of Microsoft Teams. These solutions include AudioCodes Live for Microsoft Teams, a flexible portfolio of fully managed services for simplifying Teams adoption.

Acquisitions have played a key role in our development and growth strategy. For example, in 2004 we entered the field of call recording when we acquired Ai-Logix, a leading provider of advanced voice recording technology and integration cards for the call recording and voice/data logging industries. In 2015, we acquired Active Communications Europe to further strengthen our ability to provide advanced software solutions for the then emerging Microsoft Skype for Business online application, including CloudBond 365 and User Management Pack™ 365. In 2021, we acquired Callverso Ltd. a company with conversational AI solutions. Callverso was subsequently merged into AudioCodes.

Our principal executive offices are located at 1 Hayarden Street, Airport City, Lod, 7019900 Israel. Our registration number with the Israeli Registrar of Companies is 520044132. Our telephone number is +972-3-976-4099. Our U.S. subsidiary, AudioCodes Inc., 80 Kingsbridge Road, Piscataway, New Jersey 08854, serves as our agent in the United StatesStates.

Our website address is AudioCodes Inc., 200 Cottontail Lane, Suite A101E, Somerset, New Jersey 08873.www.audiocodes.com. The information contained on or available through our website is not incorporated by reference into and should not be considered a part of this Annual Report on Form 20-F. The SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.

MAJOR DEVELOPMENTS SINCE JANUARY 1, 20192022

AudioCodes Live Offerings for Microsoft Teams

Virtualized Session Border ControllerDuring 2022, we continued to expand and enhance our AudioCodes Live for Microsoft Teams portfolio of managed services aimed at removing the complexity involved in integrating Microsoft Teams collaboration, unified communications, or UC, and enterprise telephony. We offer AudioCodes Live services on a monthly subscription basis with minimal upfront costs, enabling customers to benefit from Teams collaboration and voice services without having to make significant capital investments.

The AudioCodes Live for Microsoft Teams portfolio includes three offerings for enterprise customers:

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Enterprise customers can complement AudioCodes Live for Microsoft Teams with our monitoring and management tools, and service-enhancing applications. AudioCodes Live for Microsoft Teams is delivered by AudioCodes global professional services teams and is also available through our global network of telecom and Microsoft 365 partners.

There continues to be increased penetration of Cloud Virtualization inFor the service provider market, we offer AudioCodes Live Cloud for Microsoft Teams, a managed service which simplifies the creation and operation of multi-tenant Teams offerings, including enterprise markets. Servicetelephony. With AudioCodes Live Cloud for Microsoft Teams, service providers can reduce time-to-market for offering hosted Teams services to small and enterprises seekmedium sized businesses, or SMBs, without the need for investing in building costly infrastructure or for specialist technical knowledge. AudioCodes Live Cloud for Microsoft Teams is delivered as a white-label service on a monthly subscription basis and is available in two variants:

In 2022 our Live Cloud solution was certified for the for the Microsoft Operator Connect Accelerator, providing a suite of capabilities, including managed SBC as a service, API bridging that uses the Operator Connect APIs, integration into operator OSS and BSS platforms, and more, for connectivity into the Microsoft Teams cloud. These offerings allow eligible operators to harmonizeonboard faster to Operator Connect and provide services to their infrastructurecustomers.

In 2022 we also introduced Live Express - a new SaaS solution that enables partners to onboard and manage their business customers’ Microsoft Teams connectivity to the PSTN. The new solution includes Direct Routing for PSTN connectivity and management automation to simplify daily operations for partners and their customers. Partners can swiftly onboard new customers using the solution’s portal and automation capabilities, thus providing connectivity of the customer’s trunks to Microsoft Teams, control of dial plans and advanced call policies management. The service also provides a customer portal enabling moves, adds, changes, and deletes by the end customer.

Solutions for Work-from-Home Agents and Contact Centers

In 2022, many of our developments for the contact center market were focused on expanding the functionality of our WebRTC solutions to overcome the challenges posed by the COVID-19 pandemic and the rise of the Work-from-Home model.

VoiceAI Business Line

Our Voice.AI business line is focusing on content gathering and providing insights and predictions based on the content by using AI and machine learning.

SmartTAP 360° Live

SmartTAP 360° Live is an intelligent, secure enterprise compliance recording solution for automatically capturing and indexing all types of internal and customer organizational interactions on voice, video and instant messaging (IM).

Following its official certification for Microsoft Teams, we rebranded SmartTAP as a recording as a service solution, available from either the customer’s cloud or the AudioCodes cloud. We continue to work with common offour traditional Microsoft channels to offer SmartTAP 360° Live to enterprise customers worldwide who are migrating to Teams.

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As a result of the shelf servers, insteadshift to Teams and the Work-from-Home model, we see many more customers wanting to record video to meet their compliance requirements and to share the recorded content internally to drive collaboration and productivity improvements.

Voca

Voca is an agile conversational Interactive Voice Response, or IVR, solution for automating main-line call flows, capable of using proprietary hardware. In 2019,understanding and mastering unique organizational vocabularies. Customizing and managing Voca is straightforward due to its real-time, self-service web management interface, with no prior technical knowledge required.

The voice recognition technology behind Voca is based on an engine from Microsoft Azure Cognitive Services. For additional speech capabilities, such as language support, natural language understanding and more, Voca uses the speech cognitive services extension from Microsoft Azure. Major developments in 2022 include adding: (i) call functionality; and (ii) real-time reporting and skill-based routing.

VoiceAI Connect

The AudioCodes continuedVoiceAI Connect Enterprise Edition extends chat and voice bot functionality to investtelephony communications, by connecting the bots to any type of telephony channel and thus allowing customers to talk naturally with bots for a voice-centric user experience. VoiceAI Connect supports multiple bot use cases, including conversational IVR (replacing DTMF-based legacy IVR systems), Virtual agent (offloading live agents), Agent assist (virtual assistant for live agents) and outbound campaign (calls initiated by the bot).

During 2022, we enhanced the integration with leading bot frameworks, including Microsoft PVA, Google Dialogflow and Amazon Lex and exposed APIs for voice streaming and fetching information such as call transcription.

The AudioCodes VoiceAI Connect Cloud Edition is the self-service portal version of VoiceAI Connect Enterprise in cloudwhich the bot developer can immediately connect the bot to a public phone number, supplied by AudioCodes, to be able to call and virtualization technologiesspeak with a bot in just a few clicks.

During 2022, we expanded the capabilities of VoiceAI Connect Cloud to non-bot use cases by adding more capabilitiesBring-Your-Own-SIP (BYOS) enabling connecting SIP Trunks to its software session border controller (SBC) product line. This includes increasing scale in multiple dimensionscontact centers, unified communications or any other SIP based telephony solution. Additionally, we added support for customers to add their speech recognition and high availability schemestext to speech providers.

VICA

VICA is an Intelligent Virtual agent for private and public clouds, as well as integration with public cloud automation tools and listing in market places.

contact centers that enhances customer experience while reducing operating costs.

Meeting Insights

Meeting Insights leverages AudioCodes’ voice expertise and state-of-the-art Voice.AI technology to effortlessly record any meeting, presentation or lecture via Microsoft Teams, regardless of whether the attendees are in the room or participating through a conference call.

Based upon feedback we received during our successful early adoption program that ended in the third quarter of 2020, we recently upgraded Meeting insights is an Enterprise software application which captures informationInsights with powerful new capabilities requested by our users, including:

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Product and Technology Developments

SBC Developments

During 2022, we continued to improve our SBCs’ performance, capacity and resiliency in virtual and cloud environments, and invested in advanced security certifications such as FIPS140-3.

IP Phones and Meeting Room Solutions

During 2022, we continued developing our range of IP phone devices and Room Experience, or RX, meeting room suite offering for Microsoft Teams environments. The advent of COVID-19 and the resulting global switch to working from multiple sources spanning both in-roomhome, or WFH, played a significant role in adapting our strategy to suit the “new normal”, leading to the introduction of high-quality video solutions for Teams meetings.

With increasing demand for video support in Teams meetings, we launched a new video collaboration bar designed for Microsoft Teams, enabling customers to add high-quality video in huddle rooms and small meeting spaces. We introduced a broad set of RX video devices and solutions enabling us to offer video solutions suitable for all room sizes from huddle rooms up to large conference rooms.

As WFH and remote participants connected from multiple locations. Meeting Insights seamlessly delivers multi-modalmeetings became more prevalent, we also introduced a range of attractively priced personal audio and real-time accessvideo solution bundles comprising a high-quality personal camera and one of our native Teams phones. Our native Teams phones include a low-cost device, a touch-screen phone with a reduced footprint and an executive model complete with expansion module.

ManagementSolutions

During 2022, we focused on developing functionalities for AudioCodes Live and Live Cloud. In particular, we developed onboarding, reporting and tools for our professional services to key meeting moments, decisions takenbe able to provide managed services.

We also began developing a microservices holistic architecture to be used by OVOCaaS and resulting action items. The result isour managed service platforms (live and Live Cloud).

Moreover, we developed a robust solution that holds crucial company information that would otherwise be lost.

Room Experience (RX) suite

AudioCodes Room Experience suite (RX) delivers a solution for a variety of sizes of meeting rooms. RX suite isgeneric analytics platform based on three pillars:  devices, meeting recordingAzure synapse capabilities. The new generic analytics platform can provide insights and management tools. Devices:  AudioCodes currently sells RX10, RX20predications based on MS teams call information integrated w/ SBC and RX50 audio conferencing devices. Major effort was givenMGW quality of services information. Moreover, the system analyzes the alarms to be used for fault predictions.  

To combat the releasegrowing issue of RX50 asspamming and robocalls, which constitutes a high-end conference phone device. In late 2019, we started to work on new device, which we plan to release during 2020, that includes video for Microsoft Teams.

Meeting recording and analytics:  AudioCodes Meeting Insights is a meeting recording and analytics solution.

Management tools:  AudioCodes device manager,growing problem in public networks, ARM now offers security-based routing as part of One Voice Operations Center, is able to monitor and control the RX devices.

Part of the Room Experience Suite is based on a technology and product partnershipintegration with Dolby and Jabra. Each of these companies manufactures devices and technology which we use as part of our RX suite. We complement their products and technology with our software and comprehensive solution suite, including third party interoperability, integration and management capabilities.

Voice.AI Gateway

Advances in artificial intelligence, machine learning and natural language processing have led to the creation of naturally conversing chatbots. Customer service chatbots help to increase customer satisfaction by eliminating waiting time. At the same time, they can save up to 30% in customer support services expenditure by automating simple and repetitive tasks.

SecureLogix’s Orchestra One™ CAS (Call Authentication Service). In 2019, we announced the AudioCodes’ Voice.AI Gateway – a new solution that is built around our session border controller technology and product. The AudioCodes’ Voice.AI Gateway enables connecting telephony voice to text-based chatbots, leveraging bot frameworks and cloud speech recognition and text-to-speech services. This Gateway extends the reach of chatbot using voice calls via PSTN, enterprise unified communications or WebRTC.

IP Phones

During 2019, we continued to evolve our IP Phones offering for Microsoft Skype for Business and Teams, contacts centers and hosted business services by developing additional capabilities and offering tighter manageability and control of the phones from the One Voice Operations Center.

In 2019, we introduced a completely new model for Teams – C448, in addition to the C450 model that was addedalready-supported basic authentication with Orchestra One server, ARM now has an advanced mode which verifies calls with Verizon Call Verification Service. This service is available for markets in 2018. The C448 brings a lower cost option for customers.the United States. In addition, ARM supports Emergency Call Users in Microsoft Teams. During 2022, we added many features on the C450 for Teams such as hot-desking, emergency calling, Wifi supportestablished a joint cloud service with SecureLogix to provide voice firewall, robocall prevention and more.branded call verification services.

In 2019, we also certified our complete 400HD series for the generic SIP market, which enables customers that do not use Microsoft Skype forMulti-Service Business or Teams to use our phones with different IP PBX options. The customers can migrate to Microsoft Teams in the future, while leveraging the same IP phones devices by changing the version to be a Microsoft certified version.

In late 2019, we started to develop two new models for TeamsRouters and the Android market, which we plan to release in summer of 2020.

The AudioCodes 400HD series of IP phones is a range of easy-to-use, feature-rich products for the service provider hosted services, enterprise unified communications and contact center markets. Based on the same advanced, field-proven underlying technology as our other VoIP products, AudioCodes high quality IP phones enable systems integrators and end-customers to build end-to-end VoIP solutions.

Multi-Service-Business-Routers

Universal CPE

During 2019, we continued to evolve our MSBR product line with more hardware configurations as required by service provider customers and enhanced management and operation capabilities, such as WEB GUI, used to enable end user restricted configuration without involving the service provider. In addition,2022, we developed a new advanced all-in-one business router, suitable for speedsproduct to support 5G access to our MSBR platforms. This product enables us to promote our routers and gateways to new installations, where physical access (such as xDSL or fiber) are not possible or very costly.

In parallel, we saw our universal CPE (uCPE) gain further market traction, due in part to our ability to provide a unique combination of upvoice application and various access methods. In particular, we experienced a notable enterprise win, utilizing our global presence and support to 1Gbps, and including fiber, ethernet, DSL and 4G/LTE connectivity in addition to VoIP functionality. This new router also supports super vectoring (profile 35b) VDSL connectivity, which is widely used in Europe.provide a complete, global solution.

