Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Ceragon Networks First Quarter 2023 Earnings Conference Call.

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

Maya Lustig

operator. you, Thank everyone. morning, And good I'm joined Ronen Executive and Ceragon's Doron Chief Financial Arazi, Stein, Chief Officer. Officer, by

Securities Before we outcome, information start, statements I efforts initiatives, would like to outlook, business of as accounting-related Private other and this constitute of forward-looking and provisions company's the meaning financial amended, development including the XXXX, plans, future results of and and events, made their safe-harbor matters, note call, projected Act progress XXXX. as other the and Securities financial XXXX, Act potential timelines within Securities and and the the future anticipated Act on of that amended, Exchange certain results and statements Litigation and Reform the of

differ expects, similar reflect plans should, actual which of results, believes, Ceragon Ceragon's and may, beliefs, those are will, uncertainties, expressions but identify and statements materially such differ may Such performance, projected intends subject of achievements risks or forward-looking from in materially, only forward-looking statements. or current assumptions could results as to forward-looking statements. certain expectations, they Ceragon actual anticipates, such management, to cause terminology, Ceragon's as to

the all uncertainties press Ceragon's including XX-F be earnings herein by those limited are are but are described SEC, today's time to on the that from supplemented reference. earlier which of release, other in and not with and Ceragon's expressly risks most Such filings report include, annual may filing recent to, Form of as incorporated in time

no results, to the undertakes accurate, prove of be update and to and will obligation Ceragon can made, to be them. to predictions that they statements not events date do initially assurance be relate or purport no there future Forward-looking

from available on website Commission's Securities Ceragon's also Ceragon's at obtained be website at public Exchange www.ceragon.com. www.sec.gov, and may filings and are the

will certain numbers. Also, today's call non-GAAP include

non-GAAP, release today. that the to was please a GAAP table For see attached earlier issued between and reconciliation the press

ahead. go Doron. turn over now call the I to Please will

Doron Arazi

Thank growth $XX.X Maya. share, our especially delivered in And double-digit And revenue at in quarter, you, Ceragon demand in revenue book-to-bill importantly and the with are non-GAAP X. looking data per we trailing and trends, everyone. and us. above million $X.XX profitability are the Networks solid points first encouraging positive and booking results, revenue, for good a morning, the when bookings, experiencing. These XX-month seeing we levels, momentum the earnings confirm are

that clear, telecom be pressures not seen slowdown softness To industry reported. the have others in the we spending, have across or

sales has has In fact, our improved our in key be to access supply normalize. and to for demand all regions solutions while strong execution continues our continued to chain

seeing The trends we are are encouraging.

are the recognize telecom the speaking patterns. we macroenvironment volatility have to not in and and – customer in others buying of that softness softness cognizant – are industry experienced We

have to want we to Doing will we we mind, more date from not customer a future demand trends in experiencing give the that pulled seems, and we year outlook. raising as before being consider With experienced touchpoints so the period. it confirm forward is validate that to our are us full

of power earnings organization. improving the our demonstrate results our line, revenue the Beyond

higher Our our costs. to America, execution revenues as continue key well gross in North chain in margins markets, as supply improved reductions expand, reflecting from

net we non-GAAP unexpected million believe quarter. income any net non-GAAP deliver in continue the will Barring income positive XXXX. in we during We $X.X first developments, that delivered to

success. for and customers a we booking for goals address to With CapEx are exceeds and a ratio that profitable the world, business model, sustained solutions X, revenue key a well-positioned that we solid backlog, around believe OpEx

has chain, improving. Importantly, impacts manage been there disruption from chain supply carefully were significant supply component continue quarter, in the and we to no while availability the

we and the benefit and APAC, year-over-year generated India and sequential revenue consecutive growth North our to continues geographic America, where fourth Our of revenue. Europe, revenue quarter, over million. in $XX growth generated diversification first In our we quarter in year-over-year

and of million In in revenue we from $XX.X last $XX.X quarter fourth the America, million generated in up $XX.X year. the from million, North first quarter

In modest in head recently seasoned in We expect have to revenues. the even lead our improvement believe for installed further as a Europe, this considering our and improvement we we business improvements transition Europe, advances. we region room

we quarter some approximately our going and forward. of fourth in first Our revenues that the noted normalization on that that first revenue $X of million of last quarter revenue call. in out With quarter XXXX XXXX the we reflect the would shift, expect shifted cadence quarterly into

