Unassociated Document

Exhibit 1

P R E S S R E L E A S E

Company Contacts		IR Agency Contact
Guy Avidan, VP Finance & CFO AudioCodes Tel: +972-3-976-4000 guy.avidan@audiocodes.com	Shirley Nakar, Director, Investor Relations AudioCodes Tel: +972-3-976-4000 shirley@audiocodes.com	Erik Knettel, Grayling Tel: +1-646-284-9415 erik.knettel@grayling.com

AudioCodes Reports Third Quarter 2010 Financial Results

Lod, Israel – October 20, 2010 – AudioCodes Ltd. (NasdaqGS: AUDC), a leading provider of Voice over IP (VoIP) technologies and Voice Network products, today announced financial results for the third quarter of 2010, ended September 30, 2010.

Revenues for the third quarter of 2010 were $38.3 million compared to $36.5 million for the second quarter of 2010 and $32.1 million for the third quarter of 2009.

Net income in accordance with U.S. generally accepted accounting principles (GAAP) was $2.9 million, or $0.07 per diluted share, for the third quarter of 2010 compared to net income of $2.1 million, or $0.05 per diluted share, for the second quarter of 2010, and a net loss of $79,000, or $0.00 per share, for the third quarter of 2009.

Non-GAAP net income for the third quarter of 2010 was $3.6 million, or $0.09 per diluted share, compared to $2.8 million, or $0.07 per diluted share, for the second quarter of 2010, and $1.6 million, or $0.04 per diluted share, for the third quarter of 2009.

Non-GAAP net income excludes (i) stock-based compensation expenses, (ii) amortization expenses related to intangible assets, and (iii) for the 2009 periods, an adjustment to expenses related to the Company’s Senior Convertible Notes due to application of FASB Staff Position APB 14-1. Almost all of the Company’s Senior Convertible Notes were repurchased in November 2009. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the tables that accompany the condensed consolidated financial statements contained in this press release.

“I am pleased to announce another strong quarter of sequential and year-over-year revenue and net income growth. Our financial performance underscores our execution of our strategic initiative to migrate from a pure play VoIP gateway focus to a global provider of converged VoIP and data solutions for service providers and enterprises,” said Shabtai Adlersberg, Chairman of the Board, President and CEO of AudioCodes. “AudioCodes has put in place a number of new growth opportunities for our business which are starting to ramp up as we look ahead to 2011 and beyond. These include our Mobile VoIP solutions which are expected to enable us to emerge as an early leader in mobile VoIP clients for the smartphone market and our Enterprise Session Border Controllers which are seeing solid demand. We continue to launch leading edge products including our recently announced All-In-One Multimedia Home Gateway that provides service integration for the broadband home user, an increasingly important feature for our service provider customers. Overall, we continue to focus on financial execution, supported by our solid balance sheet, healthy cash flows from operations and a strict focus on maintaining an efficient operating expense base,” concluded Mr. Adlersberg.

During the third quarter of 2010, AudioCodes generated $5.8 million in cash from operating activities compared to $5.6 million in the third quarter of 2009.

Cash and cash equivalents and short-term deposits were $58.6 million as of September 30, 2010 compared to $52.9 million as of December 31, 2009.

Conference Call & Web Cast Information

AudioCodes will conduct a conference call at 9:00 A.M., Eastern Time on October 20, 2010 to discuss the Company’s third quarter 2010 operating and financial results. The conference call will be simultaneously Web cast. Investors are invited to listen to the call live via Web cast at the AudioCodes corporate website at www.audiocodes.com

Third Quarter 2010 Financial Results

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About AudioCodes

AudioCodes Ltd. (NasdaqGS: AUDC) designs, develops and sells advanced Voice over IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises. AudioCodes is a VoIP technology market leader focused on converged VoIP & data communications and its products are deployed globally in Broadband, Mobile, Cable, and Enterprise networks. The company provides a range of innovative, cost-effective products including Media Gateways, Multi-Service Business Gateways, Session Border Controllers (SBC), Residential Gateways, IP Phones, Media Servers and Value Added Applications. AudioCodes’ underlying technology, VoIPerfectHD™, relies on AudioCodes’ leadership in DSP, voice coding and voice processing technologies. AudioCodes High Definition (HD) VoIP technologies and products provide enhanced intelligibility and a better end user communication experience in Voice communications. For more information on AudioCodes, visit http://www.audiocodes.com

Statements concerning AudioCodes' business outlook or future economic performance; product introductions and plans and objectives related thereto; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are "forward-looking statements'' as that term is defined under U.S. Federal securities laws. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties and factors include, but are not limited to: the effect of global economic conditions in general and conditions in AudioCodes' industry and target markets in particular; the ability of AudioCodes to raise additional financing; shifts in supply and demand; market acceptance of new products and continuing products' demand; the impact of competitive products and pricing on AudioCodes' and its customers' products and markets; timely product and technology development and upgrades and the ability to manage changes in market conditions as needed; possible disruptions from acquisitions; the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes’ business; and other factors detailed in AudioCodes' filings with the Securities and Exchange Commission. AudioCodes assumes no obligation to update the information in this release.

