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Edited Transcript of RDCM earnings conference call or presentation 13-Feb-20 1:00pm GMT

Q4 2019 Radcom Ltd Earnings Call

Tel Aviv Feb 20, 2020 (Thomson StreetEvents) -- Edited Transcript of Radcom Ltd earnings conference call or presentation Thursday, February 13, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Amir Hai

RADCOM Ltd. - CFO

* Eyal David Harari

RADCOM Ltd. - CEO

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Conference Call Participants

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* Alexander Henderson

Needham & Company, LLC, Research Division - Senior Analyst

* Bhavanmit Singh Suri

William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome to RADCOM Ltd. Results Conference Call for the Fourth Quarter and Full Year 2019. (Operator Instructions)

As a reminder, this conference is being recorded and will be available for a replay from the company's website at www.radcom.com from February 14, 2020.

On the call today are Eyal Harari, RADCOM's CEO; Amir Hai, RADCOM's CFO.

Please note that management's prepared the presentation for your reference that will be used during the call. If you have not download it yet, you may do so through the link on the Investor 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 feelings about its 2020 revenue guidance, anticipated gross margins, intended expenditures in research and development, the company's strategy, growth, leadership position, opportunities and momentum, visibility, headcount and backlog as well as statements about future market conditions and trends, including 5G pace of adoption, benefits and appointment and future plans of the industry participants and customers.

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 company's SEC filings. In this conference call, management will be referring 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, non-GAAP results provide information that is useful in assessing RADCOM's core operating performance and in evaluating and comparing our results of operation 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 which are included in the quarter's earnings release, which is available on our website.

I would like to repeat the information about the presentation. If you have not downloaded yet, you may do so through the link on the Investors section of RADCOM's website at www.radcom.com/investor-relations.

Now I'd like to turn the call over to Eyal. Please go ahead.

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Eyal David Harari, RADCOM Ltd. - CEO [2]

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Thank you, operator, and thank you all for joining us today. Earlier this morning, we issued a press release, stating our results for the fourth quarter, full year 2019.

As you may have seen, total revenue were $9 million for the fourth quarter of 2019, bringing our total revenue for the year to $33 million, which was at the high end of our 2019 revenue guidance. The solid end of the year reflects the progress made during 2018, in which we expanded our customer base into new markets by adding VimpelCom and Rakuten Mobile and maintained strong relationships with our current customers, including AT&T and Globe.

Our recent customer engagements are aligned with our strategy of entering multi-year contracts with recurring revenues, which provide us with good visibility into the coming year. Considering our good visibility into 2020 and the current engagements, we are providing an annual revenue guidance of $35 million to $38 million.

Heading into 2020, we believe the 5G revolution has begun as more operators are beginning to launch their commercial 5G services, and we are continuing our work to make sure that RADCOM is in position to benefit from this technological transformation.

As 5G sets out to be such transformative technology, I would like to spend few moments explaining about this technology and the expected stages of its rollout.

In the initial 5G rollouts, compatible handsets connects to both 5G and 4G radios that in turn connect the subscriber to the same existing 4G core network. Today, we are at this stage of 5G, also known as first phase of 5G, and we see more now of these limited-scope 5G deployments.

So far, just over 60 operators in 30 countries have launched 5G. In this type of mobile network, operators may use their current service assurance solutions to monitor 5G services. Long term, we agree with the industry consensus that the fifth-generation mobile network is expected to lead the fourth industrial revolution, in which technology is always connected and deeply embedded into society.

5G will seamlessly connect billions of IoT devices while delivering mission-critical communications that is ultrareliable and low latency such as remote control of driverless equipment for mining into suctions as well as remote surgery and fleets of drones connecting to the mobile network for surveys and disaster relief.

Later this year, the second phase of 5G standard is expected to be finalized by the 3GPP. In this network environment, operators will deploy an entirely new network call and will need a new assurance solution to monitor mission-critical, always-connected services.

In prior iterations of mobile network, low network performance would have meant (inaudible). In the second phase of 5G, low network performance can affect the successful remote surgery or whether remote-controlled drone's flight safely. This means the platform will be even more essential to operators as they need to know what is happening in the network all the time to monitor mission-critical services delivered using dynamic cloud network.

