Q4 2022 Ceragon Networks Ltd Earnings Call
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Numbers for a reconciliation between GAAP and non-GAAP . Please see the table attached to the press release that was issued earlier today I will now turn the call over to Ron. Please go ahead.
And good morning, everyone.
We had a very good when he pointed to in terms of the strengths of our business as reflected in our annual bookings.
Our bookings to revenue ratio was well above one.
We ended the year with a strong backlog.
Fourth quarter bookings were softer than prior quarters, but this is similar to fourth quarter 2021 largely reflecting seasonality factors in doing business in the last quarter of the calendar year.
At inception of 2023, we're seeing again strong demand for our products and services.
Financially the fourth quarter of 2022, despite being at the lower end of our revenue projection was a good quarter for us in many aspects.
We ended the quarter with 33, 1% gross margin and $3 $2 million in operating profit, which reflects a growth of 113% over the fourth quarter of 2020 one.
When we look at the second half of 2022, we see significant improvement in our revenue levels and profitability.
This we believe is mainly thanks to a combination of two factors.
<unk> is our relentless execution of our growth strategy and the second is the changing market dynamics, especially in supply chain, which continues to head in a good direction.
Our fourth quarter 2022 revenues would have been even higher.
By a few million dollars were it not for a policy change by one of our leading customers regarding equipment received prior to year end.
The gap was also impacted to a lesser extent.
But a delay in a specific component that pushed certain equipment delivery out of fourth quarter of 2022 into the first quarter 2023.
As of today, we are mostly caught up with these deliveries.
Without these two factors, our fourth quarter revenue and profit would be stronger.
Throughout 2022, we made significant headway in the productivity of our new system on a chip technology and we are on track and expect to finished product division in 2023 and launch our new product line in 2024.
Okay.
We strongly believe this system on a chip will drive strong demand and have a transformative impact on the industry and on our market share and performance mainly due to two to three years' time to market advantage, we expect to have over our competitors.
Assuming supply chain dynamics continue to head in the right direction together with strong business direction.
Diverse and growing use cases for Ceragon solutions and the new products in development.
We expect to launch we are excited about the growth opportunities, we anticipate for 2023 and beyond.
I'd now like to give you an overview of beverages.
In North America in the fourth quarter of 2022.
<unk> continues to be strong.
We received first orders for the dish 2023 deployment.
We also saw significant traction in the critical infrastructure sector in certain states with multiple rfps.
We continue to invest and intensify our sales efforts and services infrastructure in the region and we intend to continue with this investment in 2023.
Our bookings were softer than our expectations as some of the orders were not received on time in Q4 2022.
And we have shifted to Q1 2023.
Our revenues were also lower than our expectations due to the year end policy change by one of our clients.
I'm happy to report.
That were already caught up on a major part of the slippage.
We expect a strong first quarter in this region.
India is a saturated market in terms of end customer demand, which means operators are increasingly turning to upselling and cross selling to improve customer experience and drive engagement.
The Indian Telcos continued to invest in <unk> technology, while they start deploying <unk> in different regions.
They augment their network capacity with additional fiber and wireless E band and multi band to meet the demand for high speed.
Coupled with the growing affordability and availability of <unk> smartphones, we expect this development to fuel consumer adoption of <unk> in 2023 and beyond.
In Q4, 2022, we continue to deliver our products for <unk> networks as well as started delivering our EBIT multi band solution for <unk> networks.
We expect this trend to continue in 2023.
In Europe , we had a good quarter despite macroeconomic challenges seen in this region.
We signed an agreement for a new turnkey projects in Italy was $4 million through which we replaced competition.
We want our first project in partnership with a leading operon vendor composed of the full IP 50 family, including IP 50 FX.
In General our open network architecture solution continues to get traction as we are invited to more labs of tier one operators continue field trials with others and participate in RF skus.
In APAC.
<unk> deployment is still unfolding, though at a different pace in different parts of the region.
Australia, Japan, and Korea are well advanced in <unk> rollout and those are increasing the focus into the rural regions.
Indonesia, Vietnam and several others are behind.
