Q3 2022 Ceragon Networks Ltd Earnings Call

In Europe , given the macroeconomic environment and the impact of the war in Ukraine, we are seeing some deals slowdown.

In addition.

Competition previously focused on Russia has now become more aggressive in other countries.

In the third quarter, we continued to see strong demand for <unk>.

We have new wins and so good traction in our growth engines, namely our dis aggregated cell site router and managed services and software offerings.

Overall, we are pleased with the execution of our strategy in this region.

And supply chain issues continued to fall and our new low cost series is launched we believe we'll be able to increase our market share in Europe .

In APAC.

The market continues to be ultra competitive.

Yet.

We continue to be successful keeping our position with the potential <unk>.

Business increase in our strategic accounts.

We signed a large multi year contract with a leading tier one oceania operator to extend and strengthen their nationwide <unk> coverage.

They will be deploying our microwave and millimeter wave solutions SDN suite as well as turnkey services.

Yeah.

This contract is valued at the potential of over $44 million.

Over the next three years.

In Latin America, we saw heightened competition.

Each country in this region presents different economic circumstances and challenges.

Despite these challenges we had a good quarter with increased bookings year on year.

We are encouraged by the traction our managed services offering has achieved and plan to increase our focus in the services domain.

In Africa, while business closing is still soft we achieved new wins in the managed services domain.

To summarize the <unk> era is not just a next generation communications technology.

<unk> is creating new markets.

And major league reshaping existing ones.

So far our strategy is proven to be an excellent approach to these developments.

We continue to provide leading wireless solutions in our core wireless backhaul domain.

We developed first in the industry solutions.

For open network architecture, and we leverage our knowledge and homegrown software development for software led services and managed services or enabling us to capitalize on the opportunities that <unk> presents.

We expect to continue to be the first choice of our customers.

Thanks to our category defining technology is vast experience in product and services and customer focused attitude.

I'll now turn the call over to Nancy to review of the financials Hunan.

Okay.

Thank you Ron and good morning, everyone.

I am excited to be here and to be participating on my first earnings call since joining <unk> and the team at Ceragon a few weeks ago.

I would like to thank everyone for the warm welcome.

I will now share a detailed review of our third quarter 2022 financial results.

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 refer you to today's press release.

Let me now review the actual numbers with you.

Revenues for the third quarter was $78 6 million.

Up by three 3% compared to $76 1 million.

In Q3 last year.

Our strongest regions in terms of revenues for the quarter, while India, and North America, with $22 $1 million and $21 6 million respectively.

Reflecting ongoing deliveries for <unk> customers and in line with the strong demand we see in these regions.

Our strongest region in terms of revenues was Latin America.

With $13 4 million.

Followed by Europe with $10 million.

We had two above 10% customers in the third quarter.

Historically, we had always had such big customers from India.

And I am happy to report that we now have such a large customer of North America as well.

They've been a long term customer and this year the business with us grew substantially.

Gross profit for the third quarter on a non-GAAP basis was $28 million.

Giving us a non-GAAP gross margin of 35, 5%.

Compared to 31% in Q3 2021.

35% in Q2 2022.

Our improved gross margin in Q3 as compared to Q2 of this year.

Is primarily due to the fulfillment of orders with better margins.

Mainly North America strong software upgrade sales.

To a lesser extent a reduction in shipping costs.

I'd like to emphasize that the majority of our business is still project based and we see continued lumpiness in our revenues and gross margins.

Quarter to quarter.

That said.

The upward trajectory.

Of our gross margin is very encouraging and reflects our ability to gain high margins when we execute on our strategy and operational efficiencies.

Operating expenses on a non-GAAP basis for the third quarter were $21 5 million in line with our expectations.

I'd like to draw your attention to the fact that on a GAAP basis, our operating expenses were higher primarily due to a onetime expense of approximately $4 million.

Related to rvs or start up there.

Research and development expenses for the third quarter on a non-GAAP basis were $7 2 million.

Up from $6 6 million in Q3, 2021 and down from $7 5 million.

In Q2 2022.

Sales and marketing expenses for the third quarter on a non-GAAP basis were $8 3 million.

Same as in Q3, 2021 and down from $9 1 million.

In Q2 2022.

General and administrative expenses for the third quarter on a non-GAAP basis were $6 1 million.

Compared to $4 6 million in Q3, 2021, and $4 6 million in Q2 2022.

