CRNT - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ceragon Networks Second Quarter Earnings Call.

Our presentation today will be followed by a question-and-answer session. [Operator Instructions] I'd like to hand the call over to the first speaker today, Maya Lustig, Head of Investor Relations. Please go ahead.

Maya Lustig

Thank you, operator, and good morning, everyone. Doron Chief Chief Financial by Ran Officer; joined Ceragon's Vered, Officer. am Arazi, Executive Ceragon's and I

Before we within Private of start, amended, as this of the call amended, I Act Act Securities and would like information Securities safe Act XXXX. constitutes Litigation to the that and Securities Reform forward-looking of XXXX, the the statements of the Exchange of includes meaning as note XXXX, that provisions harbor

also not based in we will other today Exchange statements filings assumptions, Commission's cause obtained call any Report uncertainties Ceragon upon purport to involve those no but from the today's as results, Web Ceragon's of on with was Securities that are forward-looking at Ceragon's may any do at subsequent predictions to future may that assurance in recent at further are so. site, any and Ceragon's in These risks, be the to, represent be expectations not Exchange point forward-looking there should limited other forward-looking Although elect statements any and assurance to our be non-GAAP could filings most expectations statements that future, material. include, of and disclaims affect date. as published numbers. be will such public be and from or Also, accurate. as that in obligation but as site, that statements and reasonable anticipated. and to include risks reflected it views www.ceragon.com. can views factors and events our such release results will Such only no our made day Form not that believe or Commission. and available will give are prove do deviations upon they the www.sec.gov, uncertainties XX-F, are Ceragon's to we can in therefrom uncertainties our certain as Web of be materially Securities earlier not risks be our results, Such representing specifically statements the update forward-looking press they future that detailed detailed Such may the and obtained relied these on and differ Annual

results, For a and earlier was reconciliation issued release turn the Doron. attached ahead. go I now between to press will GAAP to see non-GAAP the table please call today. over Please the that

Doron Arazi

morning, Maya, you, everyone. and Thank good

be I start success with how transition case the share from me it's tradition the was in of Ceragon of [at to feel to Let wireless now, XG, It Ceragon's as them to of us XG delighted of I've transitions. [Ph] introducing [most] [Ph] put the our with shortly. the to and of XG be ahead allows for I to technology and believe already our you passion that am sharing motion, highly innovation XG CEO. curve. XG, by energized, things will I from cusp] back and XG. technologies I lot proud and some disruptive in repeated a

momentum. installations resources and capacity our very XG new Like a for hunger XXXX, development given achieved lower We we and XG strong latency. and number surge QX the time, QX, achieved operators' and invest continue have our to a for in in of across plans, to bookings. accommodating wins, networks globe, more orders XG design energy, In the saw transform network strong

especially Europe, years, the highest in were America, India. bookings North and QX three Our

among new XG by focus three connectivity. network deploy leading reach and expanding way in are and making improve others, on partnerships connected Our areas X. North initial book-to-bill ratio we have and was XG to pleased rural and renewed In North keeping strong progress already booking as America, orders received These the the in America, in material QX well selected region. am above ever. we orders, as have by highest to resulted I These been operators this areas, dense orders up in speed.

Tier They recent not are us Because in fiber more XG alternative for America and efficiency. cases, network us. push They or are the may all how in into What's provides Additional to of seem our operators terms are viable operators our that turning powered become initial XG fit more transport for product IP-XX competition new fronthaul. X multi-gigabit products trials North either to network IP-XX customers leading wireless fierce IP-XX intrigued possible not including speed, our is two well series. by economically for most optic new scenarios, from field. architecture. by different evaluating happening fiber-like use in and the is in operators a reliability, into

trails are in We rollouts. participating several initial and

by grow year-to-date boasts market first-half North Tier placed for for of are XG commercial the by by projects around Today, million and auction In this XG follow-on we towards to region and in we're Trials over fact, data XXX numbers three-fold, developing users, XXXX. users spectrum XX% America strongest per are smartphone, has India multiple the and in second-half to is XXXX, of and India, our largest the internet by is help expected expected nationwide out There the the network XX% corridors. network India, rolling Its million, world's share. bookings XXX market second-half multiple providing to With support prepare to grow in a expansion in share. of capture XG our of user In planned second which XX region is over the X launch coverage, XG-related, operators significant opportunities XXXX. of XXXX, terms operators' of base. in orders will Ceragon consumption for booking, and to gigabit encouraged move XG.

