Update: Contract Wins Continue For Radcom

Aug.27.14 | About: Radcom Ltd. (RDCM)

Summary

Two contract wins with Tier 1 Latin America telcos provides tangible evidence of new use cases for MaveriQ - wireline network customer experience management.

This confirms my investment thesis, which is driven by an evolving business model and market adoption of MaveriQ. The new use case increases the addressable market.

Management is guiding to "significant growth" year-over-year in 2014; the contract win adds to Radcom's growing backlog.

In a recent "Top Idea" article, I posited that Radcom (NASDAQ:RDCM) is set up for significant price appreciation over the next 6 to 12 months because of an evolving business model and market adoption of its new product, MaveriQ. MaveriQ is a customer experience management software product which allows telcos to manage their networks.

Today, Radcom announced two MaveriQ contract wins, although the financial details were not disclosed. However, the press release did indicate that MaveriQ is being used in a new application, fixed wireline networks. MaveriQ has historically mostly been used for wireless networks. The press release also indicated that the new MaveriQ wins were sold to two customers already within Radcom's customer base who found it useful and scalable enough to deploy it to other areas of the business where customer satisfaction is the key to reducing churn.

I remain bullish on Radcom because of its evolving model which features expanding margins, more predictable revenue streams and faster deployment and cash collection cycles. While I don't know what kind of revenue growth Radcom will achieve in the near term, management indicated in the Q2 earnings release that even with certain revenue recognition/timing issues in the quarter, Radcom management indicated they expect "significant growth in 2014 compared with 2013, coupled with anticipated gross margin above 75%." If "significant growth" is 15% or 20% for the full year, then Radcom will likely be a home run when combined with its realigned fixed cost base. All the pieces of an inflection point appear in place for Radcom.

Disclosure: The author is long RDCM.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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