Q4 2024 Ceragon Networks Ltd Earnings Call
Okay.
Please go ahead.
Speaker Change: Thank you, Operator, and good morning, everyone. Hosting the call today is Daron Arazi, Saragon's Chief Executive Officer, and Ronen Stein, Chief Financial Officer.
Speaker Change: Before we start, we'd like to note that certain statements made on this call will constitute as 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 Security Litigation and Reform Act of 1995.
Speaker Change: Saragon intends forward-looking terminology such as may, plans, anticipates, believes, estimates, targets, expects, intends, potential, or other comparable terminology, although not all forward-looking statements contain these identifying words.
Speaker Change: Such statements reflect current expectations and assumptions of surrogate management. Actual results may differ materially as they are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected in these forward-looking statements.
Speaker Change: A full list of risk uncertainties are disclosed in Saragon's annual report on Form 20-F that was published on March 21, 2024, as well as with other documents.
that have been
Speaker Change: subsequently filed by Saragon from time to time with the Securities and Exchange Commission.
Speaker Change: Forward-looking statements relate to the date initially made and they are not prediction of future events or results And there can be no assurance that they will prove to be accurate and Saragon undertakes no obligation to update them
Speaker Change: Saragon's public filings are available on the Securities and Exchange Commission's website at scc.gov and they may also be obtained from Saragon's website at saragon.com
In addition, today's call will include certain non-GAAP financials.
Speaker Change: For a 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 Saragon's website.
Doron: With all that said, I'd now like to turn the call over to Doron. Doron, the call is yours.
Thank you, Rob, and good morning, everyone.
Doron: This was a record year for Saragon financially, achieving record operating profit on the highest revenue levels since 2012.
Doron: Importantly, we made significant progress in our strategy to expand our TAM and diversify our revenue streams.
To remind everyone, our growth strategy consists of three pillars.
Doron: focusing on millimeter wave products that are expected to be the fastest growing part in the wireless transport market, increasing our market share in private networks of end-to-end solutions, and increasing our recurring revenue primarily by helping our customers
in Network Operation and Optimization.
Let me highlight some of the achievements in this regard.
Doron: We grew our annual revenue during 2024 by more than 13% even as the wireless transport market, according to industry analysts, declined more than 10% year over year.
Doron: About half of that growth was organic and the balance was contributed by c-clue acquisition.
Doron: We grew our bookings from private networks by more than 50 percent.
Doron: And we secured additional recurring revenue from managed services worth approximately $7 million annual recurring revenue, which is more than 30% of our current ARR.
Doron: These additional revenues are expected to have gradual impact on our recurring revenue in 2025 and 2026.
Doron: Simultaneously, we continue to execute against our product roadmap, extending our technological lead.
Doron: We have introduced the IP50CX, enabling us to win a significant new business and take market share in India.
We have introduced the new millimeter wave series IP 50 E X that we believe is the best price performance millimeter wave product in the industry as demonstrated by the recent indication of demand for the IP 50 E X a product in India.
Doron: On that same front, we have finished the test.
Doron: Our proprietary Neptune cheap successfully and have been developing the first 25 gigabit per second in a single box. Our IP 5100 E that once again is expected to be the best price performance product in the industry, enabling us to also.
Doron: I'll provide a multi band solution in a split Mount configuration of 29 gigabit per second likely the highest in our space.
Doron: And finally on the millimeter wave.
Doron: We have launched the new product version of cyclo by Ceragon product. The 80 20 that many cyclo by Ceragon customers have been waiting for.
During 2024, we also started developing a new split one product after many years of focusing primarily on an all outdoor solutions.
Doron: This product can address the needs of a large part of the market, including private networks that Steve prefers split Mount products, and we expect it to be commercially available within the first half of 2025.
Doron: On the software front, we've introduced the smart activation key that enables more flexibility and ease of use of different features and configurations of our products opening the door for software as a service business model.
Doron: We have recently seen an increased interest in our ingredient features due to the increased threat of cyber attacks.
Doron: This can drive higher software revenue for us from both our installed base and future purchases.
Doron: Our smart activation key can make this feature even easier to use.
Doron: With these achievements, we entered 2025 in a strong competitive position.
Speaker Change: I believe our position is the strongest it has been since I became CEO.
Speaker Change: We're making our strides and seamless signals of success tied to the continued execution of our strategy.
