Ceragon Networks Ltd. (NASDAQ:CRNT) Q3 2019 Earnings Conference Call - Final Transcript

Nov 04, 2019 • 09:00 am ET


Ceragon Networks Ltd. (NASDAQ:CRNT) Q3 2019 Earnings Conference Call - Final Transcript


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Ira Palti

may recall, this was the subject of a press release we issued recently. We continue to expect growth next year on top of the excellent year we are expecting in 2019 as we begin to recognize revenue from a 5G design win in the Pacific region we mentioned on our last call. Europe remains steady at somewhat higher run rate than we saw in 2018. And now it seems likely to remain steady at a similar run rate for next year as well even with additional macro uncertainties, again, owing to some recent design wins.

In North America, the near-term risk we highlighted last quarter was manifested in Q3 with a pause -- we believe the pause in Q3 was related to the State Attorney General filing a lawsuit to block the proposed merger between two of our customers despite the fact that it had received most regulatory approvals. We continue to be confident in the long-term business regardless of the outcome of the lawsuit. But we are now assuming only modest improvement in Q4 versus Q3.

Next year, we expect North America to grow versus 2019 when our new Tier 1 customer in North America begins to contribute to revenue during the second half. Meanwhile, we are tempering our overall expectation for North America a little in view of the additional timing . On the -- on positive side, as I said at the beginning, we are making good progress toward another significant 5G design win that might provide some additional upside towards the end of next year.

To summarize the main challenge from now through next year continues to be India. To put it in another way, the basic difference between an assumption of an $80 million to $85 million of quarterly run rate for 2020 and our new assumption that next year average quarterly run rate will be closer to $75 million is India.

Since our overall growth next year is coming mainly from new business we won recently or expect to win soon, the timing of the revenue recognition is likely to be skewed more to the second half of the year. So the first two quarters are apt to be below the average quarterly run rate. And the final two quarters are apt to be above the average.

We expect at least stability and in some cases revenue growth for most regions due to ongoing 4G project as well as new 5G design wins in APAC, Europe and North America. There is a more cautious environment but the journey to 5G has not stopped. We are winning 5G business and expect to continue to do so in the coming quarters. Meanwhile, we have a slowdown in India which will continue to affect us until the dynamics in that region improve.

Of course, we recognize the risk associated with geographic concentration as India grew rapidly during the past several years. One objective of our various strategic initiative has been to mitigate or our geographic concentration. Some