Q1 2024 Ceragon Networks Ltd Earnings Call
Operator: Thank you for standing by. We will be starting shortly. Ladies and gentlemen, thank you for standing by, and welcome to the Ceragon Networks Fountain School. Our presentation today will be followed by a question and answer session. If you wish to ask a question, you'll need to raise your hand using your mobile or desktop application or press star 9 on your telephone keypad and wait for your name to be announced. I must advise you that this call is being recorded. I'd now like to hand it over to Rob Fink, Head of Investor Relations. Please go ahead, sir.
Thank you for standing by it will be starting shortly.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Ceragon Networks Conference call.
Speaker Change: Our presentation today will be followed by a question and answer session.
Speaker Change: If you wish to ask a question you will need to raise your hand, using your mobile or desktop application.
Speaker Change: Starting nine on your telephone keypad and wait for your name to Vietnam.
Speaker Change: I must advise you that this call is being recorded.
Speaker Change: I'd now like to hand, it over to Rob Fink has investor relations. Please.
Rob Fink: Please go ahead Sir.
Rob Fink: Thank you, operator. Good morning, everyone.
Rob Fink: Thank you operator, and good morning, everyone hosting todays call are drawing Marathi Ceragon as Chief Executive Officer, and Ronen Stein Chief Financial Officer before we start I'd like to note that certain statements made on this call, including projected financial information results and the company's future initiatives future events business outlook development effort.
Rob Fink: Hosting today's call is Doron Arazi, Ceragon's Chief Executive Officer, and Ronen Stein, Chief Financial Officer. Before we start, I'd like to note that certain statements made on this call, including projected financial information results and the company's future initiatives, future events, business outlook, development efforts, and their potential outcome, anticipated progress and plans, results and timelines, and other financial... Accounted Relators Matters constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended and the safe harbor provisions of the Private Securities Division Reform Act of 1995.
Rob Fink: Ceragon, intense, forward-looking statement terminology such as believes, expects, may, will, should, anticipate, plans, or similar expressions to identify forward-looking statements. Such statements reflect only the current beliefs, expectations, and assumptions of Ceragon's management. The actual results, performance, or achievement of Ceragon may differ materially as they are subject to certain risks and uncertainties, which could cause its actual results to differ materially from those projected in such forward-looking statements. Such risks and uncertainties include, but are not limited to, the risks and uncertainties that are described in Ceragon's most recent annual report on Form 20-F and that may be supplemented from time to time in Ceragon's other filings with the SEC, including today's earlier filing.
Rob Fink: And a potential outcome anticipated progress and planned results and timelines and other financial.
Rob Fink: The earnings PRs, all of which are expressly incorporated herein by reference, forward-looking statements relate to the date initially made, do not purport to be predictions of future events or results, and there can be no assurances that they will prove to be accurate, and Ceragon undertakes no obligation to update them. Ceragon's public filings are available on the Security and Exchange Commission's website at sec.gov. It may also be obtained from Ceragon's website at ceragon.com.
Rob Fink: Counter <unk> matters constitute forward looking statements within the meaning of the Securities Act of 1990 1933 as amended and the Securities Exchange Act 1934, as amended and the Safe Harbor provisions of the private Securities Litigation Reform Act of 90 95.
Rob Fink: Also, today's call will include certain non-GAAP numbers for reconciliation between GAAP and non-GAAP results. Please see the tables attached to the press release that was issued earlier today, which is posted on the investor relations section of Ceragon's website. With all that said, I would now like to turn the call over to Doron. Doron, please go ahead.
Rob Fink: Ceragon intends forward looking statements.
Rob Fink: Terminology, such as believes expects may will should anticipate plans or similar expressions to identify forward looking statements.
Rob Fink: Such statements reflect only current beliefs expectations and assumptions of Sarah guns management.
Rob Fink: Actual results performance or achievement of Ceragon may differ materially and are subject to certain risks and uncertainties, which could cause <unk> actual results to differ materially from those projected in such forward looking statements.
Rob Fink: Such risks and uncertainties include but are not limited to risks and uncertainties that are described in <unk>. Most recent annual report on form 20-F that may be supplemented from time to time in Ceragon other filings with the S E C, including today's earlier filing.
Rob Fink: The earnings P. R. All of which are expressly incorporated herein by reference forward looking statements relate to the date initially made Gi purport to be predictions of future events or results and there can be no assurances that they will prove to be accurate ceragon undertakes no obligation to update them.
Rob Fink: <unk> public filings are available on the security and exchange Commission's website at SEC Gov and May also be obtained from <unk> website at Ceragon Dot com.
Rob Fink: Also today's call will include certain non-GAAP numbers for reconciliation between GAAP and non-GAAP results. Please see the table attached to the press release that was issued earlier today, which is posted on the Investor Relations section of Saragossa website with all that said I would now like to turn the call over to Jerome to Rong. Please go ahead.
Doron Arazi: Thank you, Rob, and good morning, everyone. This was a solid start to 2024 for Ceragon. We're executing against our strategic plan and are on pace to achieve our full year growth and profitability target. Demand for our solutions is strong and growing in North America and India, in particular, and we are expanding our presence with private network customers globally. We grew revenue year-over-year, expanded our gross profit margins, and delivered another profitable quarter with positive free cash. The quorum was highlighted by particularly strong booking letters.
Jerome: Thank you, Rob and would morning, everyone.
Jerome: This was a solid start to 'twenty 'twenty four for Ceragon.
Jerome: We're executing against our strategic plan and are on pace to achieve our full year growth and profitability targets.
Jerome: Demand for our solutions is strong and growing in North America, and India in particular, and we are expanding our presence with private network customers globally.
Jerome: We grew revenue year over year expanded our gross profit margins and delivered another profitable quarter with positive free cash flow.
Jerome: The quarter was highlighted by particularly strong booking delivered.
Doron Arazi: The large-scale network modernization project for a Tier 1 operator in India was a major contributor to the higher bookings as we received significant initial orders against the agreement. We continue to generate strong bookings in North America as well. And we generated improved bookings in all other regions sequentially. The strong bookings give us visibility and optimism that we will achieve our full year growth and profitability targets. Our new products and solutions are serving as a catalyst for our business.
Jerome: The large scale network modernization project for a Q1, operator in India was a major contributor to the higher bookings as we received significant initial orders against the agreement.
Jerome: We continued to generate strong bookings in North America, as well and we generated improved bookings in all other regions sequentially.
Jerome: The strong bookings give us visibility and optimism that we will achieve our full year growth and profitability targets.
Jerome: Our new products and solutions are serving as a catalyst for our business.
Doron Arazi: As expected, our new offerings are creating higher customer interest and are starting to translate into bookings and revenue. We used Mobile World Congress as a venue to showcase our next generation solution. We also started delivering significant quantities of one of our new products in the first quarter.
Jerome: As expected our new offerings are creating higher customer interest and are starting to translate the bookings and revenue.
Jerome: We used mobile World Congress as the venue to showcase our next generation solutions.
Jerome: We also started delivering significant quantities of one of our new products in the first quarter.
Doron Arazi: Some of the new solutions in our portfolio that are worth highlighting include, first, our multi-hole or fixed wireless access family of point-to-multipoint solutions that operate in the VBEN frequency, opening doors to diverse applications through its use of unlicensed spectrum, along with its high capacity and short-range characteristics. These quantities are ideal for both private networks and service providers, aiming to establish swift connections in confined, dense areas, such as cities and campuses.
Jerome: Some of the new solutions in our portfolio that are worth highlighting include first all.
Jerome: Our multi haul or fixed wireless access family of point to Multipoint solutions that operate in the V band frequency opening doors to diverse applications through its use of iron license spectrum, along with its high capacity and short range.
Jerome: Six.
Jerome: These quantities are ideal for both private networks and service providers aiming to establish swift connections in confined dense areas such as cities and campuses.
Jerome: Next.
