Q1 2021 Ceragon Networks Ltd Earnings Call
So.
Ceragon public filings are available on the Securities and exchange Commission's website at Www Dot S. E. C. Dot Gov and May also be obtained from Ceragon website at Www Dot Ceragon dotcom.
Also today's call will include certain non-GAAP numbers for a reconciliation between GAAP and non-GAAP results. Please see the table attached to the press release that was issued earlier today I will now turn the call over to IRA. Please go ahead.
Thank you Michael and good morning, everyone.
It's my pleasure to share with you that we are hosting the school using fiber <unk> technology right now everyone and Jim Ceragon is on there.
<unk> smartphones. This is a five G&A built video call providing firsthand that's five G is here to stay.
It is here to grow it here to lead.
We are proud to be the ones, making this revolution and reality.
And to lead the change.
And last quarter I shared with you and my vision for <unk> are presented deal with ways at Ceragon and will be a driver of this new data driven five day power global culture.
Now this quarter I am pleased to share with you the details of our participation and cutting edge projects and new design wins and Poc's, which also we've already moved from a vision into a successful tangible.
Yeah.
2021 is looking to be a good year for <unk>.
Despite the overall economic impact of the pandemic net worldwide telecom market is marching forward with robust activity.
We are observing a positive trend in the amount of data flowing through the virtual veins of the networks.
As Ben and massive cultural shift towards the digital and more and more people have become more willing to and skilled in using new technologies.
To keep up with this new era operators around the world and rushing forward to upgrade their existing systems or build new networks.
This global shift impacts, our <unk> and five day offering positively.
And Q1, we achieved new design wins and saw very strong bookings in fact, our bookings and Q1 were the highest in two years.
Book to Bill ratio was way above one.
While this increases our visibility and confidence and market demand for the remainder of the year. It's clouded by global component sales to this we will probably affect the very capabilities.
One other.
Great and this further.
Yeah.
And North America, we had a very strong quarter the strongest in terms of bookings since 2016.
We see increasing demand from existing tier one customer to expand its <unk> networks.
We are also providing solutions for significant capacity increase for tier two operators and risks.
We see growth and sales to west and the U S as well as in Canada, which reflects a regional trends.
We see this trend in both direct and indirect channels.
In addition, we are increasing our sales efforts to critical interest starts chair type of customers, such as public safety and utility providers and they start looking to upgrade their networks to <unk>.
We see a lot of potential and this market, especially for providing value for complete communications solutions and services.
And Europe, driven by <unk> demand, we had a very positive quarter in terms of bookings.
And I'm proud to say that more than 20% of the region's bookings came from <unk> related orders.
And the European operators continue to push <unk> from initial trials into the field. We are there to provide them with the technology expertise and the services they need.
And that the space, we are participating in numerous <unk> proof of concept and initial rollouts and plans are being finalized for mass rollout.
And Western Europe, especially we foresee a significant opportunity to grow and take market share.
After Western Europe, we expect to see <unk> momentum built and the rest of Europe.
And India. There is massive competition among operators will now invest heavily and strengthening the <unk> capabilities and planning the POC for <unk>.
Based on our current relationship with them, we believe will be part of those <unk> PL CS.
At the same time, there are great efforts to bring the best population is still using <unk> and <unk> into the data driven world.
Efforts drive the operators to rapidly expand the comment forging and networks in both reach and capacity, which creates significant demand for our products.
Loss trends play to our favor and Q1.
And our operations and our revenues were strong and stable in fact, and India. We believe 2021 will be even stronger than 2020, assuming no material impact on our operations from the latest COVID-19 outbreak.
And the Latin America market is showing signs of heating up after a corona virus induced freeze.
COVID-19 continues to hip Latin America severely yet theres new momentum.
Especially in new investment towards a stronger for <unk> and readiness for <unk>.
Operators are catching up for time lost last year and implementing the networks.
I am pleased to share that our bookings were more than doubled and versus Q4, 2020 and that 80% of those bookings came from tier one operators, including a multinational Colombian tier one operator, whose frame agreement is worth $26 million.
