Q3 2025 Ceragon Networks Ltd Earnings Call

Speaker #2: Our presentation today will be followed by a question-and-answer session. At which time, if you wish to ask a question, you will either need to raise your hand using your mobile or desktop application or press star 9 on your telephone keypad.

Speaker #2: And wait for your name to be announced. I must advise you that this call is being recorded today. I would now like to hand over the call to our first speaker, Rob Fink, Head of Investor Relations.

Speaker #2: Rob, please go

Speaker #2: ahead. Thank you, Operator, and good morning,

Speaker #3: everyone, hosting today's call as Doron Arazi, CERAGON's Chief Executive Officer, and Ronen Stein, Chief Financial Officer. Before we start, please note that today's discussion includes forward-looking statements within the meeting of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Safe Harbor Provisions of the Securities Litigation Reform Act of 1995.

Speaker #3: CERAGON attends forward-looking terminology such as may, plans, anticipates, believes, estimates, targets, expects, intends, potential, or the negative of such terms or other comparable terminology, although not all forward-looking statements contain these identifying words.

Speaker #3: Forward-looking statements are based on expectations that are subject to certain risks and uncertainties, which could cause actual results to differ materially. These results and uncertainties include but are not limited to the company's ability to execute strategic plans, marketing and product strategies on the forecasted evolution of market developments, such as market and territory trends, future use cases, business concept, technologies, future demand, and necessary inventory levels.

Speaker #3: The effect of the geopolitical situation in Israel and the related regional conflicts, the effects of global economic trends—including rising inflation, rising interest rates, commodity prices, increases in fluctuations, commodity shortages, and exposure to economic slowdown—risks associated with the integration and deployment of acquired businesses, risks associated with delays in the transition of 5G technologies and the 5G rollout, and risks relating to the concentration of Ceragon's business on a limited number of large mobile operators. The significant weight of their ordering is important.

Speaker #3: Compared to the overall ordering by other customers coupled with inconsistent order patterns, that could negatively affect the company. Risk resulting from volatility in revenues, margins, and working capital needs, disagreements with tax authorities, tax positions, that have been taken as a result of increased tax liabilities, the high volatility in the supply chain of our customers, which from time to time leads to delivery issues, and may lead to the company being unable to fill order commitments.

Speaker #3: And other risks, uncertainties, and other factors that could affect operations, as further detailed in CERAGON's most recent annual report on Form 20-F, published on March 25, 2025, as well as other documents that may subsequently be filed by CERAGON from time to time with the Securities and Exchange Commission.

Speaker #3: Forward-looking statements relate to the date initially made and they are not predictions of future events or results, and there can be no assurance that they will provide accurate and CERAGON undertakes no obligations to update them.

Speaker #3: CERAGON public filings are available on the Securities and Commission's website at sec.gov, and may also be obtained from CERAGON's website at ceragon.com. Also, today's call will include certain non-GAAP numbers for reconciliation between GAAP and non-GAAP results.

Speaker #3: Please see the table attached to the press release that was issued earlier today which is posted on the Investor Relations section of the company's website.

Speaker #3: With that, I'll now turn the call over to Doron. Doron, the call is

Speaker #4: Good morning, everyone. CERAGON delivered a solid third quarter, reflecting the resilience of our operations, strengthening demand across key markets, and continued progress against our strategic roadmap.

Speaker #4: Visibility improved meaningfully during the quarter, with greater clarity around customer spending plans and project timing. That visibility has continued to strengthen in recent weeks giving us confidence in our outlook for the remainder of this year and, more importantly, optimism for growth in 2026.

Speaker #4: Revenue for the quarter was $85.5 million above our expectations, non-GAAP gross margin of 35% remained high, and non-GAAP EPS was $0.02, but was negatively impacted by $0.02 foreign exchange fluctuation related to a project in India.

Speaker #4: Excluding this effect, EPS would have been approximately $0.04. Importantly, we generated free cash flow of $3.3 million further demonstrating the strength and resilience of our business model.

Speaker #4: From a technology and market perspective, we are increasingly benefiting from the same structural forces reshaping communications networks globally. The investment in AI is growing from data centers to 5G infrastructure and this is driving the need for high-capacity low-latency connectivity.