We are well positioned primarily in Australia, where we are providing turnkey services.
As well as in South Korea, and Japan.
We continue to see traction and interest in our IP 50.
<unk> series, especially for wide band and open network use cases.
In Q4 2022, we received the first significant order from one of the largest operators in APAC, which includes our IP 50 FX.
We also delivered the first phase of a private network in Taiwan, which is an emerging and promising use case for us.
In Latin America, the continued instability of economies and governments may delay <unk> rollout government projects and the overall expected telco business.
We continue to see competition, primarily driven by Chinese vendors and we continue to focus on offering our managed services getting very strong traction.
We also continue to focus on private networks.
In Africa business was slow in 2020 to as many projects Npls were moved to 2023.
We enjoyed recurring business in managed services in Nigeria and Congo.
To summarize while 2022 was a good year overall.
It could have been better were it not for supply chain challenges, especially in the first half of the year.
While these challenges are less intense today.
They were a month ago.
They still exist and impact our operations.
Despite the said challenges we reached new milestones in 2022.
Successes in key areas of our business advanced the prioritization of our new chipset and gain traction on our managed services offering.
We did all that while improving our gross margins and profitability when we look into the future. We expect our strong 2023.
Given the positive business traction in our operational momentum, we expect to continue our growth in.
In the leading regions we operate in.
We anticipate substantial growth coming from our E band sales, especially with the new coming cost effective product that enables covering a broader market base.
We also expect that our cell site routing and managed services businesses to increase in 2023 and beyond.
Before I turn the call over to <unk> to review the financials allow me to acknowledge our new Chief revenue officer are on Colombia.
In this newly created position alone will oversee the entire revenue materially better realization.
From prospect to order delivery and collection.
We believe that with this addition to our team will be better able to fulfill our strategic goals.
I'd also like to welcome aboard demo Friedman, who is joining us as chief operating officer.
Simo will work on further streamlining our operations.
With these changes in place our goal is to optimize our organizational structure and implement our growth strategy with further success.
I'll now hand over to you.
Thank you Darren.
Good morning, everyone.
I will now share a detailed review of our fourth quarter and full year 2022 financial results.
To help you understand the results I will be referring mainly to our non-GAAP numbers.
More information regarding our use of longer.
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 were $75 5 million.
A decrease of 3% compared to $77 8 million.
Q4, 2021 and.
And for one person.
Perfect compared to $78 6 million in Q3 2022.
The decrease is mainly attributed to a policy change by one of our customers.
The equipment received prior to year end.
Our strongest regions in terms of revenues for the quarter were India, and North America with $21 6 million.
And $17 2 million respectively.
In line with the continuous strong demand we see in these regions.
Our third strongest region in terms of revenues was Latin America with $13 2 million.
Followed by Europe , with $10 1 million.
We had two above 10% customers in the fourth quarter.
Gross profit for the fourth quarter on a non-GAAP basis was $25 million.
An increase of 10, 7%.
Compared to $22 6 million in.
In Q4 2021.
And the decrease of 10, 6% as compared to $28 million.
In Q3 2022.
Our non-GAAP gross margin was 33, 1%.
Compared to 29% in Q4 2021.
35, 5% in Q3 2022.
When we take the trailing 12 months view, our non-GAAP gross margin was 31, 8% an increase compared to last quarter's trailing 12 months gross margin of 38%.
I'd like to emphasize that the majority of our business is still product based and we see continued lumpiness in our revenues and gross margin from quarter to quarter.
That said the upward trajectory of our gross margin is very encouraging and reflects our ability to increase margins when we execute on our start.
And operational efficiencies.
As for our operating expenses.
Research and development expenses for the fourth quarter on a non-GAAP basis were $7 9 million.
Up from $7 7 million in Q4 2021.
<unk> up from $7 2 million in Q3 2022.
Sales and marketing expenses for the fourth quarter on a non-GAAP basis were $8 6 million.
Down from $8 7 million in Q4, 2021 and up from $8 3 million in Q3 2022.
General and administrative expenses for the fourth quarter on a non-GAAP basis, well $5 4 million.
