Q1 2022 Ceragon Networks Ltd Earnings Call
To raise your hand, using your mobile or desktop application.
I'd like to hand over the call to our first speaker today <unk> <unk> Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone I'm joined by Duran RAC, Sara <unk>, Chief Executive Officer, and Ron <unk> <unk>, Chief Financial Officer before we start I would like to note that this call includes information.
Asian that 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 90.
<unk> 95.
Although we believe that the expectations reflected in such forward looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviation there from will not be material.
Such statements involve risks and uncertainties that may cause future results to differ materially from those anticipated.
These risks and uncertainties include but are not limited to such risks uncertainties and other factors that could affect our results is detailed in our press release that was published earlier today and as further detailed in Ceragon. Its most recent annual report on form 20-F.
And in Silicones other filings with the Securities and Exchange Commission.
Such forward looking statements represent our views only as of the day. There are made and should not be relied upon as representing our views as of any subsequent date such forward looking statements do not purport to be predictions of future events or results and there can be no issue.
Orange that they will prove to be accurate.
Ceragon may elect to update these forward looking statements at any point in the future, but it's specifically disclaims any obligation to do so.
Sir Oregon's public filings are available on the securities and exchange Commission's website.
At Www Dot S E C Dot golf and May also be obtained from silicones website at www Dot Ceragon Dot com.
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 Duran. Please go ahead.
Thank you Maria and good morning, everyone.
We began the year with strong momentum.
Since the beginning one of 'twenty, one, especially in North America and Europe .
We saw exceptionally strong bookings in Q1, when it went into the highest in the last four years and a war with second quarter of last year.
We continue to make good progress in all three of our strategic pillars, together, which constitutes all growth brought the June assuming you'll recall will no discussions.
Our first strategic pillar has to do with increasing our traditional business, which is the best in class all al Dor, microwave and millimeter wave market sooner.
With the massive ongoing Voyager network rollout in North America, and Europe was insignificant value of orders this past quarter.
Our second pillar involves expanding our business into open network architecture domains. Our IP 50 F. This aggregated sensor gateway or D. C. G solution launched in the first quarter uses the best of breed software and hardware to integrate a sensor.
Rather than the original indoor unit offering both in a single solution. This quarter. We've already received the Bureau for IV <unk>, former large tier one operator in Latin America.
And our third pillar.
In strengthening our managed services offering to deepen our relationship with our customers. This offering has garnered considerable attention from operators private networks and carriers in North America, Latin America and you in fact, the results of our most recent customer served.
Which was conducted in the first quarter demonstrated the 28% of our existing customers would be interested in you know a minute services.
And we are already seeing this interest into POC and orders for Knox support connectivity as a service and more across different regions.
Our customers were very also shows that our broader satisfaction rate stands at a competitive 85%.
That 85% of our customers. Thank all remain advantage.
Is us being their quote dropped the trusted unquoted, sorry, who trusted advisor on a quote.
And the rate us among the top three technology leaders in the industry. In addition, a staggering 97% reported that they are likely to increase or maintain their business with us.
Got into them what sets us apart is our product quality ease of use and reliability.
These results allow us to confirm our continued confidence in the strong demand for our solutions in 2022.
I will now give you an overview per region in North America, we experienced high demand and resumed healthy bookings.
Based on the current outlook, we anticipate another record year in this region.
As we announced earlier today, we signed a contract with dish and started receiving orders worth multi million dollars.
This will leverage our ultra high capacity IP 50, C microwave and IP 50 millimeter wave two and sport.
Solutions to support its nationwide five zero.
We will also provide them with deployment services for smooth rollout and network asset management.
Is Americas first cloud 95 June network service provider and we feel proud to be their partner of choice.
Also in the first quarter, we want to deal with a large north American carrier to provide them with our all indoor technologies in this region. In addition to accelerated <unk> rollout by large operator, where see the Isps and branded networks market expand in Q1 win.
Hence embrue, our sales funnel significantly winning a tender in this domain as well.
In India. The continued high demand is reflected in the strong orders in the bookings. We received here, we mainly work with original tier one operators, helping them with first site upgrades and network expansion to prepare for the <unk> era and deliver uninterrupted connectivity.
