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RADCOM Ltd. delivered a robust Q1 2026 performance, reporting 12% revenue growth to $18.6 million and an expanded non-GAAP operating margin of 20.1%. The company reaffirmed its full-year revenue growth guidance of 8-12%. Strategic focus has shifted heavily toward 'Agentic AI' with the launch of RADCOM Neura, an AI agent suite designed to automate telecom operations. Key developments include a multi-year renewal with a Tier 1 operator, a second certified connector for ServiceNow, and a new partnership with Infosys to develop telco-specific AI agents. Management emphasized a significant TCO advantage, citing ACG Research findings that RADCOM can reduce costs by up to 70% relative to competitors. With $108.4 million in cash and no debt, the company is well-funded to continue its R&D investments in AI-native assurance. Management anticipates that the acceleration of 5G standalone deployments and high-traffic events like the 2026 FIFA World Cup will drive further demand for its real-time analytics and automation solutions. The 'partner-leverage' model with AWS, NVIDIA, and ServiceNow is expected to scale the sales pipeline efficiently throughout the remainder of the year.

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RADCOM LTD: High-Assurance Technology with Fragile Revenue Pillars

Full Earnings Call Transcript — Q1 • 2026-05-19

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd results conference call for the first quarter of 2026. [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/mailtome. On the call are Benny Eppstein, RADCOM'S CEO and Hod Cohen, RADCOM's CFO. Please note this management has prepared the presentation for your reference that will be used during the call. If you have not downloaded it, you may do so through the link in the investor's section of RADCOM's website at www.radcom.com/investor-relation. Before we begin, I would like to review the safe harbor provision. This conference call will contain forward-looking statements. Forward-looking statements in the conference call involve several risks and uncertainties including, but not limited to, company's statements about its momentum, strategic direction and goals, market position and trajectory, future execution and delivery of value to customers and stakeholders, expansion within its existing customer base and expansion of its footprint, development of an enhancing strategic partnership and expected benefits and revenues from collaborations, the success of new technologies, including AI to, among other things, enhance automation and efficiencies pipeline, opportunities and customer engagements and the timing thereof, the launch and reception of RADCOM Neura and its integration into agentic AI ecosystems, demand for its products and solutions and the ability to address new customer segments and expand its market reach, trends in the market, the expected benefits of its AI-driven assurance and other solutions, its expectation with respect to research and development and sales and marketing expenses, expectations regarding the growth of 5G and AI and related spending and its full year 2026 revenue guidance, future growth and profitability. 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 today's press release 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 noncash stock-based compensation that has been expensed in accordance with ASC Topic 718 financial income, expenses related to acquisitions and amortization of intangible assets related to acquisitions. Non-GAAP results provide information helpful in assessing RADCOM's core operation 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 quarterly earnings release available on our website, www.radcom.com. Now I would like to turn over the call to Benny. Please go ahead.
