Q4 2020 Radcom Ltd Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Broadcom Limited results conference call for the fourth quarter and full year of 2020.
All participants are present in a listen only mode.
Following managements formal presentation instructions will be given for the question answer session for.
For operator assistance during the conference Please press Star Zero.
As a reminder, this conference is being recorded and will be available for replay of the company's website at www Dot <unk> Dot com later today.
All of the call, our Yale Harare, Broadcom, CEO and a mirror of high Broadcom CFO.
Note. The management has prepared a presentation for your reference that will be used during the call. If you have not downloaded it yet you may do so through the link in the investors section of Red comes website at Www Dot Red Com Dotcom Slash investor cash relations.
Before we begin I would like to review the Safe Harbor provision.
Forward looking statements in the conference call involve several risks and uncertainties, including but not limited to the company's statements about its continued investment in technology and R&D positive momentum of the five G market and other market and industry trends the company's market.
Cash and cash position potential unexpected growth the company's expectation with respect to its contract with Rakuten and continuing relationship with AT&T the potential of the Red from east product the company's expectation regarding the impact of COVID-19.
Its ability to capitalize on the emerging five G opportunities and it's the revenue guidance. The company does not undertake to update forward looking statements. The full safe harbor provisions, including risks that could cause actual results to differ from these forward looking statements.
Of our outlined in the presentation and the company's SEC filings.
This conference call management will be referring to of certain non-GAAP financial measures, which are provided to enhance the users overall understanding of the company's financial performance by.
By excluding certain noncash stock based compensation expenses non-GAAP results provide information that is useful in assessing red comes core operating performance in evaluating and comparing the results of operations consistently from periods of period the presentation of the Swedish.
The information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles investors are encouraged to review of the reconciliations of GAAP to non-GAAP financial measures, 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 downloaded yet you may do so through the link on the investors section of Red comes website at Www Dot Red Com Dotcom slash investors Dash relations.
Now I would like to turn over the call two of Yeah. Please go ahead. Thank you operator, and thank you all for joining us today.
This morning, we issued the press release, stating the full quarter and full year results for 2020, we are pleased with the financial results. We ended 2020 on the stronger note following several consecutive quarters of revenue growth.
Total revenue for the fourth quarter of 2020, where the $10 $2 million, bringing our total revenues for the full yields plenty of 20 to 37 $6 million.
This was at the high end of our revenue guidance for 2020, an increase of 14% yields of the year and resulted in a significant improvement on all of a bottom line.
Over the last couple of years, we maintained our significant R&D investment to expand our technological advantage and capabilities.
The investment both fruit in the second half of 2020, we reached the critical milestone in our long term strategy as we launched the article Mace, our automated factory assurance solution.
We secured one of the industry the sales side your Standalone assurance of contract we directly to him.
Shortly after the reticle makes launch and continued support in Rakuten is the aggressively rollout.
The full June five centimeters in Japan on the world's first fully Virtualized mobile net book and one of the most advanced <unk> networks the.
So the the end of the year reflects the progress we made during 2020, despite the impact of COVID-19.
I wish to take this opportunity to thank all of the fragile employees is the rose to the challenge and helped us meet the company's commitment.
And so both of our customers during 2020.
From the beginning of the pandemic, we quickly adjusted our internal and external processes to the new way of the multiple can we follow the regional heads of the guidelines to ensure the total for employees, who work safely and support our customers.
We also issued debt all of the worldwide teams could collaborate and share the knowledge effectively.
Virtual conferencing and the other cloud based tools.
Looking at the telecom industry, the fast to market continues to gain momentum.
This is reflected in our pipeline as we see molding mobile operators, including five G. In the attendance requirements and we believe this strength will continue during 2021.
We see increase the investment across the market from hence the menu fixtures networking, we spent for advisors and operators. These increased investments inside of <unk> will drive demand for automated the assurance solution to ensure service quality.
We believe the 'twenty 'twenty, one starting point for <unk>.
In the United States recently, so the FCC complete <unk> spectrum auction in which companies bid just under 81 billion for the licensing rights to use the spectrum.
The C band spectrum is an essential part of the five year rollout and it wasn't available previously no. It will enable operators to deliver increased speeds and coverage and we directly would be live as operators have made substantial commitments to this transition we see this trend worldwide.
