Ceragon Networks Ltd. (NASDAQ:CRNT) Q4 2022 Earnings Call Transcript

Doron Arazi: So generally speaking, yes, we decided to invest in this part of the segment of the market in the U.S. I think we made very good progress there. As we speak, obviously, we are looking into ways to even accelerate this part of the business that we believe is very important for us, and we think that we have a very good offering. Obviously, for a company that was not in this business in the past, at least not directly because we sold via channels, and we’ve now kind of made a change in our strategy, and we are taking also more and more direct deals where we need to provide with the whole solution, it takes time to ramp up. But we’re quite encouraged from the progress we made in 2022 — and actually, our targets for next year are basically to even double the achievements of 2022. Obviously, I cannot comment to that level of specifics and provide with the numbers.

Alex Henderson: I actually got a couple of questions from investors that they wanted me to pass along, almost like it’s a fireside chat here.

Doron Arazi: Okay, go ahead.

Alex Henderson: First question was what would GMs have been in Q4 if that one customer had accepted delivery?

Doron Arazi: This is a hypothetical question, and I will answer it, obviously, hypothetically. I believe in this case, we would probably get closer to 34%.

Alex Henderson: And then targets for inventory turn cash flow benefits, same for AR targets without litigation and possible details on litigation.

Doron Arazi: So I will start with possible details about litigation. Actually, I cannot provide any details. The process is under strict confidentiality. The only thing I can add is that we believe that this process together with some other measures could be very effective. But obviously, we are monitoring closely. And at this point, we cannot assure our success.

Alex Henderson: Targets, and inventory turns and cash flow.

Doron Arazi: do you want to answer that?

Ronen Stein: Yes. So regarding inventory, of course, it is derisking our ability to fulfill the backlog. But we are working on that from quarter-to-quarter to ensure first that we have as less risk as possible. But on the other hand, to convert it as soon as possible into cash.

Doron Arazi: I would just add one comment on the inventory. Guys, for us, it’s very clear that this level of inventory is on the high side. However, when we see opportunities for very significant business and especially in cases where some of the components are still, I would say, a challenge to attain, we take these business decisions — obviously, we are looking in all aspects, cash flow, God forbid, obsolete inventory in the future and so on and so forth. But these are decisions that can be made actually within the quarter, without even anticipating that this will happen at the beginning of the quarter. All-in-all, it’s our intention to start gradually, take the level of inventories down, and obviously, subject to the supply chain market, assuming it continues to get better and better. He wants also an answer about the AR.

Ronen Stein: So again, the AR, we have targets to reduce the DSO, and we will continue to push for that. For example, in Q4, our collection was higher than the revenues.

Alex Henderson: Right. I’ll cede the floor. Thanks.

Operator: Thank you. Our next question today comes from the line of Brian Kinstlinger from Alliance Global Partners. Please go ahead.

Brian Kinstlinger: Okay, great. Thank you. Sorry if I’m repeating the question, I missed part of the call. But can you talk about the short term and medium term targets for gross margin with inflation easing, and as the supply chain does begin to improve for you? What are the puts and takes that can drive improvement from, say that hypothetical in 4Q?