Radcom Ltd (RDCM) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd. fourth-quarter and year-end 2011 results conference call. All participants are at present in 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 January 26, 2012. I will now hand over the call to Ms. Noga Fisher. Ms. Fisher would you like to begin?

Yes, thank you, Nessia, and thank you all for joining us. With me today are RADCOM's CEO, David Ripstein, and CFO, Gilad Yehudai. 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 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. The Company does not undertake to update forward-looking statements.

In this conference call, management will be referring to certain non-GAAP financial measures, which are provided to enhance the user's overall understanding of the Company's financial performance. By excluding certain non-cash charges, non-GAAP results provide impact 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 the quarter's earnings release.

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. The fourth quarter was a very strong finish to another good year for RADCOM, a year of growing demand, accelerating sales momentum and strategic investment.

Our revenues for the quarter were $7 million, double the level in the third quarter, and up 31% year-over-year. These results confirm that the shortfall in the third quarter was a one-time event and that we are back on our growth track.

For the year, our revenues were $22 million. This is almost double the level just two years ago in 2009. We are very pleased to have ended the year with new record gross margin and annual bookings. And we started 2012 with a record year-end backlog. This improves our visibility for both top-line and bottom-line growth as we look forward.

Our success has been driven by one of the strongest trends in telecom today, the phenomenal growth of smartphones, tablets and other always-connected devices. This is causing an explosion in data traffic and dragging down the quality of telecom services. This is a big problem for a service provider. Every time a customer gets frustrated with their slow network, he may respond by moving very easily to a different operator. This affects operators where it hurts, in the revenues and profits.

Also, one of the main ways that they can differentiate themselves from their competitor is by offering a superior customer experience, especially to strategic customers. So they are looking for service assurance solutions, and this is leading them to RADCOM.

RADCOM's solutions have the reputation of being the best on the market for solving these problems. We are high-end, which means several things. First, our solutions are the most comprehensive. We can monitor any type of network or service, including 4G LTE and voice-over IP, voice and data, end to end, from a single platform. We pinpoint the source of the trouble and then show the service provider how to fix it. This helps keep networks up, running and performing well despite the heavy traffic.

In addition, we are differentiated by a clear performance advantage. With our GEARX8 technology, we perform well in high traffic, multiservice environments, and this is a huge competitive advantage.

Our value is not only for troubleshooting. Lately, we are seeing that our customers are also using the information provided by our systems to improve their marketing campaigns and their ongoing business operations. That is why we are consistently among the top vendors in the tenders that we enter.

The clear advantage and differentiation of our products has enabled us to win consistently larger deals, building our backlog significantly. With each new win, our reputation and our momentum improves.

Once we saw that our booking and backlog were moving to a new level, we decided that it was time to scale up our sales, marketing and customer support capabilities. Our long-term success depends on our ability to reach our customers and to keep them satisfied. When a company is growing fast, this is a challenge. Therefore, during the year, we invested to develop our offices in Singapore, India and Brazil. Now, the process is mostly finished, so expect our operational expenses to stay at a similar level in the year ahead to what they were in the fourth quarter.

We are pleased with the quality and the spirit of the organization that we have built, and believe it is the right size to address opportunities. So we are now positioned to achieve our growth targets. With a stable level of expenses, a growing proportion of each new sales will contribute to the bottom line, helping us achieve higher profits in 2012.

In summary, with a talented and motivated team, growing market and leading products, we continue to build momentum and believe we are positioned for strong growth. I will stop here to let Gilad review the highlights of the financials. Gilad, please.

Thank you, David, and hello, everyone. Since you have the press release before you, I will just go over the highlights. To give you a better understanding of our results, I will be referring only to non-GAAP results, which exclude share-based compensation and warrants for all periods.

Revenues for the fourth quarter were $7 million. This is up 31% compared with Q4 2010, and double the level in Q3 2011. This confirms that the third-quarter shortfall was a one-time event, and we believe we are back on our growth track.

For the year, revenues were $22 million, up 15% to 2010, and almost double their level in 2009. We ended the year with near record annual bookings and a record year-end backlog. This demonstrates our positive momentum and gives us visibility for growth in 2012.

Gross margin for the quarter increased to 69.9% from 64.6% in Q4 2010. This, combined with the higher revenues, increased our gross profit by 41% year-over-year. For 2011, we finished the year off with a gross margin of 69.6%, which is very strong for our type of business.

The significant investments we made throughout 2011 are reflected in our operating expenses. Now that most of the scale-up is completed, we expect our expenses to remain at similar levels for the coming quarters, and for a greater percentage of each new sale to increase our profits.

Despite these increased expenses, we achieved a 22% year-over-year increase in non-GAAP operating income for the quarter, reaching $564,000. This gave us a non-GAAP operating margin of just over 8%, which is excellent compared to previous quarter.

Our net income for the quarter was affected by unusually high financial expenses. This was related to fluctuations in the exchange rate of the Brazilian real over the US dollar. As a result, our non-GAAP net income for the quarter was $268,000, or $0.04 per share, compared with $500,000, or $0.08 per share, in the fourth quarter of 2010. With increasing sales and stable expenses, we expect the profit to increase in 2012.

Turning to the balance sheet, you can see that our inventory as of the end of the year was $6.6 million. This is an increase from last year due to the high level of equipment that has been delivered to customers for projects in process that we have not yet recognized as revenues.

Our accounts receivables are down to $5.4 million, and our DSOs are down to 70 days. This reflects the increase in our customer satisfaction and the efficiency of our deliveries. Back to you, David.

Thank you, Gilad. Before taking your questions, I would like to thank you all for your ongoing support. 2011 was a good year for RADCOM, and we believe that 2012 will be much better year for strong top-line and bottom-line growth. We are excited about the future and look forward to reporting our progress in the quarters ahead.

With that, we will be happy to take your questions. Operator.

(Operator Instructions) There are no questions at this time. Mr. Ripstein, would you like to make a concluding statement?

Yes. Thank you, Noga. Thank you, Gilad, and special thanks to all of you for your support and for participating in this conference call. Thank you.

Thank you. This concludes the RADCOM Ltd. fourth-quarter and year-end 2011 results conference call. Thank you for your participation. You may go ahead and disconnect.