Doron Arazi: The IP50CX is the most compact universal microwave radio in the industry. This all-outdoor radio, with its unparalleled versatility, has the capability to form the entire network, from small cells to large-scale aggregation, significantly simplifying network architecture, reducing costs, and accelerating time to revenue. Finally... There is the IP50EE, and Ultra Compact, high capacity even radio, which is ideally suited for a variety of use cases, especially when small size and low OPEX are priorities.
Jerome: And the idea 50 C E X the most compact universal microwave radio in the industry.
Jerome: This all outdoor radio with its unparalleled versatility has the capability to form the entire network from small cells to large scale aggregation sites significantly simplifying network architecture, reducing reducing costs and accelerating time to revenue.
Jerome: Finally.
Jerome: There is the IP 50 E X.
Jerome: An ultra compact.
Jerome: High capacity, even radio which is ideally suited for a variety of use cases, especially when small size and low opex our priorities.
Doron Arazi: As I'm sure you know, MWC is the largest, most influential connectivity event in our industry. Our goals at MWC were to demonstrate our technology, communicate our millimeter wave solution, which is the industry's broadest, and also demonstrate our recent advances in microwave and millimeter wave transport and fixed wireless access. We achieved each of these goals. We had a record number of face-to-face meetings with customers and prospects, received great affirmations of our upcoming next-gen technology, and received strong indications that we are well-aligned with market needs. We provided an industry-first live demonstration of the capabilities of our soon-to-be 100-gigabit-per-second eBendLink that is based on our new system-on-a-chip with great feedback.
Jerome: As I'm sure you know and the Blue C is the largest most influential connectivity event in one industry.
Doron Arazi: We also showcased our end-to-end private networks offering with a unique display of our broadband luminaires that integrate gigabit speed wireless connectivity into lightning infrastructure to enable smart city connectivity. Visitors to our booth learned about our professional and managed services offering and saw a demonstration of our Ceragon Digital Twin solution and how it optimizes networks for reduced costs and improved user experience. As it relates to private networks, we made particular strides in the energy sector during the quarter.
Jerome: Our goals at MW see where to demonstrate our technology communicate our millimeter wave solution, which is the industry's broadest and also demonstrate our recent advances in microwave and millimeter wave transport and fixed wireless axis.
Jerome: We achieved each of these goals.
Jerome: We had a record number of face to face meetings with customers and prospects received great affirmations of our upcoming Nextgen technology and received strong indications that we are well aligned with market needs.
Jerome: We provided an industry first live demonstration of the capabilities of our soon to be 100 gigabit per second even link that is based on our new system on a chip with great feedback.
Jerome: We also showcased end to end private networks offering with a unique display of our broadband luminaries that integrate gigabit speed wireless connectivity into lightning infrastructure to enable smart city connectivity.
Jerome: Visitors to our booth learned about our professional and managed services offering and so a demonstration of our Ceragon digital twin solution and how it optimizes networks for reduced costs and improved user experiences.
Jerome: As it relates to private networks, we made particular strides in the energy sector during the quarter.
Doron Arazi: We signed new deals serving the energy industry across multiple regions with an aggregate deal value of nearly $10 million. These energy sector agreements underscore the pivotal role we play in advancing digital transformation within the energy industry and facilitating the goal of network operators to achieve high capacity at reduced cost. In the second half of 2023, we expanded our talent center approach to better position Ceragon for profitable growth. In addition to our existing and very successful talent centers in Israel and Romania, we have now opened two new talent centers, one in Bangalore, India, and one in Asuncion, Paraguay.
Jerome: We signed new deals serving the energy industry across multiple regions with an aggregate deal value.
Jerome: Nearly $10 million.
Jerome: These energy sector agreements underscore the pivotal role we play in advancing digital or digital transformation within the energy.
Jerome: Industry facilitating the goal of network operators to achieve high capacity at reduced costs.
Jerome: In the second half of 2023 we expanded our Italian center approach to better position Ceragon for profitable growth. In addition to our existing and very successful Tallinn centers in Israel in Romania. We have now opened two new tiling centers, one in Bangalore, India and <unk>.
Jerome: Wanting us on Sian Paraguay.
Jerome: The primary goal of these dialing centers is to improve our access to the talent market as well as to support our long term targets of growth and expanded operating margins.
Doron Arazi: The primary goal of these talent centers is to improve our access to the talent market, as well as to support our long-term targets of growth and expanded operating margins. I'd now like to provide an overview of our Q1 highlights by region, 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 near term. In North America... revenue was $28.9 million. We continue to maintain our presence with large carriers and other major customers. Specifically, we saw significant demand from large ISPs for CCLUS millimeter wave solutions.
Jerome: I'd now like to provide an overview of our Q1 highlights by region.
Jerome: Noting them on today's call, we will focus primarily on.
Jerome: On activities in North America and India.
Jerome: The two regions that have and we expect we'll continue to have the greatest impact on our results in the near term.
Jerome: In North America Revs.
Jerome: Revenue was $28 $9 million.
Jerome: We continue to maintain our presence with large carriers and other major customers spin.
Jerome: Specifically.
Jerome: We saw significant demand from large Isps for cyclo is millimeter wave solutions.
Doron Arazi: The headwinds service providers face have been well documented, and capex expanding by large networks has been more volatile. We continue to navigate these challenges better than many in the space, though it has reduced our line of sight to converting bookings to revenue and elongated our sales cycles somewhat. In private networks, we've made important first steps in a few new accounts, receiving initial orders, and we expect the number of new customers to increase in Q2.
Jerome: The headwinds service providers face has been well documented and capex spending by large networks has been more volatile.
Jerome: We continue to navigate these challenges better than many in the space, though it has reduced our line of sight to converting bookings to revenue and elongated our sales cycles somewhat.
Jerome: In private networks, we've made important first steps in a few new accounts, receiving initial orders and we expect the number of new customers to increase in Q2.
Doron Arazi: Also, our expanded marketing initiatives in North America are just now accelerating, and we hope to start seeing the fruits of these investments later this year. In India, revenue was $26 million with record bookings, again related to the large agreement we discussed last quarter, as well as the high value of orders received from one of our longstanding customers. We continue to expect delivery and deployment of new customer orders to begin in the second quarter, and deployment is expected to take approximately two years, with about 75 percent of the project value expected to be recognized during this time frame.
Jerome: Also our expanded marketing initiatives in North America are just now accelerating and we hope to start seeing the fruits of these investments later this year.
Jerome: In India revenue was $26 million with record bookings again.
Jerome: Related to large agreement, we discussed last quarter as well as high.
Jerome: High value of orders received from one of our longstanding customers.
Jerome: We continue to expect delivery and deployment of new customer orders to begin in the second quarter and deployment is expected to take approximately two years with about 75% of the project value expected to be recognized during this timeframe.
Doron Arazi: Clearly, we continue to be successful in India and North America, and this is facilitating our growth and profitability. With that, I'll turn the call over to Ronen Stein, our CFO, to discuss the results in more detail. Ronen, over to you.
Jerome: Clearly, we continue to be successful in India, and North America, and this is facilitating our growth and profitability.
Jerome: With that I'll turn the call over to Ronen Stein, our CFO to discuss the results in more detail.
Ronen Stein: And then over to you.
Ronen Stein: Thank you, Doron, and good morning, everyone. As Doron outlined, the first quarter represented a solid start to the year for Ceragon. To help you understand the results, I will be referring primarily to non-GAAP financials. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer to today's press release. Let me now review the actual results.
Ronen Stein: Thank you Ron and good morning, everyone as.
Ronen Stein: As Don outlined the first quarter represented a solid start to the year for silicon.
Ronen Stein: To help you understand the results I will be referring primarily to non-GAAP financials.
Ronen Stein: For more information regarding our use of nonfinancial of longer financial measures, including reconciliations of these measures we refer to todays press release.
Speaker Change: Let me now review the actual results.