Benny Eppstein: Thank you, operator and good morning, everyone. Please turn to Slide 7. The first quarter marked a strong start to 2026. We sustained financial and operating momentum. We delivered revenue of $18.6 million representing 12% year-over-year growth and extending the positive trajectory we have built over the past several quarters. Profitability also strengthened with non-GAAP operating income increasing to $3.7 million and operating margin expanding to 20.1%, up from 19% in the first quarter of 2025. This performance reflects our operating discipline and our ability to efficiently convert top line growth into higher profitability, while investing in innovation and long-term initiatives. Based on our current visibility, we are reaffirming our full year 2026 revenue guidance of 8% to 12% year-over-year growth. Now to Slide 8. From an execution standpoint, we delivered financially and continue to strengthen our position within evolving AI-native telecom ecosystem. During the quarter, we signed a multiyear renewal with one of our Tier 1 customers, expanding the deployment of RADCOM ACE into additional AI-driven use cases focused on automated data-driven network operations. The extended scope includes enhanced automation capabilities designed to improve service assurance workflows, accelerate issue identification and resolution and provide deeper real-time network insight across increasingly complex 5G environments. This renewal not only confirms the strategic nature of our relationship with this operator but also reflects growing confidence in the measurable value we deliver, lower operating costs, faster issue resolution and stronger service quality in 5G networks. During the quarter, we also launched RADCOM Neura, our AI agent suite designed specifically for Agentic telecom ecosystem. Neura represents an important milestone in our AI strategy and product roadmap. This suite turns real-time network and subscriber data into autonomous intelligence that identifies issues, analyze user behavior and automates workflows across assurance, network operations and customer care. Neura integrates directly with existing service management system, including ServiceNow, letting operators embed telecom intelligence into their broader IT and support environment. As we broaden our strategic offering, our AI strategy is receiving positive feedback from operators, ecosystem partners and industry publications. Last quarter, our predictive complaint resolution agent received the Best AI/ML Innovation award at the Global Connectivity Awards in London, highlighting growing industry recognition for our AI-native assurance capabilities. Turning to Slide 9. In March, we launched our second certified connector on the ServiceNow store, RADCOM network case validation and verification, which extends deeper network intelligence directly into service management workflow. The solution lets operators detect, validate, prioritize and resolve network issues faster without leaving the ServiceNow platform, cutting manual work and improving efficiency. These releases demonstrate our ability to rapidly translate  AI road map into deployable capabilities that operators can implement today. AI is reshaping how operators run their networks and the value it delivers will be defined by the quality of the data it receives. In telecom, the data that matters most is the data that reveals the real subscriber experience on the live network. That is precisely what RADCOM produces. We capture data, correlate it, and transform it into subscriber level insights that drive the AI use cases our customers need to deliver real-time benefits and fuel network automation. If data is the new oil, RADCOM operates the refinery, the point where raw telecom data becomes the subscriber level intelligence that AI use cases actually need. Turning to Slide 10. This is also the value we bring to our work with key ecosystem partners, including NVIDIA, ServiceNow, AWS, a leading global system integrator such as Infosys, with whom we have recently partnered to develop telco-specific AI agents and network use cases. These partnerships are increasingly important as operators seek AI solution built specifically for telecom environments rather than on generalized AI platforms that lack telecom domain expertise. For us, these partnerships amplify our reach putting our technology in front of operators we might not have reached directly, carried by trusted implementation partner. The right partner relationships don't just expand our reach, but they accelerate the sales cycle and lower the barrier to adoption. Turning to Slide 11. This partner leverage model is also why we can scale the pipeline efficiently, by extending our reach through trusted system integrators and ecosystem partners rather than through proportional growth in direct sales and marketing investment. RADCOM has spent more than 3 decades inside Tier 1 operator networks, generating intelligence from live subscriber and service data, the edge cases, protocol expertise and operational workloads that emerge only at scale. It's what general purpose AI can't replicate. A useful analogy is that of a fluent speaker versus a native speaker. General purpose AI applied to telecom may understand the language, but it lack the context to understand edge cases and service impacting events. Combining AI with telecom native expertise and product innovation is what turns automation into real customer outcome, and that is what we bring. Turn to slide 12. Beyond AI capabilities, our technology also stands out for operators focused on lowering total cost of ownership. During the quarter, ACG Research a leading telecom research firm independently reviewed our total cost of ownership against competing solutions. It found that RADCOM can lower an operator's total cost of ownership by up to 70%, even when run on the same hardware as competing solutions. These savings come from our patented cloud distributed architecture, which requires fewer servers, use less data center space, consume less power and handle large-scale network datasets