Is moving more operators investing the fights respectful.
The into the GSA over the two hungry the operators worldwide are investing plenty of invest and decided the spectrum by the end of 'twenty 'twenty. Two we also see the strength in Europe as operators begin the selection process for <unk>.
And this will cause the weekly calls I just continue announcing the <unk> sides of the contracts Nokia recently announced as he said the closed 195 commercial sides of the agreement and Ericsson announced the detailed close 127, both of these and other network wiechmann providers of aggressively targeting the five day market and offering.
Mostly for the first because of the 50%.
We believe that all of this investment and activity around the <unk> indicators that the market is strong and moving forward.
However, due to the ongoing pandemic, we estimate some building uncertainty in terms of timing of Rollouts.
As mentioned before five years most of the two phases in the first phase compatible handsets connect to both sides of you sold your radios that in turn joined the subscriber to the same existing Folgers net book. This is known as non Standalone sides of <unk> two day, we're still at this stage of <unk> the.
The second phase of the five G is known as Standalone side of <unk> in decent net booking environment open items will deploy an entirely new network call and needs of new issuance solution to monitor mission critical always connected services.
We see early signs of stand alone <unk>, but the critical mass is still at the early stage of non Standalone <unk>.
In these initial build outs of five G assurance vendor selection ease at the latest stage of the process. We expect to see some early adopters begin the multi stage process of choosing the assurance solution in 'twenty and 'twenty one.
I suppose the keeps trend is the.
Public cloud providers like Microsoft, Google and Amazon C of potential market in the telecom industry is operators adopt the cloud native technology, which is the lines with the <unk> product strategy over the recent deals.
In 2020, we saw Microsoft introduced a jewel for operators of cloud platform that incorporates edge computing capabilities with our advanced cloud technology and telecom expertise, we see an opportunity for cooperation with cloud providers.
The launch of our automated the assurance solution radical mace the market feedback has been extremely positive. We are currently engaged in multiple opportunities of different stages of the sales cycle.
We believe the trust for them is well positioned to win more market share of decides to continue to evolve.
Besides of the size of your market opportunity, we also see demand for Fuji and vault issuance solutions.
As the operator blamed the issuance of investment for the long term, we see a competitive advantage for the logical base, it's fudge of requirements or included in these tenders losses.
I'll take those increasingly see the need for advanced support in preparation for visualizing because of the net book and we're racing to <unk>.
We are making good progress with these additional opportunities.
In November we announced that we entered into a new multiyear agreement with Rakuten mobile this increase the level of business, we'd wreck within the initial deal we signed with directly to end of May 2019 cover their full gene. This book.
This new agreement the shoes tens of recently launched non Standalone <unk> yourself.
The upcoming Standalone five you said at least launch expected in 2021. This was an important milestone and the significant acknowledgment of our advances assurance solution is one of the industry's first standalone sides of the assurance contracts I'd call will provide rakuten mobile end to end full Gen <unk> service assurance.
Rats from solutions is also being integrated into directly tends communication platform is the remainder of this platform packages and market, even though the Abc's network architecture to operators worldwide.
Who tends to assurance vendor of choice, we could be part of this offering if the opportunity evolves.
Looking at the U S over the past year AT&T is the key strategic customer for us our cutting edge cloud technology is embedded into At&t's network and monetize the subscriber experience as they continue evolving the underlying network infrastructure to the cloud.
In 'twenty 'twenty, one we will continue to deliver consistent cutting edge software releases to AT&T as we support the evolution of the the cloud network that is moving even more critical for millions of customers Julian the different dynamic.
Our solutions help customers identify service issues in real time and top of the chew them to continually maintained the highest quality of service, which is even more vital when operators rollout of new technologies like <unk>.
We believe the Starwood knowhow in advance of cloud technology plays an essential role in the opening those customer centric approach to network deployment.
In light of the multiple opportunities in our pipeline and the.
The market, we plan on increasing our sales team to focus on specific regions and take advantage of the market opportunity we see.
I am pleased by our achievements Julien went through 'twenty and execution, despite the global pandemic.
We launched Russell Mace and signed our first fives of your customer contracts.
We are expanding our sales team and the already involved in multiple opportunities for radical mace for new and existing customers.