Ronen Stein: Revenues were $88.5 million, up 6% from $83.4 million in Q1 2023. Our strongest regions in terms of revenues for the quarter were North America and India with $28.9 million and $26 million, respectively, in line with the continuous strong demand we see in these regions. Our third strongest region in terms of revenues was EMEA with $14.9 million.
Speaker Change: Revenues were $88 5 million up 6% from $83 4 million in Q1, 2023.
Ronen Stein: Our strongest regions in terms of revenues for the quarter, while North America, and India, with $28 9 million and $26 million respectively.
Ronen Stein: In line with the continued strong demand we see in these regions.
Ronen Stein: Our sale of the strongest region in terms of revenues was EMEA with $14 $9 million.
Ronen Stein: We had two customers in the first quarter that contributed more than 10% of our revenue. Gross profit for the first quarter, on a non-gap basis, was $32.5 million, an increase of 14.7%, compared to $28.4 million in Q1 2026. Our non-GAAP gross margin was 36.7% compared with a gross margin of 34% in Q1 2023. We continue to achieve high gross margins, mainly as North America becomes the strongest region in terms of revenue, with record quarterly revenues, and product mix continues to be favorable while we keep costs under control.
Ronen Stein: We had two customers in the first quarter that contributed more than 10% of our revenues.
Ronen Stein: Gross profit for the first quarter on a non-GAAP basis.
Ronen Stein: Was $32.5 million, an increase of 14, 7% compared to $28.4 million in Q1 2023.
Ronen Stein: Our non-GAAP gross margin was 36, 7% compared with gross margin of 34% in Q1 2023.
Ronen Stein: We continue to achieve high gross margins, mainly as North America becomes a strongest region in terms of revenue with record quarterly revenues and product mix continued to be a favorable while we keep costs under control.
Ronen Stein: Our gross margins may continue to fluctuate from quarter to quarter due to changes in product and regional mix. As for operating expenses... In general, this quarter's operating expenses fully include the cycloacquisition impact. Research and development expenses for the first quarter, on a non-gap basis, were $8.7 million, up from $7.7 million in Q1 2023. As a percentage of revenue, our R&D expenses were 9.8% in the first quarter, compared to 9.2% in the first quarter last year.
Ronen Stein: Our gross margins may continue to fluctuate from quarter to quarter due to changes in product and regional mix.
Ronen Stein: As for the operating expenses.
Ronen Stein: In general this quarters operating expenses fully include the secret acquisition impacts.
Ronen Stein: Research and development expenses for the first quarter on a non-GAAP basis were $8 7 million.
Ronen Stein: Up from $7 $7 million in Q1 2023.
Ronen Stein: As a percentage of revenue our R&D expenses were nine 8% in the first quarter compared to nine 2% in the first quarter last year.
Ronen Stein: Sales and marketing expenses for the first quarter on an on-gap basis were $10.7 million, up from $9.8 million in Q1 2023. As a percentage of revenue, sales and marketing expenses were 12.1% in the first quarter compared to 11.8% in the first quarter last year. General and administrative expenses for the first quarter on a non-gap basis were $5.5 million, compared to $5 million in Q1 2023. As a percentage of revenues, G&A expenses were 6.3% in the first quarter, compared to 5.9% in the first quarter last year.
Ronen Stein: Sales and marketing expenses for the first quarter on a non-GAAP basis were $10 7 million.
Ronen Stein: Up from $9.8 million in Q1 plane in 'twenty three.
Ronen Stein: As a percentage of revenue sales and marketing expenses were 12.1%.
Ronen Stein: In the first quarter compared to 11, 8% in the first quarter last year.
Ronen Stein: General and administrative expenses for the first quarter on a non-GAAP basis were $5 5 million comps.
Ronen Stein: Compared to $5 million in Q1 2023.
Ronen Stein: As a percentage of revenues G&A expenses were $6, 3% in the first quarter compared to five 9% in the first quarter last year.
Ronen Stein: I'd note that our GAAP operating expenses include restructuring expenses associated with organizational changes, the establishment of the two new Centers of Excellence Doron mentioned earlier, as well as integration costs related to CIC. These charges are backed out of our non-GAAP operating expenses. Operating income for the first quarter on a non-GAAP basis was $7.6 million, compared with $5.9 million for Q1 2023. As a percentage of revenues, non-GAAP operating income was 8.6% in the first quarter, compared to 7.1% in the first quarter last year. Financial and other expenses for the first quarter on an on-gap basis were $2.3 million. Our tax expenses for the first quarter on an on-gap basis were $0.5 million.
Ronen Stein: I'd note that the old GAAP operating expenses include restructuring expenses associated with the organizational changes the establishment of the two new centers of excellence the launch mentioned earlier as.
Ronen Stein: As well as integration costs related to <unk>.
Ronen Stein: These charges are backed out of our non-GAAP operating expenses.
Ronen Stein: Operating income for the first quarter on a non-GAAP basis was $7 6 million compared with $5 9 million for Q1 2023.
Ronen Stein: As a percentage of revenues non-GAAP operating income was eight 6% in the first quarter compared to 7.1% in the first quarter last year.
Ronen Stein: Financial and other expenses for the first quarter on a non-GAAP basis were $2 3 million.
Ronen Stein: Our tax expenses for the first quarter on a non-GAAP basis were zero point $5 million.
Ronen Stein: Net income for the first quarter on an on-gap basis was $4.7 million, or $0.05 per diluted share, compared to $3.6 million, or $0.04 per diluted share, for Q1 2023. As for our balance sheet, our cash position at the end of the first quarter was $28.8 million, compared to $28.2 million at the end of 2023. Short-term loans were $30.5 million compared to $32.6 million as of December 31st, 2023.
Ronen Stein: Net income for the first quarter on a non-GAAP basis was $4 7 million.
Ronen Stein: Or five cents per diluted share compared to $3 6 million.
Ronen Stein: Or four cents per diluted share for Q1 2023.
Ronen Stein: As for our balance sheet, our cash position at the end of the first quarter was 28 point entry point $8 million compared to $28 2 million.
Ronen Stein: At the end of 2023.
Ronen Stein: Short term loans were $35 million.
Ronen Stein: Compared to $32 6 million as of December 31st 2023.
Ronen Stein: We believe we have cash and facilities that are sufficient for our operations and working capital needs. Our inventory at the end of Q1 2024 was $61 million, down from $68.8 million at the end of December 2022. The reduction is mainly due to our efforts during 2023. Streamline inventory levels following the improvement in component availability have materialized. We continue to monitor inventory levels, taking into consideration the improvements in availability of components and expected changes in demand.
Ronen Stein: We believe we have cash and facilities that are sufficient for operations and working capital needs.
Ronen Stein: Our inventory at the end of Q1, 2024 was $61 million down from the $68.8 million at the end of December 2023.
Ronen Stein: The reduction is mainly as our airports during 2023 to streamline inventory levels. Following the improvement in components availability have materialized.
Ronen Stein: We continue to monitor inventory levels, taking into consideration the improvements in availability of components and expected changes in demand.
Ronen Stein: Our trade receivables are at $97.4 million as compared to $104 $3 million at the end of December 2023.
Ronen Stein: Our DSO now stands at 101 days.
Ronen Stein: As for cash flow.
Ronen Stein: Net cash flow generated by operations and investing activities in Q1 was $2 $4 million.
Ronen Stein: We are reiterating our full year outlook for 'twenty 'twenty, four we expect revenue of $385 million.
Ronen Stein: $405 million.
Ronen Stein: Representing growth of 11% to 17% compared to 2023.
Ronen Stein: This guidance includes the contribution from cyclo.
Ronen Stein: non-GAAP operating margins are targeted to be at least 10% at the midpoint of our revenue guidance.
Ronen Stein: non-GAAP operating margins are targeted to be at least 10% at the midpoint of the revenue guidance. As a result, we expect increased non-GAAP profit and positive free cash flow for the full year of 2024.
