Q2 2023 RADCOM Ltd Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the <unk> Com Limited results conference call for the second quarter of 2023, all participants are present in a listen only mode falling managed.
My formal presentation instructions for the question and answer session will be given for operator assistance. During the conference. Please press star Zebra as.
A reminder, this conference is being recorded and will be available for replay on the company's website at www Dot <unk> Dot com later today.
<unk> are y'all, Harare Rad Con C E O and Ah Ha Ha Retcon CFO . Please note that management has prepared a presentation for your reference that will be used during the call. If you still need to download. It you may do so through the link in the investors section of Rad comes website at.
Www Dot <unk> com dot com forward Slash Investor Dash relations before we begin I would like to review 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 full year 2000 twenty-three revenue.
<unk> the potential to scale up to a mid size software company levels of gross margin operating expenses and head counts expected growth in 2023 and beyond expectations regarding the enterprise market for telecom operators, including trends in the market and the effect of general economic can.
Conditions continued investment in and benefits from research and development as well as sales and marketing it's expectation to gain further interest from operators and play an important role in facilitating the transition to five G. The potential to leverage continuous technology and products to the.
Benefit a rag com, it's expectations about its pipeline opportunities leadership positions.
Hi, and cloud strategies increase in market share and momentum further demand for its products and growth the company's expectations with respect to its relationships with AT&T rack with 10 dish and potential grants from the Israeli innovation authority. 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 S. E C filings.
In this conference call management will refer to certain non-GAAP financial measures, which are provided to enhance the user's overall understanding of the company's financial performance by excluding certain non-cash stock based compensation expenses acquisition related expenses and amortization of intangible assets related to acquisition.
<unk> non-GAAP results provide information helpful. In assessing rack comscore 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 prepare.
[noise] in accordance with generally accepted accounting principles investors are encouraged to review the reconciliation of GAAP to non-GAAP financial measures included in the quarter's earnings release available on our web site now I would like to turn the call over to a Yao. Please go ahead.
<unk> or.
Good morning, everyone and thank you for joining us for a second quarter 2023, and a new school.
This quarter, we achieved several old timeframe mentioned records and continues investing solutions to drive future growth.
<unk> for the second quarter will 12.4 million.
The 16 consecutive quarter of yoga vehicles.
We significantly pooled our bottom line, achieving net income for the second quarter and so six months afterwards between history defeat if five G high.
The important to know local suitability kpis continue the momentum and are driven by <unk> and revenue increase.
At the same time with a robust business model.
Will social century company delivers high gross margins, Enrique and revenues driving the business and providing good visibility into the future.
You know to the business strategy, we announced us months and the relation of roosters onto the <unk> to the both of directors.
He was the only nation will be voted for at the AGM Tomorrow.
And they are served in various senior executive positions with AT&T.
The most recent of which was the executive Vice President and CEO of network services.
We're all excited at times, there is <unk> invitation to be nominated.
And I believe you will contribute significantly to the company's strategy in future goals.
Their lives to the five G market.
We don't take into account the micro economy, some operators may take longer than others to roll out five G expand on transition to spend it on five G. <unk>.
<unk> the market direction is clear and we believe our position as a leading assurance provider for five G will continue to drive positive returns.
Not only does five G complexities requiring assurance to help manage the networks with extensive automations, but operators also walk in a highly competitive environment.
Hunter pleasure to control costs and streamline the processes.
So do you also look to insurance information to improve efficiencies it close to the network operations.
As mentioned the previous schools I will vision used with telecom operators transition to more autonomous nipple.
Our solution enable this full-cut engage AI and analytics.
Hopefully tools use our assurance technology Tomatoes, Jeanette walk so actually believes site to ensure excellent customer experiences, while saving opec's and driving automation.
This is our added value and why we are well positioned to win additional business.
An example of out our insurance solution hope so polite to all of five G. <unk>.
Dishes building one of the walls, most advanced cloud in 85, Jeanette walls and towards first stand alone Ness walk on a public loud.
