Q1 2025 Ceragon Networks Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Ceragon Networks Learning's call. Our presentation today will be followed by a question and answer session, at which time, if you wish to ask a question, you will need to raise your hand using your mobile or desktop application, or press estrics on your telephone keypad and wait for your name to be announced.
I must advise you that this call is being recorded today.
Speaker Change: I would like to now hand this call over to our first speaker, Rob Fink, Head of Investor Relations. Please go ahead.
Doron Arazi: Thank you, operator, and good morning, everyone. Hosting today's call is Doron Arazi, Ceragon's Chief Executive Officer, and Ronen Stein, Chief Financial Officer.
Doron Arazi: Before we start, I would like to remind everyone that certain statements made on this call may constitute forward-looking statements within the meaning of the Securities Act of 1933, Securities Act of 1934, as well as the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Doron Arazi: Ceragon 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.
Doron Arazi: Such statements reflect current expectations and assumptions of Ceragon's 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 our forward-looking statements.
Doron Arazi: These risks are detailed in Ceragon's most recent annual report on Form 20F, as published on March 25th, 2025, as well as another document that may be subsequently filed by Ceragon from time to time with the Securities and Exchange Commission.
Doron Arazi: Forward-looking statements relate to the date initially made, and they are not predictions of future events or results. There could be no assurance that they will prove to be accurate. And Ceragon undertakes no obligation to update them.
Doron Arazi: Ceragon's public filings are available on the Securities and Exchange Commission's website at sec.gov and maybe also obtained from Ceragon's website at Ceragon.com.
Doron Arazi: Also, today's call will include certain non-GAAP numbers. For reconciliation between gap and non-GAAP results, please see the table attached to the press release that was issued earlier this morning, which is posted on the Investor Relations section of Ceragon's website.
Doron Arazi: With all that, I will now turn the call over to Doron. Doron, the call is yours.
Thank you, Rob, and good morning everyone.
Doron Arazi: Ceragon delivered a strong financial performance in the first quarter, highlighted by the highest Booking Levels since Q1, 2020-24.
Doron Arazi: We are reiterating our outlook for full year 2025 and have been encouraged by multiple positive demand signals we observed during the quarter and specifically at Mobile World Congress in Barcelona in early March.
Doron Arazi: Our conversations with senior decision makers from both existing and prospective customers
Doron Arazi: Further validated that Ceragon is strategically aligned for long-term success in the evolving wireless connectivity landscape.
Doron Arazi: Notably, we had direct discussions with senior executives from major customers in India and other regions.
These conversations, along with other market insights,
Doron Arazi: Support our belief that our current offerings are exceedingly well aligned with customers needs.
Additionally,
We heard compelling feedback that supports [inaudible]
Doron Arazi: Strong anticipated demand for microwaves and millimeter wave products including first fixed wireless point to point point to multi-point solutions for tier one operators in North America and Europe .
Doron Arazi: We are discussing with at least one T1 operator the possible development of a new solution tailored to their needs that has substantial commercial potential.
Doron Arazi: Another trend that was evident at the Mobile World Congress was the deep interest from CSPs and private networks in our software-driven services and solutions to support network cooperation and optimization.
Doron Arazi: As we have discussed on previous calls, managed services are an important strategic priority for Ceragon and we saw strong interest at MWC from customers who are increasingly evaluating software applications and managed services to enable faster deployment and more efficient network operation.
Doron Arazi: Finally, we continue to see the emergence of new use cases for our products.
Doron Arazi: Both in CSP and private network segments, which have the potential to meaningfully expand our targeted addressable market and drive incremental revenue opportunities.
Doron Arazi: These market dynamics are consistent with our product and service roadmap supporting our strategy to maintain technology leadership and address the needs of both T1 and T2 carriers as well as private networks.
Doron Arazi: As we have previously noted, the shift to software driven services and applications will also enable us to increase our annual recurring revenue and achieve higher margins relative to our traditional hardware business.
Doron Arazi: In February , we successfully closed the acquisition of E2E Technologies, strengthening our expertise in private networks.
particularly in the energy and utilities sector in North America.
Doron Arazi: Private Networks remain a fast-growing segment of telecom connectivity, and it with proven system integration capabilities and software platform are expected to strengthen our portfolio significantly.
Doron Arazi: E2E's bookings in the first quarter outperformed our expectations and revenue contribution in the first quarter was in line with our expectations.
