RDCM - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the Second Quarter of 2021. All participants are present in a listen-only mode.

Following management's formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay on the company's website at www.radcom.com later today.

Eyal CEO, are RADCOM's Amir call CFO. the Harari, and RADCOM's Hai, On management presentation prepared that note has Please that a used the will during for call. be reference your

do Investors section RADCOM's not yet, downloaded If www.radcom.com/investor-relations. of the you the you website have may in link so it at through

Before Safe provision. we like the I review would begin, to Harbor

products, certain second its statements the conference about uncertainties, pipeline, and limited in not but potential the expansion R&D The spending, opportunities. company's XG in for in of expectation investments call statements provisions, the that filings. regarding and industry statements cause investment call, could SEC Harbor overall technology risks evaluating its financial XXXX, new substitute requests this be financial and in the the not conference operator, Forward-looking expansion company's the actual corresponding users’ from expectation The trends measures, differ in the additional consistently period-to-period. to information cloud operating of visibility to provide with including and to company’s respect its comparing half referring the included measures momentum, demand the expenses, continued and and additional Safe market the size into expected and Generally with reconciliations website. does provided for in to for including, with to considered are enhance presentation and sales top are RADCOM's outlined involve to performance. several core non-cash of undertake the the are a position, accordance measures, Israel digital the in understanding to its the and forward-looking management trend full with of the from results release, partnerships the potential from providers Authority, Rakuten non-GAAP market AT&T, in operations this review Principles. not compensation to the grants The performance be is a helpful its non-GAAP and GAAP position, these the cash the statements. presentation forward-looking with future In Investors results assessing potential of company’s potential financial guidance. Innovation meant The company's available for company's company's our in results and with encouraged respect relationships top expectation earnings update revenue and information company Accepted tier stock-based prepared which growth, financial LATAM Accounting of quarter's will the non-GAAP telecom, the certain By to risks additional potential excluding to on its

I Please the go to turn over Eyal. to like call would ahead. Now,

Eyal Harari

today. quarter and Thank you, for this results. release morning, stating we press XXXX joining Earlier a thank issued our you, all second operator, us

eighth as with was We number in pleased XG are invest as XXXX revenue quarter the of for We growth. quarter quarter higher solid delivered revenue sales cloud significant continue an the another advanced of our to company's million, second consecutive we we execute the results. in $X.X a Total and representing engage opportunities. of technology strategy year-over-year

covers announced orders at XXXX. of initial the from base We the increasing LATAM secured we ACE, their believe significant made which our win the with our we This May. the of on network XG platform. operator’s meaningful based customer we to automated our operators the in second was advanced capabilities future. with of in the top This visibility Additionally, the several deployment expanding into as RADCOM provides XG technology achieved and to assurance value network half during XG innovative that operator tier progress quarter expectation radio existing the order

expanding progress with We these our and delivering on commitments remain focused our on we as pleased relationships. are

and delivering shift telecom week, can and faults solution adopting insights. new impact of would and ACE. digital our industry in last We of challenges enriched of We ensures innovative more Even and There continue more I pandemic, millions in people network customer operating and operator a solution advancing solution am complex, proud services. a This cloud to of sessions overcome new helps introduced RADCOM been quality analyze the dedication AI-driven technology commitments. our is invest culture data AI the quickly worldwide multi-vendor to technologies part communication our moving ongoing the automatically the and with R&D, in of reveal for networks. strategically that their announced as of to team underlying commitment forward. real-time towards XG our has massive otherwise This be and are be the identified networks on tools. unlikely in

As network favorable trend new ramp a up activity or solutions. our their XG to operating partnerships a building large-scale to keep a in for networks We creating telecom are the and between We result, positively that for this will this operators infrastructure existing with believe providers business. environment new future operators of pace our see worldwide trend. contracts networks cloud impact

mentioned still XG known of to same Today, XG. XG connect in This network. to has XG we both stage non-standalone compatible multiple phase, XG are As at and first radios, as existing joining this subscriber is the before, phases. In the the handsets XG.