© 2010 AudioCodes Ltd. All rights reserved. AudioCodes, AC, AudioCoded, Ardito, CTI2, CTI², CTI Squared, HD VoIP, HD VoIP Sounds Better, InTouch, IPmedia, Mediant, MediaPack, NetCoder, Netrake, Nuera, Open Solutions Network, OSN, Stretto, TrunkPack, VMAS, VoicePacketizer, VoIPerfect, VoIPerfectHD, What’s Inside Matters, Your Gateway To VoIP and 3GX are trademarks or registered trademarks of AudioCodes Limited. All other products or trademarks are property of their respective owners. Product specifications are subject to change without notice.

Summary financial data follows

Third Quarter 2010 Financial Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	September 30,		December 31,
	2010		2009
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	44,266	$	38,969
Short-term bank deposits		14,314		13,902
Trade receivables, net		25,204		18,522
Other receivables and prepaid expenses		4,683		2,754
Deferred tax assets		1,053		1,053
Inventories		15,946		13,516

Total current assets		105,466		88,716

LONG-TERM INVESTMENTS:
Investments in companies		1,547		1,510
Deferred tax assets		1,174		1,174
Severance pay funds		14,183		12,235

Total long-term investments		16,904		14,919

PROPERTY AND EQUIPMENT, NET		3,993		4,956

GOODWILL, INTANGIBLE ASSETS, DEFERRED CHARGES AND OTHER, NET		37,790		38,942

Total assets	$	164,153	$	147,533

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term bank loans	$	6,000	$	6,000
Trade payables		12,598		8,609
Other payables and accrued expenses		26,282		19,550
Total current liabilities		44,880		34,159

LONG-TERM LIABILITIES:
Accrued severance pay	$	14,926	$	13,336
Long-term bank loans		11,250		15,750
Senior convertible notes		353		403
Other payables		1,135		-
Total Long-Term liabilities		27,664		29,489

Total equity		91,609		83,885

Total liabilities and equity	$	164,153	$	147,533

Third Quarter 2010 Financial Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except per share data

	Nine months ended					Three months ended
	September 30,					September 30,
	2010		2009			2010		2009
	(Unaudited)					(Unaudited)
Revenues	$	109,576	$	91,736		$	38,294	$	32,082
Cost of revenues		48,911		40,927			17,080		14,362
Gross profit		60,665		50,809			21,214		17,720
Operating expenses:
Research and development, net		22,350		22,697			7,264		7,245
Selling and marketing		25,026		24,089			8,814		7,749
General and administrative		6,137		5,857			2,106		1,931
Total operating expenses		53,513		52,643			18,184		16,925
Operating income (loss)		7,152		(1,834	)		3,030		795
Financial expenses, net		285		2,349			84		751
Income (loss) before taxes on income		6,867		(4,183	)		2,946		44
Income taxes, net		225		236			91		106
Equity in income (losses) of an affiliated companies		17		(68	)		17		(17	)
Net income (loss)	$	6,659	$	(4,487	)	$	2,872	$	(79	)
Net loss attributable to non-controlling Interest		111		374			-		165
Net income (loss) attributable to AudioCodes	$	6,770	$	(4,113	)	$	2,872	$	86
Basic net earnings (loss) per share	$	0.17	$	(0.11	)	$	0.07	$	0.00
Diluted net earnings (loss) per share	$	0.17	$	(0.11	)	$	0.07	$	0.00
Weighted average number of shares used in computing basic net earnings per share		40,429		40,189			40,550		40,204
Weighted average number of shares used in computing diluted net earnings per share		40,763		40,189			40,743		40,309

Third Quarter 2010 Financial Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES

NON-GAAP PROFORMA STATEMENTS OF OPERATIONS

In thousands, except per share data

	Nine months ended						Three months ended
	September 30,						September 30,
	2010			2009			2010			2009
	(Unaudited)						(Unaudited)
Revenues	$	109,576		$	91,736		$	38,294		$	32,082
Cost of revenues (1) (2)		47,937			39,897			16,762			14,028
Gross profit		61,639			51,839			21,532			18,054
Operating expenses:
Research and development, net (1)		22,073			22,230			7,187			7,111
Selling and marketing (1) (2)		24,385			23,113			8,629			7,448
General and administrative (1)		5,832			5,696			2,007			1,892
Total operating expenses		52,290			51,039			17,823			16,451
Operating income		9,349			800			3,709			1,603
Financial income (expenses), net (3)		(285	)		65			(84	)		76
Income before taxes on income		9,064			865			3,625			1,679
Income taxes, net		225			236			91			106
Equity in income (losses) of an affiliated companies		17			(68	)		17			(17	)
Net income (loss)	$	8,856		$	561		$	3,551		$	1,556
Net loss attributable to non-controlling Interest		111			374			-			165
Net income (loss) attributable to AudioCodes	$	8,967		$	935		$	3,551		$	1,721
Diluted net earnings (loss) per share	$	0.22		$	0.01		$	0.09		$	0.04
Weighted average number of shares used in computing diluted net earnings per share		40,675			40,248			40,011			40,331

(1) Excluding stock-based compensation expenses related to options granted to employees and others.

