Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd. Results Conference Call for the Second Quarter of 2023. [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 Hadar call CFO. the Harari, and RADCOM's Rahav, On management presentation prepared that note has Please that a used the will during for call. be reference your

do Investors section RADCOM's need it, to If www.radcom.com/investor-relations. of the you the you website still may in link so download at through

Before safe provision. we like the I review would begin, to harbor

revenue count, to statements the in operators, beyond, expectations including conference about uncertainties, and up limited and development, not benefits head economic but as company's midsized in levels the call regarding telecom statements and software potential the XXXX Forward-looking in of operating general to, full for and its from guidance, and market to research market growth a expected well marketing. trends XXXX gross year effect as in including, investment scale expenses involve the several the the company, sales continued and risks and margin, of enterprise conditions,

and The these filings. from presentation in statements. Israeli to differ Authority. forward-looking further and The results further Innovation to with pipeline are the the for not forward-looking the the that safe position, DISH, RADCOM, interest continual cloud its and to leadership company's products could potential company's statements outlined and Its XG, in and to including respect expectation risks expectations growth, share increase about update its the actual technology market expectations its from and strategies, potential to to company AI important to relationships Rakuten, harbor play from role benefit momentum, facilitating SEC transition with operators opportunities, gain leverage the the grants cause in and its an products of AT&T, undertake demand provisions, does full

results to stock-based understanding excluding acquisitions, financial to to user's expenses, helpful In acquisition-related assets financial certain core from intangible this which and assessing of the RADCOM's to provided performance the of compensation call, amortization non-GAAP operations by certain related operating will in the measures, noncash overall information period results enhance and expenses of are comparing consistently provide and non-GAAP company's refer period. management conference evaluating performance

The presentation generally substitute reconciliations financial in considered the are accounting the of measures principles. be the non-GAAP meant as prepared release for not our measures encouraged information accordance website. to to in corresponding financial to additional on available accepted of this is with included quarter's earnings Investors GAAP review

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

Eyal Harari

second thank Thanks, operator. everyone, our XXXX earnings joining for morning, Good call. and us quarter you for

several solutions our improved year-over-year first consecutive and continued financial achieved all-time XXth a of growth. were in bottom net $XX.X hit quarter quarter the for X-year achieving high. quarter line, and the we records, investing future second million, income our growth. months XXXX We Revenues of quarter, the This that to X for drive second significantly

providing The continued are gross company improvements revenue execution with future. revenues, visibility in driven the driving a time, business software-centric our strong momentum and and margins into increase. delivers At our recurring good profitability same KPIs strong our and high robust business the model, and by the

which AT&T, announced be will the has Network was and His Directors. AGM in tomorrow. President voted of Vice at Services. for nomination CTO of the Fuetsch business Executive most Andre last the the senior we recent Board Andre the of note various on A Mr. strategy, nomination positions executive month at to the served of

strategy to the our We will company's contribute nominated. Andre and are believe invitation I accepted has And excited growth. future significantly to be he that

stand-alone does under assurance to roll assurance XG. on we work only to for clear, out They complexity operators are to the networks XG environment. direction a may extensive leading manage their and in as will believe Turning the help transition With also competitive market require XG continue than pressure market. with but to around highly positive the costs Not operators control position expand our the to returns. automation, to processes. streamline drive a and uncertainty longer Still, take is macro XG economy, some XG, provider others

they also to operations. to across So automation look improve assurance efficiencies and network their

