Record 82.5% Gross Margin With $0.1 EPS (Basic, Non-GAAP) –
Continued Progress in Penetrating Top-Tier NFV Markets: Discussions Move Forward With Tier-1 Service Providers in the U.S.
TEL-AVIV, Israel – October 27, 2015– RADCOM Ltd. (NASDAQ: RDCM), a leading provider of Customer Experience Management (CEM) solutions, today reported its financial results for the third quarter and first nine months ended September 30, 2015.
| In $ thousands | Q1-Q3 2015 | Q1-Q3 2014 | Q3 2015 | Q3 2014 |
| Revenues | $15,958 | $16,448 | $4,767 | $6,007 |
| Gross margin | 80.0% | 69.2% | 82.5% | 66.0% |
| Net profit (loss) (GAAP) | $1,201 | $1,093 | $561 | $776 |
| Net profit (non-GAAP) | $2,261 | $1,480 | $835 | $872 |
| Cash & equivalents | $7,978 | $4,509 | $7,978 | $4,509 |
Financial Results
First Nine Months of 2015: RADCOM’s revenues for the nine-month period totaled $16.0 million compared with $16.4 million in the first nine months of 2014, while gross margin increased to 80.0% from 69.2%. The strong gross margin is in line with the new target margin announced last quarter, reflecting the Company’s successful transition from hardware to software-based products.
Net income for the first nine months totaled $1.2 million, or $0.14 (basic) and $0.13 (diluted) per ordinary share, up 10% compared with $1.1 million, or $0.14 (basic) and $0.13 (diluted) per ordinary share in the first nine months of 2014. On a non-GAAP basis, net income for the period totaled $2.3 million, or $0.26 (basic) and $0.25 (diluted) per ordinary share, a 53% increase compared with $1.5 million, or $0.18 (basic) and $0.17 (diluted) per ordinary share, for the first nine months of 2014.
The Company’s cash balance as of the end of the period totaled $8.0 million, up 78% compared with $4.5 million at the end of Q3 2014. The increase reflected the strong collections and high customer satisfaction achieved throughout the year.
Third Quarter: For the third quarter, RADCOM’s revenues totaled $4.8 million, unchanged from the second quarter of 2015 but down from $6.0 million in the third quarter of 2014. For the past two quarters, sales have been affected by the Company’s focus on high-potential Tier-1 deals in the U.S. and other regions, each with long decision-cycles.
Gross margin for the quarter was 82.5%, an all-time record for the Company. This compared with 66.0% for the third quarter of 2014.
Net income for the third quarter totaled $561,000, or $0.07 (basic) and $0.06 (diluted) per ordinary share, compared with $776,000, or $0.10 (basic) and $0.o9 (diluted) per ordinary share, for the third quarter of 2014. On a non-GAAP basis, net profit for the period was $835,000, or $0.10 (basic) and $0.09 (diluted) per ordinary share, compared with $872,000, or $0.11 (basic) and $0.10 (diluted) per ordinary share for the third quarter of 2014.
Comments of Management
“During the past several quarters, we have been fully focused on a number of transformative opportunities with top-tier service providers in the U.S. and other regions, with recent developments making us very excited,” commented Mr. David Ripstein, RADCOM’s President and CEO. “Addressing these opportunities has required a massive R&D and marketing effort which has naturally affected our execution of other projects. However, our Q3 bookings set a new quarterly record for us, demonstrating the continued health of our business from existing customers. We believe our Tier-1 investment will prove itself in the quarters ahead, taking our business to a new level while positioning us as the premier CEM provider for virtualized/NFV networks.
“We are pleased that our record margin has partially compensated for the quarter’s weaker revenues, enabling us to post our eighth straight profitable quarter and demonstrating just how far we have come in a relatively short time. Building from a strong and healthy platform, we are poised to enter the exciting NFV market at the beginning of its growth curve, and believe that we are on the cusp of a breakthrough.”
Earnings Conference Call
RADCOM’s management will hold an interactive conference call today at 9:00 AM Eastern Time (15:00 Israel Time) to discuss the results and to answer participants’ questions. To join the call, please call one of the following numbers approximately five minutes before the call is scheduled to begin:
From the US (toll-free): + 1-888-668-9141
From other locations: +972-3-918-0609
For those unable to listen to the call at the time, a replay will be available from October 28th on RADCOM’s website.
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About RADCOM
RADCOM provides innovative service assurance and customer experience management solutions for leading telecom operators and communications service providers. RADCOM specializes in solutions for next-generation mobile and fixed networks, including LTE, VoLTE, IMS, VoIP, UMTS/GSM and mobile broadband. RADCOM’s comprehensive, carrier-grade solutions are designed for big data analytics on terabit networks, and are used to prevent service provider revenue leakage and to enhance customer care management. RADCOM’s products interact with policy management to provide self-optimizing network solutions. RADCOM’s shares are listed on the NASDAQ Capital Market under the symbol RDCM. For more information, please visit www.RADCOM.com.
Non-GAAP Information
Certain non-GAAP financial measures are included in this press release. These non-GAAP financial measures are provided to enhance the reader’s overall understanding of our financial performance. By excluding non-cash stock-based compensation that has been expensed in accordance with ASC Topic 718, our non-GAAP results provide information to both management and investors that is useful in assessing our core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results and to plan and forecast future periods. The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with GAAP.