Speaker #4: This demand is cascading outward from the core to the metro and ultimately to the wireless edge. Our addressable market continues to grow, driven by two key challenges.

Speaker #4: Our customers face network capacity and network resiliency challenges. These two factors are being amplified by the growth of AI and increasingly data-intensive applications. CERAGON's capabilities, especially our E-band and innovative point-to-multipoint offerings, provide tangible solutions to address these challenges and, in our opinion, create incremental opportunities for us and give us durable tailwinds for future growth.

Speaker #4: Our carrier customers need to add capacity especially as data traffic continues to grow and as they attempt to gain market share in the fixed wireless access market.

Speaker #4: AI is also playing a major role in this increased demand predominantly for enterprise connectivity. CERAGON's advanced E-band solutions enable operators to replace or significantly augment legacy microwave deployments to increase capacity in an efficient and cost-effective way.

Speaker #4: As we noted in a recent press release, we recently completed three proof-of-concept E-band deployments with T1 operators and a leading ISP using auto-aligning antennas and e-stabilizers demonstrating our ability to boost network capacity extend reach beyond standard E-band solutions accelerate deployments and lower total cost of ownership.

Using our Network digital twin for predictive maintenance.

This win underscore seragon expanding capabilities in network, reliability and integration and our pipeline includes additional opportunities that can potentially increase our managed Services business. Meaningfully

In general.

Our new Innovative products and services offerings, which are driven by the convergence of our core and recently acquired capabilities, open for us. Many new opportunities Beyond traditional backward.

I'm also proud of our ability to generate positive cash flow, even on the Topline pressure.

This underscores the resilience of our model and operational discipline.

Importantly, our balance sheet remains solid, enabling us the flexibility to pursue additional potential acquisitions, supported by the continued confidence and long-term relationship with our bank consortium.

Turning to a regional overview.

North America again LED, our growth, delivering record revenue and booking of orders in the quarter including e2e.

This was primarily driven by accelerating deployments of a major T1 customer.

And private Networks.

In India Revenue was flat compared with Q2 importantly. Visibility has increased as order flow from a major carrier whose purchasing activity had previously been paused has resumed.

We are optimistic that this renewed activity, with this carrier will continue. And potentially accelerate, once their debt issue is resolved.

We also see other opportunities that can potentially Drive significantly higher Revenue than current levels in 2026.

For example, we are pursuing a sizable RFP from another major carrier in India. And if successful, this could provide meaningful, incremental Revenue in 2026,

Outside North America and India results were generally stable and increased opportunities in India and Latin America give us higher confidence for 2026. Even if revenue and bookings were modestly. Softer for the quarter in some regions.

In summary.

The third quarter marked continued progress, in executing our strategy with increasing opportunities in both csps and private networks segments.

As near-term visibility has improved, we feel more confident about our $340 million revenue projection for 2025.

With business volumes recovering and a mixed shift toward more active North American Market, we see continued opportunity for profitability expansion.

Our financial discipline.

Combined with ongoing investment in our strategic initiative.

Positions us to translate future topline growth into meaningful EPS improvement as we move into 2026.

With that, I'll now turn the call over to our CFO renance Stein to review the financial results in Greer details.

Thank you, Don and good morning everyone.

As doron described, we delivered, solid Revenue in the third quarter, particularly in North America.

We continue to translate incremental Revenue into higher profitability and sustainable cash generation demonstrating the earnings power of our business model.

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 investors to today's press release.

Let me now review the third quarter results.

Revenue for the third quarter was $85.5 million, down 16.7% from $102.7 million in the third quarter of 2024.

North America was the strongest region in terms of Revenue and contributed 36 million including e2e.

India contributed 24.4 million in Q3 2025 and was the second strongest strongest region.

We had 2 customers in the third quarter that contributed at least 10% of our Revenue.

Gross profit. In the third quarter on a non-gaap basis was 29.9 million, which was down 15.1% from 35.2 million in Q3 2024.

Our non-gaap gross margin was 35%.