As is previous autonomous to calls, mentioned to network. help transition our telecom in vision operators more

is solution while assurance insight value actionable customer our this cutting manage positioned why saving we are and for automation. Our and well our OpEx excellent to to network win analytics. use and enables ensure business. experiences through edge Operators AI to driving technology the This additional added

is An announced world's example that the of DISH coverage providing network out XX% population. advanced is a first roll it cloud. of industry how world's XG the XG U.S. DISH. assurance to public recently cloud-native stand-alone accomplished and by the had milestone network on operate most significant X helps It of over to building a solution our networks

bringing it to sign exclusive services. Last members is an offer up week, mobile DISH announced Amazon for its Prime to

without up technology, and points retail by a store, infrastructure. digital touch cutting-edge limited has foot which offers DISH completely setting customer improves New Amazon a The experience. can legacy and offer DISH, innovation of not and customers services, quickly Using potential. in sign Amazon partnership can lots on-demand

to are solution integrates understand a more network verticals the on critical network XG and in to delivering XX/X. build their seamlessly continues. DISH Cloud, key network assurance is services These XG into as Our to multiple AWS intelligent helping advanced what enabling happening are insights drive

partner enjoy significant assurance they We feel journey, to create best-in-class their network as providing proud customer milestones experiences. subscriber and these ensure along their be that great meet DISH assurance

we extensive Turning strategy. XG. architecture, continued cloud our our integrated ACE cloud cloud-native RADCOM ecosystem and to our the solution for With maturity cloud combined into expertise, with team's

our to launched last that we are on month. have excited solution Google We announce Cloud

now Amazon customers. market all X Web leading cloud Services, Google Azure potential Cloud, are providers, with Microsoft and integrated availability we public So more our to extending

these operational telco means XG cases cloud multiple providers Integrating integration choose automatically safe positive to operator by new rollouts. and and public ongoing We whatever Google use to technology top automation ACE use our potential can received to they network want service drive Cloud. Cloud This have assurance manage costs with provider with RADCOM AI. degradation, several powered opportunities from their already Google we customers, assurance feedback has prevent for on offer

act our AI others Copilot many to the complex creating world. processing. providing is task and learning, Generative AI latest think automating AI and from to Turning and around massive humans large that analytics, tasks ChatGPT, as core, captured GitHub The people machine applications its have like can models imagination perform generative applications, and strategy. smart natural of of data the experiences. it can analyzing amount language language personalized and about combine At such machines

documented generative to guys It to and speed recommend to help where offer engineers network actions tasks ingest operators and incurring and losing processes leakage. can areas simplify industry, are failure. In revenue the telecom revenue interactive when or a procedures they networking up there engineers AI installation troubleshooting can is identify

heavy AI the with and and to cases. will doing providing quality, that data, to network efficient service making automatically solutions enables network our the lifting automate invest the through elaborate to operations. use AI And of our network automated continue operator massive intelligent and boost more amount the operator's and workflows transition to We use I analytics. we analyzing It develop AI, insight further, XG drives

opportunities believe and adding customer of completed feedback with The continual. opportunities added Turning for core already our in acquisition been We positive assets have these to continual's initial to In bearing customer. continual. the additional the RADCOM that has May, create enrich solution will engagements we top-tier new fruit pipeline. and

operators specialized part We drive with drive future. can opportunities significant generate network to require the announced pleased for the geographical electronic drive test or devices equipped the that to solution Telecom of around physical am test far virtual more I and the integrations. Typically, a quality. various highly progress RADCOM made OpEx tests RADCOM of test in service in launch integrations solution fleet spent so with vehicles as drive parameters and on believe VDT every this ensure area. physical RADCOM

Our solution. the approach significantly innovation providing boost RADCOM for helping the aims analytics cost It mobility green, solution, drive Continual experience capabilities. more new significant powered sustainable operators It a insights, also with to better test the to tests. powerful replace physical mobility drive telecom experience VDT, while offers operators save subscribers. AI

to innovation. Turning product our

believe We leadership. navigate serve network a continually because smart to XG evolving as XG is operator the continue copilot we business. our assurance future enabler means for which investing in our We complexities, product it crucial maintain assurance development to solution

companies announce for to that recognition industry our the innovation excited company XXXX the the This strategies top and during in communications products telecom I'm year. next-generation finalists Award. achievements recently received recognizes named industry's the and we the Lights were focused program technology, Leading as

as named and to the business Company competitors finalist customer named innovates that a company to improve in of were the operations. to learning and use awarded company out performance, Year AI case outstanding awarded AI innovatively or Innovative service for its use from were the stands that constantly. We machine also network for We Public finalist a

