Q1 2022 Radcom Ltd Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
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Ladies and gentlemen, thank you for standing by welcome to the rack Com Limited results conference call for the first quarter of 2022, all participants are at present in a listen only mode.
Following managements 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 a replay on the company's website at www Dot rack com dot com later today.
On the call are al Harare rack com CEO and her daughter of a hub right Thomas 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 investors section of rack Com's website at Www Dot Com Dotcom Slash Investor Dash relations before we begin I would like to.
Review the Safe Harbor for vision forward looking statements in the conference call involve several risks and uncertainties, including but not limited to the company's statements about its full year 2022 revenue guidance continued investment in research and development its leadership and the five G assurance market and.
Potential increase in market share and ability to continue to drive positive returns that's expectation to gain further interests from operators and play an important role in facilitating the transition to five G. Its expectations about its pipeline and momentum further demand to our products and growth.
The potential for additional multiyear contracts and engagements and expansion of opportunities the company's expectations with respect to its relationship with Rakuten and AT&T and the expected benefits of its in person events, starting to resume and potential grant from the Israeli innovation authority.
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 S. E. C filings in this conference call management will be referring to certain non-GAAP financial measures, which are provided to enter.
They use our overall understanding of the company's financial performance by excluding certain noncash stock based compensation expenses non-GAAP results provide information helpful. In assessing rack com's core operation performance and evaluating and comparing the results of operations consistently from period to period that presents.
All of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles and investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures included in the quarter's earnings release available on our website.
I would now like to turn over the call to IR. Please go ahead.
Thanks, operator.
Morning, everyone and thank you for joining us for our first quarter 2022 schools.
You may have seen the early today, we announced the dish selected restroom to wanted to the new five G cloud networks.
This exciting views continues the positive momentum since the start of 2022.
This is the second new five new customer wins did brings us to a total of $50 million in new contracts this year.
Our first quarter was another quarter of solid revenue growth while at the same time, we significantly improve our bottom line.
Revenue grew 16% year over year for the first quarter, reaching $10 6 million.
This is our 11th straight quarter of revenue growth year over year, and I'm very pleased with our results.
As mentioned these selected restroom to monitor America's first strategy snap municipal.
This wireless announced a few years ago did they plan to deploy <unk> network capable of serving 70% of the U S population by June 2023.
This started this nationwide rollout at the beginning of demands by launching first Vegas.
This announced in the recent in Nichols did they expect to launch in about 25 markets by June we.
We feel proud to be dish assurance partner.
We will begin to rollout American sales focus must Nashville.
Dish selected Grad school, because they wanted best in class assurance solution that seamlessly integrates into the cloud.
Rescue Mace, we monitor all the stand alone <unk> network, the first fully deployed in public cloud.
Our cloud technology, we run on Amazon Web services, AWS, and now dish launched <unk> smoothly and monitor all the service quality and of course its nationwide rollout.
Last month, we announced a multiyear <unk> contract wins, we do mobile network in Europe .
This new odor coverage issue is for these <unk> networks.
<unk> will enable the operator to one or two weeks into <unk> network performance and provide the end to end visibility that the operator will make real time data driven decisions and proactively improve the network performance.
Ensuring top quality services are delivered to its customers.
These wins, which is based on our innovative cloud technology.
The advanced capabilities of rental base, which provides an intelligence automated assurance platform.
Built for the cloud and <unk>.
We believe this strengthens our position is besides your assurance provider.
An important acknowledgment of our leadership in this market.
Therefore, we expect reticle Mays to gain further interest for multiple vehicles and play and decision on role in facilitating the transition to <unk>.
With these two new customers in previous weeks over the five year strategy is paying off.
At the same time, we remain focused on capturing the growth potential we see in our current sales pipeline with both new and existing customers.
We also see good momentum for the furniture market in the mid and long term and believe it will be a catalyst for growth as the market ramps up creating most is engagements that can bring additional multiyear contracts and increased market share. So.