Overall, there has been very strong momentum and the Andean and Mexico as well.
In APAC and after a slowdown in the last few quarters, we signed a follow on frame contract was $23 million with a tier one Pacific rim operator.
One of our more advanced five day implementations with significant traffic on our equipment in fact, the majority of the bookings in this region came from tier one operators.
We are also beginning to sales <unk> technologies for China, and continuing to make progress with our new tier one open one customer.
Overall in every region, we are moving into a new future, where I believe there will be and increasing number of opportunities for us across the globe.
I am pleased to report that we have 12 five G design wins to date.
And additional three since we last reported.
One is a new addition to our customer base and divest existing customers.
We are working hard to leverage future opportunities and to continue to be a key enabler of our multiyear <unk> evolution.
Allow me to provide you with some statistics regarding the acceleration and the global <unk> evolution.
According to the GSM and latest reports wireless backhaul evolution and Abi research <unk> mobile subscriptions are expected to grow by more than 41% CAGR and the next six years, increasing from 378 million subscribers to for 2 billion.
And.
Traffic is estimated to increase above 6000 extra bytes annually by 2027 with <unk> accounting for more than 80% of total traffic.
Thus higher capacity backhaul bands, Melissa and wave and microwave will be vital in meeting five G traffic demands.
And they will account for more than 55% of the links in 2027 for.
Fiber will be next.
With only 42%.
The need to further densify their networks to support five for <unk> will result in additional macro cell and small cells and particular being deployed in urban areas to handle the traffic while fiber will be deployed not orben sales sites can be supported by fiber.
Instead, microwave and millimeter wave backhaul links will be used which are versatile and can handle significant database.
Now five G comes with diverse use cases and requirements there.
And the growing opened one movement provides new avenues of customization and flexibility that meet such requirements.
As it offers interoperability among different video and digital control units solutions from different providers.
I believe it's the brightest future of our industry Oprah and one has picked up steam across the globe and.
And is causing massive disruption and disaggregation and how networks are architected.
Today, It isn't just the Greenfield tech, but also major market players.
Turn towards open one.
As the market in general continues.
To move from analytic approaches to open one our best of breed open and I talk hauling solutions become more and more relevant and they can be seen through our joint project and Brazil, plus various and design wins, we are working on.
Allow me to elaborate on the Brazil project.
We're participating in Cape <unk> opened one trials, which test equipment provides for <unk> opened one.
It's a joint project team, Brazil is carrying out with pizza telecom in for a project and then National Telecommunications Institute.
Our new generation, all outdoor ultra high capacity IP 58 millimeter wave solutions capable of delivering up to 20 gigabit capacity today is being trialed.
At this time for solution is a must for open one as it provides the connectivity to the radian units.
We are proud to be involved and this project and Brazil, future and network deployments and we see it as an opportunity to prove our technology edge.
To meet future five G and opened one related technology demands, we are developing a new high capacity low latency system on a chip.
It is designed to offer the next stage of frontal linking between digital and radio units.
And with this solution will be the first ones and the market offering. This technology. We are very excited about this prospect.
Ceragon system on chip with tape out is planned for July will support both microwave and millimeter.
Millimeter waves with high bandwidth and low latency. It will support significant expansion of five day networks and addition to supporting all previous wireless generations.
Our existing IP 50, and 90 50 seat family of products successful support now fiber deployments.
The new system on a chip will enhance our offering with and increased capacity, reaching 100 gigabits per second as well as improved five G and opened one compatibility.
We are innovating on the disruptive market trends.
As we always done from <unk>, all the way to today's <unk>.
Ceragon has grown so much and the last decade, and a half and it is a global company today.
And it's been a pleasure serving as the president and CEO of Ceragon for the past 16 years and to lead and incredible progress and the very many accomplishments from the company.
And the beginning of July I'll be transitioning my responsibility for several of those former deputy CEO and CFO the one LLC.
And we've continue serving the company as Vice chairman of the board.
For what.