In February a leading tier one operator placed orders for our all outdoor <unk> ready multiple solution with delivery scheduled for Q2 and Q3 2022.
Countrywide the Pfizer spectrum tender is on track even spectral relief for backhaul Ing is on its way, which presents a significant opportunity for us we believe that our long time market leadership.
And.
Reputed name will help us have a decent market share in this domain.
In Europe , we had an exceptionally strong quarter in fact, it was a record quarter in the past two years here as large operators begin there.
<unk> field trials, we provide them with our latest capabilities and technologies.
A leading tier one operator, and the third party D C or G has visited our Rowan which proved that our around software works well with other open network elements.
We also finished a successful people see with a tier one global operator as part of their type of activity. In addition, we acquired a new tier one customer sorry, a new tier two customer we will be supporting them with their nationwide <unk> projects.
In APAC, we saw an improvement in the business environment.
Impaired to the last quarter.
Post Covid countries are opening up and the market is working its way back to normal except for China.
This past quarter, we acquired two new private network customers in there in this region.
Bookings were strong.
In Latin America, we experienced a very strong start to the year, thanks to strong bookings.
The pandemics.
To be behind us.
And business recovery.
Despite some political instability, which has an impact on business decisions and ongoing project investments are beginning to increase in several different countries.
We received.
For our IP 50 F X form a leading tier one operators in Paraguay and Argentina.
In Africa, we had a slow quarter in line with our expectations due to seasonality.
On the delivery and gross margin from this quarter, we continued to experience the challenges we spoke about in our previous call.
These challenges caused our revenue to be somewhat lower than our expectations.
So it was the gross margin.
This quarter, an issue that stood out was shipping costs relative to our expectations.
We have been analyzing the main reasons for this specific cost increase in order to take action, where we can and to get a better control of it.
As stated in our previous analyst call. We believe that these challenges are temporary.
Improvement in our gross margin is expected to only during the second half of the year, assuming gradual improvement in our supply chain and shipping constraints and costs.
Our main goal is to continue to meet the increased demand, we're seeing from our customers and maintain and expand our market share that then we are doing our utmost to improve our gross margin via short mid and long term cost reduction initiatives as well as price increases were.
Were applicable.
Looking ahead, we feel confident of our core about our core domain products as well as our newer products, such as <unk>, which help us leverage the fast growing open network footprint, we believe that our positioning.
<unk> best in class providers.
<unk> microwave and millimeter wave technologies as well as a leader.
In the new Disaggregated market will continue to drive positive returns.
As I mentioned earlier these two areas cover the first two pillars of our growth strategy. In addition expansion in the third pillar, which is managed services will bring us more recurring business and revenues and improve our gross margin. Our belief is that together increased activity in all three.
Pillar will help us achieve margin expansion, which is our core aim.
The Bottomline is that demand looks strong and we see opportunities to increase our market share. Thus in spite of the challenges associated with deliveries and cost increases we are optimistic about the future.
With that let me now turn the call over to Ron to discuss the financials for the quarter Ron.
Yeah.
Thank you the wrong and good morning, everyone.
To help you understand the results I will be referring mainly to non-GAAP numbers.
For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures.
We will refer you to today's press release.
That was the one mentioned during Q1 'twenty to 'twenty two we saw strong bookings coming from North America, Europe , India and Latin America.
We see strong continued demand over all of them.
Yeah.
Let me now review the actual numbers with you.
Revenues for the first quarter was $70 3 million.
But two 9% compared with $68 3 million daus in Q1 last year.
Somewhat lower than expected.
In Q1, we experienced several challenges which included delivering some of our products on time due to component shortages and supply chain disruption.
That said.
As I mentioned earlier demand continued to be high.
Our strongest region in terms of revenues for the quarter as India with $15 6 million.
Collecting ongoing delivery for our main customers and in line with the strong demand we see in this region.
Our second and third strongest regions in terms of revenues for the quarter were Latin America, and North America with revenue of $7 9 million in southern pen 3 million respectively.
As Don mentioned in Latin America, the pandemic seems to be behind us and business is recovering.
We had two above 10% customer in the first quarter.
Gross profit for the quarter on a non-GAAP basis was $19 $5 million, giving us non-GAAP gross margin of 27, 7%.
Lower by almost 2% than the first quarter of 2021.
