Q3 2023 Ceragon Networks Ltd Earnings Call
Speaker 1: to successfully navigate macroeconomic challenges affecting our industry.
<unk> economic <unk>.
<unk> affecting our industry.
Speaker 1: demonstrating the durable demand for our solutions, primarily in North America and in...
Demonstrating the durable demand for our solutions, primarily in North America and India.
Speaker 1: Similarly, the ongoing hostilities in the Gaza Strip have not had any material impact on our business today.
Similarly, the ongoing activities in the Gaza strip have not had any material impact on our business to date.
While we are proud to be a company headquartered in Israel.
Speaker 1: while we are proud to be a company headquartered in Israel.
Speaker 1: The majority of Seragon employees are based outside of Israel, close to the customers and partners.
The majority of Ceragon employees are based outside of Israel.
Close to the customers and partners.
Speaker 1: The vast majority of our manufacturing and our suppliers are also located outside of Israel.
The vast majority of our manufacturing and our suppliers are also located outside of Israel.
Speaker 1: We have a detailed contingency plan which anticipates conflicts in the region and this planning has enabled us to minimize the impact of the current issue.
We have a detailed contingency plan, which anticipates conflicts in the region.
And this planning has enabled us to minimize the impact of the current events.
Speaker 1: Following the horrific terrorist attacks of October 7th, approximately 3.5% of our total employee base has been called up to active duty in the Israeli Defense Force.
Following the recent terrorist attacks of October 7th approximately three 5%.
Our total employee base has been called up to active duty in the Israeli Defense Force.
Speaker 1: Based on our analysis, we don't anticipate this level of to materially change and don't expect it to disrupt our operations in any meaningful way.
Based on our analysis, we don't anticipate this level of.
Two months to materially change and don't expect it to disrupt our operations in any meaningful way.
Speaker 1: For now, our offices in Israel are open, and some employees are working there while others are working remote.
For now our offices in Israel are open and some employees are working there while others are working remotely we.
Speaker 1: We are following the same type of protocols we used during the pandemic.
We're following the same type of protocols, we used during the pandemic.
Speaker 1: We are in constant communication with our team and our priority is the safety and well-being of our employees and their families.
We are in constant communication with our team and our priority is the safety and wellbeing of our employees and their families.
These are challenging times.
Speaker 1: But Israelis are resilient and we have a devoted team.
But Israelis are resilient and we have a devoted team.
Speaker 1: We continue to see robust demand, particularly in India and North America, and we are executing well in the face of geopolitical and economic concerns impacting others.
We continue to see robust demand, particularly in India, and North America, and we are executing well in the face of geopolitical and economic concerns impacting others.
Speaker 1: This demonstrates the durability of our business.
The demand that this demonstrates that the durability of our business we.
Speaker 1: We believe our gross strategy involving expanding our addressable market beyond T1 and T2 customers that have historically been our base is coming into clear focus.
We believe our gross strategy involving expanding our addressable market beyond tier one and tier two customers.
That have historically been our base is coming into clear focus and the acquisition of <unk>, which we expect to close later this quarter will only accelerate this initiative.
Speaker 1: and the acquisition of C-Clue, which we expect to close later this quarter, will only accelerate this initiative.
For the first quarter.
Speaker 1: In a row, revenues surpassed $80 million.
In a row revenue surpassed $80 million.
Speaker 1: And we remain solidly profitable, generating significant cash from operations and investing activities.
And we remain solidly profitable generating significant cash from operations and investing activities.
Speaker 1: Our performance in the first nine months of 2023, combined with improving visibility into the fourth quarter, which is only dependent on smooth delivery and absent surprises, has given us the confidence to further narrow and raise the midpoint of our annual revenue guidance range.
Our performance in the first nine months of 2023, combined with improving visibility into the fourth quarter, which is only dependent on smooth delivery and absent surprises here.
It has given us the confidence to further narrow and raised the midpoint of our annual revenue guidance range.
Speaker 1: We believe we will end the year with strong force quarter.
We believe we will end the year with a strong fourth quarter.
Speaker 1: giving us significant momentum as we move into 2020.
Giving us significant momentum as we move into 'twenty 'twenty four.
Speaker 1: which we expect to be another growth year for Saragm.
Which we expect to be another growth year for Ceragon.
Speaker 1: We are executing well, dear risking our business and reinforcing our competitive advantage.
We're executing well Darius derisking, our business and reinforcing our competitive advantages.
While the timing of bookings is not in our full control.
Speaker 1: While the timing of bookings is not in our full control
Speaker 1: and we are susceptible to shift in order.
And we are.
Susceptible to shift in orders.
Speaker 1: We also believe that we will end the year with a book to be a ratio above one, increasing the strong backlog we had at the beginning of the year.
We also believe that we will end the year with a book to bill ratio above one increasing the strong backlog we had at the beginning of the year.
Speaker 1: Revenue for the fourth for the quarter was $87 million up 10.9% year over year.
Revenue for the fourth for the quarter.
Was $87 million up 10, 9% year over year.
Speaker 1: Demand remains strong primarily in India and North America.
Demand remained strong primarily in India and North America.
Speaker 1: Revenue in India reached quarterly highs since Q2 of 2018.
Revenue in India reached quarterly highs since Q2 of 2018.
Speaker 1: And this was the third consecutive quarter with North America revenues exceeding $20 million.
And this was the third consecutive quarter with North America revenues exceeding $20 million.
Speaker 1: New leadership in Europe in particular and in other regions are putting initiatives in place to drive improvements in 2020.
New leadership in Europe in particular and in other regions are putting initiatives in place to drive improvements in 2024.