Of the boards throughout my time at Ceragon I've truly been honored to work with so many talented leaders and visionaries and including our incoming CEO zone for that and.
Allow me to briefly pass the mic to him.
And.
Yeah.
Thank you IRA.
And Hello, everyone.
And privileged and excited to come back to Ceragon is the new CEO.
And the IRS leadership, Ceragon as competitively and enhanced its Fuji and five G offering and.
And today it is a global supplier to many of the worlds Q1 and Q2 operators.
And assuming no I'm, either new to ceragon, nor to the industry in which it operates.
And my many years in the telecom and related industries I got exposed to a wide variety of strategies and business models for scaling up results I.
And late changes that generated stronger bigger and more profitable businesses.
I also built solid relationships with operators vendors banks and investors I'm now, bringing this extensive experience back to ceragon.
I see a lot of potential and opportunities and leveraging ceragon as core competencies to build a stronger bigger and more profitable company. It.
It's my plan to keep our technological leadership, which is the foundation of Ceragon success.
And develop more and more innovative ways to fulfill the worlds growing <unk> and beyond.
I look forward to furthering our commitment to our existing customers as they navigate the new five <unk> and continue to enhance their for gene networks. I also look forward to finding new ways to scale, our technology and to open new doors in existing and new verticals.
Back to you IRA.
Thank you the wrong once again congrats.
And good luck and your new position.
Our non like to turn the call over to Ron to discuss our financials in more details one.
Thank you IRA and the wrong.
And good morning, everyone.
To help you understand the results and we'll be refining and mainly to non-GAAP numbers.
For more information regarding our use of non-GAAP financial measures, including a reconciliation of these measures. It was a failure to today's press release.
Thank IRA mentioned during Q1 2021, we saw very strong bookings coming from Europe, North America, Latin America and India.
In fact Q1 was the strongest in terms for bookings in the last two years.
Book to Bill ratio was way above one.
Our revenues for a strong level and at the high end of our projections for the quarter.
During the first quarter and made further progress moving back towards normal operations accelerating the positive trend that began in Q3 2020.
Let me now review the actual Q1 numbers for you.
Revenue for the quarter was $68 3 million up 22% compared with Q1 last year.
Our revenue starts from region to region in line with the effect that COVID-19 has had on local business operations and the network build out plans.
Our strongest revenue for the quarter were from India.
And ongoing deliveries to <unk>.
Europe and strong quarter, continuing its positive momentum for 2020.
In fact, it is the strongest first quarter since 2015.
Reflecting some initial revenue from five day project.
Revenues in North America were strong with second continued positive momentum with our tier one customers and other Isps and smaller carriers.
Latin America.
And the slightly low quarterly revenue than its normal run rate.
Driven by the low bookings in the second half for 2020.
However, we are starting to see and new momentum and the telco market and Dell.
And we start and deal with very strong bookings.
Revenue in Africa, the sudden and the completion of the Orange and just project, we announced in August 2020 as.
And as well as another customer who want and two for 2020.
Revenues and APAC, we're at the low level and in conjunction with low bookings and the last two quarters.
We had one above 10% customer and the first quarter.
The bookings to revenue ratio for the first quarter.
Way above one.
The strong bookings give us confidence for the remainder of deal.
Though clouded by the global component shortage crisis, which my effect for our deliveries.
And we will elaborate on these small shortly.
Gross profit for the quarter on a non-GAAP basis was $22 million, giving us and non-GAAP gross margin of approximately 30%.
Comparable of 25% for the first quarter of 2020.
Our relatively low gross margin the fix the continued high supply chain cost that we have had to deal with in the COVID-19 environment with a major increase in air freight cost higher material costs and more.
This is likely to continue to fluctuate over the next two quarters until there's a full recovery.
Operating expenses and non-GAAP basis for the first quarter was $19 $5 million lower than our expectations.
Research and development expenses for the first quarter on a non-GAAP basis was $7 million.
A slight increase from Q1 2020.
Mainly due to our progress with chip development.
As planned this expense will continue to stay high and till we reached tape out and July 2021.
