RADCOM (RDCM) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wednesday, Nov. 11, 2026

CALL PARTICIPANTS

• CEO - Benny Eppstein
• CFO - Hod Cohen

TAKEAWAYS

• Revenue -- $14.04 million, representing 19.4% growth quarter over quarter.
• Year-Over-Year Revenues -- down 23.6%, compared with $18.4 million in the third quarter of 2025.
• Non-GAAP Operating Income -- $700,000, or 4.9% of revenue, following an operating loss of $2.2 million in the second quarter of 2026.
• GAAP Operating Loss -- $0.9 million, reflecting ongoing operational expenses despite sequential revenue growth.
• Cash and Equivalents -- $111.4 million, including short-term bank deposits, compared with $109.7 million at the end of June 2026.
• Quarterly Cash Flow -- $1.7 million, supporting the company's debt-free balance sheet.
• Revenue Guidance -- $57 million to $63 million for the full year 2026, with a midpoint of $60 million.
• Share Repurchase Program -- up to $20 million authorized for a multiyear period of up to 18 months.
• Non-GAAP Net Income -- $1.9 million, or $0.11 per diluted share, down from $4.9 million in the third quarter of 2025.
• GAAP Net Income -- $441,000, or $0.03 per diluted share, compared with $3.5 million a year ago.
• Non-GAAP R&D Expenses -- $4.9 million, up 9.1% year over year primarily due to the weaker U.S. dollar against the Israeli shekel.
• Non-GAAP Sales and Marketing Expenses -- $3.5 million, down 23.5% year over year due to lower bonus and commission expenses.
• Non-GAAP G&A Expenses -- $1.2 million, representing an increase of $24,000 from the third quarter of 2025.
• Total Cost of Ownership Reduction -- up to 70% for customers using the cloud-native platform compared with legacy solutions.
• Tier-1 Subscriber Bases -- VNPT reported more than 30 million subscribers, and Rakuten Mobile reported 11 million subscribers.
• Pipeline Scale -- higher-single digits for the number of Tier-1 proof-of-concept and request-for-proposal engagements in North America and Europe.
• Tier-1 Sales Cycles -- six months to one year from contract to meaningful revenue contribution, depending on project scope.
• Gross Margin -- 73.8% on a non-GAAP basis for the third quarter.
• Customer Acquisition -- two new logos closed in the third quarter, including CETIN Slovakia and VNPT in Vietnam.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Eppstein stated, "Other vendors in our industry have also reported that operators delayed core network projects this year because of server supply and cost," noting that infrastructure constraints have affected deployment timing.

SUMMARY

RADCOM Ltd. (NASDAQ:RDCM) reported a sequential return to non-GAAP operating profitability in the third quarter while navigating industry-wide delays in core network projects. Management noted that server infrastructure costs and supply constraints have impacted the timing of customer deployments, though the company reaffirmed its full-year revenue outlook and emphasized a debt-free balance sheet. The company secured two competitive Tier-1 replacements in Europe and Asia, which management attributed to the platform's cloud-native efficiency and its ability to run on existing customer hardware. RADCOM continues to invest in its AI-native roadmap, focusing on agentic AI capabilities for autonomous networks as it prepares for an expected return to double-digit revenue growth in 2027.

• Management reported that several delayed core network upgrades are expected to begin moving forward in early 2027 based on recent orders.
• The company completed the required 30-day creditor objection period under Israeli law for its share repurchase program and intends to begin buybacks following the current blackout period.
• CEO Eppstein noted that the new RADCOM ADM allows operators to create real-time data insights that feed directly into AI agents to identify the root cause of network issues.
• Management indicated that current engagements with major European operators are shifting from standard network analytics projects toward testing AI agents.
• CFO Cohen stated that the company expects to remain profitable on a non-GAAP basis for the full year and aim to remain free cash flow positive through the second half of 2026.
• Eppstein noted, "Several opportunities advanced during the quarter from technical evaluation and proof-of-concept to commercial discussion."