Speaker Change: The recent acquisition of <unk> technologies.
Speaker Change: Another at the station of our determination to pursue the private network market organically and Inorganically.
Speaker Change: The two acquisitions completed over the last 14 months.
Speaker Change: Prove our ability to compete in this domain.
Speaker Change: I firmly believe that we can continue increasing our market share significantly said that the dynamics of the private network market results in projects shifting from quarter to quarter and this impacts our visibility on revenue until we reach a critical mass of projects.
Speaker Change: In our backlog.
Speaker Change: On the managed services front, we had a few recent successes that are reflected in our increased committed <unk> and make us more optimistic or even much more optimistic about this part of growth.
Speaker Change: We have seen increasing interest in the market for full turnkey deals, where we are expected to design deliver deploy and manage the performance of our products over periods that can range between five to 10 years.
Speaker Change: We expect to continue this approach even if it impacts our growth pace in the short run.
Speaker Change: Ceragon has been outperforming the market in 2024.
Speaker Change: And we expect to continue to outperform the market in 2025.
Speaker Change: That's it.
Speaker Change: Data from analysts as well as other company's performance in the telecommunications technology space suggests.
Speaker Change: That the CSP market has been soft for at least a year.
Speaker Change: Recently.
Speaker Change: Some of the companies, especially in the run in fiber domain are reporting on signs of potential recovery.
Speaker Change: Iran and fiber deployments typically come before wireless transport deployments.
Speaker Change: Serving as a leading indicator for growth for us.
Speaker Change: In 2020 for Ceragon outperformed the industry in this respect due to being the vendor of choice in particular parts of the market, primarily in India and North America, yet we are not immune to the global market trends.
Speaker Change: But with the huge progress we have made with our offerings, we are very well positioned to benefit from it.
Speaker Change: From a recovery in the industry.
Speaker Change: To summarize I am very optimistic about long term direction.
Speaker Change: 2025 is indeed, starting with low visibility, but can also turn into another successful year for ceragon.
Speaker Change: <unk> market recovers and subject to the pace of success in private networks.
Speaker Change: As we navigate this period I continue to believe that Ceragon is well positioned and we expect to continue to outperform the market.
Speaker Change: I would now like to provide an overview of our Q4 highlights by region.
Speaker Change: In North America revenue was $13 $4 million.
Speaker Change: This reflects the lower level of bookings we had in Q3 as previously discussed and into Q4.
Speaker Change: We saw a nice uptick in bookings in Q4, and we expect another sequential growth in Q1 of 2025.
Speaker Change: This trend reinforces our confidence that lower bookings in Q3 were reflective of timing issues not demand.
Speaker Change: We also see opportunities for deployment of our encryption capabilities, a cyber security is getting more attention.
Speaker Change: In India revenue was $55 6 million, an all time record quarter for Ceragon exceeding the $55 million reported in the third quarter our previous record.
Speaker Change: We have been shipping and deploying equipment related to several projects in India, including the new customer we won in Q4 2023.
Speaker Change: These deployments are supporting customers in both the expansion of <unk> and <unk> networks.
Speaker Change: During the last few months.
Speaker Change: We have finished negotiations of the commercial terms with two of our customers securing our market share with the potential for a certain increase on account of competition.
Speaker Change: We have started receiving orders for.
Speaker Change: For delivery in 2025 based on the new commercial terms and we expect more orders in the coming quarters for both our microwave and EBIT product importantly.
Speaker Change: Our IP 50 E X E has generated significant traction being most probably the best price performance product in our space.
Speaker Change: Our strong relationship with one of our customers and their trust in us and its appreciation of our strong technological capabilities are opening for us more opportunities that are beyond our core domain and current roadmap.
Speaker Change: While these opportunities are in the initial exploration phase they are in other to station to our strong position in India.
Speaker Change: In our Asia Pacific Region, we finished the year strong winning business that included significant cyclo by Ceragon products.
Speaker Change: This was primarily in the point to Multipoint access solutions for municipality projects, which included managed services following deployment.
Speaker Change: We also were awarded a project worth of approximately $20 million in collaboration with our company to provide capacity as a service to set a communications service providers as well as $3 $5 million win in the energy demand.
Speaker Change: We expect to have final agreement signed by this.
Speaker Change: Final agreement signed by the first half of 2025.
