RADCOM Ltd. Price & Performance (RDCM)

In this conference call, management will refer to certain non GAAP financial measures, which 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's 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 reconciled 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. Thank you, operator. Good morning, everyone, and welcome to RatCon's RADCOM quarter and full year 2024 Earnings Call.

We appreciate you taking the time to join us today. I'm excited to lead Radcom RADCOM. Company transforming the assurance market for five gs. Working closely with our talented team, I'm focused on driving innovation, expanding our business and leading the company into exciting new phase of growth and success. Both organic initiatives and strategic expansion opportunities will fuel this journey. Believe that our 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. Turning to the results on Slide seven. 2024 was a record breaking year for Radcom. Driven by exceptional team execution and remarkable achievement. We exceeded the midpoint of our full year revenue guidance marking our fifth consecutive year of growth while significantly enhancing Earnings 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, dollars 94,700,000.0 all while remaining completely debt free. Our record breaking performance showcases the strength of our cloud and Gen AI based assurance solution. Which telecom operator need to enhance efficiency and provide exceptional customer experiences.

These achievements would not have been possible without our team's outstanding execution and unwavering commitment to meeting our customer evolving needs. Thanks to their dedication, we closed 2024 stronger than ever reinforcing competitive position in the market. As shown on Slide eight, we announced earlier this year that we secured a new multiyear contract with Nolis. The owner of TeliaDenimark. After extensive selection process involving numerous competitors, we replaced incumbent assurance vendor. Reinforcing our position as trusted partner for disruptive telcos. This will highlight the growing value of our intelligent assurance enhanced by Gen AI in improving telecom operators. As a reminder, NORI selected Radcom ASE to monitor customer experiences across its five gs and four gs networks. Our solution provides end to end network analytics across Denmark. From the run delivering vendor agnostic insights that enable engineers to make informed Turning to our installed base. [indiscernible] believe our collaborations with key strategic operators will continue to bear fruit as we introduce new cutting edge AI and Gen AI based capabilities to support network management and improve customer satisfaction. As published and noted on Slide nine, In the Oregon customer satisfaction survey of mobile carriers, Rakuten Mobile again claimed to top spot for the second year.

Also, HumanLoud's latest NYC audit report states that Boost Mobile has been recognized as the best, most reliable network in New York City. We're happy that these customers continue to receive industry recognition and delighted that we can contribute to their success. With multiyear contracts, in place and ongoing development of innovative AI and automation driven we believe our business remains strong. Look forward to drive even more success as we help our customers enhance operational efficiency and elevate customer With that, I'm pleased to share that we recently received a certificate of appreciation from Rakuten Mobile for our Turning to the telecom market. Operators are increasingly deploying standalone five gs network as they transition to more capable modern cloud networks. These networks will support more automation, leading to a greater efficiency and cost reductions. [indiscernible] remain laser focused on innovation generative AI and automation, which consistently investing in research and development to enhance our leadership in five gs assurance and assist telecom operators as they transition to standalone five gs. [indiscernible] As operators increasingly transition to standalone five gs, we see significant potential in offering our intelligent assurance solution to mid tier operators. To seize this opportunity, we are productizing our industry leading five gs assurance solution, RADCOM ACE, into scalable, flexible package designed to meet needs to operators of all sizes.

This approach will enable us to introduce new product offerings to a broader audience ranging from full scale deployments to mid tier Please turn to Slide 11. Our recent press release noted, we are collaborating with ServiceNow to drive additional business. Our solution integrates with ServiceNow to automate service and complain [indiscernible] This collaboration leveraged AIOps to drive network efficiencies and enhance customer satisfaction with combined service management and service assurance solutions. Ratcom's integration with ServiceNow is expected to help ServiceNow customers create best in class subscriber experiences while reducing network The seamless integration of Continuall's core technology acquired in May 2023 has significantly enhanced our integration with ServiceNow by including state of the art radio analytics, reinforcing our leadership in network intelligence. [indiscernible] The synergies from this acquisition remain promising. As a reminder, integrating continuous technology was pivotal in securing a 7 figure multiyear deal in the third quarter of twenty twenty four with a leading North American operator for Radcom's RADCOM enhanced mobility experience analytics solution. Turn to Slide 12. [indiscernible] noted that AIOPS is increasingly leveraged to drive network efficiencies and enhance customer satisfaction with telecom operators. AIOps integrates AI and analytics into standard network operations. However, before fully embracing AI, operators must ensure that they have the right databases and analytics framework This is where Radcom 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. Deeper customer insights and more efficient automation. Turn to Slide 13. In brief, we continue actively showcasing our off offering to existing and potential customers at key industry events as part of our go to market in Barcelona in early March. We will showcase a demo with ServiceNow in Amazon Web Services. We will present the integration of our innovation solution with ServiceNow leveraging AI ops to provide ticket validation and prioritizing the significantly reduced the time and effort network engineers spend investigating and resolving technical issues and complaints. We will also attend NVIDIA's GTC AI Conference in March. Where we look forward to engaging direct with telecom operators and partners. See 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. 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.

