Ladies and gentlemen, thank you for standing by. Welcome to the Vadcom Limited Results Conference Call for the 4th Quarter and Full Year of 2020. All participants are at present in a listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. 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 Eyal Zarrari, Radcom's CEO and Amir Hai, 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/investorrelations. Before we begin, I would like to review the Safe Harbor provision. Forward looking statements in the conference call involve several risks and uncertainties, including but not limited to the company's statements about its continued investments in technology and R and D, positive momentum of the 5 gs market and other markets and industry trends, the company's market position, cash position, potential and expected growth, the company's expectation with respect to its contract with Rakuten and continuing relationship with AT and T, the potential of the Radcom Ace product, the company's expectation regarding the impact of COVID-nineteen, its ability to capitalize on the emerging 5 gs opportunities and its revenue guidance.
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 the presentation in the company's SEC filings. In this conference call, management will be referring to certain non GAAP financial measures, which are provided to enhance the user's overall understanding of the company's financial performance. By excluding certain non cash stock based compensation expenses, non GAAP results provide information that is useful 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 of GA of GAAP to non GAAP financial measures, which are included in the quarter's earnings release, which is available on our website.
I would like to repeat the information about the presentation. If you have not downloaded yet, you may do so through the link on the Investors section of Radcom's website at www.radcom.com/investors relations. Now I would like to turn over the call to Eyal. Please go ahead.
Thank you, operator, and thank you all for joining us today. Earlier this morning, we issued a press release stating our Q4 and full year results for 2020. We are pleased with the financial results. We ended 2020 on a strong note following several consecutive quarters of revenue growth. Total revenue for the Q4 of 2020 were $10,200,000 bringing our total revenues for the full year of 2020 to $37,600,000 This was at the high end of our revenue guidance for 2020, an increase of 14% year over year and resulted in a significant improvement on our bottom line.
Over the last couple of years, we maintained our significant R and D investment to expand our technological advantage and capabilities. This investment bore fruit in the second half of twenty twenty. We reached a critical milestone in our long term strategy as we launched Radcom Ace, our automated 5 gs assurance solution. We secured 1 of the industry's first 5 gs standalone assurance contract with Rakuten. Shortly after the Radcomain's launch and continued support in Rakuten as they aggressively roll out their 4 gs and 5 gs services in Japan on the world's first fully virtualized mobile network and one of the most advanced 5 gs networks.
The solid end of the year reflects the progress we made during 2020 despite the impact of COVID-nineteen. I wish to take this opportunity to thank all of Brightcove employees as they rose to the challenge and help us meet the company's commitment and support our customers during 2020. From the beginning of the pandemic, we quickly adjusted our internal and external processes to the new way of remote working. We followed the regional health guidelines to ensure that all of our employees could work safely and support our customers. We also assured that our worldwide teams could collaborate and share knowledge effectively through virtual conferencing and other cloud based tools.
Looking at the telecom industry, the 5 gs market continues to gain momentum. This is reflected in our pipeline as we see more and more operators including 5 gs in their tenders requirements and we believe this trend will continue during 2021. We see increased investment across the market from handset manufacturers, network equipment providers and operators. This increased investment in 5 gs will drive demand for automated assurance solution to ensure service quality. We believe that 2020 was turning point for 5 gs.
In the United States, we recently saw the FCC complete its C band spectrum auction in which companies bid just under $81,000,000,000 for the licensing rights to use this spectrum. The C band spectrum is an essential part of the 5 gs rollouts and wasn't available previously. Now it will enable operators to deliver increased speeds and coverage. And with record these levels, operators have made substantial commitments to this transition. We see this trend worldwide as more and more operators invest in the 5 gs spectrum.
According to the GSA, over 200 operators worldwide are investing or planning to invest in the 5 gs spectrum by the end of 2022. We also see this trend in Europe as operators begin the selection process for 5 gs vendors. Network equipment providers continue announcing new 5 gs contracts. Nokia recently announced that it has closed 195 commercial 5 gs agreement and Ericsson announced that it has closed 127. Both these and other network equipment providers are aggressively targeting the 5 gs market and offering multiple verticals of the 5 gs set.
We believe that all of this investment and activity around 5 gs indicates that the market is strong and moving forward. However, due to the ongoing pandemic, we estimate some building uncertainty in terms of timing of rollouts. As mentioned before, 5 gs has multiple phases. In the 1st phase, compatible handsets connect to both 5 gs and 4 gs radios that in turn join the subscriber to the same existing 4 gs network. This is known as non standalone 5 gs.