Risks Regarding Forward-Looking Statements
Certain statements made herein that use words such as “estimate,” “project,” “intend,” “expect,” “’believe”, “may”, “might”, “predict”, “potential”, “anticipate”, “plan” or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties that could cause the actual results, performance or achievements of the Company to be materially different from those that may be expressed or implied by such statements, including, among others, changes in general economic and business conditions and specifically, decline in the demand for the Company’s products, inability to timely develop and introduce new technologies, products and applications, and loss of market share and pressure on prices resulting from competition. For additional information regarding these and other risks and uncertainties associated with the Company’s business, reference is made to the Company’s reports filed from time to time with the United States Securities and Exchange Commission. The Company does not undertake to revise or update any forward-looking statements for any reason.
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| RADCOM LTD.Consolidated Statements of Operations (1000’s of U.S. dollars, except share and per share data) |
| Three months ended September 30, | Nine months ended September 30, | |||||||
| 2015 | 2014 | 2015 | 2014 | |||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||
| Sales | $ 4,767 | $ 6,007 | $ 15,958 | $ 16,448 | ||||
| Cost of sales | 835 | 2,044 | 3,189 | 5,069 | ||||
| Gross profit | 3,932 | 3,963 | 12,769 | 11,379 | ||||
| Research and development, gross | 1,389 | 1,397 | 4,452 | 4,483 | ||||
| Less – royalty-bearing participation | 867 | 719 | 1,007 | 1,306 | ||||
| Research and development, net | 522 | 678 | 3,445 | 3,177 | ||||
| Sales and marketing, net | 2,194 | 1,650 | 5,781 | 5,371 | ||||
| General and administrative | 534 | 550 | 1,740 | 1,686 | ||||
| Total operating expenses | 3,250 | 2,878 | 10,966 | 10,234 | ||||
| Operating income | 682 | 1,085 | 1,803 | 1,145 | ||||
| Financing expense, net | (107) | (309) | (481) | (52) | ||||
| Income before taxes | 575 | 776 | 1,322 | 1,093 | ||||
| Taxes | (14) | – | (121) | – | ||||
| Net profit | $ 561 | $ 776 | $ 1,201 | $ 1,093 | ||||
| Basic net income perordinary share | $ 0.07 | $ 0.10 | $ 0.14 | $ 0.14 | ||||
| Diluted net income perordinary share | $ 0.06 | $ 0.09 | $ 0.13 | $ 0.13 | ||||
| Weighted average number of ordinary shares used in computing basic net income per ordinary share | 8,622,196 | 8,073,268 | 8,541,563 | 8,021,425 | ||||
| Weighted average number of ordinary shares used in computing diluted net income per ordinary share | 9,141,928 | 8,515,158 | 9,091,721 | 8,493,472 | ||||
RADCOM LTD.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(1000’s of U.S. dollars, except share and per share data)
| Three Months Ended | Nine Months Ended | ||||||
| September 30, | September 30, | ||||||
| 2015 | 2014 | 2015 | 2014 | ||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||
| GAAP net income | $561 | $776 | $1,201 | $1,093 | |||
| Stock-based compensation (1) | 274 | 96 | 1,060 | 387 | |||
| Non-GAAP net income | $835 | $872 | $2,261 | $1,480 | |||
| Non-GAAP net income per share (basic) | $0.10 | $0.11 | $0.26 | $0.18 | |||
| Non-GAAP net income per share (diluted) | $0.09 | $0.10 | $0.25 | $0.17 | |||
| Number of shares used in computing Non-GAAP earnings per share (basic) | 8,622,196 | 8,073,268 | 8,541,563 | 8,021,425 | |||
| Number of shares used in computing Non-GAAP earnings per share (diluted) | 9,141,928 | 8,515,158 | 9,091,721 | 8,493,472 | |||
| (1) Stock-based compensation: | |||||||
| Cost of sales | 7 | 2 | 29 | 11 | |||
| Research and development | 108 | 34 | 433 | 135 | |||
| Selling and marketing | 102 | 29 | 326 | 133 | |||
| General and administrative | 57 | 31 | 272 | 108 | |||
| 274 | 96 | 1,060 | 387 |
| RADCOM Ltd.Consolidated Balance Sheets(1000’s of U.S. dollars) | |||
| As of | As of | ||
| September 30,2015 | December 31,2014 | ||
| (unaudited) | (audited) | ||
| Current Assets | |||
| Cash and cash equivalents | 7,946 | 6,848 | |
| Restricted cash deposits | 32 | 32 | |
| Trade receivables | 5,527 | 5,477 | |
| Inventories | 1,709 | 2,699 | |
| Other receivables | 1,928 | 1,411 | |
| Total Current Assets | 17,142 | 16,467 | |
| Severance pay fund | 3,130 | 3,051 | |
| Other long-term receivables | 464 | 600 | |
| Property and equipment, net | 316 | 200 | |
| Total Assets | 21,052 | 20,318 | |
| Liabilities and Shareholders’ Equity | |||
| Current Liabilities | |||
| Trade payables | 1,013 | 1,524 | |
| Deferred revenue and advances from customers | 799 | 765 | |
| Employee and payroll accruals | 2,000 | 2,377 | |
| Other payables and accrued expenses | 1,850 | 1,739 | |
| Total Current Liabilities | 5,662 | 6,405 | |
| Long-Term Liabilities | |||
| Deferred revenue | 318 | 198 | |
| Accrued severance pay | 3,573 | 3,453 | |
| Total Long-Term Liabilities | 3,891 | 3,651 | |
| Total Liabilities | 9,553 | 10,056 | |
| Shareholders’ Equity | |||
| Share capital | 371 | 361 | |
| Additional paid-in capital | 69,866 | 68,059 | |
| Accumulated other comprehensive loss | (2,843) | (1,062) | |
| Accumulated deficit | (55,895) | (57,096) | |
| Total Shareholders’ Equity | 11,499 | 10,262 | |
| 21,052 | 20,318 |