To summarize, see Slide 15. 2024 was a record breaking year for Radcom. Marking the continuation of five years of strong growth momentum. Our robust sales marketing efforts highlight the increasing demand of our solutions. Remain focused on expanding our business which we were expected to achieve by acquiring profitable customers and operating it efficiently. With our strong backlog, Ratcom is well positioned to achieve anticipate full year 2025 revenue growth of 12% to 15% [indiscernible] point of $69,200,000 representing a 13.5% increase compared to 20 With that, I would like to turn the call over [indiscernible] will discuss the financial result in detail. Thank you, Benny.

And good morning, everyone. [indiscernible] remain focused 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 [indiscernible] Sweet.

Additionally, all comparisons are on a year over year basis And let's otherwise noted. Now please turn to Slide 17 for the financial highlights.

We are pleased with how our team close the year as we grow profitably. With a record revenue of $16,300,000 up 16.1% year over year.

Our gross margin for the fourth quarter of twenty twenty four was 75%. That our gross margin may vary based on the revenue mix. Our gross R and D expenses for the fourth quarter of twenty twenty four were $4,300,000 up 8.9% year over year.

This reflects our focus on innovation, and portfolio expansion. We received a grant of $113,000 from the Israel Innovation Authority during the quarter compared to $190,000 in the same quarter last year.

Our innovation programs supported by the Israel Innovation Authority are nearing completion. In the first quarter, we received an additional grant of $100,000 However, beyond this period, there is no clear visibility regarding future grants. The company has submitted new proposals which are still in the approval phase.

Our net R and D expenses for the fourth quarter of twenty twenty four were $4,100,000 an increase of $426,000 compared to the fourth quarter of twenty twenty three. We continue to actively promote our offerings to existing and prospective customers, which resulted in $4,100,000 in sales and marketing expenses for the fourth quarter of twenty twenty four and an increase of $776,000 from the fourth quarter of twenty twenty three. G and A expenses for the fourth quarter of twenty twenty four were $1,200,000 an increase of $191,000 from the fourth quarter of twenty twenty three. Operating income for the fourth quarter of twenty twenty four was $2,900,000 18% of revenue and then in increase of $179,000 from the fourth quarter of twenty twenty three. 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 twenty twenty four remained steady at $3,800,000 unchanged from the same period in 2023. On a GAAP basis, as shown on Slide 21, our net income for the fourth quarter of twenty twenty four was $2,200,000 a decrease of $344,000 compared to the fourth quarter of twenty twenty three.

In the end of the fourth quarter of twenty twenty four, our ALCAN was three zero seven. Now let's turn to Slide 22 with the full year results. Consistent with our full year guidance, we ended 2024 with record revenue of $61,000,000 up 182% from 2023. Our gross margin was 75% in 2024 compared to 74% in 2023. Our R and D expenses in 2024 $16,600,000 a decrease of $273,000 compared to 2023. In 2025, we plan to increase our investment in R and D to develop additional automation and Gen AI best capabilities and support our strategic partnerships and productization plans. We received accumulative grant from the Israel Innovation Authority of $684,000 during the year. To support our growth, sales and marketing expenses in 2024 were $15,700,000 compared to $12,700,000 in 2023. As telecom operators continue to invest in 5G during 2025, we expect a gradual increase in sales and marketing to support an increasing pipeline of opportunities and expand our coverage in local region. G and A expenses for 2024 were $4,800,000 an increase of $929,000 compared to the entire year of 2023. Operating income grew 65.9% in 2024 reaching an all time high of $9,500,000 or 16% of revenue compared to an operating income of $5,700,000 or 11% in 2023.