Last year, we announced our initial 5G-ready portfolio, and this year, we will continue to enhance our solution to answer the needs of our customers in the 5G era. We expect that R&D expense will continue to be significant part of our operating expense as we maintain our high level of investment in R&D to maintain our technological leadership.

We expect that this investment will provide us an advantage as we seek to benefit from the expected increased momentum of 5G regulation. We expect 5G adoption to pick up pace over the year, and we want to leverage our position as market leader for virtualizing solution to engage with early adopters.

As more advanced 5G use cases such as the remotely operated equipment and remote surgery are introducing to the network that will require more advanced assurance capabilities and features that we can offer.

During the fourth quarter, we announced that we signed a new multiyear contract with VimpelCom to provide them with our fully virtualized network intelligence solutions and assure the end-to-end customer experience across the customer base. We are making good progress with this implementation and are excited about working with VimpelCom. VimpelCom is a customer-oriented operator in Russia with over 50 million customers under its Beeline brand.

Since VimpelCom operates in a competitive environment, the company is relying on our virtual solution to monitor its services and ensure high level of customer experience, while managing costs.

Earlier in the year, we signed a high-profile, multi-use agreement with Rakuten Mobile to deploy a fully virtualized network intelligence solution for Rakuten's unique mobile network, which will be the world's first fully virtualized end-to-end cloud-native mobile that adopts a 5G system architecture from launch. Rakuten plans to perfect its cloud connectivity platform in Japan and then take the same platform to other markets worldwide.

Rakuten's decision to partner with RADCOM demonstrate our industry leadership. Rakuten Mobile announced that it expects to launch fully commercial services in April of this year, and we are proud to be part of this exciting effort.

Rakuten's new network architecture allows flexible deployment of new services and lays the groundwork for speedy and straightforward implementation of 5G. We continue to work closely with Rakuten as they prepare for the full commercial launch of the content reach customers-driven network.

Additionally, we continue to execute on our strategic engagement with AT&T. Our cutting-edge software and support play an important role as AT&T continues to move forward with network virtualization to prepare for the expected nationwide rollouts of 5G.

At the end of 2018, AT&T announced they had virtualized 65% of the network, and we're on target to reach 75% at the end of this year. I'm encouraged by our progress to date and excited by the fact RADCOM is key participant in some of the most exciting network transformation in the industry today.

Looking to 2020, we expect a growth year. We plan to continue to invest in R&D and support our customers' needs as they transition to 5G and believe we are well positioned to benefit from the migration to 5G. We expect the rollout of 5G to spur the adoption of our innovative solutions.

With that, I will turn the call over to Amir Hai, our CFO, who will discuss the financial results in detail.

Amir, please go ahead.

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Amir Hai, RADCOM Ltd. - CFO [3]

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Thank you, Eyal, and good morning, everyone. Please turn to Slide 6 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 fourth quarter revenues of $9 million.

Our gross margin was 71.3%, represented our average gross margin for the full year of 2019 on a non-GAAP basis.

Our gross margin can fluctuate depending upon the level of revenues and revenue mix. Our operating expenses for the quarter on a non-GAAP basis were $7.3 million, the same level in the third quarter of 2019. Our operating expenses are comprised mostly of R&D expenses.

Adding the financial income of $0.3 million of net of tax expenses, the net loss for the quarter was $0.5 million on a non-GAAP basis. Revenue for the quarter represents an increase from $4 million in the fourth quarter of 2018. This increase was due to new contract we announced and related revenue recognized during 2019. Our gross R&D expenses for the quarter on a non-GAAP basis increased to $4.5 million from $3.9 million in the fourth quarter of 2018.

The increase is attributable to the investment in R&D require to maintain our technological leadership. R&D expenses for the quarter were approximately the same as in the third quarter of 2019.

Also, during the fourth quarter, we received $425,000 from the Israel Innovation Authority compared to $366,000 in the fourth quarter of 2018.

Our net R&D for the quarter was $4.1 million on a non-GAAP basis compared to $3.5 million in the fourth quarter of 2018. Sales and marketing expenses for the quarter were $2.5 million on a non-GAAP basis compared to $2.6 million in the fourth quarter of 2018.

