Earnings call transcript: Radcom Q4 2024 beats expectations with record revenue

Radcom Ltd (NASDAQ:RDCM) reported a robust financial performance for the fourth quarter of 2024, surpassing analyst expectations with an earnings per share (EPS) of $0.23 against a forecast of $0.20. The company’s revenue reached $16.26 million, exceeding the anticipated $15.41 million. According to InvestingPro data, RDCM maintains strong financial health with a Financial Health Score of 2.88 (GOOD), supported by a healthy current ratio of 4.2. Despite these positive results, Radcom’s stock experienced a pre-market decline of 4.28%, closing at $14.09. The stock rebounded in the premarket session, rising 3.34% to $13.6, though current analysis suggests the stock is slightly overvalued at these levels.

Key Takeaways

• Radcom reported a 16.1% year-over-year revenue growth for Q4 2024.
• EPS of $0.23 exceeded the forecast, continuing a trend of strong earnings performance.
• The company launched new AI-driven 5G assurance solutions.
• Strategic partnerships with ServiceNow (NYSE:NOW) and AWS strengthened market position.
• Stock price showed volatility, with mixed investor sentiment post-earnings.

Company Performance

Radcom’s Q4 2024 results underscore its sustained growth trajectory, with a 16.1% year-over-year increase in revenue. The company capitalized on the telecom industry’s shift towards standalone 5G networks, leveraging its innovative AI-driven solutions. InvestingPro data reveals impressive revenue growth of 18.23% over the last twelve months, with analysts expecting continued profitability this year. This performance positions Radcom favorably against competitors in the network assurance market. For deeper insights into RDCM’s growth metrics and 10+ additional ProTips, consider exploring the comprehensive Pro Research Report available on InvestingPro.

Financial Highlights

• Revenue: $16.3 million, a 16.1% increase year-over-year.
• Earnings per share: $0.23, up from the forecast of $0.20.
• Gross Margin: 75% for 2024.
• Net Income: $13.5 million, representing 22% of revenue.
• Cash and Short-Term Deposits: $94.7 million.

Earnings vs. Forecast

Radcom’s Q4 2024 EPS of $0.23 beat the forecasted $0.20 by 15%. The revenue of $16.26 million also exceeded expectations by 5%, reflecting the company’s strong market execution and strategic initiatives.

Market Reaction

Despite the earnings beat, Radcom’s stock fell by 4.28% pre-market before recovering by 3.34% in the premarket session. This volatility may reflect broader market conditions or investor profit-taking following strong performance.

Outlook & Guidance

Looking ahead, Radcom projects a 12-15% revenue growth in 2025, with anticipated revenue of $69.2 million. The company plans to increase R&D investments and expand its mid-tier market offerings, signaling confidence in its growth strategy.

Executive Commentary

CEO Benny Epstein highlighted the company’s record-breaking year, stating, "2024 was a record-breaking year for Radcom, marking the continuation of five years of strong growth momentum." CFO Hadarah Haav emphasized financial strength, noting, "We generated a positive cash flow of $12.5 million, ending 2024 with our highest cash balance."

Risks and Challenges

• Market volatility could impact stock performance.
• Increased R&D and marketing expenses may pressure short-term margins.
• Potential supply chain disruptions could affect product delivery.
• Competition in the AI-driven network solutions market remains intense.
• Macroeconomic factors may influence telecom industry investment.

Q&A

During the earnings call, analysts inquired about Radcom’s Nordic market expansion and potential mergers and acquisitions. The company emphasized its focus on enhancing customer experience through AI and maintaining operating leverage while investing in innovation.

Full transcript - Radcom Ltd (RDCM) Q4 2024:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Radcom Limited Results Conference Call for the Fourth Quarter of twenty twenty four. All participants are present in a listen only mode. Following management’s formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded and will be available for replay on the company’s website at www.radcom.com later today.

On the call are Benny Epstein, Radcom’s CEO and Hadarah Haav, Radcom’s CFO. Please note that management has prepared a presentation for your reference that will be used during the call. If you have not downloaded it yet, you may do so through the link in the Investors section of Radcom’s website at www.radcom.com/investorrelations. Before we begin, I would like to review the Safe Harbor provision. This conference call will contain forward looking statements.