Based on the current industry conditions and our current visibility we are expecting another growth year and providing full years 'twenty 'twenty one of revenue guidance of 39 million to $41 million.
We debt I would like to turn the call over to Neil Hi, I will CFO will discuss the financial results in detail of meal. Please go ahead.
Essentially yes.
Morning, everyone.
This quarter marked another consecutive period of revenue growth with our fourth quarter of increasing by 13% year over year. The also maintained our operating expenses of <unk>.
The and improving our bottom line.
Now please turn to slide six for our financial highlights to help you understand the results I would be referring mainly to non-GAAP numbers, which exclude share based compensation.
We ended the fourth quarter of 2020 was $10 $2 million revenue, an increase from $9 million in the fourth quarter of 2019.
Our gross margin in the fourth quarter of 2020 on the GAAP and the non-GAAP basis was 70%.
Most of that our gross margin can fluctuate depending on the revenue mix.
Our gross R&D expenses for the fourth quarter of 2020 on the non-GAAP basis were for 6 million daus the.
The slight increase of $142000 compared to the fourth quarter of 2019.
We received the draws from the Israeli and the vision of authority for $308000 during the quarter.
Sales of marketing expenses for the fourth quarter of 2020 were $2 $3 million in the non-GAAP basis compared to $2 $5 million in the fourth quarter of 2019 the.
The decrease is mainly related to reduction of the travel expenses due to COVID-19.
G&A expenses for the fourth quarter of 2020 on the non-GAAP basis were $748000 approximately the same of the fourth quarter of 2019 operating loss and the non-GAAP basis for the fourth quarter of 2020 was $231000.
Compared to an operating growth of 911 thousands of dollars for the fourth quarter of 2019.
Net income for the fourth quarter of 2020 on the non-GAAP basis.
$85000 or of net income of less than one cents per diluted share compared to a net loss of $501000 or a net loss of <unk> <unk>.
Diluted share for the fourth quarter of 2019.
On the GAAP basis other can see the slide five of our net loss for the fourth quarter of 2020 was $461000 or a net loss of <unk> <unk> per diluted share compared to the net loss of $1 $1 million of our net loss of <unk> <unk> per diluted share for the first quarter of two <unk>.
The 19.
At the end of the fourth quarter of 2020 of our head count was 276.
Now, let's turn to the full year results. We ended 2020 with revenues of $37 $6 million, an increase of 14% from search of 3 million the allowance in the full year of two.
2019.
On the GAAP basis, and then ended up basis, our gross margin was 71% in the full year of 2020 compared to the gross margin of 70%.
And the full year of 2019.
Our gross R&D expenses for the full year of 2020 on the non-GAAP basis were $18 $3 million, an increase of $471000 compared to the full year of 2019.
We're planning to continue the investments in R&D to maintain our technological advantages we.
We received the accumulative grants from the Israel innovation authority for $1 $4 million during the year.
Sales and marketing expenses for the full year of 2020 were $9 $2 million on the non-GAAP basis compared to nine nanometer zone in 2019 the.
Increase is mainly related to the reduction in travel expenses due to COVID-19.
G&A expenses for the full year of 2020 on the non-GAAP basis for $3 2 million compared to $3 million in the full year of 2019.
Operating loss and the non-GAAP basis for the full year of 2020 was $2 4 million compared.
Compared to an operating growth of $5 6 million the allowance for the full year 2019.
Net loss for the full year of 2020 on the non-GAAP basis was $1 8 million or a net loss of <unk> 13 per diluted share compared to the net loss of $4 $6 million, where net sales of 33 cents per diluted share for the full year of 2019.
On the GAAP basis, as you can see on slides price our net loss for the full year of 2021 4 million to allow for a net loss of 29 cents per diluted share compared to the net loss of $6 $8 million or a net loss of 50 cents per diluted share for the full year of 2019.
Turning to the balance sheet as you can see on slide nine our cash cash equivalents and short term bank deposits as of December 31, 2020 were $69 million.
We believe that our strong balance sheet provides us with the flexibility to execute the opportunities ahead of us and adapt to the ongoing global uncertainty.
That ends our prepared remarks, I will now turn the call back to the operating for your questions.
Thank you ladies and gentlemen at this time, we will begin the question answer session.
Have a question. Please press star one if you wish to cancel your request. Please press star two.