will this stage edge assurance the standalone The early network opportunities, second slicing, standalone signs this and mass deployments. network deploy XG known are critical monitor XG. of like network Operators to in services phase solutions still advanced new entirely the of transition. more core with an but early as There at and environment is new is

solutions begin expect their some choosing XXXX forces of multi-stage during and beyond. adopters see assurance early the We to

in GSMA projected of their operators XG. invest more are for Over to report trillion XX% networks. be five the $X.X than to will that next about years, from According a Intelligence,

We cases noticing network networks tender edge request are the XG use and private operators already evolving as computing, in slicing such new as them process.

due request automation this to new enter architecture, our to capabilities. equipped solutions advanced well that delivers XG cloud-native are We and

XG had achieved standalone critical XX% first industry’s in with to Mobile mobile provide to the Rakuten for contracts, it continues that experiences. Rakuten Mobile RADCOM rollout standalone assurance May, XG Rakuten also population of assurance coverage Japan. In announced XXXX. service services in its its network launch plan delivering next-generation for one As

it RADCOM network, ACE its intelligently has standalone So started which monitors. already deploying

second cloud-native virtualized quarter, subscriber deployments as Solution building and analysts first the are Mobile, our During study provides innovative journey of solution stating importance Mason Analysys end-to-end network. case the Rakuten service industry at world's environment. they visibility, a in RADCOM RADCOM’s published their end-to-end fully all in a and the supporting about

of artificial automation, Rakuten the requirement. enables also for of critical intelligence solution Our use Mobile’s was which one

with partnership Rakuten. with our progress We the in are delighted

solution releases We deployment our as the cloud-based network provide using continually to have latest processes developed state-of-the-art their software evolves.

services, which Rakuten addition, are rapid new to Mobile, changes without affecting features In roll confidence testing its network. in provides out live the we

into As being worldwide built. to platform momentum. network RCP, network noted in Solutions Rakuten the it's gaining platform communication already This is which is on the integrated cloud innovative other and packages Rakuten’s operators Rakuten’s case platform markets currently architecture study, RADCOM Mobile’s in

For help example, to Germany’s network. this month, mobile X$X contracted new build Rakuten its

to with Rakuten’s fully high-performance In create extensive addition, and with XG. exploit communication access agility full the mobile Europe's virtualized of Rakuten, platform. will X$X and potential will network X$X first, automation Together have to

on are XG standalone quarters, networks previous in mentioned technology. cloud-native built As

providers. we continue of a lots telecom public collaboration As result, cloud seeing and between operators

network cloud technology, platform announced on. in June, which was Microsoft core network AT&T’s acquiring carrier-grade example, runs XG it AT&T’s For

AT&T edge using network at recently scaled network In its level of Microsoft to addition, to workloads efficiency. committed at a support for the

integrated a Microsoft was ACE announced in fully March, reminder, Azure. with As we that RADCOM

we providers expect additional in to more with We continue continues our customer be expand cloud environments. a to engage operators key strategic to deploy to solution availability ecosystem, of cloud multi-cloud us. as AT&T the for to public

key to network their experience success. is emphasized a provider, As priority the frequently leading customer AT&T

network infrastructure Our continue their monitors their is the as customer cutting-edge cloud the experience software embedded to network in evolving underlying and they cloud.

we cutting-edge and of capabilities the releases evolution new software network. support as deliver to continue to cloud its AT&T We

that is technology, on gaining with hands deploying Given these we cloud-native networks. operators invaluable monitoring working leading experience, are RADCOM in our

proof-of-concept we the to serves engaged a reaching leadership early the give From year, these seen expertise in number I significant operators. In significant new To our a the new growth number with the sales of is is our stages to building. telecom cloud percentage number are higher addition, currently this capabilities at double-digit beginning as color, with thought increase summarize, opportunities the orders the have technological only of mentioned of some a several logos. of the journey, and and by To pipeline. build significant of stage. XG our it testament transition we and out even in with with ability secured opportunities being some momentum increase the innovate we quarter Earlier,

for result, a assurance demand we As increase. next-generation to the solution expect