The increase is primarily due to an increase in doubtful debts.

Operating profit for the quarter was $6 4 million.

Compared to $4 million in Q3 2021.

Selecting an increase of 60%.

When we take the nine months view, we see that our commodity operating profit in 2022 six.

$6 2 million.

Which again represents more than 16% increase over the same period in 2021.

The increase in revenues, coupled with increased gross margins.

<unk> on a quarterly and commodity basis contributed to the increase in operating profits.

Financial and other expenses for the third quarter.

On a non-GAAP basis.

$2 million within our expected range.

Our tax expenses for the third quarter on a non-GAAP basis were zero point $3 million.

Net profit on a non-GAAP basis for the quarter was $4 1 million.

Or five cents per diluted share.

Compared to $1 4 million.

Our two cents per diluted share.

In Q3 2021.

As for our balance sheet.

We increased our cash position to $26 million, while reducing short term loans by $2 million.

From last quarter.

Our inventory at the end of Q3, 2022 or $64 2 million.

Up from $60 7 million.

The end of Q2 2022.

Reflecting our need to stock long lead time and strategic items.

As a combined result of increased customer orders.

Ongoing component shortages and the impact, resulting from replacing one of our contract manufacturers, which we discussed last quarter.

We strive to keep our inventory levels lower.

And expect an inventory reduction.

Following the completion of the transition between the contract manufacturers and as the components industry improves.

Our trade receivables are at $115 9 million.

Down on $122 7 million.

At the end of Q2 2022.

Our Dsos now stand at 142 days.

As for cash flow.

Our cash flow from operations and investing activities in Q3 2022.

Was $4 1 million.

Noting that most of the $4 million, one time expense related to avia hostile attempt recorded in Q3 2022 will impact our cash flow only in Q4 2022.

This is the first quarterly positive cash flow from operations and investing activities since Q4 2020.

This positive quarterly cash flow was mainly a result of our focus on collection and increased factoring of our blue chip customers debts.

As a result, we increased our cash position, while reducing short term loans as mentioned before.

Net cash used for financing activities for the third quarter was $1 7 million.

Mainly as we decreased short term loans balance.

Therefore.

At the end of Q3 2022, we had available unused credit facility of $21 million.

Given only a slight improvement in supply chain issues, which continue to impact our ability to convert our strong backlog into revenues. We now expect to finish the year with a revenue range of $296 million to $304 million.

Our revenues within the new range will primarily be affected by our recent policy change by one of our leading customers regarding equipments received through to year end.

We expect that any portion which will not be delivered to this customer in Q4 2022 will be delivered in Q1 2023.

Our 2023 revenue guidance of $325 million to $345 million.

Remaining unchanged.

Our guidance is subject to potential upsides and downsides as we continue to address the supply chain challenges.

Facing the industry.

With that I'll now open the call for your questions.

Thank you in order to ask a question. Please raise your hand, using your mobile or desktop application and wait for your name to be announced.

Once again in order to ask a question. Please raise your hand and wait for your name to be announced.

Our first question today will come from the line of Alex Henderson from Needham Alex. Please go ahead.

Okay.

Okay.

Good morning.

Good afternoon, I guess a ton.

So I was hoping you could talk a little bit about the scope of the backlog you've had a lot of quarters in a row, where you have produced.

Orders in excess of.

Revenues and to what extent.

That has built a significant backlog is a critical variables.

I don't see any specific.

Delineation of it but would be helpful. If we could determine how big it is relative to your forward revenue expectations and it also is.

Critical to understand whether youre seeing any improvement whatsoever in the.

Supply chain.

Oh, Hi, Alex and thank you for your questions.

In terms of backlog as we said.

The backlog is the greatest.

Significantly this quarter as well.

In terms of magnitude.

I would say that it's probably getting beyond two quarters of.

Of our backlog.

Probably two and a half.

Pending also the revenue 11.

So so.

This amount is very substantial.

In terms of the.

The supply chain and the component shortages.

We see some some improvement.

And we analyze this by each and every product line and we are maintaining a very close monitoring of the component shortages byproduct line.

While in certain product lines, we see the relief so to speak.

There are product and which are.

We don't see the relief yet.

And therefore, while we are encouraged by the general direction.

Of the supply chain.

<unk> challenges, we are still very very cautious.

Because.

It takes only one golden screw.

Kind of.