Sales and marketing expenses for the quarter on a non-GAAP basis was $8 $2 million.
And it's Q1 and 2020, reflecting the reduced travel and variable compensation that does come with COVID-19.
We expect to gradually increase our sales and marketing expenses throughout the year as the markets open post COVID-19.
Yeah.
General and administrative expenses for the first quarter on a non-GAAP basis was $3 $9 million.
And our expectations and down from $4 2 million from Q1, 2020.
Going forward, we expect to return for 2020 finally.
Financial and other expense for the first quarter on a non-GAAP basis were $1 $2 million in line with our expectations and have returned to the normal regular levels and Q1 2021.
Our tax expense for the first quarter on a non-GAAP basis.
And $3 million lower in Q1 lower than in Q1, 'twenty to 'twenty and in line with our expectations.
Net loss on a non-GAAP basis for the quarter.
Zero $9 million.
<unk> per diluted share.
On a GAAP basis net loss was $1 $2 million.
And one cents per diluted share.
We reduced our inventory for $48 $5 million down from $59 7 million and Q1, 2020.
Our receivables and knowledge.
One $106 7 million up from 1000.
And for $2 million from Q1, 2020.
Although these so now stands at 141 days, which is almost the same as in Q1 2020.
Net cash used in operating activities for the first quarter was one $7 million.
Net cash used this quarter for investing activities was $2 million.
Looking ahead, our strong bookings and Q1, which was significantly better than expected.
Along with a very healthy funnel and positive bookings forecast for Q2.
Reflect increasing business activity in most regions.
Now all that said the gone component shortage and different industries, all across the globe and startup left and effects on the supply chain of our components as well as operators five jute rollout Lynch.
Compounding the problem is panic buying of chips and certain industries, leading to further bottlenecks.
In Q1, we were able to manage this situation without material impact on our deliveries and in turn our revenue.
We've been working with our suppliers looking for additional ones.
And taking other measures to increase our supply chain capabilities efficiency and resilience.
We continue to target revenue growth from 2021.
Although we still expect a slow start for the first half of the.
We continue to expense will continue to expect revenue to be between 275 from <unk>.
$195 million.
Now all that said the growth component shortage may have a negative impact on the timing for Q2 and rest of day deliveries and may lead to probable Busch of revenues between quarters and Phil.
The shortages and results.
We remain confident in our mid and long term prospects and and deliveries.
With that and now open the call for your questions operator.
Yeah.
Thank you.
In order to ask a question you will need to raise your hands arms zoom application. The center of your application you have a hand icon, please feel free to click on it.
Please bear with us while we update.
Yes.
Yes.
Yes.
Our first question today comes from the line of Alex Henderson, Alex you will be prompted to a mute yourself and please go ahead.
Hello, and welcome Academy.
As Alex we can hear you perfect.
A couple of questions if I could.
First of all I wanted to talk a little bit of other taped down in July.
What I think is probably one of your most important products.
And a very long time.
One do you have any risks around the takedown and timing based on capacity constraints and the supply chain.
And maybe causing deferrals on timing of tapering down.
New products.
Leased what we see right now is no.
And what we get from the people and needs to do the tape outs and the manufacturing and whats on there is that in general of the processors for new chipsets.
And time, although there is a question whether it will come a little bit further down the road and capacities to manufacture it and.
And that's.
That's why we are tape out.
We need simple quickly I think we will be on time with simple to build the products and then probably further down the year by mid 2022, and one will have to ramp up the production might then we'll have to see by then I do expect to short <unk>.
Chipsets will be over.
And relative to the taped down.
Obviously, there's always risks and takedowns will come back with the need for another turn and when do you think you'll have a sense of when that.
Product is when do you expect to have the tape down results back.
Our close to the end of the year.
Correct.
And one of the to go back to the comments around India.
To be honest with you I'm a little surprised at how strong it is not so much because of the need but rather because of the COVID-19 conditions. There frankly, we were bracing for much weaker results out of India.
And then what you obviously have come and with very good results. The question is.
