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Presentation

Operator: Ladies and gentlemen, thank you for standing by and welcome to Ceragon Networks’ Earnings Call. Our presentation today will be followed by a question-and-answer session. [Operator Instructions] I must advise you that this call is being recorded today. I would like to now hand this call over to our first speaker, Rob Fink, Head of Investor Relations. Please go ahead.

Rob Fink: 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. 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. 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. 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. These risks are detailed in Ceragon’s most recent Annual Report on Form 20-F as published on March 25, 2025 as well as in other documents that may be subsequently filed by Ceragon from time to time with the Securities and Exchange Commission. Forward-looking statements relate to the date initially made and they are not predictions of future events or results there can be no assurance that they will prove to be accurate and Ceragon under undertakes no obligation to update them. Ceragon’s public filings are available on the Securities and Exchange Commission’s website at sec.gov and may be also obtained from Ceragon’s website at ceragon.com.

Also, today’s call will include certain non-GAAP numbers for a reconciliation between GAAP 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. With all that said, I will now turn the call over to Doron. Doron, the call is yours.

Doron Arazi: Thank you, Rob, and good morning, everyone. Ceragon delivered a strong financial performance in the first quarter, highlighted by the highest booking levels since Q1 2024. Bookings rebounded across India and EMEA while growth in North America remained solid. 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. Our conversations with senior decision makers from both existing and prospective customers further validated that Ceragon is strategically aligned for long-term success in the evolving wireless connectivity landscape. Notably, we had direct discussions with senior executives from major customers in India and other regions.

These conversations, along with other market insights support our belief that our current offerings are exceedingly well aligned with customers’ needs. Additionally, we heard compelling feedback that supports strong anticipated demand for microwave and millimeter-wave products, including first fixed wireless point-to-point, point-to-multipoint solutions for Tier 1 operators in North America and Europe. We are discussing with at least one Tier 1 operator the possible development of a new solution tailored to their needs that has substantial commercial potential. 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 operation and optimization.

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. Finally, we continue to see the emergence of new use cases for our products both in CSP and Private Network segments, which have the potential to meaningfully expand our targeted addressable market and drive incremental revenue opportunities. These market dynamics are consistent with our product and service roadmap supporting our strategy to maintain technology leadership and address the needs of both Tier 1 and Tier 2 carriers as well as Private Networks.

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. 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. Private Networks remain a fast-growing segment of telecom connectivity and E2E’s proven system integration capabilities and software platform are expected to strengthen our portfolio significantly. E2E’s bookings in the first quarter outperformed our expectations and revenue contribution in the first quarter was in line with our expectations.

We continue to expect E2E to be accretive to non-GAAP earnings by the second half of 2025. I’d now like to review our first quarter highlights by region. In India, revenue was $42.9 million, an increase of 65% year-over-year. Encouragingly, bookings were also the highest since Q1 2024. 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 Tier 1 operator, which demonstrates broad based demand throughout India. The elevated bookings and revenue in Q1 and continued strong customer demand reinforce our long-term outlook in our largest market. In North America, revenue was $17.6 million including contributions from E2E. Excluding the contributions from E2E, Q1 bookings and revenue were also higher than in Q4.

We are improving our competitive position with existing customers and getting more traction from new prospects. The tariff dynamics are creating some instability for certain customers, primarily those in Private Networks. However, we are encouraged by the continued steady activity among carriers. While we are closely monitoring for any shifts in customer ordering patterns, we are also proactively positioning ourselves to navigate these changes effectively. Simultaneously, we are actively assessing the proposed tariffs not just to mitigate potential risks, but also to identify strategic opportunities to capture market share. 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.

While it is still too early to quantify the precise effect of our profitability in 2025, we believe the net impact of tariffs will be minimal. As we remain vigilant in monitoring these developments, we are confident in our ability to adapt swiftly and leverage our strength to drive continued growth. Returning to some more general commentary, through the acquisition of Siklu and E2E, we have significantly enhanced our capabilities in the fast-growing segments of wireless connectivity, particularly millimeter-wave and Private Network markets. 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 wireless connectivity.

I’d now like to turn the call over to Ronen Stein, our CFO to discuss the financial results in more details. Ronen, over to you.

Ronen Stein: Thank you, Doron, and good morning everyone. The first quarter was marked by solid execution amidst volatile market conditions. Our revenue was at the higher end of our expectations and we maintained solid non-GAAP profitability. 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 first quarter results. Revenue for the first quarter was $88.7 million, up 0.2% from $88.5 million in the first quarter of 2024. India was again the strongest region in terms of revenue and contributed $42.9 million.

North America rebounded from $13.4 million in Q4 2024 to $17.6 million in Q1 2025 and was the second strongest region. We had three customers in the first quarter that contributed at least 10% of our revenue. Gross profit in the first quarter on a non-GAAP basis was $29.7 million, which was down 8.6% from $32.5 million in Q1 2024. Our non-GAAP gross margin was 33.5% as compared with gross margin of 36.7% in the prior year period. The decline in gross 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, our initiatives in Private Networks and an increase in deployments of software-driven services should enable us to maintain or potentially expand gross margins offsetting regional revenue mix headwinds.