North XG more align our Our increase progresses. is are market our share confident analytics. product intelligent market Star making and and winning transformation autonomous offering by as networks We with best-in-class remain will our that AI-powered needs opportunities through the

As continue demand. the take increased the of in will the and assurance advantage XG investing market evolves, we sales to marketing

as results This strong market solid path, are as the and revenue we unique we right they with out demonstrates summarize, quarterly all-time our we have profitability sets net continues that supporting financial record roll To non-GAAP operators telecom KPIs. that for momentum improve X income position our on companies XG. and

engagement ongoing contracts Our XXXX while is giving our strong demand for solutions visibility results multiple us driving also the and good provide year that beyond. into a shows sales and consistent our robust, backlog,

and integrations bring technology operators. expand value of increasing availability our At cloud while are the ecosystem to assurance to customers AI the capabilities solution to our continuing we additional same to use time, our cases into more

the and So are annual scale we revenue $XX a of the XXXX first guidance software history $XX threshold the million to revenue we in ability company our growth time the midsized consecutive confident year. million. company's million to a Therefore, to in reiterating up remain fourth for $XX delivered cross

over turn With like who to that, discuss call Rahav, CFO, the detail. to will Hadar financial in our I would the results

Hadar Rahav

the help morning, to understand Thank you, refer numbers, non-GAAP everyone. Eyal, you share-based good will excluding and mainly I results, compensation. To

representing Now of of in reaching $XX.X year-over-year growth to We the quarter highlights. an achieved XXXX. in consecutive X Slide $XX quarter the and for financial revenues first XXth from revenue please a second the increase turn million, million record quarter,

year-over-year non-GAAP high. million, Second with X-year quarter double in digit of quarter revenue net by growth This the of income XX.X%. for grew a $X.X resulted

in the continue expenses manage same the our we investing and efficiently. to strategically business At while time,

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

the quarter that We level. a will similar third expect remain at

quarter second second year. a of XXXX. for $X.X on decrease non-GAAP third of quarter quarter Israel R&D compared the in Authority $XXX,XXX the to expenses a XXXX to a were from $XXX,XXX million, $XXX,XXX gross last Innovation the of received of of We during quarter Our grant compared the basis the

result, a to expenses non-GAAP of our were net the R&D XXXX. for $X.X second a second on compared quarter the million in million basis, of $X.X quarter As XXXX

Authority to level. the in We third expect Innovation grant Israel quarter a on similar the be

Sales compared second expenses quarter of the increase to non-GAAP were of increase a quarter quarter second an an $XXX,XXX were and on compared second basis, of second expenses quarter of of XXXX. XXXX non-GAAP million $XX,XXX G&A the a the basis, marketing $XXX,XXX for of for the XXXX on $X XXXX. to

this Continual teams completed operating our the acquisition of Continual, Ltd. As by Onboarding quarter, expenses increased Eyal we X%. mentioned,

increase impact positive was in previous the of expected. to rates, However, total the operating than the quarter expenses foreign thanks lower from exchange

a at of date, amount the in closing allocated its and $X.X and million. sheet basis transaction price the on assets non-GAAP intangible recognized Operating company the goodwill In income in addition, growth. of second foreign of XXXX the $XXX,XXX drove quarter an this income quarter rates XXXX. were The revenue compared operating exchange and the for second of increased $XXX,XXX to for favorable balance

for diluted of income of less $X.XX quarter non-GAAP for million, interest net quarter bank of of second $X.X the XXXX. XXXX deposits. or a was the compared short-term XXXX on basis Net share $X.XX a of to per mainly rate for net were second $X.X due million, financial Our of the second income on share to income than per income income $XX,XXX a net or diluted income quarter