Today, we are still at this stage of 5 gs. The second phase of 5 gs is known as standalone 5 gs. In this network environment, operators will deploy an entirely new network core and need a new assurance solution to monitor mission critical always connected services. We see early signs of stand alone 5 gs, but the critical mass is still at the early stage of non stand alone 5 gs. In these initial build outs of 5 gs, Assurance vendor selection is at the latest stage of the process.
We expect to see some early adopters begin the multistage process of choosing the Assurance solution in 2021. Another positive trend is that the public cloud providers like Microsoft, Google and Amazon see a potential market in the telecom industry as operators adopt cloud native technology, which is aligned with Radcom's product strategy over the recent years. In 2020, we saw Microsoft introduce Azure for operators, a cloud platform that incorporates edge compute capabilities. With our advanced cloud technology and telecom expertise, we see an opportunity for cooperation with cloud providers. Since the launch of our automated assurance solution, Radcom ACE, the market feedback has been extremely positive.
We are going to engage in multiple opportunities at different stages of the sales cycle. We believe that Tracom is well positioned to win more market share as 5 gs continue to evolve. Besides the 5 gs market opportunity, we also see demand for 4 gs and VoLTE assurance solutions. As operator plan their assurance investment for the long term, we see a competitive advantage for the Hasco MACE as 5 gs requirements are included in these standard processes. Operators increasingly see a need for advanced support in preparation for virtualizing their network and migrating to 5 gs.
We are making good progress with these additional opportunities. In November, we announced that we entered into a new multi year agreement with Rakuten Mobile. This increased our business with Rakuten. The initial deal we signed with Rakuten in May 2019 cover their 4 gs network. This new agreement assures Rakuten's recently launched non standalone 5 gs service and upcoming standalone 5 gs service launch expected in 2021.
This was an important milestone and a significant acknowledgment of our advanced assurance solution. As one of the industry's first standalone 5 gs assurance contract, Radcom will provide Rakuten Mobile end to end 4 gs and 5 gs service assurance. Radcom solution is also being integrated into the Rakuten's communication platform. As a reminder, this platform packages and market Rakuten's innovative network architecture to operators worldwide. As Rakuten's assurance vendor of choice, we could be part of this offering if the opportunity evolve.
Looking at the U. S. Over the past year, AT and T is a key strategic customer for us. Our cutting edge cloud technology is embedded into AT and T's network and monitor the subscriber experience as they continue evolving their underlying network infrastructure to the cloud. In 2021, we will continue to deliver consistent cutting edge software releases to AT and T as we support the evolution of the cloud network that has proven even more critical for millions of customers during the pandemic.
Our solutions help customers identify service issues in real time and troubleshoot them to continually maintain the highest quality of service, which is even more vital when operators roll out new technologies like 5 gs. We believe that our know how and advanced cloud technology plays an essential role in operators' customer centric approach to network deployments. In light of the multiple opportunities in our pipeline and the growing market, we plan on increasing our sales team to focus on specific regions and take advantage of the market opportunity we see. I am pleased by our achievements during 2020 and execution despite the global pandemic. We launched Frasco MACE and signed our first 5 gs customer contract.
We are expanding our sales team and are already involved in multiple opportunities for Radcommates for new and existing customers. Based on the current industry conditions and our current visibility, we are expecting another growth year and providing full year 2021 revenue guidance of $39,000,000 to $41,000,000 With that, I would like to turn the call over to Amir Hai, our CFO, who will discuss the financial results in detail. Amir, please go ahead.
Thank you, Eyal, and good morning, everyone. This quarter marked another consecutive period of revenue growth, With our Q4 increasing by 13% year over year, we also maintained our operating expenses and succeed in improving our bottom line. Now please turn to Slide 6 for our financial highlights. To help you understand the results, I will be referring mainly to non GAAP numbers, which exclude share based compensation. We ended the Q4 of 2020 with $10,200,000 revenue, an increase from $9,000,000 in the Q4 of 2019.