If you had those products can you get them in and install them given what's going on there.
Tim.
And so areas and areas.
Yes.
The answer is yes with them maybe.
Let's remember on and they are of that in general what we see as the demand plans and the operators for their plans for 2020.
One.
Plans were done somewhere and January February before the very envious of the COVID-19.
Yes, we I think I said on my script and run indicated that we are a little bit hesitant on the capability to install a lot of those under the current COVID-19, although experience from the last time about a year ago, when we had those issues.
And we were able to install and even under the COVID-19.
As of this time, I expect it might be and little bit more difficult and that might create some <unk>.
Differences and holding there, but in general yes, I think the India market is build to work under the COVID-19.
Yes difficult.
Alex just to add and deaths. We also indicated in your prepared remarks, the Clinton 'twenty one.
Can be even better than 'twenty 'twenty, because we already see a strong bookings and Q1 and we also see very strong funding and the remaining in the remainder of deal from India. So we feel confident about it we'd the question of COVID-19 and the impact from that.
The question on the supply constraints.
Just to get dig into that a little bit.
Obviously hitting every industry.
And you guys are certainly not.
Alone on that.
But it does beg the question of whether companies will choose to go with companies that can get chips.
Versus ones that can and companies like Nokia may not have best and very product, but they have bigger scale and therefore more cloud.
Are you able to get to your customers to help you get a little bit more cloud and therefore make sure that you are saying in the right positioning and theyre not going to choose to go with other people because of the lack of availability.
At a ceragon my feeling is that we do have the cloud and the areas, where we need to and which is the let's remember that some other issues, we have and will dedicate the chipsets and there we are bigger and Nokia and a requirement for some of the vendors and in some of the other.
Places, which are more general and I think there it's the opposite happens because we are smaller it's much easier.
Flow and between the current on those things so yes, it's a fight.
Are out there.
And I'm seeing focus on a lot of those things and a lot of the pump that's taking place there.
And so relative to the last question and I'll cede the Florida since and the next day.
Relative to the guidance.
I assume at the low end of the guidance, you're probably assuming a lack of availability of components and at the high end of the guidance, you're assuming that kind of the best case.
Scenario.
Of availability and relative to our.
And to a reasonable expectation of supply on the components that that you've been hearing from people.
What what would be the circumstances that would get you to the low and is that a situation where people.
Basically back off on deliverables that they told you they were going to give you or.
And I think I think that's what we indicated.
The call and we still believe and the guidance that we gave in there.
I do not know exactly.
And the range and the impact of the supply chain issues as they come across at least in first quarter and what we're seeing in second quarter, we're able to mitigate most of the risks and other things on the table and.
And that all of them, but a lot of those.
Hi, wholesale and its.
And issue that we'll have fold across for.
Across the year, where I think that's longer term. It's there I think our customers see the same issue from all suppliers and I think and we'll make the as we said probably push out of deliveries and between quarters and we move forward and longer range. We are very very confident that this is.
Once the supply chain constraints reduce wear and an excellent position to expense.
Just to add on that Alex My view is little flow indicated on the call. We saw very strong demand in Q1, and we also see very strong demand and fun and air for Q2, so in that sense, our backlog is very healthy.
And in that sense. The question is as how and how can we deliver it with the shortages.
And what will be a push between quarters and the full faith that is yet unclear, but as we indicated we feel at this point and confident with the guidance and you provide there three months ago.
Okay, well and closing for this question and neuron. Thank you for joining us for this.
And look forward to working with you and IRA congratulations.
<unk> had a great run and really done a good job of positioning the company from.
And for it and I really appreciate it and working with you over the years and certainly hope to keep in touch and even with even and your longer term post chairman position.
Thank you very much Alex Alex for.
First of all thank you for a warm words and the art is.
No.
And literally leaving us.
So let's not make this a comparison that are dramatic and looking forward to working with you Alex.
Great. Thank you guys.
Thank you our.
Our next call is going to come from the line of George I Wanna, Georgia will be prompted to talk please do so now.
Hello can you hear me.
