Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the Second Quarter of 2024. 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 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 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 5G and launches, demand for the Company’s products and services, sales opportunities, sales cycles, and pipeline, momentum, maintaining and increasing profitability and growth, its ability to provide value to customers and shareholders, the Company's expected growth, its expectations with respect to expenses and headcount, as well as grants from the Israel Innovation Authority, the Company's expectations with respect to its relationships with its customers, the potential of the Company’s long term vision and the use of artificial intelligence in its products, levels of gross margin, the Company’s revenue guidance, and the search for a permanent chief executive officer. 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 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, 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 Hilik. Please go ahead.

Thanks, operator. Good morning, everyone, and thank you for joining us for our second-quarter 2024 earnings call. Before diving into our results, I want to provide an update on the CEO search process. The board has engaged a top executive recruitment firm and established a committee to appoint the next CEO. Significant progress has been made, and the committee is now in the advanced stages of candidate selection. The committee has evaluated candidates from Israel and abroad, especially the U.S., who have the necessary leadership qualities and experience to drive RADCOM's next phase of growth and success. I have full confidence in the Board’s ability to appoint the right candidate. Hopefully, this process will be finalized soon. As the company’s COO, I’ll continue focusing on R&D, product innovation, and customer success when a permanent CEO has been appointed. Then, I will be able to invest more time in driving innovation and taking the company to the next level of our growth journey alongside the new CEO. Now, turning to the results. I'm excited to share our strong performance and execution in this quarter. Our results highlight the benefits of our customers’ trust and our ability to deliver value through our carrier-grade and innovative solutions. We achieved solid growth momentum in both our top and bottom lines. We reached record quarterly revenues of $14.8 million, up 20% from the second quarter of 2023. We generated a positive cash flow, hitting a new record of $86.1 million in cash, cash equivalents, and bank deposits. We achieved record half-year revenue and profitability for the first six months of 2024. Since the start of the year, we have secured over $50 million in new contracts, including several seven-digit contracts across various geographic markets, while maintaining significant recurring revenues. This shows the demand for our leading solutions and boosts our revenues as operators transition to 5G. Our entire organization remains committed to delivering profitable growth, increasing our market share, and driving ongoing technology innovation as we look to provide long-term value to our customers and shareholders. Turning to the telecom market, customer interest and sales activities are noticeably increasing in the U.S. and other regions. This upturn is evident in the number of opportunities our teams are currently pursuing and the 5G tenders issued by operators. As the interim CEO, my primary focus is driving existing sales activities. In this role, I provide executive level support for our sales efforts and spearhead future innovations. The heightened interest in automated assurance and intelligent analytics results from several key factors. First, most U.S. operators are progressing in their transition to 5G standalone networks, requiring the adoption of cloud-based automated assurance and intelligent analytics solutions. Additionally, as legacy assurance systems age or reach the end of life, operators must replace outdated equipment as part of the natural upgrade cycle. Further, some competitors have not developed a cloud-native automated assurance and intelligent analytics solution, which requires significant R&D investment, an investment that RADCOM has made. This process leads operators to conduct thorough due diligence, evaluating the available options in the market to identify new best-in-class automated assurance and intelligent analytics solutions. Given these market factors, we see significant opportunities to increase our market share in the U.S. and other regions, driving sustainable and continued growth while delivering more value to our shareholders. Turning to the cloud, adopting a cloud architecture is part of operators’ transition to more efficient and dynamic software-centric network operations. We continue to see increasing cloud adoption, with operators replacing legacy with modern cloud-based networks. Our solution helps operators manage this transition efficiently and with a customer-centric focus by gathering all the analytics across the cloud networks. In previous calls, we mentioned the importance of Generative AI and that all the leading public cloud providers, or hyperscalers, are emerging as having a pivotal role in the Generative AI ecosystem. During the second quarter, we announced that RADCOM NetTalk, our Generative AI application, was now available on