Our gross margin in the Q4 of 2020 on a GAAP and a non GAAP basis was 70%. Please note that our gross margin can fluctuate depending on the revenue mix. Our gross R and D expenses for the Q4 of 2020 on a non GAAP basis were $4,600,000 a slight increase of $442,000 compared to the Q4 of 2019. We received a grant from the Israel Innovation Authority for $308,000 during the quarter. Sales and marketing expenses for the Q4 of 2020 were $2,300,000 on a non GAAP basis compared to
$2,500,000 in
Q4 of 2019. The decrease is mainly related to reduction in travel expenses due to COVID-nineteen. G and A expenses for the Q4 of 2020 on a non GAAP basis were $748,000 approximately the same as the Q4 of 2019. Operating loss on a non GAAP basis for the Q4 of 2020 was $231,000 compared to an operating loss of $911,000 for the Q4 of 2019. Net income for the Q4 of 2020 on a non GAAP basis was $85,000 or net income of less than $0.01 per diluted share compared to a net loss of $501,000 or a net loss of $0.04 per diluted share for the Q4 of 2019.
On a GAAP basis, as you can see on Slide 5, our net loss for the Q4 of 2020 was $461,000 or a net loss of $0.03 per diluted share compared to a net loss of $1,100,000 or a net loss of $0.08 per diluted share for the Q4 of 2019. At the end of the Q4 of 2020, our headcount was 276. Now let's turn to the full year results. We ended 2020 with revenues of $37,600,000 an increase of 14% from $33,000,000 in the full year of 2019. On a GAAP basis and a non GAAP basis, our gross margin was 71% in the full year of 2020 compared to a gross margin of 70% in the full year of 2019.
Our gross R and D expenses for the full year of 2020 on a non GAAP basis were $18,300,000 an increase of $471,000 compared to the full year of 2019. We are planning to continue the investment in R and D to maintain our technological advantages. We received accumulated grants from the Israel Innovation Authority for $1,400,000 during the year. Sales and marketing expenses for the full year of 2020 were $9,200,000 on a non GAAP basis compared to $9,900,000 in 2019. The decrease is mainly related to reduction in travel expenses due to COVID-nineteen.
G and A expenses for the full year of 2020 on a non GAAP basis were $3,200,000 compared to $3,000,000 in the full year of 2019. Operating loss on a non GAAP basis for the full year of 2020 was $2,400,000 compared to an operating loss of $5,600,000 for the full year of 2019. Net loss for the full year of 2020 on a non GAAP basis was $1,800,000 or a net loss of $0.13 per diluted share compared to a net loss of $4,600,000 or a net loss of $0.33 per diluted share for the full year of 2019. On a GAAP basis, as you can see on Slide 5, our net loss for the full year of 2020 was $4,000,000 or a net loss of $0.29 per diluted share compared to a net loss of $6,800,000 or a net loss of $0.50 per diluted share for the full year of 2019. Turning to the balance sheet.
As you can see on Slide 9, our cash, cash equivalents and short term bank deposits as of December 31, 2020, were $69,000,000 We believe that our strong balance sheet provide us with flexibility to execute the opportunities ahead of us and adapt to the ongoing global uncertainty. That ends our prepared remarks. I will now turn the call back to the operator for your questions.
Thank
The first question is from Bhavan Suri of William Blair. Please go ahead.
Hey, Eyal and Amir, thanks for taking my questions and congrats. It's really nice to see sort of the growth and the consistency come back. So nice job there. I wanted to touch a little bit as you posted some solid upside in the quarter relative to expectations, solid results there. But can you give us an update on the spending and maybe the decision making environment in Q4?
I know, Eyal, you talked about it
a little bit, but a little more color would
be great. The pandemic was certainly challenging for customers, even potential customers. And I guess as you think about conversations and processes, are you seeing those start to pick up Q4? Obviously, 5 gs getting rolled out, but sort of there's still a
delay in sort of people wanting to make decisions. I love
to understand sort of the decision making spending environment and how that's changed?
Well, thank you, Bahram, and good morning. I think that the COVID-nineteen pandemic effect is definitely something that everyone is trying to understand. What I see is that overall 5 gs is getting a very good momentum and more and more investment in the telecom industry and global is made towards 5 gs. So the demand for 5 gs is strong and the commitment of the operators towards 5 gs is there. When talking to different CTOs globally, we do see some delays or irritations due to the pandemic.
But from experience in the market from previous technology generations, telecoms projects in many cases are longer and take delays. And I'm not sure if the effect is always due to the COVID or not. The bottom line is that and it's most important that the 5 gs momentum is there, the demand is there and most operators that we speak with are not hesitating and see 5 gs as strategic investment and they are continuing full speed towards that.
Yes. Yes. No, I think you're right. It's hard to get where it's just COVID related. But good
to see 5 gs going. I guess you've talked about the past of having in the past about having a handful of sort of POCs with Tier 1 customers. Can you just give us an update on the number of POCs and workshops you currently have in progress? And how is that pipeline shaping out to 2021? And And then
I have a question
for Amir on the guidance, but just maybe just on the POC and workshops and how that's playing out, especially in the Tier 1 carriers?
