Q2 2021 Radcom Ltd Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
Really.
Ladies and gentlemen, thank you for standing by. Welcome to The radcom Limited results conference call for the second quarter of 2021, all participants are present in a listen-only mode. Following Management's formal, presentation, instructions will be given for the question and answer session for operator assistance. During the conference. Please press star zero. As a reminder, this conference is being recorded and will be available for replay on the company's website at
Radcom.com later today on the call. Are y'all Harare? Radcom CEO and Amir Hai radcom. CFO, please note, that 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 investor section of radcom website at www.ge.com.com investor - relations before we begin, I would like to review
you the Safe Harbor provision, forward-looking statements in the conference. Call involves several risks and uncertainties including but not limited to the company's statements about its visibility into the second half of 2021. Its sales pipeline momentum demand for its products and new requests and potential expansion of opportunities. The company's continued investment in technology and R&D expectation regarding the 5G Market size and Trends in industry.
vestments and spending the company's expectations with respect to the digital
And in Telecom the company's market position cash position potential and expected growth. The company's expectation with respect to its relationships with Rakuten and a TNT its potential expansion with a top-tier latm operator. The potential for additional grants from the Israel. Innovation Authority the potential for additional Partnerships with top Cloud providers in the future and its 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 are outlined in the presentation and the company's SEC filings in this conference, call management will be referring to certain non-gaap Financial measures, which are provided to enhance the users overall understanding of the company's financial performance by excluding certain non-cash stock-based compensation expenses.
Gaap results, provide information helpful in assessing radcom score, operating performance, and evaluating and comparing the results of operations consistently from period to period. The presentation of this additional information is not meant to be considered a substitute for the corresponding Financial measures prepared in accordance. With the generally accepted accounting principles investors are encouraged to review the reconciliations of gaap to non-gaap financial measures included in the quarters.
Earnings release available on our website. Now. I would like to turn over the call to a y'all please. Go ahead. Thank you operator and thank you all for joining us today earlier this morning. We should a press release stating our second quarter 2021 results. We are pleased with the results. We delivered another sorry quarter as we continue to execute the company strategy and invest in our Advanced 5G. Cloud technology is we engaged in a
If you can't hire number of states opportunities, total revenue for the second quarter of twenty Twenty-One was nine point eight million dollars representing an eighth consecutive quarter of year-over-year Revenue growth. Additionally, we secured several meaningful orders from our existing customer base during the quarter, increasing our visibility into the second half of 2021.
We made progress with the initial deployment at the top tier, latam operator that we announced in May, this order covers the operators 4G network with the expectation of expanding to, the 5G Network in the future. This win was achieved based on our Innovative technology and the advanced capabilities of radcom Ace which we believe provide significant value to operators is 5, you ready automated Assurance platform
We are pleased with our progress as we remain focused on delivering on our commitments and expanding this relationship. We continue to invest strategically in R&D announcing last week. Our enriched AI driven Insight. We introduced a new Innovative AI solution is part of radcom Ace dissolution automatically analyze millions of data sessions in real time and can reveal underlying Network faults that otherwise would be unlikely to
Identified quickly.
G networks, this solution helps operate the overcome the challenges of operating complex multi ventev networks and ensure the quality of services. I'm proud of our team worldwide for their dedication and commitment to advancing our Cloud technology and delivering on our customer commitments. If it with the ongoing impact of the pandemic, the Telecom industry is moving forward. There has been a, massive cultural shift towards the digital.
And more and more people are adopting, new technologies and communication tools, as a result, operator worldwide. And operating their existing networks, or building new networks to keep Pace with this trend, we believe the disc when we positively impact the future of our business. We see a ramp up in 5G, activity for new network, infrastructure contracts to Partnerships between Telecom operators and large-scale, Cloud providers, creating a favorable environment for our
Oceans as mentioned before 5 years, multiple phases in the first phase compatible, handset connect to both 5 G + 4G radios, joining the subscriber to the same existing 4G network. This is known as non Standalone 5G. Today. We are still at this stage of 5G. The second phase is known as Standalone 5G operators. Will you play an entirely new network all in this network environment and need new?
