Q1 2020 Earnings Call
Good day, everyone welcome to the second networks limited first quarter 2020, with <unk> Conference call.
Today's call is being recorded and will be hosted by Mr. IRA Palti.
President and CEO oldest fares on network.
Today's call will include statements concerning cert on future prospects that are forward looking statements as defined in the private Securities Litigation Reform Act up 1995.
Such forward looking statements are based on current beliefs expectations and assumptions a circuits management.
For examples of forward looking statements. Please refer to forward looking statements paragraph in our press release.
Published earlier today.
These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the risk of disruption and our and our customers business related to an outbreak of the novel Corona virus Cobot 19 pandemic, calling the virus.
The risk of macro economic downturn and slowdown of development and significant decline of business the can harm our and our customers' ability to conduct or further developed our their business, including cancellation suspension or reduction in investment in new equipment purchase.
Postponement or cancellation of rollout of wireless network.
Postponement and the transition to Fiveg technology.
And the introduction of new products and capabilities.
Inability to deliver and perform under our contracts.
Disruption to our supply chain in production capacity.
Birth effects on our and our customers finance performance.
Cash flow.
Revenue and finance <unk> financial results.
Available cash and financing.
And our ability to bill and collect amounts due from our customer.
The risks relating to the concentration of a significant portion of Varagon expected business.
In countries, particularly in India.
Small number customers are expected to represent a significant portion of our revenue.
Including the risk of deviations from our expectation of timing sized orders from these customers.
The risk of delay and converting design wins into revenue as well as expected revenue growth.
Risk associated with any failure to meet our product development timetable and specifications to maintain our technological bullets competitor.
Risks associated with any failure to effectively compete with our wireless equipment provider.
The risk that our rollout of Fiveg services could take longer or differently than expected.
Other risks and uncertainties detailed from time to time third on annual report on form 20-F.
<unk> other filings in the Securities and Exchange Commission that represent our views.
Only as a date they are made and should not be relied upon as representing our view as any other sub the quint date.
Ford.
Forward looking statements do not proposed to be predictions of future events or results.
There can be no assurance that it will prove to be accurate.
We do not assume any obligation to update any forward looking statement.
There are gone public filings are available from the Securities and Exchange Commission website at Www Dot S. E C that GE olvey or may be obtained concerns on website at www dot.
That they're gone dot com.
Also today's call will include certain non G.H.P. number.
For a reconciliation between G.H.P. and non G.H.P. results. Please see the table attached to the press release that was issued earlier today.
I would now like to turn the copper old copper call over to Mr. IRA Palti, President and CEO of Ceragon. Please go ahead Sir.
Thank you.
Good morning, good afternoon, everyone joining us on the call today.
With me on the call too they are run very old Chief financial Officer, and offices FLIR head of Investor Relations.
I Hope you on your family are staying healthy during this unprecedented times.
During this period or top priority is ensuring.
The health or safety, all our employees around the globe, because we continue to serve our customers.
As Youre well aware covered my feeling is from the old upside down since our last conference call. It has changed the way we walk shop learn a stand for things literally overnight.
For pinnacle the influx has been dramatic.
Operators are experiencing unprecedented demand for brand with a.
According to the New York Times operators like Comcast, Vodafone Telefonica, and maybe I guess, because I remember finfets your speed been southern surge in demand.
If you're more bars U.S. present medical technology Neville Ray through its mobile hotspots usage is up 60%, meaning that people frustrated by poor home broadband or moving to the cell phone as a whole spot device.
Use of collaboration tools like soon with teams and Webex is up 57% immune online educational tools.
<unk> hundred 35%.
The change in telecom usage that we expected to see over the period for few years has accelerated into just weeks.
Although no one knows what the long term outcome will be one thing is clear.
When comic favorably with high capacity has become widely recognized is an essential utility like electricity water.
Consumers and businesses, both expect in your level of speed to support the clinic be between needed for each of the quality streaming better online gaming remote office and virtual meeting experiences.
As a result operate this wall to wall no understand they need to ramp up but capabilities and we believe that they were concrete to address the demand.
This brings urgency they need to increase the capacity over the position that fall into expand coverage in two areas, where it is unavailable.
Wireless holding is an important enabler over the process.
If it is the fastest and most flexible away for achieving this goal.
In fact, many places in the World Wallboard wireless the only broadband connectivity that exist.
