As a reminder, this conference is being recorded and will be available for replay on the company's website at www.radcom.com on November 7th, 2019. On the call today are Yaron Ravkaie, RADCOM CEO, Eyal Harari, CEO of RADCOM North America, and Amir Hai, RADCOM 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 on the investor section of RADCOM's website at www.radcom.com/investor-relations. Before we begin, I would like to review the safe harbor provision. Forward-looking statements in the conference call involve a number of risks and uncertainties, including but not limited to, the company's statements about its 2019 revenue and other performance guidance, including statements that are anticipated growth margins, statements about the company's strategy, growth, leadership position, opportunities and momentum, visibility, headcount, and backlog.
Statements about continued investment in research and development and statements about the future of NFV, industry trends, and the future market conditions, including 5G deployment and future plans of industry participants and customers. The company does not undertake to update forward-looking statements. The full safe harbor provision, including the risks that could cause actual results to differ from these forward-looking statements, are outlined in the presentation and 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 in evaluating and comparing our 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, 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 investor section of RADCOM's website at www.radcom.com/investor-relations. Now, I would like to turn over the call to Yaron. Please go ahead.
Thank you, operator, and thank you all for joining us today. By now, I assume you've seen the press release issued earlier today regarding upcoming changes to RADCOM's management. As reported, effective January 1st, 2020, I will transition from my role as CEO to the company's board of directors. It has been nearly four years since I first joined RADCOM as CEO. During this time, the company has grown, and our technology has significantly advanced. During this period, we've established RADCOM as a world leading provider of NFV service assurance and network intelligence solutions. We are now seeing the fruits of our efforts with new key engagements and expanding deployments with existing customers. We are set up today to take advantage of current and future market conditions, and we expect the rollout of 5G to spark the adoption of our platform and solutions.
With this, I look forward to my role on the board of directors and actively participating in shaping the company's strategy as we aim to capture more business as 5G adoption increases. Eyal Harari will be replacing me as CEO after many years with RADCOM, including his role as CEO of RADCOM North America and as COO of the company. Eyal has partnered with me over the last four years running the company, and this transition has been part of our succession planning. Eyal has made significant contributions to RADCOM's success, including leading the company's NFV strategy and has been instrumental in our close relationship with AT&T and other key customers. With Eyal's experience over the years and our shared journey together, I'm confident in Eyal's ability to lead the company forward as the industry transitions to 5G and virtualized solutions.
I will now turn the call over to Eyal for a few comments, after which we will get to the quarterly update and results. Eyal.
Thank you, Yaron. As Yaron mentioned, the past four years has been transformative for RADCOM as we shifted to cloud-native solutions and offered first to market NFV solution and two critical customers such as AT&T and Rakuten Mobile. During this period, we have assembled a strong and experienced team that has developed the most advanced virtualized solutions. I want to thank Yaron for being a great partner and a leader during these years. I am pleased that we will be able to continue to work together as he joins the board of directors. I look forward to stepping into the role of CEO in such exciting times for RADCOM. I believe we are well positioned for continued growth as the pace for 5G adoption picks up and as virtualization solutions become industry standards. Yaron.
Thank you, Eyal. I wish you all the best in your new role. Let's now turn to the financial results for the third quarter of 2019. We are pleased to report increased revenue this quarter of $9.4 million as we continue the upward momentum that we have seen this year. This growth reflects the progress made in adding Rakuten Mobile as a significant strategic customer, as well as our strong relationships with our current customer base such as AT&T, Globe, and others. As we announced at the beginning of October, we signed a multi-year agreement with PJSC VimpelCom, the wholly owned subsidiary of VEON. VimpelCom is a top-tier operator in Russia with over 50 million customers under its Beeline brand. VimpelCom is a very innovative, customer-oriented company operating in a highly competitive environment, so they need to monitor all their services at scale in a highly automated, cost-efficient way.
We will provide our virtualized solution and integrate it into VimpelCom's virtualized platform so they can monitor their services automatically and ensure the highest level of customer experience to their subscribers. Also, we continue to make progress on our deployment with Rakuten Mobile, where we are deploying a fully virtualized RADCOM Network Intelligence solution for the world's first end-to-end fully virtualized mobile network. This partnership emphasizes and strengthens our position as a market leader for virtualized assurance and has gained lots of attention within the telecom industry. Our advanced technology and virtualization know-how provide operators with unparalleled capabilities to enhance their customer experience as they transition to NFV and 5G. In addition, we continue to have a healthy relationship with AT&T as we deliver cutting-edge software releases and provide support for the evolution of their advanced cloud network.