Doron Arazi: With continue to expect it to be a creative, to non-GAAP earnings by the second half of 2025.
Doron Arazi: I'd now like to review our first quarter highlights by Regen
Doron Arazi: In India, revenue was $42.9 million and increase of 65% year-over-year [inaudible]
and Corrigingly Bookings were also the highest since Q1 2024.
Doron Arazi: Moreover, a minimal amount of these bookings was tied to the previously announced $150 million project award for a major network modernization initiative of a T1 operator
which demonstrates broad-based demand throughout India.
Doron Arazi: The elevated bookings and revenue in Q1 and continued strong customer demand reinforced
Doron Arazi: In North America, revenue was 17.6 million, including contributions from E to E.
Doron Arazi: Excluding the contributions from E2E, Q1 bookings and revenue were also higher than in Q4.
Doron Arazi: We are improving our competitive position with existing customers and getting more traction from new prospects.
Doron Arazi: The tariff dynamics are creating some instability for certain customers, primarily those in private networks.
Doron Arazi: However, we are encouraged by the continued steady activity among carriers.
Doron Arazi: While we are closely monitoring for any shifts in customer ordering patterns, we are also proactively positioning ourselves to navigate these changes effectively.
Doron Arazi: Simultaneously, we are actively assessing the proposed tariffs, not just to mitigate potential risks, but also to identify strategic opportunities to capture marketer.
Doron Arazi: Our diverse manufacturing footprint and adaptable supply chain provide us with a distinct advantage in this environment, allowing us to explore alternative sourcing and pricing strategies that could offset potential impact.
Doron Arazi: While it is still too early to quantify the precise effect of our profitability,
Doron Arazi: In 2025, we believe the net impact of tariffs will be minimal.
Doron Arazi: As we remain vigilant in monitoring these developments, we are confident in our ability to adapt swiftly and leverage our strengths
to drive continued growth.
Returning to some more general commentary
Doron Arazi: Through the acquisition of Cyclo and E2E, we have significantly enhanced our capabilities in the first growing segments of wireless connectivity, particularly millimeter wave and private network markets.
Doron Arazi: We are continuously evaluating additional strategic M&A opportunities that would further complement our product and service offerings enabling us to further expand in high growth areas for [inaudible]
Doron Arazi: I'd now like to turn the call over to Ronen Stein, our CFO , to discuss the financial results in more details.
Moran, over to you.
Thank you, Doron, and good morning, everyone.
Morel: Our revenue was at the higher end of our expectations and we maintained solid non-grab profitability.
Morel: To help you understand the results, we will be referring primarily to non-GAAP financial s.
Morel: For more information regarding our use of non-glapped financial measures, including recommendations of these measures will refer investors to today's press release.
Let me now review the first quarter results.
Morel: Revenue for the first quarter was $88.7 million, up to 0.2% from $88.5 million in the first quarter of 2024.
Morel: India was again the strongest region in terms of revenue and contributed 42.9 million dollars.
Morel: North America rebounded from $13.4 million in Q4 2024 to $17.6 million in Q1 2025 and was the second strongest region.
Morel: We had three customers in the first quarter that contributed at least 10% of our revenue.
Morel: Gross profit in the first quarter on a non-grab basis was $29.7 million, which was down 8.6% from $32.5 million in Q1 2024.
Our non-gabbed gross margin was 33.5%
Morel: as compelled with gross margin of 36.7% in the prior year period.
Morel: The decline in growth margin was mainly attributable to the change in revenue mix by region with India increasing to 48% of revenues and North America declining to 20% of revenues.
Over the longer term of our initiatives in private networks.
Morel: and an increase in deployments of source of driven services should enable us to maintain or potentially expand growth margins of setting regional revenue mix headwinds.
Moving on to operating expenses.
Morel: Research and development expenses in Q1 2025, on a non-gal basis, were $8.1 million, down from $8.7 million in Q1 2024.
Morel: As a percentage of revenue, R&D expenses on a longer basis were 9.1% in the first quarter, versus 9.8% in the prior year period.
Morel: 7 marketing expenses on a non-grad basis in the first quarter were $11.8 million up from $10.7 million in T1 2024.
Morel: As a percentage of revenue says the marketing expenses on a non-group basis were 13.3% in the first quarter as compared to 12.1% in the first quarter of 2024.
Morel: General and administrative expenses on an on-game basis for the first quarter were $5.4 million as compared to $5.5 million in Q1224.