The make or break.

Specific quarter.

So if I were to look at the supply chain.

And given the fact that most of the time he has shipped multiple products to a particular customer for an installation.

Is it.

Reasonable to say that even where you're able to.

Produce a portion of your product line without the supply constraints.

Phil Constrains you from shipping.

The full deployment to that customer.

I'm not sure I got the answer sorry. Your question can you repeat it. Please yeah. So if I need to ship five or six different products to our customer in order for that customer to have the network that they wanted to deploy.

And you have only half of those products available because some are constrained some earned.

Even the ones that are <unk>.

Unconstrained are those also then negatively impacted by the lack of supply on the other products.

So generally speaking.

It depends.

From customer to customer.

Generally speaking you are right.

Because of the customer wants to deploy a combination of product and it doesn't get them it delays here.

Installation.

But then.

At.

It comes to the customer's policy.

There are customers that would like to actually.

Get all the equipment, they can and put it in a central.

Warehouse.

And once they start.

Getting so to speak of.

Products.

I will just really see to the different end markets or sale, because there are customers that will not be willing to receive and to accept.

Other than just the combination our kits of full variety of products. So it depends from customer to customer.

With respect to the M&A.

Defense I assume that the $4 million spend.

Is now behind you.

There is no meaningful additional costs or is there going to be continued.

Expenses associated with that quarterly for a little while longer.

To date, we do not expect any.

Significant expenses, we believe that this is a.

What we have to record.

Nothing more than that Okay, and then going back to the.

The outlook here, it seems pretty clear that <unk> gotten.

Significant backlog.

If you were to see improved supply chain would you be able to ship that backlog and how do you think that that might translate into orders.

Is there a duration stretching.

Happening here or are these orders that.

Our real time in nature I E I will take them as soon as you can get them kind of situation.

Once again.

It's not.

Just one.

The way to look at it because different customers have different car policies.

And I would say that in the majority of the cases, if we can deliver cash.

Customers will accept what the what can be delivered.

There are cases, where there are certain orders that were.

Booked in advance by the customers and.

Anticipating that the lead time is going to be long and in those cases, we don't expect to get.

<unk>.

Products, even if their supply chain.

It has improved significantly before the future due date.

So it's a combination but generally speaking the vast majority of our backlog is in a situation where customers would love and encourage us.

To deliver as fast as possible.

Obviously this could be subject to changes.

Such as this case that we have this quarter.

One of our customers decided to change their policy in terms of accepting in.

Naturally receiving.

Equipment before the year end.

Just one last question why why not disclose the actual backlog level as opposed to giving this soft range of possible calculations.

Beyond two quarters and into maybe two and a half as opposed to just giving us the data letting us judge of that.

I'm not sure I understand Alex.

This number is going to help me here is as opposed to giving US a range of time timelines to measured against.

So.

First of all Ceragon up until the hostile attempt by.

But albeit do not disclose this number.

We disclosed this number last time.

For very simple reason, we wanted to make sure that.

Shareholders, clearly understand where we're at.

In terms of.

In terms of the backlog.

I don't think.

It is worthwhile mentioning this number on a quarterly basis.

But.

I got your comment let me think it over and maybe it will change our policy in the future, but just to be clear almost every other company in the networking space as disclosing backlog and historically not disclose backlog and then putting out specific numbers whether that be extreme Cisco juniper.

Even arista gifts.

Some clarity around it so.

It's kind of the norm. These days given the supply chain is so unusual but I will cede the floor. Thank you.

Thank you so much Alex.

Thank you Alex our next question will come from the line of George I want it from Oppenheimer. Please go ahead.

Okay.

Thank you for taking my question and congratulations on the improvement.

Iran, maybe given the big impact that mix had on your gross margins can you give us.

Maybe a sense of what you feel seasonality and the.

The demand pipeline will have on your regional mix over the next.

Six months to 12 months.

So overall, obviously, we are encouraged by the relatively high gross margins, we were able to generate.

In Q3.

I think that the mix of the backlog.

Is such that I can expect our margins to be.

We are continuously.

Better.

For me.

I would say that.

<unk>.

Uh huh.

Hopefully we have.

Finished the period in which our gross margins are.

Significantly below 30%.

And if you ask me pending obviously their revenue mix per quarter.

The numbers can vary between.

A little bit above.

Above 30%.

And all the way up to 35%.