Well there are just for big celebration of Fiveg, which supports 10 times higher conductivity speeds more reliable service has been greatly increased capacity as compared with Fourg.
We therefore believe that the current situation will serve as a catalyst for long term fiveg investment, resulting in increased demand for expanding and Densifying wireless networks as well as for building Greenfield notebooks.
This obviously trends that would walk to surrogates advantage in the mid and long term.
For the short term however, the outlook is more complex.
Your support or the optimistic scenario from service providers are celebrating the investment in both Fourg and Fiveg for example, atrium do you announced they just can't so before Berlin stock buyback to keep cash available for major network investments.
Moving nationwide to Fiveg rollouts.
Mobile I'm, having completed its merger with sprint and announced that they are moving quickly to feel the nationwide fiveg and our many other examples.
At the same time, there are significant challenges.
All aspects or supply chain are walking slower.
Thanks.
And our industry doesn't mean affected on the operational level, along with the rest of the world economy as it faces the risk for global recession.
And no one knows how to predict the timing of the recovery.
Well, where it does want to accelerate the investments that cash they have available maybe less limped land you up to two major sectors.
The fact that they haven't had to consume at higher portion of their budgets early in that year to cope with capacity shortages in networks in the Rushmore.
Reducing the resources available for spending during the rest of the year on Fiveg network deployments and.
A reduction of revenues from enterprise accounts was employees on leave or closed.
And the change in local currency versus the U.S. dollar was which makes investments more expensive in some regions.
This clearly had a negative impact on several gone for the short to midterm.
For the long term. However, we believe the market is headed Fourq celebrated fiveg velapoint and we expect to emerge as leaders into growing markets.
Well, no I would like to make the falling points.
We are currently experiencing high demand for products from certain operators, including both existing customers and your customers.
Demand with especially strong toward the end over the first quarter.
This demand.
So far translated into very strong bookings.
During the first quarter, a book to Bill ratio was well above one reflecting significant new orders from tier one operators in India.
Pacific The U.S. and Latin America.
Just last week, we announced a new order from one of our large customers in India, indicating an end of last year's slow down in this important region.
We have seen an acceleration of projects within our customer base, including North America, Europe, and India, and real reaching out to existing customers offering to help them increased capacity. So result capacity bottlenecks.
This is giving them any increased appreciation for the flexibility that's all technology provides.
Nonetheless situation has brought us up against significant challenges in the short term.
But pandemic may delay the placing orders by our customers. In addition to impacting our ability to translate booking into revenues.
Many of our suppliers of walking at reduced capacity in sourcing substitution is often slow inexpensive.
Shipments of taking longer to complete installations are taking longer to perform.
We have been walking around the clock to resolve the challenge is to ensure that's all employees customers, a safe and to keep the company resilient and Asia.
We have remained fully operational transitioning into a new model for operation and support to our customers our business continuity program.
Even though most of my employees that have been walking partially or fully from home. It has been business as usual.
We recently completed on time significant R&D release on for remote and we maintained a continuous PR and market presence and we are proud to have been able to have achieved such strong quarter from a bookings perspective, despite having no face to face meetings.
But the revenue can be recognized I feel the equipment is delivered.
When we sell with installation services, we kept the bill and recognized until the equipment is installed and duration of.
This was the main reason for our low revenues and gross margin for the first quarter as Ron will explain in more detail.
As its looks now we expect the impact to continue your Q2, but to a lesser extent.
For the longer term, however, well still early to make detail predictions. We currently believe that's markets would return to a new normal in the third and fourth quarter.
I expect to take our fair share and hopefully more fuck celebrate the long term network investments.
Turning to our recent business and financial performance I'll. Just note. That's our first quarter results were in line with the update we provided on April six.
We are pleased we're focused in almost all regions demonstrating our continued forwards in winning new five you design wins.
Substantial project for expanding and Densifying Fourg networks.
This is another demonstration of our technology leadership and our global capabilities.
India.
India is a return to activity after last year's slowed down.
We just announced a major new contract with ethylene deal customer for more than a decade, and India's largest telecommunication company.
For a project to increase its fourg network capacity when areas to expand its coverage in the reward reagents that to prepare for its future evolution to fiveg.
As the country's teleco market wakes up we are taking market share Testament to our strong network rollout capabilities, which allow us to deploy hundreds of sites every month.
North America.
The U.S., we have begun benefiting from the merger of T mobile and sprint both long term customers.
Which was completed on April 1st.