Up slightly from the prior year period, the gross margin strength was mainly attributable to our success in North America.

Moving on to operating expenses. I again, note that we have Consolidated e2e into our results. Since February 2025 impacting also total operating expenses

research and development expenses in Q3 2025 on a non-gaap basis.

Where 6.8 million down from 8.6 million in Q3 2024.

As a percentage of Revenue R&D expenses on a non-gaap basis, where 7.9% in the third quarter versus 8.4% in the per year, period.

As a percentage of Revenue sales and marketing expenses on a non-gaap basis. We have 14.1% in the third quarter as compared to 10.1% in the third quarter of 2024 mainly due to our increased business in North America and our continuous strategic Investments.

General and administrative expenses on a non-gaap basis. For the third quarter were 5.8 million as compared to 0.4 million in Q3 2024.

Keep in mind that our GNA last year included the impact of a $5.1 million benefit related to an initial collection from a $12 million debt. A settlement agreement was reached with a South American customer, for which we accounted a credit loss at the end of 2022.

As a percentage of Revenue GNA expenses on a non-gaap basis, where 6.8% in Q3 2025 versus 0.4% in the year ago period.

Operating income on a non-gaap basis. For the third quarter was 5.3, million versus operating income of 15.8 million in Q3 2024.

The decline in operating income year over year was impacted by the absence of the 5.1 million credit loss. Recovery benefit along with the reduction in gross profit as mentioned before.

Financial and other expenses on a non-gaap basis. In the third quarter, were 2.8 million compared to 1.2 million in the third quarter last year.

As mentioned by Don, the increase was negatively impacted mainly by a 1.5 million, foreign exchange fluctuation related to a project in India. However, the quarterly average foreign exchange fluctuation impact in 2025 is currently lower than the 2024 average.

Our tax expenses on a Nona basis. For the third quarter, where 0.7 million

non-gaap net income for Q3 2025 was 1.7 million or 2 cents per diluted share versus non-gaap net. Income of 14.1 million or 16 cents per diluted share in Q3 2024.

Without the negative impact of the foreign exchange rate.

Q3 2025 non-gaap EPS would have been 2 cents, higher or 4 cents per the literature

moving over to our balance sheet.

Our cash position on September 30th 2025 was 43. Million up from 35.3 million, at the end of 2024,

short-term loans were 31 million at the end of the third quarter, compared to 25.2 million at the end of 2024,

Thus, our net cash position was approximately net, 12 million, as opposed to 10.1 million on the December. 31st 2024 reflecting strong. Free cash flow in Q2 and Q3 partially offset by the acquisition of e2e.

We believe We have cash and Facilities that are sufficient for our operations and working capital needs.

I note that we generated $3.3 million in free cash flow in the third quarter. This speaks to the progress we have made in our business model.

Inventory at the end of the third quarter was $58.4 million, down slightly from $59.7 million. At the end of 2024, we continue to carefully monitor our inventory levels.

Our trade receivables at the end of the third quarter were $111.9 million, compared to $149.6 million at the end of December 2024.

Our DSO. Now stands at 112 days.

Looking at our statement of cash flow.

Net cash flow generated by operations and investing activities in Q3 2025 was $3.3 million.

I'd like to now turn the call back over to the wrong, to provide a summary and review, our Outlook, the wrong.

Thanks Ron.

I am encouraged by the continued progress. We are making strategically.

Send seragon Competitive Edge.

Our Solutions deliver high throughput and low latency that are crucial for today's AI driven environment, demand.

Our strong financials enable continued cash generation, investments in R&D, and sales and marketing, and funding strategic acquisitions. We are well positioned for continued success.

Turning now to our Outlook.

With improving visibility. We have greater confidence today in our ability to achieve our Target of 340 million dollars in full year revenue for 2025.

Importantly, our momentum is increasing and we are looking to 2026 with even greater optimism.

With that, I'll now open the call for questions.

To ask a question, please raise your hand using your...

Google or desktop, application, or press star 9 on your telephone keypad and wait for your name to be announced.

Our first question comes from Scott Searle from Roth Capital. Scott, please go ahead.