AWS. Although Generative AI is in the innovation stage, customers see our innovation and thought leadership in this space, which can be a door opener that leads to sales opportunities. As demonstrated in our support for Generative AI on AWS and the contract win to offer our solution as SaaS in the U.S., we continue engaging with operators and the cloud-based ecosystem. As a reminder, we offer potential customers integration with all three leading public cloud providers: Amazon Web Services, Microsoft Azure, and Google Cloud. And we believe our integration into cloud providers will help generate additional opportunities. Turning to the pipeline, we see positive market momentum that can drive growth, increase sales engagements, and lead to additional multi-year contracts. The more robust demand for cloud-based automated assurance and intelligent analytics technology is reflected in our increased pipeline as we engage with multiple prospects across various sales cycle stages. While these sales processes can take time and are unpredictable, we believe our solutions align with operators' needs, deliver unique value, and address critical network challenges. This sets the stage for future business growth. In today's telecom macroeconomic landscape, operators seek solutions that help them reduce significant costs while ensuring a seamless transition to 5G cloud network infrastructure and technologies. These are essential use cases for assurance and network analytics. This presents a significant opportunity for RADCOM, and we believe our position as an innovative automated assurance and intelligent analytics provider will continue to drive positive returns. Turning to our installed base, AT&T and DISH remain key strategic customers. We believe our business with these operators will remain strong. We continue to provide software enhancements and new releases to help them manage their networks. In the second quarter, we were selected to provide a SaaS Service Assurance Solution on AWS, in the U.S. for an existing customer. Deploying RADCOM ACE on AWS will enable this operator to achieve high levels of automation and flexibility when using their automated assurance and intelligent analytics solution to gain real-time insights and analytics into the network. This allows the operator to adapt quickly to network capacity changes, ensuring excellent customer experiences and delivering top-quality services. We also announced that our collaboration with Rakuten Mobile in Japan has been extended due to our strong long-term performance and support. So, business with Rakuten Mobile remains robust following the renewal of our multi-year contract. We have achieved high satisfaction levels within our install base by offering a robust and innovative product and focusing on customer requirements and needs, driving growth and recurring revenue. We continue to invest in sales and marketing to capitalize on the rising demand for our solutions. We have expanded our sales team to seize these opportunities, recognizing significant growth potential in our pipeline. We expanded our sales channels during the quarter, particularly in Europe and South America, by strengthening our partnerships with local agencies and distributors. This approach allows us to address potential sales activities and effectively meet growing demand. Our combined indirect and direct sales teams ensure an increased presence on the ground from a sales perspective. We are also actively participating in numerous industry events worldwide, where the sales team's engagement creates interest in our automated and intelligent analytics. Our executive team frequently speaks at these events, further enhancing interest in our solutions and solidifying our thought leadership in the 5G assurance and analytics space. These interactions have led to many promising discussions, including significant interest in our new generative AI applications, which could translate into future sales opportunities. We believe we have a differentiated solution aligned with key market trends and are well-positioned to address telecom operators’ needs. We continue to enhance our software with additional automation, intelligence, and AI-based capabilities to add value and expand our customer use cases. We announced Generative AI Application Support for AWS. So operators can roll out new services quickly 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 good data and telco-domain knowledge. We will continue creating value for our customers and shareholders by building upon our strategic position as the leading automated assurance and intelligent analytics platform for 5G and the cloud. Innovative technologies empower our solutions through significant product investments made over the years. We continue investing in R&D because we believe it is a crucial enabler for future business. We serve as the operators’ smart co-pilot to help navigate 5G network complexity. This means continually evolving our automated assurance and intelligent analytics solution, adding new AI-powered capabilities and use cases to maintain our 5G assurance leadership. I am excited to announce that the company received industry recognition. We were recently named a finalist for a 2024 Leading Lights award. This telecom-focused program recognizes the industry's top companies' achievements in next-generation communications technology and innovation during the year. To summarize, our strong results demonstrate