You recall last year, they both cut back on the orders during the merger process, but right before the close of the merger expedited an order with us and we expect to continue supplying them with Fourg and Fiveg wireless backhaul equipment for the network Rollouts.
In addition, following a new five you design win we have been walking intensively with the lab for another two one U.S. service provider, so integrate our products into the network blueprint.
It is completed we expect the step to lead to IP 20, and I'd be 50 orders during the second half for the year.
Europe.
In Europe, while we had the weaker revenue we had our highest Q1 bookings six years.
Is this a reflects the fact the service providers operators and ice species in the number of countries, including Italy and Spain.
Turning to us to help provide bandwidth to the lock down populations and to enable emergency projects.
Africa Africa was weak both from revenue and bookings perspective.
Let them.
In Latin America, we continue executing on Fourg expansion project for tier one pardon me, Tom operator across several countries, including Argentina, Brazil, Colombia and more.
Unfortunately, we've experienced delays with the large project in Peru, and Colombia to the Doe reagents very strict local bell measures.
Asia Pacific.
In Australia, we seem to follow on their phone tier one service provider against the five you design win that we secured last year.
Other fourg related projects with operators in the region for west during the quarter and we expect Asia to continue to expand its fourg during twentytwenty any in Japan, we are walking with a fiveg mobile operator with a goal of securing the future business.
So as you can see despite the uncertainty the crisis has brought us many new opportunities once supporting our long term strategy.
This gave us room for optimism.
I'd like to and whether discussion for readiness as a company to take advantage over the opportunities.
From a product and technology point of view.
Ideally positioned to address the fiveg opportunity.
Existing platforms continue to stand out in the markets for the technology leadership flexibility and speed.
In parallel we are on track without development of our next generation wireless holding chipset for the more advanced stages or the Fiveg network transformation.
It will allow us to provide even higher fiveg network capacity driving to 100 gigabit speeds with a focus on smart efficient spectrum ethnic management with far more flexibility for deployment or Fiveg networks.
Foreign financial point of view as Ron will explain we believe we're in excellent shape to ride out the carbon crisis and to take advantage of opportunities that come with a recovery.
Even though this was an extremely challenging quarter, we remain strong cash positive.
Our customers are primarily large where the talk to your operators with broadband services increasingly recognized as a sense of utilities.
Or large companies like utilities of public service organization with significant basis of customers subscribers.
All are likely to continue investing in the infrastructure.
So.
Although no one knows what the next few months will look like we believe this momentum will continue to build for surrogate.
Now I'd like to turn the call over to run to discuss our finances in more detail Ron.
Thank you Iraq.
Since we have all seem to breast worries I'll focus on the highlights.
As we indicated in the out did you provided in equity seeks.
Revenue for the quarter were lower than originally expected approximately $56 million.
In Latin watching shared.
This reflect normal seasonality on the first quartile compounded by delays in that basis, and that'll call outs and shipments is locked down and other complete 19 related measures.
Slowdown in the ability will fall customers.
To execute on the network expansion plan.
Regionally.
India, though the strongest markets accounting for about 25% of our revenue.
These together with strong bookings demonstrates that India has returned as an important focus market. Despite the fact that hundreds of installations become impossible to carry out you talked a little bit down.
Yes, It was followed by a buck.
Which continued with the normal level of revenue despite complete 19.
The U.S. Europe, Latin America Africa.
All had weak revenue competitive bleakness quarters due to the less ongoing projects compounded by not one Q1 seasonality.
We had three above 10% customer in the first quartile.
Oh, well controlled the quarter very strong.
With the book to Bill ratio well above one.
This demonstrates the strong positive momentum that has been developing since the beginning of the including.
There are there enough India is a major cellphone business.
Continuing strong activities in Latin America, Europe, and Asia Pacific.
And the steady quarter that you had in the U.S. counter some watts by weak water in Africa.
In general menial focused on F is accelerated the pace of existing projects.
I'll address the sudden any increase in demand of capacity.
Our non-GAAP gross profit for the quarter well spoken million dollar.
Given guessing gross margin of 25.1%.
This is the lowest it has been many years, reflecting the low revenue.
Compared to all fixed cost.
Compounded by a less favorable geographic and customer mix and increased sourcing and supply chain costs.
Our expectation is that once the volume of our revenue speaks up.
Our gross margin will return to normal range.