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Please standby, while we poll for your questions.
The first question is from the bond theory of Willi of William Blair. Please go ahead.
Yeah.
Amir Thanks for.
Taking my questions and congrats it's really nice to see sort of the the growth in the the consistency I'll come back so it's a nice job there.
Wanted to touch a little bit.
As you posted some sort of upside in the quarter relative to expectations.
Solid results there, but can you give us an update on the spending maybe the decision making by them in Q4, I know you talked about a little bit of a little more color would be great you know the.
Pandemic was certainly challenging for customers potential customers and I guess as you think about conversations and processes are you seeing those start to pick up Q4, obviously five she's got them all that but sort of the there was still a delay in sort of people wanted to make decisions the loved ones down sort of that decision, making spending environment and how that's changed.
Well, thank you Bobby and good morning.
I think that the.
For the COVID-19 pandemic effect is the definitely something that everyone needs the trying to understand.
What I see is that the overall five G is getting the very good momentum and more with more investment in the telecom industry and global He's made total it's five gig so the demand for <unk> strong and the commitment of the OCA right. Those total spiked you use there.
When talking to different day, he owes globally, we do see some.
Delays all of it.
Due to the pandemic, but you know from experience in the market for previous technology generations telecoms.
For the medical since say out of the longer and take the lead and I'm not truly for the effect is always due to the COVID-19 or not.
The bottom line is that question. The most important debt. The five G momentum is there the demand is there and the most of predictable that we speak with the pace you can see five years strategic investments and they are continuing full speed towards debt.
Yeah, Yeah, no I think you're right, it's hard to get rid of it just COVID-19 related let's get the AC side I guess, you talked about the past of having in the past about having a handful of sort of P. O sees with tier one customers.
Just give us an update of the number of P. S. Ease of workshops you currently have the progress and how is the pipeline shaping up for 'twenty 'twenty, one and then I have a question for me on the guidance, but just maybe just on the PSC in workshops, and how that's playing out, especially in the tier one carriers.
So this is the good question as you know Susan workshop during the Covid was one of the things that this radical them we had to adjust.
We actually managed to leverage the fact, we are of the cloud Native company and introduced the demo environment, and then Youll see environment using the cloud the public cloud, which allowed us to be more agile and what we sponsored to all the customers.
And then manage to cover some of the overage that other.
In some cases in the call.
Robbie the environment of less visible liking studying physical equipment, you really from several of them that are.
On the customer premises and the bank debt, we managed to actually accelerate the number of engagements we have with customers.
Got a different day less in person.
Line, but we are seeing increased.
For the activity with the customers and N P O sees the compared to what we had before.
As I pointed out the previous nodes.
The group's activity both from fuel five G customers as well as customer the they'll still not there read five G. But they are.
Doing the refurbished fold of faulty net work changing the network providers and looking now in the future pool.
So at least the assurance solution.
And the fact, we of the reticle base is something that would give us the look of points because the I'm looking for down one day, what is going to be the platform called the needs next year to come so definitely we see this building up but it's different because we are mainly working remotely.
Yeah, Yeah yeah.
Understood.
On an ace let me ask about age before I jump to the Amir.
You talked about obviously, you know Rocky times interest and obviously the department of Ace, but how is demand with other carriers like is that the wait and see if that lets see how it plays out.
With rockets added or are you actually seeing sort of of people say, okay. We're going to test that we're going to put it in Dev environments. We're gonna start looking at how we how are we seeing the early demand for ace.
So the the Ace is really for the early adopters that are really moving forward with the cloud but victorious in the.
The kubernetes and containers, which most of the other operators are still not there, but because we anticipated that we build the reticle bases and evolution platform that allow you also to walk in the and the Green environment and also run on the bare metal solution by directly out of the enabling.
The access to this new technology also for the operators that are not yet there.
The message we hear from everyone is that the they're very excited they see our technology.
The advantage and they really are looking forward to use the this kind of solution because everyone understands and believes that when she comes in full the power or D. C is going to be the architecture of choice.
Yeah, Yeah, okay.
Okay that's true.
For a quick second I mean, it's good to see the guidance for revenue growth you, obviously had challenges over the last you know.
18 months or so moving around out of the numbers I'd love to understand what you've assumed.
