RADCOM'S Q3 Sales Rise 54% YOY TO $4.8M, Yielding $0.07 EPS

4th Straight Quarter of Positive Operating Income

Oct 25, 2010, 06:00 ET from RADCOM Ltd

TEL-AVIV, Israel, October 25, 2010 /PRNewswire-FirstCall/ -- RADCOM Ltd. (RADCOM) (NASDAQ: RDCM), a leading network Service Assurance provider, today announced its unaudited financial results for the third quarter ended September 30, 2010.

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Financial Results for the Third Quarter of 2010

Revenues for the third quarter of 2010 were $4.8 million, up 54% compared with $3.1 million for the third quarter of 2009 and up 6% compared with $4.6 million for the second quarter of 2010. Gross margin for the period rose to 67.3% compared with 66.5% in the third quarter of 2009 and 66.9% in the second quarter of 2010.

According to U.S. generally accepted accounting principles (GAAP), net income for the third quarter was $361,000, or $0.07 per ordinary share (basic) and $0.06 per ordinary share (diluted), compared with a net loss of $394,000, or $0.08 per ordinary share (basic and diluted), for the third quarter of 2009, and net income of $80,000, or $0.02 per ordinary share (basic) and $0.01 per ordinary share (diluted), for the second quarter of 2010.

To provide investors with insight into the Company's underlying operating results, we are also presenting our financial results on a non-GAAP basis excluding share-based compensation expenses and change in fair value of warrants from all periods. According to this non-GAAP basis, net income for the quarter was $387,000, or $0.07 per diluted share, compared with a net loss of $219,000 or $0.04 per diluted share, for the third quarter of 2009, and net income of $487,000, or $0.09 per diluted share, for the second quarter of 2010.

Comments of Management

Commenting on the results, Mr. David Ripstein, RADCOM's President and CEO, said, "We are proud to report another period of rising sales and margins, an achievement that has enabled us to deliver four straight quarters of positive operating income since our turnaround in mid-2009. This continual improvement demonstrates the strong market need for our service quality management solutions, which are proving to be a solution-of-choice for NGN network operators plagued with difficult network performance challenges.

"In fact, operators throughout the world continue to struggle to overcome the slow data throughput, dropped calls and poor voice quality which have accompanied the increased usage of iPhones, Blackberrys and other 'smart' phones. As a result, interest in our products is high and growing, both from Tier I and other operators around the globe, all of whom need a solution for maintaining customer satisfaction and protecting existing revenues."

Mr. Ripstein continued, "As our Company moves on to a new level, we are taking steps to strengthen our financial platform. Earlier this month, we signed a definitive agreement for a $5.5 million private placement transaction (PIPE), a cash infusion which we will use to increase our working capital and flexibility."

"Taken as a whole, with favorable markets driving interest in our solutions, a stable financial platform and a motivated team, we feel well positioned, and continue pursuing our strategy to build our business momentum even further", concluded Mr. Ripstein.

Financial Results for the First Nine Months of 2010

Revenues for the first nine months of 2010 were $13.8 million, an increase of 78% compared with $7.7 million in the first nine months of 2009. Gross profit for the period rose to 66.8% compared with 62.7% in the first nine months of 2009.

According to U.S. generally accepted accounting principles (GAAP), operating income for the first nine months of 2010 was $1.3 million, compared to an operating loss of $2.6 million for the first nine months of 2009. Net income for the nine months of 2010 was $0.5 million, or $0.10 per ordinary share (basic) and $0.09 per ordinary share (diluted). This compared with a net loss of $2.8 million, or $0.54 per ordinary share (basic and diluted), for the first nine months of 2009.

To provide investors with insight into the Company's underlying operating results, financial results are also being presented on a non-GAAP basis excluding share-based compensation expenses and change in fair value of warrants from all periods. According to this non-GAAP basis, net income for the first nine months of 2010 was $1.2 million, or $0.21 per diluted share, compared with a net loss of $2.4 million, or $0.47 per ordinary share (basic and diluted) for the first nine months of 2009.

About RADCOM

RADCOM provides innovative service assurance solutions for communications service providers and equipment vendors. RADCOM specializes in solutions for next-generation networks, both wireless and wireline. RADCOM's comprehensive, carrier strength solutions are used to prevent service provider revenue leakage and enable management of customer care. RADCOM's products facilitate fault management, network service performance analysis, troubleshooting and pre-mediation with an OSS/BSS. RADCOM's shares are listed on the NASDAQ Capital Market under the symbol RDCM. For more information, please visit http://www.RADCOM.com.

Non-GAAP Information

Certain non-GAAP financial measures are included in this press release. These non-GAAP financial measures are provided to enhance the reader's overall understanding of our financial performance. By excluding non-cash equity based compensation that has been expensed in accordance with ASC Topic 718 and change in fair value of warrants that has been expensed in accordance with ASC 815-40, our non-GAAP results provide information to both management and investors that is useful in assessing our core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results and to plan and forecast future periods. The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with GAAP.

Risks Regarding Forward-Looking Statements

Certain statements made herein that use the words "estimate," "project," "intend," "expect," "'believe" and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties that could cause the actual results, performance or achievements of the Company to be materially different from those that may be expressed or implied by such statements, including, among others, changes in general economic and business conditions and specifically, decline in the demand for the Company's products, inability to timely develop and introduce new technologies, products and applications, and loss of market share and pressure on prices resulting from competition. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the United States Securities and Exchange Commission. The Company does not undertake to revise or update any forward-looking statements for any reason.

