Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd. Results Conference Call for the First Quarter of 2024. As a reminder, this conference is being recorded and will be available for replay on the company's website later today. On the call are Hilik Itman, RADCOM's Interim 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 have not downloaded it yet, you may do so through the link in the Investors section of RADCOM's website. 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 momentum growth, future profitability, expected levels of gross margin, its ability to drive the business forward in 2024 and beyond, its full year 2024 revenue guidance, opportunities to expand sales with new logos for 5G and in the cloud and GenAI ecosystem, its pipeline, its leadership and innovation in artificial intelligence as a cloud assurance vendor, the potential benefits of its Software-as-a-Service solution, the ability of RADCOM ACE on Amazon Web Services to allow operators to achieve higher levels of automation and insight, future investments by operators in their network and 5G, its expectations with respect to research and development and sales and marketing expenses and headcount, as well as grants from the Israel Innovations Authority and the company's expectations with respect to its relationship with Rakuten, AT&T, and DISH. 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 of 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 noncash stock-based compensation expenses that have been expensed in accordance with the ASC Topic 718, 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 and 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 Hilik. Please go ahead.

Thanks, operator. Good morning, everyone, and thank you for joining us for our first quarter 2024 earnings call. My name is Hilik Itman. Before being appointed by the Board as Interim CEO, I served as RADCOM's Chief Operating Officer since 2020. I was responsible for the product development and Customer Success teams. Before becoming COO, I served as Vice President of R&D from 2015 to 2020. During this time, I led the product transition from software to virtualization and finally to the cloud, including all the additional AI-powered capabilities and automation features provided to our customers as part of our solution offering. I want to thank the Board for trusting me to lead the business as Interim CEO. Since a few weeks in the role, I've worked closely with the management team to ensure business continuity and that our positive momentum and profitability goals continue. The mandate is clear, and we are laser-focused on leveraging market opportunities to expand ourselves with new levels for 5G. Turning to the first quarter results. We continued our strong positive momentum for 2023 into the first quarter of 2024 with record first-quarter revenue that increased by 17.5% year-over-year and achieved our tenth consecutive growth quarter. We reached our highest cash levels in the quarter with $85.3 million. We continued our profitability strategy and achieved positive income on both a GAAP and non-GAAP basis. We had an encouraging start to 2024 by renewing our multiyear contract with one of our key strategic customers, Rakuten Mobile. We continue to extend our collaboration and strengthen our partnership with this innovative operator. The contract extension included advanced AI-powered analytics for its private cloud, enabling Rakuten Mobile to drive more automated network operations for its nationwide rollout. The partnership with Rakuten demonstrates our market leadership and innovation in AI and automation in the telco network cloud and 5G. In addition, we announced that a U.S. telecom operator extended its contract to use RADCOM ACE. The value we offer in this contract is that our solution will run on AWS as a SaaS. It is also available on other cloud platforms. Deploying RADCOM ACE on AWS will enable this operator to achieve a higher level of automation and gain valuable insights into the network. Operators rely on assurance to navigate the critical transition to 5G and the cloud, and our goal is to be the leading assurance provider for this transition. Hence, we want to offer telecom operators the ability to choose whatever cloud provider or deployment model they want and use our innovative assurance technology to manage their network transformation. SaaS is a popular cloud computing offering that delivers a turnkey solution. Operators can access our cloud-based assurance software quickly and gain its benefits as it has already been installed and configured. It also offers cost savings as operators don't need to invest in additional infrastructure. Furthermore, operators can scale the solution usage up and down based on specific needs. Offering SaaS provides customers with flexible options that can generate more sales opportunities for us in the future. These projects reinforce the importance of our strategic journey to become a leading cloud assurance vendor and offer operators flexible SaaS options for deploying assurance in the cloud. Turning to our customers and sales pipeline, we continue to provide innovative software announcements and new releases to our installed base customers to help them manage their networks, deliver more automation, and save operational costs. AT&T and DISH remain key strategic customers, and we believe our business will remain strong. In addition, as I noted previously, our business with Rakuten Mobile remains robust following the renewal of our multiyear contract. Our pipeline is healthy based on our RADCOM ACE product line and includes a good mix of new and existing customers. We see significant growth potential in our pipeline and have increased our sales team to ensure we fully capitalize on the growth opportunities ahead of us. We continue to work within the 5G cloud ecosystem for private, public, and hybrid networks. In the public cloud, we offer potential customers integration with all three leading public cloud providers. Our investments in the cloud ecosystem are bearing fruit, and we believe our integration with cloud providers will help generate additional opportunities. In the previous call, we mentioned the importance of GenAI and that all the leading public cloud providers or hyperscalers are acknowledging our pivotal role in the GenAI ecosystem. We see an opportunity to use our unique telco-centric assurance skillset to help operators manage their networks as they partner with hyperscalers entering the telco space to facilitate operators' smooth transition to the cloud. Last year, we announced our position as one of the first assurance vendors to harness the power of GenAI for real-time management of 5G networks. Our team continues to work on embedding GenAI technology into our solutions to enable innovation that helps operators manage their networks more dynamically and efficiently through AI and automation. As part of this effort, we announced the integration of our GenAI application with AWS. Although GenAI is in the innovation stage, customers see our innovation and thought leadership in this space, which can lead to other sales opportunities. We continue to engage globally with operators through our sales and marketing activities, including direct meeting standards, processes, and conferences. Operators are continuing to invest in their networks and roll out 5G. In the current macroeconomic landscape, operators are looking for innovative solutions to help them reduce costs while seeking additional revenue to utilize their significant investment in 5G. In addition, operators must ensure that subscribers enjoy top-quality services in this highly competitive market, which is a critical use case for assurance. This is an opportunity for RADCOM. Operators can use our solution to ensure service quality while driving operational efficiencies and generating revenue through services like private networks for enterprise customers. RADCOM continues to engage in multiple opportunities for our innovative solutions at different stages of maturity. We continue to enhance our software with additional automation, intelligence, and AI-based capabilities, integrating into the cloud to add value and expand our customers' use cases. The North Star that guides our product roadmap is to make networks more intelligent and autonomous through AI-powered analytics. We will continue innovating to help operators become more efficient and increase revenues for 5G. We announced Generative AI application support for Amazon Web Services so operators can roll out new services based on AWS, while improving operational efficiencies using RADCOM ACE enhanced by Generative AI. RADCOM is a company with many years of expertise in the telco space. We know how to analyze data and deliver valuable insights to telecom operators. So we approach all our product innovation from this unique perspective, starting from a foundation of solid data and telco domain knowledge, building GenAI products on that foundation. We are leveraging our know-how to provide innovative solutions that enable operators to use natural language to tap into the wealth of data RADCOM ACE produces, helping operators work faster and more cost-effectively. To summarize, based on our good visibility into 2024, overall market opportunity, and unique market position supporting telecom operators as they roll out 5G and optimize costs, we remain well-positioned to drive the business forward in 2024. Our multiyear contract also provides a strong backlog, driving consistent results and giving us good visibility. We are confident in delivering the fifth consecutive year of revenue growth, increasing our profitability, and continuing the last four years of growth momentum. This gives us the confidence to raise the lower end of our 2024 revenue guidance to $57 million to $60 million. With that, I would like to turn the call over to Hadar Rahav, our CFO, who will discuss the financial results in detail.