Morel: As a percentage of revenue, GNA expenses on an on-gab basis were 6% in Q1 2025, versus 6.3% in the year ago period.
Morel: restructuring the related charges on a gap basis in the first quarter worth 3.7 million dollars.
Morel: as compared to $1.4 million in the first quarter of 2024, reflecting our increased efforts to achieve optimal cost discipline.
These charges are backed out of our non-GAAP operating expenses.
Morel: In the first quarter, we have 0.5 million dollars versus 0.5 million dollars in the first quarter of 2024.
These charges are backed out of our non-GAAP operating expenses.
Morel: Operating income on a longer basis for the first quarter was $4.5 million, versus operating income
Morel: Lower Gross Profit was the primary factor for the decline in operating income year over year.
Morel: Financial and other expenses on a non-depth basis in the first quarter were $1 million and an improvement from $2.3 million in the prior year period.
Morel: The change was positively impacted from favorable exchange rate changes and lower interest expenses.
Morel: Our tax expenses on a non-grad basis for the first quarter was $0.9 million.
Morel: non-GAAP net income for Q1 2025 was $2.6 million or 3 cents per diluted share versus non-GAAP net income of $4.7 million or 5 cents per diluted share in Q1 2024.
Moving over to our balance sheet
Morel: Our cash position at March 31, 2025 was $27.7 million, down from $35.3 million at the end of 2024.
Morel: Primarily due to cash payments made in Q1 in connection with the acquisition of E2E, amounting
Morel: Showtime loans were 25.2 million dollars at the end of the first quarter as they were at year end 2024.
Thus, our net cash position was approximately $2.5 million.
Morel: as opposed to $10.1 million at December 31, 2024. Again, largely due to the acquisition of E3.
Morel: We believe we have cash and facilities that are sufficient for operations and working capital needs.
Morel: Inventory, at the end of the first quarter, was $62.3 million Up slightly from $59.7 million at the end of 2024, as we are preparing to introduce our new event products.
Morel: expected to be delivered mainly in India in the second half of the year.
Morel: Our trade receivables at the end of the first quarter were $145.7 million versus $149.6 million at the end of December 2024.
ODSO now stands at 135 days
Looking at our statements of cash flow
Morel: Net cashflow used by operations and investing activities in Q1 2025 was $1.6 million, excluding cash payments made in connection with acquisition of E2E, net of acquired cash.
Turning to our 2025 Outlook Rommel Dionisio, Rommel Dionisio,
Speaker Change: As Doron mentioned earlier, we are reiterating our previous 2025 revenue guidance of $390 million to $430 million.
Speaker Change: We also reiterate our expectations for non-GAAP operating margin of at least 10% at the low end of our revenue guidance and higher positive cash flow in 2025 and in 2024.
With that, I now open the call for your questions.
Operator
Speaker Change: Thank you. To ask a question, please raise your hand using your mobile or desktop application or press star 9 on your telephone keypad and await for your name to be announced.
Speaker Change: Our first question will be from Christian Swab from Craig Hallum.
Christian.
Oh, I'm sorry I was unmuted. I'm sorry about that.
Speaker Change: I'm just wondering if you could give us some more color regarding the strength and bookings in India, is that a diverse customer base is that concentrated in the hands of one person primarily. Any additional color there would be fantastic.
Speaker Change: Hi, Christian. I would say that it's not a concentrated on a single customer. Actually, it's distributed between two customers that we are seeing very strong demand.
Speaker Change: If that happens down the road during 2025, this will be another boost.
for our business at the same token.
and I can... [inaudible]
Speaker Change: Say that we are also discussing with our all-day customer that in the last couple of years decreased the spending in wireless technology on some new opportunities.
Speaker Change: Great. And then you mentioned that we're working on a potential significant, you know, opportunity in North America, the United States, specifically, is significant, mean like 150 million, or just significant, I just, you know, were there.
Speaker Change: Any color about the range of potential outcomes there would be great.
So the opportunities we are working on could become meaningful.
Speaker Change: And by saying meaningful, I would probably talk about north of $10 million on an annual basis for a few years.
Great. And then my last question, we talked about...
Speaker Change: Gross March and Expansion Opportunities. I guess it wasn't clear to me how much gross margins potentially could expand in the future. Is there any potential color you could give us on that? And that's my last question. Thank you.