I visibility. our who call revenue XXXX $XX on year go $XX turn would ahead. like full We the to in to CFO, current discuss are reiterating results that, based Hai our Amir our please of million detail. financial Amir, guidance the million, With will over

Amir Hai

good Thank you, Eyal, everyone. morning, and

turn will share-based second increasing with mainly exclude in Now the I numbers, XXXX. compensation. in XXXX second be the million referring non-GAAP $X.X the Slide financial highlights. from $X.X ended please you X understand results, for million revenue, To help to quarter of which our to quarter We of

the margin a basis that Our revenue margin can in note on XX%. XXXX second the gross our gross on quarter depending was Please of non-GAAP fluctuate mix.

an headcount of for an of the and a on in the received XXXX Israeli related non-GAAP expenses a during second compared grant $XXX,XXX increase of second were to U.S. investments. of quarter, of dollar to the quarter Our million, and $XXX,XXX, our to Israel quarter decrease new rate gross year. We part XXXX. our Shekel last the R&D a the increase in exchange the the quarter of Authority Innovation as compared $X.X negative second mainly is This between $XX,XXX a grant basis product from

Innovation In XXXX discussion we have additional plans. the next are improve addition, clearer for Authority visibility Therefore, ongoing in will the to Israel we during quarter. with development engaged

net loss non-GAAP for or to a basis compared basis the quarter our compared quarter the non-GAAP share, our of the of for net XXXX were R&D XXXX per for net second basis XXXX. loss second on second loss of quarter a and was the as the on non-GAAP an to or diluted $XXX,XXX, as a a a million net quarter the or diluted second diluted on a X, GAAP second to increase to G&A quarter net million, on net from loss or headcount for the you of million compared $X.X the compared XXXX of XXXX. XXXX XXXX. in quarter quarter and expenses were a share income quarter of of the of net share, the quarter per slight can Net operating quarter $X.XX of net expenses second per for Operating second million a for for $XXX,XXX, basis, the second XXXX. basis a non-GAAP result, Slide On $X.X of quarter see was on second was of XXX. a a XXXX. a loss million XXXX of of basis, of $X.XXper end marketing XXXX, of of $X.X $X.XX second income a of At $X.X of As income the $X.X second quarter diluted loss non-GAAP approximately XXXX share the $X.XX Sales $XXX,XXX $XXX,XXX a quarter the of on for second the of loss for second of was $XXX,XXX of expenses same XXXX. $XXX,XXX our

execute on provide Turning XX, were bank for sheet, opportunities our questions. call balance We us prepared with XXXX That global the to to ahead operator through deposits our and to of our remarks. cash, the us I believe see now the agile cash back short-term sheet turn you remain $XX.X. flexibility that ends equivalents will XX, Slide a and June of strong uncertainty. balance the can your as the as

Operator

is from The [Operator Please of Suri Instructions] Bhavan go first question William ahead. Blair.

Bhavan Suri

I seeing. to question growth. guys. nice and afternoon my into pipeline pipeline job. I'd you get Excited the Good there a actually over morning for that Thanks taking guess, good traction color about a little love are or

know You AT&T? Rakuten And said helpful. I what color will types - make regions? are in What and the very but that double-digits. deals sort POCs, And tier? specific these of What the maybe for Any would size carriers? and to be POCs, of

Eyal Harari

and Bhavan, Good morning, you. thank

in evolving is see, most I the coming the see that growth probably where POC from to growth is in investment I from is to today progressing is we both we with we of progress in XG in is This and evolution. early positive opportunities, regions. in very technology the overall, if But this demand that the in growth. advantage now the of and take in them We these and And general, stages the it's – see look into the are double-digit of and growth we not evolving, the of initial and of increasing am many XG coming that I with we see the areas out, will Europe, stage. of them the a the the Americas, think we XG. mature. overall, of growth because reflecting pointed opportunities different saw solutions on exact operate see have next that percentage are APAC more this it - more are into due that still are are the as service is pipeline that And is pipeline some general As with in driven we technology deals follow in time. you and in some the into XG them more some we number more coming growth and believe stages assurance POCs, the is but sharing starting

