RADCOM (RDCM) 10 Nov 222022 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd. Results Conference Call for the Third Quarter of 2022. All participants are present in a listen-only mode.

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

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

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

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

accepted grants the about Forward-looking several economic visibility and XXXX in XXXX involve statements conference to, and risks in including operators guidance, benefits for enterprise assessing uncertainties, operators, call limited certain and not conditions, the conference Company's to By SEC in measures, from development, user's revenue full presentation regarding financial beyond, the and telecom investment the the in growth forward-looking understanding stock-based In general including, outlined its the but helpful that expected trends its its results cause transition of this important from consistently of an expenses, Company's non-GAAP products levels reconciliations play non-GAAP and with to release, this measures statements, expectations in from the in statements certain non-GAAP quarter's excluding measures keeping Investors The full-year could its and meant interest not our prepared compensation actual additional Company's in overall demand of market gain further information principles. enhance results and encouraged expectation are statements. research the for substitute provide market to continued and to the expenses financial the presentation momentum, of them and effect to XG, the role period-to-period. comparing its additional included are its the Company's GAAP RADCOM's growth, potential and to facilitating forward-looking information the a earnings pipeline review of harbor of these and the in the call, to financial multi-year expansion Rakuten be from performance Authority. revenues, accordance relationships The which Company Israeli the opportunities, website. differ with and evaluating undertake further contracts, and financial provided respect with below performance. generally for provisions, to corresponding available non-cash safe results to considered update Innovation expectations expectations engagements is in potential operating accounting risks will operations The including to core from and management the refer not on and for of filings. does are about

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

efficiently, resulting we investing our and a for quarter net the the to thank third consecutive At in $XX quarter, third compared morning, quarter thirteenth everyone, double-digit quarter of same XXXX. Thanks, for XX% earnings manage business of of a revenues year-over-year We achieved of record our XXXX you for reaching quarter expenses four-year $X and growth, million, the a growth third non-GAAP operator. Good call. income while in us joining million, time, in the high. strategically the representing

labor pricing a margins delivers value. built high and strong business resilient actionable great advanced XX% network ensure offering gross to model structure resolve engineers' from best-in-class to software-centric our with of of proud that beginning manual with great networks are year analytics their save that portfolio and forecastable, AI-driven insights We experiences. cloud quickly to We've help operators business enables automated, while the recurring customers over assurance manage and revenues that a customer provides degradations the long-term a our

us good XXXX giving a improved results and have wins beyond. contract multi-year visibility backlog, Our into and consistent strong driving

pipeline. to Turning the

We the be been multiple of our manage healthy different in most a on increased believe to the as we engagements on see engagements more healthy creating continue COVID demand telecom and negative base, from and the hearing a of the stages the we at pipeline to XG new catalyst contracts advanced can as believe market. of strong macro focused periods it logos is installed Recently, opportunities saw more reflected difficult concerns growth market and market during for pandemic. a cycle the our as for customer mix ramps with technology impact with companies current we have good share. for lead multi-year technology assurance XG. of that market opportunities sales cloud the up, regarding see We market the will sales robust, We economy’s momentum additional

drive We cloud-native the as will situation will networks monitor continue as position best-in-class closely provider for XG We and positive to our assurance returns. to our necessary. adapt a cloud expertise knowledge believe continue and and

and report strong, have of We increase opportunities looks potential has share. we pipeline to glad solid demand are market that that to the a our

confident healthy outlook market the pipeline, and With trends of in our growth positive business. the we're our

As scale, and handle a more growth on software-focused while future company, we meet current prospects, demand commitments. are deliver very agile and customer our continuing can to

networks, our quality. their are monitor it capabilities its deploy customers as operator ACE We in service utilize the software RADCOM that enjoying happy and new smartly teams to are we

into We cloud integrating our are the we as software progressing continue positively environment.

a existing performance the on efficiency as our many the delivering work and expertise are software at drives and As our With and cloud happy time same our them engaged expectations requirements. can financial operational XG customer’s scale to offer seamlessly assurance while teams, roll customers, closely which and out them with teams, help with to XG. we to they the be leader, our

proud solutions to can We software are our deploy Legacy limited of and releases. not are continue assurance our and we feedback are cutting-edge who customer are positive deliver receiving committed to flexible. on new our employees and and success solutions as dedicated delivering

we cloud-based deploy, our implement months solutions in to hours. or weeks or While competitors days take

who is quickly across need features We customers. software for subscribers decisions affecting to Our source make data-driven quick offerings. of deliver truth all and stack entire millions and network the to critical their can engineers of service adapt

and As DISH, experiences. like the of deploy and the our great of our to network stages customer we forward to analytics deliver new value ensure software rollout customers we deployment a through see all move smooth

