RADCOM Ltd. Aktie

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.

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.

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 Instructions] The first question is from Arjun Bhatia from William Blair. Please go ahead.

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?

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.

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.

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 Instructions]

The next question is from Ryan Koontz from Needham & Company.

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.

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.

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.

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.

That's great, Benny. I appreciate the insights.

Thank you so much.

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.

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the Fourth Quarter and Full Year of 2025. [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 later today. On the call are Benny Eppstein, RADCOM's CEO; and Hod Cohen, RADCOM's CFO.

Please note that management has prepared a presentation for your reference that will be used during the call. If you have not downloaded it yet, you may do so through the link in the Investors section of RADCOM's website at www.radcom.com/investor-relations.

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 are not limited to, the company's statements about its momentum, strategic direction and goals, market position and trajectory, future execution and delivery of values to customers and stakeholders, expansion within its existing customer base and expansion of its footprint, development of and enhancing strategic partnerships and expected benefits and revenue from collaborations, the success of new technologies, including AI, to, among other things, enhanced automation, pipeline, opportunities and customer engagements and the timing thereof, 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 expectations with respect to gross margins, research and development and sales and marketing expenses, expectations regarding the growth of 5G and AI and its full year 2026 revenue guidance, future growth and profitability, resilience and long-term commitment. 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 quarter's earnings release available on our website, www.radcom.com.

Now I would like to turn over the call to Benny. Please go ahead.

Thank you, operator, and good morning, everyone. Please turn to Slide 7 for our financial highlights. RADCOM delivered its sixth consecutive year of growth with a record $71.5 million in revenue, representing 17.2% year-over-year growth above the midpoint of our most recent revenue guidance of 15% to 18%.

GAAP earnings per share increased by just over 65% year-over-year, and we achieved the highest cash and short-term deposit balances in the company's history of $109.9 million, with no debt. In terms of profitability, RADCOM reached record results across multiple KPIs, including earning and operating margin, demonstrating tight cost control, strong operational efficiency and scalable business model.

As shown on Slide 8, we delivered another strong fourth quarter, with revenue up 16% year-over-year and $18 million. Our strong results demonstrate the solid foundation we have established for RADCOM. RADCOM continues to deliver profitability, supported by our technology advantage, a top-tier customer base and an exceptional team. Our focus now is to expand our customer base, specifically adding new Tier 1 customers to our roster to enable our next phase of profitable growth.

Expanding our Tier 1 customer footprint remains a key priority, and we are actively engaged across a set of meaningful new prospects. We continue to see a healthy set of opportunities and demand remains strong. As is common with Tier 1 customers, timing can shift as engagement move from technical evaluation to proof-of-concept to closing. Given this momentum, we expect revenue to grow by 8% to 12% in 2026, way above the service assurance market growth. Achieving this outlook will require both new business and continued expansion within our existing customer base, and we remain confident in our ability to execute.

Looking forward, our strong balance sheet is a strategic advantage, signaling to Tier 1 customers our resilience and long-term commitment. This also allows us to continue our product innovation and R&D investments and over time, expand our footprint, all while maintaining disciplined financial management and profitability.

Our performance also validates the growing market value of our industry-leading solutions. We remain firmly committed to enabling exceptional user and subscriber experiences while addressing our customers' evolving operational and business needs. Our results and improved profitability are a direct result of our focused execution of strategy and the ongoing value we offer to our customers, all driven by our highly skilled team. The continued advancement of our technology leadership position us for accelerated scalable growth.

Heading into 2026, we expect to maintain a disciplined focus on technology advancement, including in our 5G service assurance offering and agentic AI capabilities. We will continue to support operators in optimizing their network operations, reducing costs and driving network automation. We see continued and growing opportunities to build on our existing customer base and support sustainable long-term growth.

Turning to Slide 9. We will look more broadly at the market environment. Telcos are approaching a key inflection point driven by AI adoption. A recent GSMA survey conducted in partnership with RADCOM found that 71% of operators plan to implement agentic AI this year, yet only 41% report having an end-to-end data architecture that integrates information across the organization.

This gap between AI ambition and data readiness presents a clear opportunity for RADCOM to add value by enabling operators to access reliable subscriber-focused data. This data supports multiple agentic AI use cases and broader efforts to deliver consistently high-quality customer experiences.

AI-driven demand continues to reshape network priorities. Operators are increasingly integrating AI across network layers to optimize capacity and efficiency as they continue to transformation to 5G. As we have seen, many have already moved from proof-of-concept initiatives to commercial deployment in 2025.

In the area of agentic AI, operator demand is increasingly shifting towards unified end-to-end platforms. In our recent survey, the majority of operators indicated that they are interested in deploying integrated end-to-end systems. RADCOM is well positioned to address this need with a comprehensive solution that integrates smoothly with business and service management systems for customer support, care and automation of operational workflows. This aligns well with industry shift towards more streamlined data-driven operations.

Moving on to Slide 10, our product innovations. We continue to see growing customer interest in our advanced, high-capacity data capture solution, which enables telecom operators to analyze massive amounts of data to understand the real customer experience at scale while significantly reducing infrastructure costs. We believe this solution can reduce the total cost of ownership by up to 75% compared to competing solutions, enabling broader visibility into the customer experience.

As highlighted in our survey, operators are exploring agentic AI across targeted use cases. Our focus is on developing telco-specific AI agents that deliver high accuracy, faster decision-making and measurable operational improvements across specific domains. This capability not only enhance the value of our existing platform, but also position RADCOM to address new customer segments and expand our market reach.