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Cloud and Managed Services Infrastructure

We haveIn 2022, we continued to enhance our cloud and managed services delivery platform in North America, Europe and Asia Pacific. The platform support multi UCaaS solution including Microsoft Teams (Direct Route and Operator connect), Zoom Phone, WebEx calling and more and is certified for Microsoft operator Connect Accelerate.

The platform comprises AudioCodes products such as our virtualized SBC, AudioCodes Routing Manager, network management and monitoring, and Teams user management. It also enhanced our uCPE productincludes self-developed and third-party solutions that together enable network connectivity, service automation, service monitoring, CPE management, high availability and much more for seamless service delivery.

The platform allows Operators and other hosting partners to onboard customers with 4G/LTE connectivity, in order to makeminimal investment and time. On top it ready for SD-WAN application running on its internal server.

VoIP Management and Routing

Our One Voice Operations Center (OVOC) offers management applications for large-scale cloud or premise-based unified communications deployments. It monitors, manages and operates AudioCodes’ session border controllers (SBC), media gateways, Microsoft survivable branch appliances (SBA), multi-service business routers (MSBR) and IP phones.

During 2019, we invested in the following OVOC enhancements:

Enabling customers to purchase and use our OVOC platforms from cloudadd-on services such as Azure (Microsoft)Meeting Room monitor, user device management and AWS (Amazon). This will increase our product’s exposure to new small enterprisesmonitor, Compliance recording, Interaction Center, and SMBs.more.

Enhanced quality monitoring for remote IP Phones (IPPs) for working from home call center agents. This will allow our customers to troubleshoot quality problems remotely, reducing the costs when dealing with remote located IPPs issues.

AudioCodes Routing Manager (ARM) enables system administrators of large and multi-site enterprise VoIP networks to manage their call routing and policy enforcement configuration in a unified logical view. ARM is a centralized solution aimed at simplifying the task of managing increasingly complex VoIP networks, thereby saving time and reducing operational costs. ARM enables routing policies to be enforced based on a multi-variate decision mechanism and supports centralized dial plans and call routing within multi-vendor environments. ARM enables operational efficiency delivered with intuitive GUI for network views, and single-click network topology creation. ARM is a highly scalable solution providing control over many network elements.

In 2019, we enriched the routing capabilities of our ARM through various network conditions and user policies such as quality based routing, location based routing and call prioritization for emergency calls, time based routing and enhanced load balancing. We also added offline VoIP network planner module and simpler user operation by means of single sign on to the managed devices.

User Management Pack 365 (UMP 365)

AudioCodes User Management Pack 365 (UMP 365) is a software management application that allows IT managers and service providers to easily operate Skype for Business and Microsoft Teams deployments. UMP 365 does not require knowledge and expertise in Microsoft’s PowerShell tools, and instead, allows helpdesk level engineers to operate the daily tasks using an intuitive graphical user interface. Multi-tenant capabilities of UMP365 have been added to allow for hosters to concurrently manage multiple customers with the same application.

In view of increased deployment of Microsoft Teams, demand for CloudBond 365 and CCE appliances, which were developed in previous years, is declining and the importance of UMP 365 is growing.

Speech recognition and natural language understanding (NLU) technologies

In 2019, we continued to enrich our speech recognition platform with better support in more languages – German, English US and Spanish. Additional new feature of the platform is Advanced Call Routing and Hunting. Call Hunting is performed if the callee is not available (busy or not answering), followed by an action if the callee is not reachable (e.g., callee is not answering the call). For easier deployment and upgrades – A software installer is now available. HTTPS for On-premises Web interface is now supported. Infrastructure for quick integration with SMS gateways is now available. For On-premises deployments, we now support full high-availability capabilities based on the Active-Active approach. System alarms were added and can be sent to configurable email addresses. Providers can now limit the number of concurrent channels for a Service.

SmartTAP – Call recorder

During 2019, we added to SmartTAP the capabilities to support recording of Skype-For-Business Video and Video conference calls. We enhanced call recording filtering and allow flexible selective recording.

We integrated SmartTAP into AudioCodes’ OVOC so it can benefit OVOC features. We enhanced SmartTAP Announcement Server to allow configuration of announcement per each call type and generate “Beep Tone” during recorded calls. We added to SmartTAP the capability to record malicious calls. We enhanced SmartTAP robustness by enhanced system monitoring and generating test calls for total system coverage.

AudioCodes Live Services

During 2019, we rebranded our managed services (part of our professional services) as AudioCodes Live Services, or AudioCodes Live. AudioCodes Live offers OPEX-based and subscription-based packages of product, setup and proactive, managed services in the production environment. The AudioCodes Live portfolio offers various value propositions, on a managed services basis, including on-premises SBC or Gateway for VoIP connectivity with optional Microsoft Skype for Business or O365 (e.g., Teams) voice support and cloud-based SBC for VoIP connectivity with optional O365 voice support. AudioCodes Live offers the full spectrum of “Day 2” support, including proactive monitoring, incident triage, notification, hardware replacement, backup and restore, software upgrades, Key Performance Indicators (KPIs) and voice quality reporting, and dedicated client service management. In addition, we introduced the AudioCodes Voice.AI Gateway, which allows the integration of bots and cognitive voice services with private and public voice communication networks.

PRINCIPAL CAPITAL EXPENDITURES

We have made and expect to continue to make capital expenditures in connection with expansion of our operation and production capacity. The table below sets forth our principal capital expenditures incurred for the periods indicated (amounts in thousands):

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Introduction

AudioCodes designs, develops and sells advanced Voice over-IP (VoIP) and converged VoIP and data networking solutions, products and applications that facilitate secured, resilient and high quality Unified Communications (UC) and Contact Center (CC) services whether deployed on-premises or delivered from the cloud. Providing IP Phones, Customer Premise Equipment (CPE), and cloud-based platforms and applications, our solutions and products are geared to meet the growing needs of enterprises and service providers realigning their operations towards the transition to All-IP networks and hosted business services. In addition, AudioCodes offers a complete suite of professional and managed services that allow our partners and customers to choose a service packages (or complement their own offering) from a modular portfolio of Professional Services. The result is a complete network lifecycle model based on the three basic phases of PLAN, IMPLEMENT and OPERATE. Our Professional Services portfolio enables seamless integration, high availability, and non-stop scalability to meet business and network demands.

AudioCodes is a VoIP technology market leader focused on converged VoIP and data communications that offer technology, products and solutions for Enterprise Unified Communications, contact centers, service provider business services, mobile VoIP and Cloud virtualized Data Centers. Our products are deployed globally in enterprise, service provider cloud networks. AudioCodes’ products include IP phones, session border controllers (SBC), media gateways, Multi-Service Business Routers (MSBRs), residential gateways, media servers, mobile communications solutions, value added applications, life cycle management solutions and professional services. AudioCodes high definition (HD) VoIP technologies and products provide enhanced intelligibility and a better end user experience in emerging voice communications services.

AudioCodes’ vision is to be the innovative leading supplier of converged VoIP and data solutions and services for enterprises, Value Added Resellers (VAR), System Integrators (SI), service providers and Cloud communication providers worldwide. AudioCodes VoIP technology contains voice quality enhancements and best-of-breed VoIP network elements and applications, and has a proven track record in product and network interoperability with the industry’s leading companies.

With 25 years in the telecommunications market, AudioCodes’ offers a broad range of solutions and services for both enterprise and service provider deployments. These solutions are built around our field-proven VoIP product range. With full support for industry standard protocols such as SIP, and proven interoperability with all industry leading soft switches, PBXs, IP-PBXs, unified communications and contact center platforms, AudioCodes delivers innovative solutions for virtually any voice communications environment, offering reduced Total Cost of Ownership (TCO), enhanced features, and superior voice quality.

Historical Overview

AudioCodes was established in 1993 to develop its low-bit-rate speech compression technology. Our first achievement was developing the speech compression algorithm that was selected by the International Telecommunication Union (ITU) as a basis for the ITU-T G.723.1 standard.

Over the years, we continued to expand our focus. Our development and expansion focused on different technologies and solutions as VoIP progressed:

Through acquisitions and partnerships, we were able to grow our business and expand our focus, while taking advantage of our core competence –voice processing and knowhow – which gave us the ability to mix and match technologies and become a solutions provider.

We expanded to compact PCI boards, achieving a transition to a higher capacity that helped develop the gateway market. In 2001, AudioCodes released its first media gateway independent platform, based on our blade and chip technology. The first product was an analog media gateway that was followed by a family of media gateways combining analog and digital interfaces. We then began to develop and sell high density media gateways and media servers.

We entered the field of call recording in 2004 when we acquired Ai-Logix. Ai-Logix was a leading provider of advanced voice recording technology and integration cards for the call recording and voice/data logging industries. AudioCodes used VoIP communications boards as we leveraged Ai-Logix’s technology, strategic partnerships and customer base. We currently sell our call recording solutions mainly in connection with Microsoft solutions.

In 2006, we teamed with BroadSoft(acquired by Cisco) to help service providers deliver hosted VoIP service. By 2009, we had launched a strategic initiative with BroadSoft to simplify deployments of IP voice networks and, in 2014, BroadSoft and AudioCodes announced that they were collaborating on “One Voice for Hosted Services”. The One Voice initiative included BroadSoft’s unified communication services and AudioCodes’ IP phones, routers, SBCs and gateways serving as a one stop shop for service providers that are offering enterprises next generation VoIP services.

AudioCodes continued to expand its product portfolio with session border controllers, multi-service business gateways/routers and IP Phones to be able to offer a wider range of products for leading UC and CC software vendors.

In January 2013, AudioCodes launched “AudioCodes One Voice for Microsoft Lync”, a unified product and service program intended to simplify and accelerate voice-enablement of Microsoft Skype Lync (now Skype for Business and Teams) implementations with a complete portfolio of IP phones, media gateways, enterprise session border controllers (E-SBCs), survivable branch appliances (SBAs), session experience manager (SEM) network management tools, support and professional services. The program supports migration to Microsoft Skype for Business/Teams and co-existence with current telephony systems in multi-site and multi-national deployment.

On December 31, 2015, AudioCodes acquired Active Communications Europe to further strengthen our ability to provide advanced software solutions for the emerging Microsoft Skype for Business online application. In 2016, AudioCodes leveraged the Active Communications Europe acquisition and promoted several products around Microsoft Skype for Business, including CloudBond 365 and User Management Pack 365 (UMP 365).

In 2018, AudioCodes continued to work on new product offerings of software only virtual session border controller and its Voice.AI initiative, a suite of products combining voice recognition and intelligent analysis of speech for various practical applications.

In 2019, AudioCodes introduced two new solutions as part of the Voice.AI portfolio. AudioCodes Meeting Insights was introduced in September 2019 and is an enterprise solution designed specifically for the meeting-technology world. Meeting Insights captures information from multiple sources, both in-room and remote participants, as well as visual content presented. With next-generation Voice.AI features such as Speech-to-Text (STT) and Keyword Spotting (KWS) Meeting Insights is an intelligent, centralized company meeting platform. The Voice.AI Gateway, introduced earlier in 2019, is a flexible and scalable solution for integrating text-based chatbots with private and public voice communications networks and solutions, utilizing advanced cognitive voice services such as STT and Text to Speech (TTS). The Voice.AI Gateway expounds the reach of chatbots to cases where voice is the preferred or mandatory user interface.

AudioCodes began working in the call center telecommunications sector in 2003 with VoiceGenie, which was acquired by Alcatel-Lucent-owned Genesys in 2006. In 2011, we were designated a vendor in the Genesys SIP Select program specifically for our Mediant 1000 and Mediant 2000 gateway products, that provide the interface between the PSTN and Genesys SIP Server. In 2016, AudioCodes and Genesys expanded their program pursuant to which Genesys and its partners offer a complete integrated end-to-end solution that includes the Genesys Customer Experience Platform along with AudioCodes’ IP phones, session border controllers, media gateways and centralized management and monitoring applications to allow customers to benefit from a quick and easy migration to an all-IP contact center.

AudioCodes now has tens of millions of SBC, media gateway and media server sessions deployed in over 100 countries across the globe. Our high availability platforms (Mediant media gateways, Mediant session border controllers and IPmedia media servers) cover the spectrum of low, mid and high-density applications for service providers and large enterprises.

INDUSTRY BACKGROUND AND MARKET TRENDS

Impact of COVID-19 on Our Markets

The networkingCOVID-19 pandemic has impacted, and telecommunications industriescould continue to experience rapid change. Below are someimpact, the markets that we serve, and the products and services we offer. In particular, the COVID-19 pandemic resulted in an unprecedented shift to Work-from-Home for many enterprises and contact centers, and a need to enable remote teams and agents to communicate and collaborate, regardless of their location. Moreover, there has also been a significant increase in the consumption of online services resulting from lockdowns in many countries, thus increasing the load on support centers.

The initial IT priority was focused on supporting remote work and expanding network capacities. After systems had been improved to meet the immediate needs of the major market trends affectingcrisis, enterprises aimed to create a more efficient and effective Work-from-Home environment by modernizing the industry,way employees communicate and collaborate internally and with third parties, including customers.

The COVID-19 pandemic has driven, and could continue to drive, customers to reevaluate the tools that they use to provide calling, video-enabled meetings and team messaging. Organizations are now more widely seeking solutions that provide an integrated user experience, allowing easy integration with business applications and workflow processes. In particular, we have noted (and anticipate continued) customer interest in applications that integrate with existing on-premises platforms, as well as new cloud-based capabilities, including video conferencing and integrated messaging.

