Q1 2020 Earnings Call
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Ladies and gentlemen, the conference will begin shortly.
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Ladies and gentlemen, thank you for standing by welcome to the VAT Ltd results conference call for the first quarter of 2020, all participants are present.
Following managements formal presentation.
So the question answer session.
During the conference. Please proceed.
As a reminder, this conference is being recorded.
So far we placed on the company's website at <unk>.
That's come dotcom.
On the call.
Right.
And I'm your high backups.
Please note.
Prepared a presentation for your reference that well.
If you will not.
You mean doses.
Or section of outcomes website at Www dot.
Dotcom Slash Investor Dash relations.
Before I begin.
The safe Harbor provision forward looking statements in the conference calls and several risk and uncertainties, including but not limited to the company statements about this investment in technology R&D. They expect the transition to rollout of Fiveg networks.
Sure level and investments in their network.
These market position leadership, the company's execution of its commitment to existing of future customers.
Of the telecom market.
Expectations to be well position to handle uncertainties and other impacts due to covert.
Its revenue guidance and anticipated gross margins the company does not undertake.
Forward looking statements.
Our provisions.
Actual results to differ from these forward looking statements are outlined in the presentation and the company's SCC filings in this conference call management will be referring to certain non-GAAP financial measure, which are provided 10 healthy users.
The Companys financial performance.
Excluding certain non cash stock based compensation expenses non-GAAP results provide information that was his phone assessing radcoms core operating performance.
Comparing our results operation consistently from period to period.
He said on this additional information, it's not meant to be considered to substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles investors are encouraged reconciliations of GAAP to non-GAAP financial measure, which are included in the quarter's earnings release, which is available on our website I would like to repeat the information about the presentation. If you have not done.
You may do it.
On the Investor section of outcomes website at Www dot.
Dotcom flush Investor Relations no I'd like to turn over the call to please go ahead.
Thank you operator.
Yeah.
Hey.
Earlier. This morning, we issued a press release 18 go first quarter was actually Twentytwenty, we're pleased with old continue.
As we advance equalize technology and deliver on own festival commitments.
We played an important role.
Commercial launch.
Well.
In Japan last month, despite the state.
You may have seen.
Revenue was $8.3 billion will depress school.
Which was in line.
Patients would lead to leave but.
<unk>.
The global condemning highlighted the importance Andacollo Nichols today's world well maintaining mission.
He says.
It's useful to.
Keeping business running school videoconferencing.
We expect the physical media Street showed resilience.
We are continuing to deliver to existing customers continuing to walk into potential customers and continue to be when position.
The competitive.
<unk>.
There is uncertainty due to colby thanks.
Dick situation, which grew the fix and cycles. However, we believe this week.
And given our strong balance sheet and moved to you contracts with industry leading customers.
We continue to see a slow you always be activities and the ability to pursue these new business is not being significantly interrupted.
Based on our comps usability and to colleagues expectations regarding <unk> back.
Yes.
20 revenue guidance.
Hi.
No.
These challenging times.
He has been that those.
Please.
Due to the local and regional guidelines on safety something policies.
Tires globally.
<unk>.
We need money direction.
It is centered on walk you later trouble and moved old customer interactions provincial.
Occasion.
Have you already taken.
Completed the Sun season for social decency, and a will continue for the development and to support our customers without interruption.
I would like to it.
If you will run.
Please.
And the ability to meet headlong, the challenges and it will be thinking is presented as well as Dave.
The demonstrates <unk> commitment to the company and useful bolting government customers.
Brian.
We dialed Nichols.
So usage.
Relying on all those solutions to be sure into instead, we performance.
Well social do something in the most walking.
He has become even more critical.
And.
Playing and even more decision the rule.
Good evening decent activity.
So businesses.
I realize latency sensitive videoconferencing applications, such as woman with mixed runs the company operators need to monitor and optimize decent leases with missile traffic increases.