Turning to Slide 11, our new contract wins. In the fourth quarter, RADCOM announced a new customer win, 1Global, which selected RADCOM ACE to deliver next-generation AI-powered assurance across both subscribers and IoT, enabling 4G and 5G monitoring at scale for 43 million subscribers. We also expanded within existing customer, a leading European operator via Rakuten Symphony to supply our network visibility solution. The solution will deliver accurate intelligent data collection across its network end-to-end.

Regarding our installed base, Slide 12. RADCOM continues to support AT&T as it sustains leading network performance across the industry. In 2025, the mobility service revenues increased, reflecting ongoing customer demand and operational strength. AT&T finished the year with 120 million subscribers. One industry analyst noted that AT&T's network remains robust and is widely regarded as most reliable network option in rural area across the U.S.

Within its fully virtualized cloud-native network, Rakuten Mobile continues to utilize RADCOM assurance solutions to deliver high-performance, reliable network quality that supports scalable growth. The operator passed 10 million subscribers in December 2025 and ranked first in the 2025 Oricon Customer Satisfaction survey.

Turning to Slide 13, we focus on our partners. We are continuing our partnership strategy with NVIDIA and ServiceNow. Our high-capacity user analytics solution is powered by NVIDIA data processing units. In field trials, it has reduced operational costs by up to 75%, while maintaining full real-time visibility, making it strong enabler of scalable 5G assurance and AIOps. We believe this partnership will start contributing initial wins over the course of 2026.

Turning to ServiceNow on Slide 14. We continue to deepen our partnership and will showcase multiple joint demos at Mobile World Congress in March. Our RADCOM AIM AIOps solution is now fully integrated, certified and available as a connector in the ServiceNow store, enabling real-time network monitoring and advanced automation use cases. We expect this collaboration to begin delivering initial wins during 2026.

Go-to-market activities, Slide 15. In 2025, we strengthened our market presence by participating in key industry events, including Fyuz in Dublin and Network X in Paris during Q4. We are preparing for upcoming high-impact engagement, including Mobile World Congress 2026 and NVIDIA GTC in March, to showcase our solutions, expand strategic relationships and drive momentum.

RADCOM's technology leadership continued to gain global recognition. Named to The Fast Mode 100 for 2025, RADCOM was recognized as one of the solution providers shaping the future of telecom and digital infrastructure. We were also finalist in the Fierce Network Award for Best Network Test and Measurement and received the Best AI/ML Innovation Award at the 2025 Global Connectivity Awards in London. These accolades validate our industry-leading solutions, reinforce our competitive differentiation and highlight the value we deliver to customers and stakeholders worldwide.

Before I wrap up, I want to briefly address the governance update. The Board of Directors has appointed Board member, Rami Schwartz, as Chairman, effective February 8, 2026, succeeding Sami Totah. Rami has served on RADCOM's Board since 2019 and brings deep experience in strategy, leadership, governance and scaling technology businesses. I've spent meaningful time with Rami over the last year at RADCOM and previous roles, and I'm confident in his ability to support the team as we remain focused on our growth strategy.

I would like also to thank Sami for his support during my first year as CEO. Importantly, Sami will continue to serve on the Board. From my perspective, the Board provides the oversight and support our team needs. We are aligned on our strategy, priorities and execution plan as we enter 2026, and we remain focused on expanding our Tier 1 customer footprint, advancing our technology road map and delivering profitable growth.

In summary, turning to Slide 16. 2025 was a solid year, defined by strong growth, disciplined operational and financial execution and continued market momentum. We strengthened strategic partnerships with NVIDIA and ServiceNow while initiating discussion with additional collaborations. We secured a new customer, expanded our service offerings, advanced agentic AI solutions and launched our high-capacity data capture solution.

Turning to 2026. We remain focused on driving innovation, particularly in agentic AI use cases and delivering solutions that reduce the total cost of ownership for operators. With a robust pipeline of opportunities, we anticipate another year of double-digit revenue growth, reinforcing our leadership in 5G assurance. The company is committed to sustaining profitability, maintaining expense discipline and leveraging its solid financial foundation to support long-term value creation.

Our near-term focus is to continue to deliver strong operational and financial execution, converting a growing pipeline of opportunities into revenue while further expanding our presence within our existing customer base. We have established key strategic partnerships and expect to deepen these relationships to scale our business and expand our addressable market.

AI remains a strong catalyst for our business, and we are investing in AI and automation to maintain our leadership in real-time network intelligence. Our customers recognize both the opportunities and challenges of AI, and RADCOM has proven its ability to deliver a total cost of ownership advantage over our peers' solutions.

Operationally, we remain committed to delivering consistent profitability and cash flow while maintaining flexibility as we continue to scale organically.

In conclusion, we entered 2026 with momentum and a clear set of goals. We have proven our business model and established a sound foundation for profitable growth.

With that, I'll now turn the call over to our CFO, Hod Cohen, to review the financial results in detail.

Thank you, Benny, and good morning, everyone. As a reminder, unless otherwise noted, I will refer to non-GAAP results. Reconciliation 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 17 for our quarterly financial highlights. We are pleased with how our team closed the year, delivering growth in both revenue and profitability. RADCOM delivered another quarterly revenue record with total revenue of $18.9 million, up 16% year-over-year. At the same time, we continue to manage expenses effectively while increasing strategic investments in research and development. As a result, we delivered significant improvements in margins and record profitability.