Slide per of net X, share. income On of a GAAP At XXXX, million for a or $X.XX to on net basis, of second the of second was or can per second as see XXXX our of loss of This diluted income share $XXX,XXX compares quarter our diluted was loss XXXX. for $X.X net of $X.XX headcount a the the a end net XXX. quarter you the quarter

quarter. in our headcount third the remain We expect to similar

balance the to sheet. Turning

short-term and bank cash, shown As as XX, cash deposits Slide of million. XXXX, our XX, $XX.X on were equivalents June

call your will That the to ends our prepared operator remarks. the turn questions. for back I now

Operator

Instructions]. [Operator

The Arjun Bhatia. first is are question from

Arjun Bhatia

your some Eyal, the are How you how the that little minimal called out have elaborate your you at you in a might perspective? Perfect. a macro Yes. or pushouts? business -- impact seeing? telcos. have starting Can remarks on that rollout might on prepared severe some to are impact bit? downstream that just from be And might What XG these

Eyal Harari

in pressure XG, continue. part the well all we XG still executed are to programs of to their on that, the operators, top on the as We some remarks, still for to conditions. mentioned by we the economic and we we demand a for still operators CapEx progressing our our strategic journey yes, this into are prepared is evolving spend the with general, to as quarter, still and XG we reducing see confident our some we as growth products. So and XG spend evolving In that continue creating to see and -- the see do expected alignment stand-alone, their new see reporting products. And they demand in into general, macro of market and

we seeing drive our with save to are see potential that staff. We less our more influences. highly AI would X operators operators be efficient separate their -- targeting with our which X of obviously operators, And some those under required. the parallel, on enable is more and slow that customers, excite might XG, I down. requirements. spending automation is is things in say, customers the this we X this are One and And this are to And environment, helping it and demand and would and things solutions

So strategically, the continue what's going solid. to important right is I balancing, are will is kind to the towards solid think advancement see the monitor pipeline, continue we and direction. all demand still of we that into have a those X and market but We XG, things it's

Arjun Bhatia

Okay. when you've capabilities adoption newer what think That of Continual, of like? you that launched, makes look with the And sense. VDT helpful. That's some about you launched does How that that think incorporate strategy over that separately? you And something have into is you something that your you out about you there? the might plays How time? do thinking platform, are core

Eyal Harari

more can virtual also what And the the automation, stand-alone and VDT and in operator already newly a operator and as to aligns obviously, mentioned while VDT on this with find before, with are going provide. is the desire to started continuing more We the advanced ACE. innovation our of analytics the you around It are answering So while all RADCOM, ways more can is you drive still VDT in to part good better we with a Continual manage take announced we more and things you with lines And full are way. a offering our existing operations add definitely integrated and the definitely way, of efficient integration more news. and do and a test offering product or part application portfolio, between RADCOM get package to data where shape in top is this of sources value be the a we it.

offering. in this we we months, start the stage, are marketing the this acquisition We just in And May. last new few in concluded

really customers, message our overall, new new existing positive. our in the meeting are is have We customers, very We and pipeline. opportunities

time, know, in we expect is XXXX. As in of to telecom we some the see cycle sales taking and results

Arjun Bhatia

customer I'm that guess, now have all Is your I have Cloud for big AWS And is me Azure you of base with does X how have to the figure helpful. just that the more an are X big sounds exposure now? X there to? to that this have already. That's live differ on How customers in addition on clouds you Google GCP partnership. some your GCP you It X trying ACE out, between like on and Okay. last platform? you opportunity

Eyal Harari

mix. our with choice for that are available platforms. in be of We AWS, them. that architecture, with providers all that order So -- risk vision, the so cloud strategic cases And is in applications, minimize We our the for some workloads we Google. different different operator the partnerships They cloud native strategic And to be are hence, want preferring. some in build cloud a and operators to strategy to any be providers, and will environment, X backing have sometimes is into we Azure, we our leading portfolio cloud to have in have on in the all platform. product that order see it aiming solution cloud different some operators different know have choose want using with we want some into by be the some available to sometimes to best-of-bread the to to available multiple easily all and we cloud first,

addressable So our analytics leading are powerful all we is powerful available availability. to expand the platforms our be very approach to in market are Europe. very space. and market -- -- is also on Google the They in

