Ceragon : 2024 Q1 Results Conference Call Remarks

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Ceragon Networks Q1 FY 2024 Earnings Call Script

May 7, 2024

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Operator

Welcome to Ceragon Networks First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session.

1. If you wish to participate and ask a question on today's call you will
2. need to click on the "raise your hand" icon within the zoom application
3. on your desktop or mobile device.

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1. As a reminder, this call is being recorded. It is now my pleasure to
2. introduce your host, Rob Fink of FNK IR.

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1. Rob Fink
2. Thank you, operator, and good morning, everyone. Hosting today's call
3. is Doron Arazi, Ceragon's Chief Executive Officer and Ronen Stein, Chief
4. Financial Officer.

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Before we start, I would like to note that certain statements made on this call, including projected financial information and other results and the company's future initiatives, future events, business outlook, development efforts and their potential outcome, anticipated progress and plans, results and timelines and other financial and accounting- related matters, constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

1. Ceragon intends forward-looking terminology, such as believes,
2. expects, may, will, should, anticipates, plans or similar expressions to
3. identify forward-looking statements. Such statements reflect only
4. current beliefs, expectations, and assumptions of Ceragon's
5. management--actual results, performance, or achievements of
6. Ceragon may differ materially, as they are subject to certain risks and
7. uncertainties, which could cause Ceragon's actual results to differ
8. materially from those projected in such forward-looking statements.
9. Such risks and uncertainties include, but are not limited to the risks and
10. uncertainties that are described in Ceragon's most recent Annual
11. Report on Form 20-F and as may be supplemented from time to time in
12. Ceragon's other filings with the SEC, including today's earlier filing of

1. the earnings PR, all of which are expressly incorporated herein by
2. reference. Forward-looking statements relate to the date initially made,
3. do not purport to be predictions of future events or results, and there
4. can be no assurance that they will prove to be accurate, and Ceragon
5. undertakes no obligation to update them.

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1. Ceragon's public filings are available on the Securities and Exchange
2. Commission's website atwww.sec.gov, and may also be obtained from
3. Ceragon's website atwww.ceragon.com.
4. Also, today's call will include certain non-GAAP numbers. For a
5. reconciliation between GAAP and non-GAAP results, please see the
6. table attached to the press release that was issued earlier today which
7. is posted on the Investor Relations section of Ceragon's website.
8. I will now turn the call over to Doron. Please go ahead.

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61 Doron Arazi

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63 Thank you, Rob, and good morning, everyone.

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1. This was a solid start to 2024 for Ceragon. We are executing against our
2. strategic plan and are on pace to achieve our full year growth and
3. profitability targets. Demand for our solutions is strong and growing in
4. North America and India in particular, and we are expanding our
5. presence with private network customers globally. We grew revenue
6. year-over-year,expanded our gross profit margins and delivered
7. another profitable quarter with positive free cash flow.

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1. The quarter was highlighted by particularly strong booking levels. The
2. large-scalenetwork modernization project for a Tier 1 Operator in India
3. was a major contributor to the higher bookings as we received
4. significant initial orders against the agreement. We continued to
5. generate strong bookings in North America as well, and we generated
6. improved bookings in all other regions sequentially. The strong
7. bookings give us visibility and optimism that we will achieve our full-
8. year growth and profitability targets.

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Our new products and solutions are serving as a catalyst for our business. As expected, our new offerings are creating higher customer interest and are starting to translate to bookings and revenue. We used Mobile World Congress as a venue to showcase our next-gen solutions. We also started delivering significant quantities of one of our new products in the first quarter.

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Some of the new solutions in our portfolio, that are worth highlighting, include:

• First, our MultiHaul (Fixed Wireless Access) family of Point-to- Multipoint solutions that operate in the V-Band frequency, opening doors to diverse applications through its use of unlicensed spectrum, along with its high-capacity and short-range characteristics. These qualities are ideal for both Private Networks and Service Providers aiming to establish swift connections in confined, dense areas such as cities and campuses.

99 • Next, the IP-50CX, the most compact universal microwave radio in

100the industry. This all-outdoor radio, with its unparalleled

101versatility, has the capability to form the entire network, from

102small cells to large-scale aggregation sites, significantly simplifying

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network architecture, reducing costs, and accelerating time to revenue.

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106 • Finally, there is the IP-50EX, an ultra-compact,high-capacity E-

107Band radio which is ideally suited for a variety of use cases,

108especially when small size and low OPEX are priorities.