Thank you, Hilik, and good morning, everyone. To review our financial performance, while the slides contain GAAP and non-GAAP results, I will mainly refer to non-GAAP numbers, excluding stock-based compensation, acquisition-related expenses, and amortization of intangible assets related to acquisition. Now please turn to Slide 8 for the financial highlights. First-quarter revenue grew by 17.5%, reaching a new record of $14.1 million. This represents a nineteenth consecutive quarter of year-over-year revenue growth and an increase from $12 million in the first quarter of 2023. At the same time, we continue to manage and control our expenses while strategically investing in increasing our investment in sales and marketing. This resulted in non-GAAP net income of $2.8 million for the quarter. Our gross margin on a non-GAAP basis in the first quarter of 2024 was 74%. Note that our gross margin can vary slightly from quarter to quarter, depending on the revenue mix. We expect that the second quarter will remain at a similar level. Our gross R&D expenses for the first quarter of 2024 on a non-GAAP basis were $4 million, a decrease of $168,000 compared to the first quarter of 2023. With the market evolving rapidly, our continued investment in research and development to extend our technological leadership within this space is vital. This is a key enabler for our future business. We will continue to strategically invest in R&D and maintain similar expenses as in 2023 to enhance our RADCOM ACE solution, increase our 5G capabilities, expand our AI-driven insights, and seamlessly integrate our solution into the cloud. Excluding any impact from exchange rates, our R&D expenses in the next quarter will remain at a similar level with a slight increase. During the quarter, we received a grant of $209,000 from the Israel Innovation Authority compared to $262,000 in the first quarter of last year. As a result, on a non-GAAP basis, our R&D expenses for the first quarter of 2024 were $3.8 million compared to $4 million in the first quarter of 2023. We expect the Israel Innovation Authority grant to remain at a similar level in the second quarter. As announced in previous calls, we continue to strategically invest in sales and marketing to expand our business and capture more opportunities in the 5G market. Towards the end of 2023, we made an incremental investment in sales and marketing. In the first quarter of 2024, sales and marketing expenses reached $3.8 million on a non-GAAP basis, an increase of $747,000 compared to the first quarter of 2023. In the following quarters, we expect a gradual increase in sales and marketing expenses to support an increasing pipeline of opportunities. G&A expenses for the first quarter of 2024 were $1.2 million on a non-GAAP basis, an increase of $210,000 from the first quarter of 2023. Thanks to increased revenue and careful expense management, operating income on a non-GAAP basis for the first quarter of 2024 was $1.7 million compared to $800,000 for the first quarter of 2023. Net income on a non-GAAP basis for the first quarter of 2024 was $2.8 million or $0.18 per diluted share compared to $1.8 million or $0.12 per diluted share for the first quarter of 2023. On a GAAP basis, as you can see on Slide 8, our net income for the first quarter of 2024 was $762,000 or $0.05 per diluted share. This compared to a net income of $621,000 or $0.04 per diluted share for the first quarter of 2023. At the end of the first quarter of 2024, our headcount was 296, the same as the previous quarter. We expect our headcount to remain similar in the second quarter. Turning to the balance sheet, our cash, cash equivalents, and short-term bank deposits were $85.3 million as of March 31, 2024. That concludes my prepared remarks. I will now turn the call back to the operator for your questions.