(2) Excluding amortization of intangible assets related to the acquisitions of Nuera, Netrake and CTI Squared.

(3) Excluding adjustments to interest expense with respect to Senior Convertible Notes, due to implementation of FSP APB 14-1.

Note: Non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. The Company believes that non-GAAP information is useful because it can enhance the understanding of its ongoing economic performance and therefore uses internally this non-GAAP information to evaluate and manage its operations. The Company has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results and because many comparable companies report this type of information as well.

Third Quarter 2010 Financial Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES

RECONCILIATION BETWEEN GAAP NET INCOME AND NON-GAAP NET INCOME

In thousands, except per share data

	Nine months ended					Three months ended
	September 30,					September 30,
	2010		2009			2010		2009
	(Unaudited)					(Unaudited)
GAAP net income (loss)	$	6,659	$	(4,487	)	$	2,872	$	(79	)
GAAP net income (loss) per share	$	0.17	$	(0.11	)	$	0.07	$	0.00
Cost of revenues:
Stock-based compensation (1)		48		94			9		24
Amortization expenses (2)		926		936			309		310
		974		1,030			318		334
Research and development, net:
Stock-based compensation (1)		277		467			77		134
Selling and marketing:
Stock-based compensation (1)		414		725			109		226
Amortization expenses (2)		227		251			76		75
		641		976			185		301
General and administrative:
Stock-based compensation (1)		305		161			99		39
Financial expenses:
FSP APB 14-1 adjustment (3)		-		2,414			-		827
Non-GAAP net income	$	8,856	$	561		$	3,551	$	1,566
Non-GAAP Diluted net income per share	$	0.22	$	0.01		$	0.09	$	0.04

(1) Stock-based compensation expenses related to options granted to employees and others.

(2) Amortization of intangible assets related to the acquisitions of Nuera, Netrake and CTI Squared.

(3) Adjustments to interest expense with respect to Senior Convertible Notes, due to implementation of FSP APB 14-1.

Third Quarter 2010 Financial Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

U.S. dollars in thousands

	Nine months ended						Three months ended
	September 30,						September 30,
	2010			2009			2010			2009
	( Unaudited)			( Unaudited)			( Unaudited)			( Unaudited)
Cash flows from operating activities:
Net income (loss)	$	6,659		$	(4,487	)	$	2,872		$	(79	)
Adjustments required to reconcile net income to net cash provided by operating activities:					-						-
Depreciation and amortization		3,401			3,825			1,377			1,178
Amortization of marketable securities premiums and accretion of discounts, net		-			152			-			68
Equity in losses (income) of affiliated companies and interest on loans to affiliated company		(37	)		56			(17	)		5
Decrease in accrued severance pay, net		(358	)		(707	)		(94	)		(292	)
Stock-based compensation expenses		1,044			1,447			294			423
Amortization of senior convertible notes discount and deferred charges		-			2,509			-			861
Increase in accrued interest on marketable securities, bank deposits and structured notes		-			2,024			-			2,473
Decrease (increase) in trade receivables, net		(6,682	)		6,938			(368	)		(1,636	)
Decrease (increase) in other receivables and prepaid expenses		(1,333	)		(1,304	)		113			(1,138	)
Decrease (increase) in inventories		(2,430	)		4,193			(880	)		2,894
Increase (decrease) in trade payables		3,989			(4,080	)		(1,512	)		(3,245	)
Increase (decrease) in other payables and accrued expenses		6,458			(1,457	)		4,058			4,131
Net cash provided by operating activities		10,711			9,109			5,843			5,643
Cash flows from investing activities:
Proceeds of marketable securities		-			9,000			-			8,000
Proceeds from sale of short-term deposits		43,642			70,530			13,516			48,825
Investment in affiliated companies		-			(326	)		-			(77	)
Purchase of property and equipment		(1,285	)		(863	)		(652	)		(94	)
Investment in short-term deposits		(44,054	)		(49,318	)		(14,314	)		(15,300	)
Net cash provided by (used in) investing activities		(1,697	)		29,023			(1,450	)		41,354

Third Quarter 2010 Financial Results

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AUDIOCODES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

U.S. dollars in thousands

	Nine months ended						Three months ended
	September 30,						September 30,
	2010			2009			2010			2009
	( Unaudited)			( Unaudited)			( Unaudited)			( Unaudited)
Cash flows from financing activities:
Bank loan refund		(4,500	)		(4,500	)		(1,500	)		(1,500	)
Payment of acquisition of NSC		(74	)		-			-			-
Repurchase of convertible notes, net of costs		(50	)		-			(50	)		-
Proceeds from issuance of shares upon exercise of options, warrants and employee stock purchase plan		907			33			394			33
Net cash used in financing activities		(3,717	)		(4,467	)		(1,156	)		(1,467	)

Increase in cash and cash equivalents		5,297			33,665			3,237			45,530
Cash and cash equivalents at the beginning of the period		38,969			36,779			41,029			24,914
Cash and cash equivalents at the end of the period	$	44,266		$	70,444		$	44,266		$	70,444

Third Quarter 2010 Financial Results

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