Q4 2024 RADCOM Ltd Earnings Call
Ladies and gentlemen, thank you for standing by. Welcome to The radcom Limited results conference call for the fourth quarter of 2024 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 www.rad.com later today. On the call are Benny Epstein radcom, CEO and hodari have 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 RAB comms website at www.rad.com, investor,
Relations. Before we begin I would like to review the Safe Harbor provision. This conference call will contain forward-looking statements forward-looking statements in the conference. Call involve several risks and uncertainties including but not limited to the company's statements about its Innovation expanding its business. Leading. The company into a new phase of growth and success. Its expectation to drive sustainable profitable growth, while enhancing shareholder value. It's a
Expectations regarding collaborations with key strategic, operators, exploiting opportunities, including in offering its solution to mid-tier operators. Its expectation to introduce new products offerings to a broader audience.
And the productization of radcom Ace backlog. Its investment in R&D to enhance its leadership in 5G assurance and network intelligence. The expected benefits of, its AI driven Assurance Solutions, the expected
Energies from the continual acquisition, the potential in its collaboration with service. Now, to drive additional business, its expectations regarding the dollar shekel ratio, its expectations with respect to research and development and sales and marketing expenses grants from the Israel, Innovation Authority and its full year, 2025 Revenue, guidance and future growth and profitability. 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 today's press release, and the company's SEC 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 Financial income, expenses acquisition related expenses and amortization of intangible assets related to Acquisitions non-GAAP results. Provide information. Helpful in assessing radcom core 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 generally accepted accounting. Principles 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. Now, I would like to turn the call over to Benny. Please go ahead.
Benny: Thank you, operator. Good morning, everyone and welcome to raton's, fourth quarter and full year 2024 earning call, we have appreciate you taking the time to join us today.
Benny: I'm excited to lead ratko a company transforming the Assurance market for 5G.
Benny: Working closely with our talented team and focus on driving Innovation. Expanding our business and leading the company into exciting new phase of growth and success.
Benny: Both organic initiatives and strategic expansion opportunities will fuel this journey.
Benny: I believe that there are strategy can drive sustainable and profitable growth while enhancing shareholder value later. In the call, I will share more details on this strategy and some opportunities we can unlock to grow the business.
Benny: For breaking year for retcom, driven by exceptional team execution and remarkable achievements. We exceeded the midpoint of our full year Revenue guidance.
Benny: Marking our fifth consecutive year of growth while significantly enhancing profitability earning per share, surged by over 75%, on a gaap basis and we achieved the highest cash and short-term deposit balances in the company's history. 94.7 million all while remaining completely debt-free.
Benny: A record-breaking performance showcases, the strength of our cloud and Jen AI based Assurance solution, which Telecom operator need to enhance efficiency and provide exceptional customer experiences.
Benny: This achievements would not have been possible without our teams outstanding execution and unwavering commitment to meeting our customer evolving needs.
Benny: Clothes 2024 stronger than ever reinforcing competitive position in the market.
Benny: It's shown on Slide.
We are now earlier this year.
Benny: That we secured a new.
Benny: Multi-year contract with nories the owner of Tia Denmark after extensive selection process involving numerous competitors. We replaced incumbent Assurance. Vendor reinforcing our position as trusted partner for disruptive telcos.
Benny: This win highlight the growing value of our intelligence Assurance enhanced by Genai in improving Telecom operators.
Benny: Connected ratom Ace to monitor customer experiences across its 5G and 4G Networks.
Benny: Our solution provides end-to-end Network analytics across Denmark from the run to the core, delivering vendor agnostic, insights, that enable Engineers to make informed decision to optimize Network performance and quality.
Benny: Turning to our installed base.
Benny: We believe a collaborations with key, strategic operators will continue to bear fruit as we introduce new Cutting, Edge, Ai, and geni based capabilities to support network management and improve customer satisfaction.
Benny: As published and noted on slide 9 in the oricon customer satisfaction survey of mobile carriers. Rakuten mobile again claimed to top spot for the second year
Benny: Also, human loss latest NYC audit report states that Boost Mobile has been recognized as the best most reliable Network in New York City.
Benny: We're happy that this customers continue to receive industry recognition and delighted that we can contribute to their success.
Benny: with multi-year contracts in place and ongoing the
Benny: of innovative Ai and automation driven capabilities, we believe our business remains strong
Benny: We look forward to drive even more success as we help our customers and enhance operational, efficiency, and Elevate customer experiences.
Without I'm thrilled to share that. You recently received a certificate of appreciation from Rakuten mobile for our contribution, to enhancing their Network quality.