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Enterprise Unified Communications

In 2021 and 2022, the demand for UC continued to accelerate as the pandemic drove businesses towards cloud UC services, while on-premises UC adoption, as well as the PBX market, slowed down. UC functions are easily deployed through cloud services, along with access to continual updates and improvements and with native support for work-from-anywhere.

The shift to cloud-based UC or UCaaS has been driven by companies like Microsoft and Zoom.

Contact Centers and Customer Service

The contact center is rapidly evolving focusinto the interaction hub of the AudioCodes solutionsdigital enterprise, covering sales, support, education and products.more. It encompasses all aspects of the customer experience, while gathering data on customer satisfaction and needs. Although the migration of contact center technologies to the cloud will deliver far more flexibility and enable support for service delivery anywhere, and on any available media, many enterprises are retaining their existing (usually on-premises) systems to avoid the high costs involved in such a change. In such cases, companies are looking to introduce innovation to their existing contact center platform.

Unified Communications

WithIn 2022, driven by the move to VoIP and the network integration between voice and data based on Ethernet and IP, enterprises can adopt a unified communications and collaboration solution. Unified communications solutions integrate all means of communications into a single platform, providing on line (e.g., voice, data presence, instant messaging, white boarding and desktop sharing) and off line (voice mail, email and fax) integration into a single communication system shared across a variety of end user devices. Unified communications can be accessed through devices such as PCs, tablets, desktop and meeting room phones or mobile smartphones. Unified communications can be either on-premises or cloud based. Alternatively, enterprises can adopt a hybrid approach where they keep the real time media path portion of their unified communications on-premises and the applications hosted in the cloud.

Unified Communications as a Service (UCaaS)

Unified communications as a service (UCaaS) is a delivery model in which a variety of communication and collaboration applications and services are hosted by a third-party provider in public or private cloud data center and delivered over the wide area network (WAN). In this category, the growth of hosted business services is widely affecting the communications world. Enterprises are adopting hosted and cloud services. Hosted unified communications andCOVID-19 pandemic, contact centers that are drivencontinued to adapt to allowing their agents to work from home. In parallel, the on-going growth in online consumer services drove expansion in many contact centers as they adapted to the dramatic changes wrought by Microsoft, BroadSoft (acquiredthe pandemic. This required high numbers of agents working remotely, while customers were offered omnichannel engagement, enabling customers to get in touch not just by Cisco), Genesys, Five Nines, Zoom, Ring Central, 8x8phone but also via the web or dedicated mobile applications.

Another key driver in 2022 was contact center automation. We saw increased interest in virtual agents, conversational IVR and others are gaining traction within the enterprise community and are growing fast as an alternative to on-premises solutions. Microsoft’s Skype for Business and Teams unified communications offering is a market leadervirtual agent assistants in this area.market as enterprises sought cost optimization through increasing live agent productivity and automation of the customer engagement while retaining and improving the customer experience.

Service Provider All-IP Transformation

SIP Trunking

SIP trunking is a VoIPIn 2021 and for portions of 2022, we observed several telecom operators slowing down deployments due to the COVID-19 pandemic. However, during the second half of 2022, several of our service based on SIP by whichprovider customers began to resume deployment and pressed ahead and completed their business customer migrations. In countries where the migration was completed, smaller tier 2 and tier 3 service providers deliver IP telephone connectivity servicesexpedited their ISDN contract cancellation following the incumbent’s switch to customers equipped with SIP-based private branch exchange (IP-PBX) and unified communications facilities. More and more service providers are adopting SIP trunking asall-IP. In the technology of choice for connecting on-premise IP based business voice systems. SIP trunking technology is not new. For several years, Over the Top (OTT) service providers, sometimes called alternative service providers or Internet Telephony Service Providers (ITSP), have offered competitive voice services based on SIP trunking technology while the traditional telco companies continue to offer legacy PSTN services. Market data showsUK, we saw a clearpickup in migration of telcospace, moving towards SIP trunking services as well.

All IP Transformation

Many telcos are moving towards a complete replacement of their legacy TDM networks with all-IP networks.PSTN shutdown in 2025. Among the factors that drive telcostelecom operators to replace legacy networks are end of life of the traditional TDM switches reaching end of life, the need to free up the real estate that is occupied by these switches, and energy savings together withand the need to competeimportance of competing with the growing numbers of alternative service providers. Two typical

Service providers typically apply two strategies employed for the business sector by service providers in the move towards app-IP networks are placing CPEs (VoIP Media Gateways, Session Border Controllersall-IP networks. The first is deploying customer premises equipment (CPE) – such as VoIP media gateways, session border controllers or Multi-Service-Business-Routers)multi-service business routers – to connect the customers’ legacy or IP equipment or systems to their IP network, or alternatively aggregatenetworks. The second is aggregating a large number of TDM links, (PRI primarily)primarily ISDN PRI, at centralized Pointpoints of Presencespresence utilizing large capacityhigh-capacity VoIP Media Gateways.media gateways.

Virtualization, Cloud and Network Function Virtualization (NFV)

NFV is a transition of network infrastructure servicesWe also observed an increase in the need for speed to run on virtualized computing infrastructure using cloud technology, management, automation and orchestration solutionsCPEs, driving the need to provide network functionality with dynamic scaling of loadsupport Fiber connectivity (up to 1GB), as well as self-healing4G LTE (up to 300MB) and upcoming 5G. The Work From Home activity drives integration of virtual network functions (VNFs). The significance of software only virtualized products for the telecommunications market is increasing as operators and enterprises are seeking to move away from dedicated hardware platforms to common generic computing platforms that are enabling data centers. NFV aims to leverage standard IT virtualization technology to consolidate potentially all network functions (including SBCs) onto industry standard high volume servers, switches and storage, which could be locatedsuch interfaces in datacenters, network nodes and on end user premises (vCPE – virtual customer premise equipment and vE-CPE, also known as uCPE – virtual enterprise customer premise equipment). NFV infrastructure, management and orchestration promises to introduce agility and enable quick introduction of new services to service providers’ networks, similar to those characterizing internet and cloud services. There are a number of challenges that NFV needs to address, including real time performance, scale, resilience, management and automation. These and other technical challenges are being addressed in a network operator-led industry specification group under the auspices of ETSI, an industry standards setting body, as well as by leading public cloud vendors such as Amazon, Microsoft and Google.our lower-end CPEs.

WebRTC

WebRTC is a free, open project that provides web browsers and mobile applications with real-time communications (RTC) capabilities via simple application programing interface, or APIs. The WebRTC components have been optimized to best serve this purpose. WebRTC enables rich, high quality RTC applications to be developed for the standard web browser, mobile platforms, and content delivery systems, and allows them all to communicate via a common set of protocols. The WebRTC initiative is a project supported by Google, Microsoft, Mozilla and Opera, among others. WebRTC support is available by default mainstream web browsers like Chrome, Edge, Opera and Firefox, and also as a library for developing mobile applications. WebRTC is making a major impact in real time communications as it is natively supported by web browsers and therefore does not require a user to download a specific application. Similar to other open source projects, WebRTC makes a complex technology (such as voice compression and packetization, mitigation of network impairments, security and encryption of real time sessions and peer to peer connectivity of devices regardless of their location) accessible to the big and growing community of web developers, allowing them to quickly and easily develop real time communications services without requiring specific knowhow in voice and video communications. To enable connecting SIP based communication services (e.g., enterprise unified communications or contact centers) with WebRTC, a WebRTC gateway is required to mediate between the incompatible media and signaling of the different systems, as well as enable centralized functions such as compliance recording. WebRTC gateway functionality may be standalone or incorporated into an SBC, in which case it benefits from SBC capabilities such as VoIP security and interoperability. Additionally, a WebRTC Software Development Kit (SDK) is often required to complement the WebRTC GW, making it simple for web developers to quickly develop WebRTC clients for web and smartphones.

Software-Defined Networking (SDN) and Software-Defined Wide Area Network (SD-WAN)

SDN is an emerging technology and architecture for designing, building and operating networks that brings a degree of agility and flexibility to networking, similar to what abstraction, virtualization and orchestration have brought to server and storage infrastructures. SDN architecture decouples the network control and forwarding functions enabling the network control to become directly programmable and the underlying infrastructure to be abstracted for applications and network services. Similar to NFV, SDN technology is expected to reduce OPEX and CAPEX associated with building and maintaining networks and also enable innovation.

SD-WAN is a specific application of SDN technology applied to WAN connections, which are used to connect enterprise networks – including branch offices and data centers – over large geographic distances. A WAN might be used, for example, to connect branch offices to a central corporate network, or to connect data centers separated by distance. In the past, these WAN connections often used technologies (such as MPLS) that required special proprietary hardware and were sold at premium prices by service providers that offered a high degree of security, resiliency and quality of service. The SD-WAN technology seeks to modernize the network edge technology using a software approach and leverage on the wide availability of low cost broadband and internet services to offer cost effective alternatives to legacy WAN services.

VoiceAI

The momentum of the market around cognitive services, and speech applications in particular, is increasing. About 60 of our employees are working in this area. The technology giants are offering an array of technologies as a service, and service providers and Enterprise customers keep looking for innovative technologies, products and solutions, cloud-based and on premises, in order to automate customer care services, to shorten the call handling time and to make their customer care processes more efficient.

BUSINESS STRATEGY

AudioCodes’ business strategy is focused on increasing its position as a leading communications software vendor of advanced UC-SIP enterpriseUC and contact center voice solutions, voice networking, all-IP voice network migration and media processingVoice AI solutions for the digital workplace. The following are key elements of our strategy:

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Maintain and extend technological leadership. We intend to continue to capitalize on our expertise in voice compression technology and voice signaling protocols and proficiency in designing voice communications systems. We continually upgrade our product lines with additional functionalities, interfaces, densities and compatibility with the leading UC, CC and SIP solutions in the market. We are also migratingadapting our product functionality to be software-based and run natively in cloud environments, to comply with the industry trend of migrating to private and public clouds. We have invested heavily and are committed to continued investment in developing technologies that are key to providing high performance voice, data and fax transmission over packetIP networks and to be at the forefront of technological evolution in our industry.

Strengthen and expand strategic relationships with key partners and customers. We sell our products and solutions to service providers and enterprises worldwide, leading enterprise channels, regional and global system integrators, global equipment manufacturers and value-added resellers (VAR),VARs, in the telecommunications and networking industries and establish and maintain long-term working relationships with them. We work closely with our customers to engineer products, solutions and services that meet their particularspecific needs. The ongoing development and integration cycles frequently result in close working relationships with our customers and partners. By focusing on leading solution vendors, system integrators and channels with large volume potential, we believe that we reach a substantial segment of our potential customer base while controlling the cost and complexity of our marketing efforts. Our partners and customers are located around the world, and we are better able to serve them by being close by. For this reason, we are investing in building local operations in key countries and regions, including sales, marketing and support resources to closely serve our partners and customers.

Develop a network of strategic solution partners. We sell our products through, or in cooperation with, partners that can offer or certify our products as part of a complete solution to their customers. We expect to further develop our strategic partner relationships with solution providers in order to increase our customer base. Our strategic partners include companies such as Microsoft, Zoom and Genesys (including Interactive Intelligence).

Engage enterprise customers in direct sales effort. We are pursuing a strategy of engaging large enterprise customers on a global level, as part of the AudioCodes product fit within leading enterprise solutions, mainly with Microsoft and Genesys. Our ability to engage these enterprises directly enhances our ability to influence solution design and procurement decisions. This, in turn, is designed to increase demand, which we expect our business partners to fulfill based on their relationship with AudioCodes.

Expand and enhance the development of highly-integratedhighly integrated products. We plan to continue designing, developing and introducing new product lines, product features and services that address the increasingly sophisticated needs of our customers. We believe that our knowledge of core technologies and system design expertise enable us to offer better solutions that are more complete and contain more features than those available in competitive alternatives. For example, our Live Teams business increased from approximately $7 Million in 2020, to approximately $15 million in 2021, and exceeded approximately $39 million as of December 31, 2022. We believe that the best opportunities for our growth and profitability will come from offering a broad range of highly-integratedhighly integrated network product lines, product features, professional services, integration of data routing and switching services into our VoIP products, and the expansion into the service providers and carriers IP networks, unified communications and contact center markets.

Expand and enhance our solution offering. While the market is constantly looking for advanced, open communications and collaboration solutions, integration of multi-vendor products into a working solution is a complex task that enterprises, system integrators, service and cloud providers are challenged with. ThroughoutOver the years, we have developed a broad portfolio of products and invested in lifecycle management platformplatforms (day 1 and day 2 operations) for our products that form a comprehensive solution, considerably simplifying the integration efforts required for setting up a working Unified Communications, Contact Centerunified communications, contact center or hosted business solutions. Customers and partners realize and appreciate the advantage inadvantages our solutions offer, and we plan to keep expanding them with more products, management applications and enterprise productivity solutions.

Build upon existing technologies to penetrate new markets. The technology we developed originally for the OEM market has served us in building products that now sell into the service provider, enterprise, and enterprise markets. The same products and technologyOEM markets can also be used to create application-specific products and solutions, which helps us penetrate and serve various types of customers. Key segments that we focus on are unified communications, contact centers, SIP trunking and hosted services markets that have been adopting VoIP solutions.

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Work closeDevelop and expand professional services and managed services offering. We are planning to marketexpand our product-led services offering in line with our new products and solutions. AudioCodes has a rich portfolio of managed services. We offer our customers. Our partners expert professional services to assist them with design, implementation, support and customers are distributed around the world, and partmanagement of our ability to serve them is by being close by. For this reason, we are investing in building local operations in key countriesproducts. System integrators, VARs and regions, including sales, marketing and support resources to closely serve our partners and customers.