that our team is executing effectively. Our performance in the second quarter and consistent achievements across multiple quarters position us for a successful 2024. Our business strategy yields positive outcomes, as evidenced by our profitable growth and consistent positive cash flow. Our momentum remains strong, and we believe the best is yet to come as we aim to elevate the company’s evolution and enhance shareholder value. We are experiencing increasing demand for our innovative assurance and analytics solutions across multiple regions. This growing interest is evident in our expanding sales pipeline, which has the potential to drive further growth. Our R&D team is continuously innovating and supporting our customers’ needs. Therefore, we remain confident we can deliver a fifth consecutive year of revenue growth and increased profitability. This gives us the confidence to raise our 2024 revenue guidance to a range of $58 million to $61 million, up from the previous range of $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 everyone, for joining us today. Now, let’s turn to the results. While the slides contain GAAP and non-GAAP results to review our financial performance, I will mainly refer to non-GAAP numbers, excluding stock-based compensation, acquisition-related expenses, and amortization of intangible assets related to acquisitions. As noted earlier in the call, since the beginning of the year, we have secured over $50 million in new contracts, including several seven-digit contracts across various geographic markets. Most of these revenues will be recognized in 2025 and beyond. This influx of contracts underscores the robust demand for our leading solutions and positions us well to capitalize on the industry transition to 5G, significantly boosting our revenue. Now please turn to Slide 5 for the financial highlights. Second-quarter revenue grew by 20%, reaching a new record of $14.8 million. Our positive start to the year is driven by strong team execution, which has led to good financial performance, revenue and profitable growth, and measurable improvements to our bottom line. Non-GAAP net income for the second quarter was $3.1 million, and the non-GAAP net margin was 21%, which grew by 4% compared to the second quarter of 2023. GAAP net income for the second quarter doubled to $1.7 million, and EPS was up by 120% compared to the second quarter of 2023. Our gross margin on a non-GAAP basis in the second quarter of 2024 grew to 75%. Note that our gross margin can vary slightly from quarter to quarter, depending on the revenue mix. We expect that the third quarter will remain at a similar level. Regarding R&D investment, the company’s strategy is to continue investing at a similar level 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. Our investment in research and development is vital to extending our technological leadership. This is a key enabler for our future business. We believe that R&D as a percentage of revenue will decrease along with revenue increase. On a non-GAAP basis, our gross R&D expenses for the second quarter of 2024 were $4.1 million. Excluding any impact from exchange rates, we expect that our R&D expenses will remain similar in the next quarter. During the quarter, we received a grant of $180,000 from the Israel Innovation Authority, the same as in 2023. We expect the Israel Innovation Authority grant to remain at a similar level in the third quarter. As Hilik mentioned, the transition to 5G presents attractive growth opportunities. We are excited about this potential and will continue to invest incrementally in sales and marketing, mainly by expanding the global sales team. Additionally, in the last quarter, we expanded our sales channels by partnering with new local agents and distributors, allowing us to capture more opportunities. In the second quarter of 2024, sales and marketing expenses reached $3.8 million on a non-GAAP basis, an increase of 27%, compared to the second 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 second quarter of 2024 were $1.2 million on a non-GAAP basis, an increase of $230,000 from the second quarter of 2023. This increase was mainly due to special expenses incurred for the CEO search. Turning to the company’s profitability, due to higher revenues and careful expense management, operating profit on a non-GAAP basis reached $2.3 million, growing by 170% or $1.4 million from the second quarter of 2023. Our non-GAAP operating margin was 15.4%, doubling our operating margin in the second quarter of 2023. Net income on a non-GAAP basis was $3.1 million, growing approximately 50% by more than $1 million compared to the second quarter of 2023. Diluted EPS for the quarter was $0.20, growing $0.07 from the second quarter of 2023. As shown in Slide 7, our GAAP net income for the second quarter of 2024 was $1.7 million. Diluted EPS was $0.11, growing $0.06 from the second quarter of 2023. Turning to the balance sheet, as shown on Slide 11, we continued generating cash and ended the second quarter with $86.1 million in cash, cash equivalents, and short-term bank deposits. Our headcount was 307 at the end of the second quarter of 2024. We expect our headcount to remain similar in the third quarter. That ends our prepared remarks. I will now turn the call back to the operator for your questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. The first question is from Arjun Bhatia of William Blair. Please go ahead.