G&A expenses for the quarter on a non-GAAP basis were $741,000 compared to $643,000 in the fourth quarter of 2018. Operating loss on a non-GAAP basis for the quarter was $911,000 compared to an operating loss of $4.2 million for the fourth quarter of 2018 and to an operating loss of $1.1 million for the third quarter of 2019.

Net loss for the quarter on a non-GAAP basis was $501,000. Our net loss of $0.04 per diluted share compared to a net loss of $3.7 million or a net loss of $0.27 per diluted share for the fourth quarter of 2018. This compared to net loss of $988,000 or a net loss or $0.07 per diluted share for the fourth quarter of 2019.

On a GAAP basis, as you can see on Slide 5, we reported a net loss for the quarter was $1.1 million or a net loss of $0.08 per diluted share compared to a loss of $4.1 million or a net loss of $0.30 per diluted share in the fourth quarter of 2018. At the end of the fourth quarter of 2019, our headcount was 262.

I will now highlight our results for the full year 2019. Total revenues were $33 million compared to total revenues of $34 million in 2018. Operating expense on a non-GAAP basis for the full year 2019 was $28.9 million, including $17.8 million in R&D growth expense. This compares to an operating expense on a non-GAAP basis of $26.7 million in 2018, including $14.7 million in R&D growth expense. During the full year of 2019, the non-GAAP gross margin was 70.6% compared to non-GAAP gross margin of 74.3% in 2018.

Non-GAAP operating loss for the full year 2019 increased to $5.6 million compared to an operating loss of $1.4 million for the full year of 2018, mainly due to decrease in revenues and increase in R&D expenses. Non-GAAP net loss was $4.6 million or a net loss of $0.33 per diluted share, calculated on the basis of 13.8 million diluted share compared to a non-GAAP net loss of $300,000 in 2018 or a net loss of $0.02 per diluted share.

Turning to the balance sheet. As you can see on Slide 9, our cash, cash equivalents and short term bank deposits at the end of the quarter was $69.3 million. We believe that our strong balance sheet provides us solid footing to execute the opportunities ahead of us.

That ends our prepared remarks. I will now turn the call back to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Alex Henderson of Needham & Company.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [2]

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I was hoping you could talk a little bit about the outlook for 2020 at this point. Obviously, you gave some guidance on the revenue. What portion of that guidance do you think you currently have high degree of line of sight to relative to contracts that you've already won? And how much of it comes from contract that you need to bring in? And could you talk a little bit about what kind of pipeline you have relative to potentially getting some upside to those half numbers?

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Eyal David Harari, RADCOM Ltd. - CEO [3]

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I think I would start with a summary of what we did in 2009 in terms of customer wins. And as you recall, we extended our logos with 2 new Tier 1 accounts. And this mixed with a strategy to go into a multiyear contracts give us very good visibility into 2020. We started the year with a significant revenue in our backlog. And this give us good confidence that we could meet this guidance. Along the year, we are -- you asked about the pipeline. We are currently engaged with multiple additional customers as well as additional opportunities within our install base. And obviously, this should be materialized along the year. But I think the main change done in 2019 that we managed to enlarge our customer base, get multiyear agreements and by this, increase the visibility into the 2020 revenue significantly.

In terms of the opportunity we see, as we -- our strategy is still to focus on the Tier 1. We are engaging multiple processes with different Tier 1s globally. But as we know, those processes are in sales cycles are taking a long time, and it's very hard to anticipate where they are going to materialize. Most of the revenue is based on our existing installed base. And by that, gives us the size visibility. A smaller part is still unsecured and based on our success with the winning more projects, either within the existing installed base or new accounts.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [4]

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So given it's fairly early in the year, there is still obviously enough time to win an account and get some revenue from it this year. But it seems likely that any counts that were one later in the year would probably be more 2021 number. So it sounds like, if I were to summarize what I hear you saying -- I mean I'm just characterizing it, you have in hand the vast majority of what you need to get to the 2020 numbers. And you have a solid pipeline, which should then give you some visibility to increasing the numbers into '21, given the multiyear contracts, nature of the current base and the fact that AT&T is now more of a subscription and less perpetual in nature. Is that the right characterization?

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Eyal David Harari, RADCOM Ltd. - CEO [5]

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Yes, I think, yes. And I would just add that still new wins in the first half of the year like we announced Rakuten mid-2019 can materialize into revenue in 2020 like Rakuten was materialized in 2019. And -- but if revenues -- sorry, orders from the last part of the year might probably take some time to implement and will impact 2021.