Baked into guidance I guess, how much of the outlook is predicated closing new deals how much of the existing partners growing I loved your sense on how you thought about building up the guidance.
Basically.
Hi, Bob how are you.
Basically our stated I think we are of good visibility towards the 2021.
Most of the guidance is consistent consists.
Consistent.
On our multi year agreement with our existing customers.
The high level of opportunities that are we.
We think of that are will be sort of during the year and I think this is the main base for the of the guidance.
Gotcha Gotcha, and then one last one just so we're clear do you have any.
Major renewals coming up of 'twenty 'twenty one.
At all and have you built that into guidance, what's your expectation there. Thank.
Thank you.
So I think I think of you answered that in the last quarter, we any given quarter we have.
He knows the suite with all of a different accounts typically we have.
Each customer we have multiple contracts of at each of them has renewed in the different stage.
So you know this is part of the the normal course of things.
Overall, we are the we don't see anything specific that is the went through 21 different than we had greenpoint in 'twenty.
Fair enough fair enough I'm kind.
Thanks for taking my questions.
I think you both have vaccines. So congratulations on that true, we're hoping we progressed here, but stay safe and thanks for thanks for the time.
Thank you thank you Barbara.
Is there any additional questions. Please press star one if you wish to cancel your request. Please press star two please standby, while we poll for more questions.
The next question is from Alex Henderson of Needham and company. Please go ahead.
Hello, guys.
So a couple of questions I wanted to start off just with some homework on the print.
Print that you just did the gross margins coming in just a hair below.
70, it seems like that's probably got a mix shift to some of the older products in that can you talk of all but about the mix of what you reported for Q.
Yeah, Good morning, Garlic's and actually you for mainly all of the new products in this specific case.
We had the some higher expense on the set of part the software that is embedded into our product line into a renewed product debt.
Was the added to the cost.
And then the slight shift the slight over it on all of the gross margin.
Okay. So the.
The mix shifts to the new products are in 2021, what we see that.
Third party software in the mix and therefore, we should be thinking no 700 or is it something more in the 71 and a half range that you did on average for the year.
Yeah, you know, we always nice day, they have some fluctuations, but most of the sudden the button.
For the same we'd say not the related to the new product line.
One time cost associated with specific can't do but the.
The the gross margin level, it's out of the roughly.
Roughly in the range of indicated it can fluctuate between the quarters, but.
This is the range.
Alright, so continuing at the current levels for 2021.
That you've posted in 2020 of that is fairly stable gross margins.
Yeah.
Yeah, and then on the.
And already in 'twenty one.
Is it reasonable to think that the the one point.
The $314 million range is the right range or should we be tampering that a little bit.
I can't take this hi, Alex.
Basically the <unk> right now no we are.
The submitting the request.
We are waiting for the final approval, but I think that the overall from what the permission that I have now.
I think it would be the same level of what are the has been the for the last year or so so of course, if the opex.
If we get some answer we will update but I think that it's the for assumption that it would be the same.
And given the timing of the first quarter is it likely that the first quarter is again.
Without the <unk> the way it was in 2020 or we hope to get the announcer before the quarter ends but you.
No.
It's not done it's not done.
Right.
And any thoughts on the tax line.
The.
You did what 800 or so but it did seem to pick up as the year progressed.
Should we be looking at somewhere in the $1 billion range share or.
What should we be thinking about there in terms of of the tax exposure.
Basically.
We have an accumulative net losses so.
Most of the regions, we are not paying taxes on income are the tech.
This is mainly related to employee benefits, which you can look the credit.
And the credit.
And so.
We don't see any major increase in this.
At this level.
I think it to be true they stay the same.
Okay, well, it's been averaging around $1 1 million and it dipped in 2020 I'm not sure why that would be the case, but.
Should we be keeping it at that $1 $1 million range or we should be keeping it around the 810 range.
Okay.
Hundreds of turn range its credit for yes.
Okay. Thanks.
And then.
I wanted to ask about the deferred revenue as a which jumped quite sharply in the quarter.
Was there a contract the debt.
Came in and went into the deferred are the caused that jump.
Basically deferred revenue is the based on the.
The funds that we received but we didnt recognize the the revenue yet so the these are the the cases some project we'd get the financing, but we didn't recognize revenue. So this is why you see the increase.