So we believe that our <unk> strategy.
We the foundation for future revenue growth beyond our account sales engagements.
We the market evolving rapidly I was continued investment in research and development to extend our technological leadership, we seen this space user titles. We believe this to be a key enabler for future business.
We will continue to invest strategically in R&D to enhance our vertical solutions increase our <unk> capabilities extend our AI driven insights and seamlessly integrated our solution to the cloud.
All of these capabilities are aligned with the market needs and have already borne fruit as noted with our recent wins.
Our pipeline continues to be healthy and expand while having a good mix of opportunities for more of a current installed base of new customers.
You'll see positive momentum with the number of engagements the level of engagements in our pipeline total addressable market size.
We believe that our position is best in class assurance provider for cloud Native <unk> networks, and our cloud expertise and knowledge will continue to drive positive returns.
The bottom line is that the demand looks strong and we have a solid pipeline of opportunities that has the potential to increase our market share.
Turning to the installed base.
Last month, we announced that AT&T has renewed its multi year assurance contract as radical as we entered our sixth year of partnership with this leading telecom operator.
With this contract we have a significant backlog provides good visibility into 2022, and we expect our business with AT&T to remain strong as we continue all of the partnership.
AT&T mentioned in their recent earnings call due to a net promoter score up year over year in.
In addition, they are experiencing historically low churn levels, which they assigned to the improvements to the customer experience.
We believe that assurance solution are vital for monitoring service quality and ensuring a good customer experience. Therefore, we continued delivering cutting edge software releases as we support the evolution of the network and monitor and good customer experience as they continue evolving the underlying network infrastructure.
To the cloud.
I put in mobile it uses very high school in newly published reports full load, which compared network performance in Tokyo with others Cosmopolitan cities all over the world.
This report demonstrates our records and mobile has deployed a high performing quality network in Japan at Lightning speed using the latest cutting edge technology. This competes with leading open vehicles worldwide.
Rec Witten has stated that we'll solution importance in supporting their journey as they build the world's first virtualized networks.
Our solution provides end to end services subscribers visibility in a cloud native environment and its vital to help them ensure network performance and automate their network operations.
We are delighted with the partnership with retrofits.
We continue to develop our solution using the latest cloud based deployment processes to provide state of the out software releases as business will continually evolves.
We believe this work will continue helping our product mature and provides valuable experience with more operators implement standalone <unk> and looked a little foggy standalone issuance expertise.
Okay.
In February our sales team attended the mobile World Congress in Barcelona, Spain.
The leading telecom industry event. The event was held in person after couple of years due to COVID-19 limitations as.
As we covered in a recent blog post the summer is the Congress. We saw evidence of why we believe that real time analysis through ultimately to the assurance will be vital for <unk> network operations.
Operators need to make the network more intelligent dynamic and autonomous to deliver quality <unk> services.
Strong seems at the Congress, whether it's on CGM to Pfizer's Standalone cloud based networks public cloud providers and Rakuten Symphony.
All of these are areas of interest for radical and inquiries about our solution with very positive, which we believe will lead to additional sales opportunities.
Similar to the mobile World Congress, returning we see that in person industry events, you generally are starting to return.
So to use a building.
The events in the U S. The big size of the event diluted industry Conference in North America is back to an in person event.
We see this is happening globally, which is a positive sign as we believe that in person meetings are starting to resume.
As a result, we will be able to generate more sales opportunities and advance our current engagements. We believe the foundry market remained strong while still only being at the early stages, we see that the direction and momentum of our market are very positive and aligned with our strategy.
The complexity of these new <unk> network architectures requires automated assurance solution to isolate network issues optimize performance and provide cornerstone to building therefore extensive automation.
We also hear use from our customers.
To summarize I'm incredibly pleased with our performance.
Start of fiscal years 2022.
Revenues are up year over year, and we improved a little bathroom line.