Hey good morning, thanks for taking the questions. Good afternoon. Um Throne need me to just start in initially on the um the outlook for the fourth quarter you're maintaining the 340 million guidance and implies basically flat sequentially down, but it sounds like the tone of business is improving on that front. I wonder if you could give us some expanded thoughts in terms of what you're seeing sequentially and what are the drivers is it still tear 1's in? North American private networks, are you seeing India come back to drive that? And maybe as well? Give us a quick preview of your thoughts.

As we enter 2026, it looks like a year where we should be getting back to growth, given a lot of the drivers and vectors you’re talking about.

Uh, uh, thanks Scott. I will start with the first question, so we usually don't give a specific guidance for a specific order. And this is why we uh, basically gave the guidance the way we gave it, but I would say it's very clearly, I'm very optimistic about Q4 on Standalone basis.

Uh, main drivers. As we mentioned, uh, are the, uh, strengthening? Uh, so to speak visibility from India and from North America, this is for the very near term.

uh, in terms of 2026, um,

We are very much encouraged by the, uh, final opportunities.

That were able to uh, to build, uh, specially during the last uh uh 6 uh, 6 to 9 months.

And uh, we see that all across regions.

And that drives our optimism about our ability, uh, to grow in 2026. Many of the, uh, so to speak use cases, I found important to mention in my prepared. Comments are actually indicating of a, a relatively new, uh, businesses that seragon is not experienced in the past and obviously this drive uh the optimism uh people may question. Uh obviously okay, is India going to be a major factor in your growth? Yes or no.

The answer to that would be, uh, we think.

That we can grow in India, relative to the current annual run rate.

But uh, we definitely build on growth in all other regions.

Very, very helpful. And if I could just follow up for a clarification on North America, um, and the immediate outlook and an early read on Q4, it was up, I believe, about 30% sequentially in the September quarter. Is that a comfortable and sustainable level? And then in your prepared remarks, you talked a lot about AI, which is not something I've heard you refer to in the past. So, um, obviously it's been a derivative driver in terms of capacity utilization and data traffic in general. But are you seeing direct links then to vendors' data centers and otherwise that are actually driving your direct business, or are these um indirect drivers? Thank you.

Visibility. Um, would that particular, uh, the word operator, uh, continue with the same pace? We are not that, uh, uh, we are not that sure. But, uh, still our optimism about the growth.

Uh, in 2026 is not just built on this. Uh, operator, as we mentioned a few times in the past, uh, we are seeing a, a stronger engagement with other T1 operators in North America and also with isps and private networks. And this funnel of opportunities. Uh, assuming it will turn into bookings and revenue in the pace. We believe it can

will contribute to growth.

Uh, in uh, 2026 in North America as well.

um,

Now, regarding the AI, look, we have the, we've been doing a lot of, uh, uh, uh, thorough analysis of the markets as part of, uh, obviously looking on our strategy, uh, and trying to uh, to align it with the some trends that we are seeing in the markets.

What we do see?

is that first of all, it Enterprise level

and,

And also, in areas of security.

The usage of AI is becoming more imminent and more relevant.

Uh, such as video analysis and automation, this is 1 example. And eventually

That immediately requires, uh, by by far, much more capacity with the ability to keep the level of latency at the, uh, minimal requirements. Just to give you an example, uh, this, uh, uh, opportunity that we started actually executing on in Latin America and they showed us how they use automation.

Uh, based on video analysis.

To create some, so to speak, command the controls, and to give automatic commands, uh, to certain, uh, functions in the city.

So it's there; it's happening. Uh, we see that more in the private networks, uh, slash enterprise business.

And eventually, it drives much higher capacity needs and, obviously, latency.

Thanks so much. I'll get back in the queue.

Our next question is from Ryan Coons from NM

Ryan, please go ahead.

Great, thanks. Can you hear me? Yeah.

Super um I want to ask about your your Tier 1 ramp up here in North America. Nice to see that um what do you think are their main drivers here is this mostly uh capacity upgrades from Legacy microwave is it? Is it new coverage footprint for for for mobile is it fixed Wireless any? Any any clues as to what's driving the the strong uptick there uh from your big customer?