Develop a network of strategic partners. We sell our products through, or in cooperation with, customers that can offer or certify our products as part of a full-service solution to their customers. We expect to further develop our strategic partner relationships with solution providers, system integrators and other service providers are able to leverage AudioCodes professional and managed services to complement their own, and are able to offer them under their own brand to the end customers.

Expand our investments in orderthe Voice.AI space. We will seek to increaseleverage our customer base. Our strategic partners include companiesrelationship with our voice connectivity customers to upsell Voice.AI solutions, such as Microsoft, BroadSoft (now part of Cisco), Genesys (including Interactive Intelligence).

Voca and SmartTAP.

Acquire complementary businesses and technologies. We may pursue the acquisition of complementary businesses and technologies or the establishment of joint ventures to broaden our product offerings, enhance the features and functionality of our systems, increase our penetration in targeted markets and expand our marketing and distribution capabilities.

Engage enterprise customers in direct sales effort. We are pursuing a strategy of engaging large enterprise customers on a global level, as part of the AudioCodes product fit within leading enterprise solutions, mainly with Microsoft and Genesys. Our ability to engage these enterprises directly enhances our ability to influence solution design and procurement decisions. This, in turn, is designed to increase demand, which is expected to allow our business partners to fulfill this demand based on their relationship with AudioCodes.

Develop and expand professional services offering. AudioCodes has a rich portfolio of product-led services. We offer to our customers expert professional services to assist them with design, implementation, support and management of our products. We are planning to expand our services offering in line with the new products and solutions. Systems Integrators, Value- Add Resellers (VAR) and Service Providers (SP) are able to leverage AudioCodes professional and managed services to complement their own, and are able to offer them under their own brand to the end customers.

AUDIOCODES SOLUTIONS, PRODUCTS AND SERVICES

Solutions

OverviewEnterprise Business

Unified Communications

Our products are intended for voice networking and media processingenterprise business is driven primarily by our solutions for UC environments. Beginning in 2020, we noted a clear shift towards UCaaS solutions as enterprises continue to migrate their IT infrastructure, in general, and UC solutions, in particular, to the digital workplacecloud. We expect that trend to continue in 2023 and they also facilitate the transmission of voice, databeyond, and fax over packet networks. We areconsequently we plan to focus on providing solutions that ensure a leading vendor of advanced voice networkingsmooth migration to cloud-based UC and media processing solutions for the digital workplace. We have incorporated our algorithms, technologiesoffer operational simplicity, high quality and systems design expertise in both our networking and technology product lines.

reliability.

Our productsefforts in the UCaaS arena are focused on a number of key partnerships, predominantly with Microsoft, who reported substantial growth in the active users of their Teams UC and services revenues are derivedcollaboration solution from networking2020 through 2022. We expect our certified support for Teams Direct Routing, our growing offering of audio and technology products. Networking products consist of connectivity platforms (Gateways, SBCvideo devices and MSBR), IP Phones, meeting room phones and management server suite. We further split the networking products to Gateways, UC-SIP and Applications. The Gateways are comprised of the TDM Voice over IP Media Gateways (analog and digital). UC-SIP consists of SBC, MSBR, IP Phones, Microsoft specific appliances (CloudBond 365 and Mediant CCE appliance) as well as call routing, element and voice quality management suite, all together management server suite. Applications include mobile VoIP solutions, and other value added application products. Sales of networking products accountedour additional communications software solutions (call recording, Voca Conversational Interaction Center and Meeting Insights productivity solution) to continue to be focus areas for approximately 60% of our revenues in 2017, 61% of our revenues in 2018 and 64% of our revenues in 2019. Network services accounted for approximately 31% of our revenues in 2017 and 32% of our revenues in each of 2018 and 2019.

Technology products are enabling in nature and consist of our chips and boards business products. These are sold primarily to original equipment manufacturers, or OEMs, through distribution channels. Our chips and boards serveus as building blocks that our customers incorporate in their products. In contrast, our networking products are used by our customers as part of a broader technological solution and are a box level product that interacts directly with other third party products. Sales of technology products accounted for approximately 8% of our revenues in 2017, 7% of our revenues in 2018 and 4% of our revenues in 2019. Technology services accounted for less than 1% of our revenues in each of 2017, 2018 and 2019.

To support today’s complex multi-service networks, AudioCodes has developed a comprehensive professional services program intended to provide responsive, preventive, and consultative support of AudioCodes networking products. AudioCodes professional services support networking devices, applications and infrastructures, allowing large organizations and service providers to realize the potential of a high-performance multi-service network. The foundation for AudioCodes professional services is a network life-cycle model based on the four basic phases of planning, design, implementation and operations. The result is a specially designed portfolio of complementary and synergistic service components.

AudioCodes Solutions

Solutions for Microsoft Skype for Business/Teams

AudioCodes One Voice forenterprises migrate from Skype for Business and other UC solutions, and adopt Microsoft Teams.

We believe that our AudioCodes Live for Microsoft Teams includes AudioCodes’ Microsoft-qualified end-to-endmanaged services offering will continue to gain traction as enterprises look to streamline their UC operations. Consumed on a monthly subscription basis, AudioCodes Live for Microsoft Teams enables enterprises to benefit from Teams voice elements, wide-rangingcalling services without having to make capital investments in hardware and extensive expertisesoftware and without the need for specialized, in-house technical expertise.

In addition to Microsoft, we also built up our collaborations with  Zoom Phone and Cisco Webex.

Contact Centers

As contact center vendors turn their focus to cloud services, our approach is to engage with enterprises who prefer to undertake a smoother and controlled journey to the cloud at their own pace. We work with system integrators to help those enterprises introduce innovation to their existing contact centers by modernizing their capabilities with technology such as click-to-call, Work-from-Home agent access and conversational AI solutions. Additionally, we work with Cloud Contact Center vendors to enhance Microsoft Skype for Business voice implementations. These productstheir offering and services are suitable for all Microsoft-approved unified communications architectures, including on-premise, cloud-based and hybrid.

Coexistence, Migration and SIP Trunking allow for smooth and controlled migration of existing telephony system or telephony services. AudioCodes delivers a comprehensive solution for migration, integration and SIP trunking connectivity. Compatible with virtually any PBX, AudioCodes’ simplified dialing plan Active Directory (AD) integration protects investmentget listed in legacy equipment.their marketplaces.

Security and Fraud Prevention solutions prevent attacks causing voice disruptions, theft of services or other threats exposing a customer’s voice infrastructure. AudioCodes secures the integration of unified communications and external voice services with attack detection and topology hiding.

Devices and productivity improves employee efficiency while integrating UC into the work environment. AudioCodes delivers desk phones and meeting room devices products that are intuitive to work with and deliver excellent quality.

Compliance and recording meets regulatory and compliance requirements. AudioCodes helps businesses address compliance and regulation with E911 location services support and compliance recording.

Resiliency and recovery enables recovery from failures and survival of voice network interruptions. AudioCodes has a broad portfolio of resiliency products and solutions. AudioCodes products are designed for functionality and cost effectiveness.

All-in-One Voice Solution is based on CloudBond™ 365 and enables a wide range of solutions for cloud-hybrid deployments, remote branch offices, PBX replacement and UC pilots.

Skype for Business and Teams Management Solutions deliver operational excellence with full life-cycle management. AudioCodes One Voice Operations Center is a management suite providing full coverage of the entire set of actions required to manage a voice network in a Skype for Business and Teams unified communications environment.

Enterprise UC and PBX Connectivity

AudioCodes’ products are essential elements of an enterprise telephony network, adding VoIP capabilities to existing TDM equipment, or complementing IP-PBX or unified communications deployments with media gateway, IP phone, and enterprise session border controller (E-SBC) solutions.

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VoiceAI Business Line

AudioCodes’ suiteIn the last few years, dramatic leaps forward in machine learning and AI have driven a revolution in the way enterprises boost engagement with their customers. These significant advances mean that businesses can now utilize conversational AI technologies offered by various providers to automate their customer service departments and train bots to give callers a high level of products provides the scalability, flexibility and reliability needed to aid the successful deployment of best-of-breed, SIP-based enterprise communications systems. The solution delivers SIP and TDM Trunking, analog device connectivity, and enterprise branch survivability.

Device Manager

Comprehensive IP phone and meeting room phone managementservice whenever they get in touch. As voice is the key to an excellent user experience. Voice remains the most fundamental and intuitive method of employee collaborationconversation, we are focusing on enabling engagement of voice and telephony to various AI-based applications and implementing voice-based use cases, leveraging on the investment made in AI and voice applications. We began investing in these applications in 2018 and we believe opportunities will develop across products-accordingly, we anticipate that these applications will become a new growth engine for our business in the near- and long-term.

Service Provider Business

In the service provider market, our go-to-market strategy concentrates on outreach to small and medium sized businesses (SOHO, SMB, SME) with our VoIP gateways, SBCs and routers. We engage directly with service providers worldwide and supply them with our versatile range of products to suit different business scenarios. This includes the ability to controlenable Microsoft Teams voice connectivity through the user experience is critical for improved productivity.

AudioCodes device manager defines the phone as an IT-managed entityDirect Routing feature, which allows companies to connect on-premises IP-PBX and delivers unique and complete life-cycle management of end-user desktop devices. The solution provides administrators with powerful and easy-to-use tools to simplify tasks such as configuration, troubleshooting and monitoring to increase efficiency and ensure user satisfaction.

With the ability to deploy devices, monitor voice quality, identify problems and fix them rapidly and efficiently, AudioCodes’ solution is designed to deliver employee satisfaction, increased productivity and lower IT expenses.

Solutions for Contact Centers

VoIP and Unified Communications have altered and evolved the business environment in which modern contact centers operate. The new IP Contact Center offers lower costs, greater flexibility, higher customer satisfaction, improved productivity and increased revenue.

AudioCodes VoIP network solutions for Contact Centers, including SBC, IP Phones and Gateways, are designed to help enterprises and service providers in their transition towards an all-IP voice infrastructure by providing the network elements required to enable and support the smooth operation of the contact center application suite while mitigating the risks of migrating into an IP environment. Additionally, our virtualized VoIP connectivity and management solutions help cloud contact center vendors to build highly reliable and scalable Contact Center as a Service (CCaaS) offering.

Virtualization, Cloud and NFV

Enterprises and service providers adopt virtualized solutions either in privately own data centers or in public clouds, following the Network Function Virtualization (NFV) architecture and concepts. This enables scale and quick introduction of new innovative communication services without the overhead typically associated with hardware-based solution deployments. Realizing this opportunity requires flexible Virtual Network Function (VNF) Session Border Controllers (SBCs) capable of running both as access and peering/Interconnect SBCs, as well as VNFs on enterprise virtualized data centers or Virtual Enterprise CPE devices (vE-CPE, also known as uCPE).

AudioCodes offers a comprehensive and flexible set of solutions spanning from vE-CPE appliances that can host third party VNFs as well as a scalable virtualized SBC. AudioCodes’ virtual SBC. VoIP routing and lifecycle management runs on any vE-CPE device, as well as in the Enterprise, Service or Cloud provider’s virtualized infrastructure, functioning as an access or peering/Interconnect SBC. By offering a single scalable product, covering all capacity needs with unified control and management interface, Enterprises, Service and Cloud providers can leverage its deployment and operations simplicity to introduce new communications services rapidly and cost-effectively. Running on most public cloud infrastructure, the AudioCodes virtualized SBCs enable Enterprises and Software as a Service (SaaS) vendors to quickly integrate and launch VoIP services out of the public cloud infrastructure.

SIP Trunking Solutions

AudioCodes’ SIP Trunking solutions are used by service providers deploying SIP Trunking services. These solutions allow service providers to benefit from quick, easy and reliable deployments as well as address their customers’ needs to continue using their existing PBX and IP-PBX systems while migrating from TDM to SIP Trunking services. This migration can be done with minimum business disruption while providing high quality communication services. Additionally, the modular design of AudioCodes SIP Trunking devices enables service providers to leverage SIP Trunking services to allow for quick and easy remote migration to hosted UC services in the future.

PSTN Migration

AudioCodes’ PSTN migration solutions are targeted at fixed-line service providers who are transforming their TDM fixed-line networks to all-IP. The solutions consist of a set of scalable CPE devices, central office gateways, and management and monitoring application suites, working seamlessly together and designed to enable fixed-line providers a quick, reliable and cost-effective path from TDM to All-IP services.

AudioCodes enables fixed-line service providers the ability to benefit from a wide-range of PSTN migration solutions that cover on-premises CPE, street cabinet and central office PSTN to IP migration option, business customers from SOHOs up to large enterprises, PRI, ISDN and analog interface and configuration, and VoIP gateway, Session Border Controller (SBC), routing and NFV applications.

UCaaS

Designed to enable reliable and quality delivery of cloud-based services, AudioCodes’ UCaaS solutions are comprised of a comprehensive portfolio of hardware and software products. AudioCodes solutions are used by service providers who are deploying Cloud and Hosted UC services. Based on their survivability, resiliency, high voice quality assurance, and advanced remote management features, AudioCodes’ UCaaS solutions enable service providers to deliver to their business customers reliable and quality cloud services, as well as provide them with the confidence they need to place their key communications functions in the cloud.