AT&T continues to proceed rapidly with its transition to the cloud, which is a critical component of 5G rollout and future service and innovation. With AT&T and Rakuten undertaking the most exciting NFV transformations in the industry, we are proud that RADCOM is playing a central role in both of these transformations as we continue adding more and more advanced technology and capabilities into our virtualized assurance portfolio. As we plan for 2020, and with the progress already made this year, we expect to enter 2020 with high visibility and backlog and a strong potential for growth. Our strategy is to continue investing in R&D to capitalize on the increasing momentum that we expect to see with the migration to 5G.
In light of our relationship with AT&T, the execution of our contract with Rakuten for the world's first fully virtualized network, current market conditions, and our results to date, our current revenue guidance for this year is between $31 and $33 million. With that, I will turn the call over to Amir Hai, CFO, to discuss the financial results in detail. Amir, please go ahead.
Thank you, Yaron, and good morning, everyone. Please turn to slide six for our financial highlights. To help you understand the results, I will be referring mainly to non-GAAP numbers, which exclude share-based compensation. Revenue for the quarter was $9.4 million, up by 10% year-over-year. As a reminder, our quarterly revenue can become lumpy due to specific project milestones. Our gross margin for the quarter was 65.7% on a non-GAAP basis. This lower-than-usual gross margin reflects product mix, including more hardware than usual due to specific projects. Note that our gross margin can fluctuate depending upon the level of revenues and revenue mix. Our gross R&D for the quarter on a non-GAAP basis increased to $4.5 million from $3.7 million in the third quarter of 2018. This increase results from our continued investment in R&D to maintain and extend our technological leadership and capabilities.
The R&D level for this quarter is approximately the same in the previous two quarters. During the third quarter, we received $597,000 from the Israel Innovation Authority, compared to $528,000 in the third quarter of 2018. Our net R&D for the quarter was $3.9 million, an increase from $3.2 million in the corresponding period last year. Sales and marketing expenses for the quarter were $2.6 million on a non-GAAP basis, an increase from $2.3 million in the third quarter of 2018. This increase is primarily attributable to increased sales commissions. G&A expenses for the quarter on a non-GAAP basis totaled $812,000, compared to $647,000 in the third quarter of 2018. G&A expense levels were approximately the same as in the previous two quarters.
Operating loss on a non-GAAP basis for the quarter was $1.1 million, compared with an operating profit of $762,000 for the first quarter of 2018. Net loss for the quarter on a non-GAAP basis was $1 million, or a loss per share of $0.07 per diluted share, compared to a net income of $1 million, or $0.07 per diluted share for the same period last year. On a GAAP basis, as you can see on slide five, we reported a net loss
For the quarter of $1.7 million, or a loss per share of $0.12 per diluted share, compared to a profit of $634,000 or $0.05 per diluted share last year. At the end of the third quarter of 2019, our head count was 259. We expect our head count to remain around the current level in the near term. Turning to the balance sheet, we have a healthy cash balance, which places us on a solid footing to execute on the opportunities in front of us. Our liquid cash equivalent and short-term bank deposits at the end of the quarter were $68.1 million, as noted on slide nine. I will now turn the call back to the operator for your questions. Yaron will make closing remarks after the Q&A session.
Thank you. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. If you have a question, please press *1. If you wish to cancel your request, please press *2. If you're using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Bhavan Suri of William Blair. Please go ahead.
Hi, this is Matt Stotler for Bhavan. First off, Yaron, it's been great working with you and hope to continue to speak with you in the future, and I congrats you with the CEO, and thanks for taking my questions. First, as far as the revenue run rate, we've seen a step-up in the quarterly revenue run rate over the past couple of quarters. The guidance suggests a step-down in Q4. Just curious if you could flesh out what's been driving that step up, and if that's just coming from blaring in Rakuten or other customers as well, and what assumptions are behind the step-down expected in Q4 as far as the quarterly run rate goes?