Every school if he could can suffer and so using issues solution has become even more essential to pinpoint and resolve issues due in July and excellent customer experience.
This quarter, we walk slows the would recruits in mobile and build them.
Nation launch.
Pinpointing any network also we see shoes.
For Greenfield, Nicole deploying a new innovative cloud native technology using goes used to like solution is being essentially.
No issues before launch.
We continued to support Talkington Mobileye is the launched towards first we'll utilize mobile network in April this adopted five just big picture. So I'm just stopped.
No.
<unk> largest mobile operator in Japan.
Well. This is usually controls we played in recruiting mobilized for lunch.
Do you see the splunk vote of confidence in our technology and further cement our position.
As the leading most advanced utilize issuance bendel faulty towards building a new mutualize platforms for the launch of Fiveg always visualize solutions and expertise will be more important is moving more operational trends seasons, and fiveg braskems industrialization excludes these tiny support.
And innovative offerings as Washington mobilized introduce you to lose nickel and ensures the Disney live video superior customer experience. We believe our continues with them uses statement to our market leadership and advanced solutions.
Oh within mobile Scorsese network architecture.
Now this was substantial reduction in capital investment, which enables them to Boston do savings to customers with simple and affordable since then.
The aim to offer customers comprehension communication services, combined Lexington, Servicelink and cutting edge technology.
With that blends to perfect. It slows connectivity Bluff in Japan, and then existing applicable to other markets worldwide.
Our customers come to your existing debt investment of their networks agencies stated.
<unk> any color that it would continue investing in critical goals area and expects nationwide five you coverage. This summer I was cutting edge software and support play an important role is 18 continues to move forward with each network virtualization to be bill folded it fix it.
Nationwide rollout of Fiveg.
No.
Higher degree of uncertainty on the global scale. We are encouraged by all the customers continued investments told the national enhancements and visualization.
Turning to all activities during the quarter, we continued to execute according to all plants.
We remain focused on the nice thing going five you solutions.
Vincent in research and development and continued to will closely with customers to innovate and meet current needs.
We still believe did decide usually solution has begun it's more burritos south to launch cremation five you sent leases and we'll continue to position rustom firmly to benefit from these although she doesn't inflammation. We are engaged multiple up would you useful fiveg and they've already released software that's supposed to.
<unk> Standalone Fiveg networks.
So I.
Really quite often they will still be familiar entirely new missile cool.
Please open the door, we lead the news service assurance solution to money. So you should we see consensus using they nami native nimble, which creates unique opportunity for rexam.
We have significantly infested cloud native solution and continue to do you can how exposed at these two also opens equals seamless from season to Fiveg.
So Paul 73 openings. Those 41 countries have launched five you shouldn't be says which has increased by 10 over results over the last month's also so the next stage of five you sounded is being postponed for three months until June 20. When did you took what we think the most locally so moving fold we.
This will roadmap is planned looking at the rest of Twentytwenty, we see expected goals.
We plan to continue to enhancing R&D to support our customers.
At least on fusion to Fiveg, and we expect dwell lots of Fiveg destroyed the adoption of falling innovative solutions, we debt I would like to turn the call over.
I mean, our CFO will discuss the financial results in detail.
Please go ahead.
Thank you good morning, everyone.
No just don't to such a school for national highlights.
I'm just under his those I went to the filling mandate to non-GAAP numbers.
So this compensation we ended the first quarter two southern expenses.
Revenues.
Experts remains on to allow an increase from $6 million into first quarter two cents isn't it.
Gross margin of 63% was impacted by increased rental car the purchase of the netted to move to your contract with what was one of our customers.
Gross margin levels similar to the previous year.
Operating expenses.
The first quarter of 2020 on the non-GAAP basis were $7.8 million compared to 7.1 reason to allow for the first quarter. Two so isn't in which resulted in an operating loss was $2.5 million non-GAAP basis, our gross R&D expenses for the first quarter of 2020.