Ronen Stein: Our trade receivables are at $97.4 million, as compared to $104.3 million at the end of December 2022. Our DSO now stands at 101 days, and for Cashflow. The net cash flow generated by operations and investing activities in Q1 was $2.4 million. We are reiterating our full year outlook. For 2024, we expect revenue of $385 million to $405 million, representing growth of 11% to 17% compared to 2023. This guidance includes the contributions from six. Non-GAAP operating margins are targeted to be at least 10% at the midpoint of the revenue guidance. As a result, we expect increased non-gap profit and positive free cash flow for the full year of 2024. With that, I now open the call to your questions.
Speaker Change: With that I now open the call for your questions operator.
Speaker Change: Thank you.
Speaker Change: In order to add.
Operator: in order to add, In order to ask a question, please raise your hand using your mobile or desktop application and wait for your name to be announced. I repeat, in order to ask a question, please raise your hand using your mobile and desktop application and wait for your name to be announced. Our first question will be from Alex Henderson from Needham and Company. Alex, please go ahead.
Speaker Change: In order to ask a question. Please raise your hand, using your mobile or desktop application and wait for your name to be announced.
Speaker Change: And in order to ask a question. Please raise your hand, using your mobile and desktop application and wait for your name to be here.
Speaker Change: Our first question will be from Alex Henderson.
Alexander Henderson: From Needham and company Alex. Please go ahead.
Alexander Henderson: Thanks. I hope you can hear me okay.
Alexander Henderson: You can hear me okay.
Doron Arazi: Yes, Alex. Good morning.
Alexander Henderson: Yeah, Alex Good morning, good morning morning.
Alexander Henderson: Good morning. Just a couple of questions very quickly on the commentary. The 100 gigabyte system on a chip product that's still on schedule to be GA this year, is that correct?
Alexander Henderson:
Alexander Henderson: Just a couple of the questions are very quickly on the.
Alexander Henderson: The commentary that the 100 gig system on a chip product that stance.
Alexander Henderson: Schedule to be.
Alexander Henderson: G. A this year is that correct.
Doron Arazi: We intend to launch this product by the end of 2024, indeed.
Alexander Henderson: Went into to launch this product by the end of 'twenty.
Alexander Henderson: 'twenty 'twenty four and did.
Alexander Henderson: Okay, perfect. And then the second, you made a comment about the new products launched, recently launched, that one of them was seeing significant orders. Can you give us some more granularity around which one of the products it was and what kind of orders are you seeing and what is the ramp for those two products that were, you know, such important products that were launched here in the current quarter? What does the ramp look like?
Speaker Change: Okay, perfect and then the second.
Alexander Henderson: You've made a comment about the <unk>.
Alexander Henderson: New products are launched our recently launched them there one of them. We're seeing significant orders can you give us some more granularity around.
Alexander Henderson: What which one of the products that was and what the what kind of orders are you seeing and what are the ramp of those two products that were.
Alexander Henderson: Such a important products that were launched here in the current quarter, what's the the ramp look like.
Doron Arazi: Yeah, so regarding the first one that we already started delivering significant quantities. It's our new all-outdoor, probably the tiniest one in the industry microwave product. And it gets a lot of traction, primarily in India. It basically replaces our old IP20C that is kind of in relatively advanced stages.
Speaker Change: Yeah. So regarding the first one that we already started the delivering significant quantities.
Speaker Change: Our new all outdoor probably the tiniest one in the industry microwave product.
Speaker Change: And it gets a lot of traction and primarily in India. It basically replaces our all day IP 20 C.
Speaker Change: That is a kind of a in a in relative advanced the stages.
Doron Arazi: And definitely, we see a lot of traction. And obviously, the first link was launched with the frequencies that are associated with the Indian market because of the huge demand. But we do expect to basically have this product with much more frequency in the coming quarters, and we believe it will also ramp up very nicely in the rest of the world. As to the other product, we are talking about a smaller and more cost-efficient event that is suitable very nicely for Tier 1 operators but also for smaller ISPs.
Speaker Change: And definitely we see a lot of traction.
Speaker Change: And then obviously the first the links.
Speaker Change: Where are where allowance with the frequencies that are associated with the Indian market because of the huge demand, but we do expect two are basically have this product was much more of frequencies in the coming quarters and we believe it will also ramp up every night.
Speaker Change: In the rest of the world.
Speaker Change: To the other product we're talking about a smaller.
Speaker Change: In more cost efficient E band.
Speaker Change: That is suitable AR very nicely to tier one operators, but also to our two smaller Isps are this one a was already we already started production and delivery, but the quantities were are very minimal.
Doron Arazi: This one, we have already started production and delivery, but the quantities were very minimal. And we expect this product to start contributing to our business this quarter and definitely become more significant in the second part of 2024.
Speaker Change: And we expect that this product the two to start contributing.
Speaker Change: To our business.
Speaker Change: In this quarter and definitely more significance in the second part of 'twenty 'twenty four.
Doron Arazi: Can you talk a little bit about the linearity that you expect over the course of the year and, you know, give us some sense of, I'm assuming that the June quarter is sub-$100 million, but up nicely from the seasonally softest quarter of the year, the March quarter. Can you talk a little bit about linearity over the year?
Speaker Change: Can you talk a little bit about the linearity that you expect over the course of the year and give us some sense of a.
Speaker Change: I am assuming that the June quarter is sub $100 million, but but.
Speaker Change: But up nicely from the seasonally softest quarter.
Speaker Change: For the year the March quarter, and can you talk a little bit about linearity in the quarter of the year.
Doron Arazi: So look, one major factor that will impact linearity is obviously the fact that in Q2 we are starting to deliver our products and obviously also starting the installation of the big contract we want with the new customer in India. And that by itself should put us at a level of revenue that is higher. [inaudible] Generally speaking, following Q1 booking, Basically, the backlog we have should enable us to get to $100 million.
Speaker Change: So look one name major <expletive> door.
Speaker Change: That will impact the linearity.
Speaker Change: He is obviously the fact that in Q2, we are starting to deliver our product and obviously are also starting the installation.
Speaker Change: The big contract we won.
Speaker Change: With the new customer in India.
Speaker Change: And that by itself should put us in a in a level of revenue that is Ah is higher.
Speaker Change:
Speaker Change: Generally speaking.
Speaker Change: Following Q1 booking.
Speaker Change: Basically the backlog, we have enable us to get to $100 million.
Doron Arazi: The main, so to speak..., two factors that will define whether we will be able to kind of create a more rationalized quarterly revenue are basically two. One is customer demand and the pace they want us to deliver these orders. And second, our ability and capacity to manufacture the product in a timely fashion. Now, in terms of manufacturing capacity, we have no issue, but yet, as a very cautious company until we receive the large orders, or the initial large orders, from India, we are very careful in terms of component buying.
Speaker Change: The main <unk> so to speak.
Speaker Change: Two factors that will define where there.
Speaker Change: And we will be able to kind of create a more rationalized quarter over quarter revenues are basically to one the <unk>.
Speaker Change: Customer demand and the pace they want us to deliver these orders and second.
Speaker Change: Our ability and the capacity to manufacture.
Speaker Change: The product in a timely fashion now in terms of manufacturing capacity, we have no issue, but there yet is a very cautious.
Speaker Change: The company until we receive the large orders or the initial large orders from India. We are very careful in terms of the.
Speaker Change: The component a buying and that may cause certain delays that I think that within less than a quarter, we'll be able to overcome so to summarize in Q2, we do expect a ramp.
Doron Arazi: And that may cause certain delays that I think that within less than a quarter we'll be able to overcome. So to summarize, in Q2, we do expect a ramp-up in the business or in revenue generation. But I think that during the second half of the year, assuming customers continue with the same, so to speak, expectations of delivery timelines, we will probably be achieving beyond $100 million a quarter in this second part.
Speaker Change: In the business or in the revenue generation, but I think that during the second half of the year.
Speaker Change: If assuming customers continue with this with the same so to speak.