Solutions to monitor more Advanced Services like Network slicing and Edge deployments. There are early signs of stand-alone 5G opportunities, but the critical mass is still at the early stage of this confusion. We expect to see some early adapters, begin the multistage process of choosing their Human Solutions during 2021 and Beyond over the next five years, operators are projected to invest more than one point one trillion dollars in the network.
According to a report from gsma intelligence about 80% of, that will be for 5G. We are already noticing new 5, use cases such as H, Computing Network slicing and private networks, evolving as operators. Request them in the tender process. We are well equipped to enter this new request due to our Solutions. Cloud native architecture that delivers Automation and advanced 5u capabilities as one of the
Swedish First stand-alone 5G, Assurance contracts radcom continues to provide Racket and mobile which critical service Assurance for delivering, next-generation mobile experiences, in May record, and mobile announced that it had achieved 80% population coverage for its Network all out in Japan. Rakuten also plan to launch its Standalone 5G services in 2021. So it has already started deploying its Standalone Network. Which radcom Ace intelligently monitors.
During the second quarter industry.
At least analysis Mason published a case study about rats home Innovative. Deployments is records and mobile. Stating the importance of our solution in supporting. The journey is they are building the world's first fully virtualized, end-to-end Network, presscon solution, provides end-to-end service and subscriber visibility all in a cloud native environment. Our solution also enables the use of artificial intelligence for automation, which was one of Rakuten.
Mobile critical requirement. We are delighted with the progress in our partnership. With Rakuten. We have developed our solution using the latest cloud-based deployment processes to provide state-of-the-art software releases as the network continually evolves. In addition. We are testing new features without affecting Life Services, which provides rocket and mobile the confidence to All Out rapid changes in its Network as noted in the case, study radcom solution.
Scott Lee being integrated into Rakuten communication platform ocp the cloud platform on which rocket and mobile network is built. This platform packages and markets. Rakatans Innovative Network architecture to other operators worldwide and it's already gaining momentum. For example, this - Germany's one-on-one contracted Rakuten to help build its new mobile network. In addition, one and one will have access to Rakuten communication platforms together with raccoon.
Titan one on one will create your first fully virtualized mobile network with high performance and extensive Automation and Agility to exploit the full potential of 5G. As mentioned in previous quarters standard on 5G Network are built on cloud, native technology as a result. We continue seeing lots of collaboration between Telecom operators and public Cloud providers. For example, in June Microsoft announced. It was acquiring AT&T scarier greatness or Cloud platform technology.
Which AT&T is 5 G core network runs on, in addition, AT&T recently, committed to using Microsoft at the edge of its Network to support network workloads, at the scaled level for efficiency. As a reminder. We announced in March that radcom. Ace was fully integrated with Microsoft Azure. We continue to engage with additional Cloud providers. To expand the availability of our solution to more public Cloud ecosystem. As we expect operators to the
In multi-cloud environments.
AT&T continues to be a key strategic customer for us as the leading network provider AT&T frequently emphasized. Customer experience is a key priority to their success. Our cutting-edge software is embedded in the network loud and monitors the customer experience, as they continue evolving their underlying Network infrastructure to the cloud. We continue to deliver new capabilities and cutting-edge software. Releases to AT&T, as we support the evolution of
Cloud Network, given that radcom is working with leading operators, in
Blowing our Cloud native technology. We are gaining invaluable hands-on experience. Monitoring these networks. In addition, it serves as a testament to our ability to innovate and build out new capabilities and increase, our technological leadership and Cloud expertise. We Telecom operators earlier, I mentioned the goals in our pipeline to give some color. We are currently engaged with the significant higher number of sales opportunities.
With some reaching the proof of concept stage from the beginning of the year, we have seen the number of opportunities increased by double-digit percentage with a significant number of these being new logos to summarize. We secure server a significant orders this quarter and even thought the 5G to incision is only at the early stages of the journey. Momentum is building as a result. We expect the demand for next generation of human solution to increase. We are
G generating our full year 2021 Revenue, guidance of 39 million to 41 million dollars based on our current visibility.