Turning to Rakuten Symphony. Japan and Rakuten in

During operations RADCOM available in successful announced with beginning assurance providing the Symworld their in of third to cloud-native we innovative cloud their in understand Being what significant part With quarter, and is there It of we opportunities operator, our deploy teams renewal and with more announced marketplace. of happening the to rapidly the are At and the Mobile. open RADCOM future. our for this continue quarter, this the where for RADCOM XG advanced ACE built-in Symphony platform. the streamlines made that integration in issues. the Symphony Rakuten Rakuten solutions provides network Japan. This initial and Rakuten unified into roll network of out we operators contract analytics enable also helps workflows this Symphony data network agreement, ACE partnership customer-affecting with

our to innovation. Turning product

our bring Outstanding Lights industry technology top were announce next-generation automation AI-based industry's telecom-focused to cases as named Case technology, excited announced with year delivering our We as achievements the use in named finalists anomalies more award received and moves Use recognize that recently best-in-class The AI/ML-based continue and strategies, to and communications XG value our our the commitment solutions as for detection customers products for for innovation. last companies XXXX software expand that we their finalist operation of capabilities and in in Leading in AI I automation in intelligence category recognition a we was the outstanding Service forward. automatic Provider two network solution network to in the am enhance awards. programs of teams

R&D increase RADCOM performance align We with needs addition, the capabilities, our XG to solution XXXX cloud. ACE in these was the category insights, Cloud capabilities into market our Innovative seamlessly a Most strategically Offering finalist invest enhance our solutions, All and expand and integrate In program. the named already our Glotel AI-driven awards as have up we am in in improved bottom wins. company business quarter a high model the first months a by strong delivers margins. happy that as with Revenues and summarize, our line. year-over-year the reflected borne recent significantly software-centric across gross by nine fruit, our XXXX. with of third built our We've are I double-digits, in To and

to solutions some best-in-class a most provide in of the to team Our operators proven ability innovative the has world.

our innovative and We in commitments are deliver while capabilities. boost to features customer continuing working hard strategically on software invest to to our

growth good to ongoing year's about are the during a To third and increase our our we I CFO, us wins year will XXXX our nine reiterating million. continue guidance revenue trajectory With $XX turn this over XXXX we to sales that, Hadar engagements, of detail. visibility, optimistic which are deliver we who to consecutive the conclude, to months. into like million have in the these in With led our to Rahav, $XX first ability Accordingly, XXXX. results twice call new financial guidance and revenue discuss would

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

to million, a high. the quarter, Slide to quarter the growth same At in $XX efficiently. four-year turn representing We income increase quarter This we $XX.X XX%. for and while growth and continue thirteenth highlights. in million, of the XXXX. the in our third achieved manage consecutive of record please investing business in expenses the resulted Double-digit revenues an quarter Now time, revenue of for year-over-year from net $X reaching non-GAAP third X our million of a strategically financial

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

QX similar will a level. that expect We at remain

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

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

to a quarter good the with of XXXX. were the sales in we at a of backlog Authority million on as We and expect increase increase fourth the the and the our Innovation level quarter. third to non-GAAP the third expenses on be Sales compared quarter basis, $XXX,XXX similar progress third customer delivering aligned grant growth The for an $X.X and Israel marketing in commitments. made XXXX in was the in marketing quarter of

income end Net share XXXX. GAAP of XXX. was of of of per diluted of a We of third share, XXXX a the per of XXXX. in loss loss to non-GAAP net for sales XXXX. basis basis Slide a at third remain revenue or quarter the a on the level to Operating the loss for compared a the quarter of $XXX,XXX for of XXXX a compared in to on loss the diluted operating $XXX,XXX the the third $X,XXX,XXX, was can X, third for quarter of or per a headcount our to net diluted exchange the on non-GAAP compares for $X.XX an of per marketing impact of were and income the the third you quarter. loss increase or third for a net in quarter expect XXXX. $X.XX our third quarter the $XXX,XXX $XXX,XXX increase basis, This changes net of net due on $XXX,XXX the an fourth to XXXX, of positive to At diluted On XXXX income $XXX,XXX of non-GAAP third a basis, similar of a expenses quarter favorable share as income was $X.XX see quarter $X.XX G&A The loss third or net was a of foreign of for $XXX,XXX net loss rates. and net share. was of quarter compared XXXX quarter

Turning to the sheet. balance

operator and prepared million. for Slide As your our remarks. turn September $XX.X cash will questions. our to bank That back you XXXX, short-term can the I see call on deposits cash, XX, were XX, the now ends of equivalents, as