First of all, thanks, for sure, we'll be in touch and I think you guys will continue to field me and see me. I would say that we're making very good progress also with the Rakuten project. We have the stable revenue that's coming from AT&T. All of that and Rakuten now representing a full quarter, it stepped up the revenue. We have, of course, some other healthy activity from our other key customers, including Globe Telecom, et cetera. As for the guidance and finishing the year, it's not now, I think, to do the math on hundreds of thousands of dollars. Remember that we're dependent on project milestones and things that will happen. There's no real for sure downward momentum in the business. We see an upward momentum, and any modeling between quarters is just influenced by our rev rec.
In general, I think what you should take from this call is that we have a very good year. The year is not done yet, but till to date, we have a very good year from a booking perspective, and as you saw in the prepared remarks and also in the PR that we released, we'll be entering 2020 with a very nice revenue backlog. I think you need to be patient as we set up to guide. Eyal will guide 2020 when we finish the year. I think as we see it now, we're gearing up for a growth year for next year. Everything looks positive. We're building on top of everything that we're doing, a healthy pipeline, good performance this year, exactly like we want to see in the business.
Right. Absolutely. Okay, just one follow-up. If I remember correctly, obviously you guys have talked about 5G as being the sustainable long-term driver for virtually as part of this business. If I remember correctly, the Beeline deal with VimpelCom is for 3G and 4G networks and not for 5G. Just wondering, when you look at your pipeline, how much of that is being driven by virtualization of 3G and 4G networks versus next gen 5G at this point? Thank you.
Beeline is basically contracting us to do all of their network. The way to look at Beeline is we'll be doing everything. They'll be basically swapping their existing vendor with us. At this stage, we're starting the planning stage, and primarily it's probably not going to impact this year. Okay? I'm saying it with a grain of salt, but the way that we're looking at it, the main impact, financial impact of Beeline will be for next year's revenue, and I think you'll see it as we finish the planning and show you the plan for next year. When you look at the market and you look at what's driving demand, we see that more activity around 5G.
Remember that last year we came from a slowdown end of last year, so it's not like everybody's issuing and tomorrow morning we'll have 20 contracts, but we see a pickup of activity as the carriers are starting to roll out 5G. Now, the way that they're rolling it out, they're rolling it out first 5G, which is basically a building block on top of the 4G network. They're rolling out like a 5G radio, and they're staying with doing some changes to their 4G core, and that way they're giving the very high speed, but it's still not the end result of a 5G architecture. We now see more pipeline activity and discussions with the customers, both by the way, existing and new logos, around the 5G evolution, by the way, short-term and long-term.
It gives us a good engagement and good starting point for the coming quarters that we expect to see this increase, and we expect the pipeline to turn into deals as they roll out this technology. We might still see next year someone coming in and, I think you remember me talking about this in the past and saying, "Okay, look, I have my current legacy technologies at Philip. I've been running it, I don't know, with five years, seven years, whatever, and I want to do a refresh." We might see a refresh, and they still need to support 4G, 3G. 2G, I think, we see disappear, and they're going to use the 2G frequencies for 5G, maybe even the 3G frequencies for 5G.
All of this will be our world and to connect all of this, just remember that we live in a hybrid world. Telco, outside of Rakuten, which this, what makes Rakuten special and exciting, outside of Rakuten, and if we'll see, we are starting to see some activity, perhaps some others experimenting with maybe becoming a greenfield operator. If you're not a greenfield operator, you're rolling out 5G, you're rolling out it together with your current network, and you want assurance that shows you end-to-end. That's, I think, how everything fits together.
Right. Very helpful. Thank you very much, and solid quarter.
Okay, thanks.
The next question is from Alex Henderson of Needham & Company. Please go ahead.
Thanks. I'm getting a little bit of static on my line. I hope that's not my phone line. I was hoping you could talk a little bit about the structure of the trial that you've got in place. How many companies are currently in that pipeline? Any sense of scaling within that pipeline? The other question, obviously, the third quarter was a little bit more slanted towards hardware. That sounds like it's more of the legacy products than the forward pure software products. To that extent, should we expect a rebound to a more normalized gross margin with more of a software mix in 4Q?
Okay. Hi, Alex. We hear you fine, by the way, so static is not on our side. Let's start maybe from the second question. First of all, just a recap on the way that the company operates. We have one product, okay? We know how to install it. It's an NFV-based product. It's fully virtual. This is the product that we have with all of our key customers, including customers that haven't migrated fully to virtual. Specifically, what do we do? We just take the same software, and we provide the company in the business model that we operate with some of our longer-standing customers. We also ship them regular COTS servers, and we install the software on that, and we even install it in a cloud fashion that for us, it's easier to maintain, et cetera. That's what's happening technically.