Is that all the product or is that mostly on the services side.
The mix product answers.
I see okay.
I was hoping you could talk a little bit about the competitive landscape.
The slow.
The rollout of five G. The.
The Pearl of timing because of Covid. The all of those factors taken into account is certainly offered the competitors from time to catch up.
I've noticed the net scout numbers for instance had been cut.
Got a bit better of late.
Is there any change in the competitive landscape that are that we should be aware of.
So Alex the.
Overall, we we mentioned this before every one of these.
Understanding the types of use of its.
He's coming in all of the competitors the number of market the definitely targeting to see what is the offering to do some of the technology.
We believe that all of the advantage of being in the virtualization space, starting the early 2015 and bringing the very robust technology.
He will give us.
The significant advantage and this is the feedback we are hearing from the customers.
And if the that was the NIS five gene is the main market. So we do believe that most competitors with.
And the invest and continue to invest into the space. We are very focused on our execution.
We believe that the the opportunities that we believe in our technology and the sofa.
From the only.
The vendor C that was basically the growing again the anticipated continued growth. So we got all the all optimistic.
When you go into a POC are.
Are you seeing just the that scout or are you seeing additional cash.
Companies are entering the space.
Hey, you know we have all of the usual suspects the typically about three for the company.
Walking in the space.
And then this was the end game nothing nothing has changed from what we saw lots of deals.
Alright.
Uh huh.
Come back into the the mechanics side of the.
The business model, obviously, the shekel has been quite strong can you remind us.
You know what.
We should be thinking in terms of the way you hedge and the impact of the exchange rate on the Opex costs.
Yes.
I'll stay assets.
Without some short term of hedging.
And if I look at this quarter the negative impact of the shekels in this quarter compared to the previous quarter was around the $120000.
If you look at Q1, and if it will stay out of the current rate of the negative impact compared to Q4, it would be like the same $130000.
This is the quantification.
And when you looked at your Opex a did you assume some spending increased due to the teeny coming back in as a result of the.
Well, a normalization of the economy or are you expecting your T E.
<unk> expenses to stay fairly de Minimis.
Come back in 'twenty, two how should we thinking about the opex growth for the year.
Ah, yes the base.
The the negative impact of the sugar the.
It's about an order for ticketing in Manhattan.
And the level is about 600000 the allows our when we look at 2020 versus 2019, we had the negative impact.
$700000. So of course, it's affected the profitability, but a way of controlling of the show cause expenses very very carefully and are you know we're not spending.
A lot of the Opex, we do what we want to continue to invest in the R&D and we do want to extend the stay the same but it's not something dramatic.
And so just just to put this in some context.
Is it reasonable to expect that the Opex is fairly flat with the exception of the shekel impact would you say 600000 for the year or so.
Taking it up towards the pretty close to the $30 million level I think that day, we will systems like the.
Increase in the ER and the R&D level also in the in the sales and marketing.
About the the shekels.
So so something slightly above 30 30 million then it would sound like a would be the expectation.
And in the operating expenses.
Okay and do you have any sense of what your plans are relative to head count or are we holding it steady at $2 76.
Yeah, Yeah, it's a it's a day.
The mean steady as I pointed out we are the doing some increase on all of the sales team.
We are seeing five day is maturing and we all of it.
The allocating somewhere in the mall.
The moly mobile of the saving of the travel as you pointed out before and we are allocating some of the budgets in order to increase all the sets the even kept your mall of the privacy of your market opportunity.
But the overall companywide sales should be similar with maybe slight increase.
Alright so.
Going back to the top line at the lower end of the band you're talking about 5% kind of the growth rates.
Uh huh.
Very yeah I think.
So you'd have to conclude fairly low growth rates for a company your size.
Obviously, you've got a lot of opportunities for additional wins that could drive that higher.
How should we track.
The success.
Alternatively, the lack of success.
The accelerating net debt line other than just waiting for the wall the prints.
So 'twenty 'twenty one of the growth here and we did the down 14% growth.
But as I believe this was the record revenue year for Red column and the one of the highest credit Q force ever.
We are looking to continue all the growth.
We are taking some conservatism for the impact of Covid and the the slowdown that might happen.
The but still under those conditions, we are still looking to continue on growth.