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1. As I'm sure you know, MWC is the largest, most influential connectivity
2. event in our industry. Our goals at MWC were to demonstrate our
3. technology, communicate our mmW solution, which is the industry's
4. broadest, and also demonstrate our recent advances in Microwave and
5. Millimeter wave transport and fixed wireless access. We achieved each
6. of these goals.

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1. We had a record number of face-to-face meetings with customers and
2. prospects, received great affirmations of our upcoming next-gen
3. technology and received strong indications that we are well aligned
4. with market needs. We provided an industry-first LIVE demonstration
5. of the capabilities of our soon-to-be 100 Gbps E-Band link, that is based
6. on our new System on a Chip with great feedback.

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1. We also showcased our end-to-end Private Networks offerings, with a
2. unique display of our Broadband Luminaires that integrate Gigabit-
3. Speed wireless connectivity into lighting infrastructure to enable smart
4. city connectivity. Visitors to our booth learned about our Professional
5. and Managed Services offering and saw a demonstration of our
6. Ceragon Digital Twin solution and how it optimizes networks for
7. reduced costs and improved user experiences.

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1. As it relates to private networks, we made particular strides in the
2. energy sector during the quarter. We signed new deals serving the
3. energy industry across multiple regions, with an aggregate deal value of
4. nearly $10 million. These energy sector agreements underscore the
5. pivotal role we play in advancing digital transformation within the
6. energy industry, facilitating the goal of network operators to achieve
7. higher capacity at reduced costs.

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1. In the second half of 2023, we expanded our Talent Center approach to
2. better-positionCeragon for profitable growth. In addition to our
3. existing and very successful talent centers in Israel and Romania, we
4. have now opened two new talent centers, one in Bangalore, India and
5. another in Asuncion, Paraguay. The primary goal of these talent centers

1. is to improve our access to the talent market, as well as to support our
2. long-termtargets of growth and expanded operating margins.

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I'd now like to provide an overview of our Q1 highlights by region. Noting that on today's call we will focus primarily on activities in North America and India, the two regions that have, and we expect will continue to have, the greatest impact on our results in the near term.

In North America, revenue was $28.9 million. We continue to maintain our presence with large carriers and other major customers. Specifically, we saw significant demand from large ISPs for Siklu's millimeter-wave solutions. The headwinds service providers face have been well-documented, and capex spending by large networks has been more volatile. We continue to navigate these challenges better than many in the space, though it has reduced our line-of-sight to converting bookings to revenue and elongated our sales cycles somewhat. In private networks, we've made important first steps in a few new accounts, receiving initial orders, and we expect the number of new customers to increase in Q2. Also, our expanded marketing initiatives in North America are just now accelerating and we hope to start seeing the fruits of these investments later this year.

1. In India, revenue was $26 million with record bookings, again, related
2. to the large agreement we disclosed last quarter as well as high value
3. of orders received from one of our longstanding customers. We
4. continue to expect delivery and deployment of the new customer
5. orders to begin in the second quarter, and deployment is expected to
6. take approximately two years, with about 75% of the project value
7. expected to be recognized during this timeframe.

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1. Clearly, we continue to be successful in India and North America, and
2. this is facilitating our growth and profitability.

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1. With that, I'll turn the call over to Ronen Stein, our CFO, to discuss the
2. results in more detail. Ronen, over to you.

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182 Ronen Stein

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184 Thank you Doron, and good morning, everyone.

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1. As Doron outlined, the first quarter represented a solid start to the year
2. for Ceragon.

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1. To help you understand the results, I will be referring primarily to non-
2. GAAP financials. For more information regarding our use of non-GAAP
3. financial measures, including reconciliations of these measures, we
4. refer you to today's press release.

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194 Let me now review the actual results:

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1. Revenues were $88.5 million, up 6% from $83.4 million in Q1 2023.
2. Our strongest regions in terms of revenues for the quarter were North
3. America and India with $28.9 and $26.0 million, respectively, in line
4. with the continuous strong demand we see in these regions. Our third
5. strongest region in terms of revenues was EMEA with $14.9 million.

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1. We had two customers in the first quarter that contributed more than
2. 10% of our revenues.

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1. Gross profit for the first quarter on a non-GAAP basis was $32.5 million,
2. an increase of 14.7% compared to $28.4 million in Q1 2023. Our non-
3. GAAP gross margin was 36.7% compared with gross margin of 34.0% in
4. Q1 2023. We continued to achieve high gross margins mainly as North
5. America becomes the strongest region in terms of revenue, with record
6. quarterly revenues and product mix continued to be favorable, while