It recently announced that he says accomplished a significant industry milestone by providing municipal coverage to over 70% of the U S population last week dish announced it is bringing an exclusive ofer to Amazon Prime members to sign up for its mobile services.
New customers can quickly sign up without setting foot in a retail store, which improves customer touch point and all sorts of completely digital experience.
The dish Amazon partnership has lots of potential.
Using cutting edge technology decent Amazon can offer innovation and on demand services not limited by legacy infrastructure.
Was assurance solution seamlessly integrates into AWS cloud. He may believe dish to understand what is happening to the net work 24 seven.
These insights are critical in helping drive and more intelligent five G network and the key to delivering advanced five G services to multiple verticals is the network built continues.
We feel proud to be dish assurance partner as they created a network and we do significant milestones along the journey, providing best in class assurance that ensures subscribe to enjoy great customer experiences.
Turning to our cloud strategy.
We'd always solution maturity and cloud native architecture combined with our teams extensive cloud expertise. We continue the integrated garage comes into the cloud ecosystem for five G.
We're excited to announce that we have launched our solution on Google cloud last months.
So we are now integrated with all this really didn't public cloud providers, Amazon Web services, Microsoft a zoo and Google Cloud <unk>.
Extending to go with a bucket availability to more potential customers.
This new integration with Google cloud.
It's already received positive feedback from potential customers and we have several ongoing opportunities for radical mace on Google cloud.
We offer multiple assurance use cases to automatically prevent services or gradation drive network automation and save operational costs powered by integrating with these top public cloud providers means tell co operator can choose whichever provided with one of our insurance technology.
To manage your five G rollouts.
Turning to our way I strategy.
Generous T V I application, such as GPT data compilers and others if captured the imagination of people around the world.
The latest journalistic applications and large language models can perform any task formal automating complex task and analyze the massive amount of data too.
Two providing personalized experiences.
It's cole it is about creating smiles machines that can think and act like humans and combines analytics machine learning natural language processing.
In the telecom industry janitor T V. I can interest documented processes to offer engineers interactive guys to speed up and simplify installation task and they'll operator identify areas, where they are losing revenue or you're feeling revenue leakage it cannot recommend shrug.
Shoot injections and procedures to networking engineers when there is a network of failure.
We used to automate the network and automatically boost service quality, making dopers, who was network more intelligent and efficient suarez solution suddenly.
You can neighbors, the operator to transition to automated work flows we <unk> doing the heavy lifting and analyzing Macy's amount of data providing insight <unk> five G network operations.
Is I will elaborate further we continue to invest in developer would I use cases.
Turning to continual.
In May we completed the acquisition of continual we believe that adding continuous called assets will in the future, we'll solution and create opportunities for radical and talk to your customer.
The initial customer feedback has been positive and these engagement if already burn fruit with additional opportunities added to the pipeline.
I'm pleased with the progress and solution integrations made sofa and believe this can generate more opportunities for <unk> in the future.
We announced derived from Vitra drive test <unk> community launch as part of the of the solution integrations.
Telecom, operator spend significant opex on physical drive test to ensure service quality.
Typically physical drive this required a fleet of vehicles.
<unk> with highly specialized electronic devices to drive around to test various network parameters in every geographical area.
We're innovation solution <unk> aims to replace physical drive this with a powerful capabilities.
Still feels telecom operators is significantly more green sustainable approach to driver's test. It also save operator significant costs by providing better insights, helping boost their mobility experience for subscribers.
Continue mobility experience analytics power the new solution.
Turning to our product innovation.
We continue investing in product development, because we believe it is a crucial enabler for future business.
We serve as the operator smallest co pilot.
Navigate five G network complexities, which means continually evolving our assurance solution to maintain our five G assurance leadership.
I am excited to announce that the company and our products recently received this recognition as we renamed finalist for the 20 twenties really didn't like the world.
These telecom focused program recognizes the industry's top companies achievements in the next generation Communications technology.
The Jews and innovation during the.