Now, financially, what does this mean? It means that you might see a quarter where we're shipping just regular HP servers or COTS or Dell or something like that to customers, and the margins on those servers are very low. Basically, it's almost like a pass-through, and that takes the gross margin down. That's been going on for a while now. This quarter, we had such an event and this you see. It's not any, of course, evidence or something in the strategy of the company, on the contrary. Now, specifically, here, we do expect next year to have less of this because what we see is our current customers that have been using this model have started to migrate to virtual, and we've already migrated some of their network to virtual.
We expect the growth as their traffic growth in next year, not to ship them servers. We might still have occasions here and there, but less than this year, and you will see a trend that we all like in the right direction of increased gross margin. The question of what do we see from a pipeline perspective.
Before you go on, the fourth quarter comment, is it going to rebound in 4Q? You talked about gross margins for next year, but you didn't address the fourth quarter.
Yeah. It's going to rebound.
Perfect. Thanks.
Okay. When we look at the activity with the customers and the pipeline, et cetera, just to give you a feel, with our size of the company in the Tier 1, at any given time, we have around a handful of trials and engagements going on that are real engagements, okay? That are lab and trials and things like that. Now, I think you've seen in the past that it's very hard to understand in this market, and I still, unfortunately, don't have the best crystal ball, what will be the sales cycle and how we would advance some of them. From the past situation, we saw some of them advance, and by the way, VEON is one of them. It took a lot of time. It was in the pipeline for a long time. I'm not going to give too much color why. It's their own buying process.
I can tell you that, and we've talked about it in the past, Rakuten Mobile was very fast because their need was fast. What we're going to do, we're going to very closely work with the customers. As this 5G momentum grows, okay, we're hopeful that it will shorten the sales cycle, but we don't know yet to date.
If I could, the contract that you did with Rakuten, their network launched, as I understand it, in October, just launching now. I assume that the majority of that deploy occurred over the summer in order to set up that network. It sounds like VimpelCom is more of a 2020. Is that part of the reason, the timing of that launch, that they're sequentially down a little bit in the fourth quarter? To that extent, how are those structured? Are they structured as subscriptions, or are they structured as one-time payments? Can you talk a little bit about to what extent those two contracts are ongoing revenue at a steady rate or whether there's growth to them or what?
Okay. Let's start from Rakuten. Rakuten is a multi-year engagement, looks, I want to be accurate with the word, it looks and it's as close as possible that you can get in our world to a subscription model. My recommendation, this is how you should model it. This is how we're modeling it, and this whole thing. It's a stable revenue, and with a potential upside to grow that recurring revenue on a recurring basis. We're at the tail end of receiving some additions to that contract that are meaningful, there's also additional positive activity going on with Rakuten that can increase the relationship with them. The relationship with them is meaningful. They will become our number two customer. That's Rakuten.
Let's stop there for a second. To the extent that Rakuten is targeting 170 million population and just launched the network, if they add subscribers, is there certain levels of additional subscribers that then culminate in revenue sharing, or is it just a subscription based on footprint and features? How does it scale up?
It scales up if they launch 5G and if they launch more technologies. It's unlimited to Japan for their subscribers. As they add more subscribers, it's not going to generate more revenue for us. If they do launch, which they have a desire to launch beyond Japan, it will add significantly more revenue to us.
Very good. Thank you. Cleared that up. VimpelCom?
Okay. VEON, it's a little bit complicated because we haven't gone through the full planning stage, but we expect the revenue to materialize primarily in the next two years. It's more of a traditional license and maintenance model. As we migrate to more of a cloud SaaS model, and I mentioned this, I think, several times, we are not going to be religious on it, and if a customer forces us or really insists on having a license model, we will remain flexible to work with. That's what's standing behind this.
Although I expect more and more to see new logos come in with a subscription model because of the fact that it's cloud software, et cetera, and they get the benefit of a cloud model, which is ongoing releases and getting the latest and greatest all the time, and they basically get RADCOM as a partner for the subscription period, for the multi-year period.You'll see these milestones basically split on this. It will contribute, we didn't disclose the numbers, will contribute a percentage of the revenue going up next year and into the year after.
If we excluded VimpelCom, was it reasonable to think that your revenues would be fairly steady, and that that's all upside to the 2020? Do you have some things in [backlogs] and some declining, some are increasing? The other piece of that question is what happened to the other Tier 1 in the U.S. that you guys were talking to?
