Radcom Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the first quarter of 2021. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded and will be available for a replay on the company's website at www.radcom.com later today. On the call are Eyal Harari, Radcom CEO, and Amir Hai, Radcom CFO. Please note that management has prepared a presentation for your reference that will be used during the call. If you have not downloaded it yet, you may do so through the link in the Investor section of Radcom's website at www.radcom.com slash investor dash relations. Before we begin, I would like to review the Safe Harbor provision. Forward-looking statements in the conference call involve several risks and uncertainties, including but not limited to the company's statements about its continued investment in technology and R&D, the 5G market and industry trends, the company's market position, cash position, potential and expected growth, the company's expectation with respect to its relationships with Rakuten, and AT&T, the potential of the RADCOM ACE product and the integration with Microsoft Azure, its ability to capitalize on the emerging 5G opportunities and win more market share, its potential expansion with a top-tier LATAM operator, the potential for additional partnerships with top cloud providers in the future, and its revenue guidance. The company does not undertake to update forward-looking statements. The full Safe Harbor provisions, including risk that could cause actual results to differ from these forward-looking statements are outlined in the presentation and the company's SEC filings. In this conference call, management will be referring to certain non-GAAP financial measures, which are provided to enhance the user's overall understanding of the company's financial performance. By excluding certain non-cash stock-based compensation expenses, 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 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 over the call to Eyal. Please go ahead.

Thank you, operator, and thank you all for joining us today. Earlier this morning, we issued a press release stating our first quarter 2021 results. We are pleased with the financial results as they mark our seventh consecutive quarter of year-over-year revenue growth. Total revenue for the first quarter of 2021 was $9.1 million, representing 10% year-over-year growth and a continued improvement of our bottom line. This revenue growth is supported by our strategy of procuring multi-year agreements for software and services, culminating in a significant contribution of recurring revenue. Our consistent results come from the execution of these multi-year contracts with the leading operators globally and our ability to remain agile in a dynamic and ever-changing business environment. We are excited about our recently announced win at the top tier LATAM operator as we secured a multi-million dollar order for our Radcom ACE assurance solution. The selection process involved a multi-vendor tender in which the operator analyzed and evaluated vendors on their 4G and 5G assurance capabilities. This win was achieved based on our innovative technology and the advanced capabilities of RADCOM ACE, which provides an intelligent automated assurance platform. RADCOM ACE will enable this top-tier operator to resolve network quality degradations before they affect the customer, and as such, improve the overall customer experience. This win expands the deployment of our technology to the operator's mobile network with the potential to expand when the operator transition to the 5G network in the future. As mentioned in previous quarters, standalone 5G networks are built on cloud-native technology, which is why we recently see cooperation between telecom operators and public cloud providers like Microsoft, Google, and Amazon. Last month, several operators announced their collaboration to build a cloud-based 5G network in the US and in Europe. As Radcom has been transitioning to cloud native technology for the last few years, this is an encouraging trend. We are already seeing this come to fruition as we announced the integration of Radcom ACE with Microsoft Azure earlier during this first quarter. This integration with Azure enables operator to assure the quality of their 5G services. Radcom ACE runs as a cloud native function within the public cloud, And when deployed on Azure, it is scaled and managed through the Azure Kubernetes service. This integration also exemplifies our growing capability to support cloud-native operations. Our advanced cloud-agnostic technology and significant telecom experience put us in an excellent position for additional partnerships with cloud providers as we expect customers to deploy in multi-cloud environments. In addition, we are currently seeing more opportunities and are engaged with multiple prospects at different stages of the sales cycle. We believe that Radcom is well positioned to win more market share as 5G continues to evolve. We are still in the early days of this transition. In North America and several countries in Asia, operators are aggressively rolling out 5G, followed by Europe and then Latin America. In addition, we are seeing several greenfield operators adopt cloud-native technologies to roll out mobile services and expand to new market verticals. AT&T remains a key strategic customer for us. In the recent earning