North going primarily this into forward. run impacting region two is some and shifting probably points these America, in quarter, data The therefore first This America. revenue North the somewhere had is from the with revenue normalized in lower-than-expected quarter fourth between rate

operational trend chain. $X.X million. This the for improvement million in also driving non-GAAP margins execution, in is We of quarter, non-GAAP North from with gross of supply a encouraging. coupled delivered the in especially income, The margins XX% our higher positive better operating $X.X swing America, revenues reflects

have the To of a and advance new we system-on-a-chip this, line date, to to industry a continue remain work demand share. in We XXXX. be our on there our And our significant powered productization market to transformative our drive we believe to two have on done, products track product is impact first new on technology. according and the three-year position market With believe over to advancing we advantage are our will and launch mover much We time system-on-a-chip efforts while our plan. to competitors.

the America expect that to like quarterly Noting that on on and greatest the results. continue regions to I'd will QX we primarily on region. calls call our highlights have, today's India, and in impact will focus quarterly future and we by two overview now our have, activities North

strong. America, to North build be continues the XG In

driving receive our continued to major carriers, have We of portion orders with one customer from volume. a significant

multiple initiatives are pursuing for and other well broadband region. the rural RFPs this We are seeing participating as infrastructure opportunities critical also in new as sector, we in

well wireless technology. accommodated initiatives These the as funding critical and a incremental diversification for are remain demand and opportunity plans for area business. which be rollouts, state networks as Those transport driven by of our faster federal can by

particular. general, in the these broadband but specific shape, when take the federal and states broadband believe time to Rural for various plans as States takes government United we represent in The expansion we mature. opportunities initiatives well-positioned are capitalize priorities process in rural increasingly in

India, in are certain deploy operators Indian in increasingly beginning turning In engagement. to and to cross-selling technology and customer up-selling experience invest improve while XG continue regions. drive to to telcos XG

for We equipment well in operators and market XG in enhancement deploy areas. as selected in XG are as working rollout regions, with the urban

though band fees additional concluded not meet has E- yet. to telcos their E-band and with multiband the the and fiber wireless Indian network augment for capacity high-speed, demand government

of an affordability band/multiband fuel Coupled we deliver XG smartphones, in growing consumer availability XG of XXXX solution beyond. these for and XG expect with of products our we XG In to our networks the as for QX developments and adoption networks E- increased well delivering continued XXXX, to pace. as in

approximately reliable we rural We existing quarter focused deploy uninterrupted orders expect improving million capacity, ended two high-speed quarters. next include customers orders over with capabilities to the follow-on and both in X mainly with XG, expanding These upgrading connectivity, providing Operators on to products services experiences. the $XX network that from tier and

throughout continue XXXX. this trend expect to We

and strong here good Looking quarter, there from We leadership. near-term at another us despite In under ongoing the is we for improvement the a as we rest believe for of challenges. navigate bookings, the had even QX opportunity organizational significant the benefiting world. a macroeconomic Europe, new with change significant room

region is XG quarter In in deployment the domain. private we in in primarily this APAC, booking, different a as also the opportunities network good We see Australia and region different of in a in from unfolding had terms pace and of telcom Indonesia. parts the at

significant although market still from private a soft. In business Africa, we this had a quarter, is booking the networks

getting both our a chain levels. a have better. reality, always is Demand and standpoint. months conditions our improving, are and our improving, and on summarize, we trends and XX for the from macro is has micro improving, strong, Quarter-to-quarter been variability in availability business believe trailing a supply for execution revenue both solid profitability the financials but To solutions is the been

time, a our X traction, the Given book-to-bill expect first above that over and the continue. quarter, backlog is trajectory, significant to business we our growth positive in

profitable, Importantly, non-GAAP can a we be full-year. XXXX for the also believe that on basis, we