Speaker 1: In addition, we believe the pending CICLU acquisition will provide new capabilities to meet customer demands and help fueling growth, not only in North America and Europe where CICLU has established significant presence.
In addition, we believe the pending Cigna acquisition will provide new capabilities to meet customer demands and help fueling growth not only in North America, and Europe, where <unk> has established a significant presence, but also in other regions, especially in South America.
Speaker 1: but also in other regions, especially in South America and Asia.
In Asia.
Speaker 1: We are encouraged by the initial reaction from existing Serodon customers to this acquisition.
We are encouraged by the initial reaction from existing hitting ceragon customers to this acquisition.
Speaker 1: Based on this feedback, we are optimistic that we will have opportunities to integrate sickleous products into solutions for some of our existing customers for specific use cases. Additionally,
Based on this feedback we are optimistic that we will have opportunities to integrate <unk> products into solutions for some of our existing customers.
For specific use cases.
Additionally, cyclo.
<unk> technologies.
Speaker 1: Prodense our addressable market by opening up the fixed wireless access portion.
Broadens, our addressable market by opening up the fixed wireless access portion.
Speaker 1: to an end-to-end solution, particularly for private networks and small service providers.
To an end to end solution, particularly for private networks and small service providers.
Speaker 1: For each of these reasons, we see the pending sickle acquisition as an important strategic transaction providing approximately $25 to $29 million in revenue, incremental to Sergon's standalone plan for 2024, which is expected to be another year of organic growth.
For each of these reasons, we see the pending Cipla acquisition as an important strategic transaction, providing approximately $25 million to $29 million in revenue incremental to Ceragon stand alone plan for 2024, which is expected.
To be another year of organic growth.
Speaker 1: We also believe that this pending acquisition will be a catalyst for accelerated revenue and earnings growth over the next several years and think that it will accelerate our path to achieving and potentially exceeding our $500 million revenue target currently anticipated by 2020.
We also believe that this pending acquisition will be a catalyst for accelerated revenue and earnings growth over the next several years and think that it will accelerate our path to achieving and potentially exceeding our 500 million dollar revenue target.
Currently anticipated by 2027.
Speaker 1: Following the closing of this and the finalization of our 2024 AOP process, we intend to provide guidance for 2024 and discuss long-term.
Following the closing of this and the Finalization of our 2020 for MLP process, we intend to provide guidance for 2024 and discuss long term plans.
Speaker 1: Simultaneously, our existing core business remains solidly profitable.
Simultaneously, our existing core business remain solidly profitable.
Speaker 1: We delivered 4 cents in gap earnings per share and 6 cents on a non-gap basis. Importantly...
We delivered four cents in GAAP earnings per share and <unk> on a non-GAAP basis.
Importantly, strong collections.
Speaker 1: enabled us to generate nearly $11 million in cash flow from operate, turns and investing activities in the quarter. This way
Enabled us to generate nearly $11 million in cash flow from operate churns and investing activities in the quarter.
This reinforces our expectations that we will grow revenue and be profitable for 2023 generating cash and demonstrating that our business is self sustaining.
Speaker 1: that we will grow revenue and be profitable for 2020-23, generating cash and demonstrating that our business is self-sustaining.
Speaker 1: We have no current plans to raise money and we do not believe we need additional capital to execute on our existing opportunity.
We have no current plans to raise money and we do not believe we need additional capital to execute on our existing opportunities.
Speaker 1: As I mentioned, we have not encountered any significant impacts from supply chain disruption in the quarter, and while we continue to carefully manage the supply chain, component availability continues to improve.
As I mentioned, we have not counted any significant impacts from supply chain disruption in the quarter.
And while we continue to carefully manage the supply chain.
Component component availability continues to improve.
Speaker 1: I do want to call attention to the increase in inventory that we amassed during the quarter and note that this increase is directly related to current orders that are in hand and in the process of being full.
I do want to call attention to the increase in inventory that we amassed during the quarter and note that this increase is directly related to current orders that are in hand and.
And in the process of being fulfilled.
Yeah.
Speaker 1: We continue to advance the productization of our new system on a chip.
We continue to advance the productive they shell of a new system on a chip.
Technology.
Speaker 1: During the third quarter, we surpassed approximately 50% of our testing plan with no bugs or issues that would delay our plans for production of the system.
During the third quarter, we surpassed approximately 50%.
Of our testing plan with no bugs or issues that would delay our plans for production of the system on a chip.
Speaker 1: Today, our efforts are advancing according to plan. And while there is still much work to be done, we believe we remain on track to launch our new product line using the new system on a chip in 2020.
To date our.
Our efforts are advancing according to plan and while there is still much work to be done. We believe we remain on track to launch our new product line using the new system on a chip in 2024.
Speaker 1: In addition, we are in the final stage of productization of two new products featuring a lower
In addition.
We are in the final stage of productive patient of two new products <unk>.
During a lower total cost of ownership.
Speaker 1: These two products are expected to be available for commercial use during Q1 2024.
These two products are expected to be available for commercial use during Q1 'twenty 'twenty four.
Speaker 1: We believe these new additional products will help us further expand our market presence and offer tangible benefits to our customers.
We believe these new additional products will help us further expand our market presence and offered tangible benefits to our customers. In addition, they are expected to also help us with our long term goal of improving gross margins.
Speaker 1: In addition, they are expected to also help us with our long-term goal of improving growth models.
Speaker 1: I'd now like to overview our Q3 highlight by Ridge
I'd now like to overview, our Q3 highlights by region.
Speaker 1: noting that on today's call, we will focus primarily on activities in North America and India. The two regions that have and we expect will continue to have the greatest impact on our results in the new term.
