Good day, everyone. Welcome to Ceragon Networks Limited First Quarter 2019 Results Conference Call. Today's call is being recorded and will be hosted by Mr. Ira Palti, President and CEO of Ceragon Networks.

Today's call will include statements concerning Ceragon's future prospects that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon's management.

For examples of forward-looking statements, please refer to the forward-looking statements paragraph in our press release that was published earlier today.

These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including risks relating to the concentration of a significant portion of Ceragon's businesses in certain geographic regions and particularly in India; risks associated with the decline in demand from the single market segment in which we focus; risks associated with any failure to effectively compete with other wireless equipment providers; risks relating to certain guarantees granted by Ceragon on behalf of Orocom to FITEL in the framework of the FITEL project; and other risks and uncertainties detailed from time to time in Ceragon's annual reports on Form 20-F and Ceragon's other filings with the Securities and Exchange Commission that represent our views as of the date they are made and should not be relied upon as representing our views as of any subsequent date.

We do not assume any obligation to update any forward-looking statements. Ceragon's public filings are available from the Securities and Exchange Commission's website at www.sec.gov or may be obtained from Ceragon's website at www.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 today. I would now like to turn the call over to Mr. Ira Palti, President and CEO of Ceragon. Please go ahead, sir..

Thank you for joining us today. With me on the call is Ran Vered, our Chief Financial Officer. This is his first call with Ceragon, and I welcome him on board. I want to summarize our current business situation before we get into discussion of the details of the quarter. The headline is business conditions continue to be very good.

No significant change anywhere in the world since the last call, and we have some very positive progress to report in several areas. Meanwhile, first quarter results were skewed by the lumpiness and timing of orders for customers in India. This was not a surprise and we indicated this could happen during our last call.

There has been no fundamental change in the backhaul market in India nor do we expect to see one in the foreseeable future. We'll get into the details regarding the regions in a moment, but the key takeaways from this call is that overall demands remain steady or picking up in all regions compared to the end of last year.

We continue to expect 2019 revenue to be similar to 2018 and we continue to target non-GAAP net income growth for the fifth consecutive year based on improving gross margins and lower financial expenses.

As noted in previous calls, we are benefiting from the ongoing deployment of 4G as well as initial 5G initiatives by various operators to upgrade and densify the wireless backhaul networks in preparation for launching 5G services.

We are at the beginning of the first phase of a network evolution that is expected to last several years with acceleration in overall demand as the transition progresses. We are very well-positioned to participate as a wireless backhaul vendor of choice for most operators due to a severe technology and service capabilities.

In fact, our leadership was validated recently when we announced the 5G-related development agreement with NEC, one of the other large players in this market. This work will build on the R&D work we have done so far on our new 5G next-generation technologies to be embedded in our -- in 5G future chipsets.

So, within the context of continuing strong business as our main message, we'll discuss Q1 results and business developments in more detail. On the last call, we alerted investors to the possibility that the timing of orders from India might cause Q1 to be lower beyond what we would expect from typical seasonality.

For those of you who didn't hear the call, in the response to a question about whether Q1 could drop below the low end of our current revenue run rate, Doron said it could. He also mentioned similar patterns of lumpiness in orders from India during Q1 of 2016 when we reported $60 million in Q1 of 2017, when we reported $76 million in revenue.

Doron indicated that we could be somewhere in between those two levels in Q1, which proved to be the case. The reason is simple. Q4 bookings in India were low. And in Q1, we did not receive the next batch of orders. We continue to expect to receive a large batch of orders before the end of the first half as we said on the last call.

The remainder of our business during Q1 showed typical seasonality and all other regions were in line with or ahead of our expectations. Excluding India, booking in Q1 were quite good with the book-to-bill above one. And booking in most regions were better-than-expected with Latin America continuing to be strong even after a very good Q4.

Despite the sequential decline in revenue, gross margin was very good, reflecting the more favorable geographic mix. So everything was in line with expectations and what we anticipated on our last call. Turning to the regional update. We'll discuss India first.