Moving on to operating expenses. Research and development expenses in Q1 2025 on a non-GAAP basis were $8.1 million, down from $8.7 million in Q1 2024. As a percentage of revenue, R&D expenses on a non-GAAP basis were 9.1% in the first quarter versus 9.8% in the prior year period. Sales and marketing expenses on a non-GAAP basis in the first quarter were $11.8 million, up from $10.7 million in Q1 2024. As a percentage of revenue, sales and marketing expenses on a non-GAAP basis were 13.3% in the first quarter as compared to 12.1% in the first quarter of 2024. General and administrative expenses on a non-GAAP basis for the first quarter were $5.4 million as compared to $5.5 million in Q1 2024. As a percentage of revenue, G&A expenses on a non-GAAP basis were 6% in Q1 2025 versus 6.3% in the year ago period.

Restructuring and related charges on a GAAP basis in the first quarter were $3.7 million 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. Acquisition and integration related expenses on a GAAP basis in the first quarter were $0.5 million versus $0.5 million in the first quarter of 2024. These charges are backed out of our non-GAAP operating expenses. Operating income on a non-GAAP basis for the first quarter was $4.5 million versus operating income of $7.6 million in Q1 2024. Lower gross profit was the primary factor for the decline in operating income year-over-year. Financial and other expenses on a non-GAAP basis in the first quarter were $1 million and an improvement from $2.3 million in the prior year period.

The change was positively impacted from favorable exchange rate changes and lower interest expenses. Our tax expenses on a non-GAAP basis for the first quarter were $0.9 million. Non-GAAP net income for Q1 2025 was $2.6 million or $0.03 per diluted share versus non-GAAP net income of $4.7 million or $0.05 per diluted share in Q1 2024. Moving over to our balance sheet. Our cash position at March 31, 2025 was $27.7 million, down from $35.3 million at the end of 2024, primarily due to cash payments made in Q1 in connection with the acquisition of E2E amounting to $6.6 million net of acquired cash. Short-term loans were $25.2 million at the end of the first quarter as they were at year end 2024. Thus, our net cash position was approximately $2.5 million as opposed to $10.1 million at December 31, 2024, again largely due to the acquisition of E2E.

We believe we have cash and facilities that are sufficient for our operations and working capital needs. 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 E-Band products expected to be delivered mainly in India in the second half of the year. Our trade receivables at the end of the first quarter were $145.7 million versus $149.6 million at the end of December 2024. Our DSO now stands at 135 days. Looking at our statements of cash flow, Net cash flow used by operations and investing activities, in Q1 2025 was $1.6 million excluding cash payments made in connection with the acquisition of E2E net of acquired cash. Turning to our 2025 outlook.

As Doron mentioned earlier, we are reiterating our previous 2025 revenue guidance of $390 million to $430 million. 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 than in 2024. With that, I now open the call for your questions. Operator?

Operator: Thank you. [Operator Instructions] Our first question will be from Christian Schwab from Craig-Hallum. Christian, please go ahead. Christian?

Christian Schwab: Oh, I’m sorry, I was on mute. Sorry about that. Congrats on the strong start to the year reiterated [ph] guide. I’m just wondering if you could give us some more color regarding the strength in 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.

Doron Arazi: Yes. 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. And obviously with the third one that still has some potential booking out of the $150 million. If that happens down the road during 2025, this will be another boost for our business. At the same token, I can say, that we’re also discussing with our old customer that in the last couple of years decreased the spending in wireless technology on some new opportunities.

Christian Schwab: Great. And then you mentioned that we’re working on a potential significant opportunity in North America or the United States specifically. Is significant mean like $150 million or does significant – just, any color about the range of potential outcomes there would be great?

Doron Arazi: Look, the opportunities we’re working on could become meaningful. And by saying meaningful, I would probably talk about north of $10 million on an annual basis for a few years.

Christian Schwab: Great. And then my last question, we talked about gross margin 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.

Ronen Stein: I will take it. Good morning. First of all, part of the expansion is improved mixture. That’s one potential because we have the opportunity to come back much stronger in the U.S. Secondly, it’s the economies of scale, obviously when we have higher revenues, that’s a good potential for increasing our gross margins. The third thing is more software and Private Networks sales, the more we continue to sell to these solutions or these markets, it will also improve our gross 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. And obviously in the short-term, it depends on the mixture specifically and how much revenues from software we can have.

Christian Schwab: Great. Thanks for taking my questions.

Doron Arazi: Thanks, Christian.

Ronen Stein: Thank you.

Operator: Our next question is from Scott Searle from ROTH Capital. 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. 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 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, particularly within the second half. It sounds like you 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: Yes. So, hi Scott, thanks for the question. Look, 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 E-Band as a result of a very significant deployment of fixed wireless access technology in this country. Obviously, our projections are based on the indications that we are getting from the customer. And in terms of the pace that they are talking about now, it looks like there will be a very significant uptick. And I think that from capacity perspective as well as procurement, we are ready, but India is India and obviously we will wait until the last minute to get the go ahead either in terms of orders or even if you already received orders in terms of delivery timelines.