We have good visibility, as I said, to the revenue. If I start, as you said, we are early in the year, and we have this good confidence to set this guidance of -- that reflects growth, and some parts, obviously, are still to be executed along the year, which is, as I mentioned, could be mix of new wins and upside on existing accounts.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [6]

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So given that -- it's good news on the revenue. We can forecast that reasonably easily, but we have a little bit more difficulty dealing with what -- can you give us some granularity around, whether we should expect gross margins to be stable or improve, given the mix? And to what extent you intend to spend -- increase spending over the course of the year? How should margins track? And can we anticipate any improvement in the operating losses?

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Eyal David Harari, RADCOM Ltd. - CEO [7]

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So overall, the gross margin in a range that we are working with is in the range of 70% to 75% usually. As you recall, it might fluctuate quarterly, depends on the product mix. But overall, we are seeing more and more software-based solutions. As you recall, we have some customer that requires to deliver the service, which impact the product mix. When we look on the expense, we are looking to do similar level of expense in 2020 and grow significantly on the revenue. So by that, I would say, gives you some color on the direction.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [8]

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I see. And just going down the line items. So one of the critical areas for your cost structure has been the NRE on the gross margins -- or on the R&D, excuse me, are you expecting a similar amount or less, more? Again that's impossible for us to forecast that independently?

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Eyal David Harari, RADCOM Ltd. - CEO [9]

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It's -- if you look on the last few years, we are looking on a similar number. Obviously, we cannot forecast exactly, but if we take the last 3 years, we were in around the same number. So you can take this as a base.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [10]

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Right. And just one last one. So you've had some very good success with Rakuten. Obviously, it's a huge win and an indication of just how superior technology is because they are definitely picking the most advanced companies to partner with. That program was pushed out from the launch time, I think, from October into the April timeframe, if I remember correctly. Can you talk about how that changes the trajectory of the business? So does it slow it down for you? How do we think about the impact of that on your operations?

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Eyal David Harari, RADCOM Ltd. - CEO [11]

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So first of all, the bottom line, we don't see on the -- or expect any impact. The revenue and business model we have with Rakuten is more based on milestones, but it's more like a subscription. So we are not relied on their milestones. That being said, Rakuten has launched -- a soft launch in late last October. And if you follow most of their milestones are public, they are progressing rapidly on their implementation of the cloud-native network. And we are going hand -- end-to-end with them implementing our solution and evolving with them with more use cases, more services and more capacity. The current announcement was that on April, they are going to do full launch, which is just in couple of months. And for us, it's mainly exciting to see the technology comes to play and the key role of service assurance in -- when operators try to build the virtual network. How critical is the component of the service assurance to give them the visibility into issues as obviously building a new network is not easy. Most of the telecom today are established networks of 4G that are built for like 10 years or so. But when you look in companies like Rakuten that just started to build the network only like 6 to 9 months ago, they're evolving and changing. And the fact that they have their eyes into the network, and they see the transformations, they see the statistics, they see the issues, and they get insights on how to improve it is really exciting and making us confident that while more operators will start to be new networks, either it's greenfields or 5G new networks, our technology advantage will come to play.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [12]

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Is there any -- in that Rakuten ramp, is there any opportunities beyond what you've licensed so far to ramp with them? Or is it just a fixed license agreement, subscription agreement?

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Eyal David Harari, RADCOM Ltd. - CEO [13]

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So yes, there is some increments, some of them already -- small increments already received. There is bigger potential on 2 dimensions. One is on the 5G. On the longer term, there could be an upside to the subscription cost. And as Rakuten mentioned, they are now looking to go global. And by working with them in Japan and both of them successful and are successful in the implementation, it gives us the opportunity to work with them once we are implementing in other parts.

Now this -- my personal belief, I don't think they are -- they mentioned any time, and that will take some time because they are mainly focusing now on Japan. But I think, in Q4, they started to be more vocal on that we are going global. For us, it's an opportunity that we have them as our partners. And if their plans will come through, this will give us an opportunity to replicate the same software stack into additional countries as they will implement more virtual networks globally. Nothing yet was announced, no new operation in another country. I do believe that the coming quarters will be focused on excellent execution in Japan. This is what I would expect, and we are also focused on their success would come once the network is up and running and operational and shows the high quality. And if all goes well, this could start to become multiple projects.