It was there for we talked before our sales cycles of some uncertainty in the.
It might be longer than expected in the old one situation and the results. So the the time it takes to go down to the revenue.
From the time you close the deal because we usually have some.
The few quarters for the implementation.
So this is why we are looking on the on this guidance and the I'm still very very pleased that we can.
The show a consecutive meal for growth.
Is the always the goods the good signs in the use of our updates and progress with our customers in the no contract wins and I want to highlight again the importance of the deal we closed redirect within air which is probably the one of the most advanced <unk> networks in the world.
World and probably one of the most advanced.
700, the shrink project in our space that gives us a lot of the country dense on the novel the journey.
I think this is the this is the way you can look into it and the new wins that we are expecting to come in the ease of doing the year would build up and maybe the second part of the you could be building up already revenue for the 'twenty 'twenty two.
And as I look at the AT&T contract.
It has inherently.
<unk> been in place now for quite a while I think the.
The original contract is three years and this kind of runs its course through.
Through 'twenty one.
I know you've had a couple of renewals and the like should that contract. All the scene is something that is stable as we go through 'twenty, one and 'twenty two worries that.
Upper renewal.
Hum needs to be renegotiated and is there any growth relative to the installed.
Installed base.
So our relationship with AT&T are healthy and we have secured.
The revenues into 'twenty 'twenty, one 'twenty two 'twenty two already.
Pointed out the other multiple contracts.
With different customers, we did see some upside on the AT&T already in 'twenty 'twenty.
And there is nothing that we see that these are coming now.
Because as long as is true intended we'll continue to focus as I pointed out on delivering new software updates into AT&T to the.
And the cloud platform.
And some of the most of the fleet is already secured until 2022.
Alright, great. Thank you very much.
Thank you Alex.
Got it.
The next question is from Abba Horwitz of Old School. Please go ahead hi.
For you all a very nice quarter. My question is regarding the R&D R&D now is tracking around 50% of revenues and I'm wondering and actually it was up this year versus last year. Once again I'm wondering at what point of you guys going to feel comfortable that we'll start to see that number.
Slow down or or even flat line for a while.
So we gave you about any of our R&D is one of all of the bigger the biggest assets as we believe now is the time to invest in technology.
I would say that in 'twenty and 'twenty, one we are going to stay in the very similar levels in R&D and again, excluding the <unk>.
And the exchange rate changes.
So we are about the right size of investment.
We're thinking that for.
The coming two years for going to be critical and for with cementing our product offering so we.
The invested in the last two three years into R&D in order to of Shaw relaunched reticle mace, but in OE environment, you need to continue and innovate and this is why we are going to continue and maintain the stipulate 11, I believe that with the revenue growth the percentage of R&D is going to get the lower because we.
We're going to keep stimulant of level to what we had before in any revenue growth would be not necessarily requiring additional R&D investment. Okay. So so would it be fair to say that right now of between 19 and $20 million would be the level for 2021 for R&D.
This is the range, yes, okay, and and I mean, when we look at incremental revenues because this quarter. What you demonstrated is that at these levels of pretty much your breakeven.
So really any revenue out of after this levels is actually going to produce profit can we just assume that it will all flow to the bottom or will there be certain variable costs associated with the incremental revenue.
So all of the gross amounts easily the 70 ship.
But then so you do have some right of course.
But yeah from this level of beats the most from go to the bottom line as I pointed out we do want to do some additional expense from the sales and marketing.
And the reason the asked before.
The.
Like increase on the line travel that we are optimistic that in the.
Second part of the year, we would start to see things back goes back to normal but roughly the.
The the operation expense, we have is the.
Breakeven in the revenue growth should start to to go into bottom line as we pointed in the past.
Okay.
Great and just one other are there any other stand.
The Standalone public companies that are doing what you're doing at this point.
Okay.
No at the time of wealth you know some of our competitors some of them.
Public, but most of them out of doing the.
Multi multi product lines.
Not the only focus on the insurance.
Okay. The ones that are focused on the assurance I think most of them all the progress.
Thanks, very much and again great quarter. Thank you IRA.
Thank you of it.
Yeah.
There are no further questions at this time. This concludes the Rad Com limited fourth quarter and full year 2020 results conference call.
You for your participation you May go ahead and disconnect.
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