We were named a finalist for outstanding use case, you know you're iron machine learning awarded to accompany <unk> AI to improve mental performance customer service or business operation.
We will also named as a finalist for innovative public company of the year. It will be to the company that stands out from its competitors and innovate constantly.
Well no Sir is making networks more intelligent and autonomous swallowed a high powered analytics.
We remain confident that our product offering a language market needs.
Our best in class and will increase our market share by winning opportunities is the five G transformation progresses.
Is the five G market evolves, we will continue investing in sales and marketing to take advantage of the increased assurance demand.
To summarize our strong momentum continues with solid financial results.
<unk> two old time companies record for quarterly revenue and non-GAAP net income as we improve our profitability kpis.
This demonstrates that we are on the right path and we have unique market position supporting telecom operators is there a rule out five G.
Oh, well ongoing sales engagements shows that the demand for our solutions is robust.
While also multiple your contract or by the strong backlog driving consistent results and giving us good visibility into 2023 and beyond.
At the same time, we are increasing go with assurance capabilities and Eh I use cases to bring more value to customers, while continuing our solution integration to cloud ecosystem to expand the availability of our technology to additional operators.
So we remain confident in our ability to cross the $50 million annual revenue threshold scale up to a mid sized software company for the first time in the company's history and deliver a false consecutive goes to you.
Therefore, we are reiterating the 2023 revenue guidance or 50 million $253 million.
With that I would like to turn the call over to a dollar or CFO will discuss the financial results in details.
10-Q, Yada and good morning gave me one to help you understand or don't say what.
Sell mainly to non-GAAP numbers, excluding show based compensation now please turn to slide eight further financial I like <unk>.
We achieved vehicle to a vanilla and the second call to bleach and $12.4 million, representing is 16 consecutive COTA C. O O E revenue growth and then you please phone $12 million in the first quarter of 2023.
Second quarter way venue go by double D. G. Two <unk> <unk>, 11.2%. This resulted in non-GAAP net income for the quarter of $2.1 million is six here hi.
At the same time, we continue to manage other expenses whaling best in the business strategically inefficiently.
A little gross margin on an <unk> basis in the second quarter of 2023 was 73%. Please note <unk> me fluctuate between the quotas, depending on the way the new mix.
We expect they detach quarter were to remain a dissimilar Nathan.
<unk> and the experiences for the second quarter of 2023, when <unk> bases with $4.4 million, a decrease of $290000 compared to the second quarter of 2022.
We received a grant of $180000 from the Israeli innovation sorority during the quota.
<unk> to $197000 in the first quarter of last year.
Is there a result onion added up basis, Nathan the expenses for the second quarter of 2023, we'll $4.2 million compared to $4.5 million in the second part of 2022.
We expect that the Israeli innovation <unk> in the third quarter to be honest seem you know live in.
Sales and marketing expenses for the second quarter of 2023 the tree.
$3 million on the name that's basis, an increase of $490000 compared to the second quarter of 2022.
Gmail expenses for the second quarter of 2022.
$929000 <unk> basis.
<unk>, a $48000 compared to the second quarter of 2022.
It's a I'll mention this quarter, we completed a physician of continual entity.
Bowden continuous teams increased our operating expenses specifics per cent Oh is to the positive impact of swollen change weight gain Christian total operating expenses <unk> was lower than expected.
In addition, it the closing date the company located transaction price and recognized in its balance sheet goodwill and intangible assets and the amount of $3.2 million.
Okay.
Come on and on that basis for the second quarter of 2023.
Sandwich and sort of $2000 compared to <unk> of $176000 for the second quarter of 2022.
Jean Christo Avenue and says over the phone exchange rate two of these calls.
Our financial incomes for the second quarter of 2023.
$1.3 million, mainly due to Angel 218 come on short term bank deposits.
Net income for the second quarter of 2022 on and on that basis was $2.1 million or a net income of 13 cents per diluted share compared to a net income of $15000 <unk>.