Forward looking statements in the conference call involve several risks and uncertainties, including but not limited to to the company’s statements about its innovation, expanding its business, leading the company into a new phase of growth and success, its expectation to drive sustainable profitable growth, while enhancing shareholder value, its expectations regarding collaborations with key strategic operators, exploiting opportunities, including in offering its solution to mid tier operators, its expectation to introduce new product offering to a broader audience and the productization of Radcom Ace backlog, its investment in R and D to enhance its leadership in five gs assurance and network intelligence, the expected benefits of its AI driven assurance solutions, the expected synergies from the continual acquisition, the potential in its collaboration with ServiceNow to drive additional business, its expectations regarding the dollar shekel ratio, its expectations with respect to research and development and sales and marketing expenses, grants from the Israel Innovation Authority and its full year 2025 revenue guidance and future growth and profitability, 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 today’s press release and the company’s SEC filings.

In this conference call, management will refer 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 stock based compensation expenses, financial income expenses, acquisition related expenses and amortization of intangible assets related to acquisitions, 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 the call over to Benny. Please go ahead.

Benny Epstein, CEO, Radcom Limited: Thank you, operator. Good morning, everyone, and welcome to Radcon’s fourth quarter and full year twenty twenty four earnings call. We appreciate you taking the time to join us today. I’m excited to lead Radcom, a company transforming the assurance market for five gs. Working closely with our talented team, I’m focused on driving innovation, expanding our business and leading the company into exciting new phase of growth and success.

Both organic initiatives and strategic expansion opportunities will fuel this journey. I believe that our strategy can drive sustainable and profitable Slide 07/2024 was a record breaking year for Radcom driven by exceptional team execution and remarkable achievements. We exceeded the midpoint of our full year revenue guidance marking our fifth consecutive year of growth while significantly enhancing profitability. Earnings per share surged by over 75% on a GAAP basis and we achieved the highest cash and short term deposit balances in the company’s history $94,700,000 all while remaining completely debt free. Our record breaking performance showcases the strength of our cloud and GenAI based assurance solution, which telecom operator need to enhance efficiency and provide exceptional customer experiences.

These achievements would not have been possible without our team’s outstanding execution and unwavering commitment to meeting our customer evolving needs. Thanks to their dedication, we closed 2024 stronger than ever reinforcing competitive position in the market. As shown on Slide eight, we announced earlier this year that we secured a new multi year contract with Nolis, the owner of TeleoDenimark. After extensive selection process involving numerous competitors, we replaced incumbent assurance vendor reinforcing our position as trusted partner for disruptive telcos. This will highlight the growing value of our intelligent assurance enhanced by Gen AI in improving telecom operators.

As a reminder, Nordli selected Radcom Ace to monitor customer experiences across its five gs and four gs networks. Our solution provides end to end network performance and quality. Turning to our installed base, we believe our collaborations with key strategic operators will continue to bear fruit as we introduce new cutting edge AI and GenAI based capabilities to support network management and improve customer satisfaction. As published and noted on Slide nine, in the Oricon customer satisfaction survey of mobile carriers, Rakuten Mobile again claimed to top spot for the second year. Also, Human Louth’s latest NYC audit report states that Boost Mobile has been recognized as the best most reliable network in New York City.

We’re happy that these customers continue to receive industry recognition and delighted that we can contribute to their success. With multi year contracts in place and ongoing development of innovative AI and automation driven capabilities, we believe our business remains strong. We look forward to drive even more success as we help our customers enhance operational efficiency and elevate customer experiences. With that, I’m thrilled to share that we recently received a certificate of appreciation from Rakuten Mobile for our contribution to enhancing their network quality. Turning to the telecom market, operators are increasingly deploying standalone five gs networks as they transition to more capable modern cloud networks.

These networks will support more automation leading to a greater efficiency and cost reductions. We remain laser focused on innovation, generative AI and automation consistently investing in research and development to enhance our leadership in five gs assurance and assist telecom operators as they transition to stand alone five gs. See Slide 10. As operators increasingly transition to stand alone five gs, we see significant potential in offering our intelligent assurance solution to mid tier operators. To seize this opportunity, we are productizing our industry leading five gs assurance solution, Radcom Ace into scalable flexible package designed to meet needs to operators of all sizes.