Up from $4 6 million in Q4, 2021 and down from $6 1 million.
Q3 2022.
Operating profit for the fourth quarter was $3 2 million.
113, 3% compared to $1 5 million.
In Q4, 2021, and down 50% compared to $6 4 million.
In Q3 2022.
When we take the trailing 12 months view, our non-GAAP operating profit was $9 3 million.
At 28% increase compared to last quarter's trailing 12 months operating profit of $7 7 million.
Financial and other expenses for the fourth quarter on a non-GAAP basis were $2 9 million.
Impacted by an increase in interest rates interest rates and fluctuations in certain currencies.
Our tax expenses for the fourth quarter on a non-GAAP basis were <unk> 5 million.
Net loss on a non-GAAP basis for the fourth quarter was zero point $2 million.
Zero cents per diluted share compared.
Compared to $2 million.
<unk> <unk> per diluted share in Q4 2021.
And compared to.
$4 $1 million of net income of five cents earnings per diluted share in the previous quarter.
As for our balance sheets.
Our cash position at the end of 2022 was $22 9 million.
Our short term loans.
<unk> at $37 5 million.
Leaving us with additional $12 5 million.
Variable unused facility.
Our inventory at the end of Q4 2022 was 72 million.
Up from $64 2 million at.
At the end of Q3 2022.
The increase is expected to reduce risks and <unk>.
Fulfilling the demand we are witnessing mainly for our new products, including the E band products.
Our trade receivables are at $112 3 million.
Down from $115 9 million at the end of Q3 2022.
Approximately 11% reflect the debt from a single customer for which we have recently initiated legal proceedings.
While we believe we are taking effective measures in collecting this debt we continue to closely monitor the situation.
Our DSO now stands at 139 days.
As for our cash flow.
Net cash flow used for operations and investing activities in Q4, 2022 was $10 6 million.
Mainly related to the investment in inventory and the one time expense related to average hostile attempt recorded in Q3 2022.
In 2022 revenues came in shy of the lower end of our guidance.
Zora unexplained specific factors were critical including a policy change by one of our customers regarding equipment purchased prior to the year end.
To a lesser extent, a particular delay related to one specific component, which pushed deliveries from Q4 2022 to Q1 2023.
Our 2023 revenue guidance of $325 million to $345 million remains unchanged.
As we see improvement in the supply chain and component shortages.
Shortages challenges.
And anticipate this trend to continue we are more confident in our ability to navigate these challenges and expect to maintain our profitable growth trajectory.
With that I.
And I will open the call for your questions operator.
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. Please raise your hand, using your mobile or desktop application and wait for your name to be announced or.
Our first question today comes from the line of Alex Henderson from Needham. Please go ahead.
Great. Thanks semi can be heard.
Yes, Alex good morning.
Perfect.
Let's just start off with the obvious.
Can you explain what policy change occurred and how that manifests into your numbers.
And the component delay can you give us a little bit of a.
A sense of was it just a temporary thing of you have gotten those components in or are you still experiencing it.
So as we said we.
We already caught up.
With this delays that reduced our revenue for Q4 versus our original expectation.
All of these revenues were already basically taken into account in Q1 of them. We are delivering the products now there were two issues. The first one is one of our big customers, who usually are received.
Material.
And equipment almost until the last minute at the end of the year.
At least in previous years.
And this year.
Appoint they decided that too to make a change and to push.
Expected equipment delivery.
Into Q1.
The other point.
<unk> was referring to a specific component that came late by a couple of weeks and obviously as a result of that.
Created a delay in our production.
Production line, we're trying to catch up but eventually.
A few million dollars slipped into January so generally speaking as I said.
We already caught up with the revenues.
If I were to look at the policy change what magnitude impact did that have on the quarter was $2 million to $3 million kind of number or what was it.
This this size are more or less.
Hey.
So the policy change it sounds like it wasn't a policy so much as it was the timing of the desire delivery.
Am I wrong in.
That assessment as well.
When somebody says I just wanted to next quarter, it's maybe more of a timing of their spend in recognition of their cost as opposed to.