VocaNOM

AudioCodes VocaNOM is a cloud-driven voice communication application for businesses and organizations allowing voice-based dialing and routing. VocaNOM is improving internal communication between employees and staff as well as external calls to suppliers (outbound) or from customers (inbound). VocaNOM provides a solution for the problem of managing multiple business contacts and dialing on the go. The solution allows dialing by voice as the organizational phone directory is fully synced into the cloud alongside the speech recognition algorithms designed by AudioCodes.

VocaONE

AudioCodes voice-driven calling assistant is an easy-to-use solution that enables organizations, public institutions and retailers to handle thousands of calls each day, while maintaining high-quality customer experience. Based on AudioCodes state-of-the-art voice recognition technology, VocaONE provides callers with an ‘always-on’, 24/7 calling solution that improves customer experience and satisfaction, while significantly reducing associated costs.

VocaONE includes a built-in guided NLU engine that provides a wide coverage of industry-related enterprise jargons, enabling users to use their natural language rather than having to learn a new set of operational terms and words. By allowing callers to use their familiar, every day, language, VocaONE increases both engagement and satisfaction, by presenting an authentic and unparalleled customer experience.

SmartTAP Call Recording

AudioCodes SmartTAP Call Recording is an enterprise-wide compliance and liability recorder supporting Skype for Business as well as gateways and SBCs supporting SEPRec protocol. Though most recorders in the market focus on contact center features, SmartTAP is deployed across the enterprise to capture calls, either on-demand or, in some cases, full time. With an integral Skype for Business recording toolbar, enterprise users can be recorded with SmartTAP anywhere and anytime they are on Skype for Business calls. SmartTAP can initially be deployed on a small scale and then can be scaled up to support many thousands of users using its linear scalability feature. SmartTAP supports Skype for Business recording of voice, video, video conference, instant messaging and desktop sharing transactions.

AudioCodes Products

Core Technologies

Narrowband and Wideband (HDVoIP) Voice Compression Algorithms

Voice compression techniques are essential for the transmission of voice over packet networks. Voice compression exploits redundancies within a voice signal to reduce the bit rate required to digitally represent the voice signal, from 64 kilobits per second, or kbps, down to low bit rates ranging from 5.3 kbps to 8 kbps, while still maintaining acceptable voice quality. A bit is a unit of data. Different voice compression algorithms, or coders, make certain tradeoffs between voice quality, bit rate, delay and complexity to satisfy various network requirements. Use of voice activity detection techniques and silence removal techniques further reduce the transmission rate by detecting the silence periods embedded in the voice flow and discarding the information packets which do not contribute to voice intelligibility.

We are one of the innovators in developing low bit rate voice compression technologies. Our patented MP-MLQTM coder was adopted in 1995 by the ITU as the basis for the G.723.1 voice coding standard for audio/visual applications over circuit-switched telephone networks. By adhering to this standard, system manufacturers guarantee the interoperability of their equipment with the equipment of other vendors.

We also provide wideband compression techniques that provide high definition VoIP quality, which expands the sampled frequency range from the traditional narrowband frequency range of 3.3Khz to over 7Khz, providing better voice quality and intelligibility, and a better user expertise. This technology is expanding and is expected to become a de-facto standard for future VoIP communications.

Advanced Digital Signal Processing Algorithms

To provide a complete voice over packet communications solution, we have developed a library of digital signal processing functions designed to complement voice compression coders with additional functionality, including: echo cancellation; voice activity detection; facsimile and data modem processing; and telephony signaling processing. Our extensive experience and expertise in designing advanced digital signal processing solutions allows us to implement algorithms using minimal processing memory and power resources.

Voice Communications Software

To transmit the compressed voice and fax over packet networks, voice packetization processes are required to construct and deconstruct each packet of data for transmission. The processing involves breaking up information into packets and adding address and control fields information accordingplatforms to the specifications of the appropriate packet network protocol. In addition, the software provides the interface with the signal processors and addresses packet delay and packet loss issues.cloud-based Teams service.

Products

Media ProcessingNetworking

Our media processing products provide the enabling technology and platforms for developing enhanced voice service applications for legacy and next generation networks. We have developed media processing technologies such as message recording/playback, announcements, voice coding and mixing and call progress tone detection that enable our customers to develop and offer advanced revenue generating services such as conferencing, network announcements, voice mail and interactive voice response.

Our media processing technology is integrated into our enabling technology platforms like Voice over Packet processors and VoIP blades, as well as into our network platforms like the Mediant media gateways and the IPMedia media servers. The same technology is also integrated into our multi-service business gateways, enabling the use of these platforms to run third party VoIP software, offloading media processing from the host CPU.

Addressing Multiple Networks and Standards Concurrently

Convergence of wireline and wireless networks is becoming a key driver for deployment of voice over packet networks, enabling operators to use common equipment for both networks, thus lowering capital expenditures and operating expenses, while offering enriched services.

Our voice over packet products provide a cost-effective solution for these convergence needs, complying with the requirements of broadband wireline operators using xDSL technologies, cable operators, mobile operators, FTTx operators, Internet Telephony Service Providers, or ITSPs, and Virtual Network Operators, or VNOs. This includes support for relevant vocoders (wireline and wireless concurrently), interfaces and protocols.

Our products are also positioned to support the requirement of all types of enterprise customers. From SOHO, SMB all the way up to large enterprises, our products can provide integrated VoIP services and service provider access to enterprises in multiple vertical markets.

Voice.AI technology Expertise

AudioCodes Voice.AI solutions set helps businesses become more productive by capitalizing speech and text processing and analytics. We have developed artificial intelligence, deep learning and machine learning technologies for Speaker Recognition (SR), Speech to Text (STT), Speaker Verification (SV), Text to Speech (TTS), Natural Language Processing (NLP) and Natural Language Understanding (NLU) services. Additionally, we have acquired expertise in Voice User Interface (VUI) design, voice bots design and development and automatic tagging and organizing of meetings content out of recording.

Networking Products

Session Border Controllers (SBC) and Media Gateways (MG)

AudioCodes’ Mediant family of Session Border Controllers (SBCs)SBCs, media gateways, or MGWs, and Media Gateways (MG)MSBRs is a line of versatile IP communications platforms that connectdeliver seamless VoIP connectivity.

Our Mediant SBCs include hardware and software platforms that offer cost-efficient, scalable SBC and hybrid SBC-MGW functionality (SIP to TDM, networks.

SIP to SIP) for enterprises, service providers and cloud deployments. Our software SBCs are cloud-native and deliver elasticity and high scale on all current major cloud platforms. SBCs are deployed at the border between the enterprise and the service provider, as well as between the networks of different service providers. In the enterprise environment, SBCs form an effective demarcation point between the VoIP network of a business and the SIP Trunk or hosted VoIP service of a service provider. In this capacity, an SBC performs SIP protocol andOur media mediation (interoperability) and secures the enterprise VoIP network. In the service provider core, SBCs provide primarily VoIP security, protocol normalization, VoIP routing and service level agreement monitoring and enforcement.

The Mediant SBC family includes a range of hardware and software platforms that offer cost-efficient, scalable SBC and hybrid SBC-MG functionality (SIP to TDM, SIP to SIP) for enterprises, service providers and cloud deployments.

AudioCodes’ family of High-Availability Media Gateways is a line of highly reliable IP communications platforms that connect VoIP and TDM networks. Featuring NEBS Level 3 compliance and cost-effective redundancy configurations, the AudioCodes platforms meet the stringent availability requirements of service providers. AudioCodes High-Availability Media Gatewaysgateways serve as an efficient junction between VoIP networks, legacy TDM equipment, and the PSTN. They interwork with most market-leading softswitches, application servers, IP-PBXs, and other standards-based VoIP elements.

AudioCodes’AudioCodes MediaPack 1xx series of Analoganalog VoIP Gatewaysgateways are cost-effective, stand-alone VoIP gateways that provide superior voice technologydevices for connecting legacy telephones, fax machines and PBX systems with IP telephony networks and IP-based PBX systems. The MediaPack 1xx gateways are fully interoperable with leading softswitches and SIP servers and support a wide variety of service provider and enterprise applications.

Service providers can use MediaPack gateways to connect Multi-Tenant Units (MTUs), IP Centrex subscribers, payphones, and rural users over wireless and satellite links.

Enterprises can use MediaPack gateways to connect their legacy PBX systems over an IP infrastructure. In addition, in IP Centrex and central IP-PBX applications, MediaPack enhances remote location availability and provides Stand Alone Survivability (SAS) when there is no IP connection between branch locations and a central SIP server, SIP proxy or central IP-PBX.

The MediaPack(MP)-12881288 is a high densityhigh-density analog media gateway. Supporting up to 288 analog ports in a compact 3U chassis. The MP-1288 offers a cost-effective solutiongateway for organizations transitioning to all-IP that need to integrate large numbers of analog devices into their new infrastructure. The MP-1288 enables these organizations to protect the investment made in their analog devices and cabling while enjoying the functional and cost benefit of the move to the all-IP infrastructure.

Multi-Service Business Routers (MSBR)

AudioCodes’Our family of Multi-Service Business Routers (MSBR)MSBRs offers service providers a range of all-in-one SOHO, SMB and SME routers combiningthat combine access, data, voice and security ontoin a single device. It isThese platforms are designed for managed data, SIP trunking, hosted PBX, and cloud-based communications services, and allowsallow service providers to deploy flexible and cost-effective solutions.

Applications

AudioCodes’ Multi-Service Business RoutersAudioCodes offers a wide range of value-added voice applications to boost productivity and ensure a superior user experience.

SmartTAP

SmartTAP 360° Live is an intelligent, secure enterprise compliance recording solution for automatically capturing and indexing all types of internal and customer organizational interactions, including voice, video and instant messaging (IM). SmartTAP is available for deployment in customers’ datacenters and private clouds, or from the AudioCodes cloud.

SmartTAP 360° Live integrates seamlessly with Microsoft Teams to record all voice, video and IMs interactions for later-stage AI analysis and for meeting regulatory compliance demands.

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Voca

AudioCodes Voca enables businesses to upgrade their calling experience rapidly and easily, by allowing callers to talk their way through an IVR menu. By combining Voice.AI and voice networking technologies, our agile conversational IVR solution features advanced, enterprise-grade voice recognition capabilities that instantly automate calling journeys for both customers and internal users with simple, intuitive voice requests. Voca’s out-of-the-box experience is mainly targeted at companies serving a large number of callers on their main line.

For contact center partners and system integrators, Voca is an easy, go-to solution for adding conversational capabilities to existing IVR systems, avoiding the complexities of dealing with a dedicated speech technology vendor, reducing the dependency on professional services, and maintaining high sales margins.

Voca enables a rich IVR experience in UC ecosystems by utilizing flexible hybrid connectivity capabilities with multiple telephony environments. Its multi-tenant service capability allows service providers to provide their business customers much more than just an internet connection. In addition to its integrated powerful routing and security software, the MSBR also features a multi-core architecture that aids consistent high performance, allowing endlarge customers to maximizemanage dedicated conversational IVRs for each of their broadband connectionssites, with easy role-based access for both dataeach site’s administrators.

Voca’s marketing and sales efforts are growing rapidly in North America, Germany, the United Kingdom, the Caribbean and Latin America region and Brazil, with plans to expand regional activity, mainly in the French, Nordics and Benelux markets. Voca’s key partners and channels include NTT, NEC Cloud, ScanSource, Nextpointe and ETKn.

VoiceAI Connect

AudioCodes VoiceAI Connect extends chat and voice applications.bot functionality to telephony communications by connecting bots to any type of telephony channel, thus allowing customers to talk naturally with bots for a voice-centric user experience. We work primarily with bot framework vendors to enable and promote creation of voice-bots by adding voice and telephony functionality to their bot framework platforms. In 2021, we extended the supported bot frameworks, including Microsoft PVA and others.

ServiceWe also initiated collaborations with a wide variety of market players, such as speech services providers, offering hosted PBX or SIP trunking communication services will benefit from AudioCodes’ MSBR, which includes integrated voice gateway, analogbot developers, system integrators and digital interfaces with various codecs that support analog phones, fax, PBX and PSTN connectivity, and session border controllers (SBC).

IP Phones and Meeting Room Devices

advisors. We intend to leverage these alliances to create significant voice-bot opportunities for us, especially in the contact center domain.

The VoiceAI Connect Cloud Edition is the self-service SaaS version or VoiceAI Connect Enterprise, and serves as a primary tool for exposing the bot development ecosystem to a wide array of voice-bot use cases via trials and proof of concept projects.

Meeting Insights

AudioCodes 400HD series of IP Phones includes a range of easy-to-use, feature-rich productsMeeting Insights is an enterprise solution designed specifically for the service provider hosted services, enterprise unified communicationsmeeting-technology world. It captures and contact center markets. Based on the same advanced, field-proven underlying technology as our other VoIP products,organizes all meeting-generated content, from team collaboration and training sessions to sales and recruitment calls.

During meetings, Mia, a unique in-meeting voice assistant, takes notes, defines action items and marks important moments, either by text or with built-in AudioCodes high quality IP phones enable systems integrators and end-customers to build end-to-end VoIP solutions. AudioCodes Room Experience suite (RX) deliversVoice.AI technology.

Having made many user-driven product enhancements in 2020, we launched a voice-meeting solution for a variety of sizes of meeting rooms.

Device Manager

AudioCodes IP phones and meeting room phones can be offered along with our Device Manager which defines phones as an IT-managed entity and delivers complete life-cycle management of end-user desktop devices.