Non-GAAP operating expenses for the first quarter, well, the $19.6 million, which is below plan.
R&D continues its slow on one level as we continue to move for all the development of falling chipset enact the 15 platform.
Sales and marketing were lower than their normal run rate, reflecting lower variable compensation and global travel expenses you touch on limitations of the go online environment.
Gina expenses remained it does not my level.
Financial expenses and other expenses lower than the normal I'd expect the 11.
We do expect them to were dental does that you like revenue in Q2.
Given the causes the current environment, we expect opex to continue around this level for the second quarter.
And then probably mid to rise gradually back to the nominal rate of $21 million to $22 million this quarter.
Thanks expenses for the quarter low, it's a bit less than 400 gate.
On a non-GAAP basis, net loss was $6.7 million or eight cents diluted share.
GAAP net loss was $6.9 million I will make sense nine cents.
The chair.
Turning to the balance sheets, well principal domain cash flow positive despite the low revenues.
Our cash balances up but one thing the young reflecting the combination of $1.9 million afflict cash generated from our operating in investing activities.
Together with the $18 million, a blow home our revolving credit facility.
The to carry out as the precautionary measure.
Went to would you sell short term loan in Q2.
Our receivables decreased to one or more than $4.2 million.
Giving us the so one rather than focus base.
This reflects our successful on Glenn collection effort and we'll continue to boot in major focus on it.
Similarly.
I will inventories decreased by another 2.5 million dollar, reflecting the l. continuous efforts to reduce them. So the 11th we had in 2018.
We are continuing.
Felt to optimize our inventories in this challenging period.
Well into the new outlook, our Collins view is that expected Q2 revenue.
Below wasn't going to $70 million to $75 million average quarterly run rate the two previously projected.
You don't Glencore 19 related difficulties in supply chain installations et cetera.
With the situation fossil resolved he just to edit to make predictions about the rest of the.
As I said why do we believe that long term trends are looking in our favor.
There's a lot of uncertainty in the short to midterm.
We continue to invest in all major development programs to show the Gulf, which a lot lots at both our design wins at fault.
Sustaining goal positioning is the strongest company in wireless hauling.
And the kids will generate future revenue.
No I would like to open the call for questions operator.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press. One then you on your Touchtone phone.
You may removed himself from queue at any time by pressing one zero again.
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One moment for our first question.
Our first question comes from App piston from Needham. Please go ahead.
Hi, guys.
So.
Obviously lots of questions to run through here. The first one obviously is on the revenues for the second quarter.
Clearly 70 75 is.
Nobody is expecting any come anywhere near that but do you expect a moderate recovery off for the 50.
56 million you did one Q is.
Should we thinking something in the 60 65 range. He was any more granularity on that.
Relative to that same question.
To what extent you think your book to Bill will be above one another words continue in supply constraints.
Resulting in those lower numbers or do you think.
Mannville stabilized.
I will answer the demand side, though let's.
Talk about that numbers.
I think that big issue right now and I think we emphasize it's very hard to predict right. Now Q2, given this we see its right now although trying to elaborate a little bit but.
Selling the company I've seen scenarios.
Very large range a much larger range and then a usual because of the constraints on the table.
I think thats from a demand perspective.
So look quite now is that in between the higher demand and some constraints was just talking to emerge.
Uncertainties.
Oh for example that I mentioned people investing early analysts are budget, so fluctuation seen currencies and others probably will be a normal course.
Ron you want to hand, the talk a little bit about so that when forecasting mean by normal quarter I'm not sure I understand the term.
A more in the range of probably book to Bill the problem.
Thanks.
Just to let them that Alex and when the wanting running the scenarios that that's we're seeing.
They are a we have very strong backlog is I don't mention and this is Juan acting in the equation that is very clear I think the issue with this anomaly off.
Mainly around supply chain deliveries and installation.
And things are changing liking today, so it's really really hard to predict.
At the positive side of that is because of this healthy backlog you FAA, who could not convert some of this backlog in Q2 will see the upside in Q3.
At this point the range if revenues are really really wide and it's really helpful hostile predicts that.
Is it reasonable handling and would be at lease up sequentially, Yeah, we and we hope.
Oh that it will be up versus the first quarter.
If I could.
The gross margins were probably the most surprising piece of the puzzle in the quarter.
25% gross margin a long time.
Obviously.
That reflects the strength in India as well as all the other issues that you outlined.
To the extent that we're looking forward into the second quarter.