more efficiently. Exact savings vary by deployment, workload and network setup, but the cost advantage held up across every customer environment ACG reviewed. This combination of AI native capabilities, telecom domain expertise and cost efficiency is shaping conversation with operators globally and is driving activity across our pipeline. Growing our Tier 1 footprint remains a top priority and we are actively engaged in multiple sales opportunities, several of which are advancing through technical evaluation and proof-of-concept stages. Ultimately, adoption of next-generation assurance moves at the pace of each operator's tech stack, checked by a variety of variables from cloud maturity to AI readiness. That variability is why our pipeline is broad and multiyear by design and why our partner leverage model is built to meet operators wherever they are on that curve. Turning to Slide 13. Alongside new opportunities, our installed base remains an important validation of our strategy and technology. During the quarter, we advanced deployment work with 1GLOBAL following its selection of RADCOM ACE to monitor 4G and 5G services, supporting around 43 million subscribers. We also expanded our relationship with a leading European operator through Rakuten Symphony for our network visibility solution, thereby enhancing visibility and real-time insights across virtualized and cloud native network environments. Both deployments are progressing well and further show how our solutions perform in large-scale production networks. We also continue to support AT&T and Rakuten Mobile, where our assurance solutions remain embedded in production networks supporting millions of subscribers. Turning to Slide 14. Stepping back, the broader market landscape is evolving in ways that align closely with our strength. According to a recent Omdia report, 5G core spending increased 83% in the fourth quarter of 2025 as operators accelerated 5G standalone deployments, extended cloud-native architectures and prioritized AI-driven efficiency initiatives. Operators are increasingly focused on automating their networks, improving subscriber experience and lowering operating costs while managing rapidly growing data consumption and network complexity. We believe these industry priorities directly drive demand for cloud-native AI-enabled service assurance and network intelligence solutions such as RADCOM ACE and RADCOM Neura. Looking ahead, the FIFA World Cup in June will push operator's networks to increase capacity with traffic levels as much as 5x normal around event stadiums. High-density, high-stress events like this are where real-time assurance, subscriber analytics and automated workforce matter most. And, our solutions like RADCOM ACE delivered the clearest value. Turn to Slide 15. From a go-to-market perspective, we also remain highly active during the quarter. We participated in NVIDIA GTC, the TM Forum Tour Tokyo and Mobile World Congress, Barcelona showcasing solutions in collaboration with ServiceNow, AWS, and Infosys. Customer partner responses to our AI agent capabilities and AI native assurance solutions were very encouraging, and we held productive meetings with operators and ecosystem partners that we believe can translate into additional sales opportunities over time. Turning to Slide 16. Overall, this was a strong start to the year. Revenue grew 12%. Operating margin expanded to 20.1%, and we reaffirm our full year guidance of 8% to 12% revenue growth. The market is moving toward AI-native operations, and RADCOM produces the network and subscriber data that Telco AI needs to run on. We remain focused on disciplined execution, deepening our installed base, growing our Tier 1 footprint and advancing AI-driven assurance for autonomous networks. Looking ahead to the rest of 2026, we expect to expand the Neura agent suite with additional use cases across assurance, customer care and network operations and to continue translating our AI road map into deployment capabilities that our customer can run today. With that, I'll turn the call over to Hod.
Hod Cohen: Thank you, Benny, and good morning, everyone. As a reminder, unless otherwise noted, I will refer to non-GAAP results. Reconciliations between GAAP and non-GAAP measures are provided in our press release and presentation. Additionally, all comparisons are year-over-year unless otherwise noted. Please turn to Slide 18 for our quarterly financial highlights. We grew revenue 12% year-over-year to $18.6 million and managed expenses effectively even as we increased strategic R&D investments, resulting in improved margins and profitability. Gross margin in the first quarter was 76.5%, operating income reached $3.7 million, and the operating margin was 20.1%. Net income was $4.7 million or $0.28 per diluted share compared with $4.1 million or $0.25 per diluted share last year. As shown on Slide 19, our gross R&D expenses for the first quarter totaled $5.1 million, up 19.7% year-over-year. This growth reflects our focus on strengthening collaboration, fostering innovation and expanding our product portfolio. We plan to continue strategic R&D investment to deliver advanced intelligent solutions with a focus on agent-to-agent and multi-modal workflow while supporting our strategic partnership and productization efforts. Sales and marketing expenses for the first quarter totaled $4.3 million, a 1.4% year-over-year increase. We continue to invest in our sales capabilities to support pipeline growth and expansion in high value regions. On a GAAP basis, as shown on Slide 20, our net income for the first quarter of 2026 was $3.1 million, a 26.1% year-over-year increase. GAAP earnings per diluted share were $0.18 compared with $0.15 last year. We ended the first quarter of 2026 with 328 employees. Turning to the balance sheet on Slide 23. We closed the quarter with $108.4 million in cash, cash equivalents and short-term bank deposits, reflecting a $1.5 million negative cash flow, mainly due to annual bonuses payment. Thank you. We will now pass the call back to the operator for any questions.