Benny: Turning to the Telecom Market.
Benny: Operators are increasingly deploying Standalone 5G networks as they transition to more capable modern Cloud Networks.
Benny: this networks will support more automation, leading to a greater efficiency and cost reductions
Benny: We remain laser focused on Innovation generative, Ai and automation consistently investing in research and development to enhance our leadership in 5G assurance and assist Telecom operators as they transition to Standalone 5G C, slide 10 as operators, increasingly transition to Standalone 5G. We see significant potential in offering our intelligent Assurance solution to meet your operators. To seize this opportunity where productizing our industry-leading, 5G, Assurance solution, radcom, Ace into scalable flexible package designed to meet needs to operators of all sizes.
Benny: This approach will enable us to introduce new product offering to a broader audience ranging from full-scale deployment to mid-tier implementation to limited scope lab environments. We will soon provide further updates on productization of ratom ace.
Benny: Please turn to slide 11.
Benny: As a recent press release noted where collaborating with service now to drive additional business, our solution integrates with service. Now, to automate service and complaint resolution for Telecom operators, this collaboration, leverage, AI Ops to drive Network efficiencies and enhance customer satisfaction with combined service management and service Assurance Solutions.
Benny: Rat comes integration with service. Now is expected to help service. Now, customers to create best-in-class subscriber experiences while reducing network engineering time and effort.
Benny: The seamless integration of continuous core technology acquired in. May 2023 has significantly enhanced our integration with service now by including state-of-the-art, radio analytics, reinforcing our leadership in network intelligence,
Benny: The synergies from this acquisition remained promising.
Benny: Reminder integrating continuous. Technology was pivotal in securing a 7 figure, multi-year deal in the third quarter of 2024 with a leading North American operators for rat coms enhance Mobility experience analytic solution.
Benny: Turn to slide 12.
I noted that AI Ops is increasingly leveraged to drive Network efficiencies and enhance customer satisfaction with Telecom operators.
Benny: AI Ops integrates Ai and analytics into standard network operations.
Benny: However, before fully embracing AI operators must ensure that they have the right databases and analytical Frameworks.
roskam: This is where roskam comes in with years of experience. In Telecom industry, we analyze network data. From the end user perspective, providing a strong data foundation for AI driven, automation leveraging, this Foundation we use AI to improve Automation and service quality. Providing more intelligent network operations, deeper customer insights and more efficient automation.
Turn to slide 13 in brief. We continue actively showcasing our offering to existing and potential customers. At Key industry events as part of our go-to Market efforts.
We will also participate in the Mobile World Congress in Barcelona in early. March we will showcase a demo with service. Now in Amazon web services, we will present the integration of our Innovation solution with service now, leveraging, ai Ops to provide ticket, validation, and prioritizing the significantly reduced the time and effort. Network Engineers spent investigating and resolving technical issues and complaints.
We will.
roskam: Also attend the Nvidia GTC. AI conference in March where we look forward to engaging direct with Telecom, operators and partners.
roskam: This event present, a valuable opportunity to Foster new technology Partnerships and drive sales growth.
roskam: C, slide 14, I'm thrilled to share that. The company has received notable industry recognition. We were recently named the winner of the first Network, Innovation Award for best network test and measurement solution.
roskam: This award celebrates our Solutions in Innovative approach to collecting real-time subscriber, insights utilizing Advanced, artificial intelligence and enhance operators. Understanding of the customer experience. It also significantly reduced environmental impact on improved the efficiency of engineering teams.
roskam: As a record-breaking year for rcom marking the continuation of 5 years of strong growth. Momentum our reused sales marketing, efforts highlighting the increasing demand of our Solutions. We remain focused on expanding our business, which we were expect to achieve by acquiring profitable customers and operating inefficiently
roskam: with our strong backlog, radcom is well, positioned to achieve 6 consecutive year of Revenue, growth in 2025,
roskam: when dissipate full year 2025 Revenue, growth of 12% to 15% with a midpoint of 69.2 million representing a 13.5% increase compared to 2024
Speaker Change: To turn the call over to Hadar rahav. Our CFO who will discuss the financial result in detail.
Hadar Rahav: Thank you Benny and good morning. Give everyone.
Speaker Change: I will mainly focus on our non-GAAP results during this call unless otherwise stated a Reconciliation of non-GAAP to gaap measures is included in today's presentation in slight 3.
Speaker Change: Additionally, all compared with zones are on over year basis, unless otherwise noted
Now, please turn to slide 17 for the financial highlights.