Noting that on today's call, we will focus primarily on activities in North America, and India. The two regions that have and we expect we'll continue to have the greatest impact on our results in the near term.
Speaker 1: In North America, we have continued to receive orders from major carriers with one customer driving a significant portion of our volume.
In North America, we have continued to receive orders from major carriers with one customer driving a significant portion of our volume.
Speaker 1: Service providers are standardizing on higher transport capacity and investing in upgrading existing sites in parallel to network expansion and densification.
Service providers are standardizing on higher transport capacity and investing in upgrading existing sites in parallel to network expansions and densification.
Speaker 1: We expect this upgrade need will continue creating the month for our high end solutions even as build out for 5G new sites is slowing down.
We expect this upgrade need will continue creating demand for our high end solutions, even as build out for five G. New sites is slowing down.
Speaker 1: And, co-logingly, we are participating in additional opportunities with smaller carriers and private networks in line with our strategy.
Encouragingly, we are participating in additional opportunities with smaller carriers and private networks in line with our strategy.
Speaker 1: This also revolve around new use cases that we had not historically been involved with. As the need for ubiquitous connectivity intensifies and is not fully addressed by fiber.
This also revolve around new use cases that we had not historically been involved with is the need for ubiquitous connectivity intensifies and is not fully address by fiber.
Speaker 1: There are multiple enterprise use cases, including autonomous vehicles and IoT, where fiber is either not an option or cannot be delivered fast enough to support the business.
There are multiple enterprise use cases, including autonomous vehicles, and Iot, where fiber is either northern option or cannot be delivered fast enough to support the business again.
Speaker 1: Again, C-Clume help us penetrate this growing market with the largest set of connectivity solutions.
Hello, My help us penetrate this growing market with the largest set of connectivity solutions to date, our business in North America remains weighted toward large carriers, but this is beginning to shift.
Speaker 1: to date, our business in North America remains weighted toward large carriers, but this is beginning.
Speaker 1: As it relates to the multi-year contract with the City of Cincinnati, we have started deployment...
As it relates to the multi year contract with the city of Cincinnati, We have started deployment.
Speaker 1: which will include long-term maintenance and support plans.
Which will include long term maintenance and support plans.
Speaker 1: In parallel we are already identifying various expansion opportunities.
In parallel we are already identifying various expansion opportunities.
Speaker 1: The expansion of availability for 5G frequencies as well as the evolving need for heterogeneous services profiles continue to serve as durable catalyst for our business.
The expansion of availability for five G frequencies as well as the evolving need for heat, Virginia services profiles continue to serve as durable catalyst for our business.
Speaker 1: This is leading to a growing number of our speeds covering all segments of our addressable market, including Q1 operators, realized speeds and small carriers, as well as private needs.
This is leading to a growing number of rfps covering all segments of our addressable market, including tier one operators realized speeds and small carriers as well as private in it.
Speaker 1: Some of these opportunities, particularly in the rural broadband and critical infrastructure segments, may take longer to mature as they are also supported by federal and state funding.
Some of these opportunities, particularly in the rural broadband and critical infrastructure segments may take longer to mature as they are also supported by federal and state funding plans.
Speaker 1: However, rural broadband and infrastructure projects remain an important opportunity for
However, rural broadband and infrastructure projects remain an important opportunity for ceragon.
Speaker 1: contributing to our revenue growth and their
Contributing to our revenue growth and diversification.
Speaker 1: Our digital twin software solution is also getting traction with several significant customers in North America.
Our digital twin software solution is also getting traction with several significant customers in North America.
Speaker 1: We sum, we are about to start proof of conceptual
With some we are about to start proof of concept shortly.
Speaker 1: This solution is a differentiator in providing managed services to help customers optimize their multi-vendor multi-technology network.
This solution is a differentiator in providing managed services to help customers optimize their multi vendor.
Multi technology networks.
Speaker 1: We won our first-minute services engagement in North America earlier this year, and we are building a nice funnel of opportunities for additional engagements in the Telco and private.
We won our first managed services engagement in North America earlier, this year and we are building a nice funnel of opportunities for additional engagements in the telco and private networks.
Speaker 1: We believe we are increasingly where position to capitalise on all of these opportunities when they mature.
We believe we are increasingly well positioned to capitalize on all of these opportunities when they mature.
Speaker 1: We also continue to increase other services business in the region, which often can double the value of the equipment we sell.
We also continued to increase other services business in the region, which often can double the value of the equipment we sell.
In India.
Speaker 1: Tercos continue to aggressively invest in 4G technology and 5G expansions. Depending...
Telcos continued to aggressively invest in <unk> technology, and five G expansions, depending on the region.
Speaker 1: with LOWERLAL CITIES adding 5G and 4G being used in more rural areas.
With Lauder cities, adding five G and <unk> being used in more rural areas.
Speaker 1: We continue to work with operators in the market for 4.0 rollout.
We continue to work with operators in the market for <unk> rollout.
Speaker 1: as 4G continues to be the dominant subscription type in India, as well as delivering our event multi-band solution for 5G networks at an increased pace.
As for GE continues to be the dominant subscription type in India as well as delivering our E band multi band solution for five G networks at an increased pace.
Speaker 1: bookings were modest in India during the quarter, but this was a factor of timing. Not the month.
Bookings were modest in India during the quarter, but.
This was a factor of timing not demand.
Speaker 1: In fact, bookings have accelerated in the first weeks of the four quarter, and we expect a strong end to the year in India from a booking perspective. We have...
In fact bookings have accelerated in the first weeks of the fourth quarter and we expect a strong end to the year in India from a booking perspective.
We have not seen a reduction in demand.