Um, if I need to answer a very short answer to your question, it's all of the above.

uh, what we are seeing is a constant demand for

Higher capacity that is either driven by um the continued uh uh increasing capacity needs as as part of 5G and this particular, operator is also very successful in uh in uh getting more and more subscription on a fixed while.

Success and eventually that creates a bigger load, uh, in terms of, uh, capacity and they are leveraging their, uh, very strong position in the market to cover some additional areas, where it makes sense to them economically, uh, to, to build more coverage either as part of their plans, or as part of commitments that they have to the FCC.

Right. Makes sense, are you hearing any concerns in that regard, about coverage of them? Using, you know, satellite uh, direct to device type Technologies um, to meet some of those FCC requirements?

I think that in terms of uh, uh, satellite or uh, to be more specifically Leo,

Yeah, and yeah.

I would say the understanding that this is another technology.

That helps.

Giving a better service.

To the customers wherever they are. If they are in a very rural areas.

And, uh, obviously it's another augmenting technology that they use. In most cases, they are partnering. They are partnering.

Uh, with the, uh, satellite uh, uh, companies.

And they don't see that as a necessary uh direct competition.

and a

it is the same for our technology and the wireless technology the more traditional so to speak. Wireless technology.

Has its place and its advantages.

And the 4, I would say that Leo is just another technology, uh, to make the world, a more connected and I would say even evenly digitized.

Makes sense. Great. And maybe just 1 more. If I could about, uh, you know what's going on with end to end. Maybe an update there. Uh, are you, you know, pleased with, uh, kind of commercial activity on, uh, on private networks and what your outlook is, you know, as you look ahead into the next, uh, into 26,

Yeah. So first of all end end to end is actually meeting the, the plans that we uh, uh, we took into account as part of 2020 uh uh 5 plans. And I would even there saying that, if not for the administration strikes in the US, uh, we would probably be ahead of our plan in terms of booking. There's a lot of traction, there's a lot of sizable opportunities on the plate. Some of them are, uh, subject, to some government approvals and, uh, due to the strike, uh, the strikes, it, it has been delayed. So, all in all, we are very satisfied with the progress of e2e, and I would even there saying that we have started seeing uh the uh the synergies uh by bringing this knowledge uh into the company.

where in a way that we have some similar opportunities in other regions that we would, probably not, uh, uh, seriously participate, if not for the knowledge that is being brought, uh, with, uh, with the acquisition of itu,

Got it. Great. And maybe just wanted to wrap up any comments on supply chain as it relates to availability of of parts and and costs and any any any new concerns that we've heard from other Hardware vendors about uh, dram costs um ratcheting a pretty pretty significantly, but any impact on your on your business.

So generally speaking, we've seen in certain areas slight increase in components costs.

and the the uh the the model and the the the strategy of seragon in this respect is I would say a constant uh pressure and cost reduction efforts whether it's

Tactical talking with with the vendors and trying to find the better uh a commercial terms. Whether it's most strategic by, uh, finding second sources and replacing a certain components by other components that are cheaper generally speaking.

And we don't see this as a significant.

Uh, or significantly impacting our uh phone cost in general.

Uh, but we monitor that very closely as as to um uh uh uh, components scarcity, uh, I don't think there is any particular, uh issue.

Uh, at this point, uh, that I can uh, described as a trend.

Uh, or epidemic, but uh, as a hardware company, there's always, uh, every now and then some shortages in components that I call them tactical. And this is part of the business. So, at this point, I don't see any major concern in this regard.

All right, great. That's all I've got. Appreciate that.

Our next question is from Christian swap from Greg Halen Christian. Please go ahead.

On mute button, I missed. Um, I I just have 1 1, quick. You know, question, I know you don't provide, you know, specific guidance, but I'm just trying to bracket, you know what growth and optimism for 26 means, um, you know, is should we, you know, broadly think about that. As, you know, mid single digit, you know, growth or do you, do you see an opportunity for Topline growth? I'm just trying to gauge um, the expansion of visibility uh, India coming back. Um and and and what that could potentially mean to to Topline estimates for 26, any directional clarity as broad as you could give would be great.