Net income for 2024 was a record of $13,500,000 representing 22% of revenue or $0.83 per diluted share compared to a net income of $10,200,000 or 20% of revenue or net income of $0.67 per diluted share in 2023. On a GAAP basis, as you can see on Slide 21, our net income for 2024 was another record at $7,000,000 or 11% of revenue or $0.43 per diluted share compared to $3,700,000 or 7% of revenue or $0.24 per diluted share in 2023. In 2025, we believe the Doro Shekel ratio will stabilize at the current levels and doesn't require hedging. Turning to the balance sheet. As shown on Slide 23, our cash equivalents and short term bank deposits as of December 31, 2024, Curt, 94,700,000.0 Thanks to our strong results, we generated a positive cash flow of $12,500,000 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 question.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. The first question is from Arjun Batya of William Blair. Please go ahead.

Hi, guys. Thank you. This Alinda Lee here for Arjun.

Congrats on a great Q4. Ben, in queue, give us more color on the Norleaf What that represents for the progress made in the geographic market expansion efforts moving forward.

Thank you for the question. Nordic Is Very Important For Us Because It's In To A Market In Europe that and customer profile that is exactly what we're looking for. And I believe it's the first time that we're going through run to core portfolio offering efficiencies with Gen AI capabilities and I hope that it will follow with additional wins in Europe. That we're currently working on and will open up a mid tier market for us that currently [indiscernible] breaking all the five gs domain in general is allowed us to get into those type of customer profiles and looking forward for more of those wins coming up. Up.

Also, another question With the go to market efforts, how do you feel about the current sales capacity Any plans to Sorry, I couldn't get to the second part. Go to market start In general, [indiscernible] [indiscernible] Just general go to market efforts, how do you feel about the current looking to expand, just different things like that?

Yes, absolutely. We're looking to expand. We're also looking to expand our partnerships. So as announced ServiceNow and more partners will will follow and we'll announce more in the coming weeks. And we will demonstrate it also in the MWC in Barcelona in Capalufuik. So ex So this is one step go to market approach. We're also trying to fit our product offerings into mid tier as I mentioned earlier. And together with the partnership and the meter offering, we believe that we can extend significantly to new customer base.

Awesome. Thank you.

Thank you.

The next question is is from Ryan Kuntz of Needham and Company. Please go ahead. Hi. This is Jeff Hobson on for Ryan Kuntz. First and foremost, very sorry for your loss Benny. I know you and your family are in our thoughts and in our prayers But secondly, congrats on the great quarter. You've had kind of two years of really impressive operating leverage and now you're talking about continuing to invest in R and D and sales for this year.

How are you kind of thinking about driving more operating leverage versus investing back in the business? Thanks.

First of all, thank you, Jed, for the personal note. I appreciate it. What we feel generally speaking and then Anurag can elaborate a little bit bit more that the more we grow is to keep the same level of growth and profitability while investing in R and D, introducing new capital [indiscernible] [indiscernible] that we will keep the same level of profitability on our version side. While investing in R and D moving forward. Hope I answered your question.

Awesome. Thank you. Maybe one more. You've been driving great free cash flow and have record cash Are you guys thinking of exploring any acquisitions or are there any particular segments of the market that you find interesting right now? [indiscernible] looking in different options. We're taking it We're not in a hurry to to when it comes to M and A in general, but carefully we're looking how to maybe expand our addressable market with areas that take closer to ours. But again, jumping up, we're evaluating and are taking our time and that And once we find the right candidate, we will pursue acquisitions, but we'll at it very carefully as we [indiscernible] if I could sneak one more in. Benny, I know you've just been in for [indiscernible] over two months now. But what do you think your initial focus is going to be on Radcom for driving this continued growth.

Sure. So I'm sorry if I'm repeating, but I think introducing partners and leveraging on big companies such as ServiceNow and others but there will be announce very, very soon what I think will help us to expand also to go together with, for example, ServiceNow will allow us to go and penetrate into areas that outside of the network center going into the care domain will also help us to expand our addressable market We believe that we can bring a lot of value when it comes to customer experience and can help our customers to to improve those domains And I think we see the awards that our customers and ourselves awarded in the last quarter. The plan is to continue to to push for a better customer experience through our unique data can bring with Gen AI and other platforms like ServiceNow, and better customer experience.

Awesome. Thank you very much. And can This concludes the question and answer session. And Radcom's Fourth Quarter twenty twenty four Results Conference Call. Thank you for your participation. You may go ahead and disconnect.