Yes. Hey guys. Sorry to mute. Congrats on the momentum and the strong execution here. Look, it sounds like you're getting some pretty good adoption from 5G contracts. I think you cited $50 million in these top 5G contract signs from the start of the year. What is driving that in your view? Is it just where we are in the 5G cycle and build-out? Or is there some other catalysts that you think is driving momentum with some of these contracts here?

I believe the current momentum is positive. While it may not align with expectations from three years ago regarding 5G, we have observed a shift in momentum over the past six to ten months, revealing numerous opportunities for 5G transition. This trend is unstoppable; 5G is progressing, and it is closely linked to the cloud transition as well. RADCOM is well-prepared with our products, technology, and experience. We are not waiting for the final year to meet these requirements. This is the momentum I perceive.

I would add that we are still confident in the market evolving into 5G, and we see continued demand for our various products. We executed well this quarter and expect our growth journey to continue. Our strategy remains important to leading operators who are focused on 5G programs and continuing to invest in the transition to 5G standalone, which creates demand for our other products. Operators can be categorized into two growth segments: those who are enthusiastic and will invest more strategically in the transition to 5G, and more conservative operators who will initially invest less but increase their investment in the mobile space over time. We support both models as we believe in long-term relationships, which depend on the customer’s confidence and 5G strategy.

That's very helpful. Thanks, Hadar. I have a question about AWS. It seems you have had one existing customer move to your SaaS solution. Looking ahead over the next few years, do you expect that most operators and your customers will transition to your SaaS model? As this shift occurs, how do your economics differ in terms of pricing or gross margins between the SaaS offering and your original offering?

Focusing that most of the operators will make the transition to cloud. Part of them will do it on private, part will do it on public cloud. And then the option of SaaS is valid for us, and I think it's a big opportunity for the company to implement our product with more operators using SaaS because the advantages are clear with SaaS deployment. So yes, I think that it will happen. We saw it this year, and we have engagement with more customers in this area. So it’s very positive.

Is there anything we should consider regarding the economic aspects and margin impact of increased SaaS adoption, or is it still too early to determine?

Yes. So, the advantage is very clear on SaaS because the installation is much easier, and the technological options are more advanced in this area. It's very attractive mainly for medium and small customers that they don't need to buy some equipment or rent with the cloud providers. So, from an economic perspective, it is very attractive because it will help us to get many more operators compared to cost solutions or public cloud or compared to private cloud or cost solutions.

And I would like to add that the SaaS model may improve our gross margin, the more operators transition to this model. The SaaS model is a win-win situation. On the one hand, the operator incurs lower costs and doesn’t need to invest additional costs in the infrastructure, and for RADCOM, the marginal cost will decrease while the revenue will increase, which will improve our gross margin.

All right. That's very helpful. Thank you.

Thank you, Arjun, for your question. The next question is from Alex Henderson. Please go ahead.

Thanks. So, you've obviously produced some very strong numbers over an extended period here. And there is obviously also some lumpiness in this business, which can have an impact in any given quarter. So, as I'm looking forward into the September quarter, seasonally, that's a little bit of a softer quarter. Should we anticipate that the business is a little bit more skewed to the December quarter and that the September quarter might be down here sequentially from the June quarter? Or should we assume that the $14.8 million is at least attainable again in the September quarter here?