Speaker 1: and headwinds, described by certain major equipment manufacturers, have not had an impact on our business. The man...
And the headwinds described by certain major equipment manufacturers have not had an impact on our business.
Demand has remained robust.
Speaker 1: To summarize, we continue to deliver solid execution, including revenue growth, advancing our strategy, and driving profitability and cash.
To summarize we continue to deliver solid execution, including revenue growth at.
Advancing our strategy and driving profitability and cash flow.
Speaker 1: Conditions continue to improve both on the macro and the micro level, especially in regards to the supply.
Conditions continue to improve both on the macro and the macro level.
Especially in regards to the supply chain.
Speaker 1: The man for our solutions is strong and we are participating in our spills for new opportunities.
Demand for our solutions is strong and we are participating in rfps for new opportunities.
Speaker 1: We believe we can deliver similar revenue to the trajectory for the foreseeable future and that we can be profitable on a non-gap basis for each quarter this year.
We believe we can deliver a similar revenue trajectory for the foreseeable future and that we can be profitable on a non-GAAP basis for each quarter. This year.
Speaker 1: With that, I'll turn the call over to Ronan Stein, our CFO , to discuss the results in more detail. Onan, over to you. Thank you, Doran.
With that.
I'll turn the call over to Ron Epstein, our CFO to discuss the results in more detail O&M over to you.
Thank you Ron and good morning, everyone.
Speaker 2: As the run outlined, this was another strong water for service.
As <unk> outlined this was another strong quarter for Ceragon.
Speaker 2: So it is important to keep in mind that we are a project driven business and as such there is inherent variability in results from quarter to quarter.
So it is important to keep in mind that we are a product driven business and as such there is inherent variability in results from quarter to quarter.
Speaker 2: Because of this, we analyze our bookings, revenue and cross-margin.
Because of this we analyze our bookings revenue and gross margins as well as other key performance indicators.
Speaker 2: as well as other key performance indicators over a 12 month period, at a ratio which we believe better reflects the underlying business trends.
The 12 month period.
<unk>, which we believe better reflects the underlying business trends.
Speaker 2: In addition, to help you understand the results, I will be referring primarily to non-gap finance.
In addition to help you understand the results I will be referring primarily to non-GAAP financials.
Speaker 2: For more information regarding our use of non- GAAP financial measures, including the recommendations of these measures, we refer you to today's press release. Let me now...
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 results.
Speaker 2: Revenues were 87.3 million dollars up 10.9% from 78.6 million dollars in Q3 2022 and 1.3% compared to 86.2 million dollars in Q2 2023. When we take
Revenues were $87 $3 million.
Up 10, 9% from $78 6 million.
In Q3 2022.
And one 3% compared to $86 2 million.
In Q2 2023.
When we take the trailing 12 months view, our revenue was $332 $4 million in it.
Speaker 2: Our revenue was $332.4 million, and increased compared to last quarter's 12 months revenue of $323.7 million.
Increase compared to last quarter's trailing 12 months revenue of $323 $7 million.
Speaker 2: Our strongest regions in terms of revenues for the quota were India and North America with $29.9 million and $22.5 million respectively. In line with the continuous strong demand we see in these regions.
Our strongest regions in terms of revenues for the quarter were India and North America.
$29 $9 million and $22 $5 million, respectively in line with the continuous strong demand we see in these regions.
Speaker 2: Our third strongest region in terms of revenues was Latin America with $12.9 million.
Our third strongest region in terms of revenues was Latin America with $12 $9 million.
We had two customers in the third quarter that contributed more than 10% of our revenues.
Speaker 2: We had two customers in the third quarter that contributed more than 10% of our revenue.
Speaker 2: gross profit for the third quarter on a non-gab basis was 30.4 million dollars and increase of 8.8 million of 8.8 percent compared to 28 million dollars in Q3 2022 and essentially unchanged compared to 30.4 million dollars in Q2 2020
Gross profit for the third quarter on a non-GAAP basis.
Was $34 million.
An increase of $8 8 million of eight 8% compared to $28 million in Q3, 2022, and essentially unchanged compared to $30 4 million.
In Q2 2023.
Speaker 2: Our non-get gross margin was 34.9%.
Our non-GAAP gross margin was 34, 9%.
Speaker 2: Compel to 35.5% in Q3 2022 and 35.3% in Q2 2020.
Compared to 35, 5% in Q3, 2022 and 35, 3% in Q2 2023.
Speaker 2: We continue to achieve high-growth margins mainly as revenues from North America continue to maintain its high-level and product mix continue to be favorable while we keep costs under control. Although this was offset to some extent by inventory writers as we prepare to launch new products.
We continue to achieve high gross margins, mainly as revenues from North America continued to maintain its high level.
And product mix continued to be favorable while we keep costs under control. Although this was offset to some extent by inventory write offs as we prepare to launch new products.
Speaker 2: Our growth margins continue to fluctuate from quarter to quarter due to changes in product and regional mix.
Our gross margins continue to fluctuate from quarter to quarter due to changes in product and regional mix.
When we take the trailing 12 months view, our non-GAAP gross margin was 34, 3%.
Speaker 2: Our non-gab gross margin was 34.3%
Speaker 2: slightly lower from last quarter's trading 12 months growth margin of 34.5%.
Lightly lower from last quarter's trailing 12 months gross margin of 34, 5%.
As for operating expenses.
Speaker 2: Research and development expenses for the third quarter on a non-gab basis were $7.3 million up from $7.2 million in Q3 2022 and slightly lower from the $7.6 million in Q2 2020
Research and development expenses for the third quarter on a non-GAAP basis were $7 3 million.
Up from $7 2 million in Q3, 2022, and slightly lower from the $7 6 million.