In addition, we continue to receive industry wide recognition by telecom operators Rolling out advanced cloud based <unk> networks and looking for forward looking assurance solution to help their <unk> transformations.
We are excited to win several new noteworthy multi use assurance contracts.
We will have selected by dish is the assurance vendor to wanting to America's first five do you smoke Nashville and added another new customer in Europe for a further five year issuance contract.
We look forward to providing our advanced cloud native software to help ensure great mobile experiences for most subscribers.
Our cloud in fact, your assurance expertise continue to expense, where multiple customers deployments, which we believe will become a key differentiator is the market gains momentum.
We are helping operators make data driven decisions in real time based on the seasoning to social based more intelligent and more automated networks.
I am confident of our future success and the business strategy, we are pursuing with our innovative.
Innovative cloud native offering and it will we expect to play in the <unk> transformation.
Based on our recent wins that provides greater visibility and our healthy pipeline of opportunities. We are optimistic about our ability to deliver our goals here above our initial revenue guidance provided in February .
Therefore, we are increasing our fiscal 2022 revenue guidance from a range of $42 million to $45 million to a range of $43 million to $47 million.
With that I would like to turn the call over to derive our CFO will discuss the financial results in detail.
Thank you Jan and good morning, everyone now please turn to slide eight for the financial highlights.
I hope you understand.
I will refer mainly to non-GAAP non definitely should exclude share based compensation.
We ended the first quarter of 2022 with $10.6 million in revenue.
And from 9.1 million Doral seem to first quarter of 2020, while we are pleased with consistent growth trend.
In an 11th consecutive quarter of E O.
Although gross margin in the first quarter of two dozen in 'twenty two on a non-GAAP basis was 74%.
Please note that all gross margin can fluctuate depending on Dow Avenue.
Although the gross R&D expenses for the first quarter of 2022 on a non-GAAP basis, $4 9 million, daughter slight increase of $113000 compared to the chessboard they'll still does in 'twenty one.
We received a grant of $218000 from the Israel Innovation Authority you ended the quarter compared to go onto a 68 doesn't do it out in the first quarter of last year.
As a result of our net R&D expenses for the first quarter of 2022, when a non-GAAP basis will fall by $7 million compared to four $4 million to $8 million in defense Codell still doesn't in 'twenty one.
Six days around innovation, so I think one to end of second quarter to be a similarly, then in the first quarter.
Marketing expenses for the first quarter I'll still doesn't it $22 million to $6 million on a non-GAAP basis, increasing $227000 compared to the first quarter 2021.
G&A expenses for the first quarter of 2022 on a non-GAAP .
<unk> $825000 with no significant change from defense for tariffs or does any of 'twenty one.
Operating loss on a non-GAAP basis for the first quarter of 2022 was $274000 compared to an affiliate in close of $1.170 million for the first quarter of two dozen in 'twenty. One net income for the first quarter of two dozen in 'twenty two on a non-GAAP basis was six.
$14000 or net income or four cents per diluted share compared to a net loss of one metre uncertainty doesn't do it off or a net loss of seven cents.
Good show for the first quarter of 2021.
Positive 19 Congress due to financial income derived from into us and fluctuation of foreign exchange.
On a GAAP basis as you can see on slide seven of our network for the first quarter of 2020 210.6 million do it also in excess of false sense.
So compared to a natural sort of $1 $7 million well in excess of 12 cents per diluted share for the first is what else do hotels into 'twenty. One at the end of a successful 2022, <unk> PON was still under the ADC.
Turning to the balance sheet.
You can see on slide 11 of our cash cash equivalents and short term bank deposits as of March 31, 2020 to $74 9 million.
That answers all three thirds remarks, I will now turn the call back to the operator for your questions.
Thank you, ladies and gentlemen at this time well begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment kind of lift the handset before pressing the numbers.
<unk> will be Paul then the order. They are received please stand by while we poll for your questions.