As a primary wireless backhaul vendor to two of the major Indian operators, we have been in close contact with them and we have gained a better understanding of the timing issues. We have confirmed that all vendors are in the same situation.

No one has been receiving large orders, and the explanation for the pause is related to multiple factors, including the complexity of the budgeting process for the new fiscal year beginning April 1 as well as company-specific projects such as internal reorganization and capital waiting -- raising events that also has been affecting the timing.

Most of those are behind us and/or are close to be completed. We expect to receive the next batch of orders for the ongoing deployments literally any day now. Meanwhile, the rollout of 4G is far from complete. We are also in extensive discussion with the largest operator in India about their forward network planning.

For example, they are looking at rolling out small cells, outdoor deployments, street-level for hot zones in certain areas such as shopping malls and city centers where people congregate in order to increase speeds and better compete for subscribers.

One operator is currently in the process of conducting a tender for the wireless backhaul portion of the small cell deployment. If we are successful, this will become additional revenue next year. Going back to other parts of the world.

In the U.S., our primary customer continues to expand services with recently acquired low-band spectrum using our microwave and millimeter wave backhaul solutions. They are incorporating more of the all-outdoor configurations to speed rollout, simplify the network and prepare for 5G.

In addition, we are continuing our 5G-related discussions with a Tier 1 operator we haven't served in the U.S. previously. They have strong interest in our newest IP-50 disaggregated wireless backhaul solutions in the variety of spectrum bands.

Some investors have asked about the status of our partnership with Fujitsu, so we'll mentioned that our corporation in the U.S. is moving well but slowly. APAC region. APAC region continues to show strength.

In Southeast Asia, we're supporting large-scale network expansions with one of the region's mobile operators as they continue an aggressive push to increase the mobile subscriber base. Over the past year, we have increased our share of this operator business and have become the primary vendor to this customer.

Our success, as well as our advance solution has opened the door and started business with another large operator in the same geography. We have also made significant focus with a major RFP process we mentioned on the last call.

It is for very large project in the Pacific part of the region where the service provider is preparing for 5G with a major upgrade of its backhaul infrastructure.

In Latin America, we continue to expect very good year that will certainly represent growth over 2018 due in part to overcome the large digital device project we won in Peru for which we continue to ship and work on deployments.

As expected, our long-term customer in South Cone countries is turning on higher-speed 4G services in dense urban areas with a millimeter wave solution as well as expanding 4G services to more remote areas with our high-power, ultra-high capacity wireless backbone solutions. You probably saw a recent PR about these orders.

In Africa, we are continuing to support 4G rollouts in multiple countries, bringing broadband mobile services to more subscribers. Our recent announcement with MUNI is one example of how we excel in this regard.

In this complex project, we installed the longest known high-power, long distance wireless backhaul link from the capital city on an island to places on shore, a distance of 240 kilometers. Europe.

Europe has remained generally flat at a fairly low level, but we are seeing positive -- what we're seeing are positive developments encouraging with two of the regional global operators. The trends we see in various geographic regions reflect the operator's position as they prepare for 5G.

Some are farther along than others, but all operators are making decisions with evolution to 5G technology in mind. Our technology leadership is putting us at the forefront of this discussion as evidenced by experience at Mobile World Congress this year. It was by far, the busiest show we ever had.

We had twice as many full-scale sit-down meetings with customers and prospective customers than the prior year. Traffic in our booth was noticeably greater than some of our competitors.

Operators were interested in many things, including, our IP-50 platform and this aggregation strategy, our overall capabilities and helping them simplify an increasingly complex network, better understanding of how a combination of solution could, for small premium, provide additional capacity headroom.

This is another evidence of our strength as a wireless backhaul specialist. We thoroughly understand the growing complexities associated with 5G, and we hope make the network as simple as possible for our customers.

Another evidence of our strengths on the strategic front is our recent collaboration with NEC, which is a great achievement for several reasons. There is an undisputable recognition by one of our largest competitors in the superiority of our multi-core technology and its basis for further cooperation and development.