Say, a policy implementation, where it's a change in accounting or any other element of that sort.
Yeah, when we're talking about policy change.
What I mean is that they have kind of a more focused on certain kpis such as the level of their inventory in their warehouses at the end of the of the year and as a result of that obviously the organization is focused on making sure that the level of inventories at the end of the year.
Year will be minimal as possible.
Essentially from our perspective, it's just a timing difference I fully agree with you.
Okay.
Has your visibility improved for 2023.
Over the course of the back half of the year.
I would say that generally speaking our visibility has increased obviously when looking on the second half of <unk>.
Of 2022, all in all in the booking we received.
Uh huh.
This ability has increased.
And your gross margins have now moved up.
The most recent around 33% is that a function of mix and therefore, that's kind of the new range in and also as you're starting to shift more to the U S and EMEA, which where margins are tend to be higher is that is that a reasonable thought process on the new range.
Eventually it's a combination I will let <unk> give you a more detailed answer.
Yes, Hi, Alex.
It is a combination both of.
The.
At North America improvement and also.
A reduction in supply chain costs Ppas.
Sourcing of components costs.
And then if I.
We're to look at your Opex, obviously, you've got some big moving items here you've got increases in.
Your compensation that happen has to happen every year, but you've also got the shekel swing.
Yeah.
But two other companies report out of Israel. This morning, and they both said they were benefiting enough to offset the.
The ryzen and costs and both guided to essentially flat Opex can you give us some sense of what your Opex is expected to do over the course of 'twenty three.
We do expect the Opex.
Opex to increase a bit.
Yeah.
According to our growth products <unk> and.
And also the improvement in the gross margin, we would also increase a bit the opex.
And of course of course of course.
Uh huh.
Forex impact.
The impact will approve.
So two last questions and I'll cede the floor and they're both related do you think at this point that you would expect to be profitable throughout the four quarters of <unk>.
Of 23, and do you expect to build or eat backlog in 'twenty three.
So.
First of all yes, our expectation is to be profitable.
Throughout <unk>.
2023.
In terms of backlog.
Basically we just.
Finalized our LP for 2023, just a month and a half ago.
And the plan is on the one hand to leverage the strong backlog and hopefully.
Improve our top line is supply chain issues continue to ease up.
But at the same token we are putting our.
A strong and high target for booking.
So all in all we want and the situation due to be.
A very positive for us at the end of 2023, where the backlog would probably maybe stay the same or even grow a little bit but not because of.
Revenue conversion issues, but more because of more bookings and more business.
Great.
The floor and get back into queue. Thanks.
Thank you as a reminder, if you wish to ask a question. Please raise your hand, using your mobile or desktop application and wait for your name to be announced once again. Please raise your hand, using your mobile or desktop application and wait for your name to be announced.
Alex Your backup please go ahead.
Alright.
So.
Let's talk about the.
The flow of orders here.
Obviously, the fourth quarter orders were.
All the way back when you announced your third quarter would be down.
From the third quarter rate.
And you had a big big slug of orders in the third quarter.
But with that order decline.
The question is the.
The back half I think Youre your backlog increased.
Can you give us some sense of where your backlog is as a percent of four four quarter product sales.
Sounds like it's still running at something over 50% of the full year for 2003.
Yes, I think 50% is a good.
Rule of thumb.
The level of the backlog.
Backlog, we're having at the beginning of 2023.
And if I were to look at chip. If you were to look at your pipeline of deal flow.
Yes.
Good orders over the course of 'twenty three duration stretched a little bit.
As parts become more available.
Do you expect any change in the timeline for the expected delivery dates to have an impact on order rates or do you have such a strong pipeline that that's not an issue for you.
I think that the some of the behaviors, we have seen during 2020.
Sorry, 'twenty, one and 'twenty two.
Would probably <unk>.
<unk> a little bit.
S. A you actually may be losing.
Obviously when people are understand our understanding that the timelines are improving.
There will not be in such a rush to place an order in order to secure.
Timelines.
Said that.