In Q2 2023.
Speaker 2: As a percentage of revenue, our R&D expenses were 8.3% in the third quarter, compared to 9.1% in the third quarter last.
As a percentage of revenue our R&D expenses were eight 3% in the third quarter compared to nine 1% in the third quarter last year.
Sales and marketing expenses for the third quarter on a non-GAAP basis were $9 7 million.
Speaker 2: Sales and marketing expenses for the sales quarter on a non-gab basis were $9.7 million. Up from $8.3 million in Q3 2022 and also up from $9.4 million in Q2 2023. As a percent of revenue...
Up from $8 3 million in Q3, 2022, and also up from $9 4 million in Q2 2023.
As a percent of revenues.
Speaker 2: Salon marketing expenses were 11.1% in the third quarter, compared to 10.5% in the third quarter last.
Sale and marketing expenses were 11, 1% in the third quarter compared to 10, 5% in the third quarter last year.
Speaker 2: General administrative expenses for the third quarter on a non-group basis will $5.5 million. Down from $6.1 million in Q3 2022 and down from $6.1 million in Q2 2022.
General and administrative expenses for the third quarter on a non-GAAP basis were $5 5 million.
Down from $6 1 million in Q3, 2022 and down from $6 1 million in Q2 2023.
Speaker 2: As a percent of revenues, GNA expenses were 6.2% in the third quarter, compared to 7.8% in the third quarter last.
As a percent of revenues G&A expenses were six 2% in the third quarter compared to seven 8% in the third quarter last year.
Speaker 2: We intend to continue being disciplined in our operating expenses, while leveraging our strong results to further invest in certain areas to support continuous growth.
We intend to continue being disciplined in our operating expenses, while leveraging our strong results to further invest in certain areas to support continuous growth.
Speaker 2: Primarily, it is all intention to increase all sales and marketing expense.
Primarily it is our intention to increase our sales and marketing expenses to support acceleration in our penetration to private networks and small service providers.
Speaker 2: in our penetration to private networks and small service providers.
Speaker 2: Therefore, we expect our operating expenses in the fourth quarter to slightly exceed $23 million. We believe that such investments and better position us to see further growth in these segments in 2024.
Therefore, we expect our operating expenses in the fourth quarter to slightly exceed $23 million.
We believe that such investments and better position us to see further growth in these segments through 2024.
Speaker 2: Operating profit for the third quarter on an on-gap basis was $8 million Up from 6 from the 6.4 million dollars reported in the last year's third quarter and also up from $7.4 million reported in Q2 2020
Operating profit for the third quarter on a non-GAAP basis was $8 million.
Up from six from the $6 4 million.
Reported in last year's third quarter, and also up from $7 4 million reported in Q2 2022.
Speaker 2: Financial and other expenses for the health quarter on a longer basis will $2.1 million in line with expectations and prayer.
Financial and other expenses for the third quarter on a non-GAAP basis were $2 1 million.
In line with it with expectations in prior periods.
Speaker 2: Our tax expenses for the third quarter, on a longer basis, will just earn the $1 million.
Our tax expenses for the third quarter on a non-GAAP basis were just under $1 million.
Speaker 2: Net income on an on-game basis for the quarter was $5 million or six cents per the Lutature compared to net income of $4.1 million or five cents per share in the third quarter last
Net income on a non-GAAP basis for the quarter was $5 million.
All six cents per diluted share compared to net income of $4 1 million.
<unk> per share in the third quarter last year.
Speaker 2: The sales water gap net income was 3.4 million dollars or 4 cents per diluted share compared to a net loss of 0.9 million dollars or a loss of 1 cents per share or the sales water the last year.
Third quarter GAAP net income was $3 $4 million or <unk> <unk> per diluted share compared to a net loss of 0.9 million.
Or a loss of one cents per share.
Third quarter last year.
As for our balance sheet.
Speaker 2: Our cash position at the end of the third quarter was 34 million dollars compared to 22.9 million dollars at the end of 2020.
Our cash position at the end of the third quarter was $34 million.
Compared to $22 9 million.
At the end of 2022.
Speaker 2: Show them loans were $38.2 million compared to $37.5 million as of December 31st, 2022. We believe
Short term loans were $38 2 million.
Compared to $37 5 million.
As of December 31st 2022.
We believe we have cash.
Speaker 2: and facilities that are sufficient for operations and working capital needs.
And facilities that are sufficient for operations with working capital needs.
Speaker 2: Our inventory at the end of Q3 2023 was $70.1 million down from the $72 million at the end of December 2020.
Our inventory at the end of Q3, 2023 was $70 1 million down.
Down from the $72 million.
At the end of December 2022.
Speaker 2: We continue to monitor inventory levels, taking into consideration the improvements in availability of components and expected changes in demand. As the...
We continue to monitor inventory levels, taking into consideration the improvements in availability of components and expected changes in demand.
As Dawn mentioned.
You mentioned.
Speaker 2: Inventory levels increased slightly compared sequentially to the second quarter, reflecting film orders, were scheduled to deliver in the fourth quarter and the first quarter. As such, we expect inventory levels to normalize in the near term.
Inventory levels increased slightly compared sequentially to the second quarter, reflecting film all of those who are scheduled to deliver in the fourth quarter and the first quarter as such we expect inventory levels to normalize in the near term.
Speaker 2: Our trade receivables are at $104.6 million. As compared to $100 million at the end of December 2020.
Our trade receivables are at $104 6 million.
As compared to $100 million at the end of December 2022, our DSO now stands at 115 days.
Speaker 2: Our DSO now stands at 115 days.
As for our cash flow net cash flow generated by operations and investing activities in Q3 2023.