CloudBond 365, Cloud Connector Edition (CCE) appliances, and User Management Pack 365 (UMP 365)

AudioCodes CloudBond™ 365 is a modular, adaptable solution for the data center, customer premises or the branch. A versatile all-in-one Skype for Business appliance designed for hybrid environments, it combines Skype for Business server, the Cloud-PBX and the service provider’s voice services. While Microsoft’s cloud unified communications offering is still evolving into a full PBX replacement, CloudBond 365 bridges the gap, creating the critical bond between UC and the developing cloud business.

AudioCodes CloudBond 365 CCE appliances allow Microsoft Skype for Business cloud PBX customers to connect to their local existing voice services (such as E1/T1, ISDN and SIP Trunks). AudioCodes CloudBond CCE appliances package Microsoft CCE code along with AudioCodes SBC and gateway technology and a management application for simplified installation and operation.

AudioCodes User Management Pack 365 (UMP 365) is a software management application that allows IT managers and service providers to easily manage user life-cycle in Skype for Business and Teams deployments. UMP 365 does not require knowledge and expertise in Microsoft’s PowerShell tools. Instead, it allows helpdesk level engineers to operate the daily tasks using an intuitive graphical user interface.

Survivable Branch Appliances

AudioCodes’ family of Survivable Branch Appliances (SBA) is a line of enterprise-class integrated CPEs designed to ensure access to data and voice servicesnew early adoption program in the eventfirst quarter of a WAN outage. AudioCodes SBAs are an element in multisite Skype for Business deployments, and are fully certified by2021. Meeting Insights will continue to be promoted worldwide through Microsoft for use with Skype for Business Server.partners.

A Survivable Branch Appliance (SBA) is a hardware device that ensures the availability of enterprise-wide voice service and voice mail. It also contains a public switched telephone network (PSTN) gateway for use in the event of VoIP failure. As part of our One Voice for Skype for Business portfolio, AudioCodes offers Survivable Branch Appliances that fit any enterprise location size, providing branch office voice resiliency for up to 1000 users.

VoIP Management and Routing

Operations

AudioCodes’ management and operations solutionstools are a suite of holistic lifecycle applications suitabledesigned for large scaledeployment within large-scale cloud or premises-based unified communicationsUC deployments. TheThey enable the management, monitoring and operations suite supports the entire setoperation of actions required to manage a voice network in a unified communications environment. In conjunction, the applications form the basis of a powerful network operation center (NOC) with complete end-to-end network control, service assurance capabilities and comprehensive optimization and future planning tools. The management and operations suite uniformly manages, monitors and operates the entire AudioCodes One Voice portfolio, including SBCs, Media Gateways, Microsoft specificmedia gateways, Microsoft-specific appliances and IP phones.

AudioCodes One Voice Operations Center (OVOC)Table of Contents

OVOC is a web-based voice network management solution that combines management of voice network devices and quality of experience monitoring into a single, intuitive web-based application. OVOC enables administrators to adopt a holistic approach to network lifecycle management by simplifying everyday tasks and assisting in troubleshooting all the way from detection to correction.

OVOC’s clear GUI design system allows administrators to manage the full lifecycle of VoIP devices and elements from a single centralized location, saving time and costs. Tasks that would normally be complex and time-consuming, such as performing root cause analysis, adding new devices to the VoIP network and initiating bulk software updates, can be carried out simply and rapidly using the AudioCodes OVOC management suite.

AudioCodes IP PhoneDevice Manager is a powerful and intuitive lifecycle management tool for enterprise IP phone deployments that enables administrators to deliver a reliable desktop phone service within their organization. With the ability to deploy and monitor AudioCodes 400HD IP phones, identify problems, and then fix them rapidly and efficiently, AudioCodes IP PhoneDevice Manager increases employee satisfaction and productivity and lowerlowers IT expenses.

Managing the dial plan and call routing rules of multi-site, multi-vendor enterprise VoIP networks can be extremely complicated. AudioCodes Routing Manager (ARM)ARM delivers a powerful,highly effective, innovative solution to this problem by enabling centralized control of all session routing decisions. Through ARM’s highly intuitive graphical user interface, system administrators can design and modify their voice network topologies and call routing policies from a single location, resulting in significant time and cost savings. Time-consuming tasks such as adding a new PSTN or SIP trunk interconnection, adding a new branch office or modifying individual users’ calling privileges can be carried out simply and rapidly.

Devices

VocaNOMThe AudioCodes 400HD series of IP phones includes a range of easy-to-use, feature-rich products for the enterprise unified communications, or UC, service provider, hosted UC services and contact center markets. Based on the same advanced, field-proven underlying technology as our other VoIP products, our high-quality IP phones enable systems integrators and end-customers to build end-to-end VoIP solutions. Our IP phone portfolio includes devices built specifically for Microsoft Teams environments with full Teams integration and a native Teams interface.

The AudioCodes Room Experience, or RX, suite delivers productive meeting room experiences regardless of room size. It combines a range of software and audio/video products from different UC solution vendors for effective voice-only conference calls and video-enabled collaboration sessions.

AudioCodes VocaNOM allows callers to say the name of a person or a department and be automatically transferred to the requested party, thus, relieving the need for searching for phone numbers or waiting to speak to an operator. The solution can be used by external users and by company personnel for internal calls. Combining powerful speech recognition with a simple-to-use conversational interface, VocaNOM provides reliable, 24x7 call routing for organizations.

SmartTAP Call Recording

AudioCodes SmartTAP Call Recording is an enterprise-wide compliance and liability recorder supporting Skype for Business. Though most recordersOur RX suite currently participates in the market focus on Contact Center features, SmartTAPMicrosoft Teams Room (MTR) program. Our RX products are certified under the MTR program which adds Teams to meeting rooms.

Services

Professional Services

We provide a modular portfolio of professional services to our partners and customers by delivering a complete voice network lifecycle model that is deployed across the enterprise to capture calls, either on-demand or, in some cases, full time, when calls about compliance and liability occur more frequently. With an integral Skype for Business recording toolbar, enterprise users can record with SmartTAP anywhere and anytime they are on Skype for Business calls. SmartTAP can initially be deployed on a small scale and be scaled up to support many thousands of users using the product’s linear scalability feature.

Auto Attendant

AudioCodes Auto Attendant is a powerful and flexible tool for managing inbound calls and delivering them efficiently to the correct destination based on the caller’s selection. AudioCodes Auto Attendant supports advanced call queuing for Automatic Call Distribution (ACD) based on different routing modesthree basic phases of Plan, Implement and agent availability.

As part of AudioCodes One Voice for Skype for Business offering, AudioCodes’ Auto Attendant application can be deployed together with AudioCodes’ Survivable Branch Appliances (SBA) in branch offices to complement the Skype for Business Response Group Service (RGS) when the connection with the central servers is lost. AudioCodes Auto Attendant is a pure software application which can also be deployed on standard server hardware.

Technology Products

Voice over Packet Processors

Operate. Our signal processor chips compress and decompress voice, data and fax communications. This enables these communications to be sent from circuit-switched telephone networks to packet networks. Our chips are digital signal processors on which we have embedded our algorithms. These signal processor chips are the basic building blocks used by our customers and us to enable their products to transmit voice, fax and data over packet networks. These chips may be incorporated into our communications boards, media gateway modules and analog media gateways for access and enterprise applications or they may be purchased separately and incorporated into other boards or customer products.

TrunkPack^TMVoIP Communication Boards

Our communications boards are designed to operate in gateways connecting the circuit-switched telephone network to packet networks based on Internet protocols. Our boards comply with VoIP industry standards and allow for interoperability with other gateways. Our boards support standards-based open telecommunications architecture systems and combine our signal processor chips with communications software, signaling software and proprietary hardware architecture to provide a cost efficient interoperable solution for high capacity gateways. We believe that using open architecture permits our customers to bring their systems to market quickly and to integrate our products more easily within their systems.

IPmedia^TM Boards for Enhanced Services and Functionalities

The IPmedia^TM product family is designed to allow OEMs and application partners to provide sophisticated content andprofessional services that create revenue streams and customer loyalty through the ability to provide additional services. The IPmedia^TM boards provides voice and fax processing capabilities to enable, together with our partners, an architecture for development and deployment of enhanced services.

Voice and Data Logging Hardware Integration Board Products

The SmartWORKS^TM family of products is our voice and data logging hardware integration board product line. SmartWORKS^TM boards for the call recording and voice voice/data logging industry are compatible with a multitude of private branch exchange, or PBX, telephone system integrations.

AudioCodes Services

AudioCodes offers a comprehensive portfolio of global planning, implementation, operations and support services. AudioCodes’ The Voice Experts @ Your Service program allows partners to complement their own services offering with our modular portfolio of Professional Services. The result is a complete network life-cycle model. Our Professional Services portfolio enablesdelivers seamless integration, high availability, and non-stopvast scalability to meet business and network demands.

Managed Services

AudioCodes offers flexible technical support services that ensure customer care and optimized network performance and availability. AudioCodes is committed to providing customers and partners with the most comprehensive, qualified customer support. Our global customer support team delivers customer-oriented technical support, training, and consulting that enhances the value provided by AudioCodes products.

AudioCodes Academy offers a comprehensive set of technical training courses for AudioCodes’ partners and customers. By providing several levels of certification, distinct training programs and a combination of theory and hands-on studies, the academy is built to help system integrators, resellers, and distributors equip their people with the necessary skills to deploy and maintain AudioCodes networking technology in the field.

Customers

Our customers consist of service providers (with direct and indirect relationship), enterprises (with indirect relationship) and a small percentage of OEM customers.

Our service provider customers includeWe offer a range of tier 1, 2managed services enabling our customers to deploy complex solutions solely by relying on the knowledge of our voice experts. These include providing our applications (such as SmartTAP, Voca, Meeting Insights and 3 service providers that deploy our solutionmanagement applications) as part of their voice service or UC or SIP trunk or others offering for their business customers. Our solutions are deployed both at the customer premisemanaged services and at the service core to provide connectivity and high-quality voice services. AudioCodes’a range of productsproduct-led services, such as managed SBCs and wide interoperability allowsmanaged gateways.

AudioCodesLive for Microsoft Teams

AudioCodes Live for Microsoft Teams is a portfolio of managed services that removes complexity from the integration of Teams collaboration, UC and enterprise telephony. It provides a seamless, rapid and cost-effective migration to Teams for high quality voice and video collaboration.

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This fully managed service is complemented by devices-as-a-service, monitoring and management tools, and service enhancing applications. AudioCodes Live is also available through our global network of telecom and Microsoft 365 partners.

AudioCodes Live Cloud

AudioCodes Live Cloud is a SaaS solution that enables service providers to deploy ouroffer their business customers a seamless migration to UCaS solutions, in practically any third party solution environment (e.g., together with BroadSoft (acquired by Cisco) Huawei, Alcatel, MetaSwitchsuch as Microsoft Teams and others)Zoom Phone.

AudioCodes Live Teams Cloud includes all the necessary services for Microsoft Teams Direct Routing and for a wide range of customers. Our solutions are sold to service provider customers in 100 countries mainly through a wide range of distributors and some via direct sales.

Our enterprise customers include a range of Fortune 1000 organizationsOperator Connect, as well as smaller enterprises that use our equipmentZoom Phone Provider Exchange, enabling service providers to enablereduce their UC solution. Our solutions are sold to enterprise customer through a wide network of resellers and distributors and the vast majority of the business is done in two tiers in over 100 countries. AudioCodes solutions are enabling enterprises to smoothly migrate their communications infrastructure to all-IP UC solution.

initial investment.

AudioCodes OEM customers include vendors that leverage on AudioCodes technologyprovides the voice connectivity infrastructure setup (SBCs), customer onboarding, user lifecycle management and qualitytools for monitoring, reporting and analytics, to deliver VoIP productshelp get the service up and solutions. Historically, a substantial portion of our revenue has been derived from OEM customers that sold our technology products as part of their voice solution.running expeditiously and effectively, with the service provider supplying the data connectivity and SIP trunk minutes.

Sales and Marketing

Our sales and marketing strategy is focused on ways to secureobtain direct touch with the end customers, enterprises and service providers, enabling us to offer solutions best suited to solving the challenges the customer is facing. This approach also enables us to better understand the customer network and upsell additional products and capabilities that provide an optimal solution for the customer’s needs.

In parallel, we engage with the leading channels, VARs and system integrators in each region, partner with leading application companiesvendors and achieve design wins with network equipment providerssystem integrators and VARs in our targeted markets. We select our partners based on their ability to provide effective field sales, end-customer engagement, marketing communications and technical support to our customers. In addition, we engage in direct sales and marketing with significant operators and enterprises.

Prospective customers and channels generally must make a commitment ofcommit resources to test and evaluate our products and to integrate them into larger systems, networks and applications. As a result, our sales process is often subject to delays associated with lengthy approval processes that typically accompany the design and testing of new communications equipment. For these reasons, the sales cycles of our products to new customers are often lengthy;lengthy, averaging approximately six to twelve months after achieving a design win. This time may be further extended because of internal testing, field trials and requests for the addition or customization of features.

We market our products in the United States,North America, Europe, Asia, Latin America and Israel primarily through a direct sales force.force approaching channel partners and end users. We have invested significant resources in setting up local sales forces giving us a presence in relevant markets. We have givenplaced particular emphasis toon emerging markets such as Latin America, Asia and Eastern EuropeIndia, in addition to continuing to sell our products in developed countries.

