Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the Second Quarter of 2021. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] 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 Eyal Harari, RADCOM's CEO, and Amir Hai, 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 its visibility into the second half of 2021, its sales pipeline, momentum, demand for its products, and new requests and potential expansion of opportunities. The company’s continued investment in technology and R&D expectation regarding the 5G market size and trends in industry investments and spending, the company's expectation with respect to the digital trend in telecom, the company’s market position, cash position, potential and expected growth, the company's expectation with respect to its relationships with Rakuten and AT&T, its potential expansion with a top tier LATAM operator, the potential for additional grants from the Israel Innovation Authority, the potential for additional partnerships with top cloud providers in the future and its revenue guidance. 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 be referring to certain non-GAAP financial measures, which are provided to enhance the users’ 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 the Generally Accepted Accounting Principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures, included in the quarter's earnings release, available on our website. Now, I would like to turn over the call to Eyal. Please go ahead.

Thank you, operator, and thank you, all for joining us today. Earlier this morning, we issued a press release stating our second quarter 2021 results. We are pleased with the results. We delivered another solid quarter as we continue to execute the company's strategy and invest in our advanced 5G cloud technology as we engage in a significant higher number of sales opportunities. Total revenue for the second quarter of 2021 was $9.8 million, representing an eighth consecutive quarter of year-over-year revenue growth. Additionally, we secured several meaningful orders from our existing customer base during the quarter increasing our visibility into the second half of 2021. We made progress with the initial deployment at the top tier LATAM operator that we announced in May. This order covers the operator’s 4G network with the expectation of expanding to their 5G network in the future. This win was achieved based on our innovative technology and the advanced capabilities of RADCOM ACE, which we believe provides significant value to operators as 5G radio automated assurance platform. We are pleased with our progress as we remain focused on delivering on our commitments and expanding these relationships. We continue to invest strategically in R&D, announced in last week, our enriched AI-driven insights. We introduced a new innovative AI solution as part of RADCOM ACE. This solution automatically analyze millions of data sessions in real-time and can reveal underlying network faults that otherwise would be unlikely to be identified quickly in 5G networks. This solution helps operator overcome challenges of operating complex, multi-vendor networks and ensures the quality of services. I am proud of our team worldwide for their dedication and commitment to advancing our cloud technology and delivering on our customer commitments. Even with the ongoing impact of the pandemic, the telecom industry is moving…

Thank you, Eyal, and good morning, everyone. Now please turn to Slide 7 for our financial highlights. To help you understand the results, I will be referring mainly to non-GAAP numbers, which exclude share-based compensation. We ended the second quarter of 2021 with $9.8 million in revenue, increasing from $9.2 million in the second quarter of 2020. Our gross margin in the second quarter of 2021 on a non-GAAP basis was 75%. Please note that our gross margin can fluctuate depending on the revenue mix. Our gross R&D expenses for the second quarter of 2021 on a non-GAAP basis were $4.9 million, an increase of $400,000, compared to the second quarter of 2020. This decrease is mainly related to a negative exchange rate between the U.S. dollar and the Israeli new Shekel and an increase in our headcount as part of our product investments. We received a grant of $70,000 from the Israel Innovation Authority during the quarter, compared to a grant $572,000 in the second quarter of last year. In addition, we are engaged in ongoing discussion with the Israel Innovation Authority to improve additional development plans. Therefore, we will have clearer visibility for 2021 during the next quarter. As a result, our net R&D expenses for the second quarter of 2021 on a non-GAAP basis were $4.8 million, compared to $3.9 million in the second quarter of 2020. Sales and marketing expenses for the second quarter of 2021 and $2.3 million on a non-GAAP basis, a slight increase of $100,000 from the second quarter of 2020. G&A expenses for the second quarter of 2021 on a non-GAAP basis were $841,000, approximately the same as the second quarter of 2020. Operating loss on a non-GAAP basis for the second quarter of 2021 was $646,000, compared to an operating income of $102,000 for the second quarter of 2020. Net loss for the second quarter of 2021 on a non-GAAP basis was $304,000 or a net loss of $0.02 per diluted share, compared to a net income of $231,000 or a net income of $0.02 per diluted share for the second quarter of 2020. On a GAAP basis, as you can see on Slide 6, our net loss for the second quarter of 2021 was $1.1 million or a net loss of $0.08 per diluted share, compared to a net loss of $0.2 million or a net loss of $0.01per diluted share for the second quarter of 2020. At the end of the second quarter of 2021, our headcount was 280. Turning to the balance sheet, as you can see on Slide 10, our cash, cash equivalents and short-term bank deposits as of June 30, 2021 were $64.9. We believe that our strong balance sheet provide us with the flexibility to execute the opportunities ahead of us and remain agile through a global uncertainty. That ends our prepared remarks. I will now turn the call back to the operator for your questions.