the getting plus corners In are of testing name, are what's Solutions, demand, there meet I be XG all rollout Indian in the further E-band] will by different our will And ours will XG be also to digital our it. higher and of unfolding a [Ph] market strong indisputable leader. for translate of and Europe, demand us. driven we believe country, are the operators We capacity traction. we expand a as in there brand quarter more terms of a the very country bookings. for in market had to lot will business position, positive combination leadership adoption,

by regions, a to customers. the the Overall, activity the XG slow we report we these countries. in for COVID-XX of a year. and in expect accounted new awards also feel to the to Latin Our Brazil, I moment, to new a in orders opportunities, second-half APAC for funnel for [South while. additions bookings design regions we and continue base, of rest believe will European have technologies. several signs we Mexico, than continues at please see customer translate except were range India] the I'm Argentina. XG-related same To very contracts will of new yet Colombia, of of In on Zone recovery to pace provide of awarded generate bookings greater In We've seems our most year-to-date. European operator Africa, and were the XX these of XX% Five COVID-XX summarize, in all two have our other existing be been that, impact in [Ph], impact in quarters. wins. like America, present and it wide to the And upcoming Peru, and

our the margins our global on in the demand have adversely component Our impact confidence to for in Not ability that, an may by XG but booking been environment. shortages global increase had our the component chain impacted delays prices the gross of That and in and due the supply deliver. only visibility shipments increase second-half COVID-XX also said, market year. and to

to the situations. remedy those taking are necessary measures We

one fact, gross our and on XX% areas bring an above. is focus to upward of our In even back Ceragon margin to to XX% is trajectory.

and fantastic a of be many in market efforts. to to years to fruition. time diligent, into witness highly company proved responsive we're it our and me, say proud join come I'm that effort proactive the For

transport. as time is market, achieve Ceragon to objectives total for are This our to solutions good a principal reinforce Our these our go reasons. for key expand for the addressable three wireless objectives and to

with previous yes, operators it's capacity This for will expected around to to on operators lower and grow market the scale of network. change high total backhaul backhaul of more still and the XG the much First, Also According ABI to traffic for XXXX, years, the of upcoming XG support range wireless based significantly February a increase cost portion XX% market. on in densification complex rollout ownership not the mean also to Research full XX% upgrade A the expansions comprising is is to costly than of latency. average wholly by backhaul annually. demand XX% will of be generations, is inevitable. to estimate, to expected GSMA

going XG, in the global. is Second, to parallel architecture OpenRAN

deployed to fact, specialists to committed XX Briefly, single to and operators to from XX may operators increasing for vendor or OpenRAN selection. today hardware leading already advantage from component shift best-of-breed This disaggregation deployments. vendor according plays software OpenRAN for In GSMA, neutral our to as establishes like more have markets either opportunities end-to-end strategy us.

the millimeter-wave only supported as boost our Therefore, XXXX, for our and the is will believe IP-XXE. also market front-haul specialists. densification operators portable July addition, but not OpenRAN will as surveys interest deploy such for by leading reflected rating XG as us IP-XXE. more solutions continues, in This In more opportunities opportunity from heavy in we

Third, made I'm very excited strides we've deals. in closing services managed the about new

with market we're service service provider is the network beginning using our at agreement of their manage July, -- this units to as that announced transport entire using Services improve and awarded is fact well differentiated Managed performance a in The competitors. provider statement service as to sorry, capabilities testament As wireless U.S. radio Multiyear the the is Ceragon of providers our This a strength. leading and by

upgrade enhance customer the source developed. Our intention wireless These the and the to as become as with I work recurring services of coming network turn strengthen networks and organic tools and believe we managed services operators years and Ceragon the we It will troubleshooting evolution and for strong in transport my grow natural to managed monitoring have significant such services demand and on a simplify software numerous complex. represent journey done is network. into optimization, provide services revenue more for have the and the more