Ron: With that I'll turn the call over to Ron <unk>, our CFO to discuss the results in more detail Ronan over to you.
Speaker Change: Thank you Ron and good morning, everyone.
Speaker Change: Q4, 2024 was another successful quarter closing 2024, with 13, 5% revenue growth year over year and more than 10% and non-GAAP operating profit.
Speaker Change: When eliminating an approximately $9 1 million.
Speaker Change: Benefits related to collection on account of that settlement agreement from a south American customer.
Speaker Change: While further strengthening our financial position and increasing our operating leverage we have invested organically and inorganically in positioning ourselves better in the fastest growing segments of now more diversified markets.
Speaker Change: To help you understand the results, we'll be referring primarily to non-GAAP financials.
Speaker Change: For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures. We refer you to today's press release.
Speaker Change: Let me now review the fourth quarter results.
Speaker Change: Revenues for the fourth quarter were $106 9 million.
Speaker Change: Up 18, 3% from $90 4 million.
Speaker Change: In Q4 2023.
Speaker Change: Our strongest regions in terms of revenue for the quarter were India, and EMEA with $55 5 million.
Speaker Change: $16 2 million respectively.
Speaker Change: By North America.
Speaker Change: We had three customers in the fourth quarter that contributed more than 10% of our revenues.
Speaker Change: Gross profit for the fourth quarter on a non-GAAP basis was $36 7 million.
Speaker Change: An increase of 15, 5% compared to $31 8 million in Q4 2023.
Speaker Change: Our non-GAAP gross margin was 34, 3%.
Speaker Change: Paired with gross margin of 35, 1% in Q4 2023.
Speaker Change: We continue to achieve this gross margin despite the change in regional revenue mix.
Speaker Change: We achieved this by increasing revenues continues to focus on improving product costs and maintain control over our fixed costs are.
Speaker Change: Our gross margins may continue to fluctuate from quarter to quarter due to changes in volumes and revenue mix.
Speaker Change: As for operating expenses in.
Speaker Change: In general operating expenses in 2024 fully include the impact of the secure acquisition at the end of 2023, and thus impact the comparison to 2023.
Speaker Change: Operating expenses.
Speaker Change: Research and development expenses for the fourth quarter on a non-GAAP basis was $8 8 million.
Speaker Change: Up from $7 7 million in Q4 2023.
Speaker Change: As a percentage of revenue.
Speaker Change: R&D expenses were eight 2% in the fourth quarter compared to eight 5% in the fourth quarter last year.
Speaker Change: Sales and marketing expenses for the fourth quarter on a non-GAAP basis were $10 6 million.
Speaker Change: Up from $10 2 million in Q4 2023.
Speaker Change: As a percentage of revenue sales and marketing expenses were nine 9% in the fourth quarter compared to 11, 3% in the fourth quarter last year.
Speaker Change: General and administrative expenses for the fourth quarter on a non-GAAP basis were $5 1 million.
Speaker Change: Compared to $6 $1 million in Q4 2023.
Speaker Change: As a percentage of revenues G&A expenses were four 8% in the fourth quarter compared to six 7% in the fourth quarter of last year.
Speaker Change: Operating income for the fourth quarter on a non-GAAP basis was $12 2 million.
Speaker Change: Compared with $7 8 million for Q4 2023.
Speaker Change: As a percentage of revenues non-GAAP operating income was 11, 4% in the fourth quarter compared to eight 6% in the fourth quarter last year.
Speaker Change: Financial and other expenses for the fourth quarter on a non-GAAP basis were $3 5 million net.
Speaker Change: Negatively impacted by foreign exchange fluctuations and the strengthening of the U S dollar versus several currencies offset by continuous reduction in interest expenses.
Speaker Change: Our tax expenses for the fourth quarter on a non-GAAP basis were $1 million.
Speaker Change: Net income for the fourth quarter on a non-GAAP basis was $7 7 million.
Speaker Change: Or <unk> <unk> per diluted share compared to $3 7 million.
Speaker Change: Or four cents per diluted share for Q4 2023.
Speaker Change: Turning to the full year results.
Speaker Change: Revenues were $394 2 million.
Speaker Change: Up 13, 5% from $347 2 million.
Speaker Change: In 2023.
Speaker Change: Gross profit for 2024 on a non-GAAP basis was $138 2 million.
Speaker Change: An increase of 14, 3% compared to $129 million in 2023.