Bases were $4.6 million, especially increased compared to $4.5 million into first quarter 2019. Additionally, we did not receive any grants from these are any of the vision that sort of two during the period. So our net R&D expenses for the quarter was the same as the gross amount.
Want to point out that into second quarter, two southern Twentys recent inhibition that sort of food.
None of those lots of approximately $1.3 million.
Said another buckets expenses for the first quarter 2000, 22.3 million dollar on another basis. The same the first quarter of 2019.
<unk> expenses for the first quarter, two southern fancy on the non-GAAP basis.
$838000 compared to $710000.
First quarter two so the team.
Operating loss on the non-GAAP basis for the first quarter 2020 was two plus possibly going though.
So when a person goes to 2.8 million dollar is the first quarter two sounds isn't it.
Net loss for the first quarter 2020 on the non-GAAP basis was 2.4 million to allow well and that's also 17 cents built diluted sure compelled to another.
2.7 million, though and that's also spent two cents diluted show for the first quarter 2019.
On a GAAP basis other conceals that's fine we reported a net loss for the first quarter 2000, 22.9 is going to allow or net loss of 21 cents per diluted share compared to $3.1 million.
Gross or 23 cents per diluted share in the first quarter 2019 at the end of the first quarter two sounds fancy headcount was 264.
Turning to the balance sheet as you can see on slide nine or a cash cash equivalents short term bank deposits at the end of the first quarter 2020 $63.3 million.
We've been names that I was talking about and she's provide us soon its footing to execute the opportunities ahead of SaaS and overcomes the current global uncertainty.
And our prepared remarks, I will now turn the call back to the operator for your questions.
Thank you ladies and gentlemen at this time will begin the question answer session. If you have a question. Please press star one it's less to calculate request. Please press star too.
Thanks Speaker equipment I love to have set for pressing the numbers no question will be pulled in the order. They haven't seen please standby lipo fair question.
The first question is from Alex Henderson Needham and company. Please go ahead.
Thanks, just a couple of questions just to be clear there you're not expecting any additional hardware.
In quarters.
A little unusual to see that kind of hardware heads in the quarter on the James.
Good morning.
[laughter].
And so you know we got a de say a hardware the expenses there is always a mental fluctuation of the product mix.
As you'll recall, we discussed <unk> previous quarters.
In some project we are providing the service will do for the project we choose the creates even good.
I mean, we show cost mainly on the fill stage of the project with who we deployed infrastructure.
Why is there is a our main focus is always it seems to be.
Oh in software and now whether they're visits realized the offering we always sometimes required to go if I go so the infrastructural fold open because she's older for them to get to integrate the solution.
So do you see the you know we see those.
You do previous quarters that from time to time, we have that but looking forward. We continue as before to be expecting to be then stimulus will smoke to live alone.
Usually lives Ellen.
Continue we do mainly software.
And.
Great.
On the sorry.
<unk>.
Pardon item for quarterly forecasting and it's very difficult I understand the timing of it.
Not all that concerned about one Q, but could you give us some sense of whether you think.
It's going to be very heavily back half loaded or do you think killed.
Taking that 1.3 over the course of.
Here.
Relatively evenly or.
What's going on in the June quarter relative to that.
That piece.
He said it's typically.
Do you see the spread the long they use a complete gets used its typically and.
And quite evenly so because of <unk>.
Later in the pool will be seen there might be higher on the well in the second quarter.
Overall, the DC is supposed to know are indeed, we choose a part of the you know all use investment that we do.
Do you can.
Take a local navio previous use that I've been to us before the <unk>.
The grant only the second quarter and then its create some me.
You're not going to typically on the well food participation on the when that Walter We then.
You can be spreads over the risk.
I think.
Can you remind us what a you do relative to FX and.
Obviously, the shekel has been all over the map because of Cove it.
It plunged dramatically, but then it recovered most of that plant so.