Speaker Change: Expectations of delivery timeline.
Speaker Change: We will probably be a achieving beyond $100 million a quarter.
Speaker Change: In this second part.
Alexander Henderson: The gross margin number was 36.7 in the quarter. Assuming that you're not going to be doing that again here in the June quarter or even in the back half with the mix shifting towards India, which generally has a lower margin, is it reasonable to think that that's more in the 35 and a half-ish range for the next couple of quarters as that kicks in and you have startup costs with your new products?
Speaker Change: And the gross margin numbers.
Speaker Change: 36, seven in the quarter.
Speaker Change: I'm, assuming that you're not going to be doing.
Speaker Change: That again here in the June quarter, or even in the back half with the mix shifting towards India.
Speaker Change: Which generally have lower margin is it reasonable to think that that's more on the F.
Speaker Change: 35, and a half ish range over the next couple of quarters is that as that kicks in and you have startup costs with your new products.
Ronen Stein: Yes, Alex, it's Ronen. As I said in the previous call, I think that we will be around between 35 and 37. On average, we opt to, we opt, we target to reach 36 percent. So yes, something in between 35.5 and 36 as an average is reasonable. It might go down to around 35, but it might go up also to 37 depending on the specific quarter. [inaudible] Very much dependent on how the backlog is being processed; the very good backlog that we have is converted depending on the specific needs of each quarter of the customers.
O&M: Yeah, Hi, Alex it's O&M.
O&M: I said in the previous call I think that we would be around between the 35 to 37.
Speaker Change: And on average are we when are we up to we all we target duration of 36%.
O&M: So yes, something in between the 35.5 and 36 whenever it is reasonable it might go down to around 35, but it might go up off of the 37, depending on a specific quarter specific mixture by region.
O&M: And there are specific product mixture of services mixture, whether we give more a software or no.
O&M: Very much dependent on how backlog is be there the very good backlog that we have is convert that depending on the specific needs in each quarter of the of the customer.
Doron Arazi: Just to add on top of it, I think in the last, in the previous call... We said that we were planning for further improvement in our gross margin on an annual basis. Last year, we ended up with a gross margin that is slightly shy of 35% non-GAAP. And as we said in the previous conference call, we are shooting, and we believe that with the right, so to speak, mix, there will be no big changes in what we expect. We will be nearing 36%, and that's our minimum goal for this year.
O&M: Just to add on top of it are I think in the last in the previous call.
O&M: We said that we are planning for further improvement.
O&M: In our gross margin on an annual basis last year, we ended up with a gross margin that is slightly shy of 35% non-GAAP.
O&M: And as we said in the previous conference call.
O&M: We are floating and we believe that with the right. So to speak makes no big changes in what we expect we are nearing we will be nearing the 36% and that the our our minimum goal for this year for one last question, then I'll cede the floor and get back in queue.
Alexander Henderson: One last question, then I'll see the floor and get back in queue. Can you remind us where we are on the book-to-bill as we exited 23 and what the book-to-bill looked like in the first quarter?
Speaker Change: Can you remind us where we are on the book to Bill in the as we exited 23 and what what the book to Bill look like in the first quarter.
Doron Arazi: Yeah, look, first of all, we did not specifically refer to that in the last two quarters because I think that on a quarterly basis, it may mislead. Last quarter and for the full year of 2023, we were with Book2BL above 1. And also after this quarter, and I think that my prepared comments were alluding to that very strongly, we had a huge book to build that is hugely above one, and I don't want to kind of create a situation where people are maybe misled by this because, obviously, getting this amount of orders from India in advance in order to prepare us for the very big volumes of delivery is not necessarily indicating what we expect to happen each and every quarter.
Speaker Change: Yeah look first of all.
Speaker Change: And we did not specifically referred to that in the last two quarters.
Speaker Change: Because I think that on a quarterly basis it may miss their lead.
Speaker Change: Last quarter and for the full year of 2023 we were at with book to Bill above one and.
Speaker Change: And also after this quarter and I think that there my prepared comments were eluding to that very strongly we had a huge.
Speaker Change: Our book to Bill that is a hugely above one <unk>.
Speaker Change: And I don't want to kind of create a situation where people are maybe.
Speaker Change: May be misled by this because obviously getting this the amount of orders from India in advance in order to prepare us to there are very big volumes of delivery.
Speaker Change: He is not there necessarily.
Speaker Change: Indicating what we expect them to have been each and every quarter.
Doron Arazi: So all in all, very strong end of 2023, and very strong beginning of Q1 2024. I think that the way to look at the bookings is more on a trailing 12-month approach. And definitely, on a trailing 12-month period, we are way above one in terms of book-to-book.
Speaker Change: So all in all a very strong end of 2023 very strong beginning of Q1 'twenty 'twenty four I think that the way to look at the booking.
Speaker Change: Is more on a trailing 12 month month approach and definitely on a trailing 12 month. The a period, we are way above one in terms of book to Bill.
Operator: That's very helpful. Thank you so much. I'll let anybody else get into the Q&A. Our next question is from Rommel Dionisio of...
Speaker Change: That's very helpful. Thank you so much I'll, let the let anybody else or get into the queue here.
Operator: Our next question is from Robert Rommel Dionisio of Aegis Capital. Rommel, please go ahead.
Speaker Change: Our next question is from Robert will now be only sell of ages capital amount. Please go ahead.
Speaker Change: Okay.
Speaker Change: Ramon.
Rommel Tolentino Dionisio: Rommel, hi, we cannot hear you. Doron, can you hear me okay? Yes, I can hear you. Hi, Rommel.
Robert: Or a mile high we cannot hear you.
Robert: Yeah.
Robert: John can you hear me okay.
John: Yes, I got looming pyromancer.
John: I think so you know you've obviously made significant progress on the private networks. So I wonder if you could just give us a little more color on that obviously some significant events here over the last several months and and the business prospects both in North America and Europe for that thank you.
Doron Arazi: So, you know, you've obviously made significant progress on the private networks. I wonder if you could just give us a little more color on that, including some significant events here over the last several months and the business prospects both in North America and Europe for that. Thank you.
Doron Arazi: So, I will start with what I was saying in the previous conference call. We ended up last year with $40 million in bookings on the private networks, and we aspire to double this amount in 2024. This plan has not changed, and we definitely see a path for getting to this level of booking. I think this quarter was characterized by a lot of good results from the hard work, especially in the energy segment, where we received nearly $10 million in value of orders from this segment.
John: So I will start with that what I was saying in the previous conference call.
John: We ended up last year with a $40 million of booking in their private networks and we aspire to double this amount.
John: In 'twenty 'twenty four.
Robert: The plan has not changed and we definitely see a path.
Robert: For our getting to this level of booking I think this quarter was there a characterized by a lot of air.
Robert: Good day result fell for their hard work, especially in the energy segment, where we received a nearly 10 million dollar value of orders.
Doron Arazi: And I think that with our unique solution, plus the fact that we have a good brand for some sort of system integrator concept in this particular segment, we are seeing the fruits of focusing on this segment that is going through a huge transformation, a digital transformation, across all segments. So that's definitely encouraging. On top of that, we look at the funnel. And our funnel is increasing very, very nicely. And that means that we have a very strong signal that we are getting traction with our solutions; our marketing efforts that we started at a much higher pace towards the end of last year, but they also increased them as part of our budget in Q1 are also showing very strong signs of traction. And therefore, I'm quite optimistic about our ability to achieve this double number, doubling the number of bookings this year and maybe, maybe even exceeding it.
Robert: From this segment and I think that there with our unique.
Robert: Solution plus the fact that we have a good brand of a some sort of a system integrator.
Robert: Concept in this in this particular segment, we are seeing the fruits of are focusing on this segment that is going through a huge transformation digital transformation.
Robert: And across all segments, so that definitely encouraging.
Robert: On top of that are we.
Robert: We look at the funnel.
Robert: And our funnel is increasing very very nicely and that means that we have a very strong signal.