Speaker 2: Net cash flow generated by operations and investing activities in Q3 2023 was $10.8 million. We expect to generate positive cash from operations for the full year.
$10 8 million.
We expect to generate positive cash from operations for the full year.
Speaker 2: As the owner indicated at the top of this call, demanding our business continues to be strong and we are encouraged by our backlog, which gives us good visibility into the fourth quarter. Base.
As Don indicated at the top of this coal demand in our business continues to be strong and we are encouraged by our backlog, which gives us good visibility into the fourth quarter.
Based on our results.
Speaker 2: And as our visibility improves, we are updating and raising the midpoint of our full year revenue outlook from 348 million to 348 million dollars and we are filming expectations for full year profitability.
And as our visibility improves we are updating and raising the midpoint of our full year revenue outlook.
From 334 to 348 million too.
338 $346 million.
And reaffirming expectations for full year profitability.
Speaker 2: The outlook we are providing today is based on our current visibility.
The outlook, we're providing today is based on based on our current visibility.
Speaker 2: With that, I now open the call for your questions. Operator.
With that.
Now open the call for your questions operator.
Speaker 3: in order to ask the question, please raise your hand using your mobile for best-fuck application and wait for your name to be announced. Once again, please raise your hand using your mobile for best-fuck application and wait for your name to be announced.
In order to ask a question. Please raise your hand, either mobile or desktop application and <unk>.
Wait for your name to Vienna once again.
Raise your hand, using your mobile or desktop application and wait for your name to be announced.
Speaker 3: Our first question today comes from the line of Alex Anderson-Meyedon. Please go ahead.
Our first question today comes from the line of Alex Henderson of Needham.
Please go ahead.
Speaker 4: Great, thank you so much for letting me ask a question here. And my thoughts are with you guys, given the horrible terrorist attack that's earned you guys into war. Hope everybody's safe and your families are okay. I wanted to hit a couple of quick questions. The first one is, can you give us some sense of the size of the inventory right down in the quarter?
Great. Thank you so much for letting me ask a question here and.
My thoughts are with you guys given the.
The horrible terrorist attack that Brian you guys into war hope everybody is safe.
And your families are okay.
I wanted to to hit a couple of quick questions. The first one is can you give us some sense of the.
Size of the inventory.
Down in the quarter.
Speaker 4: And is that now completed or do you expect a similar kind of write down in the fourth quarter as you anticipate launch of the products in the first quarter of next year?
And is that now completed or do you expect a similar.
Kind of write down in the fourth quarter as you anticipate launching the products.
In the first quarter of next year.
Speaker 2: Regarding the level of Right-offs, I would say that there was a Approximately 1.6 million dollars of the right of that is beyond the regular Right-offs
Regarding the level of AR write offs I would say that there was.
Approximately $1 6 million.
Right of that is beyond the irregular.
Write offs.
Speaker 2: So it's in total around $2 million. We do not anticipate any additional ride of, but this is being monitored every quarter. So I cannot say that we know now about any expected the right of...
So it is in total.
Around 2 million.
We do not anticipate any additional write offs, but this is being monitored every quarter. So I cannot say that we know now about any.
They write offs expects from the regular.
Speaker 2: from the regular model that we have.
Model that we have.
Speaker 4: So if I adjust for that right off here, gross margins would have come in at 36.7%. Can you talk about why that would not be the case again in the December quarter?
So if I adjust for that write off your gross margins would have come in at 36, 7%.
Can you talk about why that would not be the case again in the December quarter.
Speaker 2: Well, the impact of the inventory is just something that we cannot anticipate exactly the mixture in the next quarter. That could be different paths to achieve our targets for the next quarter and as you see we still have some room of change in the revenues.
Well.
The impact of the inventory is just something that we cannot anticipate exactly the mixture.
In the next quarter.
There could be different.
Paths to achieve our targets for the next quarter and as you see we still have some room of changing the revenues.
Speaker 2: So it can be higher, it can be a little bit lower. We can anticipate that it's roughly, and provide guidance.
No.
It can be higher it can be a little bit lower we cannot anticipate that exactly and provide guidance on that.
Again.
If I back out the $1 $6 million Youre $36 seven is it reasonable to think figure and the 35% plus range not only in the fourth quarter, but for that matter with these new products launching having higher margins in 'twenty four shouldn't your margins be up 35% plus going forward.
So we have shown that we can reach a higher a higher numbers of our percentage of margins even to 35, five and we even discussed we can reach even 36% are but this is something that we have to make some room also for any.
Other changes in mixture in a mixture of products software, yes or no.
Speaker 2: software, yes or no, and other mixture of mixture of revenues from different regions.
And other a mixture of.
A mixture of our revenues from different regions. So.
Speaker 2: As long as we don't know exactly the final revenues mixture, it's very difficult to predict it. Usually there are some things that can take us down as you can see to the level of 35, 36. But yes, in the last few quarters we have been in the high 34 to the high 35.
As long as we don't know exactly the final revenues mixture, it's very difficult to to predict it usually there are some something that can take us down as you can see to the level of 35 36, but he has in the last.
At quarters, we have been in there in their therapy.
The high 34 to the low to the high 35.
Speaker 4: Okay, so looking out into the 24 timeframe and just looking back at the 23 window.
Okay. So looking out into the 'twenty four time frame and just looking back at the 23 window.
Speaker 4: Just to be clear, the supply chain problems did not cause a boom bus in your revenue recognition and the timing of your revenue. So we're not looking at an overage on 23 that's then setting up a TupperComp in 24, which has been expressed by some of the companies that are in the same category. Is that a fair statement?
Just to be clear the supply chain problems did not cause a boon Boston your revenue recognition.
