Radcom Ltd (RDCM) 2008 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd. fourth-quarter 2008 results conference call. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded February 2, 2009.

I would like to now hand over the call to Ms. Noga Fisher. Ms. Fisher, would you like to begin?

Thank you very much, and thank you all for joining us. With me today are RADCOM's CEO, David Ripstein, and CFO, Jonathan Burgin.

By now, we assume you have seen the earnings press release, which was issued earlier today. 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 in the conference call involve a number of risks and uncertainties, included 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.

In this conference call, management will be referring to certain non-GAAP financial measures, which are provided to enhance the users' overall understanding of the Company's financial performance. By excluding certain noncash charges, non-GAAP results provide information that is useful in assessing RADCOM's core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period.

The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures which are included in a quarter's earnings release. The Company does not undertake to update forward-looking statements.

Now I would like to turn the call over to David. Go ahead, please.

Thank you, Noga, and thank you all for joining us today. As we promised throughout the past year, and despite many challenges along the way, we are pleased to have delivered significant progress in 2008.

From an accounting point of view, our revenues for the year increased by 15% and our net loss went down by 33%. From a business point of view, our progress has been even stronger. Our booking increased by 36% year over year. We have seen a clear movement from small to medium and large-sized deals. And we continue to view our target growth engine as offering strong potential for the future.

For the fourth quarter, our results as presented in our financial tables were disappointing. Because of accounting policy, we were not able to include significant revenues that will be recorded in the future. But our book-to-bill ratio was very strong, above 1.5 for the quarter. In addition, we have reduced our expenses significantly, enabling us to reduce our breakeven point going forward. Our focus on customer satisfaction has improved our cash collections, helping us minimize our cash loss for the quarter, despite the net loss.

These are all indications that our strategy is working and that we are on a steady path as we move into 2009. We are being affected by the economic environment. In particular, we are seeing slow sales cycles, project delays and freezes. This makes it very difficult to focus and forces us to be extremely cautious. Therefore, we have reduced our operational expenses and we will continue to be extremely careful with every penny spent.

Within the framework, we continue to follow the same strategy basically as we have been following for the past years. As you may remember, our strategy is built on several specific growth engines -- emerging markets, IMS for developed markets, and sales through new partners. In another dimension, we have been investing to build the RADCOM brand as the number one in our industry for customer satisfaction.

Emerging markets were our strongest revenue generator during the year, led by Latin America. Based on our current pipeline, we believe that Asia-Pacific will also be making a strong contribution to our sales in 2009. [In Palau], we continue working on opportunities across all emerging regions, India, Africa and Eastern Europe, as well as Latin America and Asia-Pacific, and continue investigating new sales channels to reach them.

In the developed markets, we continue to see IMS as a technology for which we have a unique solution that differentiates us from our competitors. So far, we have succeeded in translating that into initial success. Although the IMS market is developing more slowly than originally expected, we do expect it to take hold over the next few years and continue to view it as an important growth driver for our business.

In addition, in the wireless market, we see that the usage of mobile data services is growing in the developed markets -- that is, in the US and Europe. To address the need, we will soon be releasing a unique new solution. As to our sales in the US, they're still not in the level that we would like, but we did see an increase during the fourth quarter. We view this as an encouraging achievement, given the very difficult market condition throughout North America.

Regarding our brand-building, we are very pleased with the result of our efforts to become identified by the industry as a number one in personal satisfaction. In a difficult economic environment, customer satisfaction is even more important and is the key to our ability to achieve a high level of repeat sales.

As to product development, given that we expect competition to be even more aggressive in 2009, we continue to invest in the maintaining of our competitive edge, both in terms of system performance and new applications. This will help us win new accounts and improve our offering to existing customers.

In summary, despite difficult markets, we have delivered a solid year of growth and progress. The changes that we have made in our organization have made it more efficient, enabling us to do more with less resources. At the same time, we had increased the average size of our deals and are entering 2009 with a meaningful backlog. We have achieved initial success in the IMS market while improving customer satisfaction and enhancing our products.