Can you talk a little bit about whether you think that mix will stay that way.
Whether you'll start to see some improvements and that can we get back.
Some of that gross margin or should we still be thinking.
Something in that facility.
Hi, Alex it's Ron So [laughter] domain driven off of the slowest managing.
He's the low revenue that do heads compared to our fixed cost components. We had some fixed cost you know cost of revenues and to maintain a our production lines the cost of the people to operate.
This will fix cost items that when the revenue at low a causing the gross margin at lower than normal.
Normally.
While we will return to our average quarterly run rate of 70 $75 million, we are planning to get back to all their regular gross margin. This is our expectation.
All right so.
If it's consistent revenue with the same amount of revenue in the March quarter then.
We should think the gross margins are going to have that same level a pressure if it rebounds modestly little less pressure given rebounds fully obviously it goes back to normal that's.
Basically vislab then.
That's basically it tickets.
No change in the mix I mean wouldn't you be.
Slanting towards higher margin product a if you are constrained.
The changes in the mix depends on the customer and Zee.
Geography, where we serve the customers.
To be totally fair to the game almost on the first time for sort of basis on the constraints types locations, we do not see significant that any change in pricing being.
Chris shares a within the markets, except the normal ones well on every bid to your there's pressure, but that's not something which is not normal.
And we try for business as usual.
Right, So Bristol all customers worldwide with varying needs.
Certainly India is shut down more aggressively than it was in the first quarter.
In other countries, particularly in APAC have seen improvements.
My sense is that.
North American Europe are more normalized into Q.
That suggest a shift away from India to other geographies hence.
Even at the seven similar level of revenue somewhat improvement.
Somewhat but although remember that look though.
Very complex.
[laughter] regulatory ER in different places like India. For example, we still can deliver equipment, yes. It goes to the warehouse, we do expect at some point during the quarter.
For our ability to resume.
Our installation services.
Depending on the geographies.
Sometimes it becomes an issue of supply sometimes it's an issue on the ability to go installations locally.
Oh.
So it's the one of the saying so given an example of one of the quarters. We had in one of the region. So antennas for example, we supply locally almost locally in different places around the world because it's very heavy shipments.
Depending on where and then kind of manufacturers open or closed.
And moving them around the world mix total.
Totally unreasonable sense, because you pay more for shipping cost, especially that now the shifting costar.
And then kind of cost itself.
So.
As those dynamics on the table.
All right.
I think Jeff, but in general the going but in general going back to you or.
Overall assumptions as the revenue talks to climb back into the normal range gross margins will climb together with it.
I'll cede the floor. Thanks.
Thank you Alex.
Our next question comes from George I wanted from Oppenheimer. Please go ahead.
Thank you for taking my question around can you give a sense of how much flexibility you have from an opex level.
When you look at the June quarter, and then adjusting and the second half a year.
Hi, George So when we look on the Opex and they said it was sold in my prepared remarks.
In Q2.
Do expect beat on the same a range that he had in the first quarter roughly the range of $20 million.
Going into Q2 in Q4, we do expect it to go to its normal level of 22 to blend to $2 million fall.
Few reasons first well continue to invest in all of them Dean and for US. It's it's a major key factor for success and we do not expect with already down.
I think that is probably going to go up b cell fits in marketing and the was a major reductions due to some traveled to sleep chance and we do think that in Q3 in Q4, So we're probably going.
Okay and see that up.
Keep in mind that that.
And.
We do a on the Opex side, we do have some slowing go down on the hiring and investment in Capex I didn't travel, but on the other hand would do operate normally the company is fully function.
So this falling.
We do think that we would have as you add the opex to be at the normal level in Q2 in Q4.
Okay, and without the travel that you're seeing and that the type of sales engagement you have right now our decisions at the carriers taking longer even though there is an increased need for demand or bandwidth.
So as we said we are fully operational and I think the big challenge one of the challenges as we walk from home as less travel.
We need to do the business or the a lot of videoconferencing.
And we walked for extensively with our sales teams to both train can train them to this mode or build them from the old uses for that.
The walk with the customers.
Or in some places.
I do see a slowdown in some places they see even acceleration because people need or at least on the ongoing projects are the process has become some things even a shorter.
It's obvious where any thanks longer I'll give an example, one some of the things takes a little bit shorter sometimes because we are global company to schedule a meeting with an operator takes time, because they need to being for people in form fone different locations.