It opens up an opportunity for cooperation with one of the largest wireless backhaul vendors in other areas. It allows us to divert significant R&D budgets for other 5G technology requirements and diversification. Said all that, we are continuing to pursue multiple strategic opportunities.

We are looking at additional opportunities for technology collaboration, reseller agreement, OEM agreements or licensing our technology. This is one of the benefits to being in a leadership position. It opens a variety of path forward. We're also continuing to zero in our strategy for additional diversification and adding additional capabilities.

To summarize, we continue to expect 2019 revenue to be similar to 2018. And we are targeting a 50-year of non-GAAP net income growth based mainly on a more favorable geographic mix.

We believe much of our hard work of the past several years has established the foundation for a return to low single-digit growth beginning next year as the pace of transition to 5G begins to accelerate.

We are entering once-in-a-decade technology spending cycle from a position of strength, and we expect to continue to gain market share in addition to participating in the 5G-driven growth. Now I would like to turn the call over to Ran to discuss the financials in more details.

Ran?.

Thank you, Ira. Since you have all seen the press release, I'll just highlight some of the significant items in the report. Revenue declined sequentially to $69.2 million below our target quarterly run rate of $80 million to $85 million per quarter. This was a result of typical seasonality as well as substantially lower revenue from India.

As Ira described, this was something we'd anticipate and discuss on the Q4 2018 call. India accounted for all the 15% of total revenue in Q1, the lowest level in many quarters. APAC in Europe increased as a percent of total revenue and the other regions remained about the same.

We are expecting to receive the large batch of orders from India this quarter, and we have been able to plan for them in order to begin shipping as quickly as possible. Therefore, we expect that Q2 and the remaining quarters of 2019 will be at/or above our $80 million to $85 million quarterly run rate.

Our preparations for the India large batch of order has impacted and may further impact our inventory and our cash flow. I will give some more color on this impact when discussing our cash flow. In Q1, we had no above 10% customers or customer groups.

GAAP gross margin was 35.6% on non-GAAP gross -- and non-GAAP gross margin was 35.7% in Q1, a sequential improvement of 100 basis points and nearly 300 basis point higher than the same period in 2018, primarily due to more favorable geographic mix with much lower revenue from India.

We continue to expect the higher gross margin for the year in 2019 versus 2018, with the typical fluctuations from quarter-to-quarter depending on geographic and product mix. Turning to operating expenses. Non-GAAP OpEx of $20.9 million was slightly below our target quarterly range.

Our R&D expenses came lower than our initial plan primarily due to the impact of the agreement with NEC. In addition, our certain marketing expenses was slightly slower due to variable compensation expense primarily related to our low revenue in Q1. Our G&A expenses increased primarily as a result of activities related to strategic initiatives.

As mentioned by Ira, we expect to divert the R&D budget that freed up due to our agreement with NEC to other R&D initiatives. Investment in this initiatives may take some time to implement and result in some slightly lower midterm R&D expenses.

But at the same -- but at this point, we assume the same overall level of operating expenses for 2019 that we stated previously, expecting them to reach toward the upper end of our target range of $21 million to $22 million per quarter in Q2 and slightly exceed $23 million per quarter during the second half.

We expect to continue to spend aggressively, but carefully on our next generation 5G solution and other related initiatives to maintain our technology leadership. Our financial expenses increased a bit sequentially in Q1, increasing from $872,000 in Q4 to about $1.1 million on an ongoing basis, mainly due to foreign exchange rate differences.

We expect quarterly financial expenses to range between $1 million to $1.5 million this year, assuming no further significant fluctuations in exchange rate. Tax expense was slightly lower than Q4 and is likely to increase gradually during the remainder of the year.

On a GAAP basis, we reported $8,800 in net income and non-GAAP net income of $2.1 million. This was obviously much lower than Q4 also, below the same period a year ago. With quarterly revenue for the remaining quarter of 2019, expect it to be at/or above $80 million to $85 million quarterly run rate.