The relatively low gross profit is mainly due to expedite costs derived home component shortages and increased shipping costs.
Operating expenses from a non-GAAP basis for the first quarter were $21 million in line with Oxford patients.
Research and development expenses for the first quarter on a non-GAAP basis.
It was $6 8 million.
Lower than in Q1, 2021.
We expect an increase in R&D expenses in the next call them as part of the continued product innovation efforts of our new cheap.
Sales and marketing expenses for the first quarter on a non-GAAP basis was $8 5 million compared.
Compared to $8 $2 million in Q1, 2021.
General and administrative expenses for the first quarter on a non-GAAP basis was $12 8 million.
Same with our expectations.
Financial and other expenses for the first quarter on a non-GAAP basis were $1 2 million.
Lower than our expectations.
Our tax expenses for the first quarter on a non-GAAP basis.
We have bumped 1 billion.
This is in line with our expectation.
Net loss on a non-GAAP basis for the quarter was $1 2 million or two cents per diluted share.
As for our balance sheet, our inventory at the end of Q1, 2022 was $58 $2 million up from $48 $5 million at the end of Q1, 2021, but lower than Q4 2021.
The level of inventory that reflects our need to stock long lead and strategic items as a result of increased customer orders.
As well as the ongoing component shortages.
We'll try to keep.
The inventory level Lola.
Lola, but given the current environment, sometimes they need to stock key and all believed items arises.
Our trade receivables are now at $127 million up from $106 7 million at the end of Q1 2021.
Our Dsos are now stand at 150 days.
And then the 141 days in Q1 2021.
This quarter, we were able to better control, our cash flow from operations and investing activities compared to Q4 2021.
We have a strong balance sheet, including $25 million of cash and available unused credit facilities of $23 million.
Net cash used in operating and investing activities for the first quarter was $4 5 million.
Net cash provided by financing activities for the first quarter was $12 2 million.
Looking forward, we see strong operator demand.
But as the year unfolds.
We also see the global component shortage supply chain disruptions and shipping issues continue to create business challenges.
As well as fluctuations in our gross margin.
Although the situation remains volatile.
Consequently, taking measures.
To counter the challenges and are well positioned to take full advantage of phone term opportunities.
We continue to target revenue growth in 2022.
Assuming an improvement in the components supply chain and shipping drawbacks, we now expect revenue to be between $300 million to $315 million.
Improvement in our gross margin is expected only during the second half of the <unk>.
Assuming a gradual improvement in our supply chain and shipping constraints and costs.
With that I'll now open the call follow up questions.
Operator.
Thank you as a reminder, in order to ask a question. Please raise your hand using your desktop.
Our patient and wait for your name to be announced.
Again in order to ask this question is razor and using your mobile or desktop application and wait for your name to VNS.
Our first question today will come from the line of Alex Henderson.
From Needham. Please go ahead.
Greg can you hear me.
Hi, Alex.
So a couple of quick questions.
One if you were not supply constrained.
In the quarter, what kind of.
Revenue could you have produced.
Two on our gross margins how much of the pressure was a function of.
The inflation in shipping costs and parts that might be mitigated in future periods. In other words had or do you expect the parts prices that are increasing to stay up at these levels.
If that's the case, then don't back that out, but if you expect some improvement in parts that youre not expediting due.
Do back that out.
Yeah, So let's start one by one first of all.
Our our plan.
At the beginning of the quarter want to generate.
$75 million or even more.
And in terms of the impact of the shipment costs.
And the expedite fees that we're paying for components.
The impact in terms of percentage of our gross margin this quarter was something between 3% to 4%.
Okay. So just going back to your comment about $75 million plus to be clear, that's still whether it's a supply constrained guy so.
<unk> been fully available to buy any part you wanted to ship anything you wanted to.
I assume it would have been higher than the $75 million is that correct and yes. So what kind of I'm just trying to get a gauge of what the true underlying.
Revenues were Glenn had not been for these supply constraints.
Let me, let me kind of fed.
Backup for a second.
Our backlog.
Is great.
Huge.
What is holding us.
Is all of these constraints and or regionally where regionally we planned.
Our MLP for even higher revenue than the 75 once we you know.
Moved forward and ahead to provide with our projection.
In the last call in the previous call. We took some important steps and said, okay, let's reduce a bit.