We to also lines Google dose. new in activity the happy is that -- And the added the continued is fact our was opening Google portfolio, also this more on done extending are last partnership see and now now product years. we of our couple are the that around to marketplace available us

said, on are betting, direction. I We not X as

to into And us is every maintaining of successful accelerate the and cloud technology. major integrations of for looking good migration cloud the is with adopting is providers. are that continue our one We the them key all as

us. for move what As the play, architecture legacy when into from is opportunity drives operator this

and for usually us. happy more cloud for cooperate be success with them more providers is success to will we So all

Operator

The & Alex question is of Henderson Company. Instructions]. from next Needham [Operator

Alexander Henderson

into and should looking was And this nice thanks what? number did you've and that to was the third X% here sequential like September quarter Is more just the in the the $X OpEx both June going quarter, I'm a the at think line. wondering prints quarter? the got increase or you of that's to X% some look that acquisition OpEx consistently. I'm in great if What million quarters? that of adding X% there pretty and fourth or an above for you thinking the or be So

Eyal Harari

due the results both. expected gross well we are Alex. the you, of the higher benefits thank shekel, weakening the of the of acquisition and advantage So gained already operational some usual ForEx We than both incorporated The better some expense in than as to margin. as

We are a in be we similar some step function most mentioned into in say, with we is increase, quarter are sales mentioned -- let's before, expecting in we operational expense invest ForEx continuing to that numbers. to But as that and marketing. already level the last the already, I

Alexander Henderson

year So offsets am in Street the year the be given I going rate is in you're because thinking then XQ? is some Or for run revenues well so expectations back to -- half running the far. the ahead it should be that and of at midpoint guidance higher of there the XQ

Eyal Harari

change the year. see similar And rest in terms for continue we are year we strongly bottom in trend second the and ForEx, our perform to And million in execute on have of of our range, the still So if we $XX on to guidance higher half to line. revenue, plans, no likely the of we terms million also then the the of reiterate we do revenue. to and that we means looking in $XX which the are

Alexander Henderson

Right.

operating Is the mechanically, in mean, at level half would ups a million going the and I from point? suggest level. to -- $X that in XQ profit EPS crack both the first So you're that that

Eyal Harari

us Again, conditions, give potential. under the ForEx environment and sense. this it definitely makes current This

Alexander Henderson

That's helpful.

particularly cloudified There that have in markets, the in ramp of was with than have problem macro investments XG commentary. cutting that they're both on of that their the their that undermined certainly on U.S. terms and the a results challenges I international open But products operators. at service XG specifically operators deeper ability there's in in come impact we the operational heard because core, of to core to get the business. the U.S., very back hearing back are cloud-native In where because even up that. end are We've that cutting more actually the continue of root XG, providers that the -- RAN weak spending Nokia obviously and and there's

what the the to the of customers on you're is performance terms of and of And to hearing some comment in efficacy you key in core given field challenges. push the the we're what technologies? Can is path there operational that the existing down whether change continue seeing XG from any willingness

Eyal Harari

this and direction seeing overall, operators And strategic operators this requires commitment. and I a more that It's environment. joining XG So see any continues. think investing still actually, true operators into didn't taking important, solve. it's we very the This with investment this the said, don't more stand-alone. cloud more strategically that the is most is It with being We are into industry complicated complexity This and more telecom technology. are happy that. some introduced

to But smartly the very also that it's need see for complexity that DISH there in to to -- therefore, time, we are trying taking companies important that likely to means out bullish continue network. time more XG to an others. more see our are play And take industry, like and and how moving We and are Rakuten the XG figure things we with with and still We be while add are solutions. forward. as is value it's

something game, that industry solved. for them. is And be it operators is will This will the and as easier an later that be during easier

covered they higher are lot population maybe and the of are North like sites by weakness customers most of in value and -- the the most companies from a less that Nokia where America, is sales radio, Ericsson which reported to based. think driving spending the the based of I is the

new would are slowing revenues. remains are due economy, eventually they This and the cold, what And with we services to in And continuing their to new is down the drive implementations. what But to create return that the overcome continue so we will investment. and on and is that identify I'm case this something industry, as an and we'll positive is those complexity, a use do now invest.