INDUSTRY GLOSSARY

• ACE: RADCOM's integrated 5G-ready suite for service assurance, network visibility, and network insights.
• Agentic AI: AI systems capable of using tools and performing multi-step tasks autonomously to achieve specific goals.
• CSP: Communication Service Provider; a company that offers telecommunications or media services.
• LEO: Low Earth Orbit; refers to satellite constellations providing direct-to-device communication services.
• Neura: RADCOM's AI-driven module that uses machine learning to identify and resolve network issues.
• RFP: Request for Proposal; a competitive process used by operators to select technology vendors.
• TCO: Total Cost of Ownership; the comprehensive cost of purchasing, operating, and maintaining a technology platform.
• Tier-1: The largest category of telecommunications operators, characterized by national or international scale and millions of subscribers.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Limited Results Conference Call for the Third Quarter of 2026. [Operator Instructions] As a remainder 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 known and unknown risks and uncertainties, including, but not limited to, the Company's statements about its ability to grow and gain market share, strategic direction and priorities, future execution and delivery of value to customers and stakeholders, expanding its existing customer base, including Tier 1 operators, development and potential acquisitions and partnerships, the success and expected benefits of new technologies, demand for its products and solutions, trends in the telecom market, continued investment by operators in their networks.

The timing, scope and sequencing of customer development programs, the effect of server infrastructure costs and supply constraints, the timing and extent to which deferred deployments may move forward or return to a normalized cadence, customer relationships, competitive position, sales pipeline, commercial discussions, opportunities and expansion within existing accounts, expectations with respect to gross margins, research and development cash flow, non-GAAP profitability for full year 2026, free cash flow positivity in the second half of 2026, the reaffirmed full year 2026 revenue outlook, future growth, including a return to double-digit percentage revenue growth in 2027, continued investments and the size, timing, initiation, amount, duration, manner and implementation of the share repurchase program and the company's ability to return capital to shareholders while continuing to invest in its platform and AI road map.

The company does not undertake to update forward-looking statements, except as required by law. 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 non-cash stock-based compensation that has been expensed in accordance with ASC Topic 718, financial income, expenses, 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 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.

Benny Eppstein: Thank you, operator, and good morning, everyone. Thank you for joining us today to review RADCOM's third quarter results. Let's begin on Slide 7 with our third quarter highlights. This was a solid quarter for RADCOM. Revenue was $14.04 million, up 19.4% quarter-over-quarter from $11.8 million in the second quarter. While we recorded a GAAP operating loss of $0.9 million, we returned to positive non-GAAP operating income of $700,000 or 4.9% of revenue. We also generated positive cash flow of $1.7 million in the quarter. We ended the quarter with $111.4 million in cash, cash equivalents, and short-term bank deposits. That is up from $109.7 million at the end of June.

We reaffirm our revised full year 2026 revenue outlook of $57 million to $63 million, with midpoint of $60 million. Our solutions remain essential to how our customers manage the network and end-user service quality, and our relationship with them are strong. Our customers continue to invest in, maintain, and monitor their network, and we work closely with them. Based on our work with current and potential customers, we believe we are well-positioned to grow and gain market share. Our priority remains expanding our customer base, especially by adding new Tier-1 operators, which we see as key to our next phase of profitable growth. We made progress on this in the third quarter.

We closed 2 new logos, CETIN Networks and Vietnam Posts and Telecommunications Group, or VNPT. We are also actively engaged in several other meaningful opportunities. Moving to Slide 8 and our recent wins. On our second quarter call, I mentioned that two new customers we had won shortly after the quarter ended. Both contracts closed in the third quarter. The first is CETIN Networks in Slovakia, which we announced in August. CETIN selected RADCOM through a competitive request for proposal or RFP. It is a multi-year contract to provide end-to-end, AI-driven assurance across its mobile network, and we replaced the existing assurance provider. I'll come back to our progress in a moment.

The second is VNPT, a Tier-1 operator and one of the largest in Vietnam, which we also won through a competitive RFP, replacing the longtime existing vendor. The operator has more than 30 million subscribers. It selected RADCOM ACE for its roaming network. We will deploy it across multiple cloud environments. This gives VNPT real-time visibility into every roaming subscriber's experience and uses AI to detect issues before they affect subscribers. As I mentioned last quarter, this is an initial deal, but represents an important strategic step. VNPT is highly respected in the region, and this win gives us a strong reference in Asia Pacific.