So this is a good question as POCs and workshop during the COVID was one of the things that as Revcom, we had to adjust. We actually managed to leverage the fact we are the cloud native company and introduced the demo environment and POC environment using the cloud, the public cloud, which allows us to be more agile and more responsive to our customers and manage to cover some of the overheads that are in some cases in the COVID environment are less feasible like installing physical equipment even if it's servers on the customer premises. And by that, we managed to actually accelerate the number of engagements we have with customers. They are different. They are less in person.
They are more online. But we have seen increased activity with the customers and POCs compared to what we had before. As I pointed out in my previous notes, we see this activity both from pure 5 gs customers as well as customers that are still not there with 5 gs, but they are doing the refresh for their 4 gs network, changing their network providers. And looking now on a future proof service assurance solution, And the fact we have the Radcom A is something that give us a lot of points because they are looking now on what is going to be the platform for the next year to come. So definitely, we see this building up, but it's different because we are mainly working remotely.
Yes. Understood. You touched on ACE. Let me ask about ACE before I jump to Amir. You talked about obviously Rakuten's interest and obviously deployment of ACE.
But how is demand with other carriers? Like is that a wait and see? Is that let's see how it plays out with Rakuten? Or are you actually seeing sort of people say, okay, we're going to test it, we're going to put it in dev environments, we're going to start looking at how are we seeing the early demand for ACE?
So the ACE is really for the early adopters that are really moving forward with the cloud based architectures and Kubernetes and containers, which most of the operators are still not there. But because we anticipate we build the Radcom Hs as an evolution platform that allow you also to work in a MSV environment and also run on a bare metal solution that enabling the access to technology also for operators that are not yet there. And the message we hear from everyone is that they are very excited. They see our technology advantage and they really look to use this kind of solution because everyone understand and believes that when 5 gs comes in full power, this is going to be the architecture.
Yes, yes. Okay. Okay. I'll switch to EMEA for a quick second. EMEA, it's good to see the guidance for revenue growth.
You obviously had challenges over the last 18 months or so moving around guidance numbers. I'd love to understand assume baked into guidance. I guess, how much of the outlook is predicated in closing new deals? How much of the existing partners growing? I'd love to understand how you've thought about building up this guidance.
Basically, hi, Bhavan. How are you? As stated, I think we have a good visibility towards 2021. Most of the guidance is consisted on our multiyear agreement with existing customers and high level of opportunities that we think that will go through during the year. And I think this is the main base for the guidance.
Got you. Got you. And last one, just to reiterate, do you have any major renewals coming up in 2020 and 81 at all? And have you built that into guidance? What's your expectations there?
Thank you.
So I think Perry answered that in the last quarter. We any given quarter, we have renewals with our different accounts. Typically, we have with each customer, we have multiple contracts that each of them is renewed in the age. So this is part of the normal course of teams. And overall, we have we don't see anything specific that is in 2021 different than we had in 2020.
Fair enough. Fair enough. Gentlemen, thank you for taking my questions. I think you both have vaccines, so congratulations on that too. We're hoping we progress here.
But stay safe and thanks for the time.
Thank you. Thank you,
The next question is from Alex Henderson of Needham and Company. Please go ahead.
Hello, guys. So a couple of questions. I wanted to start off just with some homework on the print that you just did. The gross margin is coming in just a hair below 70%. It seems like that's probably got a mix shift to some of the older products in it.
Can you talk a little bit about the mix of what you reported in 4Q?
Good morning, Alex. Actually, Q4 is mainly our new products. In this specific case, we had some higher expense on third party software that is embedded into our product line, into our new product that was added to the cost and had a slight shift, slight overhead on our gross margin.
Okay. So if the mix shifts to the new products in 2021, will we see that 3rd party software in the mix and therefore we should be thinking in the 70% to 70% range? Or is it something more in the 71.5% range that you did on average for the year?
Yes. We always can have some fluctuations, but our models are still the same. It's not related to the new product line. It's one time cost associated to a specific deal. But the gross margin levels are roughly in the range we indicated.
It can fluctuate between quarters, but this is the range.
Right. So continuing at the current levels for 2021 that you posted in 2020 then is fairly stable gross margins?
That's fair to estimate, yes.
And then on the NRE in 2021, is it reasonable to think that the $1,300,000 $1,400,000 range is the right range? Or should we be dampering that a little bit?