The first question is from Arjun Bhatia of William Blair. Please go ahead.
Perfect. Thank you very much for taking our questions.
And congrats on the on the dish land maybe.
Maybe I'll just start there.
What is the subscription model can you just give us a sense for the timing of how that deal may layer into the model over time is that something that can be fully ramped this year or some time, maybe Q3 Q4.
How do you think about the future expansion opportunity you have.
With the.
The rollout our procedures there is a room for further expansion there.
Hi, Good morning, So yes sure we are very excited smaller in your announcement about the win.
The agreement with dish wireless and this is.
Our business model either accounts is a multiyear subscription like a concept that we are expecting revenue to be over the multiple year of course.
Yeah.
David.
And it typically takes.
One or two quarters until revenue starts so we expect revenue to start in the.
The second part of the year, while most of the revenue will come in the in the following years and we will get.
Into full capacity as we evolve.
This as you probably aware your abilities now new <unk> network and we covered in the agreement. These multiyear term, but we are definitely.
Looking and exciting excited to further.
Expand with them into additional areas and expanding with them as they grow as they just announced.
This week in Las Vegas, they are looking to go nationwide in catcher dozens of millions of subscribers. So definitely a very exciting very exciting time for us.
Perfect. That's very helpful and then I'll just.
On the on the product side.
Can you touch a little bit not just with dish, but overall in terms of the pipeline you're seeing.
Wall Art is AI, and I'm kind of predictive analytics, playing in driving pipeline and new business. Obviously, that's a big value proposition for these network operators, where they want to predict.
Predicting outage before it occurs and they want to get better visibility into.
And so their networks or is that is that a major part of the conversation that you're having with customers and how is that maybe that dynamic in the conversation changed over over the last year or so.
Actually this is a great question is there in the last two years, we were very busy building the infrastructure and the I would call. It the basic capabilities in order to have the best solution to monitor <unk> networks.
Lastly, we announced a radical ace AI capabilities, which are exactly address there as you mentioned I hope, we can do more predictive and more automated analytics and then generate insights formed and therefore this is actually becoming our secret sauce and in many occasions, we see.
More and more interest from customers to see not only how they can monetize in the shoulder and therefore, but really how they can use those.
These advanced technologies to become more efficient to enhance the automation and to get more of the data that is collected both issuance solutions. So definitely this is something that is being.
We discussed it.
Something that captured a lot of interest and I see more and more demand for this technology as we go and this is a powerful area. We are going to continuing to invest in spite of our R&D investments.
Great.
Last one for me.
You mentioned mobile World Congress in Barcelona.
Just with the traction that youre seeing in the pipeline with reopening.
And travel and expenses returning how do you think about the change or the increase in operating expenses as we get back to in person events.
Yourself people start.
Start going out and having in person meetings again should we expect.
The second half of the year to ramp up.
As travel comes back or.
I assume thats, obviously baked into guidance, but would just love to hear how you're thinking about that.
Aggressive here.
Yeah. So first of all we are very excited to see that the industries are starting to get back to on site. Some of the the effect is already there as we resumed in the last quarter.
This quarter some of our traveling onsite engagement, we do expect to see slight increase on our sales and marketing due to this.
On site events, but we are all eager to meet our customers I believe this will enhance our ability to close new business and mainly as radical them that we are.
Targeting to land and expand.
Into new accounts this is.
It definitely is going to help us to get more confidence from our customers. So overall, we are very happy from this oh and you trend and hopefully we can call me you never know hopefully this will continue.
You too.
So slight increase not dramatic.
But yet some of the expenses are going to be higher rather than as a cost.
Perfect. Yeah, I think it's I think we're all we're all for that return to in person events.
Thanks for taking the questions I forgot thank you.
There are no further questions at this time. This concludes the rack Com limited first quarter 'twenty two results.
Our results conference call. Thank you for your participation you May go ahead and disconnect.
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