Radcom Ltd (RDCM) 2004 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Radcom third quarter earnings 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.

As a reminder, this conference is being recorded. I'd now like to the conference over to our host Miss Noga (ph) Fisher. Please go ahead ma'am. Sales rep.

))Noga Fisher: Thank you, David, and hello everyone. With me today are Radcom's CEO, Arnon Toussia-Cohen and its CFO, David Zigdon.

By now we assume 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 (indiscernible).

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 effects 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'd like to turn the call over to Arnon. Go ahead, Noni.

))Arnon Toussia-Cohen: Thank you Noga. And thank you all for joining us. The third quarter was a break through for us, with the highest revenues since 2002 and progress on ultra (indiscernible) fronts. These encouraging results reflect growing sales of both the cella (ph) performer and the Omni-Q voice quality management solution including important sales to top tier customers.

Europe continues to be our strongest region. In North America, we are working on a number of opportunities that we believe will make a significant contribution in the future.

These results confirm the strategy that we have been following. The development of comprehensive troubleshooting and monitoring solutions for complex 3G and voice over IP networks.

We embarked on this strategy with confidence that 3G and voice over IP will become mainstream technologies and that new types of monitoring solutions would become necessary to help develop, deploy, and manage them since the market moved to large scale employment.

This is exactly what is happening. 3G and voice over IP deployments are now getting bigger. We are seeing rising demands for our unique solution from both vendors and operators. They lead us at each stage of the network lifecycle. During developments to improve time to market and product quality, before deployment for pre-deployment qualification, during installation for network optimization and troubleshooting, and then through ongoing monitoring and troubleshooting of (indiscernible) network.

They view our solutions as cost-effective investments that pay for themselves quickly in terms of reduced time to market and installation time, lower maintenance costs, and higher service quality.

Each of our comprehensive cellular monitoring solutions have relatively high selling prices, averaging about $300,000 compared to just $80,000 or so for a single cellular performer on (indiscernible).

A higher price tag, these sales take longer to close usually six months or more. However, each agreement paves the way to stream of new revenue.

First the deal itself then repeat orders and cross sales to other departments in the same company. Each sale also serves as a reference that brings us other new customers. We have a limitations schedule that stretches across several quarters. Each large sale also contributes to our visibility. The sales contract the pipeline give us better visibility into the fourth quarter and (indiscernible) the return to profitability in the near future.

I'd like to spend just a few minutes going over the important deals list we closed during the quarter. Sales of the cellular performer continue to rise, accounting for about half of our total revenue and for the quarter. We will soon be announcing a major sale of the cellular expert monitoring system to top tier cellular in operator in Europe.

This sale will be recognized over several quarters.

During the last few months, we closed number of Omni-Q deals, two of which to two top tier customers, Cisco and British Telecom group.

Cisco is using Omni-Q to monitor their performance of VOIP networks at customer sites. British Telecom is using it to monitor our voice quality in its 21st century pilot network.

This voice over IP is at the very beginning of production cycle. We believe there is a lot of room for for growth in Omni-Q demand.

I would like to stop here to let David go through the financial results then I will come back to sum up and answer your questions. David.

Thank you, Noni, and hello, everyone. If you have the financial statement in front of you ,we will review just the highlights.

Revenue for the quarter was 4.2 million, as Noni said, with our highest revenue in two years. Up 33 percent compared to the last year and 25 percent compared to the second quarter of 2004.

On a geographical basis, 60 percent of our sales came from Europe, 19 percent from North America, and 13 percent, that is 13 percent from Asia-Pacific. To improve our sales in North America, we are investing in the region, and expect to see progress in the quarters ahead.

Growth margin for the quarter was 68.9 percent higher than the previous quarter and ahead of our target of 68 percent. In general, the gross margin changes according to the geographical mix and direct products sold.

Our operating expenses remained steady, compared to the third quarter of 2003. Despite the substantial rise in sales and despite (indiscernible) is our grant from our office of the chief scientist is down by 20 percent.

In the future, we expect several marketing to go up as we proceed in our plans to prove our sales in North America and the Far East.

With rising sales and steady expenses, our net losses for the quarter is down to $184,000 or 1 cent per share. This is our lowest net loss since the year 2000.

Turning to the balance sheet. Our cash balance was approximately 9 million at the end of the quarter. Our cash balance for the quarter was about $700,000 reflecting the net loss from the previous quarter together with growing investments in inventory to support the new level of sales.

Going forward, our growing sales pipeline gives us more visibility than we had in the past, giving us confidence that our sales will continue to go up. Given the larger deal size, the exact revenue for any one quarter will depend upon timing in each deal. However, it's a breakeven point of approximately 4.5 million in revenues per quarter. We are well on the way to be re-back (ph)that possibility.

We're confident that we will achieve profitability in the near future. Back to you, Noni.

Thank you, David. So that's up for the quarter. In summary, we are pleased with our success in penetrating top tier customers. We have higher sales of the (indiscernible) performer, (indiscernible) express and Omni-Q. Our revenues are rising and we have a higher average deal size.

We're confident that our investment in North America will build the region into another engine for our profitability.

We have an exciting pipeline of sales opportunity. We project a return to profitability in the near future. Overall we are expecting developments in the market and working to take advantage of the opportunities ahead.

Thank you for your continued support and for participating in this conference call. With that, we would be happy to answer your questions. Operator.

(OPERATOR INSTRUCTIONS) Victor Halpert from Halpert Capital Funds. Please go ahead.

Good results, relative to the past. And, can you explain a little bit more about the major (indiscernible) we are talking about in the beginning?

Could you repeat the question?

Can you explain more about the -- you were mentioning that you were expecting to receive a major contract one of the largest in North America Telcos.

Not in North America, but European one. I'm going to do a lot of details and when we announce it, we will be able to give more details. We're trying now to get permission to get as much details as we can on the project. But this is one of the major three G service providers in Europe that has made the decision and gave us the orders for implementing, monitoring, and troubleshooting systems in this network. This is quite a major order and it will be implemented over a few quarters; and we didn't yet put any of -- it's not included in sales of the third quarter. But we believe that it will give us better visibility into the future over the next quarters.

Can you give us an idea on the size of this contract?

We prefer to wait until we can give more details in PR that we release.

(OPERATOR INSTRUCTIONS) At this point, we have no one queuing up for questions. Please continue.

Thank you very much and talk to you again at the end of next quarter. Bye.

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