We have generally entered into non-exclusive sales representation/distribution agreements with customers in each of the major countries in which we do business. These agreements are typically for renewable 12-month terms or are terminable at will by us upon 90 days’ notice, and do not commit the customer to inventory or to any minimum sales of our products to third parties. Some of our customers have the ability to return some of the products they have previously purchased and purchase more up to dateup-to-date models.

The One Voice marketing message positions AudioCodes as a one-stop-vendor for various echo systems telephony solutions. The marketing campaign started with the positioning of One Voice for LYNC (now called Skype for Business/Teams), which presented the AudioCodes value proposition as a vendor of comprehensive voice networking for Microsoft unified communications with a broad set of certified IP phones and connectivity products such as SBAs, gateways and SBCs. Additionally, One Voice positions AudioCodes as a vendor that can deliver end-to-end support and offers value-added professional services including design, implementation and network readiness assessment, among others. We also introduced One Voice for Hosted Services which similarly positions AudioCodes as a one-stop vendor for operator hosted services, mainly in collaboration with BroadSoft (now part of Cisco). AudioCodes believes it can deliver a full suite of voice and networking equipment that is required to connect business customers to an operator’s network.

In 2019,2022, we continued to enhance our field marketing efforts with direct touch enterprise engagements, along with channel recruitmentsrecruitment and generic marketing activities, including tradeshows (mainly on a virtual basis), webinars, seminars, on-lineand online and social marketing.

Customers

ManufacturingOur customers consist of enterprises (with direct and indirect relationships), service providers (with direct and indirect relationships), and a small percentage of OEM customers.

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Our enterprise customers include a range of Fortune 1000 organizations, as well as smaller enterprises that use our equipment to primarily enable their UC solutions. Our solutions are sold to enterprise customers through a wide network of resellers and distributors and the bulk of our business is carried out in a two-tier model in over 100 countries. AudioCodes solutions enable enterprises to smoothly migrate their communications infrastructure to all-IP UC solutions. Our sales in this segment are based on two major business offerings: the traditional model including equipment, maintenance contracts and, optionally, day-1 professional services, on the one hand, and a full “as-a-service” solution or managed service that includes the equipment, maintenance, day-1 and day-2 professional services, on the other. The latter offering promises higher revenues and profits over time.

Our service provider customers include a range of tier 1, 2 and 3 service providers that deploy our solution as part of their voice, UC, SIP trunk or other offerings for their business customers. Our solutions are primarily deployed at the customer premises and less commonly at the service provider core to provide connectivity and high-quality voice services. AudioCodes’ broad range of products, broad functionality (SBC, media gateway, routing, multiple WAN and PSTN interfaces) and wide interoperability allows service providers to deploy our solutions in practically any third-party solution environment (for example, Cisco, Huawei, Alcatel, and others) and for a wide range of customers. Our solutions have been sold to service provider customers in 100 countries, mainly through a wide range of distributors and some via direct sales.

AudioCodes’ OEM customers include vendors that leverage AudioCodes’ technology and quality to deliver VoIP products and solutions. Historically, a substantial portion of our revenue has been derived from OEM customers that sold our technology products as part of their own voice solutions.

Manufacturing

Some of our components are obtained from single suppliers. For example, Texas Instruments Incorporated supplies all of our DSP components, while Motorola and Cavium Networks provide embedded CPU and network processors. Other components are generic in nature and we believe they can be obtained from multiple suppliers.

We have not entered into any long-term supply agreements. However, we have worked for years in several countries with established global manufacturing leaders such as Flex and have had significant experience with their level of commitment and ability to deliver. To date, we have been able to obtain sufficient amounts of these components to meet our needs and do not foresee any supply difficulty in obtaining timely delivery of any parts or components. However, an interruption in supply from any of these sources, especially with regard to DSP components from Texas Instruments Incorporated and CPU and network processors from both Cavium Networks and Motorola, or an unexpected termination of the manufacture of certain electronic components, could disrupt production, thereby adversely affecting our results. We generally maintain an inventory of critical components used in the manufacture and assembly of our products although our inventory of signal processor chips would likely not be sufficient in the event that we had to engage an alternate supplier for these components.

We utilize contract manufacturing for substantiallyvirtually all of our manufacturing processes. Most of our manufacturing is carried out by third-party subcontractors in China and Israel. Our internal manufacturing activities consist primarily of the production of prototypes, test engineering, materials purchasing and inspection, final product configuration and quality control and assurance.

In addition, we have engaged several original design manufacturers, or ODM,ODMs based in Asia to design and manufacture some of our products. We may engage additional ODMs in the future. Termination of our commercial relationship with an ODM or the discontinuance of manufacturing of products by an ODM would negatively affect our business operations.

We are obligated under certain agreements with our suppliers to purchase goods and to purchase excess inventory. Aggregate non-cancellable obligations under these agreements as of December 31, 20192022 were approximately $23.0$39.8 million.

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Industry Standards and Government Regulations

Our products must comply with industry standards relating to telecommunications equipment. Before completing sales in a country, our products must comply with local telecommunications standards, recommendations of quasi-regulatory authorities and recommendations of standards-setting committees. In addition, public carriers require that equipment connected to their networks comply with their own standards. Telecommunication-related policies and regulations are continuously reviewed by governmental and industry standards-setting organizations and are always subject to amendment or change. Although we believe that our products currently meet applicable industry and government standards, we cannot be sure that our products will comply with future standards.

We are subject to telecommunication industry regulations and requirements set by telecommunication carriers that address a wide range of areas including quality, final testing, safety, packaging and use of environmentally friendly components. We comply with the European Union’s Restriction of Hazardous Substances Directive (under certain exemptions) that requires telecommunication equipment suppliers to not use some materials that are not environmentally friendly. These materials include cadmium, hexavalentCadmium, Hexavalent chromium, lead, mercury, polybrominatedLead, Mercury, Polybrominated biphenyls, polybrominatelPolybrominatel diphenyl ethers bisBis (2-ethylhexyl) phthalate, benzyl butylutyl phthalate, dibutylDibutyl phthalate and diisobutyl phthalate.Diisobutyl phthalate We expect that other countries, including countries we operate in, will adopt similar directives or other additional directives and regulations.

Competition

Competition in our industry is intense and we expect competition to increase in the future. Our competitors currently sell products that provide similar benefits to those that we sell. There has been a significant amount of merger and acquisition activity, frequently involving major telecommunications equipment manufacturers acquiring smaller companies, as well as strategic alliances entered into by competitors. We expect that these activities will result in an increasing concentration of market share among these companies, many of whom are our customers.

In the following sections we list competing vendors and providers in each of our main product and service categories:

Our principal competitors inNetworking Solutions

In the area of analog media gateways (2 to 24 ports) for accessenterprise session border controllers, we compete with Oracle, Ribbon Communications, Metaswitch (acquired by Microsoft), TE-Systems and enterprise are Grandstream, Natex, Iskratel, Zyxel, Adtran, Media5, Cisco, Sangoma, Innovaphone AG, Patton, Dialogic and Ribbon Communications.

Ingate.

In the area of low and mid densitymid-density digital gateways we face competition from companies such as Ribbon Communications, (formerly Sonus Networks), Huawei, Cisco, Dialogic, NewRock, Ribbon, Patton, Ferrari and Sangoma.

Our competitors in the area of MSBRsmulti-service business routers are companies such as Cisco, Juniper, Adtran, One-Access (acquired by Ekinops), Patton, Huawei, HP/3COM and Alcatel-Lucent.

Specifically in the area of enterprise class session border controller technology we compete with Oracle, Cisco, Avaya, Ribbon Communications (formerly Sonus Networks), MetaSwich, Ingate and Ribbon.

Our competitors in the Microsoft Skype for Business and Teams certified gateways, session border controller, Survivable Branch Appliance and IP Phone markets include Ribbon Communications (formerly Sonus Networks), Oracle, Poly and Yealink.

Applications

Our competitors in the area of contact center vendors are Ribbon Communications (formerly Sonus Networks), Oracle, Poly and Yealink.

Our competitors in the area of Call Recordingcall recording are companies such as Verint, NICE, ACS, Red Box, Teleware and Dubber.

Our competitors in the area of Conversational IVR and Speech Attendants include, but are not limited to, Nuance, Parlance and other contact center vendors which provide IVR solutions.

Our competitors in the area of voiceapplications leveraging speech recognition areand conversational AI technology include companies such as Microsoft, Google, Amazon andTwilio, Nuance and a group ofIBM, as well as Contact Center vendors such as Genesys, NICE and Five9s. Some public cloud providers offer technology and services that partially overlap with ours and several smaller startup companies.

companies are also developing competing solutions.

Our principal competitors in the salearea of signal processing chipsSmartTAP360 live, which focuses mainly on compliance and quality recording in conjunction with Microsoft Teams, include, among others, ASC, Redbox, NICE and Verint. Such competitors are DSP Group, Broadcom, Octasiccurrently listed in the certified list of Microsoft vendors although we mainly see their presence in mid-market projects.

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Our competitors in the area of Meeting Insights, which is focused on productivity enhancement and Mindspeed.

organization repository in the Microsoft environment, include, but are not limited to, Avoma, Otter and (at times) Microsoft (with Stream or Teams premium).Devices

Our principal competitors in the area of IP Phonesphones and meeting room devices are comprised of “best-of-breed” IP phone vendors and end-to-end IP telephony vendors. “Best of breed” IP phone vendors sell standards-based SIP phones that can be integrated into any standards-based IP-PBX or hosted IP telephony system. These competitors include Poly (acquired by HPQ), Yealink, Grandstream, Yealink,Logitech, Crestron, VTEC (acquired SNOM)(which acquired Snom Technology) and many others. End-to-end IP telephony vendors sell IP phones that only work in their proprietary systems. These competitors include Cisco, Avaya, Alcatel-Lucent, Siemens, Mitel and NEC. In the areas of Skype

AudioCodes Live for Business/Microsoft Teams our competitors are certified vendors – YealinkManaged Services

Our main competitor in the area of Live is the in-house implementation of projects (after buying products either directly or through an integrator). Competition is also exhibited in the form of system integrators, such as Converge One, NTT and Poly.

BT, among several others, in various sizes, locations and specialties.

Some of our competitors are also customers of our products and technologies.

Many of our competitors have the ability to offer vendor-sponsored financing programs to prospective customers. Some of our competitorsThose with broad product portfolios may also be able to offer lower prices on products that compete with ours because of their ability to recoup a loss of margin through sales of other products or services. Additionally, voice, audio and other communications alternatives that compete with our products are constantly being continually introduced.

Some of our competitors are also customers of our products and technologies.

In the future, we may also develop and introduce other products or services with new or additional telecommunications capabilities or services. As a result, we may compete directly with VoIP companies, system integrators, VARs and other telecommunications infrastructure and solution providers, some of which may be our current customers. Additional competitors may include companies that currently provide communication software products and services. The ability of some of our competitors to bundle other enhanced services or complete solutions with VoIP products could give these competitors an advantage over us.

Intellectual Property and Proprietary Rights

Our success is dependent in part upon proprietary technology. We rely primarily on a combination of patent, copyright and trade secret laws, as well as confidentiality procedures and contractual provisions, to protect our proprietary rights. We also rely on trademark protection concerning various names and marks that serve to identify us and our products. While our ability to compete may be affected by our ability to protect our intellectual property, we believe that because of the rapid pace of technological change in our industry maintaining our technological leadership and our comprehensive familiarity with all aspects of the technology contained in our signal processors and communication boards is also significant to our success.

We own U.S. patents that relate to our voice compression and session border control technologies. We also actively pursue patent protection in selected other countries of interest to us. In addition to patent protection, we seek to protect our proprietary rights through unregistered copyright protection and through restrictions on access to our trade secrets and other proprietary information which we impose through confidentiality agreements with our customers, suppliers, employees and consultants.

There are a number of companies besides us who hold or may acquire patents for various aspects of the technology incorporated in the ITU’s standards or other industry standards or proprietary standards, for example, in the fields of wireless and cable. While we have obtained cross-licenses from some of the holders of these other patents, we have not obtained a license from all of the holders. The holders of these other patents from whom we have not obtained licenses may take the position that we are required to obtain a license from them. Companies that have submitted their technology to the ITU (and generally other industry standards making bodies) for adoption as an industry standard are required by the ITU to undertake to agree to provide licenses to that technology on reasonable terms. Accordingly, we believe that even if we were required to negotiate a license for the use of such technology, we would be able to do so at an acceptable price. Similarly, third parties who also participate with respect to the same standards-setting organizations as do we may be able to negotiate a license for use of our proprietary technology at a price acceptable to them, but which may be lower than the price we would otherwise charge.

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Third parties have claimed, and from time to time in the future may claim, that our past, current or future products infringe their intellectual property rights. Intellectual property litigation is complex and there can be no assurance of a favorable outcome of any litigation. Any future intellectual property litigation, regardless of outcome, could result in substantial expense to us and significant diversion of the efforts of our technical and management personnel. Litigation could also disrupt or otherwise severely impact our relationships with current and potential customers as well as our manufacturing, distribution and sales operations in countries where relevant third partythird-party rights are held and where we may be subject to jurisdiction. An adverse determination in any proceeding could subject us to significant liabilities to third parties, require disputed rights to be licensed from such parties, assuming licenses to such rights could be obtained, or require us to cease using such technology and expend significant resources to develop non-infringing technology. We may not be able to obtain a license at an acceptable price.

WeIn the past, we have entered into technology licensing fee agreements with third parties. Under these agreements, we agreed to pay thethese third parties royalties, based on sales of relevant products.