We are different than scheduling goes for people and we need to fly in a four people form other locations and takes time and then the meeting starts to spread out when you do things, we oh videoconferencing much easier to schedule everyone gets on the table, sometimes the meetings, a valuation and things a bit.
Much quicker.
For achieving the results.
But I see both sides of the.
Coin on that my belief is that by the way as part of the.
Habits, social changes that covered drops on all of us.
I'm starting to hear but from my salespeople and the little bit from the customers they might even for sure longer term to have some of the meetings also.
Non face to face.
And moving it forward because of the rapidly.
Except I think.
I think that's part of the things that you're seeing on some and I said both sides of the coin is some of the.
It's less of the interaction its mess up the internal decision processes and some of the customers.
And I right when you in at least going out and lastly at least up to this point. This has been in first quarter has been.
On the positive sign I think in the second quarter will return to normal level.
Oh.
From that perspective.
In boy, So IRA when you talk about.
The the new normal for the second half of the year is that primarily related to like your manufacturing ability in the supply chain or.
Do you believe that also is a deployment in the spending environment.
Both.
For the supply chain and activities.
He shipping supply chain, which will have to adjust for that.
And Oh.
Also on the demand environment.
One other thing like we need to keep in mind and that's on the demand on the revenue signed a walking in with a big backlog.
Well at some point to during if in the supply chain constraints starts lifting up both installation stuff will have to deliver.
The backlog as quickly as possible.
And just from a.
Kind of technology perspective.
Are you seeing a list in market share currently because of you know the IP 50, and you know the ability to kind of be prepared for fiveg.
And how do you feel from a competitive basis as we get to that new normal.
Very strong.
First I see a significant lift the IP 20.
The ability to deploy non complex all Aldo solutions.
Which a quick and easy both from a connectivity high capacity.
In some cases, if then that's not youthful differs they almost double capacity by click meaning activating the second carrier.
Gives us a huge advantage.
And I see a lot of demand for those solutions and I see some mostly in the labs at this point or around the IP 50, but also a sell that you've been likely 50 products, which are already.
Also a very interesting.
Discussion.
And dialogues with operators.
And quite a few operators, we which we haven't walked in the past are willing to discuss with us.
We've been brought up capabilities like doing demos remotely we set up a whole set of cameras in the lab. So if people want to do demos with us and testing, we can do that remotely with them.
Within our labs.
To push that.
Oh and its opening doors.
And its opening those a lot of those which we haven't been though before.
Thank you.
Thank you George.
We have a follow up question from Alex Henderson from Needham. Please go ahead.
Going on Alex.
Yes can you hear me.
Yes, yes.
Couple of questions if I could.
Can you give us an update on.
What's going on with any see.
Pardon mixed.
Signals on whether there.
Emitted to your chipset or whether they are still.
Working with Max linear over the next generation product.
What's your thoughts there.
Daily video call with them not to me the technical teams working on details.
On the joint development.
Well have that gives a is that doesn't give you an answer then.
Oh.
So okay.
Any sense of whether they are still working in tandem with the Max linear or whether there.
I don't know.
I don't know or at least.
And what we hear in the markets.
I don't think Wrexham in Arizona, Oh verge of developing anything which is close to our next level the chipsets and let's remember we're doing something which is why there.
With any C, which is a joint development activity.
Any other.
Oh I am relationships.
In the background that we should be a.
Anticipating benefit from.
[noise] bus things going in the background I'm not sure. It then anticipating at this point because those are a zero one deals.
And I appeal they happen they don't happen.
So at this point, there's a lot of hard walk law, if we'll be getting close to something.
Oh, probably give a heads up at this point, it's not close.
I see okay.
Going back to the exchange rate.
Shekels been all over the map over the last couple of months, it's plummeted to surprisingly low levels, but then.
Not surprisingly it rebounded quite sharply.
Can you talk a little bit about whether you were able to take advantage of that particularly low level.
When it got down to it or weather.
Just happened to fast to benefit from it.
And to what extent you are expecting some benefit.
From the current level.
Hi, Alex it's Ron.
So just there.
I will remind remind you that we haven't had a hedged on the shekel on an annual basis. So actually when we set up the budgets at December 2019, there's checking is fixed it this year to six at the rate of three at 45.
So actually well not benefiting all of a lot a losing on on the devaluation one thing I would like to mention needs that we'd be utilized the benefits of off there a low chicken.
