Radcom Ltd (RDCM) 2003 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM second-quarter 2003 earnings release conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (CALLER INSTRUCTIONS) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Noga Fisher (ph) please go ahead.

Thank you, Linda. Good morning, everyone. With me this afternoon are Arnon Toussia Cohen, CEO, and David Zigdon, CFO of RADCOM. By now you should have all been able to see the press release which was issued this morning. It is also available on all the major financial news feeds. Before we begin, I would like to review the Safe Harbor provision. Forward-looking statements in the conference call involve a number of risks and uncertainties, including but not limited to product demand, pricing, market acceptance, changing economic conditions, product technology development, the effect of the Company's accounting policies, and other risk factors detailed in the Company's SEC filings. I would like to turn the call now over to Arnon.

Thank you Noga and thank you all for joining us. We are encouraged by the developments of the second-quarter. We are pleased to report revenue growth compared to the first quarter. The $2.4 million, our revenues are still down year-over-year, but we are moving in the right direction. We continue to be affected by the decline of the datacom segment which fell significantly in the first second-quarter. However, initial sales of the new Cellular Performer which we released in February began contributing significantly in the second-quarter, in fact, sales of our product lines for converge networks, the voiceover IP, the performer and Omni-Q, as well as the Cellular Performer now accounts for the majority of our sales, about 60 percent.

This confirms the strategy we have been following during the past two years, and encourages us regarding our ability to rebuild the Company. During the next few minutes, I will give you more details regarding initial market reaction to the Cellular Performer and the other developments of the second-quarter. The Cellular Performer has been very successful. So far, we have received orders for more than $0.5 million including initial orders from three major equipment vendors and three major service providers. Given that the sales cycle for such complex technologies is generally long, we were pleasantly surprised by this early success. Evaluations are also underway by other major players. This unusual level of interest validates that the Cellular Performer is a virtual breakthrough product which meets the real need of the market.

Cellular carriers are finally beginning to deploy next generation networks. Vendors have begun developing equipment to support video telephony, video-on-demand and other data-intensive services over cellular networks. These are difficult, complex projects that require a huge investment. They are ready to invest in Tech solutions to insure the time-to-market and high quality that is required of these networks. After releasing the product in February, we have already added a first extension, transforming it from a protocol analyzer to network analyzer. It can now create high-level pictures of the whole network while still supporting full drill downs to (indiscernible) capabilities.

This is a unique feature and customers are responding to it. From a marketing point of view, the cellular performer addresses large, well-defined markets, primarily the major cellular equipment vendors and cellular service providers. We have been approaching these players and the pipeline of the potential sales is building. Although the sales cycle is long, the early results have been encouraging, leading us to view this as a solid long-term opportunity for us.

In parallel, driven by the increased uptake of the voiceover IP throughout the marketplace, we are seeing increased demand for our other converged network solutions. During the quarter, we received an order for the Omni-Q voice quality management system from a major service provider in the Far East. It will be recorded during the third-quarter. In addition, we launched our new H. 324M multimedia analyzer which addresses emerging needs in the market. We hope the great demand for voiceover IP will increase our sales of all these products.

At the same time, we remain focused on returning to profitability as quickly as possible, while balancing the short-term and the long-term goals of the Company. I'll stop now to let David go through the financial statements. Then I will come back to summarize and answer your questions.

Thank you, Noni and hello, everyone. Since you have the financial statement in front of you, I will review just the highlights. Revenue for the quarter was 2.4 million up substantially from the first quarter. The geographic breakdown was 36 percent from the U.S., 33 percent from Europe, 21 percent from Asia-Pacific, and about 10 percent from the rest of the world. Gross margin for the quarter was about 58 percent, which is an improvement, but still low due to the volume of sales.

We continue to watch all expenses closely and to balance between our short term and long-term objectives. Both our operating expenses are down by 16 percent year-over-year, 25 percent for the first half. These include reduction in sales and marketing, R&D and G&A. We are aggressively implemented additional cost cuts which will further reduce our expenses in the next few quarters.

During the quarter, the chief scientist approved the grant of approximately $2 million for a variety of R&D projects. Net losses for the quarter was $1.7 million or 16 cents per share. This is an improvement compared to the first quarter. For the second-quarter of 2002 our net loss was 14 cents per share.

Turning to the balance sheet, our cash balance is approximately $7 million compared to $8.4 million in the end of the first quarter. The market remains too volatile to give guidance going forward. Back to you, Noni.

Thank you, David. So that is it for the quarter. In summary, we are encouraged by the positive reaction of the market for our new Cellular Performer. The fact that the majority of our sales is now from converged network products confirms our direction. We continue working to balance our long-term and short line goals. Although we cannot preedit the timing, we believe we are on the road back to growth and profitability.

Thank you for your support and for participating in this conference. With this, we would be happy to take your questions. Lydia, please.

(CALLER INSTRUCTIONS) There are no questions at this time. Please continue.

Okay, thank you very much all and talk to you again next quarter. Thank you.

Ladies and gentlemen, this conference will be available for replay after 10:35 AM Eastern time today through midnight on Monday, July 28, 2003. You may access the AT&T teleconference replay system at any time by dialing 1-800-475-6701 and entering the access code 690333. International participants may dial 320-365-3844. This does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.

(CONFERENCE CALL CONCLUDED)