This approach will enable us to introduce new product offerings to a broader audience ranging from full scale deployments to mid tier implementation to limited scope lab environments. Lab environments. We will soon provide further updates on productization of Radcom Ace. Please turn to Slide 11. As our recent press release noted, we are collaborating with ServiceNow to drive additional business.

Our solution integrates with ServiceNow to automate service and complaint resolution for telecom operators. This collaboration leverage AI ops to drive network efficiencies and enhance customer satisfaction with combined service management and service assurance solutions. Radcom’s integration with ServiceNow is expected to help ServiceNow customers create best in class subscriber experiences while reducing network engineering time and effort. The seamless integration of Continuance core technology acquired in May 2023 has significantly enhanced our integration with ServiceNow by including state of the art radio analytics reinforcing our leadership in network intelligence. The synergies from this acquisition remain promising.

As a reminder, integrating continuous technology was pivotal in securing a 7 figure multi year deal in the third quarter of twenty twenty four with a leading North American operator for Radcom’s enhanced mobility experience analytics solution. Turning to Slide 12, I noted that AIOps is increasingly leveraged to drive network efficiencies and enhance customer satisfaction with telecom operators. AI ops integrates AI and analytics into standard network operations. However, before fully embracing AI, operators must ensure that they have the right databases and analytical frameworks. This is where Radcom comes in.

With years of experience in telecom industry, we analyze network data from the end user perspective, providing a strong data foundation for AI driven automation. Leveraging this foundation, we use AI to improve automation and service quality, providing more intelligent network operations, deeper customer insights and more efficient automation. Turning to Slide 13. In brief, we continue actively showcasing our offering to existing and potential customers at key industry events as part of our go to market efforts. We will also participate in the Mobile World Congress in Barcelona in early March.

We will showcase a demo with ServiceNow in Amazon (NASDAQ:AMZN) Web Services. We will present the integration of our innovation solution with ServiceNow leveraging AI ops to provide ticket validation and prioritizing the significantly reduced the time and effort network engineers spend investigating and resolving technical issues and complaints. We will also attend NVIDIA (NASDAQ:NVDA)’s GTC AI Conference in March, where we look forward to engaging direct with telecom operators and partners. This event present a valuable opportunity to foster new technology partnerships and drive sales growth. See Slide 14.

I’m thrilled to share that the company has received notable industry recognition. We were recently named the winner of the First Network Innovation Award for Best Network Test and Measurement Solution. This award celebrates our solutions innovative approach to collecting real time subscriber insights, utilizing advanced artificial intelligence and enhance operators’ understanding of the customer experience. It also significantly reduced environmental impact on improved efficiency of engineering teams. To summarize, see Slide 15.

20 20 four was a record breaking year for Radcom, marking the continuation of five years of strong growth momentum. Our robust sales marketing efforts highlight the increasing demand of our solutions. We remain focused on expanding our business which we will expect to achieve by acquiring profitable customers and operating it efficiently. With our strong backlog, Radcom is well positioned to achieve sixth consecutive year of revenue growth in 2025. We anticipate full year 2025 revenue growth of 12% to 15% with a midpoint of $69,200,000 representing a 13.5% increase compared to twenty twenty four.

Four. With that, I would like to turn the call over to Hadar Rahav, our CFO, who will discuss the financial results in detail.

Hadarah Haav, CFO, Radcom Limited: Thank you, Benny, and good morning, everyone. I will mainly focus on our non GAAP results during this call unless otherwise stated. A reconciliation of non GAAP to GAAP measures is included in today’s presentation in Slide three. Additionally, all comparisons are on a year over year basis unless otherwise noted. Now please turn to Slide 17 for our financial highlights.

We are pleased with how our team closed the year as we grow profitably. We concluded the fourth quarter of twenty twenty four with a record revenue of $16,300,000 up 16.1% year over year. Our gross margin for the fourth quarter of twenty twenty four was 75%. Please keep in mind that our gross margin may vary based on the revenue mix. Our gross R and D expenses for the fourth quarter of twenty twenty four were $4,300,000 up 8.9 year over year.