Hi, George Hi, Jerry.
Right.
Thank you for taking my questions and yes, I just like to start off with that.
And you IRA for your perspective on the industry over the years and the relationship and drawn congratulations on coming.
Coming back and and coming on board.
So with that and maybe digging into the guidance a little bit more with.
And the visibility you have and to the supply chain right. Now is there any risk to that revenue could decrease quarter over quarter because of the tightness or is this just in and out that you can't deliver to demand and you're kind of keeping expectations and are close to the rest for the near term.
Hi, George this is Ron so.
Yes revenue might go down quarter over quarter, but as I said are there it's not at all and matter of demand. The demand is very strong the backlog is very strong it's the matter of delivery and.
And how we can deliver with the supply and with the shortages and.
And convert this very strong backlog into revenue. So we feel very confident with the backlog and where the demand is Jeff and the supply constrained and the shortages that will impact us.
Alright, and then when you look at the potential for <unk>.
Maybe not being able to deliver and India is the demand and North America, Latin America, where you're seeing the improvement at a level, where I could have asked that and how strong India was and the first quarter.
Well, you know India generates roughly on an average 25% and.
And of our revenue.
So and we our experience from the last day.
And with COVID-19 and India was actually.
And positive one if I may say, so because we will manage and we're able to deliver and execute despite the COVID-19 situation I think that at this point the outbreak in India is more severe and something that we didn't.
And then had the experience and the past at the moment and this is sales also in Q1, despite and effect, we will able to deliver deploy and install and very strong in India, but this at this point of time and want to be a little bit more cautious from this.
Alright, and then just I guess, one more related to that the supply chain tightness. When you look at your gross margins for.
For the near term is it.
Comfortable around this 30% level or do you think there is a.
And then if risk of having a expedition costs and some.
And some extra extra expense that way.
And so I will say for following the gross margin, yes that will keep in mind.
And if may fluctuate fluctuate from virus for fragrance geography.
<unk> of revenues and the revenue level as well because if you remember and the first quarter and second quarter of last year with very low gross margin because the revenue and lower because with some portion of our costs and in the cost of revenues that.
Fixed cost at this level of revenue, we feel pretty confident on this figure, but again independent of whether the revenue will go down or if they will go up we do think it should it should be improved keeping.
Keep in mind that and on a pre COVID-19 world, we would expect and.
The gross margin to be better we do face.
Some expedite costs and some changes dramatic changes in the airfreight costs that impact us, we do try to balance that by and operational efficiency doing some more E C deliveries and some other measures that we're taking not all of that.
We will have the and near future impact.
Positive impact, but we are very and focus on operational excellence and.
Clothing on this on the supply chain and air freight but back to your questions. At this level of revenue, we do expect and the gross margin to be entities.
Alright, and are you comfortable at the Opex level that you're at all that for a quarter or two before starting to increase again.
So actually we're day on the Opex, some very low and G&A that we will probably be higher is that also indicated more like in the 2021 rate R&D and.
Probably the same at the same rates, we do expect and.
And because we're continuing to invest and the chipset in the second quarter to be the same level incentives and marketing.
Probably a little bit higher so I do expect that our Q2 opex will be items.
And my interest and it is a little bit higher and just.
One last and ill.
Area of questions and this one for you Iraq and when you look at taping out.
And <unk>.
Soc chipset and how quickly do you see product ties and that that's something that you'll see a few products by the end of the year or is it first half from next year.
And as you put that in front of your customers and does that accelerate your pipeline generation you feel.
And youre going to see a step up and demand as the portfolio expense.
We'll see step up and demand is a portfolio of expense and <unk>.
We're going to put it up in front of customers, we do by the way expect to see products only towards the end of next year or beginning of 2023, let's remember between Paypal and I think even having the chipsets here and then turn it into products is usually an 18.
And months type of for a period at least.
On products out there, but I think that the story there is part of the continuous innovation and we are doing with the different products that we have on the table and really creating the demand and keeping our leadership position and the market.
Versus other competitors.