Ronen, over you? to

Ronen Stein

good everyone. Doron. morning, And you, Thank

call review in would was our I that that from to specifically was earlier filed call morning. a a in held was QX disclosure is report debt related to quarterly the included earnings that attention like this Form disclosure which single XX-F was discussed results, This our conference Before a February. I annual on a customer to on

debt in a as Recently, which full, the appropriate outstanding to of collect reduced there in for XXXX. in term credit changes circumstances the a provision in near probability it or record we outstanding found result, customer's debt loss this to and, the were QX the

previously $XX.X million, for announced corresponding now result, preliminary decrease a differ loss from previously results unaudited is a reduction announced the results and As operating receivables. our a results on our XXXX from our in audited million with GAAP unaudited $XX.X accounts the basis preliminary of a

continue matter We no towards collecting Note vigorous debt. take emphasize we has XXXX. guidance that our to measures to would on like this the impact for

for income and our impact loss I'd like of to profit, the sequential when QX the the of credit net discussing today's will quarterly purpose million results earnings $XX.X share our G&A, call, comparisons, that, note, XXXX on operating include provision. per

results. to like of said, QX shift I would review that With my to the

over period, important it's in outlined, our strong we results a well gross reflects there the a a to inherent analyze keep Doron of indicators better As in quarter. was this, variability quarter duration as mind to performance Because margin, quarter trends. XX-month we is for business underlying bookings, and a and, we Ceragon, driven which as are though project key believe other revenue, this as such, business that from

help the non-GAAP primarily referring to financials. addition, I results, In to understand will you be

non-GAAP today's measures, regarding to For you including financial press reconciliations more of release. we of our information use refer measures, these

compared compared Revenues XX our the $XXX.X million, $XXX.X an trailing XXXX review of XX.X% to to QX revenue XXXX. compared When million was now months take view, last trailing quarter's million, me $XX.X QX million. Let revenue in increase million of XX and actual to we months' XX.X% were in results. increase the $XX.X an $XX.X

strongest were demand these line terms regions respectively, we America and see strong North with Our in continuous quarter $XX $XX.X for million, in the in the revenues with regions. of million and India,

revenues Our third million. $XX Europe terms in of strongest region with was

first our the of in two contributed more XX% customers than revenues. that quarter had We

profit was $XX.X compared million the QX a increase an million XXXX Gross XXXX. of increase basis compared as QX XX.X% first and $XX.X of in non-GAAP an million, $XX for quarter to XX.X% to on in

in Our margins non-GAAP increase compared XX increase trailing XXXX non-GAAP XX% gross XX.X% take to our gross QX to gross efficiencies. our XX.X%. XXXX. view, compared months' XX.X%, the trailing gross When and margin an operational was when we our quarter's margin execute QX XX of of XX.X% was on margin last in we trend and trajectory to months our reflects strategy upward This ability margin

quarter expenses As for our lower QX first basis research up million, operating million XXXX. in million development $X.X for expenses, slightly QX non-GAAP $X.X were and on a from XXXX the and in $X.X from the

our the X.X% were expenses last As year. X.X% first a the revenue, R&D of in quarter compared in quarter to percentage first

Sales QX non-GAAP in million and from $X.X basis on marketing in $X.X million were a quarter million, expenses the XXXX. $X.X for XXXX first and QX up from

As of in the and in to quarter sales first quarter last were first year. marketing compared the a expenses XX.X% percentage revenue, XX.X%

million quarter expenses $XX.X from in million $X.X $X higher the in XXXX. first on QX and slightly basis administrative million, for a QX XXXX down and non-GAAP were from General

of quarter quarter last percent X.X% in expenses the revenues, first in As were a to year. first G&A the compared X.X%

from for QX Operating loss operating approximately up of operating million million, $X.X XXXX. $X.X the XXXX in and the from $X.X first in $X.X the QX up quarter loss of million $XX was profit million million

for in million, increase Financial by and to more on interest offset other favorable were than expenses basis the exchange a expected expenses. non-GAAP slightly less quarter rates, first due $X.X an

tax quarter for basis on first $X.X a the were expenses Our million. non-GAAP

$X.X net non-GAAP Net last $X.XX quarter for loss or of compared year. million a income or on $X.X the share a million share quarter in $X.XX the to basis was first per diluted per

$XX.X up XXXX. QX in of million or diluted The the share $XX.X net first loss $X.XX per quarter from was net income million,

at As the are cash not sufficient quarter first raising our equity and was stands for believe contemplating our we are million. and our loans and capital facilities end operations balance working position at We $XX.X for capital. we currently sheet, needs, million, have the that and of short-term $XX.X our cash

availability down backlog December, million, of at of inventory levels, was $XX as at the end Our of inventory continue million taking the QX $XX.X in XXXX from and better consideration to improvements monitor components. we into convert end the the our

no major December. with are $XXX.X compared the Our at changes at of to trade end receivables million, $XXX million

days. Our DSO now stands at XXX

activities $X.X As flow in million. for and QX for was operations investing our net XXXX used cash cash flow,

flow from generate We expect for positive the full to cash operations year.

million XXXX guidance $XXX $XXX Our of revenue unchanged. remains to million

start today's the the the quarter. at shared in we call, Doron of first we results As by are achieved encouraged strong

given think it reevaluating before prudent seeing However, are monitor year the we is outlook. we trends macroenvironment, our to the full

see sustainable supply chain challenges and and profitable increase. component in our will to drive ability our we As confidence shortages dissipate, and outlook growth

I your Operator? now call for open the that, With questions.