Speaker Change: We are pleased with our team closed the year as we grow profitably.
Speaker Change: We concluded a fourth quarter of 2024 with a record revenue of 16.3 million up 16.1% year-over-year.
Speaker Change: Growth margin for the fourth quarter of 2024 was 75%.
Speaker Change: Please keep in mind that our gross margin may vary based on the revenue, mix, our algorithm and the expenses for default quarter of 2024 will 4.3 million.
Speaker Change: Up 8.9.
Speaker Change: Year over year.
Speaker Change: This.
Speaker Change: Reflects our focus on Innovation and portfolio expansion. We received a grant of $13,000 from the Israeli, Innovation Authority, during the quarter compared to 190,000 in the same quarter last year. All Innovation program supported by the Israel, Innovation Authority, our new and completion. In the first quarter, we received an additional Grant of 100,000 dollars.
Speaker Change: However, Beyond this period, there was no clear visibility regarding future. Grants, the company has submitted new proposals, which are still in the approval, phase, our Nether and the expenses for default quarter of 2024 were 4.1 million and increase of 426,000 compared to the fourth quarter of 2023.
We continue to actively promote our offerings to existing and prospective customers.
Speaker Change: Which resulted in 4.1 million dollars in sales and marketing expenses for default quarter of 2024 and then increase of 776,000 from the fourth quarter of 2023.
Speaker Change: GNA expenses for default quarter of 2024 will 1.2 million and increase of 191,000 from the fourth quarter of 2023 operating income for default quarter of 2024 was 2.9 Million, 18% of Revenue, and then increase of 1709000 from the fourth quarter of 2023.
Due to a low interest rate which reduced Financial income and higher tax, expenses resulting from the use of accumulated losses, net income for the fourth quarter of 2024 remained steady at 3.8 million and changed from the same period in 2023.
Speaker Change: When a gaap basis is shown on, slide 21.
Speaker Change: For the fourth quarter of 2024 was 2.2 million dollars, a decrease of 344,000 compared to the fourth quarter of 2023. In the end of the fourth quarter of 2024, our ad count was 307. Now, let's turn to slide 22 with the full year results.
Speaker Change: consistent with as a full year guidance, we ended 2024 with W revenue of 61 million
Speaker Change: 2% from 2023. Our gross margin was 75%. In 2024 compared to 74% in 2023.
Speaker Change: Our war on the expenses. In 2024, will 16.6 million a decrease of 273,000 compared to 2023.
Speaker Change: In 2025, we plan to increase our investment in R&D to develop additional Automation and geni basketballs and productization plans.
Speaker Change: We received accumulative Grant from the Israeli Innovation, authority of 684,000, during the year to support our growth sales and marketing expenses. In 2024 will 15.7 million compared to 1 2. 7 2 3.
Speaker Change: The Telecom operator.
Speaker Change: Continue to invest in 5G, do in 2025. We expect a gradual increase in sales and marketing to support an increasing pipeline of opportunities and expand our coverage in local region.
Speaker Change: GNA expenses for 2024 will 4.8 million and increase of 929,000 compared to the entire year of 2023.
Speaker Change: Operating income grew 65.9% in 2024. Reaching an all-time high of 9.5 million or 16% of Revenue compared to an operating income of 5.7 million or 11% in 2023.
Speaker Change: Net income for 2024 was a record of 13.5 million representing 22% of Revenue or 83 cents per diluted share compared to a net income of 10.2 million or 20% of Revenue, or net income of 67 cents per diluted share in 2023.
Speaker Change: On a gaap basis. As you can see on slide 21. Our net income for 2024 was another record at 7 million or 11% of Revenue or 43 cents per diluted share compared to 3.7 million or 7% of Revenue or 24 cents per diluted share in 2023.
Speaker Change: In 2025, we believe the dollar of shackle ratio, will stabilize at the current levels and doesn't require hedging turning to the balance sheet as shown on slide 23, our cash, cash violence, and short-term Bank deposits. As of December, 31st 2024 totaled, 94.7 million
Speaker Change: Thanks to our strong results. We generated a positive cash flow of 12.5 million ending 2024 with our highest cash balance that concludes, our prepared remarks, thank you. And 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 Arjun Bhatia of William Blair, please go ahead
Speaker Change: Hey guys, thank you. This is alynda Lee here for RJ and congrats on a great Q4 Benny. Can you give us more color on the norly scale and what that represents for the progress made in the geographic Market expansion efforts moving forward?