[Operator Instructions] The first question is from Bhavan Suri of William Blair. Please go ahead.

Good morning or good afternoon over there guys. Thanks for taking my question and a nice job. Excited actually about the pipeline traction you are seeing. I guess, I'd love to get a little color into that pipeline growth. You said double-digits. What regions? And maybe what types of carriers? What tier? And specific for the POCs, sort of - I know that in POCs, but are these deals and the size will make to Rakuten and AT&T? Any color would be very helpful.

Good morning, Bhavan, and thank you. I think that overall, we see growth in – this is driven from the 5G evolution. We see, if you follow where 5G is evolving, these are the areas that we see more and more growth. And in general, the growth is coming from most of the regions. This is because the technology is evolving now with a - in general and we see many of them operate both in Americas, in Europe, and in APAC progressing into the next stages with 5G and starting to look into solutions of service assurance As I pointed out, the growth is coming in double-digit percentage and it's in the different stages of the opportunities, some of them are early pipeline deals that will probably take some time. But we still saw progress with more opportunities that are more mature. I am not sharing the exact number of POCs, but some of them are in the POC stage. And in overall, we are very positive on the pipeline growth as we see it today and we believe that this growth is reflecting the technology advantage we have and increasing the demand that is coming due to the initial investment into 5G.

Got it. Got it. Now that was helpful. I'd love to talk about the LATAM deal and how is that deployment going in terms of AT&T and others coming into. But how the LATAM deal is going? And then I’ve got a question on sort of the COVID risk. But let’s talk about LATAM first.

Sure. So, as we announced in May, we got orders from this LATAM operator for the 4g network. We are in the last few months starting to implement the solution. The implementation is going well. This is something that will be happening in the next few months and we are in a very good relationship with the customer and everything is going by plan. As indicated, this win is not only significant and sizable by itself, but moreover, is a potential into a further expansion into 5G once this operator is going to turn his 5G network in the future. This is something that is likely to happen probably next year. So, we are very excited from this relationship with them.

Now that sounds really good. I guess, two quick questions. One, you didn’t increase full year guidance. I'd love for you to just provide some color on sort of how the POCs might sort of turn into revenue? Is that a calendar 2022 thing? How should we think about it, is that 12, 18 months out? How do these POCs typically if you win them turn into deployments or turn into revenue?

Yes. Most of - we are now in August, so most of the POCs that are starting now are mainly to build the 2022 numbers and the visibility. This being said, we are working in the last year on some activities. Some opportunities are already post-POCs and get - can get closed earlier than that. But I am mainly focused on 2022 numbers. We mentioned that we have very good visibility into 2021, based on the orders we secured already. And we are looking on long-term growth and continue to move business forward.

Got it. Got it. And one last one for me. And obviously, we were seeing some concerns around the delta variants at least in the United States and other regions. As you look back, I mean, there was sort of a hiccup up a little bit people took, a little more delay in some of the decision-making or when COVID originally happened. Are you seeing anything from your customers any sort of hesitation or concern in terms of spending around delta or is it just sort of business as usual right now?

I think, we – this is obviously a discussion and concern on the personal level, but not a delay or something that would, I see a significant business implication. We know that are projects are always taking their time and overall it's looking that its progress is expected.

Great. Great. Thanks for taking my questions, guys and a nice job. Look forward to [Indiscernible] convert. Thank you.

The next question is from Michelle Waller of Needham & Company. Please go ahead.

Thanks. Hi guys. This is Michelle on for Alex. I guess, just for the first one, can you speak on the recently announced AT&T and Microsoft Azure deal? And how you see that impacting the assurance market over time? And maybe more specifically to you guys the business with AT&T?