We continue target growth in non-GAAP net income for the full year based on a more favorable geographic mix and lower financial expenses compared to 2018. Turning to balance sheet at March 31, receivables declined to $119.5 million with DSO of 132 days.

The DSO increase was mainly attributed to further reduction in factoring activity as well as change in mix towards customer with more extended payment terms than our average.

In Q1, we had negative cash flow about $5.8 million, this an opportunity for me to explain some trends we have seen on our balance sheet that can give more color on our cash flow trends. As you probably noticed, we have seen a continued increase in our inventories with a similar trend in our trade payables.

The main reason for that, our preparation for the fast delivery of the large batch of orders that is expected from India and to a lesser extent, slight changes we have made to our strategy of components procurement, which is meant to better accommodate fast-delivery requirements and purchase price changes.

This reason together with change in customer mix toward more extended payment terms and continued decrease in factoring have been creating pressure on our cash flow that we expect to continue for a while. We expect this trend to change within 2019, and therefore, our cash flow for the full 2019 is expected to be positive.

At March 31, we had cash and cash equivalents of $29.8, with a $40 million unused line of credit, which gives us ample financial flexibility. As Ira mentioned, excluding India, our book-to-bill ratio was above 1 for the quarter. Including India, it was slightly below 1. As noted, this is primarily due to timing factors related to our business in India.

All regions appear to be the same or stronger than 2019 in terms of overall demand and activity, so we continue to expect revenue for 2019 as a whole to be about the same as 2018, but with a more favorable geographic mix due to a lower proportion of revenue from India related to the timing of orders, not to the level of demand.

We continue to have potential upside in revenue in 2019 could be higher, if some of the projects that are currently counted in our projections at low amounts or not reflected at all will convert to orders and backlog in time to be recognized as revenues within the current year.

We are targeting approximately 33% non-GAAP gross margin in Q2, mainly due bigger portion of revenue from India, with some improvement during the second half of 2019. Non-GAAP operating expenses are expected to be slightly higher in 2019 versus 2018.

So, as Ira indicated, we are aiming to make 2019 our fifth consecutive year of growth in non-GAAP net income based on a similar level of revenue compared to 2018. We expect this additional net income improvement to be driven by gradual increase in gross margin, tight control of operating expenses and lower financial expenses versus 2018.

So as communicate last quarter, we believe Q1 was an unusual quarter that will be offset during the remaining quarters of 2019. So our net income growth objective for the year remains achievable based on the overall strength in our business. Now I would like to open the call for questions.

Operator?.

[Operator Instructions] Our first question will come from George Iwanyc with Oppenheimer. Please go ahead..

Thank you for taking my question.

Ira, when you look at India orders that you anticipate, how quickly do you expect this to be booked as revenue? Is that something that's going to happen fairly quickly?.

I think we indicated on the call that we see them around the corner. I do expect that part of them, a significant part of them, and that's what's basing our projections for Q2, will also be turned into revenue this quarter.

I think Ran mention that in anticipation, we have been building also components in other sectors to simplify manufacturing and be able to deliver quickly within the quarter..

Is there any getting of the deployments or anything like that or that will happen immediately?.

In India, depending on the customers, some of them are deployment and we separate deployment in some of the cases between the deployment itself and the – and we recognize in some of the cases depending on the contract based on products of delivery. We do have quite a few teams with very significant deployments.

The deployment itself will stretch over a period between now and probably at the end of the year..

Okay. And then picking up on that comment about potential upside for 2019.

Is that primarily related to potential new orders coming from T-Mobile and Sprint here in North America or are there other carriers that might also be included in that?.

Not necessarily. If you – and I mentioned on the call that we see the business is being very good with a lot of opportunities on the table. I think I mentioned an opportunity in the Pacific region. I mentioned an additional operator inside the Southeast Asia. I did mention the U.S. is one of them.

I mentioned very nice progress with two global operators in Europe. All of those are counted at this point as very low probabilities into our forecast. And they counted somewhat in the forecast, but there are upsides there to moving forward.