Our success would not have been possible without the dedicated effort, talent and goodwill of our fantastic team. I would like to thank each and every one of them for their efforts. We're making progress and our goals are within reach.

I will stop here to let Jonathan review the highlights of the financials. Then I will come back to take your questions. Jonathan, please.

Thanks, David. Revenues for the year were $15.2 million, an increase of 13% compared to 2007. For the fourth quarter, revenues were $2.6 million, which is down compared to the parallel period of 2007.

As David mentioned earlier, during 2008, our sales moved from smaller deals to medium and large deals. As these deals are more complex, the accounting recognition cycle is longer, which is the reason that our sales reported for the period were low despite the relatively high bookings achieved during the fourth quarter. Looking forward to 2009, we expect this trend to continue.

About 55% of our sales for the fourth quarter were from wireless operators and about 43% from wireline operators. The remaining 2% were from [labs]. For the full year, 63% were from wireless operators, 52% from wireline operators, and the remaining 5% from labs. The majority of our sales were from repeat customers. This continues to demonstrate the importance of our emphasis on customer satisfaction.

Geographically, Europe, including Eastern Europe, accounted for 37% of our annual sales. 30% of our sales were from Latin America, 18% from the Far East, and North America accounted for the remaining 16%.

Gross margin for the quarter was 60%. This is similar to our gross margin from the third quarter, despite the lower level of sales, a fact that is attributable to our success in reducing variable costs.

Operating expenses for the year were $14.7 million, down 13% compared to 2007. This reflects a steady reduction in our expenses from quarter to quarter, reaching $3.3 million this year compared to $3.7 million in the fourth quarter of 2006. During the past several months, our efforts in this direction have been helped by the strengthening of the dollar as compared to the shekel, which decreased our shekel-based expenses as expressed in dollar terms.

Our expenses for the fourth quarter include a provision of $460,000 for doubtful debts. This reflects the fact that the economic situation has increased the risk of doing business in certain regions.

We remain focused on minimizing costs in the upcoming quarters and expect the level to decrease further in 2009. Given our current level of expenses and the current exchange rate, our breaking point going forward in 2009 is expected to go down to about $4.5 million per quarter, depending on the exact mix of sales.

On a pro forma basis, excluding share-based compensation, net loss for the year was $5.3 million or $1.05 per share, down 33% from 2007. For the quarter, the net loss was $1.9 million or $0.37 per share.

Turning to the balance sheet, you can see that cash and bank deposits as of the end of the year were $3.5 million. This was down by only $300,000 compared to the end of the third quarter, despite the larger net loss. This reflects the success of our collection efforts, which in turn reflects the increase in overall customer satisfaction.

We succeeded in reducing our inventory by $700,000 during the year, from $3.5 million at the end of 2007 to $2.8 million of the end of the fourth quarter. This is higher than its level at the end of the third quarter, reflecting the purchases that we made for expected sales that did not materialize during the quarter.

Given the unstable economic environment, we do not feel able to offer guidance into 2009. For the long term, we believe that we are well positioned to take advantage of significant growth engines. We remain focused on bringing the Company back to profitability as soon as possible and on achieving long-term, sustainable growth.

Back to you, David.

Thank you, Jonathan. Before taking your questions, I'd like to thank you all, our business partners, shareholders and employees, for your ongoing support. With that, we'd be happy to take your questions. Operator?

(Operator Instructions). There are no questions at this time. Before I ask Mr. Ripstein to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin two hours after the conference. In the US, please call 1-888-269-0005. In Israel, please call 03-925-5928. Internationally, please call 972-3-925-5928. Mr. Ripstein, would you like to make your concluding statement?

Thank you, Noga; thank you, Jonathan; and special thanks to all of you for participating in this conference call.

Thank you. This concludes the RADCOM Ltd. fourth-quarter 2008 results conference call. Thank you for your participation. You may go ahead and disconnect.