And then we reached $2 75, and even that.
Was not able to be achieved only because of the constraints that we have in terms of.
Component shortages.
And obviously, even the part that we're able to overcome the shipment costs.
Went up dramatically because we wanted to supply to our customers on time and we add in some cases to use more error there.
And.
<unk> fit.
Jeff just I think just to complement on on their own if I may.
Part of.
The erosion in the gross margin derived from our decision.
To expedite shipments in order to satisfy the customer there so I will say that part of it.
<unk> is in our control.
Order to make sure that our customers are provided by the equipment as part of their deployment plan and it is in our control, yes, it's cost us money, but we do think that we are taking the right decisions because we know in this market the cost of gaining new customers by five by.
Higher than maintaining customers.
Our tier.
One long standing customer.
Customers relationship we thought that this quarter.
That is the right decision to pay this expedite fees in order to maintain our market share in these customers.
Yes, that's a great point and I want just to add to it it's not that we are blindly.
And doing that across the board.
We are making decisions on the sport.
And obviously, it's very difficult to see the end result picture of the quarter and while you are.
In the within the quarter, we're making decisions day by day.
But we are making.
Gary I would say conscious decisions, where we want to.
Spend the extra money to keep.
Maintaining our and maintain our market share in some cases, even increase it.
As opposed to the option of losing customers to the competition.
Couple of quick questions.
Exposure to Ukraine.
Russia as a result of the war and then second.
Has there been any change in the demand.
As a result of that particularly in EMEA or other markets that might be impacted by the economic consequences of that war.
So I will I will I will pick up the first one Alex and where they want to comment on the second so.
Almost I would say zero impact of the law in Russia.
Ukraine.
Both I will say on the business side of things and also on the balance sheet, because we <unk>.
Negligence I would say.
The amount in our lay out in regards to these customers and the level of activities.
<unk> is also very small so I would say almost zero impact on these customers.
On this.
In relates to Russia, and Ukraine Yeah.
Your second question, Alex So far.
We haven't seen any any impact actually Europe . This quarter came very very strong with a record booking quarter of or the last two years. So so far we don't see the impact on the rest of Europe .
And one last question then I'll cede the floor.
When obviously, congratulations thats great news.
Can you give us some sense of the scale of that on an annual basis.
As you are rolling out that program, what it could be this year, what it could be say three or four years from now.
Whats the size of this this transaction.
Based on what we've seen so far and the initial orders we have started receiving.
And I think.
This year.
Good.
Probably add.
Something within a more or less.
Two digits $10 million.
<unk>.
Booking.
This quarter.
Think that the.
It's also yet to be seen because this is just the first.
The first stage.
So it's very unclear how things will play out later, but if you ask me I would assume.
Double digit.
Amount of millions of dollars.
Low double digits.
So just to be clear the gross margins in the U S tend to be higher this should be consistent with that and then second are.
Are you the lead supplier to dish.
To the best of our knowledge, we are delighted supplier actually we have the lion's share on the equipment and then this wrong probably.
100%.
And we are leading the.
The installation and providing with the services as well as providing with managing all the.
The box is using our NMS system.
That is where we are at this point in terms of the margin.
Generally speaking you're right margins are U S margins are higher just bear in mind that with the services. Since we are in their ramp up stage because up until now we did not have a significant services business in the U S.
The fixed part of our cost is probably going to be a little burden on our gross margin in that in the near future, but we do see some more opportunities of these kind of services both to other tier one as well as tier.
Tier three tier four and critical infrastructure and as we move along the services bar.
Will increase and as a result of that the fixed cost will basically become a lower portion improving our gross margins.
Got it. Thank you very much for the response and I'll get back in queue. Thanks. Thanks. Thanks, Alex.
Thank you. Our next question comes from the line of George <unk> from Oppenheimer. Please go ahead.
Yeah.
Hello drawn in Rand can you hear me.
Hey, George how are you all right. Thank you so kind of picking up on Alex's questions. When you look at the supply chain and visibility as the year progresses. It looks like your adjustments to the annual guidance is mostly related to the first quarter.
But do you see.
Improvement in the second quarter or is most of the revenue growth.
Could it come in second half of the year.
At this point.
Because they were in the midst of the storm.
