RADCOM's Strong Positive Momentum Continues in Q2: Quarterly Sales Rise to $4.6m With $0.5m Non-GAAP Net Income

TEL AVIV, Israel, July 26, 2010 /PRNewswire-FirstCall/ -- RADCOM Ltd. (RADCOM) (NASDAQ: RDCM), a leading network Service Assurance provider, today announced its unaudited financial results for the second quarter ended June 30, 2010.

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Financial Results for the Second Quarter of 2010

Revenues for the second quarter of 2010 were $4.6 million, an increase of 77% compared with $2.6 million for the second quarter of 2009, and an increase of 5% compared with $4.4 million for the first quarter of 2010. Operating income for the period was $541,000, representing an operating margin of 11.9%, compared with 8.8% for the first quarter of 2010 and an operating net loss in the second quarter of 2009.

According to U.S. generally accepted accounting principles (GAAP), net income for the second quarter was $80,000, or $0.02 per ordinary share (basic) and $0.01 per ordinary share (diluted), compared with a net loss of $856,000, or $(0.17) per ordinary share (basic and diluted), for the second quarter of 2009, and net income of $51,000, or $0.01 per ordinary share (basic and diluted), for the first quarter of 2010. Net income was adversely impacted by a $332,000 financial expense derived from the mark-to-market of outstanding warrants based on their exercise price of $2.56 per warrant share, which is well below RADCOM's share price of $5.00 as of the close of trade on NASDAQ on June 30, 2010 and $5.61 as of the close of trade on NASDAQ on July 23, 2010. This expense was triggered by the significant appreciation of RADCOM's share price during the quarter.

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 quarter was $487,000, or $0.09 per diluted share, compared with a net loss of $795,000 or $(0.16) per diluted share, for the second quarter of 2009, and net income of $284,000, or $0.05 per diluted share, for the first quarter of 2010.

Comments of Management

Commenting on the results, Mr. David Ripstein, RADCOM's President and CEO, said, "We are very pleased to report another quarter of across-the-board progress marked by continued growth in our revenues, profits, profit margins and operating cash flow. These very satisfying results demonstrate the market's growing need for network performance tools, its recognition of the excellence of RADCOM solutions, and, most important, the ongoing commitment and talents of the RADCOM team."

Mr. Ripstein continued, "We continue to benefit from one of the telecommunication industry's strongest drivers: the emergence of smart phone devices, like the iPhone and Blackberry, and the associated explosion in network traffic. Operators are struggling to deal with a reality of dropped calls, crashed networks and extreme customer frustration, and have become hyper-aware of the cost of poor network performance. As a result, our products have become 'must-have' solutions for a growing number of operators throughout the world, and we are experiencing increased interest and demand in all territories."

Mr. Ripstein concluded, "We believe our progress confirms our 'read' of the market, our technologies and long-term strategies. Our intention going forward is to take full advantage of the opportunity, continuing to execute our strategy focused on excellence, value and customer satisfaction - a strategy which has proven itself by delivering significant growth over the past two years."

Financial Results for the First Half of 2010

Revenues for the first half of 2010 were $9.0 million, an increase of 96% compared with $4.6 million in the first half of 2009. Gross profit for the period rose to 66.5% compared with 60.2% in the first half of 2009.

According to U.S. generally accepted accounting principles (GAAP), operating income for the first half of 2010 was $933,000, compared to an operating loss of $2.3 million for the first half of 2009. Net income for the first half of 2010 was $0.1 million, or $0.03 per basic share ($0.02 per diluted share). This compared with a net loss of $2.4 million, or $(0.46) per ordinary share (basic and diluted), for the first half of 2009. Net income was impacted by a $532,000 financial expense which derived from the mark-to-market of outstanding warrants, an expense triggered by the significant appreciation of RADCOM's share price during the period.