With that, I would like to turn the call over to a meal. Hiya will CFO will discuss the financial result in detail Emil. Please go ahead. Thank you. You are and good morning everyone. Now, please turn to slide 7 for our financial highlights to help you understand the results. I will be referring mainly to non-gaap numbers, which exclude sherbet compensation. We ended the second quarter of 2021 with nine point eight million dollars.
Revenue, increasing from 9.2 million dollars in the second quarter of 2020.
Our gross margin in the second quarter of 2021 on a non-gaap basis was 75%. Please note that our gross margin can fluctuate depending on the revenue mix
Our gross R&D expenses for the second quarter of 2021 on a non-gaap basis were four point nine million dollars and increase or four hundred thousand dollars compared to the second quarter of 2020 DC creates is many related to negative exchange rate between the US dollar and the Israeli new shekel and then increase in our head count as part of our product investment.
We receive a grant of $70,000 from the Israeli Ovation Authority during the quarter compared to a grant or five hundred seventy two thousand dollars in the second quarter of last year. In addition. We are engaged in ongoing discussions with the Israel Innovation, authority to approve additional development plans. Therefore, we will have clear visibility for 2021 during the next quarter as a result. Our
What are the expenses for the second quarter of 2021 on a non-gaap basis, were four point, eight million dollars compared to 3.9 million dollars in the second quarter of 2020 sales and marketing expenses for the second quarter of 2021 were 2.3 million dollars on a non-gaap basis. Slight increase of $100,000 for the second quarter of 2020.
G and expenses for the second quarter.
2021 and a non-gaap basis were eight hundred forty one thousand dollars. Approximately the same as the second quarter of 2020 operating loss on a non-gaap basis. For the second quarter of 2021 was six hundred forty six thousand dollars compared to an operating income of 102 thousand dollars for the second quarter of 2020 net loss for the second quarter of 2021 on an ongoing.
Gaap basis was three hundred and four thousand dollars or net loss of 0.02 cents per the literature compared to a net income of two hundred, thirty one thousand dollars or net income of 0.02 cents per the literature for the second quarter of 2020 on a gaap basis. As you can see on slide 6, our net loss for the second quarter of 2021 was 1.1 million.
New laws or a net loss of 0.08 sense paid per diluted share compared to an SOS of zero point two million dollars or a net loss of 0.01 cents per the literature for the second quarter of 2020. At the end of the second quarter of 2021. Our headcount was 280 turning to the balance sheet. As you can see on, slide 10, our cash cash, equivalents and shortened Bank deposits, as of June 30.
2021 were sixty four point nine million dollars. We believe that our strong balance sheet provides us with the flexibility to execute the opportunities ahead of us and remain agile through a global uncertainty that send our prepared remarks. I will now turn the call back to the operator for your questions.
Thank you, ladies and gentlemen. At this time, we will begin the question-and-answer session. If you have a question, please press star 1, if you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift, the handset before pressing the numbers, your questions will be pulled in the order. They are received please stand by while we pull for your questions.
The first question is from Bob on sori of William Blair. Please go ahead
Good morning or good afternoon over there guys. Thanks for taking my question and a nice job excited actually about the pipeline traction. You're seeing, I guess I'd love to get a little color into that pipeline growth. You said double digits, what regions and maybe what types of carriers, what tier especially for the pocs sort of? I know they didn't pocs, but at least deals in the size of what might see with rockets on and AT&T. And
Be very helpful.
Good morning, Bob. And thank you. I think that overall we see goals in that is driven from the 5G Evolution. We see it. If you follow were five, G's evolving. These are the areas that we see more and more glow. And in general. The goals is coming from most of the regions. This is because the technology is evolving. Now with the engine.
General. And we see many of the upload both in America's in Europe and in a pack, progressing into the next stages with 5G and starting to look into Solutions of service Assurance. As I pointed out, the growth is coming in double digit percentage, and it's in the different stages of the opportunities. Some of them are early pipeline deals that will probably take some time. But we see also progress with Moe.