Instructions] [Operator Blair. of from William first Thank go ahead. Please Bhatia The question you. Arjun is

lot Perfect. Thank offering more on a It to you and until building good sounds capabilities you. quarter. congrats up adding and are a Eyal, features still the like telcos want XG. start with guys I you're

rollouts customers power the of in about and pricing good seeing with are ROI. newer do as growth existing and you base the How with seeing both your well? clearly going customer forward some model, think even the You're

morning. Good Yes.

our enhancing So investing are our support since years product, year, We we their are detection AI continuing customers RADCOM journey. solution the platform. added XG continuously which important XG in released we last our based couple XG ago are our capabilities, we and very to newly of

an those and on new making smooth and are We differentiators and but on sure upsell networks. when existing not primarily customers we do And use evaluated opportunities in their going we are to with are are are is to are simple. are possible. as as as know only going with sure focused are additional order cases we have that are possible journey focused additional cloud transformation successful integration competing now also creating our deal So a they with in capabilities customers not possible used XG Those not to We it as becoming that as included. as to cloud sure implement making really new that on and technology, make capabilities it's them added them new the their efficient some requires of XG that some idea and

are a overall, to and comfortable feel of to in innovation we with the continue continue invest very to we So to R&D, looking our market. our lot offering create

And several operating forward? we opportunity quarters, was to did great that in expenses of R&D, expenses Okay. see. Hadar, Understood. a some When a do over is good you for most in areas operating run Like then could that next revenue like the rate you in Very Or you see QX? as this increases example? out more generated look percentage of going where quarter margin ahead see this the helpful. that you the for leverage for

morning. Hi, good

level So expenses the with our will we $X years, in marketing. believe margin per similar we slight And XX%, two saw sales our that XX%. operating a million We expenses was gross are of last in and around around increase quarter. keep operating that a

for you moment. hear a continue. Please didn't We

$X will of that incremental quarter I in some sales believe keep we and believe shareholder increase in -- that ratio, similar operating around we million impact the said will level the Okay. of third a any we excluding we that expenses expenses. marketing with

question? answered She your

called see cautious is any -- still just Yes. and in Do sort commentary from changed how going them seems them their last changing, do you Eyal spend walking CapEx building more the back out all? And that maybe the or and COVID tightening you given forward it the being saw the belts in much me. you or of on they're telcos obviously -- hear out. just has one for economy strength investing you in at telco

powerful business overall situation are bit and So that. continue we and macroeconomic slowdown. and initiated we to already to being we'll that of bit, continues. some Xs industry was overall see a monitor long for know looking us have that part robust everyone cautious create But committed telecom long a for the strategy the affecting years the plan thing XG, in are multi-year and the can positive is don't everyone. term we see and the good of is that delays their we visibility the There we many targeting see a is large that XG so. of important investments. is more as good some them. course, more are continue term five them Tier The we are it them with operators already operators The most already a might to and We finally do on of be thing larger strategy

and really cautiously that macro case hoping on situation. any in no this the or monitoring any are -- we So case be economy, will in there effect but

for Very taking it. helpful. questions. got you the Okay, Thank

is Please from Henderson ahead. Company. Alex of The question go next & Needham

Thanks.

question. subject, Let's just continue last that that on

all point still XG XG So term plans, could they that those than inclined legacy more of are portion older other long in in call to the like to and technology I your would have back. the there you companies much the traditional tied is but it, how are you business cyclical at seem and customers. talk in Those what the are Can to this is more multiyear call what be more, it of XG more customers cut and traditional deployments, the clearly using formats. arena

providers there you, part mutation thank we existing XG. a and earlier our radio XG. around not the automation which of the investment tenant from the traffic and space, in maybe is the What need call, is see and they're or they nationwide we is provide a is in AI see we with this radio some delay their that business on of heavy is more lot going large And And on as insurance investment coverage operation. So that might with prepared not more -- they do you the as also in And are spot more the while on where a tools around most as CapEx allow add ways, wins pointed play our to less. recent many we remarks, traditional implementing the on my pipeline big a more had technology, more size opportunities to other this is I Alex. adding an and of of them to year people a this

more And they will like start happen. ours optimize also it to them plans. their might what continuing for are their some But could that already can most they to of It providers drive delay. adding There the sometimes XG. in yet didn't help way with be and operators as journey continue might need This committed that need. these do efficient mentioned, and need a tools

your That's answer would what thought I be.

that's traditional level. where dipped lower to sense history And of have quarters in where and margin company, some lower that had range lower XX%, so margins is up at that you're periods you've down you've good And very difference the is had selling of quarters number the margin the understanding higher the looking towards and primary of that XX% margin. the quarters amount the equipment my XX% between considerably

to margin more and that And frictionless think call we deploy more XX% a about on towards historically. where and about range the longer 'XX. so if and products straight XG to XXX basis [indiscernible] occurred gross the peak XX% points towards period shifting Where can XX margins at you've up now the term to start as opposed mix XX% the is another the and now that. range gross we Then that fairly XX% talking from in in in higher expansion to I it software 'XX 'XX talked to in are margins to the

Yes.