Speaker Change: Our non-GAAP gross margin was 35, 1%.
Speaker Change: Compared with the gross margin of 34, 8% in 2023.
Speaker Change: Operating income for the year on a non-GAAP basis was $48 8 million.
Speaker Change: An all time record compared with $29 million.
Speaker Change: For 2023.
Speaker Change: As a percentage of revenues non-GAAP operating income was 12, 4% for the year compared to eight 4% last year.
Speaker Change: Net income for the year on a non-GAAP basis was $36 4 million or 41 cents per diluted share.
Speaker Change: Compared to $16 7 million or <unk> 20 per diluted share for 2023.
Speaker Change: As for our balance sheet.
Speaker Change: Our cash position at the end of the year was $35 3 million.
Speaker Change: Compared to $28 $2 million at the end of 2023.
Speaker Change: Short term loans were $25 2 million.
Speaker Change: Compared to $32 6 million.
Speaker Change: As of December 31st 2023.
Speaker Change: We had a net positive cash position of $10 1 million.
Speaker Change: Compared to a negative net cash position of $4 4 million at December 31st 2023.
We believe we have a cash and facilities that are sufficient for operations and working capital needs.
Speaker Change: Our inventory at the end of 2024 was $59 7 million.
Speaker Change: Down from $68 8 million at the end of December 2023.
Speaker Change: The reduction is mainly related to our continued efforts since 2023 to streamline inventory levels. Following the improvement in components availability and substantial shipments to India.
Speaker Change: Our trade receivables at the end of 2024.
Speaker Change: At $149 6 million.
Speaker Change: As compared to $104 3 million.
Speaker Change: At the end of December 2023, reflecting the growth of our business in India.
Speaker Change: Our DSO now stands at 126 days.
Speaker Change: For cash flow net.
Speaker Change: Net cash flow generated by operations and investing activities in 2023 was $8 6 million.
Speaker Change: Turning to our 2025 outlook, we expect 2025 revenues to be between $390 million to $430 million.
Speaker Change: Inclusive of Italy acquisition.
Speaker Change: We expect non-GAAP operating margins of at least.
Speaker Change: 10%, even at the low end of our revenue range as we continue improving our cost structure and look carefully at our expenses, especially in times like these flow lower visibility.
Speaker Change: We also expect to increase our free cash flow compared to 2024 level.
Speaker Change: With that I'll now open the call for your questions operator.
Speaker Change: Thank you in order to ask a question. Please raise your hand using your mobile.
Speaker Change: Desktop application and wait for your name to be announced once again, please raise your hand.
Speaker Change: Your mobile.
Speaker Change: <unk> application and wait for your name to be announced.
Speaker Change: Our first question today.
Ryan: Comes from the line of Ryan <unk> of Needham <unk> Company. Please go ahead.
Speaker Change: Brian you should be able to mute.
Speaker Change: Sorry for the delay thank you for the question.
Speaker Change: Yes. My question was about the <unk> acquisition can you maybe outline for us.
Speaker Change: The role that this company plays in the energy industry.
Speaker Change: What types of customer relationships they have that they can bring to the company related to this new charter market. Thank you.
Speaker Change: Hi, Ryan this is the wrong. Thank you for your question.
Speaker Change: It with the VA.
Speaker Change: Very well known.
Speaker Change: The system integrator, primarily in North America.
Speaker Change: For networks.
Speaker Change: Within the.
Speaker Change: Energy and utilities domain.
Speaker Change: They have very.
Speaker Change: Sure.
Speaker Change: Good reputation.
Speaker Change: And they have.
Speaker Change: Very nice.
Speaker Change: Our portfolio of customers some of them are very prominent in those industries.
Speaker Change: And.
Speaker Change: Their relationship are very strong.
Speaker Change: And over time, they're able even to kind of.
Speaker Change: Build their relationship.
Speaker Change: To a level that they.
Speaker Change: Ill, providing software to their customers.
Speaker Change: That is helping them.
Speaker Change: Very nicely in managing the network.
Speaker Change: Most.
Speaker Change: The deployment.
Speaker Change: This software is actually also being OEM.
Speaker Change: Via one of the other.
Speaker Change: Technology vendor to this particular space that is using this software for <unk> customers I think the combination of a strong understanding.