Robert: That we are getting traction with our solutions, our marketing efforts that we started in in much AI or pace.
Robert: Towards the end of last year, but Theyre also increased eight as part of.
Robert: Our budget.
Robert: In Q1 are also showing very strong signs of anthrax.
Robert: <unk> traction and therefore, I'm quite optimistic about our ability to achieve.
Robert: This oh double our number doubling the number of bookings this year and maybe maybe even exceeding it.
Robert: Okay.
Speaker Change: Great. Thanks for much for the color.
Speaker Change: Okay.
Operator: Okay, once again, in order to ask a question, please raise your hand using your mobile or desktop application and wait for your name to be announced. Our next question is from Guter. Carter, please go ahead. High Contour, Hi Gunther. [inaudible] Okay, so maybe we'll move along for now to Alex Henderson. Alex, go ahead.
Speaker Change: Okay, once again and where it is.
Speaker Change: To ask a question. Please raise your hand, using your mobile or desktop application and wait for your name to P&L.
Speaker Change: Yeah.
Speaker Change: Our next question is from Gunther.
Gunther: Gardner. Please go ahead.
Gunther: Hi, Gunther.
Gunther: Alright gwenda.
Gunther: Yeah.
Speaker Change: Go ahead, please on mute.
Speaker Change: Okay. So maybe it will move alone for now to Alex Henderson.
Alexander Henderson: Go ahead.
Alexander Henderson: Yeah.
Operator: Alex, we cannot hear you. Can you check your side of the connection? Can you hear me now? Yes, Gunther. Go ahead.
Alexander Henderson: Alex the we cannot hear you can your check your all your side.
Speaker Change: The connection.
Alexander Henderson: Can you hear me.
Speaker Change: Okay.
Speaker Change: Not yet.
Speaker Change: Go ahead sorry.
Gunther: Regarding the medical industry, a specific market, there's been a rise of interest in artificial intelligence, the diagnostic areas, and such things. With regard to the short-range, millimeter-range systems and diagnostic data transmissions, has there been any notice of market interest in that area?
Alexander Henderson: Sorry, I'll regarding the medical industry.
Alexander Henderson: Hey.
Alexander Henderson: What specific markets.
Alexander Henderson: In a rising level of interest in the artificial intelligence the diagnostic areas and.
Alexander Henderson: Such a change.
Alexander Henderson: With regard to the short range millimeter range systems.
Alexander Henderson: <unk> diagnostics.
Alexander Henderson: Gotta transformations has there been any notice of.
Alexander Henderson: Market interest in that area.
Doron Arazi: So, I would say the following. First of all, what we are seeing following the acquisition of C-Clue, which is, by the way, actually heading or moving forward as planned and even slightly better. There's a lot of traction for short millimeter wave transport solutions and fixed wireless access, especially in dense areas.
Speaker Change: So I would say the following.
Alexander Henderson: First of all.
Alexander Henderson: And what we're seeing following the acquisition of ethical.
Alexander Henderson: That by the way the actually heading or moving forward as planned and even.
Alexander Henderson: Slightly better.
Alexander Henderson: There's a lot of traction for saw a fall short millimeter wave.
Alexander Henderson: Transport solutions.
Alexander Henderson: And the fixed wireless access, especially in dense area and that obviously definitely encouraging.
Doron Arazi: And that's obviously very encouraging because this was the purpose of the acquisition. So in this respect, we see a lot of traction. And we believe that we can increase our business in this domain and definitely leverage our position following the acquisition of C-Clue. In terms of AI, I know that people are asking questions. Some of these questions are coming via email.
Alexander Henderson: This was the purpose of the acquisition. So in this respect we see a lot of traction and we believe that we can increase our business.
Alexander Henderson: In this domain and definitely leveraging our position following the acquisition of ethic Lou in terms of AI I know that their people are asking questions. Some of these questions are coming via email gateway.
Doron Arazi: Guys, we already have AI embedded in our software. And we have different use cases where AI can be used for optimization, of either the network or the wireless transport piece. And with our digital twin, we can even expand it beyond just the transport itself. So we are already using these kinds of tools, and it's our intention to continue leveraging these kinds of capabilities into our software solutions and our product.
Alexander Henderson: We have already a are embedded in our software.
Alexander Henderson: And we have different used cases, where AI can be used for optimization of either the Ah Ah network or their wireless one for Pete.
Alexander Henderson: And with our digital twin weekend, even expanded beyond just the air transport itself. So we are already using these kind of tools and it's our intention to continue leveraging these kind of capabilities into our software solutions and our products.
Gunther: Thank you and good luck on that. It's a big, growing market.
Speaker Change: Thank you and good luck on that because the big growing market.
Speaker Change: Thank you.
Alexander Henderson: Okay.
Operator: Our next question is from Alex Henderson from Newfoundland Company. I think I'm unmuted, right? Yes. Yes. Now you're good. Yeah.
Alexander Henderson: Our next question from Alex Henderson from Needham and company.
Alexander Henderson: I think I'm on mute it right yeah yeah.
Alexander Henderson: Mario good yeah.
Alexander Henderson: Yeah, it didn't pop up on mute in a timely fashion earlier. So I understand that you've had some very large orders here. I get it that the timing of that heavily skewed to the first quarter set you up for a very strong, you know, deployments over not just the back half of this year but also into 2025. But I was wondering, given those orders, is your pipeline of additional deals still healthy? And, you know, or is there enough, you know, heft in that to continue to build, you know, more order flow over the course of the remainder of the year? What does the pipeline look like?
Alexander Henderson: It didn't pop out on mute.
Alexander Henderson: Timely fashion earlier.
Alexander Henderson: So.
Alexander Henderson: I get it that you've had some very large orders out here I get at that.
Alexander Henderson:
Alexander Henderson: The timing of that.
Alexander Henderson: Heavily skewed to the first quarter.
Alexander Henderson: Set you up for a very strong.
Alexander Henderson: Deployments over not just to the back half of this year, but also into 'twenty five but I was wondering.
Alexander Henderson: Given that those orders.
Alexander Henderson: Is your pipeline of additional deals still healthy and.
Alexander Henderson: Or.
Alexander Henderson: Is there enough heft in that to continue to build.
Alexander Henderson: You know more or a flow over the course of the remaining remainder of the year what does the pipeline look like.
Doron Arazi: So, the pipeline looks quite healthy. And we also, actually, I made that comment in my prepared comment, are also encouraged by the progress we made in other regions. You know, it was kind of the first quarter of this year and probably for a few quarters where all other regions, without any exception, had sequential growth in bookings versus the obviously previous quarter.
Alexander Henderson: So the pipeline looks quite healthy.
Alexander Henderson: And and we also actually made that comment in my prepared comments. We're also encouraged by the progress we made in other regions.
Alexander Henderson: You know it was a kind of the the first quarter in this year and probably for for a few quarters, where all other agents without any exception head.
Alexander Henderson: The sequential growth in the booking.
Alexander Henderson: Vessels that obviously previous quarter. So that's also a good sign for us.
Doron Arazi: So that's also a good sign for us. We see a healthy pipeline in most of the regions. We see a nice pipeline, as I said, in the private network, and it's increasing. And this gives us the confidence, the level of confidence that we need to feel comfortable on the path and in the target we set for ourselves for 2024.
Alexander Henderson: We see a healthy pipeline.
Alexander Henderson: And in most of the region, we see a nice pipeline as I said in the private networks.
Alexander Henderson: And increasing in these give us the confidence the level of confidence that we need to feel comfortable.
Alexander Henderson: In the path and in the target we set ourselves for 2024.
Alexander Henderson: Okay, and just going back to the inventory. I think your inventory is still a little higher than normal. How do you see that feathering down over the year? Is that going to be tied to the shipments into India or is that, you know, just the normal course of business? How do we think about it?
Alexander Henderson: Okay.
Alexander Henderson: Just going back to the inventory.