Less than 110, 30 literature for the second quarter of 2022.
<unk> slides seven.
Net income for the second quarter of 2023 was $781000 <unk> income of five cents per diluted share. This Comcast to a net loss of $1.3 million ordinary class of nine cents per diluted show for the second quarter of two.
And 22.
The end of the second quarter of 2023.
Can was 298.
We expect of a head count will remain email out in the third quarter.
Turning to the Bank Street and Snagged 11.
Closer to the balance in short term bank deposits as of June .
June 30th 2023.
70 hate going to email them do that.
<unk> and her prepared remarks, I will now turn to call back to the alcohol at all for your questions.
Okay.
Thank you, ladies and gentlemen at.
At this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press start to if you are using speaker appointment kind of lets the handset before pressing the numbers your questions will be pulled in the order. They are a seat. Please stand by while we Paul for your questions.
The first question is from <unk>.
June Bhatia. Please go ahead.
Yep perfect Uhm. Thank you guys you called out in your prepared remarks that.
The macro might have might be starting to have some impact.
The five G rollout. That's on talk shows can you just elaborate that on order, but what are you seeing how might that impact your business from a downstream perspective.
Severe or.
M O R. These are are these pushups.
Mmm.
So.
See the muscle.
Pressure on the.
And we.
Uhm.
Okay.
And as part of their alignment.
<unk>.
Mmm.
Democracy.
Five G.
<unk> products.
As we execute as well.
It was really interesting to you.
Eh.
We do see see this five G.
To the appropriate dosage S D.
Five G programs.
And continued to spin to evolve into five G stand alone and <unk>.
Products.
Two.
I would say two separate the.
Okay.
One is that I want a solution.
To save.
And.
This is <unk>.
<unk> customers and potential customers.
Right.
<unk> and your father.
These hopefully it will spin.
Obviously.
So have you seen those.
<unk>, So I think those two c's, so kind of a balance.
Balance you said.
To see.
Does the menu slowly to receive them.
Slowly five times.
<unk>.
Five G.
But most important is that strategically so I'm going to the right direction.
Okay that that makes sense that's helpful. Thank you and.
When you think about some of the New York capabilities that you've lost your.
<unk> with with continual.
What does adoption of that look like how do you think that plays out over time and is that something that you incorporate into your core platform something you Monetise separately how're you thinking about the stratosphere.
So.
228.
And.
And then.
<unk> <unk> <unk> <unk>.
It also aligns with what's mentioned before.
To find better ways to manage.
<unk>.
Things in a more.
This way in the mall.
Efficient way and.
And.
Definitely.
Please.
Already started and then.
We need some reason between.
This is all going to be part of our portfolio.
<unk>.
Send you an application on top of existing data.
Data sources.
<unk> can provide and obviously you can get more value when you say the full package.
<unk>.
<unk>.
He served in D C.
<unk> concluded the.
<unk> and the last few months.
This new over a week ago existing customers you customer and.
The message is very positive.
Yeah.
I would like that.
As we know satisfy feeling telecom use.
Taking time, and we expect to see some of the results.
<unk> 2024.
Okay.
Just last one for.
For me the Google cloud partnerships.
It sounds like you have some customers that are.
With a sound, Jason if you're already.
How how does your customer base.
Between the three big clouds, we have all three now is there one that you have more exposure to I'm trying to figure out I guess now I hope you have an opportunity. This is not what you have got Jason ambition to Asher and and AWS.
IPhone.
So first our vision and our strategies.
The.
To be diseases solution in the cloud environment, and and we we want to be.
For an economic choice.
The periphery, we know this is operational sweet tooth.
<unk> W. It sounds good as you Uhm, Google and then we want to be.
With folio available for all of them.
We'd be the Florida.
So can we be clubs.
<unk> easily available in all different platform and we see some cases.
But it also use a unique.
Do one of the most.
Providers.
Sometimes.
Two different applications, sometimes in order to live.
To me my system.
<unk> is the one cloud cloud home so we all our.