This reflects our focus on innovation and portfolio expansion. We received a grant of 100 and and $13,000 from the Israel Innovation Authority during the quarter compared to $190,000 in the same quarter last year. All innovation programs approved by the Israel Innovation Authority are nearing completion. In the first quarter, we received an additional grant of $100,000 However, beyond this period, there is no clear visibility regarding future grants. The company has submitted new proposals, which are still in the approval phase.

Our net O and D expenses for the fourth quarter of twenty twenty four were $4,100,000 an increase of $426,000 compared to the fourth quarter of twenty twenty three. We continue to actively promote our offerings to existing and prospective customers, which resulted in $4,100,000 in sales and marketing expenses for the fourth quarter of twenty twenty four and an increase of $776,000 from the fourth quarter of twenty twenty three. G and A expenses for the fourth quarter of twenty twenty four were $1,200,000 an increase of $191,000 from the fourth quarter of twenty twenty three. Operating income for the fourth quarter of twenty twenty four was $2,900,000 18 percent of revenue and an increase of $179,000 from the fourth quarter of twenty twenty three. Due to a lower interest rate, which reduced financial income and higher tax expenses resulting from the use of accumulated losses, net income for the fourth quarter of twenty twenty four remained steady at $3,800,000 unchanged from the same period in 2023.

On a GAAP basis, as shown on Slide 21, our net income for the fourth quarter of twenty twenty four was $2,200,000 a decrease of $344,000 compared to the fourth quarter of twenty twenty three. In the end of the fourth quarter of twenty twenty four, our headcount was three zero seven. Now let’s turn to Slide ’22 with the full year results. Consistent with our full year results. Consistent with our full year guidance, we ended 2024 with record revenue of $61,000,000 up 82% from 2023.

Our gross margin was 75% in 2024 compared to 74% in 2023. Our gross R and D expenses in 2024 were $16,600,000 a decrease of $273,000 compared to 2023. In 2025, we plan to increase our investment in R and D to develop additional automation and gen AI best capabilities and support our strategic partnerships and productization plans. We received a cumulative grant from the Israel Innovation Authority of $684,000 during the year To support our growth, sales and marketing expenses in 2024 were $15,700,000 compared to $12,700,000 in 2023. As telecom operators continue to invest in five gs during 2025, we expect a gradual increase in sales and marketing to support an increasing pipeline of opportunities and expand our coverage in local regions.

G and A expenses for 2024 were 4,800,000 an increase of $929,000 compared to the entire year of 2023. Operating income grew 65.9% in 2024, reaching an all time high of $9,500,000 or 16% of revenue compared to an operating income of $5,700,000 or 11% in 2023. Net income for 2024 was a record of $13,500,000 representing 22% of revenue or $0.83 per diluted share compared to a net income of $10,200,000 or 20% of revenue or a net income of $0.67 per diluted share in 2023. On a GAAP basis, as you can see on Slide 21, our net income for 2024 was another record at $7,000,000 or 11% of revenue or $0.43 per diluted share compared to $3,700,000 or 7% of revenue or $0.24 per diluted share in 2023. In 2025, we believe the dollar shekel ratio will stabilize at the current levels and doesn’t require hedging.

Turning to the balance sheet. As shown on Slide 23, our cash equivalents and short term bank deposits as of 12/31/2024, totaled $94,700,000 Thanks to our strong results, we generated a positive cash flow of $12,500,000 ending 2024 with our highest cash balance. That concludes our prepared remarks. Thank you. And I will now turn the call back to the operator for your questions.

Conference Operator: Thank you. The first question is from Arjun Bhatia of William Blair. Please go ahead.

Linda Lee, Analyst, William Blair: Hi, guys. Thank you. This is Linda Lee here for Arjun. Congrats on a great Q4. Benny, can you give us more color on the Norleaf deal and what that represents for the progress made in the geographic market expansion efforts moving forward?