So, the - we see a general technology trend of the public cloud providers looking into telecom as the huge opportunity. The telecom workloads as of today are primarily based on either a proprietary hardware or in the more modern cases on datacenters that telecom operators build for themselves. We are starting to see more and more investments on the cloud provider to try to take those workloads and implement the datacenter for the telcos either on-site or as public cloud service, which should probably take some more time. In the specific announcement from Microsoft and AT&T’s deal, AT&T build their own network cloud technology in-house and they sold their IP and intellectual property to Azure and build this collaboration. I believe in the short-term, this is going to be making not a big difference, but in the longer-term, the expectation and what I believe is that, it shows the commitment of Microsoft Azure into the investment to the telecom. And this could be door opener into more opportunities as customers are implementing Microsoft Azure in their cloud environment. As I mentioned before, we have our integration with Azure that was announced in March. This is very important for us and the overall trend of more and more telco operators partnering with cloud provider is part of the overall trying to move to virtualization and cloudification, which is a growth driver into company like RADCOM as we are excelling and the most advanced into the area of fully containerized application and this enables more potential for us. We see similar investments from Rakuten that are implementing their own cloud and Rakuten, they are experts on cloud platform, as well. And this is very exciting for us to see this technology evolution in the industry.

Great. Thanks. And so, just, as we look into the second half, I guess, you guys sound pretty upbeat, there doesn't seem to be anything that's just really a deceleration. So, as I look at the year-over-year growth comps that you guys are coming up against in the second half, I would think maybe September would be a higher growth opportunity, compared to December quarter, just because the comparable quarters on a year-over-year basis are easier? Is that fair to assume? Or do you see it being more linear that the growth going into the second half?

Hi, Michelle, it's Amir. Basically, we provide annual guidance since the revenue can fluctuate between the quarters, if kind of a project is implemented in and has some delays, so we cannot know exactly the time for that. But, as we've stated in the beginning, we believe that we will keep the – we will be in the range of from 39 to 41. And so, this is our target.

Okay. And just one last one, real quick on the Israeli Government grants. It sounds like you guys are in discussions with them right now. I think you guys have said and maybe, correct me if I am wrong. But for calendar 2021, you had previously been expecting a similar amount from the government grants this year, compared to last year. So, when you're talking about going - just going back to having discussions with the government over these grants, are you saying to re-discuss the additional grants? Or is that the overall expectation for the year changed?

Yes. Basically, again around - last year we gain around $1.2 million to $1.3 million in grants. Right now, we started the process that 2021 grant in Q1 and at that time, there was a government transition and without any estate budgets approval, this creates kind of budget limitation. So, as of now, what you are there, they ended about $70,000, $75,000 per quarter, this is secured. And for the other plans, we are still in discussions with the Israel authorities and we hope that making - we will make progress in the coming months. If we succeed to gain this grant, this will be paid retroactively from the beginning of the year.

Okay. Great. Thanks. That's all for me. Thanks guys.

Thank you.

[Operator Instructions] The next question is from Sasha Karim of IPI. Please go ahead.

Hi guys. First question from me. Is there anybody else, is there any other assurance provider currently engaging with Rakuten to be integrated in the ITP or to the best of your knowledge, are you the only company doing that?

I don't want to refer too specific things about Rakuten. But overall, we are having a very good relationship with Rakuten. We just mentioned few quarters ago, our expansion into 5G with them and this is one of the first deals in the market for 5G standalone, if not the first. We are now very busy to integrate our solution and deploy it into their live network as they are evolving with 5G. This is targeted to get live by end of the year and our relationship is very tight with them and as you could indicate from the last analyst reports, we had with them and testimonials we had with them, we are working very close. They are very important customers and we feel very comfortable about our relationship with them.

Thanks. Next question would be, are you expecting to recognize any significant revenue this year from the Tier-1 LATAM win? Or does that not begin properly until 2022?

The revenue is - depends on the implementation of the project. This is something few months down the road and likely to happen more in the 2022 revenue year.

Got it. Thank you. And then, my last one would just be on cloud opportunities. I think, we've seen DISH come very strongly, maybe not so much the case for established telcos. But would you agree with the general thesis that Greenfield operators are more willing to outsource their network to cloud and therefore in theory, it should be a best opportunity for you given your cloud-native software?

I believe the overall telco industry as a whole is going into the public cloud architecture and solutions. Obviously, Greenfield operators have less legacy and less limitations, therefore they can move faster and take more strategic decision earlier, while we see more of the other operators brown line operators that are already established with networks are also taking steps and there were mainly press releases by the different public cloud providers on partnership with operators like we mentioned AT&T and Azure but there were others as well. This is the trend that is gaining momentum, and it's very exciting momentum for us, because all of our technology investments, lot of our R&D investment including our lately released AI framework capabilities on top of the RADCOM ACE, this is all targeted and driven into such an environment and we believe this creates a favorable environment for us in the assurance space.

Great. Thank you very much.

Thank you.

There are no further questions at this time. This concludes the RADCOM Ltd second quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.