It also opens the door to extend our assurance beyond roaming to VNPT's wider network, and we are actively engaged with VNPT on that opportunity. Now let's turn to capital allocation on Slide 9. As we announced in September, our Board authorized a share repurchase program of up to $20 million, which is expected to remain in effect for up to 18 months. We expect to start the buyback after the current blackout period ends, with timing at management discretion. At the same time, we continue investing in RADCOM ACE and our agentic AI road map to drive growth. Our strong balance sheet allows us to carry out the share repurchase program while continuing to pursue profitable organic growth.

We also remain open to targeted acquisitions and partnerships that expand our solution portfolio, enhance customer value, and deliver greater returns to our shareholders. Together, these steps reflect our confidence in the business and our commitment to building long-term value for our investors. Hod will cover the details in a few minutes. Slide 10 covers our strategy. Our strategic priorities are unchanged from last quarter, expanding our Tier-1 footprint, deepening our installed base, and advancing AI-native assurance for autonomous networks. We continue to pursue them with the operating discipline that supports our profitability. Deepening our installed base starts with supporting our customers' planned expansions, and we are working closely with them on these plans.

At the same time, we continue to view the deployment delays we announced previously as timing related and server infrastructure costs remain the main driver. We are not alone seeing this. Other vendors in our industry have also reported that operators delayed core network projects this year because of server supply and cost. We believe deployment timing is driven by infrastructure cost, not demand for our solutions. And when infrastructure is expensive, our platform makes it a real difference. First, we offer a much lower total cost of ownership or TCO, because our platform is fully cloud-native and highly efficient. In customer deployments, our platform has delivered up to 70% lower TCO than other solutions.

So operators spend less on both CapEx and OpEx with our solutions than with legacy systems. Second, our software can run on hardware operators already own, including the servers their current assurance vendors uses. That means fewer new servers to buy and easier migration, and no need to replace the whole system. When operators need more from every infrastructure dollar, RADCOM become an easier decision. Our recent wins show this. And in each case, we replaced the existing assurance vendor. We are now pursuing several more opportunities, each at different stage of the sales process. In each one, operators are looking for the same advantages that RADCOM provides. Turning to our installed base on Slide 11.

For operators today, the experience is the product. Subscriber expect their service to simplify work, and retention depends on it. Our AI-native assurance lets operators see the experience of each subscriber. This helps them to keep service quality high and keep the most valuable customers. We continue to support key accounts, including AT&T and Rakuten Mobile, where our assurance solution remain embedded in production networks serving millions of subscribers. Rakuten Mobile recently passed 11 million subscribers. It's also ranked first in Japan for customer loyalty. And for the sixth year in a row, it was the operator that people considered most when changing providers.

AT&T has kept churn low in competitive market, and RADCOM continues to support this customer with real-time assurance for service quality and user experience. We are working closely with our new customers, and deployments are moving forward. At 1Global, the project is on schedule, and our relationship with the team is very strong. At CETIN Network, RADCOM ACE is installed in production, and project is now in acceptance testing, which is fast progress for an end-to-end deployment. Both deployments show our ability to deliver quickly in cloud-native environments, and they put us in a strong position to expand within these accounts and win new ones. Slide 12 shows the progress we have made on product and AI.

Last quarter, I told you about the launch of RADCOM ADM, our Analytics Designer Module. ADM is now available to our customers, and response has been very encouraging. It puts operators in control of their own analytics so their teams can quickly create and change data insights themselves in real time. The insights operators build in ADM then feed directly into RADCOM Neura as new inputs for its AI agents. This gives Neura richer context to identify the root cause of network issues in minutes, not hours or days. Several customers and prospects are now evaluating Neura, and their feedback has been very positive. Our AI-native assurance continues to earn industry recognition.

Last week, RADCOM won a 2026 Fast Mode Award for Impact in Network Testing and Assurance Leader category. RADCOM Neura was also named a finalist in Light Reading's 2026 Leading Lights Award for most innovative Telco AI and ML products. ADM creates the insights, and Neura acts on them. Together, they gives us clear path to expand within our installed base. Moving to Slide 13. From a go-to-market perspective, we continue to engage with operators throughout the quarter. In September, we took part in AI-native Telco Forum in Dusseldorf, co-hosted by Deutsche Telekom. There, we demonstrated RADCOM Neura and our agentic AI capabilities to operators focused on building autonomous AI-native networks.