Benny Epstein, CEO, Radcom Limited: Sure, absolutely. Thank you for the question. Nordic is very important for us because it’s introducing us to a market in Europe that and customer profile that is exactly what we’re looking for. And it’s I believe it’s the first time that we’re going through a run to core portfolio offering efficiencies with Gen AI capabilities. And I hope that it will follow with additional wins in Europe that we’re currently working on and will and open up mid tier markets for us that currently a bit with self incumbents.

It’s definitely a breaking all the five gs domain in general is allowing us to get into those type of customer profiles and we’re looking forward for more of those wins coming up.

Linda Lee, Analyst, William Blair: Awesome. And then another question, with the go to market efforts, how do you feel about the current sales capacity? Any plans to expand?

Benny Epstein, CEO, Radcom Limited: Sorry, I couldn’t get the second part, go to market for which part in general?

Linda Lee, Analyst, William Blair: Yes. Yes. Just general go to market efforts, how do you feel about the current sales capacity? Are you looking to expand different things like that? Thank you.

Benny Epstein, CEO, Radcom Limited: Yes, absolutely. We’re looking to expand. We’re also looking to expand our partnerships. So as announced ServiceNow and more to more partners will follow and we’ll announce more in the coming weeks. And we will demonstrate it also in MWC in Barcelona in couple of weeks.

So this is one go to market approach. We’re also trying to fit our product offerings into mid tier as I mentioned earlier. And together with the partnership and the mid tier offering, we believe that we can extend significantly to new customer base.

Linda Lee, Analyst, William Blair: Awesome. Thank you.

Benny Epstein, CEO, Radcom Limited: Thank you.

Conference Operator: The next question is from Ryan Coons of Needham and Company. Please go

Jeff Hopson, Analyst, Needham and Company: ahead. Hi, this is Jeff Hopson on for Ryan Coons. First and foremost, very sorry for your loss Benny. I know you and your family are in our thoughts and in our prayers. But secondly, congrats on the great quarter.

You’ve had kind of two years of really impressive operating leverage and now you’re talking about continuing to invest in R and D and sales for this year. How are you kind of thinking about driving more operating leverage versus investing back in the business? Thanks.

Benny Epstein, CEO, Radcom Limited: First of all, thank you, Jes, for the personal note. I appreciate it. What we feel generally speaking and then Alnar can elaborate a little bit more that the more we we grow is to keep the same level of growth and profitability while investing in R and D, introducing new capabilities with JNEI and other partners. But the general notion is that we will keep the same level of profitability on our operations side while investing in R and D moving forward. Hope I answered your questions.

Jeff Hopson, Analyst, Needham and Company: Awesome. Thank you. Maybe one more. You’ve been driving great free cash flow and have record cash. Are you guys thinking of exploring any acquisitions or are there any particular segments of the market that you find interesting right now?

Benny Epstein, CEO, Radcom Limited: We are looking in different options. We’re taking it we’re not in a hurry to when it comes to M and A in general, but carefully, we’re looking how to maybe expand our addressable market with areas that are closer to ours. But again, we’re jumping up, we’re evaluating and taking our time and once we find the right candidate, we will pursue acquisitions, but we’re looking at it very carefully as we speak.

Jeff Hopson, Analyst, Needham and Company: Awesome. Thank you. Actually, if I could sneak one more in. Benny, I know you’ve just been in for probably just over two months now. But what do you think your initial focus is going to be on Radcom for driving this continued growth?

Benny Epstein, CEO, Radcom Limited: Sure. So, Lai, I’m sorry if I’m repeating, but I think introducing partners and leveraging on big companies such as ServiceNow and others that we will announce very, very soon, I think will help us to expand also to go together with, for example, ServiceNow will allow us to go and penetrate into areas that outside of the network center going into the care domain will also help us to expand our addressable market. We believe that we can bring a lot of value when it comes to customer experience and can help our customers to improve those domains. And I think we see the awards that our customers and ourselves awarded in the last quarter and the plan is to continue to push for a better customer experience through our unique data set that can bring with Gen AI and other platforms like ServiceNow a better customer experience.

Jeff Hopson, Analyst, Needham and Company: Awesome. Thank you very much and congrats again guys. Thank you.

Conference Operator: This concludes the question and answer session and Radcom’s fourth quarter twenty twenty four results conference call. Thank you for your participation. You may go ahead and disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.