Gross margin in the fourth quarter was 77.6%, the highest since 2018. Please note that our gross margin may vary depending on the revenue mix. Operating income reached $4.3 million, surpassing the third-quarter record with an operating margin of 23%, the highest in 8 years. Net income was $5.2 million, or $0.31 per diluted share, compared to $3.8 million, or $0.23 per diluted share last year.

As shown in Slide 18, our gross R&D expenses for the fourth quarter were $4.9 million, an increase of 16.2% year-over-year. This growth reflects our focus on strengthening collaboration, fostering innovation and expanding our portfolio. We plan to continue strategic investment in R&D to deliver advanced intelligent solution with a focus on agent-to-agent and multimodal workflows, while supporting our strategic partnership and productization efforts.

Sales and marketing expenses for the fourth quarter were $4.2 million, a 1.4% year-over-year increase. We continue to invest in our sales capability and anticipate that sales and marketing expenses will gradually rise in the coming quarters to support pipeline growth and expansion in high-value regions. On a GAAP basis, as shown on Slide 19, our net income for the fourth quarter of 2025 was $3.6 million, a 62% year-over-year increase. GAAP earnings per share were $0.21 per diluted share compared to $0.14 per share last year. We ended the fourth quarter of 2025 with 325 employees.

Now let's review Slide 20, which presents the full year results. In line with our full year guidance, we finished 2025 with a record revenue of $71.5 million, an increase of 17.2% from 2024, above the midpoint of our projected 15% to 18% growth range. Our gross margin was 76.8% in 2025, up from 75.2% in 2024. Operating income increased by 55% in 2025, reaching an all-time high of $14.8 million, or 20.6% of revenue, compared to $9.5 million, or 15.6% in 2024.

Net income for 2025 reached a record $18.4 million, accounting for 25.8% of revenue, or $1.09 per diluted share. This compares to a net income of $13.5 million, or 22.1% million of revenue, equating to $0.83 per diluted share in 2024. As shown on Slide 18, our gross R&D expenses in 2025 were $18.5 million, an increase of $1.9 million from 2024, reflecting 11.1% year-over-year growth.

Looking ahead to 2026, we plan to increase our R&D investment to further develop automation and AI capabilities and support our strategic partnership and productization goals. We received a total of $0.4 million in grants from the Israel Innovation Authority during the year. To support our growth, sales and marketing expenses in 2025 were $17.3 million, up 10.5% from $15.7 million in 2024. G&A expenses for 2025 were $4.8 million, a decrease of $11,000 year-over-year.

On a GAAP basis, as shown on Slide 19, our net income for 2025 reached a new high of $12 million, or 16.8% of revenue, or $0.71 per diluted share, compared to $7 million, or 11.4% of revenue, or $0.43 per diluted share in 2024.

Turning to the balance sheet on Slide 21. We closed quarter 4 with a record $109.9 million in cash, cash equivalents and short-term bank deposits, reflecting positive cash flow of $3.2 million in the quarter and $15.2 million for the year, driven by our strong results.

That concludes our prepared remarks. Thank you, and we will now pass the call back to the operator for your questions.

[Operator Instructions] The first question is from Alinda Li of William Blair.

Benny, with $199 million in the balance sheet and no debt, how should we think about capital allocation in 2026, especially relates to M&A?

Alinda, thanks for the question. Our first priority remains to look into M&A, and this is our first priority, and this is what we are trying to accelerate, and this is what we're prioritizing. So I answered your question.

Okay. And any changes in the guidance philosophy? And what are some of the assumptions in the 2026 guide?

Sure. We believe we are basically at the second half of our sales cycle. It's hard to pinpoint exactly where we're going to close, and this is why we left the guidance 8% to 12%, and we're assuming that we will close it in the first half of the year -- some of the strategic opportunities.

[Operator Instructions] The next question is from Ryan Koontz of Needham & Company.

I wanted to ask about -- you've got a great run rate there with your large customer, AT&T. And looking at your Land and Expand strategy, what are some of the key drivers for expanding your business with existing customers there? Is it their deployments of the 5G stand-alone core? Is it adoption of agentic AI? Or what are some of the key drivers we should think about for you to be able to grow the size of new accounts?

Thanks, Ryan. We still believe we have lots of opportunities within our existing customers, including AT&T. Agentic is driving a lot of opportunities. Our unique data set that we bring to the table is helping AT&T and other customers to promote their own agentic platform and promote their own efficiencies within operations. So this is still the main target to support our biggest customers.

Got it. And I could certainly see how the analytics angle is an easy entry point for AI for RADCOM. The agentic element here, how critical is that to you breaking into an account today? Or is that really kind of a latter sale, kind of upsell for your basic capabilities?

I think it's a combination of both, Ryan. So it is -- our analytic capabilities is driving lots of opportunities, including in North America and in EMEA, by the way, while promoting our own core business, pushing our ACE product within new customers and prospects. But definitely, the AI and the unique data set is critical ingredient from our value proposition.

Got it. And with regards to your data collection, I assume these are on hardware NICs for the network equipment. The NVIDIA BlueField, where is that in terms of introduction? And what sort of architecture do you use if you're not using an NVIDIA-based product? FPGA-based?

We're actually using both NVIDIA-based standard server and cloud-native solution in all fronts. And we still believe that our product, our software is the most efficient one out there comparing to our peer competition.

There are no further questions at this time. This concludes the RADCOM Ltd. Fourth Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.

Welcome to the RADCOM Limited Results Conference Call for the Third Quarter of 2025. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay at the company's website at www.radcom.com later today.