Alexander Henderson: I think your inventory still a little higher than normal or how do you see that feathering down over the year end.
Alexander Henderson: Is that going to be tied to.
Alexander Henderson: The shipments into India or is that just.
Alexander Henderson: They are a normal course of business other how do we think about it.
Ronen Stein: So, Alex, first of all, thank you for the question, because, yes, indeed, the inventory has reduced substantially this quarter, reducing inventories from $69 million to $61 million.
Alexander Henderson: So Alex first of all thank you for the question because yes, indeed, the inventory reduced.
Alexander Henderson: Substantially this quarter have reduced inventories form $69 million to $61 million.
Ronen Stein: So it's a positive sign because it happened for quite a few quarters. I think that the last time we were at this level was around 2022, and we made a lot of progress in 2023 to come to this stage where inventories came down, and we believe that there is more room to decrease the inventory. I'm not sure about quarter to quarter levels, but over the year, they should continue to decrease, and we have a plan to continue to decrease.
Alexander Henderson: So it's a positive sign because it's or are.
Alexander Henderson: Our acquired there.
Alexander Henderson: A few quarters I think that the last time, we were in the seven was around 2022.
Alexander Henderson: And we've made a lot of progress are in 2020 three to come to this stage, where our inventories are coming down and we believe that there is more room to decrease.
Alexander Henderson: The inventory I'm, not sure about quarter to quarter level, but over the year to continue to degree and we have a plan to continue to degree the.
Ronen Stein: The inventory is by at least a few couple of millions. And this is associated, of course, with the fact that we built up inventories for the new products that are now being materialized and that we are now going...
Alexander Henderson: As the inventories by at least a few couples of maintenance.
Ronen Stein: [inaudible]
Alexander Henderson: And this is associated with of course with effect that we built up our inventory for the new products that are now being materialized in there that we're now we're going to start to.
Alexander Henderson: Sure.
Alexander Henderson:
Alexander Henderson: Two cents.
Alexander Henderson: Over this year.
Alexander Henderson: And then we can streamline and the new product.
Alexander Henderson: As well as coming back from their post COVID-19 building of inventories due.
Ronen Stein: as well as coming back from the post-COVID-19 building of inventories due to the challenges that we had with the sourcing of components during these years.
Alexander Henderson: Due to the challenges as we head of sourcing of components.
Alexander Henderson: This year.
Doron Arazi: Alex, just to add on top of Ronen's comment, The only issue of managing our inventory, which is obviously a big item on our balance sheet, has stepped up dramatically since we started seeing the component market rationalizing.
Alexander Henderson: Alexander you add on top of the of romance comment.
Alexander Henderson: The only issue of managing our inventory that is obviously, a big item on our balance sheet.
Alexander Henderson: As the stepped up there dramatically.
Alexander Henderson: Since then we started seeing the component the market Theyre rationalizing.
Doron Arazi: And there are a lot of activities of, on the one hand, building our plans to more of a just-in-time delivery of components and, obviously, looking at some excess inventory and working on this excess inventory very fast in the process, and not waiting too long. And all of that is creating a much more meticulous handling of our inventory. So I truly believe that we will be able to continue this trend. There are only two factors that you need to take into account.
Alexander Henderson: And.
Alexander Henderson: There's a lot a lot of activity is off on the one hand.
Alexander Henderson: And building, a where our plan to a more of a just in time.
Alexander Henderson: Delivery of components.
Alexander Henderson: M. Obviously are looking at there is some excess in there.
Alexander Henderson: Working with this excess inventory very fast.
Alexander Henderson: Theyre in Theyre in the process and not waiting too long and all of that is creating a much more a meticulous the handling of our inventory.
Alexander Henderson: So I I truly believe that we will be able to continue in this trend.
Alexander Henderson: Two factors that you need to take into account one is that we need also to look at the inventory as a percentage of our volume of business.
Doron Arazi: One is that we also need to look at inventory as a percentage of our volume of business. So if we are ramping up, and we'll go to the $400 million revenue, and maybe even exceed it, we might see inventory rationalization as a percentage of revenue. Definitely, if the part of the revenue that is associated with our hardware product is the one that is growing significantly. And the other thing is that sometimes I have to get equipped with some level of inventory in advance, expecting some capacity or overcoming some capacity issues that may come because of deliveries that are specific to a specific water. So these are the two caveats. The bottom line is, yes, we do expect to continue rationalizing our inventory, and we do expect to see further, better results down the road.
Alexander Henderson: So if we are ramping up and we will go to the 400 million dollar revenue and maybe even exceed it we might see the inventory rationalizing as a percentage of revenue definitely the bulk of the revenue that is associated with our with our hardware product is.
Alexander Henderson: The one that is the is growing significantly and the other thing is that sometimes I'm, making decisions on a quarterly basis.
Alexander Henderson: To get equipped with some level of inventory in advance.
Alexander Henderson: Expecting.
Alexander Henderson: Some capacity or overcoming some capacity issues that may come because of the deliveries that are specific for a specific quarter.
Alexander Henderson: So these are the two caveats the bottom line is yes, we do expect to continue rationalizing our inventory and we do expect to see further better results down the road.
Doron Arazi: Yeah, in that context, obviously, you've got a very large order ramping up for India, and then second, you've got two new products that are ramping now, and then another one that's slated to launch late in the year. Should we be looking at some startup costs associated with those, or is that embedded in your thinking at this point? And what size of a cost is that that will eventually fall out as those products hit the normalized production level?
Alexander Henderson: Yeah.
Alexander Henderson: In that context, obviously, you've got a very large order of ramping for India and then second you've got two new products that are ramping now and then another one that slated to launch later in the year.
Speaker Change: Should we be looking at some startup costs associated with those or is that embedded in.
Alexander Henderson: You know in your thinking at this point.
Alexander Henderson: What is the cost is that that will eventually fall out as those products hit a normalized production run.
Doron Arazi: So, these costs are already embedded in our projections; we took them into account. Um... Usually, usually we try to rationalize this cost. And to make these costs happen gradually so they don't have a big impact on a specific quarter. If that happens, obviously, we're going to disclose this kind of situation. But we don't expect that. So eventually, when we are talking about our gross margins for the rest of the year, we have taken into account the fact that we launched two new products.
Alexander Henderson: So so these costs are already embedded in our projections, we took them into account.
Alexander Henderson: Usually usually we try to rationalize these costs.
Alexander Henderson: And to to make these costs have been gradually so they don't have a big impact on a specific quarter. If that happens obviously, we were going to to disclose these kind of situations, but we don't expect that so eventually.
Alexander Henderson: When we are talking about our gross margins for the rest of the year, we have taken into account. The fact that we launched there are the two new product I don't think that the new <unk>.
Doron Arazi: I don't think that the new 100-gigabit event will have an impact on this year. But as for the other products, it's taken into account, and I do expect our gross margins from these products to improve almost by a quarter as we are able to improve our performance in terms of manufacturing and bomb control.
Alexander Henderson: 100.
Alexander Henderson: Gigabit event will have an impact.
Alexander Henderson: On this year, but as for the other as for the other product is taken into account and I do expect our gross margins from this product to improve.
Alexander Henderson: Almost by the corridor as we're able to to improve our performance in terms of manufacturing and Bom cost.
Doron Arazi: What I was trying to calibrate was to what extent that an abnormally large amount of startup costs in 2024 would then fall out in 2025 as the, you know, as these products are normalized and, you know, whether that would then imply some further upside in the gross margin in the outyear. I know you don't want to give guidance for 25, but conceptually, is that a logical conclusion? Look,
Alexander Henderson: What I was trying to calibrate was to what extent that.
Alexander Henderson: Abnormally large amount of startup cost in 2024.
Alexander Henderson: Would then fall out in 2025 as the.
Alexander Henderson: As these products are our normalized and whether that would then imply.
Alexander Henderson: Some further upside in the gross margin in the out year I know you don't want to give guidance for 'twenty five but conceptually is that a logical conclusion.