                               RADCOM Ltd.
                  Consolidated Statements of Operations
             (1000's of U.S. dollars, except per share data)


                                                     Three months ended
                                                       September 30,
                                                  2010               2009
                                               (unaudited)        (unaudited)
    Sales                                          $ 4,812            $ 3,115
    Cost of sales                                    1,573              1,045
    Gross profit                                     3,239              2,070
    Research and development, gross                  1,114              1,046
    Less - royalty-bearing participation               380                480
    Research and development, net                      734                566
    Sales and marketing                              1,827              1,370
    General and administrative (1)                     358                413
    Total operating expenses                         2,919              2,349
    Operating income (loss)                            320              (279)
    Financing income (loss), net                        41              (115)
    Net income (loss)                                  361              (394)
    Basic net income (loss) per ordinary share      $ 0.07           $ (0.08)
    Diluted net income (loss) per ordinary share    $ 0.06           $ (0.08)
    Weighted average number of
    ordinary shares used in
    computing basic net income
    (loss) per ordinary share                    5,218,847          5,081,707
    Weighted average number of
    ordinary shares used in
    computing diluted net income
    (loss) per ordinary share                    5,837,570          5,081,707

    Cont.

                                                        Nine months ended
                                                           September 30,
                                                   2010               2009
                                               (unaudited)        (unaudited)
    Sales                                         $ 13,810            $ 7,741
    Cost of sales                                    4,585              2,887
    Gross profit                                     9,225              4,854
    Research and development, gross                  3,199              3,156
    Less - royalty-bearing participation             1,141              1,265
    Research and development, net                    2,058              1,891
    Sales and marketing                              4,923              4,312
    General and administrative (1)                     991              1,245
    Total operating expenses                         7,972              7,448
    Operating income (loss)                          1,253            (2,594)
    Financing income (loss), net                     (761)              (157)
    Net income (loss)                                  492            (2,751)
    Basic net income (loss) per ordinary share      $ 0.10           $ (0.54)
    Diluted net income (loss) per ordinary share    $ 0.09           $ (0.54)
    Weighted average number of
    ordinary shares used in
    computing basic net income
    (loss) per ordinary share                    5,145,651          5,081,521
    Weighted average number of
    ordinary shares used in
    computing diluted net income
    (loss) per ordinary share                    5,594,547          5,081,521

(1) Includes a decrease of $120,000 in allowance for doubtful accounts for the three month period ended September 30, 2010, and a decrease of $326,000 in allowance for doubtful accounts for the nine month period ended September 30, 2010.

                                   RADCOM Ltd.

            RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

            (1000's of U.S. dollars, except share and per share data)


                       Three Months Ended            Nine Months Ended
                          September 30,                September 30,
                      2010            2009         2010            2009
                   (unaudited)     (unaudited)  (unaudited)     (unaudited)

    GAAP net
    income (loss)         $361          $(394)         $492         $(2,751)
    Stock-based
    compensation(1)         34             77           142             237
    Change in fair
    value of warrants       (8)            98           524             107
    Non-GAAP net
    income (loss)         $387          $(219)       $1,158         $(2,407)
    Non-GAAP earnings
    (losses) per share
    (diluted)            $0.07         $(0.04)        $0.21          $(0.47)

    Number of shares
    used in computing
    Non-GAAP earnings
    (losses) per share
    (diluted)        5,837,570       5,081,707    5,594,547       5,081,521

    (1)Stock-based
    compensation:
    Cost of sales            2               3            6               9
    Research and
    development              6              17           15              60
    Selling and
    marketing                4              26           39              81
    General and
    administrative          22              31           82              87
                            34              77          142             237



                                  RADCOM Ltd.

                          Consolidated Balance Sheets

                            (1000's of U.S. dollars)
                                                  As of            As of
                                              September 30,     December 31,
                                                  2010              2009
                                               (unaudited)      (unaudited)
    Current Assets
      Cash and cash equivalents                       3,065            3,274
      Trade receivables, net                          3,624            3,610
      Inventories                                     2,853            2,879
      Other receivables                                 889              607
    Total Current Assets                             10,431           10,370
    Severance pay fund                                2,693            2,495
    Property and equipment, net                         375              575
    Total Assets                                     13,499           13,440

    Liabilities and Shareholders' Equity
    Current Liabilities
      Trade payables                                  1,523            1,117
      Deferred revenue                                  646              478
      Current maturities of long-term loan                -            1,022
      Other payables and accrued expenses             3,111            4,781
    Total Current Liabilities                         5,280            7,398
    Long-Term Liabilities
      Deferred revenue                                  246               85
      Long term loan, net of current maturities           -              170
      Warrants related to long term loan                  -              248
      Accrued severance pay                           3,079            2,899
    Total Long-Term Liabilities                       3,325            3,402

    Total Liabilities                                 8,605           10,800

    Shareholders' Equity
      Share capital                                     196              177
      Additional paid-in capital                     53,287           51,544
      Accumulated deficit                           (48,589)         (49,081)
    Total Shareholders' Equity                        4,894            2,640

    Total Liabilities and Shareholders'
    Equity                                           13,499           13,440


    Contact:
    Jonathan Burgin
    CFO
    +972-3-645-5004
    jonathanb@radcom.co.il


SOURCE RADCOM Ltd