On the call are Benny Eppstein, RADCOM's CEO; and Hadar Rahav, RADCOM's CFO. Please note that management has prepared a presentation for your reference that will be used during the call. If you have not downloaded it yet, you may do so through the link in the Investors section of RADCOM's website at www.radcom.com/investor-relations.

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, the company's statement about its commitment to deliver solutions that are transforming the assurance landscape, continued adoption and investment in AI and 5G as well as other favorable market trends, the resilience of the company's operating model and the value of its AI-driven assurance solution, providing lowering total cost of ownership and enabling comprehensive observability across customer networks, converting the company's robust pipeline into revenue, expanding the company's current installed base, levels of investment and advancing the company's strategic partnerships, expectation for initial revenue from certain partnerships and timing thereof as well as its full year 2025 revenue guidance, expectation with respect to margin and expenses and future growth, momentum opportunities 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 those 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 operating 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 the accordance with the generally accepted accounting principles. Investors are encouraged to review the reconciliation of GAAP to non-GAAP financial measures, including the quarterly earnings release available on our website.

Now I would like to turn over the call to Benny. Please go ahead.

Thank you, operator, and good morning, everyone. The third quarter was a record quarter for RADCOM, marked by strong growth and further evidence of our scalable and profitable business model. We are deepening deployments with existing customers while continuing to develop new opportunities in the market. Operators are increasing their investment in 5G stand-alone networks and AI operation, AIOps to enhance efficiencies, improve the customer experiences and reduce costs. As the market evolves, RADCOM holds strong competitive edge with our field-proven next-generation assurance platform, RADCOM ACE.

Turning to Slide 7. I'd like to give a brief overview of the Q3 results. For the third quarter of 2025, RADCOM achieved record revenue of $18.4 million, representing 16.2% year-over-year growth with continued profitability, expanding profit margins and positive cash generation. We achieved record non-GAAP operating income of $3.8 million, representing 20.9% of revenue. This is the highest since 2017, reflecting both the scalability of our model and the disciplined execution across our operations.

Our results demonstrate a strong balance between growth and profitability as evidenced by significant margin expansion. Importantly, we generated a positive cash flow of $5.1 million and ended the quarter with cash balance of $106.7 million and no debt. Our strong balance sheet positions us well for continued investment and strategic flexibility as we pursue both profitable organic expansion and targeted inorganic growth.

Turning to Slide 8. At the broader market level, RADCOM is well positioned to capitalize on the strong and durable tailwinds driving telecom spending. AI native network are rapidly evolving, enabling operators to deliver superior customer experiences. At the same time, they offer new opportunities to improve operational efficiency. To capture this value, operators need trusted data and deep telecom domain expertise to power AI use cases and ensure end-to-end network observability. These dynamics give us a distinct advantage built on years of investment in assurance innovation, telco domain AI and strong ecosystem partnerships. It's aligned perfectly with our strategic and product road map.

As AI innovation accelerates, a second major shift is taking hold across the telecom landscape. Operators are doubling down on customer experience as a core driver of retention, reduced churn and long-term revenue growth. To compete effectively, they need real-time visibility across network operations, enabling them to detect issues and anomalies before they impact subscribers proactively. These trends align directly with our value proposition to deliver end-to-end intelligent cloud-native solutions that provide granular insights into users and services at highly cost-effective rate. These capabilities offer significant savings compared to competing solutions. We believe this positions us strongly for new opportunities to demand for customer experience insights and intelligent service assurance continues to rise.

Turning to Slide 9. Let me speak to our partnership strategy. The third quarter performance underscore the continued success of our strategy. We are deepening our strategic partnership with NVIDIA, ServiceNow and system integrators. This helps strengthen our technology leadership, expand our market reach and enhance customer retention. We are focusing on developing an Agentic AI-powered automation layer with our partner systems, which will enable networks to communicate autonomously and complete complex workflows and business processes. We anticipate initial revenue contributions from these partnerships in 2026.

In the third quarter, we also completed the integration of RADCOM AIM, our AIOps solutions with ServiceNow service operation management platform. Our solution is now certified and available as a connector in the ServiceNow store. This enables continuous real-time network monitoring and supports advanced use cases such as intelligent anomaly detection and complaint validation. It also offers a comprehensive 360-degree view of network data for automated workflows, enhancing service quality and operational performance.

Turning to Slide 10. We recently launched our next-generation high-capacity user analytics solution powered by NVIDIA BlueField-3 data processing units or DPUs. RADCOM is the first network assurance vendor to capture speeds up to 400 gigabyte per second on a single server. This solution demonstrated a reduction of up to 75% in operational costs in field trials compared to traditional network probes. Furthermore, it provides complete visibility without requiring any compromises due to cost constraints. In essence, the solution delivers real-time analytics at a fraction of the cost, a key enabler for 5G assurance and AIOps. This innovative DPU-based solution is seamlessly integrated into our comprehensive automated service assurance platform and Agentic AI framework, which drives business processes across care, service management and network orchestration.

This empowers operators to capture and process massive volumes of network traffic efficiently, bridging the gap between engineering and customer-facing teams. Our NVIDIA DPU-powered high-capacity user analytics solution is now in the lab and field trials with key customers, showing promising momentum. RADCOM is also advancing its Argentic AI solution with accelerated computing to provide telecom operators with real-time actionable customer and service insights. These innovations enable telecom operators to automate network for enhanced efficiency, superior service quality and sustained long-term value.