Alexander Henderson: Okay, thank you.
Doron Arazi: Look, the start-up costs that you would see are actually categorized into two. One is our investment in CAPEX to build the testing equipment or to enhance the testing equipment to feed the new product. And that you will see in some investment in CapEx. But, generally speaking, I don't think that investment in CapEx is going to be that different from previous years. And the other set of costs that are actually going to expenses immediately. I would not give them more than, I don't know, half a percent of the gross margin.
Alexander Henderson: Look the startup cost the U E that you would see are actually categorized into two one is our investment in capex to build the testing.
Alexander Henderson: The testing equipment or to enhance the testing equating to feed the new product and that you will see in some.
Alexander Henderson: Some investment in Capex, but generally speaking I don't think that the investment in Capex is going to be that different from previous year and the other set of costs that are actually going to the expenses immediately.
Speaker Change: I would not give them more than I don't know half a percent of the gross margin.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Alexander Henderson: Okay.
Operator: Our next question is from Jeff Rosenberg from Realsplitter Capital. Jeff, please go ahead and unmute. Bye. Jeff, good time here.
Alexander Henderson: Our next question is from Jeff Rosenberg from Rail-splitter capital.
Jeff Rosenberg: Yes. Please go ahead.
Jeff Rosenberg: Yeah.
Jeff Rosenberg: Hi, Jeff.
Speaker Change: Sir Please go ahead and onions.
Speaker Change: Okay.
Jeff: Yes, we can hear you.
Operator: Oh, I think you guys muted me and then unmuted me. Sorry. Can you hear me now? Yes, Jeff. Good morning.
Jeff: Oh, I think you guys mute them. You then amuses me sorry in hearing out yet Jeff. Good morning. Good morning. Good morning, I just wanted to ask if you could tell us what the contribution was from cyclo and the first quarter.
Doron Arazi: Look, we do not include, and we don't want to separate The Cycle of Contribution for a very simple reason. This is a tiny transaction, and the integration is so fast, and so, so to speak, deep, that it's almost becoming impossible to separate the number. Yet.
Jeff: Look a M. We do not include and we don't want to separate.
Speaker Change: The cyclo contribution for very simple reason this is a tiny transaction.
Speaker Change: And the integration is so.
Speaker Change: The fast.
Speaker Change: And so we're so to speak and deep.
Speaker Change: That it's almost becoming eh.
Speaker Change: The impossible to separate the number yet.
Doron Arazi: Just in a quality fashion, I can tell you that in the first quarter, the contribution to the gross margin of CICLU was even slightly higher than our expectations. And in terms of business and booking, it was also as strong as we were expecting. And I just remind you that our projection for 2024 was that CICLU would contribute from their specific product between $25 to $29 million in 2024. I think that we are on a path to achieve that. And if all the stars align, maybe in the second part of the year, we'll even exceed this number.
Speaker Change: Just there in a quality Ah and fashion.
Speaker Change: I I can tell you that in the first quarter the contribution to our to the gross margin.
Speaker Change: Of the error of seek Lou was even slightly higher than our expectation.
Speaker Change: And in terms of the business and the booking it was also.
Speaker Change: As strong as we were expecting and I just remind you that our projection for 2024 was that cigna will contribute from their specific product between $25 million to $29 million.
Speaker Change: In in 'twenty 'twenty four I think that we are on a path to achieve it and if it all stars aligned maybe in the second part of the Youll be able even to exceed this number.
Doron Arazi: Great. And yeah, the reason I was asking was just about looking at the year-over-year or even sequential growth because I think you got some contribution from Z-Clue and Q4. You know, the growth looked a little slower, but I just, you know, I know it's uneven and seasonality, and so maybe the comparison against last year was difficult. So maybe just to kind of talk about the just overall strength in terms of revenue in the first quarter versus obviously very good bookings and building visibility for the year.
Speaker Change: Great and yes, and the reason I was asking was just about looking at a year over year or even sequential growth because I think you've got some contribution from sequel in Q4, the growth looked a little slower, but I just I know, it's uneven and seasonality and so maybe the comparison against last year was difficult so maybe.
Speaker Change: Just to kind of.
Speaker Change: Talk about the just overall strength in terms of revenue in the first quarter versus obviously very good bookings and building visibility for the year.
Doron Arazi: So, Jeff, if you are willing to sign an NDA and join our finance team next quarter, I would love to have you on board because you hit the nail on the head.
Speaker Change: So so Jeff if you're willing to sign an NDA enjoying our finance team next quarter.
Speaker Change: Would love to have you on board because you you hit.
Jeff Rosenberg: The nail on the head there were a few moving factors.
Doron Arazi: There were a few moving factors, but we thought that eventually, if we try to explain them, we'll just confuse everyone. First of all, usually Q1 is weaker, and last year was a bit different for us, on the good side, primarily because of some delays in delivery of some of the products that were supposed to come or to be delivered in Q4 of 2022. So starting to put all these ingredients moving up and down and trying to give a more rationalized analysis of the growth, we thought that it would just confuse anyone.
Jeff Rosenberg: That we thought that eventually if we store we try to explain them was that they would get anyone everyone confused.
Speaker Change: First of all usually Q1 is weaker.
Speaker Change: And last year was a bit different for us.
Speaker Change: To the good side, primarily because of some delays in delivery of some of the product that were supposed to come or to be delivered in Q4 of 'twenty 'twenty. Two so starting to put all these ingredients moving up and down and trying to give them more.
Speaker Change: Rationalized.
Speaker Change: The analysis of the growth we thought that it was just confused have anyone I think.
Doron Arazi: I think that the most important thing, especially after Alex's comment about how they rationalized and aligned the revenue growth between quarters, that was indicating that we may see some fluctuations. So, I would not be impressed by the percentage of Q1 versus Q1 private in 2023 in terms of projecting how the full year of 2024 is going to look like.
Speaker Change: The most important thing, especially after Alex comment about okay. How are how are rationalized and align the revenue growth between quarters.
Speaker Change: That was indicating that we may see some fluctuations.
Speaker Change: So I would not be impressed by the percentage of the Q1 versus Q1 private.
Speaker Change: In 'twenty two 'twenty three in terms of projecting how the full year of 'twenty 'twenty four is going to look like.
Doron Arazi: I would add that the most important thing that we gave guidance for this year, and the guidance was for revenues of between $300,000,000.85 and $400,000,000.
Speaker Change: And the most important thing that we gave guidance for this year and the guidance wall.
Speaker Change: For our revenues of between 33 million.
Speaker Change: We haven't made an 85 to 400 million by <unk>.
Speaker Change: And we are still we still expect to our original guidance.
Speaker Change: And we as Don mentioned in the prepared comments.
Speaker Change: We have better visibility due to the higher volume of.
Speaker Change: The bookings.
Doron Arazi: [inaudible] So, we are on target at this stage.
Speaker Change: So we are on target.
Speaker Change: At this stage.
Jeff Rosenberg: Great. Well, thanks for that color. I appreciate it.
Speaker Change: Great well, thanks for that color I appreciate it.
Operator: Thank you. There are no further questions, so please proceed.
Speaker Change: Thank you there are no further questions.
Speaker Change: Yeah.
Doron Arazi: So, as I said, this was an encouraging quarter and a solid start to the year for Ceragon. We are executing against our growth strategy and capturing market share. We believe that we are well positioned to achieve self-sustaining cash flows as we execute our growth strategy. I look forward to updating you further on our next quarterly call. Have a good day, everyone.
Speaker Change: So as I said.
Speaker Change: This was an encouraging quarter and a solid start to the year for Ceragon.
Speaker Change: We're executing against our growth strategy in capturing market share. We believe that we are well positioned to achieve self sustaining cash flows as we execute our growth strategy.
Speaker Change: I look forward to updating you further on our next quarterly call.
Speaker Change: Have a good way and the good day everyone.
Speaker Change: Goodbye.