Alexander Henderson

line more up been each thousand in pretty rates of model the nicely, quarters going couple couple increase of where it dollars hundred line plus the the we in as have interest The out saw sequential sequentially? income question. a of -- last a up gone income at current level? interest we similar should flatten Or it's One

Hadar Rahav

Alex, where we interest experienced the of rate. decline

So the to be in next the quarter. we lower expect financial income

Alexander Henderson

a the interest bit come income Expect to little down in the September quarter?

Hadar Rahav

Yes, of course.

Alexander Henderson

More the along first level. Is the quarter of lines that right?

Hadar Rahav

Yes.

Operator

from The Elliott Point. next of question is Inflection Charles

Charles Elliott

major you those those be the and with mapmakers the or the your selling investment. competition virtual competition telecoms I'd map would to companies? in channel a moment, vehicles driving Google, the like VDT, test. And selling understand mapmakers? data specific TomTom Would a telecoms and then with around ask the XD about have companies, I companies is gathering go question drive that to HIA, this companies, At be into making, Apple, for including companies

Eyal Harari

customer traditional to service. the They is the of that So in in virtual test quality optimize ensure see still on to go are to offered we're to application mobile their drive around different the the order carriers using looking and of is our traditionally, network. customers, country are XG geographies experience vehicles order the the operators, what

in on to order what not so costly, and tedious, very create use is of provide emulate the data is green, points we only analysis information very and you call also and adopting test, XX/X base which And but better not much are we save more taking the costs analytics much an that green. available approach in in coverage. and drive This terms virtual more

standalone as as the complements it as a so our provide. can run synergies is continue is our data base the to our but it stand-alone already approach port We leveraging can going as it the key a to RADCOMize advantage valuable promote add-on see other our installed RADCOMize, into the and an between an X and to continue prospects operators that solution products product. similar go-to-market as with as very So definitely approach is well and

Charles Elliott

I'm sorry.

So it's your mapmaking It is of a an quality not extension assurance. device?

Eyal Harari

of add-on. quality extension could or be a an is as our standalone The that Yes. assurance

Charles Elliott

still R&D. At levels, is high second Why is R&D down it's year-on-year. question And this that? on very and net spend, is gross but the

Eyal Harari

expense R&D similar looking as a increase. mentioned, percentage-wise, will we to see on the are that we We maintain is, level. do So see

keep the we invest As the we and increase similar percentage-wise, the R&D R&D. less in a level in revenue number,

This the of and increase the teams. level a R&D in had onetime the Continual of quarter, due we to onboarding our acquisition their into

why the is looking R&D our numbers, expense similar FX. new should But we This the the of the have consideration that taking we level again, incremental fixed maintain be working we the this improvement continue in to are on And couple while proved years to last level. bottom line. we in on see allowing significant grow us as improvement to top line, should of be the

Charles Elliott

in and in way that it having for making -- any June quarter. a 'XX, R&D just number a Or your currency million, I million $X.XX the been fell Is impact? was see the in months to your leverage around there the has spend? X $X.XX ended cut R&D GAAP R&D. funny But latest a

Eyal Harari

beginning are a did bit weakened, -- along lower. in we previous FX that primarily in and numbers the the the dollars as optimizations some With calls. of mentioned I our It's therefore, change, shekel year,

Operator

concludes the This Ltd. RADCOM

Thank Second Quarter XXXX for Results Conference you your Call. participation.

You may go and ahead disconnect.

RADCOM (RDCM) 2 Aug 232023 Q2 Earnings call transcript