Yeah, so so look. Obviously we are now in the midst of the uh annual operational planning for 2026.

and we are, um, we are not done yet so it's uh,

Uh, it's difficult for me to give you, uh, something that is very concrete at this point. And I must tell you that we see many scenarios,

Uh and uh obviously we'll eventually have to pick the the 1 that we believe that is the most probable scenario. At this point just to be prudent. I would probably plan for meet single digit.

Uh, I hope that will come with something that is better. Uh, once we have a finalized our uh, aop

Fantastic, thank you for that color. No other questions. Thank you.

Uh, thank you. Our next question, comes from, Theodore, O'Neal from hills research together. Please go ahead.

No. Thanks very much. Uh, Don and you're prepared remarks, you talked about the e-band validation and I'm wondering what the, uh, expectation following that validation step.

Uh, so, uh,

I would say that, uh, with most of the uh,

Cases that we have already done, uh, proof of concept. And actually, we had another few of them that I didn't mention on the call. We are now in the process of, uh, uh, finalizing, uh, the terms, the commercial terms.

And the demand. And I hope to start seeing uh, orders either in this quarter or next quarter. So, uh, I'm quite optimistic about, uh, seeing more revenues coming out of this new products in 2026.

Okay? Any of your prepared remarks. You also talked about Network resilience, where microwave takes out the risk of fiber being cut. Are there specific places or customers that are that are looking for that as a solution.

Uh, yeah, so that's very interesting because I had an opportunity to to visit some of our customers personally and obviously, uh, my, uh, my, uh, salespeople and region it and did the same. And we see that as a

Basically Global phenomena and we see that coming as a as an an issue. Uh in North America we see that coming as an issue in Asia Pac and also in other regions. So I think that eventually it's not something that is very particular to a specific region.

I would say that.

A solution a, uh, which is basically uh building redundancy using Wireless.

is 1 of the um, viable solutions that these operators are pursuing, there could be other Solutions the best or the the I would say the, uh, the reason why, uh, Wireless

Transport solution is being looked at a very, very, uh, uh, intensely is because it's relatively cheap, and it's relatively reliable.

And it gives an immediate uh solution for fiber cuts.

Okay, and my last question, uh, 1 of your competitors cited, a possible 5% impact.

On their business if the US government shutdown continues.

Um, well, it looks like it might pick up. I might go away, but it might come back in January. Is there a similar number that you're exposed to? If the US government is shut down again.

Um, look up until

The US government shutdown was not that significant for us.

and as I kind of hinted to in in my uh in in some of my comments, it uh it has actually impacted predominantly in areas of private network uh at this point,

I don't see a very significant impact, uh, on Ceragon if that continues, uh, for the longer term. But we are obviously following it very closely, on, uh, the development in this respect.

Okay, thank you very much.

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 wait for your name to be announced.

Our next question is from Gunther

cardan.

Carter, please go ahead Gunther

Gunther, please unmute.

Uh, can I be here now? Yes, both great, thank you. Um, doron, is there any uh uh comment available regarding uh um defense uh military uh uh, security type type business? That's applicable to seragon.

Worldwide. Yeah. Look, uh, generally speaking. Um,

we see, um,

quite many opportunities around defense and security.

And security is actually 1 of the areas where we put a lot of focus.

because, uh, we have this uh uh 60 gigahertz point of multi-point product is that is um, very strong

Uh, for uh, for uh, security use cases predominantly uh video.

But we also working on opportunities uh, that are uh for uh defense, uh, communication Networks.

Yeah. Is this comments applicable, uh, uh to Regions or globally?

um,

look.

When I'm trying to kind of scan in my head, The Funnel of opportunities.

And I don't think that there is a particular region where I see a much higher concentration. So, generally speaking, it's uh.

it's all over the place.

And in terms of security, I would dare saying that in some of the countries in Latin America now that they want to improve the level of security, uh maybe the list of opportunities is slightly longer. But generally speaking, uh, we see this kind of opportunities across the globe

Thank you.

Sure, thank you.

There are no further questions.

Okay, thank you everyone and have a good day.