Speaker Change: Yeah, absolutely. Thank you for the question. Uh notice this is very important for us because it's uh introducing us to a market in Europe that uh and and and customer profiles that that is exactly what we're looking for. Uh and it's I believe it's the first time that we're going through a run to core portfolio offering efficiencies with geni capabilities. And I hope that it will follow with additional Wings in Europe that we currently working on and will, uh, and, and open up meets your market for us. That's currently, uh, maybe with with some of the in conference. Uh, it's definitely a, a
Speaker Change: A breaking all. All the 5G domain in general is say, allowing us to get into those type of customer profiles and we're looking forward for more of those wins coming.
Speaker Change: Up, awesome. And another question with the go to market efforts, how do you feel about the current sales capacity? Any plans to expand
Speaker Change: Sorry, I couldn't get the the second part go to market for which part in general. Yeah.
Speaker Change: Yes, just um, General go to the market effort. Um, how do you feel about the current, you know, sales capacity looking to expand different things like that. Thank you. Yes. Absolutely with anything to expand. We're also looking to expand our Partnerships. So as announced the service now and more to more more, more Partners will will, uh, will follow and will announce more, uh, in the coming weeks, uh, and we will demonstrate this also, in the
Speaker Change: So, so this is 1.
Go to tomorrow.
Speaker Change: We also try to, uh, fit our products offerings into midi as a, as I mentioned earlier.
Speaker Change: and together with with, with the
Speaker Change: Partnership. And the meter offering, we believe that we can.
Speaker Change: To to new customer base.
Speaker Change: Awesome. Thank you.
Speaker Change: Thank you.
Ryan Coons: The next question is from Ryan Coons of Neiman Company. Please go ahead.
Ryan Coons: Hi. This is uh, Jeff Hopsin on for Ryan, Coon's, uh, first and foremost, uh, very sorry for your loss, Benny. Um, I know you and your family, uh, are in our thoughts and in our prayers.
Ryan Coons: but uh, secondly, congrats on the great quarter, um,
Ryan Coons: You've had kind of 2 years of really impressive operating leverage, uh, and now, you know, you're talking about continuing to invest, in R&D and and sales, uh, for this year. How are you kind of thinking about driving, you know, more operating leverage, uh, versus, you know, investing back in the business, thanks.
Ryan Coons: Thank you, Jeff for the personal note, I appreciate it. Uh,
Ryan Coons: What's what's we feel generally speaking, and, and dark, and elaborate a little bit more that the more we grow is, is to to keep the same level of of growth and profitability while, you know, investing, uh, in R&D, introducing new capabilities with the geni and, and other partners. Uh, but the, the general notion is, uh, that we will keep the same level of profitability on our person side while investing in R&D, uh, moving forward.
Ryan Coons: I hope I answered your question.
Speaker Change: Awesome. Thank you. Uh maybe 1 more, you've been driving great. Uh free crash flow. Um and have a record cash. Are you guys thinking of exploring uh any Acquisitions or are there any particular segments of the market that you find interesting right now?
Speaker Change: Uh, where are you looking in different options? We're checking it. Uh,
Speaker Change: we're not, we're not in a hurry to to to when it comes to m&a in general. But
Speaker Change: No sir to ours. Uh but again we something that we evaluating and are taking our time
Speaker Change: And once we we we we find that the right.
We will pursue.
Speaker Change: Acquisitions. But uh we're looking at very carefully as we speak.
Speaker Change: Awesome. Thank you actually. Uh, if I could sneak 1 more in, uh, Benny, I know you've just been in for probably just over 2 months now. Uh, but what do you think your initial Focus, uh, is going to be on radcom for, you know driving this continued growth.
Speaker Change: Sure. So I'm sorry if I'm repeating, but I think, uh, introducing Partners, uh, and and, you know, leveraging on uh, big companies, such as service now and others. But, uh, we will, uh, uh, announced very, very soon. I think will help us to expand. Uh, also to, to go together with, for example, service now will allow us to go and and, and, uh, penetrate into areas that the outside of the Network Center going into the care domain will also help us to expand our addressable markets. Uh, we believe that we can bring a lot of value, uh, when it comes to customer experience, uh, and and can help our
Speaker Change: Customers to, to improve those, uh, domains. And I think we see the awards that our customers and ourselves awarded in the last quarter. And we, the plan is to continue to to push for a better customer experience through our unique data set that can bring a with Jen Ai and other platforms like service now, and better customer experience.
Speaker Change: Awesome. Thank you very much and congrats again test.
Speaker Change: Thank you.
Speaker Change: It's concludes the question and answer session and radcomm fourth quarter 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.