Okay. Specifically, I would say that the company, with the booking that we did this year and with the main contract that we have with the visibility, which is very good that we enter next year, even without VimpelCom, we'd be growing. With VimpelCom, we'd be growing more. Okay. You'll see it when we come out with the numbers. When we look at the North America, you remember that we won a North America customer. We're in active discussions with them, they're going through a major reassessment of their strategies, 5G and NFV. We don't know the outcome of that yet, how it's going to impact 2020 and beyond. We would be recognizing very small amounts of revenue this year from them.
I see. Thank you very much.
Primarily going through a full replanning of their strategy. I feel they're significantly behind, and I think it's impacting us. They can also shift to become a big potential and a positive surprise next year. I'm cautiously, until they finish that effort, and we're engaging with them, and we figure it out, things like that. Outside of that, there are ongoing activities in all continents by the way, including North America. We'll see this materialize into our pipeline activities with new logo.
Great. Just one last question. How many 10% customers did you have in the quarter?
It was three. Three. Three.
Great. Yaron, I appreciate working with you over the time, and Eyal, I look forward to working with you even more closely as we go forward. Thanks.
Thanks, Alex.
If there are any additional questions, please press *1. If you wish to cancel your request, please press *2. Please stand by while we poll for more questions. The next question is from Josh Goldberg of G2 Investment Partners. Please go ahead.
Hi, Yaron. How are you? Can you hear me okay?
Yeah, hearing you fine. Doing good.
Okay. Listen, I just wanted to first recognize publicly everything that you've done in the last four or five years. When you started, this company had one customer in the Tier 1 that just landed the contract. In the last four years, I believe you've landed five more Tier 1s, one more in the U.S., two in Europe, Rakuten including VimpelCom in Europe. It just is an indication of what you're able to do when it wasn't easy. People were not buying 5G equipment the last five years. Now they are. Now is a good time to start in the role, and I just really wanted to thank you on really how much you committed and drove this business to a sign that it was nowhere near this five years ago.
Don't mean to bring this up as well, but the stock is significantly undervalued versus where it was just a couple of years ago. I just want anyone who's hearing this call to recognize how much you did and how much you provided to this company to put it on such solid footing with a big backlog entering 2020 when all these 5G operators are looking for a solution, and you've proven yourself to be the number 1 solution in the market. I didn't know if you wanted to maybe talk a little bit about what you're seeing in the future now that you're on board of directors. If you can as well, maybe we can hear a little bit from Eyal about what he sees in the next 12 months as well, just so you can introduce his vision to the company, to the investors.
Thank you.
Okay. First, Josh, thanks so much for the kind words and the color for the company, and I'm sure you'll continue to see me and feel me, et cetera, and everybody will. It's not by chance that I'm joining the board of directors, both on a personal level and of course, on a professional level. The journey, while the company is like a significantly different and much better company than from before 2015, and there's still a lot to do, as you mentioned. It's going to be very exciting times for RADCOM, hence I'm going to continue to invest my personal time and all my expertise to continue this journey. That's from my angle. I would say that when you look at it from the journey that we've done, we went, and we took a gamble back in 2013. That gamble turned out that we were visionaries.
When you're a visionary, the gamble can also turn out the other direction. We are visionaries, and we were able to foresee that this migration to virtual before other players in the market. Got us to the position that we won AT&T. It wasn't by chance, okay? Together with AT&T and the fact that we have a long-term contract, we were able to start and really gain the real-world expertise, the kinds of expertise that you need in the telecom market in order to do this major shift in technology. I think when you hear the investment calls and you try to understand what's happening in the company, AT&T is 150 million subscribers strong. Okay? It's not the largest network in the world, okay? RADCOM, which was back in 2015, how many people were we, 100 what?
120.
120 people were able to land it based on the superior technology. Since then, since AT&T took this position that they are going to be very innovative and they're going to push the entire industry along and really set the pace because, in this industry, the network, the traditional equipment providers were fighting the change to virtual because it was cannibalizing themselves. They took this very strong standing in pushing this along. Over the course of this, we're able to really get to a technology that's second to none, okay? What we're able to do with the product today and where AT&T and all of our R&D investment took us is really amazing. Not by chance, we won the second significant logo which we talked about in North America.