Operator

[Operator Instructions].

comes Our first from Henderson Needham. question today line Alex the of of

Alex Henderson

are Nice getting backlog above this love you've Certainly first bookings some a good soft. print, Got environment, trend. built. really particularly bucking to X. in the you guys. Book-to-bill benefit quarter that It's it from normally to see when in

chain supply is see improved? of are I'd continued availability, there's the the the over that pace? playing improvement here to what question drive you assuming When the you extent, current you're do that trajectory course much in at How to out? the the guess is, or upside And looking guide, I at guide? upside How to the XQ one, top the would it the quarter. of ask you line if

Doron Arazi

I timeline what $XX.X that speaking, if terms if customers. may we getting back demand of QX we gap. million is, in is did a this required our by bigger can to say, in do generally I single quarter of we've capacity, But don't would capacity, production in in think terms to a swings more still gap required normal. I and revenue. close this very create There's think in that seen little

Alex Henderson

for perception ago, Or need they kind it that question, months know, out things?' their raises availability, I Are delivery? are another maybe another of and saying, but alternatively, the that maybe So clamoring customers changing quarter out, your like 'you pushing it obviously quarter still of I six the ordered

known you in certain to or encountered us to mentioned, have generally even customers of so even slowdown delays that times areas, to and expedite level we is by they don't need far we first are far, a which And, to what million we that. quarter. where not deliver. that have per to the asked So speaking, example beyond being even of in coming customers. generated we adjust Actually, is in our see a reach $XX ask asking we obviously, But terms pace

Alex Henderson

I'll then floor and The come into back last question and the cede queue.

do improvement that and would driven to Or to on because really be that at means in a orders reduction cause sooner, demand derived orders? somewhat in than timing looking out can If an and are you're projects delivery it's duration that that's think come a you're in the more big timing? supply these coming it's the specific i.e. something therefore, shipped availability, insulated generally is that in, you you of expect and,

Doron Arazi

It convert pace obviously booking Generally it the for we mean assume slight is. into end that And backlog plan revenue, our in of plan a the speaking, to higher point, our the it to the that is could XXXX in XXXX. And revenue? this will we at that would assume our be. XXXX. increase is numbers increase where increase But compared of at beyond

Operator

next from Our AEGIS Rommel of question line Dionislo Capital. the comes from

Rommel Dionislo

in perhaps talked You've a networks, the about the wonder could that potential made you detail in Europe you're quarters the just seeing last several progress Asia, with as well. opportunities about I particularly more in little North if chat you've America. private and Africa, in

Doron Arazi

we In North terms in a I say opportunities as couple than started America, of see that we network, would are also of private other segments. you seeing with. that in

the is segment. segments the of defense One

energy public and strong safety, forth. segments, other segment Another such is there the health, obviously, segment. And so as are very is that

intention to see us continents. and different believe places that give road. And our on that our we the obviously, different these because in we in So, based vigorously it's more strategy pursue margins down higher opportunities stability will they

Operator

Our next the Henderson. Alex question from comes of line

Alex Henderson

suggests the think over the in you you your Going more think spread that, quarters? very back you when do look at into characterize loaded? the evenly is next first you point? Or the How pipeline order ordering, would unseasonably pipeline, at back you quarter, the orders large that mechanics of half the three rate had do given this it's

Doron Arazi

you know opportunities always is the the this many two timeline to always even with we've more quarters. and that on ahead, least our upcoming this at bookings quarter, for are continue come know QX, see the we will to we point, being timing in made, exact expect the in But and usually the you last business why level to orders is Alex, in subject decisions us cases, minute. can that or difficult of for the At envision. which seen

we've what we seasonality at the caveat see, some seen it average, we couple with this is experienced to point, quarters in come as to as first in will one that, of So in quarter what, of well. the QX, booking come continue in assume the might in we on last terms years,

way, decided we the that a in a we've it's make of And raise expect of suddenly in we what not indeed because the and the is want bookings this we that the on by guidance of to QX one first and in trend yet QX that and what stronger seen we reasons to or to see sure fact that kind on the are had the our of comes reduction year. account weakness part not do