Legal Proceedings

None.

AudioCodes Ltd. is the parent company of a group that consists of AudioCodes Ltd. and over 20 subsidiaries worldwide. AudioCodes Inc., our wholly-owned U.S. subsidiary incorporated in Delaware, is a significant subsidiary based in Somerset,Piscataway, New Jersey.

We lease our main office and warehouse facilities, located in Airport City, Lod, Israel, which occupy approximately 274,000 square feet for annual lease payments of approximately $5.7$6.5 million (including management fees). The term of this lease extends until January 31, 2024. In November 2022, we entered into new lease agreement in Park Naymi, which is located near Messubim Junction in Israel, or the New Lease Agreement. The New Lease Agreement will replace the current lease agreement of our main offices in Israel. Pursuant to the New Lease Agreement, we will lease from the landlord an approximately 10,000 square foot facility, or the Premises. The lease of the Premises, which is still under construction, is expected to commence in 2023. The initial lease term under the New Lease Agreement is for seven years, commencing upon the transfer of possession of the Premises. We additionally hold options under the New Lease Agreement to extend the lease term for additional periods of up to 12 years.

We also lease offices in Beer Sheva, Israel, or the Beer Sheva Lease. The annual lease payments in 2022 (including management fees) for Beer Sheva Lease was approximately $418,000.

Our U.S. subsidiary, AudioCodes Inc., previously leased an approximately 15,400 square foot facility in Somerset, New Jersey. Jersey, or the Prior New Jersey Lease. On May 13, 2022, we entered into a new leasing arrangement for an approximately 14,706 square foot facility in Piscataway, New Jersey, or the Current New Jersey Lease.

AudioCodes Inc. also leases officeoffices in Morrisville, North Carolina.Carolina, or the North Carolina Lease. The annual lease payments in 20192022 (including management fees) for all our offices in the United States were approximately $480,000.$237,000.

In October 2021, we entered into a termination agreement effectively terminating the Prior New Jersey Lease, or the Termination Agreement. Pursuant to the Termination Agreement, we agreed to terminate the Prior New Jersey Lease prior to its original expiration date. The termination is subject to our receipt of a termination payment from the landlord in the aggregate amount of $1.5 million (which is to be paid in two equal installments of $750,000) minus minor electricity payments to be paid by us. We received the first payment in October 2021 and the remaining payment in August 2022. We recorded lease income related to the Termination Agreement in the approximate amounts of $1,093,000 and $382,000 in the years ended December 31, 2022 and 2021, respectively.

We lease additional offices in Israel as well as for our international offices. Weoffices; however, we do not believe the lease agreements for these offices to beare material.

We believe that these properties are sufficient to meet our current needs. However, we may need to increase the size of our current facilities, seek new facilities, close certain facilities or sublease portions of our existing facilities in order to address our needs in the future.

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ITEM 4.A.     UNRESOLVED STAFF COMMENTS

None.

ITEM 5.        OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. These accounting principles require management to make certain estimates, judgments and assumptions based upon information available at the time that they are made, historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented.

Our management has reviewed our critical accounting policies and related disclosures with our Audit Committee. See Note 2 to our Consolidated Financial Statements included elsewhere in this Annual Report, which contains additional information regarding our accounting policies and other disclosures required by U.S. GAAP.

On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management believes the significant accounting policies that affect its more significant judgments and estimates used in the preparation of its consolidated financial statements and are the most critical to aid in fully understanding and evaluating AudioCodes’ reported financial results include the following:

The extent of the impact of current macroeconomic conditions, including, but not limited to, rising inflation, an overall global economic slowdown and the ongoing conflict in Ukraine, on our business, financial condition and results of operations will depend on future developments, which are highly uncertain at this time. Accordingly, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply certain of our significant accounting policies.

Revenue Recognition and Allowance for Sales Returns

We generate our revenues mainlyprimarily from the sale of productssoftware licenses, equipment, and related services. We sell our productsservices through a direct sales force and sales representatives. Our products are delivered to our customers, which include original equipment manufacturers, or OEMs, network equipment providers, systems integrators, enterprises, carriers and distributors in the telecommunications and networking industries, all of whom are considered end-users.

AsTable of January 1, 2018, we have adopted ASC 606, “Revenue from Contracts with Customers”, As a result of this adoption, revenues from products and servicesContents

Revenues are recognized in accordance with Accounting Standards Codification, or ASC, 606, and we have revised our accounting policy for revenue recognition as detailed below. We recognize revenue under the core principle that transfers of control to our customers should be depicted in an amount reflecting the consideration we expect to receive in revenue.“Revenue from Contracts with Customers”. As such, we identify a contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to each performance obligation in the contract and recognize revenues when (or as) we satisfy aits performance obligation. We have no obligation to customers after the date on which products are delivered, other than pursuant to warranty obligations and any applicable right of return. We grant to some of our customers the right of return or the ability to exchange a specific percentage of the total price paid for products they have purchased over a limited period for other products.

obligations.

We maintain a provision for product returns and exchanges and other incentives. This provision is based on historical sales returns, analysis of credit memo data and other known factors. This provision amounted to $2.3 million and $1.9 million as of December 31, 2018 and 2019, respectively. Following the adoption of ASC 606, as of December 31, 2018 and 2019, this provision was recorded as part of other payables and accrued expenses.

As of January 1, 2018, and following the adoption of ASC 606, when we enter into contracts that includedcan include combinations of products and services that are capable of being distinct and accounted for as separate performance obligations, the productsobligations.  The software licenses and equipment are distinct upon delivery as the customer can derive the economic benefit of it without any professional services, updates or technical support.additional services. We allocate the transaction price to each performance obligation, based on its relative standalone selling price out of the total consideration of the contract. For

Software license and equipment revenues are recognized at the point of time when control is transferred, the product has been delivered and the benefit of the asset has been transferred.

Revenues from maintenance and support we determineservices are recognized over time ratably over the term of the contract.

We enter into contracts that included combinations of products and services that are capable of being distinct and accounted for as separate performance obligations. The software licenses and equipment are distinct as the customer can derive the economic benefit of it without any additional services. We allocate the transaction price to each performance obligation, based on its relative standalone selling prices based onprice out of the price at whichtotal consideration of the contract.

As we separately sell a renewal contract on a stand-alone basis. For professional services, we determine the standalone selling prices based on the price at which we separately sell those services on a stand-alone basis.

Our products contain a significant element relating to its proprietary technology and its solutions offer substantially different features and functionality. As a result, the comparable pricing of products with similar functionality typically cannot be obtained. Additionally, as we are unable to reliably determine the selling prices of comparable products sold by competitors and generally doesdo not sell the products separately on a stand-alonestandalone basis, the stand-alonestandalone selling prices are not directly observable. Therefore, we make estimates, based on reasonably available information. The estimated selling price is established considering multiple factors including, but not limited to,such as historical selling prices, internal pricing practices, in different geographical areas and through different sales channels, gross margin objectives internal costs,and discount policy.

We grant to certain customers a right of return or the pricing strategiesability over a limited period to exchange for other products a specific percentage of competitorsthe total price paid for products they have purchased. We maintain a provision for product returns and industry technology lifecycles.exchanges and other incentives, based on our experience with historical sales returns, analysis of credit memo data and other known factors, all in accordance with ASC 606. This provision is deducted from revenues and amounted to approximately $2.7 million and $3.5 million as of December 31, 2022 and 2021, respectively. This provision was recorded as part of other payables and accrued expenses.

In instances of contracts where revenue recognition differs from the timing of invoicing, the Company generally determined that those contracts do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company's products and services, not to receive or provide financing. The Company uses the practical expedient and does not assess the existence of a significant financing component when the difference between payment and revenue recognition is a year or less.

ProductDeferred revenues include amounts invoiced to customers for which revenue has not yet been recognized. Deferred revenues are recognized at the point of time when control is transferred, the product has been delivered and the benefit of the asset has transferred. Revenues from support are recognized ratably over the term of the underlying contract term. Renewals of support contracts create new performance obligations that are satisfied over the term with the revenues recognized ratably over the period. For professional services,as (or when) we perform the performance obligations are satisfied, and revenues are recognized, whenunder the services are provided or once the service term has expired.contract.

Allowance for Doubtful Accounts

Our trade receivables are derived from sales to customers located primarily in the Americas, the Far East, Israel and Europe. We perform ongoing credit evaluations of our customers and to date have not experienced any material losses from uncollected receivables. An allowance for doubtful accounts is determined with respect to those amounts that we have recognized as revenue and determined to be doubtful of collection. We usually do not require collateral on trade receivables because most of our sales are made to large and well-established companies. On occasion we may purchase credit insurance to cover credit exposure for a portion of our sales and this may mitigate the amount we need to write off as a result of doubtful collections.

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Inventories

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the “weighted average cost” method for raw materials and finished products. We periodically evaluate the quantities on hand relative to current and historical selling prices and historical and projected sales volume and technological obsolescence. Based on these evaluations, inventory write-offs are provided to cover risks arising from slow movingslow-moving items, technological obsolescence, excess inventories, discontinued productsproduct lines and for net realizable valuemarket prices lower than cost. During the year ended December 31, 2022, the Group's inventory write off was immaterial. We wrote-offwrote off inventory in a total amount of $1.9 million, $1.9approximately $1.7 million and $4.5$4.2 million in the years ended December 31, 2017, 2018,2021, and 2019,2020, respectively.

Intangible assets

Assets

As a result of our acquisitions, our balance sheet included acquired intangible assets in the aggregate amount of approximately $1.3$1.6 million and $0.9$2.4 million as of December 31, 20182022 and 2019,2021, respectively.

We allocated the purchase price of the companies we have acquired to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. These valuations require management to make significant estimations and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include future expected cash flows from technology acquired, trade names, backlog and customer relationships. In addition, other factors considered are the brand awareness and market position of the products sold by the acquired companies and assumptions about the period of time the brand will continue to be used in the combined company’s product portfolio. Management’s estimates of fair value are based on assumptions believed to be reasonable, but whichsuch assumptions are inherently uncertain and unpredictable.

If we did not appropriately allocate these components or we incorrectly estimate the useful lives of these components, our computation of amortization expense may not appropriately reflect the actual impact of these costs over future periods, which willcould materially and adversely affect our operating results.

Intangible assets are comprised of acquired technology, customer relations and licenses. Intangible assets that are not considered to have an indefinite useful life are amortized using the straight-line basis over their estimated useful lives, which range from four and a half to ten years. Recoverability of these assets is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the assets. If the assets are considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.

During the years ended December 31, 2017, 20182022, 2021 and 2019,2020, no impairment charges were identified.

Goodwill

As a result of our acquisitions, our balance sheet included acquired goodwill in the aggregate amount of approximately $36.2$37.6 million as of December 31, 20182022 and 2019.2021. Goodwill represents the excess of the purchase price and related costs over the fair value of net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method. In accordance with ASC 350, “Intangible, Goodwill and Other,” goodwill is not amortized and is tested for impairment at least annually. Our annual impairment test is performed at the end of the fourth quarter each year. If events or indicators of impairment occur between the annual impairment tests, we perform an impairment test of goodwill at that date.

ASC 350, “Intangibles – Goodwill and Other”, prescribes a two-phase process for impairment testing of goodwill. The first phase screens for impairment, while the second phase (if necessary) measures impairment. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. In such case, the second phase is then performed, and we measure impairment by comparing the carrying amount of the reporting unit’s goodwill to the implied fair value of that goodwill. An impairment loss is recognized in an amount equal to the excess. We have an option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required.

During the years ended December 31, 2017, 20182022, 2021 and 2019,2020, no impairment losses were identified.identified with respect to intangible assets.

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Income Taxes and Valuation Allowance

As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax expense in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure, which is accrued as taxes payable, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets, which are included within our consolidated balance sheet. We may record a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that is more likely than not to be realized.

Although we believe that our estimates are reasonable, there is no assurance that the final tax outcome and the valuation allowance will not be different thanfrom those which are reflected in our historical income tax provisions and accruals.

We have filed or are in the process of filing U.S. federal, state and foreign tax returns and Israel tax returns, that might be subject to audit by the respective tax authorities. Although the ultimate outcome is unknown, we believe that adequate amounts have been provided for and any adjustments that may result from tax return audits are not likely to materially adversely affect our consolidated results of operations, financial condition or cash flows.

Share-based compensation

Compensation

We account for share-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”. We utilize the Black-Scholes option pricing model to estimate the fair value of share-based compensation at the date of grant. The Black-Scholes model requires subjective assumptions regarding dividend yields, expected volatility, expected life of options and risk-free interest rates. These assumptions reflect management’s best estimates. Changes in these inputs and assumptions can materially affect the estimate of fair value and the amount of our share-based compensation expenses relating to sharestock options. We recognized share-based compensation expense of $2.3$15.1 million, $3.3$14.1 million and $5.3$8.8 million in the years ended December 31, 2017, 20182022, 2021 and 2019,2020, respectively. As of December 31, 2019,2022, there was approximately $7.8$16.5 million of total unrecognized share-based compensation expense related to non-vested share-based compensation arrangements granted by us. As of December 31, 2019, that2022, such expense is expected to be recognized over a weighted-average period of 1.072.89 years.

Contingent liabilities

Liabilities

We are, from time to time, involved in claims, lawsuits, government investigations, and other proceedings arising from the ordinary course of our business. We record a provision for a liability when we believe that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. Such legal proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and cash flows. No provision was recorded as of December 31, 2019.2022.