grow. to our these market expect addressable For total main reasons, three we

where us in years the this many is is first expected. market growth For a time

on growing is to not enough. Our readiness XG opportunities monetize the

earlier, and is thinking As our long-term innovation, I DNA. passion said technology

market product, launch all-outdoor multi-core a been technological flagship radio its since the breakthrough Our XXXX. has changing in

significantly long impressively with generations. to only XX Our and reduce more whose be space very previous in handles approach octacore new chip first consumption for year chip. the data our time, We chip next this to as that, take It with It lead will since yield and wireless is in this. tape-out capacity times a function is more Not we delivery This new is will elements a will support also later be the a fiber-like our [indiscernible] time, as represents on to efficient to provide to is industry increase. build the new it, improve robust the will well incorporated energy. planned but XG big system a flawlessly. our the for high system new only market reliable expected rescheduled certain and band, over XG it It than including all will is achieve will towards to wave system-on-chip times. breakthrough. era. we the millimeter be It to inventory it be our be believe microwave for our time longer offering most D-band. have ensure as it into have And cost it us capacity

the Our the would chipset changes capacity to mind, will for Ran financials has like connectivity been call the for requirements to the designed reporter. discuss that now future. our to Ran? turn offering over meet a of in these evolution I

Ran Vered

the Thank you, mainly you To I good non-GAAP results, everyone. morning Doron, will help to numbers. and referring understand be

mentioned, including from America, our during press QX coming Europe. India measures, reconciliations North of saw refer XXXX, non-GAAP today's measures, you we Like information strong bookings use these Doron to very release. and of we regarding financial more For

fact, was bookings of strongest In last QX three in the years. the terms in

Our book-to-bill ratio was one. way above

strong level highest a Our our of for at revenues the quarter. the end at projection and were

operations, make positive the towards of accelerating end During we progress normal to continue the the began XXXX. that second quarter, at trends further

million review Let QX compared Revenue the attributed was numbers second up you. North increase sales $XX.X year. India. with last with to is actual me the mainly strongest The now America for XX% by and quarter in QX

in the reflecting India, of for quarter main our was Our strongest region region. in for terms ongoing the revenues customers deliveries

second America and Our our ISPs region Africa continuing had also both contributing lower and customers, revenue with than than lower other its for strong from regions. slightly Europe challenging XG North and Revenues the in smaller momentum strong positive quarter, in initial a strongest quarter project. more continued previous quarter, higher America, at but in Tier-X effecting terms than the quarter carriers. relating revenue was rate. revenues Latin -- momentum of its quarter its normal APAC in previous still in the situation were reflecting slightly run still reflecting

a XXXX. associated us. have XX% development quarter us high approximately gross for gross said, relatively the for component of $XX.X These margins. XX% customer and The profit shortages was million gross challenges XX% there We on gross profit compared challenges margin COVID-XX in high quarter. basis giving affecting with environment above supply positively a still is a second a quarter. that overall the Gross great non-GAAP profit second continue an to for quarter It's non-GAAP the second mix may to are chain thanks impact have That customer the our costs. on with favorable this of the

increased bring second-half chip XXXX our an expenses in and quarter second $X.X were effort well discipline a expenses created gross how surging see timeline XX% quarter to to margin and aspects, alignments closely to We're and our Reduced level profit volume. as elements non-GAAP improve better QX million expectations. towards until with expenses non-GAAP for the by $XX gross QX margins of metrics it level from higher come to basis the XX% customers, excellence gross the of but mentioned, Operating XXXX. operational a Doron air the continued marketing the quarter for and key us. shortages, of and we Sales increase slightly As to few slight COVID-XX, with basis second mainly contribute million for the We above. on revenue to will million, and expenses that that. are in looking $X.X travel has non-GAAP increase due These a [indiscernible] second all $X million, stay on with component Research for reach freight development. a tape-out delivery in on our COVID-XX. was basis for as than costs long-term development XXXX, reduced million, continue on high the $X.X reflecting still were that from

quarter end We expenses of second expect QX QX on were basis and of year other million, our $X.X post-pandemic. expenses customers line to of to sales an marketing markets in was gradually for the $X.X a open financial towards a excluding the with expectations. and as the increase General on basis In our administrative million increase related for Financial the XXXX. second our XXXX, and million two had write-off quarter non-GAAP $X.X expenses difficulties. in a we non-GAAP

our a share. per $X.X basis expectations. non-GAAP basis per on was or quarter million diluted with line or the XXXX for was On QX in a than loss million expenses loss non-GAAP Net quarter $X.XX the GAAP $X.XX for tax were diluted $X.X in a Our million and share. lower net basis $X.XX on

this between quarter with the events and reconciliation package the During compensation measure the CEO. GAAP Paycheck former one-time retirement and Protection of impacting program several our loan was forgiveness non-GAAP,