Bhavan Suri

Got it. it. Got

about helpful. into. others got LATAM then terms that LATAM going? going Now on the deal AT&T coming was question sort the deal is But about talk But the of to first. of that how I'd and in risk. is talk COVID a how and And love LATAM I’ve let’s deployment

Eyal Harari

Sure.

this May, got in LATAM orders network. announced for operator Xg the from we we as So,

is will in good We are with are implementation that relationship starting last is well. solution. few plan. customer is the to the something in a in implement The the going few next happening going months by This very and and the be we everything months

win XG is network expansion by this once significant further in is potential but into the operator into This future. his probably to moreover, a indicated, to something sizable XG year. is going next and this only that likely is As not is a itself, turn happen

them. So, we with are very excited relationship from this

Bhavan Suri

typically turn revenue? sounds POCs some the really two sort good. might a that turn it, thing? you if months Is didn’t deployments these how love win XXXX How that or increase about One, revenue? just guidance. guess, year we to color into Now calendar out? XX that should I'd them is turn XX, sort full think for How on you I into of you do into quick questions. POCs provide of

Eyal Harari

are Yes. XXXX visibility. Most the year most on last in we - of some August, are working starting the in build said, we are This so now to now and the of the activities. numbers being POCs that are mainly

into have and business focused secured on are mainly visibility on And and opportunities looking than to on that. we numbers. move get can XXXX continue very good But already are mentioned earlier long-term Some forward. - we post-POCs I orders am that we closed XXXX, growth We the based get already.

Bhavan Suri

some States me. And other one last one And and variants delta United obviously, it. concerns in for at we the least Got the it. around Got regions. were seeing

sort look of spending a some originally back, I the took, of of or sort hiccup happened. mean, anything a As little delay people just is a right was business sort little you or hesitation bit your or in it of now? any decision-making usual you around from terms customers seeing up delta in of as COVID when more Are concern there

Eyal Harari

that its is and or We obviously are always progress discussion not it's looking are that a level, taking implication. see I the their I but significant think, time business we would, overall that expected. – this is a projects on a concern something and personal delay know

Bhavan Suri

Look a for job. nice my convert. you. [Indiscernible] to forward Thank Great. guys questions, and taking Thanks Great.

Operator

is Michelle question Waller Needham Please of Company. ahead. go next & from The

Michelle Waller

the more Michelle Thanks. with over the Hi And and guys. And first is see impacting Alex. AT&T? announced This for assurance deal? just the guys time? you you one, on the on how business market can for I guess, AT&T to Microsoft speak maybe you Azure specifically that recently

Eyal Harari

into based today technology of cases we as more for public the - the of a cloud datacenters opportunity. the hardware telecom primarily a workloads or on are build operators modern the huge see proprietary The general telecom telecom providers in So, either trend themselves. on as that looking

commitment We for to cloud on those more investments to datacenter probably sold this I what are is to and in in-house on-site longer-term, Microsoft implement difference, should believe own making in this take opener as intellectual the the the telcos Microsoft network Azure to the workloads the the as a implementing of in it and provider IP customers time. could specific AT&T’s starting shows not be to which their collaboration. the And door property some that, or and going take I to the environment. more telecom. see their the try and this technology big and In more into short-term, the either service, cloud more deal, are into AT&T is opportunities and investment they from their Azure build but announcement cloud build expectation public and Microsoft Azure be believe cloud

to in see their are this the enables and platform, this see industry. and cloud most and more this investments as fully which evolution mentioned of is the they that RADCOM integration us was cloud excelling very We part telco for for provider the before, Rakuten have into and us very is cloud driver with operators partnering virtualization well. potential as into This our Rakuten, advanced similar the to from And of on like overall is more implementing us. move exciting we we with area in Azure own important I to experts As that a trying March. of trend are the more containerized for application overall and technology growth and announced cloudification, is company are

Michelle Waller

Thanks. Great.