We see a very nice.
<unk>.
And therefore, it's hard for me to say that.
There will be a specific impact.
As a result of this change in behavior.
On our booking.
And our ability to convert into revenue.
So if I were to look at the expectations going into the first quarter or are we expecting.
Orders to be.
Our book to Bill at or above one or do is it seasonally a very tough quarter to call obviously.
Maybe maybe you could look at the first half.
Give us some sense of what you think the book to Bill might look like in that timeframe.
So I think first of all it's a good debt.
You are trying to to look at it from a longer period, because a single quarter can change dramatically just bad.
An order from India that was delayed from 2015 of March two.
I don't know tens of April could make a big change for us and when we look back we so.
Uh huh.
Quarters, where Q1 was very strong and we saw quarters, where Q1 was a weaker in Q2 was much.
A much more significant but but all in all.
Based on our.
Our current expectations.
We believe that they will be able to to see a book to bill ratio that is.
Above one <unk>.
And my recommendation is to continue or to start getting used to a 12 month or 12 trailing months trajectory because we believe it's a better.
Measurement.
For our business.
Two more questions.
The <unk>.
Income statement, which are kind of tough for us to look at externally.
Does sound like add some FX in the December quarter. So what are you thinking.
Here in the March quarter and for the year on the interest income and other expense line.
Is it going to be pretty much at the levels that it was at in 2022 or down a hair because FX is a little bit of a less of a headwind.
Excuse me the guidance on that so.
So interest expense has increased.
And for now it continues to be in the same level as in Q4.
On the other hand.
Forex fluctuations.
Are very difficult to predict.
We are trying to hedge or to minimize that.
But it could.
Fluctuate between quarters, so assuming no FX what would the number look like because we cant we have to assume flat.
<unk> exchange rates.
So assuming flattish.
Lots of exchange rates.
The financial expenses should be reduced.
So what suddenly in this seven to have two eight range kind of thing.
So, yes more or less.
And then the tax line and any guidance on that.
So the 1 million to.
'twenty two.
Any thoughts on 'twenty three tax line.
I think that the trajectory of the tax.
Is not so.
I would say a significant as as a.
Compared to what you saw.
In the last year.
I'm not sure I understand so you are saying it will be similar to the $1 168 or is below it.
Not below it could be a little bit higher according to the increase in the profit but not significant.
Right. Okay. So maybe one five kind of thing.
And in the tax line.
As we look at 2023.
How do we think about.
Obviously, you said you're going to be profitable, but what about on the cash flow side are we going to be able to generate enough cash to get back to a <unk>.
Positive net cash position.
Bring down your debt and improve the balance sheet here in 'twenty three or is that require us to go all the way out to 'twenty four.
No I believe that we are working very diligently on converting our improved profitability.
Into cash.
But I'm sure. That's the case, but do you think you can get to a net.
<unk> cash position as opposed to a net debt position over the course of 2023.
We don't give guidance on that but we hope for that.
Okay, great and.
When I look at the U S operations, you have made a pretty big investment to go after the service market and.
And even starting to go after government and enterprise markets.
That's a new initiative for you it sounds like that's running a little bit ahead of targets.
Obviously, there were some cost associated with with setting that up.
Invested ahead of revenues can you give us an update on where that's gone.
So generally speaking, yes, we decided to do to.
To invest in this part of the.
The Sigma or the segment of the market in the U S. A.
I think <unk>.
We made very good progress there.
As we speak obviously, we're looking into ways to even accelerate.
This bar.
Of the business that we believe is very important for us and we think that we have a.
Very good offering.
Obviously for a company that was not there in this business in the past at least not directly because we sold via channels.
And we've now kind of a major change in our strategy and we are taking hold so more and more.
Direct deals, where we need to provide with the whole solution. It takes time to ramp up but they were quite encouraged.
From the progress we made in 'twenty.
'twenty two.
And actually our targets for next year are basically to even double.
The achievements of Eh.
Yeah.
22, obviously I cannot comment on that level of specifics and provide with the numbers.
I guess I got a couple of questions.