I can take this, Alex. Basically, right now, we are submitting the request and we are waiting for the final approval. But I think that in overall, from what the information I have now, I think it will be at the same level of what has been for the last year or so. So and of course, if we will update, if we will get some answer, we will update. But I think that it's a fair assumption that it will be the same.
And given the timing of the Q1, is it likely that the Q1 is again without the NRE the way it was in 2020 or
We hope to get an answer before the quarter ends, but it is we did I think it's not done.
All right. And any thoughts on the tax line? You did $800,000,000 or so, but it did seem to click up as the year progressed. Should we be looking at somewhere in the $1,000,000 range? Or what should we be thinking about there in terms of the tax exposure?
Basically, we have an agreement that goes through. So in most of the regions, we are not paying taxes on the income. The tax is mainly related to employee benefits, which you cannot credit tax then. So we don't see any major increase in this level. So it seems to be pretty stay the same.
Okay. Well, it's been averaging around $1,100,000 and it dipped in 2020. I'm not sure why that would be the case. But should we be keeping it at that $1,100,000 range or we should be keeping it around the $810,000,000 range?
I think the $110,000,000 range is pretty sure.
Okay. Thanks. And then I wanted to ask about the deferred revenues, which jumped quite sharply in the quarter. Was there a contract that came in and went into deferred that caused that jump?
Basically, deferred revenue is based on the funds that we received, but we didn't recognize the revenue yet. So these are the cases. In some projects, we get the funds, but we didn't recognize revenue. So this is why you see this increase.
Is that on product or is that mostly on the services side?
It's mix, product and services.
I see. Okay. I was hoping you could talk a little bit about the competitive landscape, the slow rollout of 5 gs, the deferral on timing because of COVID, all of those factors taken into account has certainly offered the competitors some time to catch up. I've noticed the NETSCOUT numbers, for instance, have been quite a bit better of late. Is there any change in the competitive landscape that we should be aware of?
So Alex, overall, we mentioned this before, everyone is understanding that 5 gs is coming and all of the competitors in our market are definitely targeting to see what is their offering to this new technology. We believe that our advantage of being in the virtualization space starting early 2015 and building the very robust technology is still give us a significant advantage. And this is the feedback we are hearing from the customers. Unlike NFV, that was a niche, 5 gs is the main market. So we do believe that most competitors would invest and continue to invest into this space.
We are very focused on our execution. We believe that the opportunity is there. We believe in our technology. And so far, we are from the only vendors in our space that is growing and anticipate to continue this growth. So we are overall optimistic.
When you go into a POC, are you seeing just NETSCOUT or are you seeing additional companies entering the space?
We have our usual suspects. It's typically about 3, 4 companies that are working in this space.
And
this was again, nothing's changed from what we saw last year.
All right. And going back into the mechanics side of the business model, obviously, the shekel has been quite strong. Can you remind us what we should be thinking in terms of the way you hedge and the impact of the exchange rate on the OpEx costs?
Yes. As stated, we've done some short term hedging. And if I look at this quarter, the negative impact of the shekels in this quarter compared to the previous quarter was around $120,000 If we look at Q1 and if it was at the current rate, so the negative impact compared to Q4, it would be like the same $130,000 per quarter. This is the quantification.
And when you looked at your OpEx, did you assume some spending increase due to T and E coming back in as a result of a normalization of the economy? Or are you expecting your T and E expenses to stay fairly de minimis and then come back in 2022? How should we be thinking about the OpEx growth for the year?
Yes. Basically, the negative impact of the shekels is about if you take it on an annual level, it's about $600,000 When we look at 2020 versus 2019, we have the negative impact of $700,000 So of course, it's affected the profitability, but we are controlling the shekel expenses very, very carefully. And we're not spending a lot of OpEx. We do want to continue to invest in the R and D and we do want to expand the sales team, but it's not something dramatic.
And so just to put this into context, is it reasonable to expect that OpEx is fairly flat with the exception of the shekel impact, let's say $600,000 for the year or so, taking it up towards pretty close to the $30,000,000 level?
I think that we will see some slight increase in the R and D level also and then in the certain market above the shareholders.
So something slightly above $30,000,000 then it would sound like would be the expectation?
Yes. In the operating expenses, yes.
Yes. Okay. And do you have any sense of what your plans are relative to headcount? Are we holding it steady at 276? Jan?
Yes.
It's relatively steady. As I pointed out, we are doing some increase on our sales team as we are seeing 5 gs is maturing and we are allocating some more of the saving of the travel as you pointed out before. We are allocating some of the budgets in order to increase our sales even capture more of the 5 gs market opportunity. But overall, company wide, it should be similar with maybe slight increase.