And we we assume we are very prudent we're trying to kind of.
We are very careful we assume that the second part of the year is where we are going to see a bigger portion of the.
Growth.
Okay. When you are as well as improvement in the gross margin of course is the result of that yes.
And when you have discussions with your suppliers, what kind of visibility are they giving you into the timing of availability.
Yeah, Let me, let me explain to you the situation.
You get the I would say a reasonable visibility and we thought it's improving however.
There's two things that are.
Impacting.
This visibility and can create surprises to us and this is why we are very cautious one even if the component vendors who meet to a certain specific day.
They may decline this commitment.
Sometimes as late as two weeks before delivery date.
Now, we're working primarily with the contract manufacturer.
In Singapore that buys most of the components the regular components for us.
If he faces this kind of situation.
He has nothing to do with it just can let us know that this is happening and that's it.
Said that.
We think that they can improve.
The visibility as opposed to what we have seen in the last couple of quarters and by the way one of the goals I have is to meet with them this quarter and discuss how we can improve the visibility coming from them. So that we can come up I would say with better estimate.
<unk>.
<unk>.
Revenue will be able to generate.
When.
You look at the pricing environment and the expedite.
Extra costs from a shipping perspective.
How much are you able to either transfer some of those costs or have discussions with your customers on the potential to raising prices and door like temporarily offsetting some of the shipping cost.
I would say that this is an ongoing discussion with all of our customers.
And as you as you can understand it everyday is a new day.
And just looking on the graph of the increase.
In the in the air freight and sea freight.
Justin.
A couple of months.
You can understand that the environment is very very volatile.
I can tell you that we have successes.
Almost in.
Each and every region with successes of either increasing prices or doing some changes in shipment terms.
And but it's not it's not a walk in the park, because let's not forget 73% of our business is coming from tier one operators and tier two operators, which are by far.
Bigger and therapy leverage and commercial power over at Ceragon.
Ceragon as not only ceragon.
Is big.
And obviously the competition is is waiting aside and I have not seen a very.
Intensive price increase coming from the competition.
So we are doing it one by one I can tell you that I'm quite satisfied with the progress we have made.
But now after seeing the ship the shipment.
The cost increase we might make a decision to go back to our customers for a second and the third is wrong.
Alright, and then Don can you give us a bit more of an update on the <unk> side, whether you added any incremental design wins.
Then from a product innovation standpoint from the new chipset, where are you what kind of timetable should we expect.
So I mentioned on the conference call actually that the interest.
We've seen with our new IP <unk>.
Is and Theyre around which is basically the software is basically a virtual indoor unit.
Is amazing.
Were very surprised by the level of it.
And traction.
We're making a lot of progress with that.
Some of the biggest players.
Customers potential customers actually in <unk> in Europe .
In terms of.
In other areas also this particular.
<unk>.
Sure.
<unk> disaggregated router.
Is getting a lot of interest in Latin America.
And to some to a certain degree.
We are considering launching a lower cost of this product in the future and this also gets a lot of traction in India. So this.
The product is showing very very strong initial signals.
Of <unk>.
Success obviously.
Yet to be seen.
And as for the cheap generally speaking we are moving forward more or less in accordance with our plan. We are in the in the productivity phase we are about to start or.
The validation testing soon and we do hope to finish the productive productive patients face.
At the end of 2022.
Basically this.
<unk> is competing with many other.
Chip designers on substrate on manufacturing.
<unk> and so on so forth, so I am saying.
That very carefully I hope to really finish the productive <unk> in 2022, but the situation in the component the cheap market could create some some.
Delays, which we hope will be minimal.
Obviously once we're in a position where we can.
Start working.
Working with with the chips.
And move forward fast.
With our new <unk>.
100 series.
We'll do that and at this point it is our estimation that will start.
Basically.
Launching our new products.
Under the 100 series probably.
At the beginning of 2024.
Okay. Two more questions. So Brian you mentioned that R&D is expected to increase in the next quarter.
How do you look at your overall Opex spend are you able to maybe save a little bit on the G&A side, yes.
Thanks for the question George.
The answer the simple answer is yes, we are going and we already are.
And take a real look on our Opex expenses and try to be always say a more.
Discipline in terms of Opex spending mainly.
On the G&A side of things.
