Radcom Ltd (RDCM) 2005 Q1 法說會逐字稿

Good morning, my name is Mandy and I will be conference facilitator today. At this time, I would like to welcome everyone to the Radcom 2005 First Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. Thank you, Ms. Noga , you may begin your conference.

Thank you, Mandy and good morning everyone. With me today are Radcom's CEO, Arnon Toussia-Cohen; and its CFO, David Zigdon. By now, we assume you've 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 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 condition, 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 would like the call to turn over to Arnon. Go ahead please.

Thank you, Noga and thank you all for joining us. We are proud to report another strong quarter for Radcom. We had on track performance across the board. We returned to solid profitability with 43% year-over-year revenue growth, continued high gross margins, and positive cash flow for the quarter. This shows the success of our flagship product in all our target markets and the contribution or improved performance in North America.

During the next few minutes, I would like to give you some insight into the highlights of the quarter and the trends that are most relevant to our progress. Then I will turn the call over to David Zigdon, our CFO to go over the financial results and open the line for your questions. In general, two trends are driving the business. 3G, which is increasing the need for cellular performer and the emerge of the IT based triple-play services, which is increasing demand for the Omni-Q. I will speak about each of these in turns beginning with 3G.

2004 was a big year for 3G. After beginning in Japan and Korea, the pace of 3G deployments began to pick up through out year and major operators in the US started moving forward aggressively. As a result, 3G licenses are finally being used, 3G infrastructure, in shipping and a wealth of new applications are on the horizon. However, it is proving to be challenging to deploy 3G networks and services than expected. As a result, there is a strong need for comprehensive testing solutions, especially the advanced solutions that we provide.

Our solutions address testing needs through out the value chain. Equipment vendors need the cellular performer to speed up the development of 3G products and to guarantee their quality. Service providers need a cellular performer at the pre-deployment stage to test new equipment and after deployment to monitor and troubleshoot their services. The fact that it is the right tool for the job continues to be demonstrated by the strong cellular performer demand from a broad cross section of the equipment manufacturers and service providers.

During the first quarter, we recorded follow-on sales to existing customers and added several new customers including Hutchison 3G Australia. In the US, we see rising demand in with the increase in the 3G deployments. The other driver of our sales is the increasing incumbent deployment of voice over IP and triple play services, creating the need for better testing and monitoring solutions to ensure customer satisfaction.

Our Omni-Q Service Quality Management System has proven to be the tool we need and we continue to build its capability. It provides a complete view of the service quality of the entire network at a glance together with in-depth analysis of the voice and signaling quality of emulated strings across strategic network segments. As a result, Omni-Q demand continues to rise in all our target markets.

The Chinese market is an important opportunity for us. And during the quarter, we continue to build our capability there. From sales and marketing side we have appointed Mr. John , a veteran with strong experience in both Chinese and international testing and monitoring equipment industry to be the general manager of our China office. From the technology side, we have developed new solutions for TD-SCDMA, The 3G Cellular technology, this was developed specially for China and have established cooperation with several major local equipment manufacturers.

We believe the 3G will be gaining momentum in China towards the end of 2005 and expect it to become an important new driver for revenue. We continue to invest in R&D taking advantage of the flexibility of our product to support evolving triple play needs of our customers, enhancing them with the ability to analyze video as well as data voice services of a wireless and wireline network.

During the quarter we announced our Multimedia SIP Services Test Solution, an add-on to our SIPSim high volume call and signaling generator. It is designed to help triple play players, converge, reach IP telephony voice data and multi media applications into a single carrier grade IP network. We are working on additional products in the triple play area to maintain our technology leadership and support our customers. I would like to stop here and let David go through the financial results. Then I will come back to sum up and answer your questions. David?

Thank you Arnoney and hello every one. Since you have the financial statement in front of you, I will review just the highlights. Revenue for the quarter was $5 million, up 43% compared to the first quarter of last year. In contrast to our normal seasonality we are pleased that sales were down just one percent sequentially compared to the fourth quarter of 2004. On a geographical basis, the division of our sales for the quarter were about 40% from North America compared to 33% in the fourth quarter of 2004. This is in line with our plan to penetrate this important market. 33% were from Europe and 23% from Asia Pacific. By product, Performer sales were about $4 million, while sales of the Omni-Q and Prism were about $0.5 million each.

Gross margin for the quarter was 68% compared to 67% in the first quarter of 2004. We believe it would stay around 68% on average. With higher sales and moderate expenses we returned to a solid operating income and net income for the quarter. Operating income was $99,000 and net income was about $134,000 or $0.01 per share compared to the net loss of $576,000 or $0.05 per share for the first quarter of 2004.

Turning to the balance sheet, cash and marketable securities were approximately $10 million at the end of the quarter but up by about $1.4 million from the end of the fourth quarter of 2004, approximately half of this was positive cash flow from operations with the other half from the exercise of and options. Turning to receivables, were down in the quarter. In general, sales receivables and DSOs are impacted primarily by the timing of shipments in the quarter and collection performance. The increasing loans and short-term deferred revenues were mostly due to the increase in the number of post sale customer support warranties beyond the initial period.

With the full pipeline of sales, we expect revenue for the second quarter of 2005 to range between $4.8 million to $5.2 million. At this level, year-over-year revenue growth will remain well about 40% and will allow us to post another quarter of solid operating and net profit. Back to you Arnoney.

Thank you David. So, that's it for the quarter. In summary, we are proud to have returned the Company to solid profitability and positive cash flow and are making progress according to plan. We are succeeding in our efforts to penetrate top tier customers in all target markets including North America and are building our capabilities in China. Our focused areas are among the industry's fast growing segments and we are maintaining our leadership through investment in multimedia and triple play area. Overall, we feel well positioned and confident as we look into the future. Thank you for your continued support and for participating in the conference call. With that we would be happy to take your questions. Operator?

Yes sir. [OPERATOR INSTRUCTIONS] Sir, at this time there are no questions.

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

Thank you for participating in today's Radcom 2005 first quarter earnings release conference call. You may now disconnect.