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 half was $771,000, or $0.14 per diluted share, compared with a net loss of $2.2 million, or $(0.43) per diluted share for the first half 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        Six months ended
                                      June 30,                 June 30,
                                  2010      2009         2010        2009
                             (unaudited)  (unaudited) (unaudited) (unaudited)
    Sales                       $ 4,560     $ 2,608      $ 8,998     $ 4,626
    Cost of sales                 1,510       1,052        3,012       1,842
    Gross profit                  3,050       1,556        5,986       2,784
    Research and development,
     gross                        1,037       1,048        2,085       2,110
    Less - royalty-bearing
     participation                  342         385          761         785
    Research and development, net   695         663        1,324       1,325
    Sales and marketing           1,595       1,428        3,096       2,942
    General and administrative (1)  219         416          633         832
    Total operating expenses      2,509       2,507        5,053       5,099
    Operating income (loss)         541        (951)         933      (2,315)
    Financing income (loss), net   (461)         95         (802)        (42)
    Net income (loss)                80        (856)         131      (2,357)
    Basic net income (loss)
     per ordinary share          $ 0.02     $ (0.17)      $ 0.03     $ (0.46)
    Diluted net loss
     per ordinary share          $ 0.01     $ (0.17)      $ 0.02     $ (0.46)
    Weighted average number of
     ordinary shares used in
     computing basic net income
     (loss) per ordinary
      share                   5,112,291   5,081,426    5,108,447   5,081,426
    Weighted average number
     of ordinary shares used
     in computing diluted net
     income (loss) per
     ordinary share           5,585,035   5,081,426    5,435,567   5,081,426

(1) Includes a decrease of $206,000 in allowance for doubtful accounts for the three and six month periods ended June 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         Six Months Ended
                                 June 30,                   June 30,
                              2010       2009         2010         2009
                         (unaudited)  (unaudited)  (unaudited)  (unaudited)

    GAAP net
     income (loss)            $80       $(856)        $131      $(2,357)
    Stock-based
     compensation (1)          75          73          108          160
    Change in fair
     value of warrants        332         (12)         532            9
    Non-GAAP net
    income (loss)            $487       $(795)        $771      $(2,188)
    Non-GAAP earnings
     (losses) per
     share (diluted)        $0.09      $(0.16)       $0.14       $(0.43)

    Number of shares
     used in computing
     Non-GAAP earnings
     (losses) per
     share(diluted)     5,585,035   5,081,426    5,435,567    5,081,426

    (1) Stock-based
     compensation:
    Cost of sales               2           3            4            6
    Research and
     development                5          19            9           42
    Selling and
     marketing                 30          25           35           56
    General and
     administrative            38          26           60           56
                               75          73          108          160



                             RADCOM Ltd.

                     Consolidated Balance Sheets

                       (1000's of U.S. dollars)
                                        As of               As of
                                      June 30,        December 31,
                                         2010                2009
                                      (unaudited)     (unaudited)
    Current Assets
    Cash and cash equivalents               2,439            3,274
    Trade receivables, net                  4,397            3,610
    Inventories                             2,918            2,879
    Other current assets                    1,370              607
    Total Current Assets                   11,124           10,370
    Severance pay fund                      2,444            2,495
    Property and equipment, net               423              575
    Total Assets                           13,991           13,440

    Liabilities and Shareholders' Equity
    Current Liabilities
    Trade payables                          1,954            1,117
    Deferred revenue                          684              478
    Current maturities of long-term loan      426            1,022
    Other payables and accrued expenses     4,170            4,781
    Total Current Liabilities               7,234            7,398

    Long-Term Liabilities
    Deferred revenue                          198               85
    Long term loan, net of current
     maturities                                 -              170
    Warrants related to long term loan        780              248
    Accrued severance pay                   2,836            2,899
    Total Long-Term Liabilities             3,814            3,402

    Total Liabilities                      11,048           10,800

    Shareholders' Equity
    Share capital                             179              177
    Additional paid-in capital             51,714           51,544
    Accumulated deficit                   (48,950)         (49,081)
    Total Shareholders' Equity              2,943            2,640

    Total Liabilities and
    Shareholders' Equity                   13,991           13,440


    Contact:
    Jonathan Burgin
    CFO
    (+972)3-645-5004
    [email protected]

SOURCE RADCOM Ltd