So bottom line, yes, we build a lot on India. But as a last sentence to this thing, 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 during 2024. EMEA, for example, is showing very good signals. And if this will become a trajectory, I’m sure that other regions, including obviously North America, could contribute to a very nice second half.

Scott Searle: Just to follow-up on that point are, from a macro standpoint, certainly tariff environment has caused some, 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?

Doron Arazi: Well, I refer to that in my prepared comments. So far we have not seen any change in buying patterns from the CSPs. There were some, I would say, hesitations in closing deals on the Private Networks, which obviously delayed some of the bookings, but at this point it is not that significant and obviously we are following on these changes in patterns very, very closely.

Scott Searle: And lastly, if I could just to follow-up on the Private Networks front, a lot going on there now between Siklu and end-to-end in your expanding presence. I’m wondering, if you could talk a little bit about how each are doing in the different geographies, particularly Siklu. 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.

Doron Arazi: Yes. So I think the most intriguing phenomena we have seen in the last three months is a huge increase in interest in the point to multipoint solution that we basically bought as part of the Siklu acquisition. We are talking about use cases by the way, both for CSPs and for Private Networks that at least during 2024 we did not see them, at least not coming as strong as we started seeing them during the last three months. Just to give you a few examples, one of the use cases is a small cell back-haul and we have seen that use case 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 in Europe and obviously starting to discuss commercials and some rollout plans.

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 with the connectivity’s that I wouldn’t say, it’s a private network but it’s almost private network, it’s semi private network. They are looking to replace the regular 5G connectivity that is usually not steady enough and very expensive. And even in this case we already passed a few stages of PoC, particularly with a big enterprise in North America. So while the point-to-point traditional E-Band from Siklu is continuing to be a good solution for small ISPs and also for Private Networks, we are seeing also a very nice uptick in the interests and demand for the 60GHz point to multipoint in Siklu.

Obviously with E2E it’s just the beginning, but we were very encouraged by the performance of E2E in the first quarter and we all hope that this is a sign for a very successful future.

Scott Searle: Thanks so much. I’ll get back in the queue.

Operator: Our next question is from Ryan Koontz from Needham. Ryan, please go ahead.

Ryan Koontz: Right. Can you hear me?

Doron Arazi: Yes. Hi, Ryan.

Ryan Koontz: Super. Hey, good morning. I want to ask about the, 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 in that important market for you?

Doron Arazi: People who know India predominantly in this space. India is, I would say, a freak of the latest technology for the lowest price. And I think that over the years we have built this kind of experience of understanding how we find this golden line and the product that is going to be launched and actually commercially available towards the end of this quarter is just meeting these two elements, which is very strong product in terms of performance and a top-notch technology. And at the same token with a cost structure that fits in to India. Now, let’s say, let’s not forget, it’s not that we are just now – sorry finishing the development and now we’ll start negotiating the price and everything. All terms have been already closed in Q4 of last year, all commercial terms, and we basically know or we have an indication what market share we will capture with this product.

And market share in India means everything. If you are getting the lion’s share, it means that your product is meeting the cost effectiveness versus the performance the most as opposed to the competition.

Ryan Koontz: Got it. That’s really helpful. Thanks for all that color. And then maybe lastly, if you can comment on the competitive environment in north – 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.

Doron Arazi: 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 interest in looking into vendors like, like Ceragon to basically replace the Chinese. 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.

Ryan Koontz: That’s really helpful. What kind of share would you estimate the Chinese have in Europe in microwave? I assume it’s pretty big.

Doron Arazi: It’s quite big. It’s quite big. They have a very large install base in some of the leading or the Tier 1 operators in Europe. And obviously these guys are looking for different ways to reduce the level of dependency. And I think that over time this creates a very nice opportunity for non-Chinese companies, obviously including Ceragon.

Ryan Koontz: Truly great. Thanks for the color.

Doron Arazi: Sure.

Operator: Our next question is from Theodore O’Neil from Hills Research. Theodore, please go ahead.

Theodore O’Neil: Thank you very much and congratulations for the good guidance going forward. Just quick question here on India – your strength in India and North America, could you give us a sort of proportion of this is, you’ve got this strength because your technology or the service level versus market share and is it different between the technology, service and market share between India and North America?

Doron Arazi: I would say, that there’s no much difference. I would say, that in North America the main emphasis is technology and while in India they expect you to deliver including services 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 roll out equipment that was already delivered, your chances to get the next PO and to move to the next delivery are higher. It’s slightly different in North America. But look, generally speaking, when talking about Tier 1 operators, eventually I would say, that there’s a lot of commonality. Obviously, the economy in North America is allowing for better margins and also sometimes for more sophisticated pricing models. But generally speaking, both operators from both countries are aspiring to get a very strong and reliable product. They want a peace of mind. That’s what they are looking for.

Theodore O’Neil: Okay, thank you very much.

Operator: 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 Ceragon. Given our improved bookings, product roadmap and expansion into faster growing segments of the market, namely Private Networks and millimeter wave, I believe we are well positioned to remain the leader in wireless connectivity. 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.