Our Agentic AI architecture enable us to expand our addressable market by reaching operators at a time when demand for proactive analytics-based network visibility is rising. In our customer engagements, we're seeing a clear industry shift, particularly in Europe, but also across other regions. Some operators are accelerating their network modernization plans, recognizing the strategic importance of moving from legacy monolithic solutions to advanced cloud-native platform that leverage AI to automate operations. We've seen this trend firsthand with customers such as Norlys and more recently, 1Global. This positive momentum reflects the growing demand for innovative future-ready assurance solution, further solidifying RADCOM's position as trusted partner for operators seeking to enhance network performance, efficiency and competitive advantage.

As noted on Slide 11, we recently announced a new partnership with 1Global to deploy RADCOM ACE, enhancing customer experiences across Europe, North America and Asia and supporting more than 43 million connections. RADCOM ACE will provide voice and data monitoring, enabling precise and highly efficient troubleshooting across all required protocols. We also secured a business expansion with one of our existing customers. This progress underscore our land and expand strategy. As we demonstrate our value proposition, we are well positioned to grow as our customers expand their network and manage increased network traffic.

Let me now speak to our installed base. Turning to Slide 12. AT&T continues to add subscribers and RADCOM continues to support their net add gains, providing real-time assurance for service quality and user experience. Rakuten Mobile continues to expand its 5G footprint, surpassing 9 million subscribers in Japan and demonstrating increasing momentum in one of the world's most mature mobile markets. The operators continues to rely on RADCOM assurance solution as part of its effort to deliver scalable, reliable, high-quality performance across its fully virtualized cloud-native network.

Across our customer base, we're seeing broader deployments and deeper integration of our AI-powered capabilities. These solutions are enabling operators to achieve new level of automation, performance and efficiency.

Go-to-market activities. As noted in Slide 13, we attended many key industry events in Q3, including DT Campus, Innovate Americas, Network X and others, where we met with potential and current customers and business partners. Our cutting-edge solution continued to receive strong recognition from leading industry bodies. Most recently, our Argentic AI solution, RADCOM Predictive Complaint Resolution was honored with Best AI/ML Innovation Award at the Global Connectivity Award in London. The prestigious awards saw us outperform prominent global vendors and operators. Such industry validation underscores our technology leadership and reinforces the differentiated value we deliver to our customers and stakeholders.

Turning to Slide 14. As we look ahead, we believe that the current trends, combined with improving capital conditions will drive sustained investment across our customer base, continuing to fuel growth opportunities for RADCOM. Our focus remains on: one, converting a strong pipeline into revenue and looking to expand our current customer base even further; two, deepening strategic partnerships to drive innovation and expand our addressable market opportunity; three, investing in AI and automation to maintain our leadership, driving lower total cost of ownership for real-time network intelligence; and four, delivering consistent profitability and cash generation as we expand our global footprint.

In conclusion, the third quarter marked another milestone for RADCOM, achieving record results, strong execution and expanding opportunities across the AI-driven telecom ecosystem. We entered the final quarter of 2025 with strong momentum and clear visibility toward our full year outlook of 15% to 18% revenue growth, underpinned by disciplined execution, technology leadership and growing customer adoption. We will provide full year 2026 guidance when we release our fourth quarter results.

Before I hand the call over to our CFO, Hadar Rahav, to review the financial results in detail, I'd like to take a moment to share an update. As announced last week, Hadar will be leaving RADCOM after supporting the transition to our incoming CFO, Hod Cohen, during the first quarter. On behalf of the entire company, I want to thank Hadar for her outstanding leadership and many contributions over the year that helped strengthen RADCOM financial foundation and growth. We're grateful for her dedication and wish her the very best in the next chapter. We are also pleased to welcome Hod, a highly accomplished finance executive with deep experience in the telecom industry. We're confident he will build on this strong foundation and help drive our continued success.

Hadar, over to you.

Thank you, Benny, and good morning, everyone. As a reminder, unless otherwise noted, I will discuss non-GAAP results. Reconciliations between GAAP and non-GAAP measures are provided in our press release and presentation. Additionally, all comparisons are on a year-over-year basis unless otherwise noted.

Please turn to Slide 16 for our financial highlights. RADCOM delivered another quarterly record in revenues with total revenue of $18.4 million, up 16.2% year-over-year. Simultaneously, we continue to effectively manage expenses while growing our strategic investment in sales and marketing. As a result, we delivered significant improvements in margins and record profitability. The gross margin in the quarter was just over 77%. Please note that our gross margin may vary based on the revenue mix. Our strong gross margin reflects a more favorable revenue mix with a lower proportion of third-party cost elements. We believe this level of gross margin will be sustained in the fourth quarter.

Our non-GAAP gross R&D expenses for the third quarter were $4.7 million, up 11.6% year-over-year. This increase reflects our focus on deepen collaborations, driving innovation and expanding our portfolio. We plan to continue our strategic R&D investments to deliver advanced intelligent solutions with an emphasis on agent-to-agent and multi-model workflows while supporting our strategic partnerships and productization plans.

During the quarter, we received a grant of $189,000 from the Israel Innovation Authority, consistent with the same quarter last year. Of this amount, approximately $130,000 is related to programs from the prior years. As a result, we expect the grant in the fourth quarter to be approximately $50,000. Our net R&D expenses for the third quarter of 2025 were $4.5 million, an increase of $483,000 compared to the third quarter of 2024. Sales and marketing expenses were $4.6 million, an increase of 15.4% compared to the third quarter last year, reflecting our intentional investment to grow our sales presence. We expect a gradual increase in sales and marketing in the coming quarters to support a growing pipeline and expand our presence in high-value regions.