Again, I think we discussed last time, when we were on the call that we are disruptive.
We have done again, and again, the disruptions and the markets and putting it on the table, even though our current product set the IP 50, I mentioned on the call 9% to 50 C are disruptive and the market and enable capabilities no one else sales like the 20 gigabit.
And the 50 50 product or the everyone channels and we are in the 53 all of those are required today for five <unk>.
And that's what's building the five new design wins and other things that we're doing the chipset is built for the next step out there again disrupting because let's remember five day is not a onetime event, it's probably over the next six or seven years as we move forward.
And that's where the mixed <unk> comes in with.
For T.
5100, Gigabits and the air and capabilities, when we see things coming in on the table and doing the disruption again and it is a continuum that we drive the company now going back to your question to a 100% right.
Because the operators are looking for someone who will do the long term ride with them.
It's yesterday revolt with them new ones. We are they are on with us. They want the best technology best of breed today, but they want to make sure that that best of breed stays with them.
For the next step as well.
And so that's where the whole story sits on the table and this guy here and needs to make this a reality and a delivery right.
Well with that and thank you very much Iraq, and again draw and congratulations thank.
Thank you for your remarks.
Thanks George.
Okay.
Youre welcome to ask your question.
Hi, can you hear me, hi, violence, a IRA and and Rod high and dry.
Congratulations on the quarter.
It seems like you guys are executing really well in a challenging environment and by the way. Thank you for doing this call on zoom I think this is so much easier than doing the dial in and then waiting for the operator and everything so kudos kudos on that my question is actually just on the balance sheet.
I saw that cash increased a little bit. Despite the fact that you guys are burning a little cash. So presumably you have some sources of liquidity, but $33 million of cash doesn't sound like a lot of money to me and so I'm. Just wondering if you could speak to your additional sources of liquidity.
Is ceragon adequately capitalized given what I think we all agree is a pretty meaningful opportunity here at the advent of five G.
Hi, Lance Thanks for the focus is for Jeff also to comment on the zoom call. Its not only zone called all the call was down by five G. Handset from five <unk> networks. So this is really exciting and for Jeff just to begin with so, yes, and we have $73 million and.
And our cash available, but we also have a.
Also almost a.
$40 million of available and.
Cash and revolver that we can use the lies.
For for anything that we would like to the banks and are really are.
Just to remind that we had the $40 million of.
Credit with the banks, which we increased during the Corona crisis from last June to $50 million and we utilized just 11 million and out of it it's more than enough for working capital needs. You can see that we offer and improve our working capital are for the last year pretty and Rome.
Particularly we reduced our inventory levels, we improve the other a R&D. So we reduced some of the payables and so I think that's the balance sheets and the working capital is pretty strong and we have the sufficient liquidity and to operate.
Great guys, Thanks, and congratulations again, thanks, Thanks Lance.
Okay.
Our next question is from the line of Alex Henderson, Alex Please promote yourself and on unit.
Great. Thank you and I just wanted to go back to the new.
The system on a chip.
I assume that Youre shown this technology to your service providers and.
And I'm sure that they are very excited about it.
So as we're thinking about the timing of availability.
I would think that the.
And then would become to.
To what extent.
The technology that you are implementing on this product would be directly tied into the IP 50 and to that extent.
And capable of.
And being upgraded in the field.
As part of that deployment.
And they go on in front of the availability of that so is this technology, therefore already impacting the demand and therefore.
And there shouldn't be a kink in the curve as it becomes available or should we think of it and there's good demand for what we have today, but theyre going to wait for this thing and there might be a little bit of a dip.
And as it becomes a.
Almost available and the.
The first half of 'twenty, two and how do you think the customers are going to behave relative to the availability of Nomura.
Because of the way and.
<unk> experienced in the past of moving those I don't expected it.
Let's remember that we are usually with technologies and bell.
12, sometimes 18 months ahead of the curve on the need with the customers. So what will happen is the same way that we sold most of our sales today.
And with all of our IP 20, C product, which is.