Are you able to take advantage of that.
Short window, when it was a under that much pressure or.
Or was that.
Just two short a period to be down there.
Yeah, and therefore, no real impact.
I can think maybe I'll take that yes, yes, I can take it.
Basically a you're you're right to the fluctuation in the [laughter] from the girls to read the Chicago and a very short term, we do some hedging or maybe it wouldn't be.
Affected in the Q2.
So we took an advantage, but not at the four here to be effectively most in Q2.
Okay.
Going back to a rock tenn, obviously a major.
Deployment there.
Little later than expected.
Can you talk a little bit about how you expect that companies.
Deployment to unfold and whether you think there's potential for add on there over the short term or whether it's really a much longer term scenario, but what's the status there.
So I would start to weed, stating that the up within these first of all the demonstration to all industries, our telecom industry.
The power in their maturity will there be literally medical technology.
While maybe some questions and mature would be an ability to execute did a very ambitious plans.
You can definitely admired there.
Being able to launch.
I agree joining the call we'd 19.
Big and they steal the leverage the benefits of the Viewfield technology.
I think this is the most important because the company that is a big believer in the cloud Native then they believes that the telecom we go there.
Bob I was relationship. We then I think it's a in the bolt ins that people look at a nice going to the industry Molin mall. They opened it goes globally are good confidence on diesel successful launch.
Back more on these are mainly when when we look on the book to fight.
No really goes to a fair.
Our focus is a longstanding relationship we've talked with them.
You'll recall, we have the multiyear contract with them.
And we continue to support them in Japan.
We hear now back within.
Publicly announce vocally, it's not a big surprise the data the continuing full speed ahead to fiveg, which can create an opportunity.
Yeah there.
I would say, it's not where.
Next well, though so.
But it's definitely something that we are looking to partner with them.
Moving forward.
As we talk.
And the previous school does that he's also a longer.
I really do is up would end up now being very vocal on day trying to get good soak stocks index, but these are the big due to a level.
Two additional periods globally.
We are their provider in Japan.
Well positioned us to be able to replicate got into additional countries as we manage to implement the stuck but this is obviously a bit longer them and dependent on first of all know their success to be able to replicate these globally, we'll decide to open additional greenfield potatoes on the.
In another country, so I would say that he's definitely opportunity its own to fiveg.
The two we are.
Excitedly.
Looking for we'd we'd recruiting and there is a longer logo demo put you wouldn't be ones and I couldn't be able to replicate the successful Japan to other countries.
If I could.
Have.
Okay.
Solution in the rock Tenn architecture resulted in incoming calls.
Other vendors other service providers that.
I see that as a.
Architecture for an open ran future.
Does that is that causing a an influx of additional interest.
So you know it's a.
If you follow the then you seem olin more predictable saw there.
Bill Moler.
Going public we do not mental Bankmobile technologies your exceed your latest announcements for me dish in the U.S. Good. They selected there in my opinion full revealed to Iran. I think this is the second green suits open. They go that these are betting going good children, we see either the legacy operate those.
Also starting to.
Grizzly investments on future rent. So these old eventually and.
As part of the global trends of the industry that we see for the last few years that.
We will all come together we defined.
I think that five to use the consensus to be cloud recurring technology. I'd also like we did do either you'd anyone that there's no confide gene.
On the long run real name on an appliance based everyone. Both individual community Endopredict go South we're focusing on cloud Native pictures.
And all those.
Success.
In the case studies, a gain even getting more confidence that this is that the direction I don't think it's now western north.
If it's more with western of win and the Wendy's when fiveg stuff seems to be.
Yeah well.
Clearly that's the case I guess the question is hasn't translated into activity.
Kopin activity is really what I was getting at.
So so we don't a.
Sure. The I was a pipeline looks easy, but I, what they can say that the level of interest you generally in the industry on cloud because technology is increasing and then the five do and increased from five.
And.
The requirement.