Non-GAAP operating margin was $3.8 million, beating the record we achieved in the second quarter with an operating margin of 20.9%. Non-GAAP net income was $4.9 million or $0.29 per diluted share, the highest in the company's history compared to $3.7 million or $0.23 per diluted share last year. On a GAAP basis, as shown on Slide 19, our net income for the third quarter of 2025 was $3.5 million, an increase of 54% year-over-year. GAAP earnings per share were $0.21 per diluted share compared to $0.14 per share last year. We ended the third quarter of 2025 with 319 employees.

Turning to the balance sheet on Slide 23. We closed the quarter with record cash, cash equivalents and short-term bank deposits of $106.7 million, supported by a $5.1 million positive cash flow in the third quarter, driven by our strong operating performance.

That concludes our prepared remarks. Thank you, and I will now turn the call back to the operator for your questions.

[Operator Instructions]

The first question is from Arjun Bhatia of William Blair.

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?

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.

All right. Helpful. And in terms of -- you mentioned expansion within existing customers this quarter. What trends are you seeing overall in terms of expansion within your existing customers? And in particular, what are the specific expansion efforts from these customers are you seeing in terms of adding to their existing stack?

Are you talking specifically about the NVIDIA piece or generally speaking?

I think both. So if you could kind of narrow down first and then broader picture, overall, what trends you're seeing, that would be great.

Sure. Overall, we see pretty good buildup of a solid pipeline through the year right now, also building towards the end of this year. We're still targeting a double-digit growth, and we still see more and more opportunities coming up until 2026.

[Operator Instructions] The next question is from Ryan Koontz of Needham.

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?

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.

That's great. Great to hear. 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?

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

Great. And maybe last one, 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?

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.

This concludes the RADCOM Ltd. Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to RADCOM's Limited Results Conference Call for the Second Quarter of 2025. [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 later today. On the call are Benny Eppstein, RADCOM's CEO; and Hadar Rahav, RADCOM's CFO. Please note that management has prepared a presentation for your reference that will be used during the call.

If you have not downloaded it yet, you may do so through the link in the Investors section of RADCOM's website at www.radcom.com/investor-relations. 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, the company's statements about its momentum, strategic direction and goals, market position and trajectory, future execution and delivery of value to customers, strengthening its core customer base, development of and enhancing strategic partnerships and expected benefits from collaborations.

The success of new technologies, including AI to, among other things, enhance automation, pipeline opportunities and customer engagements demand for its products and solutions, including AI capabilities, trends in the market, innovation, expanding its business, the expected benefits of its AI-driven assurance solutions its expectations with respect to gross margins, research and development and sales and marketing expenses.

Its expectations regarding grants, from the Israel Innovation Authority, expectations regarding the impact of foreign exchange rates and potential tariffs, expectations regarding the growth and convergence of 5G and AI. Its ability to deliver consistent value, while driving operational excellence and long-term shareholder returns and its full year 2025 revenue guidance and 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 its intangible assets related to acquisitions.

Non-GAAP results provide information helpful in assessing RADCOM's core operating 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 as 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 included in the quarter's earnings release, available on our website, www.radcom.com. Now I would like to turn over the call to Benny. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for RADCOM Second Quarter 2025 Earnings Call. RADCOM delivered strong results again this quarter, extending the growth trajectory we established over the past few years. In Q2, revenue increased 19% year-over-year supported by demand for our intelligent service assurance platform and strengthening engagement across our core customer base.

We also reported solid profitability and cash generation ending the quarter with more than $100 million in cash and no debt. As many of you know, I stepped into the CEO role in December 2024. From day 1, my focus has been to drive our global sales effort, expanding strategic partnerships, ultimately leading RADCOM into the next phase of growth, particularly through the development of cutting-edge solutions powered by accelerated computing and Agentic AI technologies.

With background serving global Tier 1 operators, I have seen firsthand how network complexity and customer expectations are evolving. The context is shaping how we execute, and I'm encouraged by the early results. The first half of 2025 has reflected strong performance underscored by disciplined execution and expanding customer engagement. We are deepening our commitment to become a key vendor in the new era of intelligent Agentic AI-powered ecosystem.

Our investment in RMB, our strategic partnership with market leaders and our alignment around long-term initiatives are collectively reinforcing our market position and setting the stage for sustained growth. Today, RADCOM is focusing on addressing key operators pain points and future market drivers such as data volume growth, visibility and network complexity.

We are simplifying next-generation automated assurance for AI-driven networks, enabling us to penetrate previously untapped market with unique insight and value. Through close collaboration with our partners, we are scaling innovation to meet our customers' evolving needs and bring their future vision for customer experience to life. All while reducing the total cost of ownership, optimizing network performance and enhancing quality of experience.

As you can see on Slide 7, this quarter, we achieved new revenue record of $17.7 million, reflecting 19.3% year-over-year growth alongside profitability improvement and positive cash generation. Operating income increased by more than 50% compared to Q2 last year, and our non-GAAP operating margin expanded to nearly 20% of revenue, demonstrating both the strength of our long-term engagement and ongoing discipline across our operations.

GAAP and non-GAAP net income also grew year-over-year, and we generated $2.6 million in positive cash flow during the quarter. We ended Q2 with over $100 million in cash, the highest in our company history, and we remain debt free. These results reflect positive sales momentum across the business and position us well to continue investing in growth while carefully managing expenses.