The important thing, which I need to say on the table, we do see 5G putting pressure on the operator to start preparing. They will not deploy 5G anytime soon and most of the things you see on 5G deployments is – and timings and news articles related to the run and not the backhaul. Backhaul has two things.

Sometimes it comes in certain places ahead of the deployments and sometimes it comes beyond after the deployments depending on how ready the network is, and that's what we do with a lot of the operators in upgrading the networks to when they will deploy 5G, which is probably somewhere around 2020 or the second part of 2020 or 2021 will start doing things..

Okay.

And then just taking that as a transition, can you give us a little bit more color on the NEC partnership and how you expect to maybe use the extra dollars? What type of projects would you invest in on the 5G side?.

So to give the colors is – I think, it's a great achievement that one of our larger competitors after very long discussions with them, we decided to cooperate together and do some development work together on next-generation technology, what we both participate and we'll both benefit from those technologies.

It's after they have looked at our technologies very thoroughly with their technology, and together, we decided it's an excellent path to cooperate in the market. By the way, it's part of our philosophy to do cooperative steps with different players within the market as we move ahead, which help us.

This is allowed because it's a development together, allows us to divert some of the R&D dollars into other projects, which is accelerating other developments around some of the disaggregated solutions that we have and some of other things we are looking at and the ability to diversify into adjacent markets that we are in.

In general, if you look at the numbers for the year, I do not expect our R&D budget for the year to change significantly from the ongoing run rate. This quarter, it was a little bit lower, probably be the same level as before next quarter or a little bit lower, but in general, for the year we'll stay at about the same level..

Okay. And just a final couple of questions.

Ran, when you look at the G&A expenses, is it going to stay at that elevated level or does that come back down? And when you look at gross margins for the full year, is it now potentially going to be above 34%? Or is that 34% number still a pretty good target?.

So, George, thanks for the questions. So the 34% is still a good number for the gross profit. This is currently our forecast. As to the G&A, I would say that, overall, we do expect it to go down in the next quarters. And when discussing OpEx in general, and as Ira mentioned, we do expect that Q2 will be around $21 million.

And then the second half, we do a plan to increase our OpEx to a level of $23 million in Q3 and Q4..

Thank you..

Thank you, George..

Thank you. And your next question in queue will come from Alex Henderson with Needham. Please go ahead..

Thanks. Ira, I wanted to ask a question about the commentary you made about India. It sounded like you were suggesting that there -- large build around 4G was coming to conclusion. And therefore, the projects around the backhaul builds associated with that may also come to a conclusion.

And then you went on to suggest there was some additional new projects such as front-haul related stuff that would start to come forward as a result of the anticipation of post 4G and pre-5G architectures.

I guess what I'm trying to ask is does that pose a risk to 2020, if they have now spent aggressively for three years on 4G and there might be a low before you see a pick-up in demand for these newer differentiated project programs?.

So I'll repeat my comments on the scripted call. 4G rollout is far from complete, and we believe this will continue well into the end of this year and well into next budget year for India.

Maybe not at the very high rate it was in -- beginning of -- end of 2017 and beginning of 2018, but still at very, very high rates as they roll out, densify the network and continue within their competitive positioning within India. In addition to that, some of them are looking at more extensive small cell type of deployments.

Small cell type of deployment is not front-haul. Small cell type of deployments, especially in those environments, is really small cells, which require standard backhaul on the network to densify the network and put additional places.

And this is -- probably it's a different type, a little bit of a different type of a backhaul, which are all outdoor or certain parts of our all outdoor equipment is much more suited for those types of deployment, and that's what we are competing and helping define the RFPs there as it roll out.

So overall, India, my belief, will stay at significant levels into 2019 and 2020..

So to the extent that it's all outdoor, I assume that gives you a competitive advantage in those bids and therefore, might help with the margins a little bit, is that accurate?.

Most of the things we already do and India is all outdoor. Our big success with the largest customer the total deployment of number -- currently, we're getting very close to 70,000 links with them, all outdoor links that we deployed.