Opportunities that are more mature. I am not sharing the exact number of pocs, but some of them are in the POC stage. And in overall, we are very positive on the Parkland growth. As we see it today. We believe that this gold is reflecting the technology advanced Advantage we have and the increasing the demand that is coming due to the initial investment into 5G.
Scarlett. Scarlett. Now that was, that was helpful. I'm, I'd love to talk about the last time deal. And how is that deployment drawing in touch with AT&T and others coming from a noble of transcend? How that last time we was going? And then I've got a question on to the covid risk, but let's talk about letter first. So as we announced in may, we got orders from the, this left arm operator for the 4G network? We are in the last few months, starting to implement the solution.
The implementation is going. Well. This is something that will be happening in the next few months. And we are in a very good relationship with the customer, and everything is going by plane is indicated. This win is not only significant and sizable by itself. But moreover is a potential into a further expansion into 5G. Once this operator, is going to turn his 5G Network in the future. This is something that is likely.
To open the probably next year. So we are very excited when this relationship with them.
Now that sounds really good. I guess, two quick questions. One. You didn't increase full-year guidance. I'd love for you to just provide some color on sort of how the POC is might sort of translate your Revenue. That is that a calendar? 22 thing. How should we think about that? 12-18 months out. How do these POC? Typically if you win them, turn into deployments that turn into Revenue. Yeah. Most of we are now. We know, goes, so most of the pocs, that starting to now, mainly to be
20:22 numbers, and
Indivisibility did this being said, we are walking in the last year, on some activities. Some opportunities are already post plc's and get can get closed earlier than that, but I'm mainly focused. We on twenty twenty two numbers. We mentioned that we have very good visibility into 2021 based on the orders. We secured already and we are looking on long-term.
Crows and continue to move business forward.
Got it. Got it. One last one from me. And obviously we're seeing some concerns around, the Delta variants at least for the United States and other regions. As you look back. I mean there was sort of a hiccup, a little bit. People took a little more delay in some of the decision-making or when covid me happened. Are you seeing anything from your customers, any sort of hesitation, or concern, in terms of spending around Delta or did you throw out of business as usual? Right now? I think
We this is obviously concerned discussion and concern on a personal level but not delay or something. That would I see a significant business implication. We know Telecom projects are always taking their time and overall. It's looking that it focuses expect us.
Great, great. Thanks. Take my questions, guys. And nice job. Look forward to seeing you. Thank you.
The next question is from Michelle Waller of Needham and Company, please go ahead.
Thanks. Hi guys. It's Michelle on for Alex. I guess just for the first one. Can you speak on the recently announced AT&T? And Microsoft is your deal and how you see that impacting the Assurance Market over time, and it may be more specifically to you guys is business with AT&T. So we see a general technology trend of the public Cloud providers.
Looking into Telecom is a huge opportunity. The Telecom workloads. As of today are primarily based on either for piety Hardware or in the more modern cases on data centers that the Telecom operators bid for themself. We are starting to see more and more Investments on the cloud provider to try to take those workloads and implement the data center for the telcos either on site.
Or as public cloud service, which will probably take some more time in the specific announcement from Microsoft. And AT&T is do AT&T, build your own network Cloud technology in house, and they sold their IP, and, and intellectual property to a jewel and build this collaboration. I believe in the short term. This is going to be not making a big deal.
Defense. But in the laundry.
And the expectation and the what I believe is that it shows the commitment of Microsoft Azure into the investment to the Telecom. And this could be door opener into more opportunities as customer. I'll Implement in Microsoft Azure in their Cloud environment. As I mentioned before, we have our integration with the jewel that was announced in March. This is very important for us and the overall trend of
More and more tell Co-operators partnering with cloud provider, is part of the overall trying to move to virtualization and Cloud defecation, which is Ghost Driver into company like radcom as we are excelling in the most advanced into the area of fully containerized application. And this enables more potential for us. We see similar investment from Rakuten data
Implementing their own cloud and Rakuten. They are experts on the cloud platform as well. And this is very exciting for us to see this technology revolution in the industry.