The first question is from Alex Henderson of Needham & Company.

It's a nice quarter and certainly, a great start for 2024. I wanted to address the linearity implied by the large beat in Q1 versus only taking the low end of the guidance up. Was the first quarter a little of a lumpy quarter in terms of a lump into the quarter? And hence, we should anticipate a more moderate result in the upcoming quarters in terms of the year-over-year growth rate?

Okay, so as you saw, we raised the lower end of our revenue guidance, and we updated the guidance to $57 million to $60 million, which means that we are likely to have a higher second half of the year in terms of the revenue. And if no change in the forex rates, we expect a similar trend on the bottom line. As announced in the previous calls, we continue strategically investing in certain marketing to ensure we have clear visibility and enough boots on the ground to capture more opportunities in the 5G market. So part of the revenue increase will be used for sales investment, but most of it will go down to the bottom line.

So in the second quarter relative to the first quarter, it's fairly stable sequentially, I assume?

Yes.

Looking at the pipeline, you obviously had some nice news on Rakuten. The deal with Rakuten does sound like it's an expansion, not just a renewal. Can you talk about the size of upsell and how that's going?

So the renewal of the contract is going... Yes, so can you talk about the upsell to your larger partners, not just Rakuten, AT&T, DISH, as well as any others that you want to mention or put together? What does the large cohort of the top Tier 1s look like in terms of ability to upsell in '24 and to that matter into '25? So about the contract with Rakuten, the renewal is in the same manner as the previous one, but it includes a few opportunities for extension around the AI products and services. We have existing opportunities in our pipeline, and we believe that some of them will be executed in the second half of 2024.

If I were to look at the pipeline, I think you said it was evenly split between both new customers and existing customers. Is that how you're expecting the incremental growth to play out? Or is it more due to new customers driving the upside to the revenue?

No, both, from existing and from new customers. Our pipeline is a mix of opportunities from both existing and new customers.

So evenly split between the two? Or is there a bias to one type versus the other?

No. It's 50-50.

Okay. Just in terms of the new products, I think you guys have had a fair amount of new technology announcements and new product announcements. Can you just talk a little bit about whether that's something that's starting to impact into the revenue streams?

I can talk about the technology side of this product. Actually, the GenAI now is bringing to the table very dramatic opportunities, technology-wise, and we are actually processing a lot of information. Our product is based on a wealth of knowledge in telecommunications, especially in cellular fields, and the combination between these spaces, the information that we capture and analyze and the GenAI capabilities in understanding a vast amount of information and knowledge base brings a lot of significant capabilities for us. We believe it will bring many opportunities in the future and even now with the engagement we have with customers in this area.

The next question is from Arjun Bhatia of William Blair.

Very nice job on the start of the year. Maybe actually to continue on that last point, like when you think about all the new capabilities and all the innovation that you've added into the platform, obviously you're doing a lot with AI and analytics, et cetera. How do you think your pricing strategy might evolve as you look at your existing customers? Obviously, it's sticky, and you want to capture the value. So just talk about whether you think there is pricing power over time and how you maybe intend to use that as a lever.