And once again, depending on the regional mix and the software upgrade portion in that particular quarter.

Yeah.

Alright, Thank you for that and John maybe one more question kind of big picture with respect to mix.

You mentioned that managed services continues to be.

Something thats developing as well as strong software contribution this quarter, how do you feel about the.

The contributions going forward.

So in terms of software upgrades.

While this is something that can come in relatively.

Hi in a single quarter and go slowly or slower internet in a different quarter overall.

It is my feeling that if we take.

12 months period.

Software upgrades can.

Contribute easily.

Between one to two presents to our gross margins on an annual basis.

Regarding the managed services.

We're still building up.

<unk> business so the impact at this point.

It is not that significant.

Okay.

And congratulations on joining Ceragon and just to add one question for you on the on the Opex side.

Do you feel at the level that you're at right now is what you're managing to or could you see a little bit of improvement on the G&A side with that.

The doubtful debts.

So far thank you.

I think that the G&A is something that we will look into it to make sure that it will not.

To grow dramatically.

In general the Opex is something that will grew according to our expectations with the gross margins.

But we are now just in the period.

We are in the process of the IOP for next year.

So it's too early to say about are always going to go next year.

Yeah.

Thank you.

Yeah.

Thank you George our next call next question will come from the lineup Rama <unk> from <unk> capital. Please go ahead.

Yes. Good morning, Thanks for taking my question I Wonder if you could just provide a little more granularity on the North American.

Shifting to some of these smaller customers will that come at a higher margin or about an equivalent margins to the rest of the North America business.

And also you talked about increased sales and marketing resources are those going to be.

Those expenditures are going to be incurred here in the fourth quarter or is that more of a 2023 event. Thank you very much.

Yeah.

So thank you for this question.

So Jeff.

Generally speaking.

We believe that.

The margins coming from.

Business.

Increase in private networks and also in the smaller Isps.

We're not there.

Make a big difference.

And the gross margins.

From North America. So all in all we believe it will be more or less.

And the same in the same levels.

Our comments on the script was the.

Primarily to reflect.

That.

Our overall gross margins in North America are higher.

Significantly higher than our corporate.

Overall gross margin.

And the more business, we bring from North America.

The better our gross margins.

We are going to look like.

In terms of the investments that says they're marketing this is a gradual approach.

We are actually.

Taking.

A very close look at the success at.

The indications of success, we're getting from the market and.

And based on that we are increasing our investment in sales and marketing.

So I would say that over 2022.

Uh huh.

We see a gradual increase in our sales and marketing and.

And we believe that this will continue also into 2023.

Thanks, John and then just wanted to echo the congratulations on the better momentum in a very warm welcome to you.

Thank you very much.

Thank you Robin Thank you.

Thank you. Our next question will come from the line of Scott Searle from Roth Capital. Please go ahead.

Hey, good morning, good afternoon, Thanks for taking my questions and congrats on the quarter.

Maybe just to follow up on George's question on gross margins, if I could run and just to dig in I want to clarify there are no one time benefits in the gross margin results from this quarter is that correct. This is purely mix driven so it's favorable in terms of geographies and software content and then projecting that into 2023 and it sounds like.

The range that Youre thinking about is 30% to 35% depending on that mix in a given quarter I just want to clarify that for 2023, Thats, what youre thinking about and I'm, assuming that that backlog of two and a half quarters kind of reflects that range is that correct.

Yes, generally speaking that is.

Definitely correct.

Perfect.

Maybe to shift to India real quickly.

Big numbers going on in that marketplace right. Now 15 billion was spent on spectrum I think they're projecting another 15% to 19 billion required investment to build out those fiber networks and some of those circles are already turning on so.

It's progressing pretty aggressively I'm wondering has the paradigm and the cost and competitive landscape completely shifted there permanently you don't have Huawei and DTE in there anymore. So I'm wondering two things your share is it expected to go up that you would have higher India revenues than you've had in the past at peak levels when they are going through.

<unk> and <unk> build outs and second as part of the gross margin. This has always been a pressured segment of geographic mix is it permanently higher because you don't have Huawei and DTE the in there competing for that mix.

Yes, let's call it so.

I would say that <unk>.

We do not.

Have any significance.

In India for a couple of years now yet.

Let's not forget.

India is still a very developing economy and the price pressure is very very high in spite of the fact that we don't see Huawei and it either.

So I don't think that there is going to.