So margin overall, a the implementations. are of go more seeing and gross XG a we improved trend as to XX% getting and cloud closer more we into

are if margin. are mix, saying is fluctuating components But have the part margin. that that gross said, bit costs implement You also software to new we likely base customers some revenue down licenses appliance the the when high of that the this as of most the is was adding around some very you of costs a of third-party gross one-time there

we but is that is we better So some gross what and margin, see overall to and that is gross trend XX% see closer fluctuation margin have better scale. to continue ranges we the the sometimes to in the

Yes.

our September that quarter, XX% some quarter, level we right Is fourth as upside the the for the to there's on it gross the mark look model margin. in in did quarter? fourth So the we like looks the

always this of but a assumption. exact fluctuate revenue -- the can because it's we if sense mix is Again bit a again quarter-to-quarter, good

XX% at 'XX up kind new we've you're that really then if And I the 'XX, the XX% that the taking out benchmark? be been as to that's through should to XX% using here. and XX% So to out modeling of case,

assumption, As good makes I yes. it said, a as sense

shekel sales all Can I you perfect. all are don't you to hedge us the I dollars, just remind clear and the at correct? your be in outside outside S. wanted mean, -- it. U. Okay. globally. on

was is a did internationally not had, dollar S. shekel and based, We customers the revenues the to from some weakening our most are upside we Correct. had of Okay. so U. as that compared dollar. of big our part dollar the

So we the foreign effect exchange. from don't have significant any

down year here considerably. to So on end the for pretty at the shekel of loans is the the quarter. much It's

I think decline. double it's digit

for Are overall the increase going flat. that OpEx, So full year, at to sales the help on it marketing that and so you these slightly, was comment levels spend that but fairly should you you're would in reinvesting the I dollars, be OpEx. think

our still So you're to is why reinvestment as local of therefore get that's additional out flat and we look to currency and 'XX, keep in investment? it -- some able the that benefit

flattish. So we are going R&D to our keep

are moving still there in have levels. the of let's years year couple but -- plans, forward, We we R&D our to are strategic, believe of plan, the the go say, end we'll that couple I before right

cap in sales of maybe to We capture is Of opportunity increasing of improved course, ratio dollars where operators factory to make trying the the good the are to level, doing gain now the are market coverage more walk some into efficiencies share to and and in order some to areas. walk some take part and of marketing as our do advantage plan strengthen the look the have the advanced. around we we sure

we do numbers to increase go on we operation but and the be slightly look on we expense, mentioned the year the importantly, I bottom look loan going to we brand, modest, is more as our on So and operation to as expense better as looking line. next are go increase

where we bundle to larger existing a covered customers buying or pricing, an This of a give packaging an product might or about some that doing Is the by additional that earlier the would contracts existing you been to existing capabilities upsell opportunity is might bit. development little start from? a additional question features that of in up I -- there see rephrase with like cycle but that asked one some start there opportunity to Is have there to way was your would motion some a sell not customers. adding by any contracts

enhancing we of or are necessarily technology that what use use by and see is category part additional we Definitely, add-on products for application it cases parts to opportunities doing which not the Definitely. in today. customer additional as believe the mentions past

additional in installed add into also continue And sales create spending contracts to are additional allow capabilities us sure to our We into to R&D carriers. for and win up mentioned, as penetrate cutting more I edge that but and it's create order some base, innovation. to both additional our will existing

see One before. don't last question I

is we've digit into average it years, we and over in last year? Is of an done plausible as look digit double to another and double low growth digit reasonable out given your plus you double that you going it's both hold But growth rate. 'XX seems little got produced I in the forecasting So realize haven't to 'XX, think bit it. that that you to the but three a it the 'XX not another 'XX that we're yet 'XX. XX% therefore dipped pretty you've momentum

Yes.

momentum but have contracts visibility like are Many looking [indiscernible] continue -- still are that digits. we looking We likely we hopefully another in positively 'XX. Again, our already customer early, double a improve. see good and to are we it's year, of growth and similar to XXXX looks

you Thank so much good execution congratulations on and visibility. and

Thank you, Alex.

concludes the your Thank conference participation. third Ltd. for results call. This XXXX you quarter RADCOM

ahead and You may go disconnect.