Radcom Ltd (RDCM) 2004 Q1 法說會逐字稿

Thank you for standing by, and welcome to the Radcom first quarter earnings release conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. [operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Miss Nadia Fisher. Please go ahead.

Thank you, Beverley, and thank you all for joining us. With me today are Radcom’s CEO, Arnon Toussia Cohen, and CFO, David Zigdon. By now, I hope you’ve seen the press release, which was issued a few hours ago. It is 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.

Now, I’ll turn the call over to Arnon. Go ahead, please.

Thank you, Nadia, and thank you all for joining us. The first quarter was another good quarter for Radcom. Revenues were $3.5m. As we said during the last conference call, this is as we expected, down slightly from the fourth quarter, and in line with our normal seasonal pattern. However, on a year-over-year basis, revenues are growing steadily, together with a steady reduction in net loss. We are pleased with these developments.

The main driver for our growth is the Cellular Performer. Sales of this unique product began almost immediately after it was announced, and have been rising ever since. The response shows that it is the comprehensive solution for evaluating the performance of cellular networks and answers a real market need.

During the quarter, we continued to close initial sales with new customers. We were also pleased to receive repeat orders, both from [indiscernible], vendors and service providers. These validate our strategy of penetrating companies with initial orders, and then working to expand more deeply into the organization.

There are a growing number of cellular service providers, deploying 3G services. We believe that the need for the Cellular Performer will continue to grow. They are using the Performer in the laboratories to verify equipment for the 2.5G and 3G networks, and to accelerate the roll-out of new services. In addition, some have begun using it in live networks to troubleshoot a quality of service issues.

We were also pleased to sell several Omni-Q voice quality management systems during the quarter. It confirms that Voice Over IP (VoIP) is gaining traction in the market. Some of the major service providers are beginning to scale up their VoIP deployments. We believe this creates an opportunity for Omni-Q which is an excellent live network monitoring solution for them.

To maintain our technological leadership, we continue to invest in our product lines, and to introduce new ones. During the quarter, we announced the Cellular Performer Expert and closed our first sale. The Expert is an extension of the Cellular Performer, a mix tool for the engineering needs of GPRS, UMTS and CDMA2000 network operators. It gives them the key performer indicators, they need to maintain network quality and manage service level agreements (SLAs). For example, it helps them detect degrading performance because it causes measurable trouble, allowing the operators to correct the problem before it affects the customers.

Similarly, it helps them accelerate roll-out of new services. Overall, it transforms the Performer into a tool for both troubleshooting and monitoring, in a single system.

We are also extending our VoIP Performer line. At the Bonn conference last month, we introduced the latest extension, the Video Conferencing Test system. Video Over IP is an important new technology, and vendors are now developing their offerings. Our Performer will give them the simulation and analysis tools they need to achieve a reliable, high-performance system.

This direction takes advantage of both our cellular and converge technologies, which are integrated into a Video Over Cellular offering. Reaction to the new product at Bonn was excellent, and we are beginning to market the new system.

On the financial front, we are pleased to have completed our product placement during the quarter. Altogether, we made the total of $5.5m, bringing us into compliance with NASDAQ shareholders’ equity requirements. This is a good time to stop and let David go through the financial statement. Afterwards, I will come back to summarize and answer your questions. David.

Thank you, Arnon, and hello, everyone. As Arnon said, the most important [new deal] is the success of our $5.5m placement of ordinary shares. The investors who are our major shareholders are [indiscernible], as well as [Star Ventures], the DCN Group and other private investors.

As a result of the transaction, our shareholder equity is now $11.1m. Now, I’ll go through our financial statement. Since you have them in front of you, I will review just the highlights.

Revenue for the quarter was $3.5m, more than double the revenue of the first quarter of 2003. As we expected, it was down somewhat from the fourth quarter, which was about $4m, in line with our normal seasonal pattern. The majority of our sales continue to come from our convergence product lines, and especially the Cellular Performer.

Geographically, sales went well for us in Europe in the quarter, accounting for 56% of our sales. Sales in North America were 25%, down from the fourth quarter when we had particularly strong North America sales. 16% of our first quarter sales were from Asia Pacific.

We are pleased to report a gross margin for the quarter of 67.4%, just slightly below our target of 68%. This is the highest gross margin we have achieved in three years, except for the fourth quarter of 2003, which was unusually strong. Although gross margins continue to vary from quarter to quarter, depending on geographic mix of sale, and the [indiscernible] products sold, we believe we will be staying in range of the target.

We continue to consult all our expenses closely. Total operating expenses are down by 8% compared to the first quarter of 2003, reflecting efficiencies in our R&D and sales and marketing organizations.

Net loss for the quarter was $578,000, or $0.05 per share. This is a substantial improvement from the first quarter of 2003, when net loss was $3.2m.

Turning to the balance sheet, our cash balance was $10.5m at the end of the quarter. This reflects the $5.3m injection of cash from the PIPE investment, together with cash burn of $500,000.

Going forward, the market is still too volatile to give exact projections. However, we see demand in all our markets. We are on track for revenue growth and bottom line improvement in 2004. Back to you, Arnon.

Thank you, David. So that’s it for the quarter, in summary. A number of strengths are working in our favor, including the rise of next generation cellular networks and Video Over IP. We are maintaining our technological leadership with important new products.

Our efforts to penetrate new accounts, both service provider and good inventors are succeeding. Revenue growth is on track, finally. Although we can predict the exact timing, we believe that we are on the road back to profitability, and are optimistic looking forward. Thank you for your support, and for participating in this conference call. With that, we will be happy to take your questions. Operator.

[operator instructions] Mr. Cohen, we have no questions in queue. I’ll turn it back over to you.

Okay, thank you very much for participating, and talk to you again next quarter. Bye. Thank you.