To change much.

Participating in the recent Rfps and bids.

When it boils down into our margins.

The margins are quite similar to the margins we have seen in the last Ah.

Four or five years.

Gotcha.

Ron just a follow up in terms of the magnitude of peak, India contribution would you expect it to be higher through this cycle given it feels like compressed spending cycles for the <unk> build outs.

So.

In terms of quantity is if I need to compare the.

The current period.

Opposed to the previous era.

Since we're talking about E band primarily event.

And we're talking about.

Shorter distances.

And more use cases.

I believe that the quantities.

It will be by far bigger.

And at this point based on the current prices we see.

It means.

In terms of revenue it could be.

A much bigger.

Volume in terms of dollar value.

Now obviously, we'll have to look at it very carefully and see the trends.

But.

As we see the start and the quantity of discussions with the different operators.

I think it's a big opportunity for increase in the business.

Perfect and lastly, if I could.

Just on the currency impact is certainly a volatile world out there I was wondering if you could just kind of remind us how most of your contracts are denominated are they denominated in U S dollars.

And then just kind of on the expense side, how you see the currency impact going forward. Thanks, So much guys.

Yeah. So so generally speaking the vast majority of revenue.

Is denominated in U S dollars.

The part of that is not there.

Sorry denominated in U S dollars.

Is basically very diverse because it's primarily services.

That we usually provide.

Locally.

In the relevant local currency.

And some and peripheral equipment.

And that in some cases, we buy a car.

The country itself.

So in terms of top line.

Our exposure exists, but it's not huge.

In terms of expenses.

Most of our expenses.

Sure.

That are not I would say related to our activity in the different countries and regions.

Our denominated either in us dollars.

Or in Israeli shekels.

So for all the rest we have some sort of a natural hedge.

Obviously the margin itself shrinks if the dollar.

Strengthen.

In terms of our policy.

For the shackle we.

We usually hedge.

At the beginning of each and every year.

All of our fixed expenses in shekel.

And.

I do expect given the current.

Levels.

Of the exchange rate.

In this respect 2023.

We'll see some relief.

In terms of pressure on our operating expenses.

That are denominated in Nash icon.

Great. Thank you so much.

Thank you Scott back to you Alex Henderson from Needham. Please go ahead.

Great. Thanks, I wanted to go back into the.

The cost of goods sold the mechanics, a little bit.

Can you talk a little bit about how much pressure the supply chain has put on.

Your margins.

Many basis points are you absorbing.

And you did say that you are seeing a little bit lower transportation costs, but.

When do you think the rest of that cost might fall out or Alternatively are you seeing price increases by your suppliers that might be.

<unk> mitigate that benefit in the future periods.

You want to take it.

Best overall overall, we are very focused on these expenses.

As mentioned that there is already a slight improvement.

Which I don't want to get into the exact numbers, but.

There is an improvement and we expect it to continue.

Also the shift.

In our focus in two new oil contract manufacturers, we expect that there will be some.

The improvement there from this from this.

Change.

And.

Overall I don't think this is the major part of our improved gross margins.

The of course, the mix and the mix in the region and the software is the majority so.

So we have to execute on our strategy.

But still there will be an improvement.

I would just add one comment Alex.

First of all shipping cost.

Yeah, we saw prices started going down.

But it still.

As a rule of thumb.

Higher by at least 100%.

And then the shipment average costs.

We had before the pandemic started.

So first of all I have.

Not sure that we'll find ourselves going all the way down.

To where we are in terms of pricing of shipments.

The pandemic, but they still have room for improvement.

In terms of.

The components.

At this point.

After <unk>.

A series of price increase.

We see some.

I would say.

Relaxation.

We have started.

Hearing a lot of.

I would say discussions.

And.

The ease of the supply chain.

Release of bottlenecks.

And we believe that if this is true.

No we don't see it.

And that strong yet.

I think this will also drive.

The component costs down.

So I mean are we talking a couple hundred basis points of pressure from supply chain due to this.

These issues it sounds like at least 100 basis points on shipping and probably a couple hundred basis points on on supply chain. So if those start to improve in them and I would assume that given the macro conditions. That's highly probable and you have a mix shift to <unk>, which has higher margins.

And you have a mix shift to more software, which has higher margins and you have a mix shift to U S, which has higher margins explain to me why you would give a range of 30% to 35% when you're currently running at around 35%. It seems awfully conservative and it is the single most question than I am.