Great. Thanks. And so just as we look into the second half, I guess, you know, you guys sounded pretty upbeat and there doesn't seem to be anything that suggests really a deep a deceleration. So, you know as I look at the year-over-year growth comps that you guys are coming up against in the second half. I would think maybe September would be a higher growth opportunity compared to December quarter, just because
Comparable Quarters on a year-over-year basis are easier. Is it, is that fair to assume or do you do you see it being more linear, the, the growth going into the second half?
Basically, you know, we provide the annual guidance since the revenue can fluctuate between the quarters, if kind of a project is implemented in and had some delays. So we cannot, we cannot know exactly the time for that, but as we stated in the beginning, we believe that we will keep the, we will be in the range.
Cole were 39 to 41 and so this is our Target.
It's okay. And just one last one real quick on the Israeli government, grants. It seems like you guys are in discussions with him within right now. I think you guys had said and maybe it correct me if I'm wrong, but for the calendar 21, you had previously been expecting a similar amount, you know, from the, the government grants this year compared to last year. So, when you're talking about going,
you know, just
Going back to having discussions with, you know, the government over these grants. Are you, are you saying to read, discuss the additional grants, or is it has a the overall expectation for the year changed? Yeah. Basically, we going to have to regain around 1.2.1.3 million dollars in Grants right. Now. We, we, we started the process of the
21 grams in q1, and at that time, there was a government transition. And without any state budget approval, this creates kind of budget. Limitation. So, as of now what you see in the painting, there's about 70.75. So this is secured and for the other plans, we are still in discussions with these authorities and we hope that make we will make progress, you know.
Coming months. If you succeed, you know, to gain this plan. This will be paid retroactively from the beginning of the year.
Great. Thanks. That's all for me. Thanks guys.
Thank you.
If there are any additional questions, please press star 1. If you want to cancel your request, please press star 2. Please stand by while we pull for more questions.
The next question is from Sasha Kareem of IPI, please go ahead. First question for me. Is there anybody else? Is that any other Assurance provider currently engaging with rakatan to be integrated in the RTP or to the best of your knowledge? Are you the only company doing that?
II don't want to refer into specific things about Rockets then, but overall we are having a very good relationship with Rakuten. We just mentioned a few quarters ago, our extension into 5G with them and this is one of the first days in the mosque in the market for 5G Standalone. It's not the first. We are now very busy to integrate our solution and deploy it into their lives. Network is the value.
Will be with 5G. This is targeted to get live by end of the year and our relationship is very tight with them. And as you could indicate from the last last analyst reports we had with them and testimonials we had with them. We are working very closely. They are very important customers and we feel very comfortable about our relationship with them.
Thanks. Next question, would be, are you expecting to recognize any significant Revenue this year from Tier 1 Latin win, or does that not begin properly until 2022?
The revenue.
Depends on the implementation of the project. This is something few months, down the road, likely to happen more in the 2022 Revenue.
Thank you. And then my last one would just be on cloud opportunities. I think we've seen dish bumper, it, very strongly, maybe not so much. The case for established telcos. Would you agree with the general thesis, that Green Field, operators are more willing to Outsource their Network to cloud and therefore in theory. It should be a better way.
Are you giving your Cloud native software?
I believe the old Telco industry as a whole is going into the public. Cloud architecture and solutions. Obviously Greenfield operators have left Legacy and less limitations. Therefore they can move faster and take more strategic decision earlier while we see more of the other operators, bounded, operators, that are already established with networks or also taking steps. And there will many press releases by the
Public Cloud providers on partnership with operators, like we mentioned AT&T and a jewel, but there were others as well. This is a trend that is gaining momentum and it's very exciting momentum for us because all of our technology investments in all of our R&D Investments, including our lately released, a I pray more capabilities on top of the radcom ace. This is all targeted and driven into such an environment and we believe this is great.
A favorable environment for us in the human space.
Great. Thank you very much.
There are no further questions at this time. This concludes the radcom. LTD, second quarter, 20.21, results conference call. Thank you for your participation. You may go ahead and disconnect.