Speaker Change: Of the needs of these two Sigma private network market together with the very strong relationship.
Speaker Change: We're able to build over time.
Speaker Change: And the additional 8-K.
Speaker Change: Capabilities in terms of software development.
Speaker Change: And boost our success in the private networks market in North America and outside predominantly.
Speaker Change: In.
Speaker Change: <unk>.
Speaker Change: Energy and the utilities space.
Speaker Change: That's really helpful. There Opex these are energy producers or distributors or kind of broadly in the crowd.
Speaker Change: It's broadly you see different use cases.
Speaker Change: This could be producers this could be oil and gas manufacturers.
Speaker Change: Have both offshore and onshore networks.
Speaker Change: I would say it could be mining there is a lot of.
Speaker Change: Different use cases under the <unk>.
Speaker Change: The energy segment, and I would dare, saying that probably their solutions can can be applicable for 80% to 90% of the use cases.
Speaker Change: Now it sounds like a great opportunity.
Speaker Change: You mentioned on the call here on the private network side maybe.
Speaker Change: Maybe some some deal slips.
Speaker Change: It is coming to you from channels and.
Speaker Change: What types of customer opportunities are these.
Speaker Change: In terms of market verticals that are seeing some slips.
Speaker Change: Yeah, so so usually.
Speaker Change: The reporting about private networks is focusing primarily on deals where either we go direct.
Speaker Change: Or we go via system integrator, but we have it.
Speaker Change: The ultimate the relationship with the end user helping them and integrator to come up with the best solution.
Speaker Change: So eventually the slippage is driven by a pattern in this industry that it takes time to close deals, especially if you are working with some government institutions that may make the decision based on the available budget.
Speaker Change: Sometimes defer the decision.
Speaker Change: But generally speaking.
Speaker Change: It's either direct or system integrators, where we have a very strong a direct impact on the architecture and the solution.
Speaker Change: Got it thank you and you talked about some contract renewals or expansions.
Speaker Change: In India.
Any any color you can share with us. They are these are these are the big mobile operators that have been your traditional customers there.
Speaker Change: So we're still talking about the large players.
Speaker Change: We're starting 2025, probably with the best position.
Speaker Change: I think since 2013 of 2014, when we adjust the.
Speaker Change: The announced the IP 20 C. At the time. This was the product that was winning for US the market. It was like a silver bullet.
Feel that.
Speaker Change: We are kind of.
Speaker Change: Repeating this same position at the beginning of 2025. This time, we obviously continue being very successful with the microwave product with our CXC.
Speaker Change: Sure.
Speaker Change: Our theories.
Speaker Change: But more importantly, especially nowadays when the demand for EBIT for millimeter wave solutions is higher I think.
Speaker Change: Is that the.
Speaker Change: 50, Exa is a winning product and actually this.
Speaker Change: The pricing and the conditions of delivering these products.
Speaker Change: Due to the India market at least for two <unk>.
Speaker Change: Customers out of the air.
Speaker Change: Three we own are already closed and they are.
Speaker Change: Waiting.
Speaker Change: For this product too.
Speaker Change: To be.
Speaker Change: In mass production, which is going to happen starting Q3.
Speaker Change: Got it that's great and one last one if I can around gross margins and new products and a lot of time to new products have lower yields.
Speaker Change: Higher startup costs, how should we think about shaping.
Speaker Change: Gross margins for the year in consideration of kind of the new products ramping.
Speaker Change: No. This is also associated for sure.
Speaker Change: With the original mix in each and every quarter, but generally speaking AI.
Speaker Change: I believe that as we introduce these new products, although we may face certain.
Certain period of.
Speaker Change: I would say more investment.
Speaker Change: Generally speaking I would expect our gross margins too.
Speaker Change: Improve during the second part of the year.
Speaker Change: <unk>.
Speaker Change: Great.
Speaker Change: Thats all Ive got.
Speaker Change: Thank you. Thank you very much. Our next question comes from the line of Scott Searle from Roth Capital. Please go ahead.
Speaker Change: Okay.
Scott Searle: Hey, good morning, good afternoon, Thanks for taking my questions maybe.
Speaker Change: Maybe just to follow up on some of Ryan's questions on the private networks front Undrawn I'm wondering if you could.
Speaker Change: Give some of your longer term expectations in terms of growth for private networks.
Speaker Change: I know, there's a little little bit of softness in North America. This quarter, what's the comfort level with that returning.