Alex Henderson

Yeah, well said expressed. and well

of towards India the of arena margin relative lower geographies. driven the it is in expansion at the Can pipeline is EMEA, margin slanted outlook to expansion end being clearly, here, talk much differences And which by markets? Looking pretty you the US, the much conversely, in it's and about there the in is how more similar? how

Doron Arazi

eventually North in our more us our also generally keep the bigger also that that our that in say, obviously, gross as business, optimistic forecast terms in to revenue, of XXXX booking, of in current a of speaking, XXXX, America and margins. improvement will have plan but is portion our would I and opposed about

Europe, new us our margins. market share In on we're leadership. forward it in gross smaller this or increase move the business. with that our will major do things and change not is assumption I our Latin could depends If other Asia to in with Asia able to any in portion improving slightly be a India. how help to than America Europe, in really expect of Africa, current the relatively continue of going And it's also rest

Alex Henderson

the market, a result of obviously there you you India talk products kick starting about to move higher bit, back little seeing Going XG higher to as that? software functionality? Can are little capacity, the drives in a finally a shift towards margin to the higher a which bit

Doron Arazi

to trying we're competitors more on The although been, to but greatest always penetrate at for prices seen to and prices. dynamics power into one put technology, significantly. the because lot the coming token, latest buying with India a looking the hand, huge reduce market pressure of we've Recently, has opportunity. same that, new leveraging this of And technology, their they're continuing the of on is

I expect near a So not improvement the don't least significant bottom line, India, term. margins the in at in gross in

Alex Henderson

I offsetting functionality mix So product, would carried higher margin. which a otherwise higher understand. competition increased have to shift

productivity of the and you, sales investment bottom a orders, bit the where realization top on of you of function that line for sales a The And have on American stiffer a the the and revenues, continuation last question little marketing and we driving of success? of North accruals and the for was America? line, is stiffer. Overall, marketing marketing was are but the North that the little us in you had Or on investments? realization beat timing modeled. obviously than I sales Is

Ronen Stein

some two increased mix one a the that of quarter, and had within the the sales cost. and investments was events we we've marketing other the regions, MWC it the our with CRO in built that realigned and coupled organization that with the So things, fact and of

also provided from percentages We range of a revenues. have

So I monitor well. think that as we will that

Alex Henderson

expect How are bit a making talk when you the And the the And the customers about XXX in – little is the gig there? the Can impact? do on the how's XXX of progress? the time product, important the you hearing to terms for to What chips be customers? from market? queue progression gig it? product process What's and in putting decision themselves you

Doron Arazi

progress, our is the And is testing would functionality. and testing that the the making the the chip. progress This indeed all, very in of of a our of last because the we're I plan. is of sure line terms expectations eventually comments, First robust as in chip say on with that said a I XX prepared and it's functional process lengthy miles in

moving to but So, need in tests, far so you of right direction. the we're do lot a

see products. operators chip in next In from are believe operators be a of which of use right terms It's our so we would orders. in the when new with and some advantage interest, different these cases, to we ahead not great the terms the we of the think of commercial of to we new chip what competition can or traction generation products use solutions of by capacity. are the would there use terms And this did us of will we quantify cases, that far, intrigued design world pace put cases. use also the that in quite the early even have can around But coming cases the deliver of our deliver

Alex Henderson

do what actually amount think hand Going when back you it's revenue you'll revenue? even orders it? broader from do exactly if the small you for into And of shipping you'll think it question, in actually be have a

Doron Arazi

That would would kind you're tongue. I very end difficult this of say at my assess. of expect me be getting guess point. to before my would that I Alex, pulling by the not XXXX. orders It's

Operator

Please no have questions. further You proceed.

Doron Arazi

and this improved strong the year strong start significantly for profitability. close, revenue We delivered to a was to So us.

strategies. to we our growth and achieve flows as self-sustaining cash diversification are well-positioned We execute

will XXXX expect competitive We new based that the a launch system-on-a-chip give durable to us advantage. line in product

you further Goodbye. on call. Ceragon's about updating to We I our look forward are excited next increasingly opportunities.

Ceragon Networks (CRNT) 1 May 232023 Q1 Earnings call transcript