Radcom Ltd (RDCM) 2003 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the third-quarter earnings release. At this time, all participants are in a listen-only mode. Later we will open up the lines for questions and answers. (OPERATOR INSTRUCTIONS) As a reminder, this conference will be recorded. At this time I would like to turn the conference over to our host, Noga (ph) Fisher.

Thank you, John and good morning. With me this afternoon our Arnon Toussia-Cohen, CEO; and David Zigdon, CFO of RADCOM. By now we hope you have seen the press release which was issued earlier today and is available on all the major financial news. Before we begin I would like to review the Safe Harbor provisions. 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. Now I would like to turn the call over to Arnon.

Thank you, and thank you all for joining us. We're pleased to report another quarter of sequential revenue growth. Our revenues for the quarter reached $3.1 million, up 28 percent compared to the second quarter and 95 percent compared to the first quarter. Although this is still lower than previous years and we're still losing money, we have been moving in the right direction to close the gap. The main driver of our improved performance is our Cellular Performer, our newest products. Available for eight months now, it is extremely versatile and powerful testing solution for Next Generation cellular networks and has enjoyed a very encouraging reception. The reason is that it starts out of marketplace, it closely meets the needs of the R&D, QA and integration labs for cellular equipment vendors as well as of corporations you must sit up and operate these hover metrics.

This Cellular Performer is differentiated mainly by two features, our own hovel (ph) and whole network flexible (indiscernible) approach. The hovel takes advantage of our proprietary GEAR chip. It allows the system to perform analyses at up to 2.5 Gbs per second, the rate which beats all competitors systems. It also gives the system a significant technology barrier to competition.

The Cellular Performer’s analysis approach is also unique. It is able to look at the complex interactions of the whole network, not just at each individual graphical interface. While looking at the high-level network feature, the user can drill down to investigate any particular trouble spots and up again. This allows the user to quickly pinpoint specific problems and to smooth out the performance of these highly complex metrics. The product obviously supports all major cellular protocols. This feature have proven to be a close fit for the needs of major cellular equipment vendors and service providers.

During the third quarter we made many initial sales and a number of potential customers began the evaluation process. Our success is being helped by the fact that Next Generation networks are becoming more widely deployed. Also the equipment vendors have now begun developing the next stage of cellular equipment, systems that support more data intense cellular services. Our packet electronic capabilities play an important role in our positioning in the cellular markets, allowing us to support advanced services like push-to-talk, instant messaging, video telephony, etc. We are working to take full advantage of these market developments and the Cellular Performers favorable position. We believe the key to sustaining long-term sales is to form global sales agreements with major vendors and service providers. We are working to achieve these goals.

Sales of our other converged network solutions, including the Voice-over-IP performer and Omni-Q have been steady. Trends in the Voice-over-IP market are changing with the emphasis moving from testing network quality towards analyzing performance of services over Voice-over-IP networks. Taken together, our converted network products now accounts for 68 percent of our sales. We believe the increase in deployment of Voice-over IP and Next Generation cellular network place to our strengths.

I will stop now to let David go through the financial statements. Then I will come back to summarize and answer your questions.

Thank you Noni ph , and hello, everyone. Since you have the financial statement in front of you, I will review just the highlights. Revenues for the quarter were 3.1 million, up from the second quarter in a row. The geographic breakdown was 26 percent in the U.S., 39 percent from Europe, 33 percent from Asia-Pacific, and about two percent from the rest of the world.

Gross margin for the quarter was about 65 percent, a substantial improvement compared to 58 percent in the second quarter. The gross margin depends on both volume and mix of sales. Over the long-term we're targeting a gross margin of 65 (ph) to 68 (ph) percent. We continue to watch all expenses closely and balance between our short-term and long-term objectives.

Operating expenses are down by 5 percent year-over-year and 16 percent for the first nine months. This trend will continue due to the cost cuts taken during the third quarter. Net losses for the quarter was $91 million or 10 cents per share, an improvement compared to the second quarter.

For the third quarter of 2002, the net loss was 8 cents per share. Turning to the balance sheet, our cash balance is approximately $6 million, compared to 7 million at the end of the second quarter. The markets remain too volatile to give guidance going forward. Back to you, Arnon.

Thank you, David. So that is it for the quarter. In summary we're pleased with the Cellular Performer demand and hope to transform initial sales into global agreements. We are working to take advantage of the positioning of our product and market trends to increase our sales and return to profitability as quickly as possible. Although we cannot predict the timing, we believe we are moving in the right direction. Thank you for your support and for participating in this conference call.

With that, we would be happy to take your questions.

(OPERATOR INSTRUCTIONS) At this time we're showing no questions. Please continue.

Okay. Thank you very much, everyone and we will talk to next quarter. Goodbye.

Ladies and gentlemen, this conference will be available for replay starting today at 10:10 and ending at midnight on October 27. If you wish to join the replay, please dial 1-800-475-6701. International parties can dial 320-365-3844 and the access code for this call today it is 701333. This does conclude our conference for today. Thank you for your participation. And thank you for using AT&T executive teleconference. You may now disconnect.