So coming back to the top line, at the lower end of the band, you're talking about 5% kind of growth rates. Very I think we would have to conclude fairly low growth rates for a company your size. Obviously, you've got a lot of opportunities for additional wins that could drive that higher. How should we track your success or alternatively the lack of success in accelerating that line other than just waiting for the prints?
So 2020 was the growth year and we did around 14% growth. And as far as I believe, this was the record revenue year for Radcom and one of the highest Q4s ever. We are looking to continue our growth and we are taking some conservative of the impact of COVID and the slowdown that might happen. But still under those conditions, we are still looking to continue and grow. As if we talked before, our sales cycles have some uncertainty and they might be longer than expected in normal situation.
And there is also the time it takes to go down to the revenue from the time you close the deals, because we usually have some few quarters for the implementation. So this is why we are looking on this guidance. And I'm still very pleased that we can show a consecutive year of growth. As always, the good signs is our update and progress with our customers and new contracts and wins. And I want to highlight again the importance of the deal we closed with Rakuten, which is probably one of the most advanced 5 gs networks in the world and probably one of the most advanced service assurance project in our space that gives us a lot of confidence on our journey.
I think this is the way you can look at that. And new wins that we are expecting to come during the year would build up maybe the 2nd part of the year or could be building up already revenue for 2022.
And as I look at the AT and T contract, it hasn't currently been in place now for quite a while. I think the original contract is 3 years and it's kind of runs its course through 2021. I know you've had a couple of renewals and the like. Should that contract be seen as something that stable as we go through 2021 into 2022 or is that up for renewal and needs to be renegotiated? Is there any growth relative to that installed base?
So our relationship with AT and T are healthy and we have secured revenues into 2021 2022 already. As pointed out, there are multiple contracts with different customers. We did see some upside on AT and T already in 2020. And there is nothing that we see that is coming now that is a big renewal as you intended. We have continued to focus, as I pointed out, on delivering new software updates into AT and T to the cloud platform.
And some of that most of it is already secured until 2022.
All right, great. Thank you very much.
Thank you, Alex.
Thank you, Alex.
The next question is from Abba Horowitz of Old School. Please go ahead.
Hi, Al. Very nice quarter. My question is regarding the R and D. R and D now is tracking around 50% of revenues. And I'm wondering and actually it was up this year versus last year once again.
I'm wondering at what point are you guys going to feel comfortable that we'll start to see that number slow down or even flat line for a while?
So, thanks to our bank and our R and D is one of our biggest assets is we believe now is the time to invest in technology. I would say that in 2021, we are going to stay in a very similar levels in R and D, again, excluding any share exchange rates changes. So we are about the right size of investment. We are thinking that the coming 2 years are going to be critical for cementing our 5 gs product offering. So we invested in the last 2, 3 years into R and D in order to ensure we launch Brascom H.
But in our environment, you need to continue and innovate. And this is why we are going to continue and maintain a similar level. I believe that with revenue growth, the percentage of R and D is going to get lower because we are going to keep similar level to what we had before and any revenue growth would be not necessarily requiring additional R and D investment.
Okay. So would it be fair to say that right now between $19,000,000 $20,000,000 would be the level for 2021 for R and D?
This is the range, yes.
Okay. And I mean, when we look at incremental revenues, because this quarter, what you demonstrated is that at these levels pretty much you're breakeven. So really any revenue after this level is actually going to produce profits. Can we just assume that it will all flow to the bottom or will there be certain variable costs associated with incremental revenue?
So our gross margin is in the 70% -ish. So you do have some incremental costs. But yes, from this level up, it's most should go to the bottom line. As I pointed out, we do want to do some additional expense on the sales and marketing. And there is, as before, slight increase on like travel that we are optimistic that in the 2nd part of the year, we will start to see things back goes back a bit to normal.
But roughly, the operation expense we have is our breakeven and the revenue growth should start to go into bottom line as we pointed in the past.
Okay, great. And just one other, are there any other standalone public companies that are doing what you're doing at this point?
Not that I'm aware of. Some of our competitors are public, but most of them are doing the multi product lines and not only focused on the assurance. Okay. The ones that are focused on the assurance, I think most of them are private.
Okay. Thanks very much. And again, great quarter. Thank you, Ariel.
Thank you, Abba.
There are no further questions at this time. This concludes the Radcom Limited 4th quarter and full year 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.