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Operator [14]

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(Operator Instructions) The next question is from Bhavan Suri of William Blair.

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Bhavanmit Singh Suri, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications [15]

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Nice to see growth coming back this year. So that's exciting. And I just wanted to touch base here a little bit at a high level focus before we get the details here. You've been CEO for 1.5 months. You've obviously been at the company a long, long time. You've talked about what's changing this year versus last year. Do you see an inflection in the pace of change? Because it still feels like outside of AT&T, the 5G rolls are still pretty small, pretty sporadic, the sort of test and sort of sub services, as you said. How should we think about what's changing between maybe '18, '19 and what you're seeing today from the end markets that sort of gives you guys sort of confidence on the growth?

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Eyal David Harari, RADCOM Ltd. - CEO [16]

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So as you see our guidance, we expect significant growth, but we are not expecting to double the revenue in 2020. So the inflection point is -- might need time. If you follow the analyst of the 5G, the expectation is that 2020 will be the year of the stand-alone implementation of 5G. The real network change where you will need to do a refresh to service assurance just start during late 2020 or even 2021, and keep -- and start to accelerate with more operators in -- around the next couple of years. We do see that by winning more accounts, we managed to get and create growth. We see that there is strategy to work on a multiyear agreements, and working very closely with our Tier 1 accounts as partners and as strategic advisers pays off and allow us to get this good visibility to 2020 and give this guidance.

I believe that the 5G is the long term today. It's not that the market will happen all at once in 2020, and I believe the company towards it. Today, the main focus in 5G is investment in R&D. We started that in 2019, and we continue in higher pace 5G investment in the product. We believe, as a technology company, that our growth will come with the technology advantage that we build. We had virtualization capabilities that were helping us to win AT&T and Rakuten and others. Now we are keeping and investing to create unique capabilities into the 5G market that allow us, once transformation will happen, to secure new wins.

Now about the inflection point, again, I can't exactly foresee if and when it will happen. But we believe in our technology. The feedback from the technology we get is very good, and it always depends on the investment of the operators in 5G.

We see a very encouraging fact that, as I mentioned before, 60-plus operators already in production with the 5G initial phases. This is not yet a full-blown 5G networks, but it's a first important step. And for those of us, as you mentioned, I have a lot of experience in this market. I recall, the first days of the 4G, it always starts with tactical and initial implementations. But this is a good sign that we are on the right path into full-blown implementation in the coming years. So if there were some question marks about the pace on 5G, I think 2019 was giving more confidence that the market is growing.

Obviously, the Telco is still suffering from ARPU decrease, and they are still slow in their investment. But I think it's a consensus today that 5G network is going to come, and it's all going to be virtualized and containerized where our investment in the last 5 years will create a technology advantage.

Today, we are mainly working in our R&D to continue to create more and more advantages as we believe the 5G network introduce new requirements and new challenges that we want to make sure we keep our differentiation in this case. And now we are mainly dependent on the operators to adopt it, to adapt it, and obviously, winning the accounts. So we have the opportunities with our existing installed base, which grew over 2019. But we are looking to grow into more accounts in the next few years. And if all goes well, 5G is definitely an opportunity because it's a total refresh in the telecom. It's a global trend. It's bigger than the service assurance. But it's a trend that changed the network so much that it's clear that the service assurance will have to go through a refresh. So it will open new opportunities. It will be based on virtualization technology. And we believe that this gives us a good position once it comes to the opportunities.

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Bhavanmit Singh Suri, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications [17]

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That's helpful. I got one more strategic one, and then I'll dive into sort of more tactical ones. But given the sort of the delay or the slower uptake or the slower shift to 5G, do you worry the competition has had time to sort of start catching up? Are you seeing any change in the competitive environment? Any of the competitors building sort of a software-only virtual service capability for improving sessions, things like that? Or are they still sort of still relatively behind still focused on a hardware-based world? How should we think about the competitive environment, given that there's been more time for these guys to sort of maybe think about uping their legacy stacks?