$XX.X XXXX. quarter the from inventory million $XX.X for in QX million down Our was

at in $XX.X million, $XXX.X now million are Our receivables XXXX. QX trade up from

XXX million. $X.X days. cash quarter cash Net the was quarter this activities Our second investing DSO activities [technical used -- difficulty] for operating was in Net used for $X million.

$XXX I than happy mainly increasing funnel India that second-half it which healthy growth confident QX return in in million. XXXX we we activity business with in annual expect bright about very ahead at and and revenue of report [technical us our more bookings that, reflecting end of profitability along significantly are a difficulty] year. revenue am strong to our our in to between today see and to better backlog expected guidance, were ahead, Europe. be QX a a higher $XXX Looking the More is the which than of light million

our and component remain long-term questions. an for create mid and current revenues Operator? deliveries. business still With deliveries, our of on shortage that impact in I open now confident the have timelines we the and in your call the fluctuations quarterly our may opportunities While

Operator

Thank today and first Needham ahead. you. Henderson from Alex [Operator of Company. line question you Instructions] comes Our can go the Alex,

Alex Henderson

Can you hear me?

Doron Arazi

Yes.

Alex Henderson

Can you hear me?

Doron Arazi

Alex. Hi, hear loud you and We clear.

Alex Henderson

Thank Perfect. much. you very

first off, So congratulations, great orders.

Doron Arazi

you. Thank

Alex Henderson

quarters wanted book-to-bill one, in now a have I you So, a I a How guess. run many of to couple or questions. on think I it's above ask three running four, row

Ran Vered

but were probably or X, a quarters Yes. two above My three this four very in quarters last is with book-to-bill recollection significant [indiscernible].

Alex Henderson

that record there. orders seen you And you said have

was yes. looking back, I Record $XXX in you million XXXX. So, did orders, here,

some towards return a at level point. So, that

So I process you the timeline getting, can the in on some when question to becomes, large in, stuff would necessarily at comes not longer of these of that that year? projects, you're talk back-half orders about look realization the the projects these that I because them, assume

Doron Arazi

[Indiscernible].

think it that I I will two separate So, buckets. into

you one, projects more and into last first year. in The And some convert of revenue. for bookings one is second us for to that are time them will second-half -- than correct, it's

for [technical the course, the why quarter. XXXX. reminder the felt visibility of This difficulty] next for improved comfortable Of quarter it's on -- is from

difficulty] prepared still remarks. is something a and second The in piece, And challenge for talked length [technical which which [technical that at is is this good putting is us, I the difficulty]. my

are signs able there. we But why is again, we more better Still, out because relief of some a challenge of feel this improvement. not we woods put we're that. [technical on we the still that. the us. to able difficulty], were comfortable There the than will thought, is, than And some see for of materials we the from way, to get of the are initially to do We by seeing QX

Alex Henderson

difficulty] [Technical Yes.

Ran Vered

recognition to able see will over see thing just And we booking. issue light an shortage customers We'll of is also a is we'll to as that in we this component portion are still of of XXXX. our to But, We the and the this a in is add a end a that yet. there. the with Doron's the and you see Alex, not with the happen able obviously, this be we all improvement. up, terms comment, but setting catch of tunnel, of that backlog result That's start at XXXX. And opposed kind slower significant will a this not of to during line. up backlog be year, believe we a have time actually why catch-up to nice catch to expectations

Alex Henderson

then product the pushed -- sound second why occurred and Can their does about talk going on was out the the questions, Thanks. I'll implies? with out the little Huawei quick to chip ability ability tape-down you Two it to one, bit. share that a a leave Can little of floor. you talk that ship then on what And base, the system little like your a bit about was a install products. and and what's gain bit