Shortly after, we attended Network X in Vienna, it was a valuable opportunity to meet senior operators leaders from across Germany, Austria, Switzerland, and Central and Eastern Europe, and we are now following up on those conversations. Turning to our pipeline on Slide 14. Our pipeline remains broad and healthy, with a good balance between installed base expansions and new logos. In North America, we are engaged with several Tier-1 operators. Some are existing customers where we are expanding into new use cases. Other are new opportunities where we are in active proof-of-concept and RFP processes.

One SIM comes up again and again, operators want to reuse the hardware they already own, and our software-based approach lets them to do exactly that. In Europe, the shift to 5G stand-alone and cloud-native networks continues to create new opportunities. Our win at CETIN this year shows that operators are ready to replace legacy assurance vendors, and we are engaged in several competitive RFPs across the region. Some engagements with major European operators are shifting from network analytics project to testing our AI agents. In Asia Pacific, our win with VNPT and our current Rakuten deployment gives us important references.

We are working with VNPT on a broader network-wide project, and we see growing interest from other operators in the region. We also see opportunities in Japan with our existing customers and with new operators. Across all 3 regions, several opportunities advanced during the quarter from technical evaluation and proof-of-concept to commercial discussion. As we have said before, Tier-1 sales cycles are long and timing can shift, but the demand is there. Our competitive position is strong, and we remain confident in our ability to convert this pipeline into new business and continued expansion within our customer base. Let me close with Slide 15. To summarize, revenue grew nearly 20% from the second quarter.

We returned to positive non-GAAP operating income, maintained positive cash flow, and reaffirmed our full year 2026 revenue outlook. We expect to remain profitable on a non-GAAP basis this year and aim to remain free cash flow positive in the second half. We added 2 new logos, and North American operators evaluating our solutions. We also see positive signs that some deployments delayed this year will begin to move forward in early 2027. With our AI-native assurance platform, a strong balance sheet, and our share repurchase program in place, we believe we are well positioned to return to double-digit growth in 2027.

With that, I will now turn the call over to our CFO, Hod Cohen, to review the financial results in details.

Hod Cohen: Thank you, Benny. 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. Let's start with our quarterly financial highlights on Slide 17. Revenues for the third quarter were $14.04 million, up 19.4% from $11.8 million in the second quarter of 2026. Revenue were down 23.6% year-over-year from $18.4 million in the third quarter of 2025. Non-GAAP gross margin in the third quarter was 73.8% -- we recorded non-GAAP operating income of $0.7 million, or 4.9% of revenue, compared with an operating loss of $2.2 million in the second quarter of 2026.

Year-over-year, that compares with operating income of $3.8 million or 20.9% of revenue in the third quarter of 2025. As stated in the second quarter, we expect to remain profitable on a non-GAAP basis for the full year. Non-GAAP net income was $1.9 million or $0.11 per diluted share. That compares with net income of $4.9 million, or $0.29 per diluted share, in the same quarter last year. Moving to Slide 18, which covers our R&D and sales and marketing expenses. Our net R&D expenses for the third quarter totaled $4.9 million, up 9.1% year-over-year. The year-over-year increase is mainly due to the weaker dollar against the shekel.

We plan to continue our strategic R&D investments to maintain our competitive advantage. We are focusing on agent-to-agent and multimodal workflows and bringing new features to the market. Sales and marketing expenses for the third quarter totaled $3.5 million, down 23.5% year-over-year. This reduction is mainly due to lower bonus and commission expenses and less marketing events. Non-GAAP G&A expenses for the third quarter of 2026 were $1.2 million, up $24,000 from the third quarter of 2025. Turning to our GAAP results on Slide 19. On a GAAP basis, our net income for the third quarter of 2026 was $441,000, compared with net income of $3.5 million in the same quarter last year.

GAAP earnings per diluted share was $0.03, compared with earnings of $0.21 per diluted share a year ago. Now to the balance sheet on Slide 22. We closed the quarter with $111.4 million in cash, cash equivalents, and short-term bank deposits, up from $109.7 million at the end of June. That reflects positive cash flow of $1.7 million for the quarter, and we have no debt. As Benny mentioned, in September, our Board authorized a share repurchase program of up to $20 million, which is expected to remain in effect for up to 18 months. Since then, we have completed an important step. Under Israeli law, our creditors have 30 days to object to the program.

