Radcom Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the second 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 replay on the company's website at www.radcom.com later today. on the call are Eyal Harari, Radcom's CEO, and Amir Hai, Radcom's 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 visibility into the second half of 2021, its sales pipeline, momentum, demand for its products, and new requests, and potential expansion of opportunities. The company's continued investment in technology and R&D expectation regarding the 5G market size and trends in industry investments and spending the company's expectations with respect to the digital trend in telecom, 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, its potential expansion with a top-tier LATAM operator, the potential for additional grants from the Israel Innovation Authority, 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 risks 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 the generally accepted accounting principles. Investors are encouraged to review... The Reconciliations of Gap to Non-Gap 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 second quarter 2021 results. We are pleased with the results. we delivered another solid quarter as we continue to execute the company's strategy and invest in our advanced 5G cloud technology as we engaged in a significant higher number of sales opportunities. Total revenue for the second quarter of 2021 was $9.8 million, representing an eight consecutive quarter of year-over-year revenue growth. Additionally, we secured several meaningful orders from our existing customer base during the quarter, increasing our visibility into the second half of 2021. We made progress with the initial deployment at the top-tier LATAM operator that we announced in May. This order covers the operator's 4G network with the expectation of expanding to their 5G network in the future. This win was achieved based on our innovative technology and the advanced capabilities of Radcom Ace, which we believe provides significant value to operators as 5G-ready automated assurance platform. We are pleased with our progress as we remain focused on delivering on our commitments and expanding this relationship. We continue to invest strategically in R&D. Announcing last week our enriched AI-driven insights, we introduced a new innovative AI solution as part of RadComAce. The solution automatically analyzes millions of data sessions in real time and can reveal underlying network faults that otherwise would be unlikely to be identified quickly in 5G networks. This solution helps operators overcome the challenges of operating complex multi-venture networks and ensure the quality of services. I am proud of our team worldwide for their dedication and commitment to advancing our cloud technology and delivering on our customer commitments. Even with the ongoing impact of the pandemic, the telecom industry is moving forward. There has been a massive culture shift towards the digital, and more and more people are adopting new technologies and communication tools. As a result, operators worldwide are upgrading their existing networks or building new networks to keep pace with this trend. We believe that this trend will positively impact the future of our business. We see a ramp-up in 5G activity, from new network infrastructure contracts to partnerships between telecom operators and large-scale cloud providers, creating a favorable environment for our solutions. As mentioned before, 5G has multiple phases. In the first phase, compatible handsets connect to both 5G and 4G radios, joining the subscriber to the same existing 4G network. This is known as non-standalone 5G. Today, we are still at this stage of 5G. The second phase is known as standalone 5G. Operators will deploy an entirely new network core in this network environment and need new assurance solutions to monitor more advanced services like network slicing, and edge deployment. There are early signs of standalone 5G opportunities, but the critical mess is still at the early stage of this transition. We expect to see some early adopters begin the multi-stage process of choosing their assurance solutions during 2021 and beyond. Over the next five years, operators are projected to invest more than $1.1 trillion in their networks. According to a report from GSMA Intelligence, about 80% of that will be for 5G. We are already noticing new 5G use cases, such as edge computing, network slicing, and private networks, evolving as operators request them in the tender process. We are well equipped to handle these new requests due to our solutions cloud-native architecture that delivers automation and advanced 5G capabilities. As one of the industry's first standalone 5G assurance contracts, Radcom continues to provide Rakuten Mobile with critical service assurance for delivering next-generation mobile experiences. In May, Rakuten Mobile announced that it had achieved 80% population coverage for its network rollout in Japan. Rakuten also planned to launch its standalone 5G services in 2021, so it has already started deploying its standalone network, which Radcom Aids, intelligently monitors. During the second quarter, industry analyst Analysis Mason published a case study about Ratscom innovative deployments at Rakuten Mobile, stating the importance of our solution in supporting their journey as they are building the world's first fully virtualized end-to-end network. Ratscom's solution provides end-to-end service and subscriber visibility, all in a cloud-native environment. Our solution also enables the use of artificial intelligence for automation, which was one of Rakuten Mobile's critical requirements. We are delighted with the progress in our partnership with Rakuten. We have developed our solution using the latest cloud-based deployment processes to provide state-of-the-art software releases