Speaker Change: In the second half of this year.
Speaker Change: And also on the M&A front, you have been acquisitive in that area with <unk> now and the end to end.
Speaker Change: Are you still looking around in this space to continue to add to and enhance the portfolio.
Speaker Change: So good morning, Scott and thank you for your questions I will start with the last one so it is part of our.
Speaker Change: The strategy too.
Speaker Change: Actually execute.
Speaker Change: With continuous.
Speaker Change: Search for M&A opportunities, so definitely we will continue to pursue.
Speaker Change: For such opportunities that can strengthen our position and.
Speaker Change: That's a part.
Speaker Change: Part of our daily work here as management in.
Speaker Change: In Ceragon when it returns to the private networks.
Speaker Change: We believe that the.
Speaker Change: The second part of the year.
Speaker Change: Could be stronger for us.
Speaker Change: I think that also with the last organizational changes we have done internally, we're even more well positioned.
Speaker Change: Two to pursue such opportunities and to take business.
Speaker Change: There are certain indications that there is.
Speaker Change: And increased demand.
Speaker Change: For that particular in North America, but just to remind you. This strategy is not solely focused on North America, we see a lot of other private network opportunities in other places in the world. This.
Speaker Change: Deals that we won in APAC.
Speaker Change: That is actually leveraging the cyclo.
Speaker Change: Point to Multipoint product.
Speaker Change: Four four municipalities is just another example.
So I am very very optimistic about private networks in general, Yes, I believe that we will continue in high percentage of growth.
Speaker Change: In this domain.
Speaker Change: And I believe that North America will be a much better in 2025.
Speaker Change: Very helpful and maybe to shift over in India for a second I'm wondering if you could talk about the comfort level and visibility in the second half of this year. You also indicated you benefiting from both forging <unk> builds I'm wondering how E band fits into that particularly as we start to get into the latter portion of this year.
Speaker Change: Yeah. So so look.
Speaker Change: The way the process works usually is that we are before the.
Speaker Change: The next day.
Speaker Change: Fiscal year.
Speaker Change: For the operators in India that basically starts.
Speaker Change: In April we started the negotiation and the discussions about the volumes.
Speaker Change: They expect to buy from us the kind of product that they want to buy from us given their plans.
Speaker Change: For rollout.
Speaker Change: And obviously following.
Speaker Change: Negotiation about commercials, we get a strong indication about our <unk>.
Speaker Change: Market share and basically we finish this process was due out of the the three customers. The other one is the one that we won back in 2023, and we are still delivering under the.
Speaker Change: Old contract. So there there was no need at least not yet to discuss further the terms now when when we look into 2025, we see a very strong phenomena.
Speaker Change: A.
Speaker Change: Operators.
Speaker Change: Basically going to.
Speaker Change: Increased their fixed wireless part of the network in order to serve not just mobility, but also to serve homes.
Speaker Change: And this is a driving.
Speaker Change: Any increase in demand for our.
Speaker Change: Our EBIT solution.
Speaker Change: The backhaul.
Speaker Change: For the fixed wireless access that usually it will contain much more capacity and this is the main driver for at least some of the customers that we are working with to go back and to start buying.
Speaker Change: E band products.
Speaker Change: I believe.
Speaker Change: We'll see.
Speaker Change: Very significant ramp up on the second part of 2025, but I can tell you that as we speak we already received orders for EBIT in both the oil products and the new product.
Speaker Change: Few days ago, and we intend to start delivering certain quantities in Q1 and Q2.
Speaker Change: Thank you very helpful and lastly, if I could.
Speaker Change: Running on the operating margin targeting 10% plus for this year I'm wondering if you could give us some directional guidance in terms of Opex as we go into the first quarter. Thanks.
Speaker Change: So as I mentioned in the pre.
Speaker Change: Yeah.
Speaker Change: In the remarks.
Speaker Change: We are going to align on the.
Speaker Change: Opex and to ensure that.
Speaker Change: As visibility.
Speaker Change: Is not that high.
Speaker Change: We are monitoring the opex as much as possible so Jenny.
Speaker Change: Generally.
Speaker Change: We will align that with our revenues and the gross margin to ensure that.
Speaker Change: The target is.
Speaker Change: As the actuaries.
Speaker Change: As possible to the targets of 10%.