Because the whole all outdoor concept, which is in IP-20C and more so in the next generation IP-50 and the whole concept to this aggregation simplifies the network significantly and allows for a much lower OpEx and CapEx type of a deployment to run and build networks.

And that is type of success when I'm talking about technology leadership is what we saw across the board and operators that are coming to us, not all of them doing exactly the same, but asking us help us simplify networks as they start rolling in to the 5G world..

So let me shift gears to -- second question for you is you identified PAC room opportunity to EMEA opportunities, U.S. opportunity, Southeast Asian opportunity, that are "low probability".

If we look at those in aggregate, if they were all come in, what is the scaling of those transactions in aggregate if you were to pull 4 of those or 5 of those or 6 of those in?.

So let's put it this way. Low probability for us to see revenues from those opportunities during 2019 and that's where we indicated because at the stages they are in, the ability to convert them to revenue in 2019 is low probability with low skills is what we have right now.

If I look forward in 2020 and beyond, if you will all 6 of them, it's a significant number on the top line as we move into probably, I look at all of them together, second half of 2020 and 2021..

If you were to look at that on an annual basis for when they are all -- and they may not be at the same timing, but if they were all going together, would that be $40 million to $50 million in incremental opportunity?.

Yes..

Perfect.

Going back to the NEC stuff for a second, most of the discussions about the partnership around R&D, is there also some potential for revenue opportunities there?.

At this point, the partnership is around joint development program we are doing together into the next generation of technologies. And I'm very specific on technologies because we probably will embed the technology in our product. They'll probably embed similar technology in their own sets of products moving forward.

But like any other opportunities, I think it opens the door over time to also revenue opportunities and shared other activities, something we pursue with them and with others on a continual basis, because I'm a great believer in competition in the market which helps all the players together..

Is there risk that you could be out with similar products and they are competing with you against you on price, maybe willing throw the product in with other product bundles that might pressure your competitive position and that they have similar technology as a result of the partnership? Or has that been -- that issue mitigated somehow?.

There's a risk always like that, but there are technologies within the market even in the current generation, and I think both companies will know how to differentiate as we move forward.

And they are very confident we'll know how to differentiate our product sets in such a way that in cases where we might face also competition with them on the basis of the same technologies, we'll have an angle..

And then one last question and then I'll cede the floor. When the Indians come back in, should we anticipate that it'll be obvious in the sense that there is a press release associated with those orders, or will it be something that we'll have to wait to find out about, how do you anticipate communicating that....

Yes. Prior -- our prior, I'll say it this way, our prior history has been that we usually in those types of situations put out press releases.

Now you see me hesitating a little bit because putting out a press release, and I cannot promise that on the table, also depends on certain situations with specific customers and the way the contracts with them are based on us allowing or not allowing to -- and when publicized either walking with them or in non-name basis.

So the high probability is yes, but they can't sign at the bottom at 100%..

So one last question I forgot to ask. Relative to Sprint and T-Mobile, I know you work with both of them. I know they both want to buy your product. There seems to be some timing issues there relative to the deal.

If the deal does get done or if the deal doesn't get done, does it change the probabilities and the scale of what you might see in terms of orders from those customers?.

The interesting part is no or at least not for 2019. We haven't factored in significant numbers for both of them based on the deal done for this year and assuming it's there. On the other hand, because they are still competitors, we do still see both of them keep on investing at various level throughout the year. I've seen the patterns last year.

I started seeing it in Q1 as well. And my belief is that what we built in our plans for this year, for both of them, either separate or together, which were not huge numbers, will materialize in 2019 under both scenarios..

Perfect. Thank you very much for the explanations..

Thank you very much, Alex..

And the next question in queue will come from Mike Staiger with Odeon Capital. Please go ahead..

Hi, thanks a lot for letting me ask a question. A lot of them have already been asked, but maybe you could just elaborate on the additional capabilities that you're looking for. You mentioned in your discussions what these additional capabilities include, potentially an acquisition? Thanks..