From investors that they wanted me to pass along almost like it's a fireside chat here.
Go ahead first question was what would <unk> have been in Q4 that one customer had accepted delivery.
This is a hypothetical question and I will answer it obviously hypothetically I believe in this case we would.
Probably get closer to 34%.
And then.
Targets for inventory turn cash flow benefits the same for our.
Our targets without litigation and possible details on litigation.
So I will start with a possible details about litigation.
Actually I cannot provide any details.
Process is under a strict confidentiality.
Anything else I can add is that.
We believe that this process together with some other measures.
Could there be a very effective but obviously.
We are monitoring closely and at this point, we cannot assure our success.
Tarik on inventory turn of cash, but <unk> do you want to answer that so yes, so regarding inventory.
Of course, it is de risking.
All of our ability to fulfill.
The backlog.
But.
We are working on that from quarter to quarter to ensure that we have.
As less risk as possible.
But on the other hand to convert it as soon as possible into cash.
I would just add one comment on the inventory.
For us it's very clear that this level of inventory is on the high side.
Uh-huh however.
When we see opportunities for very significant business.
And especially in cases, where some of the components are still.
I would say a challenge to attain.
We take this business decisions, obviously, we're looking at all aspects of cash flow.
God forbid the obsolete inventory in the future and so on and so forth.
But these are decisions that can be made actually within the quarter without even anticipating that this will happen at the beginning of the quarter.
All in all it's our intention to start.
It gradually.
The level of inventories are down.
And obviously subject to the supply chain market, assuming it continues to get better and better.
He wants to also an answer about the AAR.
So again that we.
We have.
Argus to reduce DSO.
And we.
We will continue to push for that for example in Q4.
Our collection was higher than the revenues.
Greg I'll cede the floor. Thanks.
Thank you. Our next question today comes from the lineup, Brian Kissinger from Alliance Global Partners. Please go ahead.
Okay, great. Thank you.
Sorry, if I'm repeating a question that I missed part of the call, but can you talk about the short term and medium term targets for gross margin, but inflation easing and as the supply chain does begin to approve for you. What are the puts and takes that can drive improvement from say that hypothetical and <unk>.
So first of all hi, Brian and obviously, thank you for joining the call.
So the trajectory is.
<unk> said is a positive trajectory.
Still within quarters, there could be some fluctuations because of the revenue mix between regions.
And.
But the general trajectory is to continue and see the percentages go.
<unk>. So if we ended up on and where it was at 31, 8%.
For 2022.
I think as it is the target.
We want to inquiries at 2023 by at least.
By at least 1% do you have a chance to do better.
Yes, but this is a target taking into account all the aspects and factors that are impacting our gross margins.
In a period, where inflation maybe as modest have you seen that today in a period, where the supply chain is not a challenge at all to you.
In the long term goal to be above 35%.
Yes.
We said that already we put out some sort of a range last time that we discussed that because the situation was much more turbulent than it is now and obviously.
The more we see the markets stabilize.
The more we feel comfortable to aim towards the.
A higher end of the range.
It was originally we're indicating 34 to 36.
So.
Already kind of indicated a 35 there could be.
Very.
Probable scenarios, where we are in the long run.
Go beyond 35%. Okay. My other question is if you could discuss at a high level of the M&A pipeline is this going to be an area of focus for the company and if so what is it you hope to accomplish is yet more international expansion as a complementary technologies increased scale.
Yeah. So obviously this is something that I cannot.
Discuss very freely.
All I can say is that our strategy.
He is basically to increase.
Our poor Shan and especially in the segments of private networks and small.
Operators.
We see huge opportunities there.
And in order to to take a bigger market share.
We will look for either.
Faster attainment of customers' M&A.
Or for some augmenting technologies products that can help us provide end to end net.
Network solutions.
These players. So these are basically the main focus areas. When we are looking into potential M&A.
Great. Thank you.
Yeah.
Thank you. Our next question today comes from the line of Scott Searle from Roth Capital. Please go ahead.
Okay.
Hi, Scott.
Good morning, good afternoon, Deron, Rona and thanks for taking the questions.