as half, into we there just, guess, so, that's the guys really anything deceleration. sound a you pretty to seem upbeat, look be And I doesn't second just

into at compared I growth the on higher the growth a quarters would coming the a being second that that So, quarter, growth that are you half? be comps Or comparable year-over-year guys just easier? you half, more because second opportunity, maybe year-over-year as it against do September are in look basis going December assume? I would to linear the up see Is to think fair the

Amir Hai

between of cannot Hi, we so Michelle, kind in the annual can fluctuate if delays, project has since Amir. Basically, the and that. guidance it's stated is keep quarters, some we revenue the implemented provide that the as know believe of the for we beginning, XX. time to we've exactly be the we But, from will in in will we range – a XX

our is target. this so, And

Michelle Waller

Okay. real discussions the right It with guys last just quick now. in are you And Government on like grants. one one, Israeli sounds them

from you think the me government been year. XXXX, a similar have said maybe, had I last this to compared I year, am guys correct for wrong. grants if amount But and previously calendar you expecting

discussions are changed? re-discuss for the overall you're about saying government back additional when to - the you going Or expectation over the going just the these talking that year is So, to grants, grants? with having

Amir Hai

time, government Basically, million started around - the again that around we grant estate QX limitation. XXXX kind any that Yes. $X.X last and year without at Right and million creates to there budgets now, was gain in budget this approval, a $X.X transition grants. of in process we

the the will in retroactively there, hope that grant, of discussions with for beginning in we this this And we to other progress If this per authorities now, is gain are ended - quarter, months. the making still we will year. succeed from Israel as we coming $XX,XXX $XX,XXX, paid they be the what secured. and make the you are So, about of plans,

Michelle Waller

me. Okay. Thanks Thanks. Great. for all guys. That's

Eyal Harari

Thank you.

Operator

IPI. go Instructions] from of Please next [Operator is Sasha Karim ahead. question The

Sasha Karim

Hi guys.

Is or else, ITP the any assurance to First question me. doing company integrated provider to of your in be other the anybody currently is best Rakuten from you there that? engaging with are there knowledge, only the

Eyal Harari

of few for having not Rakuten. overall, good this mentioned relationship XG quarters and very the with is specific the our to standalone, a I ago, we are But first. about in into with We one deals refer if don't want XG first expansion Rakuten. too market just the them things

We you to relationship are is are is live them, them are live deploy had and with from busy now solution had with by and network and into relationship them them. very year as our integrate feel our analyst their are close. evolving XG. very tight with targeted testimonials to get with indicate we could and and They last our working the This we comfortable as very with very very the end we we it of important reports, customers about they

Sasha Karim

Thanks.

until be, not to expecting win? recognize are Next you year begin Or this any that question the significant would XXXX? from Tier-X properly does revenue LATAM

Eyal Harari

likely happen revenue is the The the - depends to of implementation revenue the year. in down something on road is months project. XXXX more This few the and

Sasha Karim

you. opportunities. And my on would it. Thank last one be just Got cloud then,

and not operators the I a for case opportunity your network to theory, you think, Greenfield general be would given outsource cloud come it software? maybe much seen the we've you DISH cloud-native to thesis very for that best so should strongly, in telcos. with are agree more But established therefore their willing

Eyal Harari

we are lot investments, AT&T steps were that also all our is and Azure us, including operators but top there favorable and this mentioned and networks believe investment the into and established the environment such AI that the driven and in were us press others more legacy a trend ACE, momentum, and earlier, the can targeted of creates the technology gaining is on it's this cloud architecture exciting on into RADCOM they our already of overall capabilities whole while faster very well. solutions. for partnership released because less of brown with all R&D telco momentum believe space. we framework an see the I is assurance there less public take our releases the of decision with as operators operators a for is have are line environment we lately mainly Greenfield public This more and like different operators cloud therefore as limitations, strategic move by providers Obviously, taking other and going industry

Sasha Karim

very Great. much. Thank you

Eyal Harari

Thank you.

Operator

There RADCOM at results second time. quarter this for This XXXX you Ltd questions are further call. conference Thank your participation. no concludes the

may ahead disconnect. and go You

RADCOM (RDCM) 12 Aug 212021 Q2 Earnings call transcript