If I look at additional capabilities, we're looking at a very wide spectrum of opportunities on the table to complement our capabilities both in technology, sometimes within our market and to adjacent market, both in service capabilities and our ability to service customers, both in the mobile space and vertical spaces around the world and in some places also enhancing our customer and geographic play within that.

We do look at various opportunities of this kind. They come and go. They are on the table and top of the table. And this is part of the ongoing strategic initiatives and activities that we do as part of growing the company..

Thank you. [Operator Instructions] Our next question comes from Gunther Karger with Discovery Group. Please go ahead..

Yes, good morning. And congratulations on great results still. My question has to do with vertical markets again.

And would you care to make any overall comment on that? And specifically, given the rising unrest worldwide in the homeland security area, just what any business in that area that you see coming at?.

We do see -- on this call, I focused most of my comments on the mobile space and where we are. We do have significant work done around what we call vertical markets. Some of them are homeland security types of projects in different places. And those are all continuing and ongoing business within our overall non-mobile businesses, about 20%.

And we do see those are usually smaller project longer term with very gradual deployment as people roll them out. We are involved in one project of this kind in the U.S. and another one right now in Italy, another one in another place in Europe. All of them are there as part of our business..

Thank you..

Thank you very much..

Thank you. The next question in queue will come from David Allen with Woodbury Financial. Please go ahead..

Good morning. Ira, this is a fantastic report. I've been following the company for 10 years and your execution is -- deserves complement. I'll take two….

Thank you very much..

…two quick questions, if I can..

Go ahead..

The gross margins you talked about, we had difficulties all the way back to Venezuela if you recall a few years ago. The gross margin at 35.6% and 35.7% is very complementary. And the other aspect I like about it is India and the fact that, notwithstanding, India not being in the game right now, execution was very good on the P&L in terms of earnings.

Two questions I have, please. The first one is, you touched upon it, about the NEC leadership, and you touched upon the Fujitsu relationship.

And could you elaborate some more specifically on timing on that and the opportunity for Ceragon to continue to develop and promote its R&D powers?.

So, I'll start from the end of your comment. We do not promote our R&D hours, okay? We are technology leader within the market. But, one of the things that’s good to do, again, on competitive positioning is work with some of our competitors, which validate our technology, validate our leadership position, and walk with them on the future.

We announced the NEC deal sometime, I think, it was the end of March, but it was effective from the first quarter period where we are collaborating together on development and have been for a while because this is something that is not cooked in one day on defining things moving forward.

And I think it's progressing together very nicely, and will continue until it bears, both for them and for us, fruits and products down the road. And I think it's very important for both companies to work together.

And it's not the only place where we're looking at those types of things doing together, which is not our hours per se, but as a joint work program that we're doing. Your other part, which is on collaborating, and you mentioned Fujitsu.

Fujitsu is more of a local North American type of a relationship where we're working together, more using them as a channel into the market, and as a strong channel and services partner within the U.S. market and some of the projects. And then I said it in my comments, yes, it's progressing very nice but slowly..

Thank you..

And at this time, there's no additional questions in the queue. I'll turn the call back over to management for any closing comments..

I'd like to thank all of you for joining us today on the call, and hoping to see you between now and Q2 call, also face-to-face. We will be at the Oppenheimer conference in New York next week, and towards the end of the month, also probably participating at the Cowen conference in New York.

Between now and then, you're welcome to call us either directly or via Claudia, and we'll be happy to answer any further question and elaborate as things progress. Thank you very much..

Thank you. And ladies and gentlemen, this conference will be available for replay after 11 A.M. Eastern time today running through June 6 at midnight. You may access the AT&T Executive Playback service at any time by dialing 800-475-6701 and entering the access code of 466180. International participants may dial 320-365-3844.

Once again, the telephone numbers are 800-475-6701 and 320-365-3844, using the access code of 466180. That does conclude your conference call for today. We do thank you for your participation, and for using AT&T Executive Teleconference. You may now disconnect..