Doron Arazi

sure. difficulty] Huawei. [Technical Yes,

at the the think a in obviously they we that, the Huawei. of I we attack] They still of of us. quarters so at -- them And little And see to bit don't banned APAC, them in to there for much. are countries in or [Ph], don't but are are see being, is the [push, couple in bigger no we in that don't and in most all. in obviously, up we major obviously, they We there regarding same trying in we seen generally see -- Africa, speaking, countries. change speak, opportunities some America, hardly an actually least them see In on last U.S., have markets we Latin what opens there. are the

to terms or the very statement, It's progress for and comes initial the you huge back higher almost is, very this It's ever production longer. much it, bugs it chip, little putting the once the the the by we invest production, in difficulty]. are we because We is In also if And, into. careful this in said sure out kind three, initial most transport. this that nano take found to us a after is testing is, why more time. our complexity go I complex. it, making critical, on chip some and And [technical chip the production, of that testing making in it sure a of robust four wireless is checking chip, bulletproof. all probably the did this And as months it, go biggest I preference script faulty, XX that system would the parts of will the more go in is you we are obviously, bit say,

Alex Henderson

you. Thank

Operator

Alex. you, Thank

from Iwanyc. and question yourself. next unmute Our today is line ahead please George the coming of George, go

George Iwanyc

Hi, hear you can me?

Doron Arazi

George. Hi,

Ran Vered

Hi, George.

George Iwanyc

my Hi. And, congratulations Thank role. the you on for new taking questions. Doron,

Doron Arazi

Thank you, George.

George Iwanyc

view looking the you impact at services of interesting What And opportunity. How new the managed margin? do that? an type you So, what that kind unfolding? does that's see that announcement, operating on for globally have do of opportunities

Ran Vered

one network go operators' to over [matching] then way, starts also a for with, would to were it products. kind particular say, operation faulty, within our with have background. in advanced I we fiber I by in might only computability, products, obviously, the fact, customers was take a accommodate of we it we of maintenance, optimization. a operator. things part back to optimization, to part of [Ph] bigger And trusted full the need was to And, that customers, much that even operation maintenance for this and on And, of some give you a not [indiscernible] there, time. able competition's be America, of account bigger so been our very developed more company, in have in our so, strong Actually, speak, second the providing Yes, Latin

it kind we believe substitute difficult XG, and to it parallel very smaller the especially also this to lot also operators, that capabilities, and flawlessly. a operating that I think will solutions is believe what much a more and create in one, provide the [indiscernible] major developed complex of point, have manual part provide two work to really develop we idea more automate, that because network. of services developed One and more in we the [indiscernible]. we in actually the on will At with more to software And going have Tier So, of, Xs speak, so these to business, more And is transport call need advantages. focus this be and handle is this I that to what developing customer service, area. for them would

Just for with the is after months, current to sake provide decided current. of we difficulty] [technical in this network of something the customer, And, example, this upgrade. has upgrade transport first particular into opportunity more line explore three to that are obviously,

important the in piece. So, stickiness we to want very [technical a our generate revenue business. difficulty] is is a other bigger piece And

creates think it I [Ph]. [authorization]

will it capital less the the business. fluctuations, think I how the type to to to market, although be explain say, easier is of this

more that we and want this XG opportunity we exploring forward goals these becomes achieve implementation. the as we believe two more actually, by So, imminent with to move

George Iwanyc

And maybe seen expanding Doron, yes, positive levers far as you'd that, with but TAM that or coming have you new on as explore addition, following up opportunities very that you're guiding the like a further? other to growth you like back, that sounds

Doron Arazi

the contain not opportunities additional First I answer to these company generally this need yes. is monetize at short developing is because it But The prefer first forget, ensure would I of of are answer kind speaking, and to all, viable modern in expert and some them. on all, opportunities, comment, will quantify of that of point this to the what an kind let's that deep-dive of to into to is long chipset. try not

a system-on-chip. frequency expert be this for other RFICs might also also that become expert It's used advantage a chipsets. adjacent has areas. And in areas radio is huge Now in developing or developing an or for

the The and transport can prerequisite network say, would is will in the I also XG, other leverage best become or become of to of in optimization in a we and overrun. the that network, that era that bigger player have the also, area thing of we