I will take it good morning.
Speaker Change: First of all, a part of the expansion is improve the mixture. That's one potential because we have the opportunity to come back much stronger in the US.
The third thing is the Morse software and the private network says [inaudible]
Speaker Change: The more we continue to sell to these solutions or these markets...
Speaker Change: It will also improve our growth margins. So, in the long term, we still continue to discuss 35 to 38% in the long term. That's what we hope to arrive.
Speaker Change: And obviously in the short term it depends on the mixture specifically and how much revenue is from software we can have.
Great. Thanks for taking my questions.
Speaker Change: Thanks, Richard. Thank you. Our next question is from Scott Searle from Ross Capitol. Please go ahead, Scott.
Scott Searle: Good morning, good afternoon, thanks for taking the questions. Nice job in terms of maintaining the outlook for the remainder of this year.
Speaker Change: Maybe Doron, just to dive in on that front, you're maintaining the guidance for this year. At the midpoint, it implies a pretty significant uptick over the next couple of quarters. I'm wondering if you could talk a little bit about first half versus second half. It sounds like you've got some e-band kicking in in India in the second half of that of this year. If you could kind of expand on that a little bit. And how important India is to growth.
Speaker Change: particularly within the second half. It sounds like you've got some decent visibility now on that front, but presumably it sounds like India will continue to be a growth opportunity in 2025.
Doron Arazi: Hi Scott, thanks for the question. Indeed we believe that the main uptick will happen on the second part of the year.
and this is coming predominantly from India and the rollout.
of an event as a result of...
A very significant deployment of fixed wireless access.
Doron Arazi: Technology in this country. Obviously our projections are based on the indications that we are the customer. And in terms of the pace.
Doron Arazi: that they are talking about now, it looks like there will be a very significant update and I think that from capacity perspective as well as procurement we are ready.
Doron Arazi: But India is India and obviously we will wait until the last minute.
Doron Arazi: to get the go-ahead either in terms of orders or even if you already received orders in terms of delivery timeline.
Doron Arazi: So, bottom line, yes, we build a lot on India, but as a last sentence to this thing...
Doron Arazi: I want to tell you that I was also encouraged by the booking that came up in other regions that were relatively, I would say, weak.
Doron Arazi: during 2024. In here, for example, is showing very good signals. And if this will become a trajectory
Doron Arazi: I'm sure that other regions, including obviously North America, could contribute to a very nice second half.
Doron Arazi: Just to follow up on that point, from a macro standpoint, certainly tariff environment has caused some...
Speaker Change: I guess raised the level of uncertainty out there from a macro standpoint, but you're insulated from I think a tariff standpoint, but what is that doing in terms of customer decision timelines and otherwise, and do you think you're seeing any pull-ins as a result of that?
Speaker Change: Well, I refer to that in my prepared comment. So far, we have not seen any change.
in buying patterns from the CSP.
There were some, I would say, hesitations.
in closing deals on the private networks, which obviously delayed
Speaker Change: Some of the bookings, but at this point it is not that significant and obviously we are following on these changes in patterns very closely.
Speaker Change: Well, and lastly, if I could just to follow up on the private networks front, a lot going on there now between Ciklu and end-to-end junior expanding presence. I'm wondering if you could talk a little bit about how each you're doing in the different geographies, particularly Ciklu. I'm not sure if we heard many comments during your prepared remarks, and geographically, where are you starting to see the demand on that front? Thanks.
So I think the most intriguing
with a huge increase in interest.
Speaker Change: in the point to multi-point solution that we basically bought as part of the
Speaker Change: and we are talking about use cases by the way both for CSPs and for private networks.
Speaker Change: as we started seeing them during the last three months. Just to give you a few examples, one of the use cases is the small cell back hole and we have seen that use case.
Speaker Change: in both North America and Europe coming up. In fact, in Europe we are already beyond a very successful POC with one of the CSPs.
Speaker Change: in Europe and obviously starting to discuss commercials and some rollout plans.
Speaker Change: And so this is one use case. The other use case that we have started seeing is very dominant and very interesting is actually supporting large enterprises.
Speaker Change: with the connectivity that I wouldn't say is a private network but it's almost private network, it's semi-private network, they are looking to replace the regular 5G connectivity.
Speaker Change: that is usually not steady enough and very expensive and even in this case we already passed.
Speaker Change: A few stages of POC, particularly with a big enterprise in North America.