as the network continually evolves. In addition, we are testing new features without affecting live services, which provides Rakuten Mobile the confidence to roll out rapid changes in its network. As noted in the case study, Ratscom's solution is currently being integrated into Rakuten's communication platform, RCP, the cloud platform on which Rakuten Mobile's network is built. This platform packages and markets Rakuten's innovative network architecture to other operators worldwide, and it's already gaining momentum. For example, this month, Germany's one-on-one contracted Rakuten to help build its new mobile network. In addition, one-on-one will have access to Rakuten's communication platform. Together with Rakuten, one-on-one will create Europe's first fully virtualized mobile network with high performance and extensive automation and agility to exploit the full potential of 5G. As mentioned in previous quarters, standalone 5G networks are built on cloud-native technology. As a result, we continue seeing lots of collaboration between telecom operators and public cloud providers. For example, in June, Microsoft announced it was acquiring AT&T's carrier-grade network cloud platform technology, which AT&T's 5G core network runs on. In addition, AT&T recently committed to using Microsoft at the edge of its network to support network workloads at a scaled level for efficiency. As a reminder, we announced in March that RACOM ACE was fully integrated with Microsoft Azure. We continue to engage with additional cloud providers to expand the availability of our solution to more public cloud ecosystem as we expect operators to deploy in multi-cloud environments. AT&T continues to be a key strategic customer for us. As a leading network provider, AT&T frequently emphasizes customer experience as a key priority to their success. Our cutting edge software is embedded in their network cloud and monitors the customer experience as they continue evolving their underlying network infrastructure to the cloud. We continue to deliver new capabilities and cutting edge software releases to AT&T as we support the evolution of its cloud network. Given that RADCOM is working with leading operators in deploying our cloud native technology, we are gaining invaluable hands-on experience monitoring these networks. In addition, It serves as a testament to our ability to innovate and build out new capabilities and increase our technological leadership and cloud expertise with telecom operators. Earlier, I mentioned the growth in our pipeline. To give some color, we are currently engaged with a significant higher number of sales opportunities, with some reaching the proof-of-concept stage. From the beginning of the year, we have seen the number of opportunities increase by double-digit percentage, with a significant number of these being new logos. To summarize, we secured several significant orders this quarter, and even thought the 5G transition is only at the early stages of the journey momentum is building. As a result, we expect the demand for next-generation assurance solutions to increase. We are reiterating our full year 2021 revenue guidance of $39 million to $41 million based on our current visibility. With that, I would like to turn the call over to Amir Chai, our CFO, who will discuss the financial result in detail. Amir, please go ahead.

Thank you, Eyal, and good morning, everyone. Now, please turn to slide 7 for our financial highlights. To help you understand the results, I will be referring mainly to non-GAAP numbers which exclude share-based compensation. We ended the second quarter of 2021 with $9.8 million in revenue, increasing from $9.2 million in the second quarter of 2020. Our gross margin in the second quarter of 2021 on a non-GAAP basis was 75%, Please note that our gross margin can fluctuate depending on the revenue mix. Our gross R&D expenses for the second quarter of 2021 on an ongoing basis were $4.9 million, an increase of $400,000 compared to the second quarter of 2020. This increase is mainly related to a negative exchange rate between the US dollar and the Israeli new shekels, and an increase in our headcount as part of our product investment. we receive a grant of $70,000 from the Israel Innovation Authority during the quarter, compared to a grant of $572,000 in the second quarter of last year. In addition, we are engaged in ongoing discussions with the Israel Innovation Authority to approve additional development plans. Therefore, we will have clear visibility for 2021 during the next quarter. As a result, our net R&D expenses for the second quarter of 2021 on an ongoing basis were $4.8 million, compared to $3.9 million in the second quarter of 2020. Sales and marketing expenses for the second quarter of 2021 were $2.3 million on an ongoing basis, a slight increase of $100,000 for the second quarter of 2020. GNX expenses for the second quarter of 2021 on an ONGA basis were $841,000, approximately the same as the second quarter of 2020. Operating loss on an ONGA basis for the second quarter of 2021 was $646,000 compared to an operating income of $102,000 for the second quarter of 2020. Net loss for the second quarter of 2021 on a non-GAAP basis was $304,000 or net loss of 0.02 cents per dilution compared to a net income of $231,000 or net income of 0.02 cents per dilution for the second quarter of 2020. On a GAAP basis, as you can see on slide six, Our net loss for the second quarter of 2021 was $1.1 million or a net loss of 0.08 cents per diluted share compared to a net loss of $0.2 million or a net loss of 0.01 cents per diluted share for the second quarter of 2020. At the end of the second quarter of 2021, our headcount was 280. Turning to the balance sheet, As you can see on slide 10, our cash, cash equivalents, and shortened bank deposits of June 30, 2021, were $64.9 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 questions.