Used to be available in the only thing that comes to explain how the market.
This is a market and the visibility.
Very powerful <unk>, yeah, I'll also very possible.
Thanks.
Eh.
The happy to see Google now 82 hours.
Portfolio in D. C. You could you. Please also extending.
The PVC this was done and continue on both of <unk> and then.
<unk> It also on the Google marketplace.
He's hoping a small dose.
As I said on one direction.
Do you mind doing the.
And the integration.
<unk> and.
Every one of them. This is successful <unk> is all the information you know.
<unk>.
<unk>. It does you know technology is when hopefully to move.
Hello, This is wood drive.
So we'll be happy to cooperate.
Oh cloud providers and most successful them is usually most of this loss.
Alright very helpful. At all thank you.
Thank you.
If there are any additional questions.
Please press star one if you wish to cancel your request. Please press star too. Please stand by while we call for more questions.
The next question is from Alex Henderson Needham and company. Please go ahead.
Thank you so much.
Great quarter, and and thanks for the nice prints are pretty consistently.
I'm looking at the the number here and thinking and.
Stopped and acquisition, that's adding six per cent to the Opex mine and I'm wondering if there was some of that in.
June quarter or was that as a some more of a sequential increase into the September quarter.
You know what you're so perfect should.
Should look like and.
Both the third and fourth quarters is going to be you know five or six per cent above the 8 million that you just did or or what.
So it says you Alex in the morning, we already appropriated the operation expense of disposition and most the results are better than expected you to both.
<unk> <unk> <unk> <unk> <unk> <unk> <unk>, some benefits as well as a higher higher than usual the gross margin.
We are expecting corporation expense.
Is what they're supposed to be in the in the seemingly Elizabeth with some increase.
And that should be fool, just real continue to invest into sales and marketing.
But we already did did they say <unk>.
Last four digits already and most and the numbers.
So.
And I.
Thinking than that.
Given the run rate revenues in the back half of the year as well.
B at the midpoint.
Cause it should.
It should be.
Higher in.
Three Q and pork, you or or some offsets.
Sure running well ahead of us.
Street expectations for the year so far.
So.
<unk> in terms of revenue and and we'll see looking to do in the 50 253 right.
Likely to.
Hire a second half of the <unk>.
And if.
Changing the full weeks and then we execute within our plans and.
We continue to perform strongly filter this confusion.
Though it sooner fan on the bottom line.
Alright so.
<unk> that would suggest that you get a crack a million dollars in profit.
Yeah it yet.
[noise] level in the queue and the ups from the first half E. P. S level is that.
When did this pain.
This makes sense again under the.
Because of this environment and force <unk> definitely he was used to Los Angeles.
But that's that's helpful.
In terms of the market.
Markets are and I, certainly get the Max Pro and.
And Pat commentary, but we're actually hearing.
But there's a deeper root problem with the five G.
Open Corps.
Date of core that there's operational challenges that have.
Come up that have undermined.
The ability of the service providers to continue to ramp their business. There was obviously very weak resolve it both here.
And.
And the five G, particularly in the U S where U S operators are more cloud of five.
An international operators, we've heard that they're cutting back on spending and five G. Because of that and specifically you know cutting back even though the ran investments because of that can you comment on what you're seeing in terms of the efficacy and the.
Performance of the existing five G Corps technologies and whether there is any change in the world. This of the key customers to take the kids, who need to push down that path given what we're hearing from the field.
Some operational challenges.
So.
<unk> and I think this is the most important <unk> strategically existing into five G stand alone.
<unk> continues we don't see any operations hesitated with that and actually will see molino over at the adjoining introduces strategic investment we've.
And more commitment.
<unk>. This is a very complicated technology.
To cloud the environment.
And to review, some and complexity telecom industry <unk>.
But it also brought into and we.
This complexity means this is more and more value for our solutions and beautiful.
<unk> <unk> <unk> <unk> <unk>.
Taking time and likely to take time.
As an industry will be fine.