We are very excited about the results. Our consistent execution is driving order growth, and we exceeded expectations. We are encouraged by our momentum and see significant growth potential ahead. We anticipate this trend will continue and we are on track to meet our guidance. We also have strong visibility for 2024, which is why we have increased our guidance. The higher range suggests we might achieve around 18% year-over-year revenue growth, reflecting our performance in 2023. I believe this growth will be evident in each of the next two quarters, and I expect a steady trend. If foreign exchange rates remain stable, we foresee a similar pattern on the bottom line. As mentioned earlier, we aim to maintain our current R&D expenses while expecting a gradual rise in sales and marketing. Aside from any potential false impact on profit, we believe our profit as a percentage of revenue will improve.

Second question, kind of on the same general trajectory. There's been an extremely large amount of volatility around the yen, one of your anchor customers, Rakuten is based out of Japan. Does that have any impact on your business?

No.

And then relatively speaking, the R&D is expected to be fairly flat sequentially. I'm assuming in June to September, is the NRE also fairly flat?

We believe that in the third quarter, the NRE will be at a similar level. I expect that in the first quarter, we will see a decrease in the NRE due to the conclusion of existing programs.

I see. And then just broadly speaking, I would assume that there is some upward bias to the operating expenses total in the third quarter. Is it reasonable to think that you're fairly flat sequentially on the revenues and therefore, a little bit of upward bias that the EPS in the third quarter ought to be maybe a hair below the $0.20 number?

Yes.

Okay. Great. I wanted to go back to the commentary that you made on the call regarding the end of life of competitive products in the field that are more appliance-based in nature. Obviously, the transition to 5G is a decision point for most companies. But is that causing an acceleration in that adoption rate that's meaningful? How large an EOL event is that for your competitors?

Yes. So, first of all, the end of life, it’s not only related to 5G, but most of the time it is related. But also I want to emphasize that we see that also our competitors' systems start to be end of life, and connecting with the 5G is a real compelling event for transition to our system. We see a lot of customers, including Tier 1 customers, that are struggling with their existing service assurance platform. They try to manage, but it's inevitably not working for them. So sure, it will not work forever, not even for the next few years. I think this will remarkably help us to take more customers.

I would think that the installed base of those appliance-based systems are multiples of your revenue, and your share has been fairly low in the historical 4G base. That the magnitude of that upgrade cycle could be very substantial over the next two to three years. Is that a fair way to look at this transition?

Yeah, sure. So we've seen it. Again, our solution, which is totally software-based, cloud-native, is in line with this transition and addresses all the customer needs on this level. I saw it personally a few times during the last quarter. These are big customers.

I have two final questions before I conclude. Regarding the $50 million in orders that you previously announced in the first half, do you expect the order rate in the second half of the year to be similar? Or do you think that the earlier orders were an anomaly and that we might experience a temporary lull?

So Alex, as you know, during the second quarter, we renewed our eight-figure contract with Rakuten. This is thanks to our strong incumbent relationship with them. Except Rakuten, we won new deals, including 5G deals, the competitive interest that we secured due to our strong performance, differentiated technology, and established relationships. We remain focused on profitable growth, and we are going to continue to push forward because we believe that we are uniquely positioned to do it better. We are confident that our differentiated solution is aligned with key technology trends and well-positioned to address our customers' needs, but it’s really hard to predict what the level of bookings will be in the second half of the year.

You have a strengthening pipeline, but the exact closure dates can be challenging to determine. I understand that. I wanted to revisit NetTalk briefly. What are your thoughts on the future of that business regarding additional orders and backlog?

Yes. So first, I think the network is based on Generative AI. As you know, Generative AI is very much in the spotlight – you see it not just in our area but across the industry. We think that we have a unique value here, mainly the synthesis of our data combined with our network knowledge and new insights that we synthesize together. I believe that when we approach new operators, both new and existing customers, they want to see our vision and our cost leadership. I think this really advances our progress in sales because nobody will adopt this new service assurance system without a strong foothold in AI and Generative AI, mainly because all the information transition that telecom is heading toward will save costs. So, I think that it will influence our performance for sure, and today, it's helping us to engage with new logos. I see this as very important for us.

Thanks.

Thank you, Alex.

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