Looking ahead, we remain focused on converting active sales engagements and pursuing new avenues for growth as well as strengthening our position with current and prospective customers. As we close a successful first half of the year, our priority remains on delivering consistent value, while driving operational excellence and long-term shareholder returns.

Turning to Slide 8. I will discuss our company's strategy. In a fast developing AI markets and building on the momentum of the last few quarters, we continue to invest in R&D. Our goal is to deliver advanced service assurance framework that will support operators' AI-driven customer-centric vision. In particular, we are advancing our work in agent to agent and multi-model workflows, while exploring new innovation pathways align with emerging market needs.

Since announcing our collaboration with NVIDIA in the first quarter to develop high-capacity user analytics solution, we've generated encouraging traction. Several customers have already advanced from initial discussion to lab deployments, validating both the relevance of our high-capacity user analytics and the distinct competitive value we're bringing to the market.

In parallel, our broader strategic alliances continue to expand our addressable market and are expected to drive incremental value through deeper customer engagement. We remain focused on our key markets, North America, Japan and EMEA, where we are actively engaged in field trials with Tier 1 operators and advancing multiple proof-of-concept deployments.

This brings us to our key customers in Slide 9. AT&T, the largest wireless network in North America continues to be strong reference customer. Their customer first strategy has earned recognition from RootMetrics for best overall network performance at both national and state level. The mobile network analytics firm specifically mentioned AT&T's strength in consistency and reliability, especially across core markets.

RADCOM provide AT&T with intelligent and automated assurance that drives end-to-end network visibility and improve the quality of the subscribers' experience, which is Boost Mobile added 212,000 subscribers last quarter and was ranked #1 in 5G reliability and coverage across 15 major U.S. cities by OpenSignal.

Earlier this year, they also received top marks for 5G reliability in New York City. RADCOM's assurance platform underpins this performance by proactively monitoring and optimizing Boost 5G network. This enables them to deliver more consistent and dependable experience to their growing subscriber base.

Slide 10. In Japan, Rakuten now serves over 9 million subscribers and was recently recognized by industry peers in the second cloud-native telco market perception study. Our solution embedded in their private cloud infrastructure assures network functionality and stability as they continue to scale. This capability is critical to supporting Rakuten fully virtualized cloud-native architecture and enables reliable service delivery at scale. Across these leading operators, RADCOM's assurance solutions are helping translate strategic investment into measurable network performance gains, enhancing visibility and improving service quality enabling our customers to achieve industry-leading results.

Turning to the telecom market trends in Slide 11. The telecom industry is undergoing a profound transformation driven by the convergence of 5G and AI. According to Accenture, 84% of telecom executives expect Agentic AI to fundamentally reshape their organization and digital infrastructure. At the same time, data volume growth continues with acceleration of IoT adoption, along with introduction of new devices and applications. This introduced significant challenges for operators. This includes delivering new workflows and services relying on real-time analytics as well as data aggregation, monitoring and real-time visibility.

On the network side, the pace of 5G adoption is picking up. The LoRa Group projects 6% growth in the mobile core market through to 2029. And in Q1 alone, operators added 145 million new 5G subscriptions globally, bringing the total to 2.4 billion. We believe the convergence of AI and 5G will drive the next-generation service delivery and RADCOM is uniquely positioned to lead this new era.

Powered by our innovation in Agentic AI in high-capacity real-time intelligence assurance, RADCOM offers complete network visibility for complex 5G networks. By correlating network and customer data across silos, our solution analog reach insights to streamline operational efficiency and improve quality of services across multiple domains.

Moving to our go-to-market activities on Slide 12. Our go-to-market effort this quarter included major industry events such as Network X, Knowledge and FutureNet. As seen on Slide 13, at the TM Forum DTW event, we received 2 awards, the most Interactive Showcase Award of the Agentic ODA for proactive customer experiences, catalyst program, and the Tech for Good Award for the SATCOM with an Edge Phase III catalyst program.

These events, along with increased collaboration across our partners' ecosystem, are expanding our visibility and positioning us for continued growth in the second half of the year. To summarize, in the second quarter and the first half of 2025 RADCOM delivered record revenue, extending our technology leadership and deepening our relationship with strategic customers and partners. We remain focused on executing our long-term strategy combining technical excellence with commercial momentum and customer-centric innovation.

Turning to Slide 14. As we look to the remainder of the year and beyond, our strategy remains focused on 3 critical goals:

1, deliver measurable value and elevate customer satisfaction through deep automation real-time visibility and proactive assurance, capabilities that are increasingly critical for operators managing complex 5G environments.

2, grow our customer base by leveraging our advanced AI and agent-based technologies, establishing them as a foundation for delivering actionable customer experience, insights across multiple domains.

3, expand our assurance offering and continue pioneering innovation through our strategic partnerships, including ServiceNow and NVIDIA as part of our advanced and future-ready ecosystem.

Turning to Slide 15. As the industry continues shifting towards cloud-native architectures and advanced AI-driven operations, RADCOM's differentiated technology is playing an increasingly central role in helping telecom operators ensure real-time performance, optimize operations and enhance customer experiences.

We remain confident in our full year revenue guidance of 15% to 18% growth. This outlook is supported by healthy customer engagement and ongoing market shifts toward intelligent, automated real-time assurance. With that, I would like to turn the call over to Hadar Rahav, our CFO, who will discuss the financial results in detail.

Thank you, Benny, and good morning, everyone. I'll focus on our non-GAAP results unless stated otherwise. You can find the GAAP to non-GAAP reconciliation on Slide 3 and in today's press release. All comparisons are year-over-year unless noted.