And we are going.
To keep it for the next quarter, especially with the volatile markets in terms of gross margin, we are going and why.
Already do some more disciplined.
Opex expenses in particular on the G&A side of things.
Okay and then last question so ran.
Thank you for the conversations and all the work over the years.
And I wish you well so drawn how is the CFO transition search going can you give us an update on what Youre looking for yes, we have basically obviously.
In the mid sale the process. The search I think we have identified a couple of.
Very good candidates.
And then <unk>.
Obviously, it's a process that.
It's not only me always involved also thermal for.
Directors on the board of Directors will interview.
The candidates I hope I hope.
So that this.
That we are a relatively.
In the last I would say stages of this process, but it.
It may take us some some more time.
Generally speaking the profile is.
Of people who.
Have business experience.
And are not just a very much focused on the accounting and financial because.
People, who know Sarah won't know that the impact of finance.
On the success of the business is very significant.
So we're looking for this kind of.
Profile and obviously if this person also is coming from some experience in particular in the telco industry or vendor.
Our equipment vendors to this industry that would be nice to him just complement that for a second George tenths of the room for the Walmart just two two malls a comment from you on that first.
I may leaving.
Leaving but I have a very very strong team.
Some of them I recruit myself some of them don't recruit on its previous Florida as a CFO and we are able to maintain them.
And even after my departure.
I have a commitment to dawn and diebold.
To have a position with a new thing for us So I guarantee a smooth transition in that respect as well.
Thank you very much.
Thank you and as a reminder, in order to ask a question you need to raise your hand, using your mobile desktop applications. Our next question comes from the line of Alex Henderson from Needham.
Ahead.
Great. Thanks.
Clearly.
The supply chain issues have been a big problem in the rearview mirror, but looking at the headlights.
There.
There is a lot of risk coming out of China. These days.
Locking down I don't know what is a 400 million.
Shanghai, another doing Bejing, I don't know, whether they're going to lock down 800 or what but.
Can't imagine.
Living in an environment, where.
Even with government comes in Padlocks, you into your office or apartments, but those points aside.
What's the impact do you think.
Of this on you and how much have you been able to diversify away from that risk.
Yeah, so I need to distinguish between a direct impact.
And an indirect impact.
When I say direct impact I referred to some.
The Chinese vendors.
Who are supplying to a certain.
Certainly.
Elements of our solution directly.
In this respect the exposure at this point is low.
At least one of the vendors has two sides one of them is out of China, and we were able to remove most of the activity to decide that is out of China.
The other one and we have started and embarked.
Most of the alternate solution outside of China and at this point.
Sumit engaged.
The lockdown is not going to linger a forever.
The the direct impact is not big.
The indirect impact is something that we cannot access and I will explain to you why.
If our contract manufacturer by certain components from the Chinese market.
We are not aware of each and every nitty gritty.
Element and component in our.
In our.
Our solution and it could be that they may have.
Yeah.
I would say challenges so far so far.
We haven't seen a big deterioration.
And coming from the cm.
And based on that we assume that.
The impact.
If any is already included in their estimation.
So.
It sounds like.
The exposure on parts is lower what about the.
Travel side of it.
Freight side do you expect the freight costs to start to trim down.
Or do you expect the problems in Russia, slash, China to cause freight to stay.
A big problem.
In through the second quarter at least.
Frankly, it's very hard to tell.
I can tell you that for example.
We've seen an increase in the freight cost.
For India.
In the first quarter and now it looks like it looks like the <unk>.
Certain relaxation.
In this in this call.
The arrest.
It's very difficult to say our assumption at this point and based on that we gave our.
Our revised so to speak the outlook for the year is that this situation will continue for a while.
And the relaxation will come later in the year, but not in a I would say.
Steve.
Steep improvement.
And then on the.
The <unk> side.
Three weeks ago I had traveled in two years now.
<unk> scheduled over the next quarter.
So I assume that you guys.
Have a similar kind of the.
Improvement in or.
Yeah.
Our cost to increase to cope with but also hopefully productivity to generated from that can you talk about what your assumptions are for the year in terms of.
Kenny rebounding.
60, 70%.
Where it was 2019 is that the new normal how do we think about that.
So.
So we do actually even in the first quarter, we are seeing.