George Iwanyc

it growth chain And difficulty] you do year. R&D at quickly your on for OpEx And resolved you the you when that Thank to expect at switching in your it the the How marketing of to look [technical the are to look trends continue pretty you, now, showing that. of And by maybe also supply Ran, confident like when seems side? second-half up? the right you're loosening they're on you looking the end be you much to side year? that, increase in

Ran Vered

answer. I'll

but resolving of it's areas comfortable, board, across comfortable some quarter, see all, to why first and shortage growth losing about We because is some we're to [indiscernible] the feel issue. see issue, sense, improvement, at issues. also we although and confident with So, the even the issues. second-half matter a of we we'll and of starting us, the this yet although some issues, still this more that why but the shortage of this a more in this year, we're feel point or see still why And concern this is a the we're confident we in material saying up, is do -- finished not areas that,

to not OpEx, - because area update the yes, continue as This dramatic, expect to is mentioned, there is we're stop of second more a it Doron the the invest an than going to relaxation is mainly may [indiscernible], side. in on OpEx As some some overall ramp this be higher anything of some up, be some the it. on what And see travel the do through. products do a COVID, QX. of on on we certain coming to do don't is marketing in especially We see layer plan expect and had we the we chipset. to don't will And focus. the Overall, I tape I but

George Iwanyc

gross and the near-term that just more kind last more given of just the [technical is a uncertainty a margin type on XXXX side, the of flat gross margin, ramp And on is sounds question, of difficulty] like results likely.

Doron Arazi

challenges this of way Yes, every in year, sea of to don't be are trajectory. are There I correct. do the And freight. still in these hope this And that still is is going not XXXX. XXXX ahead us. sorry, we and -- think mentioned, some freight long be to I issues resolved air is There going

shortages, of that of by way, a about and do that is we're the operational Some lot the going to see, which normality excellence we of going the to speaking that's In revenue. some back and prove get going are course material increase [indiscernible] to are we're and the resilience, resolve to going that well. of in to to going as end, seeing, of things XXXX, to but be

being much to XX% Just not in up. point, and there that our the are things and kind to long-term XX% Ran actually continue and mentioned various to would There that, by control, and look efficient, also are long-term XX% above at burden it to the actually are our for time, push most why goal. I point in dramatically. more to at we're we're which this important say freight going this so control, is is that to take that the heavy are add to they XX% ones prices, our to us There lifting or will our increased for are are as ones that the things margins has driving their is doing on the of But things goal. speak And different can we us. need and this cost component terms that in gross the margin, of the

George Iwanyc

things Doron, on least of normally trends as you that's is you're to down, able I pricing following on costs? some up can one know do increase those pass and this the just So, maintain market a of or to at pricing, that,

Doron Arazi

in say Every is is discussed it's I ID areas, some the I in difficult. meticulously. that areas, our and more for would would easier function it's say on table some following. the being improving

two last it require speak And don't business this And I of that which vendor eventually of trend ingredient. it this that our line tend they the business in at take that various so global a this, understand will our particular tolerant slightly customers wheel obviously with of quarters is think crisis part so I least to part that golden driving that so to for and ramp-up believe we to will we dramatically. a about more ways, therefore, not lose and discussion the a that continue burden. looking is this be a issue it's

George Iwanyc

All thank much. you very right,

Operator

no further you, Thank Doron, you have questions. George.

Doron Arazi

Thank you.

has it. tradition traveling remain meet XG share you our Ceragon U.S. this and to to innovated prepared take next with enjoy with new the committed to with Ran era generation that state-of-the-art We're We pride in transitions. week to services to I backhaul are also face-to-face in interactions I'm pleased successfully and on the and investors confidence. excellent So, August. wireless technology,

there. day you good seeing Finally, we forward look everyone. Have a to

Operator

gentlemen, call and Thank joining. concludes much Ladies our today. very you for that for

Maya Lustig

Goodbye.

Ceragon Networks (CRNT) 2 Aug 212021 Q2 Earnings call transcript