So...

No, it's generalized. Okay, yes, I think...

I will first refer to the test model. If you look at the test model, for example, it's a win-win situation. On the one hand, it's cost savings for the operator, and the operator saves on infrastructure. As for RADCOM, more operators will switch to the SaaS model. The marginal cost will decrease, and we will improve our cost structure. This is from the financial effect. Hilik, do you want to add anything?

No, no. It's okay.

Got it. So, as you're increasing your sales and marketing investments, could you explain how those efforts are being carried out? Are you primarily hiring new sales representatives to target telco accounts that are not currently in your pipeline? I assume much of this is related to the 5G ramp, which seems to be your main focus. How is the execution on that front progressing, and where are the new representatives being directed?

So we are following very carefully the evolution of 5G and primarily the projects there. As we announced in our previous call, we focus on the early adopters in the North American market and in some advanced countries in Asia like Japan and South Korea. There we focused in the last few years. In the last year, we started to see that more we can progress, mainly in Europe, and you know that Europe has more operators in smaller countries. So we want to have adequate coverage and to make sure we have enough boots on the ground, and thus, we extended our investment in sales and marketing and our team in order to ensure we capture more and more opportunities and increase our market share. This increase has already been reflected in the results of the first quarter, and we see an additional gradual increase in the second half of the year. Does that answer your question, Arjun?

Yes. Yes. Very helpful.

The next question is from Jeff Meyers from Cobia Capital.

Congratulations on a good start to the year. Kind of just wanted to ask about your cash position. It's your all-time high. What are your thoughts about that? Have you thought about share buyback or tender offers, something along those lines?

So in the last three years, we generated about $15 million, which gives us a very strong position in the market and the ability to engage and take more risks. Last year, we did our first M&A transaction, and we want to ensure that we have enough cash and sufficient levels of cash to execute other relevant opportunities for M&A. Dividend or buyback is something that is being discussed, and the Board and the company may allocate a limited level of cash for this purpose. But we don't see it as the key strategic use of our cash. We use our cash for stability, increasing our market share, and as I said, we wish to maintain a sufficient level to engage and make further M&A transactions.

Understood. I think you have enough cash to maintain stability, do buybacks, and consider any acquisitions you might look at. But congratulations again.

The next question is a follow-up question from Alex Henderson of Needham & Company.

So listening to virtually every person who sells into the telecom space, it seems pretty clear that most of the telecom industry is under duress and cutting back on their budgets and spending. There's clearly been some challenges around the 5G core in terms of delivering a true multi-vendor modern API-driven microservice-based architecture. And so when I talk to virtually every other company in the category, they're telling you that we're in telecom winter here and that the pace of adoption of 5G is going to be slower than originally expected, with challenges around delivering some of the advanced architecture, new features like network slicing that were intended to monetize the 5G investments. So yes, it was clear that AT&T had tried to go down the path of a multi-vendor and ended up cutting out Nokia and going with Ericsson. So how does all of that affect you? Are you negatively impacted by it? Or, alternatively, and I think the right answer is, do you see RADCOM products as the key to solving those problems, and instead of slowing investment, are they actually accelerating investment with you?

Yes, exactly. I think to understand the 5G evolution in the right context, that all the technology transitions are derived from some valid and strong business. I believe that 5G is the only way for transition to more software-based and cloud-based networks for telecoms. So from what I see, and we saw, the telecoms are continuing on their autonomous journey. I think that the trend is already established. I know there are some difficulties, but we are in the best position in this space, with many things to bring to the table to aid them with this journey, with assurance and new aspects. So I believe that we are in a good position, and all this 5G transition and autonomous network position are going together, and I don't see any way that it will not happen eventually. Any further questions?

Well, there's clearly a problem, right? I mean, there's no doubt that everybody believes that the 5G core is not functioning as expected. And AT&T was kind of at the center of that with the decision to go multi-vendor to standardize on Ericsson. So given the observation that this problem, is Rakuten seeing RADCOM products as the solution to those challenges, and instead of slowing investment, are they actually accelerating investment with you?

Yes, that is true. The fact that we are dealing with this space, with all the 5G and cloud-native transitions, we provide a platform that customers rely on during these transitions. This positions us well. We see this with all the customers that we are working with around the 5G transition. In the new customers, it's very significant that they are relying on our technology because they can reduce costs by reducing workforce, and we are in the best position because our platform allows them to manage their networks more efficiently and on a larger scale. So yes, it's very beneficial to work with us in this area.

Thank you. This concludes the RADCOM Ltd. First Quarter 2024 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.