678 years old and driving the networks as we advance the product we came out with a 50 C with additional capabilities towards the edge of five G, which meets the current and probably the next week or for years of main deployment of a five day and it's creating the demand there.
The net set of products, which will not be the IP 50 pick a name for it and then we have internal names for it but one doesn't matter, which will come out.
We will be ahead of the care and from requirements of 50, and 100 gigs and near as five G base stations of Mark for small cells and others will require those so I see those as layering on top and really pulling the demand through our out there I don't expected it.
And so second question is I remember very distinctly.
Getting very excited about the for G upgrade cycle years back.
And you guys had the most advanced product with all the bells, and whistles and what and it up happening was people didnt want to buy and bells, and whistles and and put gross margin pressure on the company, which you then add to convince them that.
And that they werent going to get.
Net discounts and that caused the big dip and your business temporarily as <unk> always tried to game your availability.
And the result of all of that was a little bit of a disappointment on that product cycle launched for about a year and a half before the.
Customers determined that you weren't going to give way and by the way that was the right decision not to give waiver that point aside.
Are we comfortable here the five day cycle is one that needs these functionality and capabilities and that they're willing to pay for it.
And the answer is yes, because and that's why I said I think.
Minute ago that we still sell a lot of IP 20, and see if a customer does not need the functionality and they want to stay with us.
And less of a functionality IP 20 C is an excellent horse for right.
And I think the people who want the first losses for fire and G are attaching themselves to the IP 50, and I say that in different places around the world and that's what we said.
Got it. Thank you that's good enough for me and Ken Alex.
Yes.
Great.
Your next question Rashid and that's coming from the line of Gunther Karger from please go ahead.
Yeah.
Ontario on.
Yes, and Youre having.
Yes, Greg.
Yes.
First of all other I have a passion for outside.
Service getting the company through difficult times, and turnaround and welcome again Hello, how are you.
Thanks.
A question and I'll have this regarding the cash.
And it was mentioned before some other with 10 million dollar reduction and little unclear as to where that reduction came from.
There is no $10 million reduction Gunther on this on the on the first quarter and we had a cash breakeven.
If you take the cash flow and investing and operation activities, It was down $3 $7 million.
Which was offset by $3 7 million cash from financing activities. All in all net net cash position of cash.
Minus the loans that will stay the same in in Q1 and in Q4.
And the other question and history of verticals.
DSC and <unk>.
And this actually in your presentation.
You see a growth and the verticals and and.
Various markets going forward.
Thanks for the answer is yes, we focus on and the conversation.
Mainly on the mobile, but we do for the huge effort around the verticals.
We are putting a user for thin vertical sales, mainly in the north American market, but in other places.
Look at we announced last quarter or a deal and Africa, and we're announcing and other places and.
The market the verticals by the way behave differently.
And what we sell and the verticals is our equipment, but with a lot of integration services and capabilities to really provide a walk in and therefore.
And the interesting part that we start seeing a low verticals are not there yet that are started talking about five G and being ready for <unk> and our capabilities and our experience with the mobile operators on <unk> with us and a good position to start taking market share there mainly in the U S market.
Hi, Thank you and finally.
And there's a question regarding <unk>.
And you'll see.
And early movement toward.
And applications and the Iot area.
Okay.
The mobile operators that we work with today are investigating all areas of <unk> pick for the operator Youll see different things left they do with a five day some of them will go for mobile and a lot more broadband and some of them do play with Iot.
Some of them play more enterprise and industrial and the way they approach the market.
At the end of the day similar technology.
But of different way your spreads and net or can you do things, but it drives all of them drive.
And the five year requirements.
<unk> and <unk>.
Best of luck.
Thank you very much Walter.
Okay.
And I would like to close the call first I'd like to thank Ron for being with me for the wrong being with me for both of them for learning and new tricks and doing it on five G and mobile.
Video was not easily.
To do that transition.
I look forward to hearing from all of you next quarter.
With us and in between and if anyone wants to ask questions and contact us.
Please.
Feel free.
Very much.
That does conclude our call for today. Thank you very much for attending have a great rest survey.