That period has now ended, and we received no objections. Any repurchases will be made at management discretion in the open market, including under Rule 10b5-1 plans. We did not repurchase any shares during the third quarter. We expect to start the buyback after the current blackout period ends. We are reaffirming our revised full year 2026 revenue outlook of $57 million to $63 million, with a midpoint of $60 million, as announced in July. That concludes our prepared remarks. Thank you, and we will now turn the call back to the operator for your questions.

Operator: [Operator Instructions] The first question is from Arjun Bhatia from William Blair.

Faith Brunner: Faith Brunner from William Blair. First of all, for both VNPT and CETIN networks, there were both competitive replacements of incumbent vendors. Can you give us a little bit more color on where the -- what were the key reasons of winning those deals? And what are the trends that you're seeing across kind of the competitive replacement deals that you've had thus far?

Benny Eppstein: Sure. In both cases, it's basically modernization of the legacy platform that was supported with competitors up to that point. For both cases, they moved to 5G and roaming, specifically for one of them.

Faith Brunner: And then for the deployment delays that we've seen through the second quarter and now as you're going into -- you've been through third quarter and now going to the fourth quarter, any kind of increased visibility of where that's at? And any indicators that you are looking for to give you a sign of the deployments reverting back and these customers who have delayed their deployments are reconsidering reaccelerating that?

Benny Eppstein: Yes, sure. We do see encouraging sign. We already received a couple of orders that planned for early 2027. So those orders that we expected to get early 2026, and we said that we pushed to 2027 is happening.

Operator: The next question is from Ryan Koontz.

Ryan Koontz: With regards to the pipeline, some nice color you provided there. I appreciate that. Any kind of rough quantification you give there in terms of the number of kind of Tier-1 RFPs or POCs and RFPs you're engaged in at the moment that would give you some confidence in some of those turning on?

Benny Eppstein: I don't know if to quantify, but we have multiple POCs and field trial across North America and across Europe. So it's, I don't know, higher-single digits, let's keep it like that.

Ryan Koontz: And typically, what's the time frame from a contract to revenue really picking up?

Benny Eppstein: It depends on the scope, Ryan. So it could be a subset of the solution, it could be the complete solution. So it could be anywhere from, I would say, 6 months to a full year, depends on the scope.

Ryan Koontz: And are you seeing much of an emerging opportunity with any of the satellite LEO direct-to-device players yet?

Benny Eppstein: We do, but through our customers primarily.

Ryan Koontz: And then as far as cloud-native goes, any update on the competitive landscape there for -- I know one of your prime competitors has not been cloud-native, but can you update us on the landscape for cloud-native solutions in the market besides yourself?

Benny Eppstein: Yes, absolutely. We do see a great desire for our customers to modernize and to have a technology fit to their 5G and 5G stand-alone ecosystem. So this is still a need. And together with the TCO reduction desire, it's even stronger than before. So we are -- we do see the need of modernizing their network alongside with their layoff and automation push, I think our product is coming in the right timing.

Operator: The next question is from Blair Corey.

Unknown Analyst: I just have 3 quick questions. Just want to get a sense with the Q3 revenues, what's sort of the mix between products and services? Is it sort of your traditional mix? Or have you found that more of the new wins have been resulting from products or services?

Hod Cohen: So it was -- Blair, it's. So it was in our traditional mix. We had a little bit more third-party hardware-related this quarter, for example, in comparison to the previous quarter, but not something meaningful.

Unknown Analyst: And in terms of Q4's revenues, I know that there's been delays, as you mentioned, due to server procurement issues from existing customers. Do you anticipate that Q4 revenues are going to come from existing customer contracts or some of those upgrades? Or will those upgrades be delayed until 2027?

Benny Eppstein: Those delayed upgrades will come at early Q1 2027.

Unknown Analyst: And just one last quick question. Not a lot of stock-based compensation. We're sort of end of the -- do you anticipate or what is the flow for you guys in terms of issuing stock-based compensation? Should we expect something in Q4? Or would that be pushed to 2027 as well?

Hod Cohen: No, we are not planning to issue a lot of stock-based compensation in quarter 4. We are looking at 2027 when it will be a year that we will issue stock employees.

Operator: This concludes the RADCOM Limited. Third Quarter 2026 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.

Should you buy stock in Radcom right now?

Before you buy stock in Radcom, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Radcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $341,157!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,037,753!*

Now, it’s worth noting Stock Advisor’s total average return is 834% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of November 11, 2026.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.