Radcom : Q3 2022 – Management Remarks and Q&A – Transcript

RADCOM Ltd.

Conference Call

November 10, 2022

©RADCOM Ltd., 2022

Operator:	Ladies and gentlemen, thank you for standing by. Welcome to the Radcom Ltd.
	Results Conference Call for the Third Quarter of 2022. All participants are
	present in a listen-only mode. Following Management's formal presentation,
	instructions for the question-and-answer session will be given. For operator
	assistance during the conference, please press star-zero. As a reminder, this
	conference is being recorded, and will be available for a replay on the company's
	website at www.radcom.com later today. On the call are Eyal Harari, Radcom's
	CEO, and Hadar Rahav, Radcom's CFO. Please note that Management has
	prepared a presentation for your reference that will be used during the call. If
	you still need to download it yet, you may do so through the link in the Investors
	section of Radcom's website at www.radcom.com/investor-relations. Before we
	begin, I would like to review the Safe Harbor provision. Forward-looking
	statements in the conference call involve several risks and uncertainties,
	including but not limited to the company's statements about its full year 2022
	revenue guidance, visibility expected growth in 2023 and beyond, expectations
	regarding the enterprise market for telecom operators, including trends in the
	market and effect of general economic conditions, continued investment in and
	benefits from research and development, its expectation to gain further interest
	from operators and play an important role in facilitating the transition to 5G, its
	expectations about its pipeline and momentum, further demand for its products
	and growth, levels of expenses and keeping them below revenues, the potential
	for additional multiyear contracts, engagements and expansion of opportunities,
	the company's expectations with respect to its relationships with Rakuten, and
	potential grants from the Israeli Innovation Authority. The company does not
	undertake to update forward-looking statements. The full Safe Harbor
	provisions, including risks that could cause actual results to differ from these
	forward-looking statements are outlined in the presentation and the company's
	SEC filing. In this conference call, Management will be referring to certain non-
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GAAP financial measures, which are provided to enhance the user's overall understanding of the company's financial performance. By excluding certain non-cashstock-based compensation expenses, non-GAAP results provide information helpful in assessing Radcom's core operating performance, and evaluating and comparing the results of operations consistently 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, included in the quarter's earnings release available on our website. Now I would like to turn over the call to Eyal. Please go ahead.

Eyal Harari: Thanks, Operator. Good morning, everyone, and thank you for joining us for our third quarter 2022 earnings call. We achieved record revenues in the third quarter, reaching 12 million dollars, representing the thirteenth consecutive quarter of year-over-year growth, double digit growth of 17% compared to the third quarter of 2021. At the same time, we manage our expenses while investing in the business strategically and efficiently, resulting in a non-GAAP net income for the quarter of 1 million … [glitch 03:57] We are proud of our best-in-class cloud assurance portfolio that enables operator to manage their networks with advanced AI-driven analytics, that provides automated actionable insight to save engineering manual labor, and help quickly resolve network degradations to assure great customer experience. We have built a resilient software-centric business, with strong business model, that delivers high gross margin in over 70% recurring revenue from the beginning of the year, while offering our customers forecastable long-term pricing structure and great value. Our multiyear contract wins have improved a strong backlog, driving consistent result and giving us good visibility into 2023 and beyond. Turning to the

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pipeline. We continue to see strong demand for our advanced cloud assurance technology, reflected in our healthy pipeline of opportunities as we manage multiple customer engagements, at different stages of the sales cycle, with healthy mix of new logos and the current installed base, with most opportunities focused on 5G. We see good momentum for the 5G market, and believe it will be a catalyst for growth as the market ramps up, creating more sales engagements that can lead to additional multiyear contracts and increase market share. Recently, we have been hearing concerns from technology companies regarding the macro economy's negative impact on the market. We believe the telecom market is robust, as we saw during the more difficult periods of the COVID pandemic. We continue to monitor the situation closely, and will adapt as necessary. We believe our position as a best-in-class assurance provider for cloud native 5G networks, and our cloud expertise and knowledge, will continue to drive positive returns. We are glad to report that the demand looks strong, and we have a solid pipeline of opportunities that has the potential to increase our market share. With the positive market trends and our healthy pipeline, we are confident in the growth outlook of our business. As a software focused company, we are very agile and can handle future growth prospects scale and meet more demand while continuing to deliver on our current customer commitments. We are happy that the new customers are enjoying our Radcom ACE software, as we deploy it in their networks, and operator teams utilize its capabilities to smartly monitor service quality. We are progressing positively and we continue integrating our software into the cloud environment. As a 5G and cloud assurance leader, we are happy to be engaged with the teams, work closely with them, and offer our expertise to help them as they roll out 5G. With our existing teams, our software can scale seamlessly to many customers, which drives our financial performance and operational efficiencies, while at the same time delivering on the customer's expectations and requirements. We are receiving

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positive feedback, and are proud of our employees, who are dedicated and committed to delivering on our customers' success, as we can continue to deploy our solutions, and deliver new cutting-edge software releases. Legacy assurance solutions are limited and not flexible. While competitor takes weeks or months to deploy, we implement our cloud based solutions in days or hours. Our software is a critical source of truth for engineers who needs to make quick data- driven decisions affecting billions of subscribers across their entire network stack, and all service offering. We can adapt quickly and deliver features to customers. As we move forward and deploy our software to new customers, like DISH, we see the value of our analytics through all stages of deployment, to assure a smooth network rollout and deliver great customer experiences. Turning to Rakuten in Japan, and Rakuten Symphony. During the third quarter, we announced the renewal of our initial contract with Rakuten Mobile. With this agreement, we continue our successful partnership with this innovative operator, providing advanced cloud native assurance solutions for their network in Japan. At the beginning of the quarter, we announced that Rakuten Symphony made Radcom ACE available in the Symworld marketplace. This integration of Radcom ACE into Rakuten Symphony streamlines network operations and help teams understand what is happening in their network and where there are customers-affecting issues. It is also provides built-in workflows and unified data analytics to enable more operators to rapidly deploy and roll out 5G with the Symphony platform. Being part of this cloud opens significant opportunities for Radcom in the future. Turning to our product innovation. We continue our commitment to deliver best-in-class solutions as we enhance our software with more automation and intelligence AI-based capabilities to bring value and expand use cases for our customers as 5G technologies move forward. I am excited to announce that we recently received industry recognition as two of our products were named finalists in the Telecom Focus Award programs that

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