call, AT&T stated that they added nearly 600,000 subscribers in the quarter, which was their best net ad first quarter in more than 10 years. Our cutting-edge software is embedded into their mobile network and monitors the customer experience as they continue evolving their underlying network infrastructure to the cloud. We continue to deliver consistent cutting-edge software releases to AT&T as we support the evolution of their cloud network. We are also progressing in our partnership with Rakuten in Japan as they aggressively roll out the world's first end-to-end virtualized network deployed on a nationwide scale. We continue supporting Rakuten with their 4G and 5G network build. In addition, Rakuten plans to launch its standalone 5G network in the second quarter of 2021. In preparation for this, we have moved to the RADCOM-A software implementation to monitor the standalone 5G services. During the first quarter, TelecomTV published an interview with Rakuten Mobile CTO on their nationwide rollout and the transition to 5G and the importance of RADCOM's solution in supporting them on this journey. As Rakuten Mobile CTO stated in the interview, assurance is vital when rolling out Greenfield networks, allowing Rakuten analyze events in real time, diagnose them and improve the network, but most importantly, it provides real-time data about the true customer experience. In addition to rolling out software releases for standalone 5G, RASCOM solution is also being integrated into Rakuten's communication platform, which is already being marketed to operators worldwide and deployed in Japan. Given that Rakuten is a leading pioneer in deploying cloud-native technology and transitioning to 5G, we are gaining invaluable hands-on experience monitoring the first-ever implementation of this cutting-edge technology. It further serves as a testament of our ability to innovate and build out new capabilities that we believe will increase our market share in the future. As mentioned, when deploying new technology, such as cloud-native platforms or 5G networks, assurance play an essential role in monitoring service quality, pinpointing network degradations, and helping the operator improve the network performance. Therefore, We expect RADCOM ACE to continue to gain further interest from operators and play an important role in facilitating the transition to 5G through real-time insight and network performance optimization. We are continuing to invest strategically in R&D to enhance our RADCOM ACE solution, increase our 5G capabilities, expand our AI-driven insights, and seamlessly integrate our solution to the cloud. We are continuing to expand our sales team And as mentioned, we are currently engaged in multiple opportunities and looking to expand our pipeline as 5G gains momentum. Based on the current industry conditions and our visibility, we reiterate our full year 2021 revenue guidance of $39 million to $41 million. With that, I would like to turn the call over to Amir Chai, our CFO, who will discuss the financial results in detail. Amir, please go ahead.

Thank you, Eyal, and good morning, everyone. This quarter marked another consecutive period of year-over-year revenue growth. With our first quarter revenue increasing by 10% year-over-year, we succeeded in improving our bottom line. Now please turn to slide six for our financial highlights. To help you understand the results, I will refer mainly to non-GAAP number, which is exclude share-based compensation. We ended the first quarter of 2021 with $9.1 million in revenue, increasing from $8.3 million in the first quarter of 2020. Our gross margin in the first quarter of 2021 on a non-GAAP basis was 75%. Please note that our gross margin can fluctuate depending on revenue mix. Our gross R&D expenses for the first quarter of 2021 on a non-GAAP basis were $4.8 million, a slight increase of $200,000 compared to the first quarter of 2020. During the quarter, we received grants from the Israel Innovation Authority for $68,000. Sales and marketing expenses for the first quarter of 2021 were $2.4 million on a non-GAAP basis, approximately the same as the first quarter of 2020. GNA expenses for the first quarter of 2021 on a non-GAAP basis were $809,000, approximately the same as the first quarter of 2020. Operating loss on a non-GAAP basis for the first quarter of 2021 was $1.1 million, compared to an operating loss of $2.5 million for the first quarter of 2020. Net loss for the first quarter of 2021 on a non-GAAP basis was $1 million, or a net loss of $0.07 per dilution, compared to a net loss of $2.4 million, or a net loss of $0.17 per dilution for the first quarter of 2020. On a gap basis, as you can see on slide five, our net loss for the first quarter of 2021 decreased to $1.7 million, or a net loss of 12 cents per dilute share, compared to a net loss of $2.9 million, or a net loss of 21 cents per dilute share for the first quarter of 2020. At the end of the first quarter of 2021, our headcount was 273. Turning to the balance sheet, as you can see on slide 9, our cash-cash equivalents and short-term bank deposits as of March 31, 2021, were $67.3 million. We believe that our strong balance sheet provides us with the flexibility to execute the opportunities ahead of us and remain agile through global uncertainty. That ends our prepared remarks. I will now turn the call back to the operator for your questions.