I've gotten a half a dozen E. Mails why is it such a broad range I get it you've been 30% to 35% historically, but the dynamics don't suggest a return to those levels. So why throw out a 30% number when it seems like a draconian back off on margins to deliver that.

Well Alex.

Fortunately to you you.

You don't manage their business.

And I am facing their challenges on a daily basis.

And I am facing the challenges where a cheap.

That cost us $70 in the past.

Went up to $140 now.

No.

And all the noise.

About the ease of the supply chain and the bottlenecks maybe other companies are already enjoying it.

Not enjoying it yet.

At least not in the magnitude that they feel comfortable to say that we are out of the woods now I don't think you listened to my question very carefully.

Hey, Mike.

<unk>, sorry, I said that 30% is probably the bottom and I expect.

Our gross margins on a quarterly basis.

Will vary between slightly above.

30% and 35%, which means it's not generally speaking the full range.

With all due respect there on.

The idea that your supply chain isn't going to get improve at all it seems that draconian and it's a pretty large number and you're already at the upper end of that band I get it that you have volatility, but the band I would think given the mix given the U S. Given the software mix.

Should always produce some improvement <unk> is a higher margin product for you.

The us is a higher margin geography, and software is a higher margin geography, and you managed to produce margins that are at the upper end of the band.

Even though <unk> been absorbing the worst of the supply chain. So therefore, it's logical to assume the supply chain will improve as well. So I just think you might want to give us a little bit more clarity.

On the full year do you think that the margins are likely to be towards the upper end of the band as opposed to in the middle of that band because right now you're suggesting 32 and a half is kind of the norm and that's what we're going to do the norm, but thats not what the business model would suggest to me.

So if you are talking about full year.

Let's take 2023.

And I am in them.

I would say in a level of confidence that is much higher that.

We can probably end up this year with margins that are higher than the mid end of the mid of the range.

Well, let's let's take it over to the sales and marketing side for a second the shekel is down about 20, some odd percent.

Where it started the year when you hedged at.

Nearly youre going to get a significant benefit from that.

Does that not translate into improved margins at the operating level given those characteristics, particularly if your revenue accelerates from the 3% you just posted as a result of a gradual improvement in supply chain in this massive backlog.

On the other hand.

Let's not forget our success in North America.

It doesn't come for free and it's North America, we are investing and we intend to continue to invest.

In order to achieve these numbers and to keep and even increase the portion of North America in our business. So I need to be very cautious we are before.

Concluding our <unk> for 2023.

And.

I take all these factors and all of these elements into the account.

And my intention is to run this company for success in the long run.

Taking into account all the different variables.

And therefore, I'm not willing to assume at this point anything about opex improvement until we finalize our IOP.

Okay. One more one last question then I'll cede the floor.

One of our companies who sells into service providers on a global basis, just blew up.

And gave a steep decline in their outlook for <unk>.

Demand from.

The service providers that started to erode in September and the result is that they lowered their guidance for.

Telecom service providers by 20% going into the seasonally stronger normal fourth quarter have you seen any change in the service provider spending intentions for this area given the strategic criticality of it and is there a risk that you could see orders start to.

To rollover on the other side of the equation.

What we see is as of now.

Is that at least in North America.

And in India. The business continues to be very strong.

We did not get any signals from these regions.

About any sort of slowdown.

Now as I mentioned in the.

Script.

In Europe .

We have started seeing some slowdown.

And in Asia and also in Africa.

I think that the business is not.

Yeah.

Hi at this point and it's hard for me to see it going down further.

So all in all.

I think that the message about service providers.

Yeah.

Seizing or slowing down dramatically there.

The investment.

Has not come.

To us yet, but we're looking very very carefully to see whether this ed.

A trend.

Is it starting.

Great. Thank you very much I appreciate the answers.

Sure.

Thank you Alex that concludes our question and answer session for today. Please proceed to closing remarks.

The third quarter helped us reach new milestones and achieved substantial success in key areas of our business.

Our bookings and backlog continued to strengthen and our initiatives to improve gross margin proved highly effective.

All of that plus our progress in our long term strategy execution.

Now that we are headed in the right direction.

As global demand for faster speeds network upgrades and expanded services increases.

And as supply chain issues improve we look to the future with rising confidence I look forward to updating you further on our next call have a good day everyone.