Radcom Ltd (RDCM) 2004 Q2 法說會逐字稿

Welcome to the Radcom second-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 with instructions 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, Ms. Nadia Fisher.

Thank you, David, and thank you all for joining us. With me today are Radcom's CEO Arnon Toussia-Cohen, and its CFO, David Zigdon. By now we hope you have seen the press release which was issued before the opening of trade this morning. It is available on all the major financial news feeds. Before we begin I'd like to review the Safe Harbor provision.

Forward-looking statements and 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. The Company does not undertake to update forward-looking statements. Now I'll turn the call over to Noni (ph).

Thank you, Nadia, and thank you all for joining us. The second-quarter was marred by continued strong (indiscernible) performance sales in Europe and a stiff increase in Omni-Q bookings. However, total revenue fell short of our expectation due to poor sales in North America. The states and Canada are critical markets for us and we must improve our performance there. To address this situation we have recently appointed Avi Zamir as the President of our U.S. subsidiary.

Avi served in the same position for 6 years from 1993 when Radcom Inc. was incorporated through 1999. During that time he established Radcom's U.S. team, (indiscernible) network of (indiscernible), and was responsible for generating about half of Radcom's sales. In 1999 he left Radcom to co-found Business Layers where he achieved impressive success penetrating large accounts.

We are pleased to have Avi back at Radcom. We are confident that he and his team will turn North America back into a strong revenue generator. At the same time we are encouraged by momentum building in other regions for both Cellular Performer and Omni-Q.

During the quarter we recorded several Cellular Performer orders both from new and repeat customers. These sales have been driven by UMTS and CDMA deployments. The operators deploying these complex networks are recognizing the Cellular Performer's value as a powerful monitoring and troubleshooting tool.

We are also pleased with the progress of our marketing efforts for The Cellular Expert, our new extension to the Cellular Performer. Through the addition of a central database, an intelligent analysis engine and easy to use front end, The Expert identifies performance issues and strengths that aren't normally visible. In addition, The Expert makes it possible to look at information about specific users; this makes it indispensable for efficient service management.

By adding The Expert to The Performer now we are able to offer a complete solution from high-level information about services all the way down to information about packet level. As a result new opportunities are opening for us for. For example, we recently signed cooperation with TTI for integrating our product into service management solutions. We have also initiated talks with other companies. As a large-scale and complex solution The Expert sales cycle is longer than The Performer six months or so; but we are working on a number of deals and hope to see them begin to close.

We are also encouraged by a strong increase in Omni-Q interest and sales. In fact, Omni-Q bookings doubled from Q1 to Q2. The driver is the worldwide increase in Voice-over-IP activity. Omni-Q is one of the few systems that can keep up with live monitoring requirements of large scale Voice-over-IP deployment. Another important advantage is its ability to monitor Voice-over-IP over cable, a market that is growing in importance. During the quarter we sold initial systems to one of Europe's largest service provider and to several smaller operators. In addition, a major Voice-over-IP equipment vendor is using the system at customer sites. I'll stop here and let David go through the financial statements. Afterwards I'll come back to summarize and answer your questions. David?

Thank you, Arnon, and hello, everyone. If you have the financial statements in front of you I will review just the highlights. Revenues for the quarter were 3.3 million; this is up by 36 percent compared to the last year. On a geographical basis 46 percent of the sales came from Europe, 32 percent from North America, and 19 percent from Asia-Pacific. Gross margin for the quarter was 67.5 percent, just a little below our target of 68 percent. This is almost the same as it was in the first quarter. In general gross margins will vary depending on geographical mix and exact order flow.

We continue to control our expenses closely. Operating expenses are down by 6 percent compared to the last year reflecting efficiencies in our R&D and sales and marketing organization. Net loss for the quarter was $675,000 or 5 cents per share. This is a 62 cent improvement over the second quarter of 2003 when net loss was 1.3 million. Please note that the rated average number of all the new shares is now 14.4 million from 10.5 million; this is due to the 5 point option which closed at the end of the first quarter.

Let me include the balance sheet. Our net cash balance was 9.7 million at the end of the quarter. Our cash burn for the quarter was about $800,000. Going forward we are still unable to give exact projections. As Noni said, we are moving forward (indiscernible) and are currently working on (indiscernible). Our success in closing in any one of them and the timing will have a significant effect. Back to you, Noni.

Thank you, David. That's it for the quarter. In summary, we view North America as a crucial market. We are taking serious measures to overcome the challenges. We are pleased with the market's reaction to The Cellular Expert and with rising Omni-Q interest. Perhaps most important, our (indiscernible) products improve our targeted positioning and open up new opportunities. The challenge ahead is to turn these opportunities into sales. Overall we are confident in our technology and team and we are working to achieve our goals. Thank you for your support and for participating in this conference call. With that, we'd be happy to take your questions. Operator?

(OPERATOR INSTRUCTIONS) Alan Lichtenberg (ph), Lumen Capital.

Good morning. My first question is if I could get a product breakdown of your revenues this quarter approximately?

The Performer is about 72 percent -- 73 percent. The (indiscernible), our legacy product, is about 9 percent and we have from the Omni-Q about 11 percent and we have a royalty about 8 percent.

Thank you. Turning to the financials a bit, do you have a sense of what your breakeven level might be? And also, is it fair to assume that your cash burn won't be going up going forward?

The breakeven is about sales -- sales of about $4.5 million. Of course it depends on the geographical mix and the product mix. As we said, it affects our -- mainly it affects our gross margin as well as if we are selling in North America we are paying a higher commission there. And what involves the second question?

Just if you could a sense of cash usage going forward or cash burn going forward.

We don't give guidance for the sales and the -- (indiscernible) as part of the sales level. We can't provide this information.

Okay. Maybe another way to touch on it -- this is my final question -- could you give me a sense of the size of the revenue "miss" in North America this past quarter or how much more you're expecting?

We didn't give any expectation, but I would say that it would put us ahead of the last quarter and I can't say really any specific forecast.

Okay, thank you very much.

(OPERATOR INSTRUCTIONS) We have no one else queuing up for questions at this time. Please continue.

Thank you everybody and see you next quarter. Thank you.

Thank you. Ladies and gentlemen, this conference will be available for replay starting at 10:45 a.m. Eastern Time today and running through Monday, July 26th at midnight. You may access the AT&T Executive Playback service at any time by dialing 1-800-475-6701 and entering the access code 738507. International participants dial 320-365-3844. Those numbers once again are 1-800-475-6701 and 320-365-3844 with an access code of 738507. That concludes our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. And you may now disconnect.