Okay to pay some are far as endorse he locally and so benefit it's part of feet on the cash flow, but don't from being that perspective, well it will almost 100% hedge on the shekel.
If I could go back to your comment around interest income and expense.
758 in the quarter.
Averaged.
It's a little over $2 million.
Actually wanted to $5 million per quarter before well when you said it was going to rebound in normal did you mean.
Wanted to half million Ranger, well, yes, one and a half one point, yes. So we should think about one and a half 1.6 $1.7 million, it's going to rebounding in second quarter. Okay. That's helpful. Thanks.
And then.
[noise] just talking through the.
The the geographic stuff for a second.
Really sounds like your higher end.
Countries are.
Really seeing strength.
Your your U.S. commentary I think is the most robust I've heard and.
As long as I can remember.
EMEA being extremely strong.
And APAC being strong so.
It sounds like you're seeing a pretty good mix shift to some are higher area products and particularly given.
The the turn up of the.
The soft.
A key.
Capacity.
It also sounds like it's a positive for margins as we go back.
If we in fact get back to.
More normalized revenue levels in the back half of the year or for that matter 21.
Given those dynamics should we be expecting some positive trajectory to to margins, even with a India.
A little stronger or as India, the bigger factor here.
I don't think India is the big your factor and I think that all the trends that you indicated our rights on the point.
But again as you know a little bit shifting on the mix, a little bit or with a new supply chain you a normal costing a little bit more shipments costing a little bit more I'm. It's too early for me to predict that we'll see an uplift on the numbers, but probably.
Really being what we call the normal range.
A of the.
Somewhere where it was all averaging like last year around.
Around the numbers.
And it's a and I think that the trends you're mentioning out right on the points, but some other things in the backlog, which I'm not sure exactly what will be thing effects.
Given an example shipment close to just in the air went up on a 50%. So some of it we moved to customers. Some of it is a we have to be or this.
It's causing it or issues on the tape.
Hi ran at a minute bunch on the spot what's the fully diluted share count if you are profitable.
For for valuation question.
Yes, good question probably a.
[noise] I would say roughly one then it has to 2 million mall shelf.
And then then we had its right now.
So youre at 82 to five BOE in the June quarter, and yes, which was last.
Meaningful probably yes, something something like that yes, we probably going we'll go back to two this fish account.
Okay.
Going back to your comment on Japan for a second if I could.
Racket 10, I believe is your primary customer there at this point and obviously they've launched now.
What kind of experience are you seeing.
Particular customer, it's a rather unique situation relative to.
Your customer base.
Can you give us any insight into what we should be thinking there.
Im going to work with then we are walking with a customer in depend on Fiveg.
Which might be I didn't put on purpose named mixed with remember that Japan in general.
He is a very intensive fiber country.
And a wireless laying is a second step a on top of the networks.
Both by the way for classical architectures, Oh and for opened one architectures like.
Rock within is using.
Okay I got it.
And one last question on the Fiveg.
Should we be thinking you view is not just at backhaul company, but also a front all company and to what extent do you think fronthaul starts to become a made meaningful contra payment you should be thinking for us of Russell for holding company Fund told me the whole backhaul.
And we have Ollie all those solutions my expectation that front hauling rule it could play a larger and larger place has opened one five GE types of architecture and remote radio heads off take place a we do assuming that sometime they will become.
A significant part of the business.
And that's part by the way over the new chip design and some of the things we do because if you look at for example, 40 and 100 gig and are there.
More target that all foreign tolling versus that calling applications.
All right I understand great. Thank you very much.
Thank you very much Alex.
Our next question comes from Cantor quicker than Discovery Group. Please go ahead.
And they are.
The virus problem.
Has there been any increase in interest all possibilities in the M&A area.
As we said in the past week coupon looking all the time, but usually in a situation. So this kind of most companies hunkered down.
A couple one figure out where are they are.
Probably when things emerge.
From the pandemic, well, probably see increased interest out there.
Thank you good luck calling for.
Thank you very much went there.
Yes.
So as a closing remarks as we don't have a additional questions.
So.
We believe that we're well positioned through whether this challenging period.
Industry trends that will support long term growth for company.
And one final Lopes I'd like to draw your attention to our newly designed website Blowgun Lincoln page, we've tried to make them as informative as possible relevant to the trends as we mentioned so I encourage all of you and invite you to have a look at them and to check back and frequently.
Thank you and have a good they.
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