Please turn to Slide 17 for our financial highlights. Second quarter revenue grew by 19.3% to a new company record of $17.7 million. We continue to manage expenses carefully, while making strategic targeted investments to drive growth, foster innovation and maintain our competitive edge. This disciplined approach enabled us to deliver our highest ever non-GAAP operating income of $3.4 million, representing 19.5% of quarterly revenues. Our non-GAAP gross margin for the second quarter of 2025 was 76.2%, as a software company, we don't expect U.S. tariffs to add a material impact on our gross margin next quarter, though results may fluctuate depending on our revenue mix.

As shown on Slide 21, our non-GAAP gross R&D expenses for the second quarter of 2025 were $4.5 million up 10.7% year-over-year. This increase reflects our commitment to strengthening collaborations, driving continuous innovations and expanding our portfolio. We will continue to invest strategically in R&D to deliver advanced intelligent solutions with a focus on agent-to-agent and multi-model workflows, while supporting our strategic partnerships and productization plans.

This quarter, we didn't receive a grant from the Israel Innovation Authority compared to the $180,000 grant we received in the same quarter last year. For the second half of 2025, we are in the final stages of securing grant approvals, which we anticipate receiving in Q3 and Q4. Our net R&D expenses for the second quarter of 2025 were $4.5 million an increase of $620,000 compared to the second quarter of 2024.

Sales and marketing expenses were $4.3 million an increase of $514,000 from Q2, 2024, reflecting our active engagement with existing and potential customers. We expect a gradual increase in sales and marketing in the coming quarters to support a growing pipeline and expand our presence in high-value regions.

Non-GAAP G&A expenses for the second quarter of 2025 were $1.2 million, in line with the same period in 2024. Most of our revenues are in U.S. dollars, but about 60% of our operating expenses are in shekel. So they are affected by the dollar weakening against the shekel. We don't currently hedge these expenses, but we are closely monitoring currency movements and we'll adjust our spending as needed to mitigate any foreign exchange headwinds.

Driven by higher revenue and disciplined expense management, non-GAAP operating income for the second quarter of 2025 was $3.4 million or 19.5% of revenue and an increase of $1.2 million from the second quarter of 2024. Non-GAAP net income was $4.2 million or $0.25 per diluted share compared to $3.1 million or $0.20 per diluted share last year. On a GAAP basis, turning to Slide 20. Our net income for the second quarter of 2025 was $2.4 million an increase of $731,000 year-over-year. At the end of the second quarter of 2025, our head count was 319.

Turning to the balance sheet on Slide 24. We ended the second quarter with a record $101.6 million in cash, cash equivalents and short-term bank deposits. This reflects a positive cash flow of $2.6 million for the quarter, driven by our strong performance. That concludes our prepared remarks. Thank you, and I will now turn the call back to the operator for your questions.

[Operator Instructions] The first question is from Alinda Li of William Blair.

Congrats on a great quarter here. Benny, could you touch on -- you mentioned NVIDIA partnership...

Alinda, I'm sorry, you were disconnected. Could you start your question again?

Yes. Can you hear me now?

Yes, you sound perfect.

Perfect. Yes. So I just wanted to touch on how is the partnership with service management system vendors like ServiceNow and AWS going?

This is Benny. The partnership is actually going very well. We are basically co-development and interconnecting our platforms as right now, a few of the connectors are already in place, and we start building the agent-to-agent use cases together.

Well, how should we think about the capital allocation with now you guys have $100 million roughly in cash on the balance sheet?

We're looking into potential M&A as the first priority. We are progressing with a few candidates and based on the progress we will decide when and how to proceed with the capital allocation.

The next question is from Ryan Koontz of Needham & Company.

Nice execution there by the team. Some basics, Benny, if you think about your growth over the next 18 months, what percentage of that -- of your pipeline do you see is coming from existing customer expansion versus new logo wins?

We're thinking about around 2/3 from existing and 1/3 from new, Ryan.

Got it. Helpful. And then on the revenue split, can you give us any idea what percentage of your current revenue base is coming from 5G roughly versus -- is there any legacy network revenue that we should be concerned about?

I think there's still a lot of LTE network is up and running and it will take some time until they will -- will transform to 5G. So it will take a while. And while I think 5G is growing all over the place. So definitely 5G is the focus but that still remains to stay for at least a few years.

Right. That makes sense. Great. And on your pipeline of new Tier 1 opportunities, you mentioned several. Can you give us any color as to where those are in the RFP process? And what kind of timing you expect on decisions from any Tier 1s you have in the pipeline?

We are participating in more than a few RFPs globally. We expect at least a few of them within the next half of this year and we get to know whether we -- we're going to be awarded or not.

Got it. And in terms of emerging opportunities, is there an opportunity in the direct-to-device satellite space have been doing a lot of work on that segment?

There is an active opportunity in certain customers, but it's still not clear in terms of their capital allocation. So we're looking -- we're waiting to see how they're progressing on their side, but definitely, there are some opportunities there that we are participating.

That's great to hear. And maybe last one, if I could squeeze it in. Any change in the competitive environment you point out relative to your peers?

Not too much. We still see our competitors that are trying to shift out of telcos, while we are were doubling down and investing in innovation. So supporting TCO reduction, supporting AI and Gen AI journey for our customers. So I don't see big differences on our competitive landscape.

Thank you. This concludes the question-and-answer session and the RADCOM Ltd Second Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.