RADCOM Ltd. Q3 FY2025 earnings call

• Third quarter was a record quarter for RADCOM with strong growth and profitable business model; operators increasing investment in 5G stand-alone networks and AI operation (AIOps).
• RADCOM holds competitive edge with RADCOM ACE platform; Q3 revenue $18.4M, 16.2% Y/Y growth, record non-GAAP operating income $3.8M (20.9% of revenue), positive cash flow $5.1M, cash balance $106.7M no debt.
• Well positioned to capitalize on telecom spending tailwinds; AI native networks evolving, operators focusing on customer experience.
• Partnership strategy: deepening partnerships with NVIDIA, ServiceNow, system integrators; developing Agentic AI-powered automation layer; integration of RADCOM AIM with ServiceNow; new partnership with 1Global to deploy RADCOM ACE.
• Launched next-generation high-capacity user analytics solution powered by NVIDIA BlueField-3 DPUs; in field trials showing promising momentum; Argentic AI solution for real-time insights; customer engagements show shift to cloud-native platforms leveraging AI.
• Installed base: AT&T adding subscribers with RADCOM support; Rakuten Mobile expanding 5G footprint; broader deployments of AI-powered capabilities.
• Go-to-market: attended key industry events in Q3, solutions received strong recognition; Argentic AI solution honored with Best AI/ML Innovation Award.

For the third quarter of 2025, RADCOM achieved record revenue of $18.4 million, representing 16.2% year-over-year growth. Non-GAAP operating income was $3.8 million, which is 20.9% of revenue. Positive cash flow of $5.1 million was generated, and the quarter ended with a cash balance of $106.7 million and no debt. Gross margin in the quarter was just over 77%. Non-GAAP gross R&D expenses for the third quarter were $4.7 million, up 11.6% year-over-year. Sales and marketing expenses were $4.6 million, an increase of 15.4% compared to the third quarter last year. Non-GAAP operating margin was 20.9%, and non-GAAP net income was $4.9 million or $0.29 per diluted share. On a GAAP basis, net income for the third quarter of 2025 was $3.5 million, an increase of 54% year-over-year.

• Expect strong balance between growth and profitability to continue.
• Believes gross margin level sustained in fourth quarter.
• Plan to continue strategic R&D investments.
• Gradual increase in sales and marketing expenses in coming quarters to support growing pipeline.
• Target double-digit growth in 2026, with visibility of new opportunities in market, especially in cloud native and 5G stand-alone areas.

• Forward-looking statements involve risks and uncertainties including company's commitment to solutions, market trends, resilience of operating model, value of AI-driven solution, converting pipeline to revenue, expanding installed base, levels of investment, strategic partnerships, initial revenue from partnerships, full year 2025 revenue guidance, margin, expenses, future growth, momentum, profitability.
• Non-GAAP financial measures not substitute for GAAP measures; investors encouraged to review reconciliation.

Q: For the newly launched high-capacity user analytics solution, what are the early feedback from customers so far? And what are you most excited about?

A: Thanks for the question. We're super excited about it. It's currently in a couple of field trials. We see great performances, and we see targeting this to materialize in 2026. But so far, we are very happy with the performance we see in the field.

Q: I wanted to ask about your visibility as it relates kind of looking into next year. It sounds like you're feeling a little more confident. Can you give any color there around visibility? And as you look ahead into next year, any major renewals or anything coming up that would make you concerned about maintaining your current run rate of revenue into '26?

A: We're still targeting -- thanks, Ryan. But we're still targeting double-digit growth for next year. We do see a lot of new opportunities coming up in the market for us specifically to the move the cloud native and the 5G stand-alone piece is driving a lot of transformation on the customer side. And then obviously, the line of spend, we still see some activities within our customers that need to consolidate certain applications, and we're going to support that. So overall, I think we can continue to support the double-digit growth also in 2026.

Q: In terms of earnings leverage next year, it sounds like you're planning to spend a little more on the sales and marketing line. Any other puts and takes you'd point out on leverage, '26?

A: Yes, marketing and R&D, yes, that's right.

Q: Just a macro question about 5G core. It certainly sounds like we're starting to see some real deployments out there, at least in the U.S. Can you validate that view? And also any updated thoughts on the other kind of geographies in APAC or EMEA around 5G core deployments stand-alone?

A: Absolutely. We see good momentum on 5G core stand-alone Open RAN as well through U.S., Europe and some areas in Japan and Asia. And it is driving a lot of the activities, as I mentioned earlier, moving -- having a cloud-native application to support the troubleshooting and customer experience. The NVIDIA piece is really driving full user population visibility, and this is also driving a lot of excitement on the customer side.