Operator: [Operator Instructions]  The first question is from Arjun Bhatia from William Blair. Please go ahead.
Arjun Bhatia: Yes. Perfect. Thank you so much, you're kind of talking to a lot of Tier 1 operators you're engaged in sort of several opportunities at various stages. And so it sounds like the pipeline is strong, and I'm curious if you can just touch on how -- where you are in these deals when you expect they might convert? And is that growth opportunity '26 better? Or is it further out in '27 and '28?
Benny Eppstein: Hi Arjun.  thanks for the question. I believe that at least part of it will translate into revenue in the second half of 2026, definitely -- or at least what I believe in is Q4 definitely will reflect some of the general new customer that currently we are engaging with.
Arjun Bhatia: Okay. Got it. Perfect. And then on your new AI offering Neura, what -- is that a new sort of monetization motion? Is it going to be like an add-on pricing or some premium pricing? How do you think about sort of layering that into your contracts with customers and prospects.
Benny Eppstein: I believe it's the right and the idea is to orchestrate different AI agents within the Agentic ecosystem as a whole. And it will definitely be monetized based on the number of use cases at the agents, AI agent that you'll acquire from us, but it would be also part of a larger bundle and also part of partnership play that we mentioned today with Infosys or others. So it's very dependent on the requirement and very specific to customer endpoints. I can put it like that.
Operator: [Operator Instructions] The next question is from Ryan Koontz from Needham & Company.
Ryan Koontz: Want to maybe ask about your partnerships here, your ecosystem partners with ServiceNow and maybe AWS to a lesser degree. But can you update us maybe on your joint sales motion there and how that's playing out for you? What's been working so far and maybe what you think about where and how that relationship evolves in the future.
Benny Eppstein: Sure, absolutely. Yes, we have the number of existing customers and new prospects that we are working together. We are actually experiencing some of the geographical reach due to that. We're making good progress. And as you know, telco sales cycle is a bit long, but we are seeing good and positive response from our customers looking into it and also kind of extending leverage and their platforms with our capabilities, bringing a lot of value to our end customers. So definitely good prospects and here, I do hope to get something in production by end of the year or early 2027.
Ryan Koontz: Great. Maybe a follow-up on a similar vein, but thinking about from a technological perspective, as you see 5G stand-alone cores, we're hearing a lot more about that momentum picking up out there. How does that affect your opportunities out there for your customer base with regards to the proliferation of stand-alone.
Benny Eppstein: We see a lot of need to move to a cloud-native architecture. We see some struggle with our competitors and the ability to providing those abilities. And I think with us, we already know how to work with each and every cloud provider also to support the private cloud solutions. So overall, I think it's pushing the customer towards more innovative and current technology-based solution versus legacy. So definitely helping us combine with the new and the AI agent that we're putting into the ecosystem is definitely something that promoting our business globally.
Ryan Koontz: That's great, Benny. I appreciate the insights.
Benny Eppstein: Thank you so much.
Operator: There are no further questions at this time. This concludes the RADCOM Ltd First Quarter 2026 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.