Speaker Change: The gross margins on the other hand.
Speaker Change: It's obviously dependent toward dawn mentioned before regarding the mixture.
Speaker Change: And of the of the revenues and also the volume of the revenues.
Speaker Change: Yeah.
Speaker Change: Thanks, so much.
Speaker Change: Thank you. Our next question today comes from the line of Theodore O'neill from <unk> Research. Please go ahead.
Speaker Change: Yes, thanks, and congratulations on the revenue in the quarter.
Speaker Change: I'm sorry, Jerry.
Speaker Change: In this challenging environment I was wondering if you could talk about your success in India, just sort of briefly is this.
Speaker Change: Talk about the combination of technology wins versus market share there for you.
Speaker Change: I would start by saying that.
Speaker Change: The.
Speaker Change: The most important things that grow our.
Speaker Change: <unk> strong position in India is our technology.
Speaker Change: We are not a new vendor to.
Speaker Change: To the Indian market.
Speaker Change: And then.
Speaker Change: Many years of.
Speaker Change: Delivering very reliable products and in most cases cutting edge and also coming with a very good price performance.
Speaker Change: The.
Speaker Change: <unk>.
Speaker Change: Factors is creating this ongoing demand for us I think.
Speaker Change: That this actually is also built for us very stronger relationship over time.
Speaker Change: The customer know that even if we are introducing a new product that they did not fully test.
Speaker Change: They know that they can rely on us that.
Speaker Change: 90% probability.
Speaker Change: It will be functional from day, one as we did with the IP 50 X in 2024.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: It's not they know that we will.
Speaker Change: Do the utmost.
Speaker Change: And find the solutions and that has created an intimate relationship for us with at least some of the customers and it actually opens up more opportunities for us where they are coming to us.
Speaker Change: And asking for specific.
Speaker Change: The use cases for specific products.
Speaker Change: That they are pursuing knowing that if.
Speaker Change: We can eventually commit to meet the spec.
Speaker Change: They can trust us.
Speaker Change: So all in all it's a combination of very strong technology.
Speaker Change: Very in depth understanding of the Indian market needs in terms of price performance.
Speaker Change: And over time, obviously building a strong relationship with the customers executives.
Speaker Change: Okay and Toronto.
Ron: Ron I Wonder if you could talk about.
Speaker Change: How do you manage the challenge of having tier one.
Speaker Change: It's ramping up and down in what.
Speaker Change: What kind of impact that has in terms of youre managing.
Speaker Change: Balance sheet income statement your personnel.
Speaker Change: Well first of all.
Speaker Change: I want to start by by saying that our three pillar strategy.
Speaker Change: Exactly.
Speaker Change: Men, who resolve at least partially.
Speaker Change: For this.
Speaker Change: So by going after private networks.
Speaker Change: And by going up the managed services, whether it's full private networks or four.
Speaker Change: Service providers that's exactly.
Speaker Change: The long term answer for this is an actuation in the CSP in a market that is us is very cyclical now.
Speaker Change: On the expense and the cost structure side, we are obviously.
Speaker Change: Looking into this space.
Speaker Change: And as I mentioned in a few previous conference call, we have a very.
Speaker Change: Structured model and strategy, where we are changing.
Speaker Change: Changing the baseline of our cost by building a low cost.
Speaker Change: Centers of excellence, where a lot of back office functions are.
Speaker Change: Our concentrated in those centers and buy that are becoming more efficient and obviously in terms of low cost.
Speaker Change: There are also reducing our cost were versus the <unk>.
Speaker Change: Productivity, so that's one piece.
Speaker Change: Part of our strategy. It's a three year plan that is being looked at every three years and then we come up with a new plan and this is a gradual approach on top of that when we see that the visibility is becoming lower.
Speaker Change: Taking.
Speaker Change: The measures.
Speaker Change: To do certain alignments, usually usually.
Speaker Change: In the regions that we see that the weakness.
Is the strongest and we don't expect.
Speaker Change: In the immediate recovery.
Speaker Change: So generally speaking we are striving.
Speaker Change: Two.
Speaker Change: To contain our costs and expenses and we are making the necessary adjustments.
Speaker Change: Either we use subcontractors or we also make.
Speaker Change: The necessary adjustments in specific.
Speaker Change: Activity is that we don't see them as very strong.
Speaker Change: As applicable.