And the timing of your revenue so we're not looking at it.
And overage on 'twenty, three that's been setting up a tougher comp in 'twenty, four which has been expressed by some of the companies that are in the same category.
Is that a fair statement.
Speaker 4: I'm sorry I couldn't hear you well can you can you repeat the question please sure so a number of companies have
Sorry, I Couldnt hear you well can you can you repeat the question. Please sure.
Yeah.
A number of companies have.
Speaker 4: understated revenues in prior periods because they couldn't get parts when the supply chain improved they over shipped relative to demand and have very tough pumps
Understated revenues in prior periods, because they couldn't get parts.
Then when the supply chain improved over shift relative to demand and have very tough comps.
Speaker 4: I don't believe that that happened with the Saragon. Saragons 23 numbers are normal demand numbers correct. There is no boom bust in the, or bust boom in the shipments because of supply chain. Is that a fair statement?
I don't believe that that happened with Ceragon.
Aragon twenty-three numbers are normal demand numbers correct. There are no boom Boston.
Oh are bust boom.
Shipments because of the supply chain that parents statement.
Speaker 1: But let me take this, Alex, if you are talking business-wise, as I said, we expect book to build ratio in this year to be above one. And that means that probably the short answer is that we don't feel that we overshipped or overdelivered this year relative to the true demand that we are seeing now from the market. Okay.
Let me take this say Alex if you are talking.
Business wise as I said.
We expect book to Bill ratio.
And this year to be above one.
And that means that.
Probably the short answer is that we.
We don't feel that we over shipped or over delivered.
This year relative to the true demand that we're seeing now from the market.
Perfect.
Speaker 4: You made the comment on the prepared remarks that
You made the comment on the in.
And in the prepared remarks that <unk>.
Speaker 4: You expect similar levels of growth. You're growing it about a 10% clip now. Is it fair for us to think of 24 as a 10% growth year?
You expect similar levels of growth Youre growing at about a 10% clip now is it fair for us to think of 24 is a 10% growth year.
Speaker 1: I think I did not make the exact comment. Like you got it. I think that we do expect to grow next year as well organically, setting aside Ciclos contribution. I think we can get to high single digit, maybe touch 10%.
I think I.
I did not make the exact comment.
Like you like you've got it I think that we do expect to grow next year as well organically setting aside secrets contribution I think we can get to two high single digit maybe touch 10%.
Speaker 1: But let's not forget that this year is a year of a very, very strong demand.
But let's not forget that this year is a year of a very very strong demand.
Speaker 1: where we started with a relatively low baseline in 2023. So all in all, I think we can be in high single digit growth, touching 10%, maybe slightly below, and that's in terms of organic growth.
Where.
We started with a relatively low.
Baseline in 2023, so all in all I think.
Think we can be in high single digit growth touching 10%, maybe slightly below and that's in.
In terms of organic growth.
Speaker 4: Looking at the fourth quarter just to nail the down a little bit, you talked about $23 million in off-ex, which is a pretty good increase sequentially and year over year, quite a substantial increase. I assume that some of that's in the sales and marketing. I assume some of it's in the R&D line for the new product.
Looking at the fourth quarter just.
To nail that down a little bit.
You talked about $23 million in Opex, which is a pretty good increase sequentially and year over year quite a substantial increase I assume that some of that from the sales and marketing I assume some of it's in the R&D line for the new products is it reasonable to think that the gross margins can be robust enough in <unk> to allow you to.
Speaker 4: Is it reasonable to think that the gross margins can be robust enough and for a queue to allow you to produce close to that 10% operating margin again in the quarter or is that stretching?
Produced close to that 10% operating margin again in the quarter or is that stretching.
Speaker 2: You want to take it, Ronan? Yes, we do believe that this investment is important. And as I mentioned primarily in the sales and marketing.
You want to take it down one of them is go ahead.
We do believe that this investment is important.
I mentioned, primarily in sales and marketing, we feel that in order to achieve our targets in growing in the specific segments of <unk>.
Speaker 2: We feel that in order to achieve our targets in growing in the specific segments of a private...
Private networks and small to medium.
Speaker 2: and small to medium service providers. We have to invest and to use our profitability right now in these quarters for some investment to the future.
Service providers, and we have to invest and to use our profitability right now in this quarter.
For some investment to the future. So there may be some fluctuation in their profitability and the operating.
Speaker 2: So there may be some fluctuation in the profitability, operating a profit, a percentage from revenues. But as we don't know exactly the growth margin that is expected, hopefully it will not be a much less than the current operating profit.
Our profit percentage from revenues.
But as we don't know exactly the gross margin with these expected.
Hopefully we will not be met.
Much less than the current operating profit.
Speaker 4: All right, I'll see the floor and go back in the queue.
Alright.
See the floor and get back in the queue.
Thank you Alex.
Speaker 3: reminder in order to ask a question please raise your hand in your mobile to drop that application and wait for your name to be in it.
As a reminder, in order to ask a question. Please raise your hand, and your mobile and desktop application and wait for PNM.
Speaker 3: Our last question today comes from the line of Rommel Beyond Field Ashes. Please go ahead.
Our next question today comes from the line of Rommel beyond.
Please go ahead.
Speaker 5: Good morning, thank you. And I just want to echo Alex's sentiments as well, wishing you and your families all the best in safety. I wonder if you could, thanks. You know, you guys talked about marketing efforts on, you know, to reach out to expand your business with private networks and small customers. Could you talk about, are you adding personnel there? Are there other sort of more temporary expenses that you'll be incurring in the nature or?
Good morning, Thank you and I just wanted to echo Alex's sentiments as well and wishing you and your families. All the best in safety.