Speaker Change: So, while the point-to-point, the traditional event from C-Clue is continuing to be...
Speaker Change: A good solution for small ISPs and also for private networks. We are seeing also a very nice uptick in the interest and demand for the 60 gigahertz point to multipoint in cyclone.
Speaker Change: Obviously with it we are just the beginning but we were very encouraged by the performance.
Speaker Change: of ITWI in the first quarter and we all hope that this is a sign for a very successful future.
So much, I'll get back in the queue.
Speaker Change: Our next question is from Ryan Koontz from Needham. Ryan, please go ahead.
Right, can you read?
Speaker Change: Yes, hi, Ryan. Super, hey, good morning. What to ask about?
Speaker Change: The e-band product you have coming out for, sounds like really targeted for India, can you maybe expand on your differentiation there and why you think that that's a game changer and that important market for you?
Um...
You know, people who know India predominantly in this space...
Speaker Change: India is, I would say, a freak of the latest technology for the lowest price.
Speaker Change: and I think that over the years we have built this kind of an experience.
Speaker Change: of understanding how we find this golden line and the product that is going to be launched.
Speaker Change: and actually commercially available towards the end of this quarter is just meeting these two elements, which is
A very strong product.
Speaker Change: in terms of performance and top-notch technology, and at the same token with a cost structure that fits in to India. Now, let's not forget, it's not that...
Speaker Change: And now we're starting negotiating the prize and everything. All terms have been already closed in Q4 of last year, all commercial terms.
Speaker Change: and we basically know or we have an indication what market share we will capture with this product.
Speaker Change: And, market share in India means everything. If you are getting the lion share, it means that your product is meeting the cost effectiveness.
versus the performance.
is the most supposed to the competition.
Speaker Change: Yeah, that's really helpful. Thanks for all that color. And then maybe lastly...
Speaker Change: If you can comment on the competitive environment in the developed markets North America and Europe and who you see out there in your traditional deals and any changes in the last quarter or two.
Speaker Change: I think that there were not any major changes during the last couple of quarters. I would only say that in Europe we are seeing more and more interests.
Speaker Change: in looking into vendors like Ceragon to basically replace the Chinese.
Speaker Change: It's not as strict and it's not as fast as it happened in some other countries and some other regions, but this is obviously opening up for us some new prospects.
and which we did not see in the past.
Speaker Change: That's really helpful. What kind of share would you estimate the Chinese have in Europe , in my
I assume it's pretty big.
Speaker Change: It's quite big. They have a very large install base in some of the leading or the T1 operators
Speaker Change: And I think that over time this creates a very nice opportunity for non-Chinese companies
Truly great thanks for the color.
Sure.
Speaker Change: Our next question is from Theater O'Neill from Hills Research. Theater, please go ahead.
Thank you very much and congratulations for Rommel.
Speaker Change: The Good Guidance going forward. Just put question here on India, your strengths in India, North America.
Speaker Change: Could you give us a sort of portion of this is you've got the strength because you technology or service level versus market share and is it is it different between the technology service and market share between India and North America.
Speaker Change: I would say that there is no much difference. I would say that in North America, the main emphasis
is technology.
and while in a...
In India, they expect you to deliver, including services.
Speaker Change: and that makes a little difference in terms of the rollout and how it works and in many cases you are actually dependent on yourself so if you are able to faster rollout...
Equipment that was already delivered.
Speaker Change: Your chance is to get the next PO and to move to the next delivery are higher.
Speaker Change: and it's slightly different in North America. But look, generally speaking, when talking about T-1 operators...
Eventually,
I would say that there's a lot of commonality.
Speaker Change: Obviously, the economy in North America is allowing for better margins and also sometimes for more sophisticated pricing models.
Speaker Change: But generally speaking, both the operators from both countries are aspiring to get a very strong and reliable product. They want a piece of mind. That's what they are looking for.
Okay, thank you very much.
Doron Arazi: Thank you. There are no further questions. So Doron, back to you for closing statements.
Doron Arazi: Yes, I'd like to thank all of you for participating in today's call and for your interest in
Doron Arazi: Even our improved bookings brought a crod map and expansion into faster-growing segments of the market, namely private networks and millimeter waves, I believe we are well positioned to remain the leader in wireless connectivity.
Doron Arazi: I look forward to sharing our progress on the next quarterly conference call when we report our second quarter results. Have a good day everyone.