Mostly the five G networks, we see this is moving forward with companies like.
<unk> and <unk> will appear to be very bullish with five G and the others <unk>, we'd be solved and the nature of the hopefully soon joined again it will be easier and easier for you then.
I see that most of the weakness is both of us by companies like Nokia and Ericsson is driving.
<unk> to the radio which is the.
Cover the notes of the same size most of America, where the.
Most of the <unk> the population.
And maybe the higher valued customers and sunbathe and due to the economy slows down without intimidation.
In the fall.
To you in two to invest diseases, eventually mostly drive new services and <unk> and what's the make is known as the complexity and I. Suppose. This is this is something we really almost covers it needed three of them as we continue to do so and identify those <unk> <unk>.
It doesn't exist.
What.
<unk> one more model question. The interest income line rates have been going up.
A similar Ah sequential increase in the interest income line as we saw.
In each of the last couple of quarters, where it's gone up.
Pretty nicely a couple of hundred thousand dollars plus sequentially or should we plotting it out at the current level.
Hi, Alex C <unk> C.
Say dangerously so we.
A.
Come to the lawyer <unk> well again.
The interest income to come down a little bit in the September quarter.
Yeah.
More along the lines of the first quarter level is that right.
Yeah.
I'll see the floor.
The next question is from Charles Elliot of inflection point. Please go ahead.
Alright.
[noise] specific question about D G T vegetable drive test.
Uhm.
Moment.
The company.
Google Apple.
Tom Tom have vehicles driving around gathering data.
The.
A major investment.
Would you be.
Okay.
Companies.
Filling in competition with those companies channel will be.
Because.
Homes companies on the telecoms companies.
Competition with the.
Cause.
So the the visual drive this application is suitable for two hours physician.
Customers mobile locally so is the five G could you looking to optimize and issues with customer experience on your network.
Recently was using vehicles.
To go around the different the yoga fees of the country knows just to see what is the quality of service.
This is very tedious very costly and also green and we are adopting a slow today is <unk> and base.
He was available data points, you know those too.
<unk>, <unk>, <unk>, which not only save on costs.
And more green, but also.
Too much more information.
We have the four by seven analyses and you must visit covers.
So go to lunch at all she's very souvenirs, lower if pull through either acclimate for that.
<unk> between the two products will definitely going into always told me and other prospects as an add on and is it is better to use the <unk> as well as continuing to almost because they send it on solution is a <unk>.
<unk> available data.
Hopefully it goes already and beautiful voice.
I'm sorry, Sir it's an extension of your quality assurance it is not.
Yes.
<unk>, whereas the assurance that could be as a citizen always and add.
Thank you.
R a D.
And.
This is still very high R&D spend.
Why is that.
So the guarantee expenses is essentially we're looking to to maintain I'm, assuming a liver we do see the percentage wise do you see the creases we.
As we increase the revenue in.
That is C N a number.
<unk> <unk> <unk>.
The one time, increasing the level used to the physician, who do continue on and Joan Bald Eagles. Their R&D blowers. These this is why we have a few minutes.
Expenses that should be all new multi level.
But we are looking to do.
Leaping Randy Liberty receiving the.
Somewhere else again, taking frequent situation fixed effects and then why do we continue to go on the top line.
This should be allowing us to see improvement as we won't be the last.
Couple of fuse significant movement on the button.
Thank you.
<unk> B R a D but.
Three months <unk> June th to Europe .
R. D number was 5.15 billion and it fell to 4.77 billion in the latest quarter is that just currency making for.
Having a funny impact or has it been a a.
In any way of cops and you are do you spend.
You explained Natalie ethics James.
The the chicken weekend in their full hour.
<unk> it'd be slower <unk> optimizations, we need a lot of the beginning.
Beginning of the year as I mentioned in previous cause mhm.
Great. Thank you that's that's great.
This concludes the <unk> L. T D second quarter 2023 resolve conference call. Thank you for your participation you May go ahead and disconnect.
[noise].