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Eyal David Harari, RADCOM Ltd. - CEO [18]

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So I would say that, definitely, in the last 5 years, since we launched the first virtualized assurance, competitors had time to invest and move to more companies to software, but we didn't stay still. We invested in the last 5 years significant amount of R&D resource to continue and improve indiscernible] and innovate a lot around this product. I can just share that most of the customers that we meet are giving us a feedback that we still have a significant advantage compared to most competitors.

I wouldn't underestimate any of our competitors because some of them are big companies that can invest. So far -- and both in VEON and Rakuten, it was a competitive, I would say, look on all the market and all the players, and we managed to win due to our unique technology. So I'm -- for one, I am confident that we have this advantage, but it's definitely not -- the market is not where we were 5 years ago. When we announced this 5 years ago, everyone told you that what RADCOM is doing, software is bull(expletive). Let's spend on hardware. Now everyone understands this is the right direction and everyone invests in software. So we always need to keeping invest and innovate and create an edge. And this is what we are busy these days.

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Bhavanmit Singh Suri, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications [19]

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Got it. Got it. No, that's helpful. And then a little more tactically, you've talked about -- the company has talked about in the past, the POCs, the Tier 1s workshops. So just an update in terms of how POCs the large Tier 1s are progressing, obviously, if you are keeping a separate one. And then sort of workshops and things like that, and this is obviously tying to not revenue this year, but sort of revenue next year? I just want to get some color to the numbers there. Number of POCs? How they're progressing? Number of workshops? How they're progressing?

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Eyal David Harari, RADCOM Ltd. - CEO [20]

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So what I can tell you is that we are now -- we are -- in any given time, engaged with multiple accounts in both workshops and POCs. I don't want into exact numbers, but I think it's -- we are very busy on marketing our technology, mainly now with everyone very curious on how to address 5G. So in any given time, we are active with multiple Tier 1s. Eventually, as I mentioned before, sales cycle is long, and it's a process. It's very hard to anticipate when those processes will materialize, but we are busy today not only on the wins for 2020 revenue, but as you mentioned rightly, we are bidding also 2021. Because we are talking about multiyear, long-term processes. I think it's -- the message we get from the market is our technology is exciting, which is, what's important. And when and if and how this will materialize to business, this -- we are in February. Hopefully, along the year, we'll see more progress, and we'll have more announcements as we progress with the business.

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Bhavanmit Singh Suri, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Technology, Media and Communications [21]

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Got it. Got it. One last one from me. Renewal -- any major renewals coming up in 2020. And if they are, can we talk about what that expansion could look like or reduction could look like if there are any coming up in 2020?

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Eyal David Harari, RADCOM Ltd. - CEO [22]

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Most of our contracts are multiyears and in a scale of 3 to 4, 5 years. Most of them are not ending in 2020. Some of them do. We are working closely with those customers and working to secure those renewals. It's not most of the contracts, but some. It's not insignificant. But if contracts are 3 to 5 years, you can estimate the range of what's relevant. I would say that Rakuten is -- was just announced. VEON was just announced. And AT&T is just -- we announced late April that were multiyear, give us a lot of confidence for 2020.

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Operator [23]

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(Operator Instructions) We have a follow-up question from Alex Henderson of Needham & Company.

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Alexander Henderson, Needham & Company, LLC, Research Division - Senior Analyst [24]

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Okay -- And it seems that there is a potential for a pretty nice improvement in margins if you're holding the cost fairly stable. You have a little improvement in mix on gross margins and your revenue growth, given the near breakeven fourth quarter, is it -- we believe I think it's more than half the losses you posted in '19 and then maybe even breakeven or it’s like profit at some point there in 2020? Or is that too aggressive?

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Eyal David Harari, RADCOM Ltd. - CEO [25]

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So as we gave our guidance to the revenue, we didn't give any guidance on profit. We know that there could be fluctuations depend on the product mix and the projects, and we focused today on the growth. We do keep the investment of the -- on the technology high. And our intent is to mainly secure the growth and the wins on the 5G. That being said, as you hinted out, it looks that if we will keep the same range of gross margin, then we are getting closer, I would say, to the breakeven point. And it depends eventually on the fluctuation on the exact wins and the product wins and in this mixture.

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Operator [26]

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There are no further questions at this time. This concludes the RADCOM Ltd. Fourth Quarter and Full Year 2019 Results Conference call. Thank you for your participation. You may go ahead and disconnect.