I Wonder if you could.
Thanks, you guys talked about Chad.
Marketing efforts on Q2.
Reach out to expand your business with private networks and smaller customers could you talk about are you, adding personnel. There are there other sort of more temporary.
<unk> expenses that you'll be incurring in the near term or.
Speaker 5: It would be additional personnel and that's therefore more permanent.
It would be additional personnel and therefore are more permanent.
Speaker 1: uh, addition to the self-marking level. Thank you. Yeah, Roman, thanks for this question. It's basically combination first of all.
Addition to the sales and marketing level. Thank you yeah Omar. Thanks for this question its a basically its a combination first of all we.
Speaker 1: We have kind of a beefed up our sales foot in North America primarily.
We have a kind of a desktop our sales force in North America, primarily.
Speaker 1: that is focusing on this private network signal.
That is is focusing on this private network segment.
Speaker 1: So that's one thing for us to stay. And obviously, as these guys started bringing business.
So that's a one thing there for us to stay and obviously as these guys start bringing business.
Speaker 1: It will also help us to grow our booking and obviously the record.
It will also help us to grow our booking and obviously the revenue.
Speaker 1: The second part is more of a variable part. It's an investment in marketing. Let's not forget that the Seragon is very, very well-known brand in the T-1, T-2 operators across the world.
The second part is more of a variable part it's an investment in marketing, let's not forget that ceragon is very very well known.
Brand in the tier one tier two operators across the world.
Speaker 1: We are just building the brand
We are just building the brand.
Speaker 1: in the private networks and the smaller players. And that requires certain marketing investments. Now, this could be up and down depending on campaigns, depending on the marketing strategy. So that is a part that is more of a variable expanding.
In the private networks and the smaller players and that requires certain marketing investments now this.
Could there be up and down depending on campaigns depending on.
The marketing strategy so.
That is the part that is more of a variable expenditure.
Speaker 1: Okay, and just on a geographic focus standpoint, you've also made some penetration in North America with the private networks. Looking forward, do you proceed continued penetration in North America, expansion into Europe potentially? What are some of the geographic regions you wanna target there? Thanks, Teron. So, generally speaking, first of all, I mentioned the...
Okay and just on the geographic.
Focus standpoint.
You've obviously made some penetration in North America with the private networks.
Looking forward do you.
<unk> continued penetration in North America expansion into Europe, potentially what what are some of the geographic regions you want to target there. Thanks, Terence. So so so generally speaking first of all I mentioned.
Speaker 1: at 20 new customers in the domain of private networks and small operators. One thing is that this
At 20, new customers.
Customers in the domain of private networks and small operators.
Yeah.
One thing is that this is widespread.
Speaker 1: but definitely North America has a very
But definitely North America has a very significant portion of this success and just for you to understand we are not counting every $5000.
Speaker 1: significant portion in this success and just for you to understand we are not accounting every five thousand dollars The new customer the aggregate amount of this 20
New customer the aggregate amount of these 20.
Speaker 1: 20 new customers
'twenty on new.
Our customers are initiative initially our initial orders is amounting to eight digit eh booking so it's not an insignificant amount.
Speaker 1: Sure, initial order...
Speaker 1: is amounting to eight digit booking. So it's not an insignificant amount. We see the opportunity.
We see the opportunity.
Speaker 1: in many regions. And we are actually changing the structure of our cells for...
In many regions.
And we are actually changing the structure of our sales force.
Speaker 1: It to be led by sigma and rather than by geography in each and every region. So for example, in Europe , now we have three categories. One is chasing T1, big operators, one is chasing private networks, and one is chasing smaller transactions via China. So the focus on private networks is increasing.
B are led by segment rather than by.
Geography in each and every region. So for example in Europe now we have three categories. One is chasing Q1 big operators.
One is Jason private networks, and one is chasing a smaller transactions via China's so the focus on private networks is increasing.
Speaker 1: And as I said, the wings are not just in North America, although in North America we are very so to speak pleased with the progress.
And as I said the wins are not just in North America, Although in North America, we are very so to speak.
Pleased with the progress.
Speaker 1: but this is meant to be a global effort not just in North America.
But this is meant to be a global effort not just in North America.
Great. Thank you very much John.
Speaker 3: 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.
In order to ask a question. Please raise their hand, using your mobile or desktop application and wait for your name to Vietnam.
We have no further questions. Please proceed to closing.
Okay.
Speaker 6: To close, we are encouraged by our year-to-date results.
To close we.
We're encouraged by our year to date results.
Speaker 1: And we believe that we are well positioned to achieve self-sustaining cash flows as we execute our growth strategy.
And we believe that we are well positioned to achieve self sustaining cash flows as we execute our growth strategy.
Speaker 1: We are excited about the opportunities in front of Syracon. We have commenced our strategic planning and budgeting process for 2024, and we anticipate achieving organic growth business next year. We announced, depending closing strategic acquisition, that we believe will accelerate Syracon's strategy, execution, and can provide incremental growth opportunities and extend our margin expansion for the future.
We're excited about the opportunities in front of Ceragon, we have commenced our strategic planning and budgeting process for 2024, and we anticipate achieving organic growth business next year.
Once the pending closing strategic acquisition that we believe will accelerate ceragon strategy execution and can provide incremental growth opportunities and extend our margin expansion efforts, we expect to communicate our guidance for 2024, when we announce Q4 2023.
Speaker 6: We expect to communicate our guidance for 2024 when we announce Q4 2023 results.
<unk> results.
Speaker 1: I look forward to updating you further on our next quarterly call. Have a good day everyone.
I look forward to updating you further on our next quarterly call have a good day everyone.