Unfortunate, but also shows you that when you're dealing with such transformations, you need a very innovative company to help you and work with it, but they had problems on their overall network and how they're transforming and resetting their strategies. I'm positive that we will see activity come back with them because what fits AT&T fits them too, and more to come on that. This year, this amazing win with Rakuten Mobile, okay? That when they chose the technology, they looked at the entire market. By the way, they also didn't look only the traditional players of our direct competitors. They also looked at very innovative approaches of how to do the assurance and how to launch, et cetera, things like that. I think when we look now at where the company's positioned, we got AT&T continue to work with us and scale with us.
We have major customers like Globe that we're rolling out a lot of stuff, and they're enjoying everything that we came out with virtualization as they virtualize their network. We have Rakuten Mobile that in these times where the technology is shifting so much, the Amazon of Japan decided to launch a mobile network. This is just the beginning of what we're going to hear from them. This is why we're so excited about the future of the company and where it's going to go. When you have such customers and you see the journey, the journey will continue to be positive, and we will continue to come with this innovative solution. We're ready for the 5G. Okay, let's put it in perspective. It didn't explode yet, okay? It didn't explode yet, and we're ready for that explosion.
Let's see how this explosion manifests itself. We saw many things happen in telco in the past, and we saw also that things in the future not always happen as they do in the past. You hear a lot of the CEOs, AT&T-Mobile, others talk about the 5G evolution, revolution. It's going to be very interesting. It brings to the table things that are going to change our lives. It's being looked at, the next evolution or revolution, not almost, but at the same energy and the same size of the smartphone revolution. If we all look back, we had the day before the smartphone and then all these days after smartphone, and now our lives changed. We're ready to capitalize on that. We're already starting to capitalize.
We're already implementing 5G projects with these new wins and AT&T and existing customers. Our expertise will be very valuable there. I think this is how it all ties together. Eyal is going to reserve the right to give you the color on the next call. He's going now through the transition with me. We're going to give him enough time to get his strategy and his plans in place. We're going through exactly now a budget planning for next year and some strategy discussion with the board. I'm sure you want to say something? Yeah. First of all, Josh, thank you. As you know, I know the company, I know the team, I know what we can do. I believe that we have a very healthy situation today. We can definitely grow the company moving forward with 5G.
I'm excited with this new journey as the CEO of the company. Give me the time to plan 2020 before we pull some color on what we expect there.
Okay, great. If you can just give me or give us some comfort on this backlog that I think you talked about. Where do you have visibility towards some growth in 2020 besides your pipeline? We know pipelines do come and go.
I think the way that you need to look at it is that without new bookings, we're already going to grow in 2016. 2020, sorry. Back to 2020. Apologize. We're very comfortable. You do the numbers, okay? We're at 31 to 33. We see already a number higher than that is already contracted, and we don't need to sell beyond that. Just for that number. Of course, we're selling.
Do you think that you're going to need to use your cash at all to buy acquisitions of any sort? Do you feel like your product set is ready for next year without the cash usage?
Look, it's a good question, and we've been asked this over the quarters. The company is in a very strong cash position. The primary reason we wanted, and we still want this very strong cash position is everybody needs to understand that we deal directly with the Tier 1 telcos in the world. When you're a company without a strong balance sheet, you cannot do business with them. They're afraid that you'll disappear in the course of a couple of quarters. I think you see the numbers here, we're not going to disappear. This is the comfort level, this is what we need to give them that comfort level. Now, I'm separating the cash from the desire to look at M&A.
I can tell you that we are keeping our eyes open, and in some cases, we are doing some, call it discovery and corporate development activity, but at a discovery phase, to see if we can accelerate growth through M&A. It can have any flavor that we will need. There's nothing to report today. I can tell you that we're keeping our ears and eyes open, and once in a while, we look at the company, and we get our thinking straight, et cetera.
Okay, great. Thanks so much.
There are no further questions at this time. I would now like to turn the call over back to Yaron for closing remarks. Please go ahead.
Okay, thank you. As you heard on today's call, we've made very good progress to date. The company is strong and growing with a very healthy balance sheet and strong backlog. With this solid foundation for continued success, we'll be transitioning the company over to Eyal's very capable hands, while at the same time staying very involved through my board position. I've enjoyed working with interacting with all of you and expect RADCOM to continue doing great things. This ends our prepared remarks. I will now turn the call back to the operator.
This concludes the RADCOM Ltd. third quarter 2019 results conference call. Thank you for your participation. You may go ahead and disconnect.