I just wanted to get some clarification on the sequential outlook.
It sounds like there was $2 million to $3 million that slipped out due to customer delivery schedules and it sounds like another $2 million to $3 million in terms of component availability. So is that correct, we had about $5 million or so slip out so as we're looking into March.
What are you guys thinking about in terms of the sequential progression typically their seasonality works down do we not see that now because of what it sounds like you've already recognized in the March quarter, and then for all of 2023, the guidance of 10% to 17% growth is very healthy I Wonder if you could give us some color in terms of the geographies.
Quickly, where youre kind of seeing a lot of that strikes.
Yeah. So first of all you are right on spot.
Q1 will be stronger than the usual so the seasonality that we usually have.
<unk> will be by far our loyal lower if not even kind of.
Evened out due.
Due to the slip.
Slippage of this level of revenues that you adjust that.
Mentioned, so generally speaking, we believe and we plan.
For a strong Q1 in terms of revenue.
Hum.
As to the <unk> to the other question can you remind me Oh, sorry idea looking at the growth expectations for this year in that range, where are you really expecting the geographic Chiang from.
And Mark it sounds like private networks regard for you as well yeah. So so first of all we are.
Plan to continue.
The increase in our business in North America.
For two reasons first of all the tier one operators at least as we see it now.
Continue to rollout the <unk> and we expect to have.
A strong year in this respect as well at least as of now and.
And obviously starting to kind of.
Enjoy the fruits of our investment in the private networks and the smaller Isps the second the region or maybe even the first one is.
Is India.
We see a lot of traction for both.
E band and the traditional microwave.
And so we believe that India will also be strong and even slightly stronger.
Now in terms of other regions.
Let's not forget that.
First of all Africa was very very soft this year.
And we expect a certain level of rebound there that can help us obviously.
To grow.
And M <unk>.
Also a buck.
As well as Europe are showing some initial signs.
That could add.
Give us some level of hope.
Hope.
They will look better.
Then 2022, but the leading regions are North America and India.
Very helpful and lastly, if I could.
On the ASIC timeline. Thank you very much for the color on that front or is it sounds like youll be taping out this year with design win certifications kind of as youre going into 'twenty four so I guess the question as to.
When do you start to see meaningful revenue coming from those platforms in the second half of 'twenty four or is it earlier in 'twenty four and I think that has a favorable impact on the gross margins as well. So when you are talking about 35% as your long term target. What are you kind of assuming from an ASIC adoption and penetration standpoint. Thanks.
So.
As we all know.
Introducing new products.
Even if they are.
Available.
<unk> time.
We hope to start.
Selling but not that large volumes.
Towards the end of 'twenty 'twenty four I hope that we will get the surprises in the volumes would be by far higher but they're definitely the bigger impact.
Could it be in 2025 now in terms of.
The cost structure Bom costs, and so on so forth.
Must tell you that with the new theories of 50.
<unk> and <unk>, we are already coming with.
A big portion of the savings on the bond costs. So in this respect.
I expect the upcoming new.
New products in 2023.
To contribute to the improvement in the gross margins.
Already.
So we don't need to wait that long from the for the new chip in order to.
To get the better gross margins, the new Jeep would add.
Some additional.
A level of cost reduction.
But I think.
The <unk>.
The message would be about the performance the message would be about a very very very strong a radio capabilities.
Which obviously is our bread and butter.
Great. Thanks, so much.
Thank you we have no further questions. Please proceed.
I'd like to underline the excellent execution of our growth strategy.
Which has led us to achieve strong traction across different regions with different solutions.
The improvement in our annual gross margin and operating profit.
Testaments.
To the effectiveness of this strategy.
We expect an even better 2023 <unk>.
Barring unforeseen developments.
Lastly.
We will be at the mobile World Congress in Barcelona on February 27th through March 2nd.
We will be showcasing our solutions at our booth such.
Such as AI networking sites open.
Open transport.
As long as toll.
And flexible network services.
Common visit us at all five booth number G 61.
I look forward to updating you further on our next call have a good day everyone.