Speaker Change: Hello, Thanks, very much my last question is.
Speaker Change: Are you seeing any supply chain issues.
Speaker Change: The short answer is that so far we have not seen any.
Speaker Change: Any significant supply chain issues, there might be some cases here and there whether a specific component is missing and since we are managing our inventory and our liabilities to the vendors very meticulously in order to minimize the exposure sometimes it comes on.
Speaker Change: The components scarcity.
Speaker Change: Sometimes we may need to pay some expedite fees, but this is a very tactical situation and eventually I truly believe that this policy is actually driving much better operational and financial results for us.
Speaker Change: Okay. Thanks very much.
Speaker Change: Thank you. Our next question today comes from the line of Jonathan Pearce. Please go ahead.
Speaker Change: Okay.
Jonathan Pearce: Can you guys hear me.
Jonathan Pearce: Yes, Hi, Jonathan Awesome ASIC Allen.
Speaker Change: Hey, just wanted to say congratulations on a great quarter and a great year. It seems like you guys are starting to fire on all cylinders, which is really really nice to see.
Speaker Change: My question has to do with the AAR issue with their South American customer.
Speaker Change: Seems like the past few quarters, you guys have seen a positive impact from that issue and then from what I understand this quarter actually had a negative impact just wondering if you guys could shed a little bit more light on that and then also.
Speaker Change: How you guys see it affecting subsequent quarters, if at all or if that's now behind us.
Speaker Change: Okay.
Jonathan Pearce: Hi, Jonathan.
Speaker Change: Two quarters of Q2 and Q3.
Speaker Change: The impact that it had like a one time impact of resolving all the debt.
Speaker Change: <unk> already.
Speaker Change: Provision in 2022, so it's not on our books anymore and the fact that we collected something that was fully provisioned.
Speaker Change: <unk> about $9 1 million.
Speaker Change: Altogether in Q2 and Q3.
Speaker Change: The settlement is for higher amount, but we're still chasing further amounts, but it's not on our books anymore.
Speaker Change: <unk> is not active they are.
Speaker Change: There is no anything no impact on the AAR anymore.
The air itself went up as I mentioned in there.
Speaker Change: In the in my comments.
Speaker Change: Comments.
Speaker Change: That.
Speaker Change: And that is more or less in line with the fact that the business shifted more towards India, and obviously DSO in India is.
Higher.
Speaker Change: I would just add that on top of <unk> comments, if you look at our investor presentation.
Speaker Change: There is a chart that shows the adjusted non-GAAP operating profit and margin.
Speaker Change: And there we actually carving out.
Speaker Change: This.
Speaker Change: These two.
Speaker Change: Very significant collections just to normalize for the investors community how do we see.
Speaker Change: The operating.
Speaker Change: non-GAAP profit.
Speaker Change: In the normal course of business.
Speaker Change: Okay.
Speaker Change: Alright, thanks, guys.
Speaker Change: Thank you our last question today comes from the line of <unk>. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hi can you hear me okay.
Speaker Change: <unk>, yes, we can hear you very well.
Speaker Change: Yes. Thank you.
Speaker Change: I just want to.
Speaker Change: Our remarks that over the years I've, followed the company and yourself are you done remarkably well.
Speaker Change: Some of the storms have been counted.
Speaker Change: Those are on the way congratulations.
Speaker Change: Based around.
Speaker Change: Nine months.
Wish you well.
Speaker Change: Escalations. Thank you.
Speaker Change: Gunther. Thank you so much for your kind words I wish that you will continue being with us for as long as possible I wish you best health.
Speaker Change: And.
Speaker Change: I wish you to be able to continuing following up on us hopefully with continued success.
Speaker Change: Yes. Thank you I will do that as long as I can on sure.
Thank you.
Speaker Change: We have no further questions. Please proceed.
Speaker Change: As we enter 2025 following our achievements in 2024 hour long term and our long term outlook and confidence has only grown.
Speaker Change: We remain focused on executing on our strategy towards achieving our stated long term revenue and profitability targets.
In the near term visibility is limited hence we are prudent in our projections long term, we continue to move forward towards our target of $500 million in annual revenues. We believe that the pieces are in place for us to achieve this level of scale.
Speaker Change: From a combination of organic growth as well as strategic acquisitions.
Speaker Change: I look forward to updating you further on our next quarterly call have a good day everyone.