Some signs of recovery.
<unk> however.
Not a great extent and even when I see the projections of travel.
By far less than the level of plenty of 19, if I want to give you some.
Some ballpark less than.
More than 50% less than the level we had.
In play in the plenty of 19 and even death.
If you know.
When we see it's mainly the main factor of our seven is actually travel incontinence.
Therefore, with select <unk> for a.
For training and knowledge transfer.
Less travel we'll see.
For internal meetings and things like that this is still.
Not a something that this is happening at this point.
So is that a new normal or what do you think the new normal.
When we planned.
In 2022.
And my guidance to.
Due to management was guys.
<unk> got used to close deals via.
Via zoom via teams.
And I'm, not saying that we should stay contained in our rooms forever, but.
This is a very effective tool.
And yes, there is no substitute to <unk>.
Physical proximity.
And obviously the more important parts of metering and closing deals and so on so forth.
And should be done face to face.
But the budget.
Was instructed is more or less 50% then the level of travel.
Travel expenses, we have seen in 2019 I think that the.
Cerro Verde has proven itself, especially on the opex to be a very disciplined company and this is what I expect from from the management and employees.
So kind of a new normal is a much lower level on it.
Going to the exchange rate can you remind us where you are on the hedging.
I mean, the shekel is certainly helping things at this point.
You are not sure.
Yeah. So unfortunately, Alex on the OE sales expense aside I say, unfortunately, because we already hedged in 2022 at an average rate of three.
Three point 15, something like that and since then.
The dollar strengthening against the shekel.
We have already hedged it does help us.
I would say for on the balance sheet items that are not hedged and denominated in <unk>.
Second and this is why you see also the financial expenses this quarter.
A much lower than in the.
Previous quarters.
And one more question then I'll cede the floor again.
Churn staffing churn and wage inflation what are you seeing.
Yeah. So first of all I'm happy to announce that.
We in the first quarter, especially in R&D.
We have seen some relatively relaxation in the attrition and the ratio between our recruitment and attrition has improved.
Very significantly so obviously that's good news.
Us.
There are some menu.
I would say articles docks.
Talking about a spike on the demand side for work on on employees and that is.
<unk> is being noticed.
So this gives us some sort of hope that this.
A very challenging situation will start coming down and obviously as a result of that also salaries.
We'll get to something that is more.
Reasonable.
But.
I don't think it's coming.
Very soon I still believe that this year, we will continue to be a.
A bit difficult in other main locations, primarily Romania and India.
I think that we have seen similar situations.
In India, we've seen a lot of.
Turnovers by the way not only in Ceragon.
Across the industry.
And people are just trying to improve their their terms.
And so.
Is in Romania to a certain degree.
At this point I think that we are managing this situation.
Very well, it's a combination of sometimes salary increase coming with some efficiency measures.
Making sure that people are really.
Doing well.
100%.
So to speak a productivity.
And so far this helps us to contain.
To keep our budget in accordance with what we plan.
I have just one last question.
I apologize I forgot to ask so most of the companies in the networking.
And.
Telco space have been talking to the magnitude of their backlogs on a full year basis.
Sienna is running a backlog that's equal to roughly 100% of it's <unk>.
The annual <unk>.
Product sales.
Juniper is well over 50%.
This has become kind of a standard comment are you willing to give us some gauge of what your backlog is relative to.
The full year.
Product revenue guide.
So Alex you asked this question so politely I cannot deny.
And refused to answer this.
It's I would say that it's above 50% and I would say normal.
That's very helpful. Thank you so much for that brand.
Understand you've got a great new gig.
Congratulations and look forward to to maybe working with you wherever we end up.
Alex was pleasure working with you as well.
Thank you you have no further questions with pursuit.
Thank you in closing we will continue to stay focused in the areas that add value to our business and market leadership in the medium and long term, we will continue to sharpen our competitive edges.
Which are our technology leadership, our growing managed services offering and our reputation that spans over 25 years, our latest product IP 50 F. <unk>, our newest customers orders and bookings are all.
Testaments to our strengths and to the trust our customers continued to place in us.
As 2022 unfolds, we will continue to build on and amplifying. These distinctions through our gross strategy and by focusing on the best opportunities in each region I look forward to updating you further on our next call.
Good day everyone.