Ceragon Networks Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 6, 2025

Key Takeaways

  • Negative Sentiment: Q2 revenue declined 14.4% year-over-year to $82.3 million, driven by a 30% drop in India orders from a financially challenged customer that stalled near-term visibility.
  • Positive Sentiment: Ceragon delivered $0.03 non-GAAP EPS, generated $6.1 million in free cash flow and reduced net debt, showcasing robust operational resilience and cost discipline.
  • Positive Sentiment: The company secured a multi-million-dollar deployment with a North American Tier 1 carrier using SiClu technology, positioning Ceragon for incremental share gains.
  • Positive Sentiment: Its point-to-multipoint solution from the SixLu acquisition passed multiple PoCs—highlighted by a Latin American smart city project potentially worth $7–8 million annually for five years.
  • Neutral Sentiment: Due to India uncertainties, management suspended full-year guidance but expects H2 revenue roughly in line with H1 while maintaining investments in wireless connectivity and private networks.
AI Generated. May Contain Errors.
Earnings Conference Call
Ceragon Networks Q2 2025
00:00 / 00:00

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Ceragon Networks Earnings Call.

Operator

Our presentation today will be followed by a question and answer I must advise you that this call is being recorded. I now like to hand over the call to our first speaker today, Rob Fink, Head of Investor Relations. Please go ahead.

Rob Fink
Managing Partner at FNK IR

Thank you, operator, and good morning, everyone. Hosting the call today is Doron Razzi, Ceragon's Chief Executive Officer and Ronen Stein, Chief Financial Officer. Before we start, would like to remind everyone that statements made on this call may constitute forward looking statements within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934 and the safe provision Arbors of the Private Securities Litigation Reform Act of 1995. 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 forward looking statements.

Rob Fink
Managing Partner at FNK IR

These risks and uncertainties include, but are not limited to, company's forward looking forecast with respect to which there is no assurance that such forecast will materialize, company's ability to future plan business, marketing, and product strategies on the forecast evolution of market development such as market and territory trends, future use cases, business concept, technologies, future demand and necessary inventory levels. The effects of evolving geopolitical situation in Israel and the related evolving regional conflicts. The effects of global economic trends, risks associated with integration and deployment of acquired businesses, risks associated with the transition and rollout of five gs technologies, risks related to the concentration of our business on a limited number of large mobile operators, risks resulting from the volatility in our revenues, margins and working capital needs, disagreements with taxes authorities, the high volatility and supply chain needs of our customers, which from time to time lead to delivery issues and other such risks, uncertainties and other factors that could affect results of operation as further detailed in Saragon's most recent annual report on Form 20 F as published on 03/25/2025, as well as other documents that may be subsequently filed by from time to time with the Securities and Exchange Commission.

Rob Fink
Managing Partner at FNK IR

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 prove to be accurate and Ceragon undertakes no obligation to update them. Ceragon's public filings are available on the Securities and Exchange Commission's website at sec.gov, and they may also be obtained on Ceragon's website at ceragon.com. Today's call will also include certain non GAAP financial measures. Reconciliation between GAAP and non GAAP results is included in 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 that, I will now turn the call over to Doron. Doron, the call is yours.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Thank you, Rob, and good morning, everyone. On the surface, Ceragon's second quarter revenue was below expectations, but this is primarily tied to a single region, India, and is largely being driven by one key customer that is navigating well publicized financial challenges. This has temporarily halted this customer's order activity and limited near term visibility as path forward are not yet established. Based on what we know today, we expect that this will just be a timing issue with market demand and our share of the market essentially unchanged. Beneath that headline, I believe the Ceragon story is far more encouraging, reflecting the substantial improvements we have made in our business over the past two years as well as the benefits of continued innovation in our solutions.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

We delivered $03 in non GAAP earnings per share and maintained healthy operating margins even in the face of the disruption in India, a clear demonstration of the operational strength, cost discipline and resilience we have built into Ceragon. At the same time, our broader momentum continues to build. In fact, the second quarter was an encouraging period for Ceragon with our differentiated technology demonstrating meaningful capabilities that we believe outpaces our competitors. These durable competitive advantages are actively positioning us for new opportunities and use cases that can drive incremental revenue and market share gains across multiple geographies. Customer needs and market trends are aligning with our technological roadmap.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

We are proving our value through field trials and proof of concept engagements, and this is beginning to fuel potential growth in our pipeline and bookings in real time. This dynamic is especially evident in North America, where our recent introduced technologies are proving applicable to both service providers, carriers and private network operators alike. In fact, during the second quarter, we secured a multi million dollar project as a preferred vendor for a new major Tier one carrier in North America. This project leverages SiClu technology to introduce a new product demonstrating our ability to deliver differentiated value through capabilities that in our opinion, our competitors are far from introducing. We are also expanding interest in such products across North America and other regions.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

While still early, we believe this new carrier engagement as well as this new product could unlock substantial new business and contribute to incremental share gains with other service providers in one of the world's most strategic communications markets. Second, we are cultivating significant increased interest in our point to multipoint solution. This technology has been demonstrated and validated in multiple proof of concept projects, both in North America and Europe, serving a wide range of use cases across private networks and CSP domains. These successful evaluations have enabled us to advance into more detailed discussion with potential customers and discuss early stage commercial engagements. The point to multipoint platform acquired through our SIKLU transaction continues to prove its value, particularly in private network applications, but increasingly with other customers as well.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Given SixLou's financial position at the time of acquisition, we expected to address areas of underinvestment and we acted quickly to stabilize and strengthen the product. We are now beginning to see the returns from that effort with growing momentum and expanding business potential. Importantly, the Point to Multi Point technology is particularly well suited for smart city applications. As a chosen partner, we are currently involved in a multi year project in one of Latin America's largest cities under a connectivity as a service model. Should this project mature to its full extent, it could represent recurring annual revenue of 7,000,000 to $8,000,000 for a minimum of five years.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

In our traditional business, our IP50 EXP solution is gaining significant traction as a leading traditional microwave solution alternative. The IP50 EXP delivers millimeter wave like capacity over traditional microwave distances. This high power product combined with an auto align antenna enables customers to replace microwave deployments at a significantly lower total cost of ownership and in many cases even higher bandwidth. We are also participating in multiple RFPs of our traditional backhauling projects using our latest CX, EX and IP50GP product families in EMEA and Latin America. These projects support network modernization efforts aimed at increasing capacity.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Our new products' exceptional price performance ratio is increasing our chances to win business from customers whom we hadn't worked with in several years, demonstrating yet again our ability to capture and recapture market share with our industry leading technology. We are driving demand globally, but in Q2, America remained a standout. Excluding E2E contribution, both bookings and revenue in North America exceeded $20,000,000 Balancing these exciting developments, our short term headwinds we are experiencing in India, our largest market, and it's important to address those directly. Revenue from customers in India was $24,800,000 a decrease of 30% year over year. As I mentioned, our customers' well publicized financial challenges impacted the project we are involved in and this project stalled.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

At this point, it is hard to predict whether and when it will resume, although we believe the situation is a timing issue and expect a favorable resolution in the future. Additionally, some other projects with other Indian carriers are progressing at a slower pace than our original expectations. However, we are bidding on a new opportunity in India that could add significant incremental business for us in 2026 and beyond. We continue to pursue more opportunities with new products, including without limitations, leveraging CCLUS technology. To summarize, our market share in India is expected to remain intact and we still see the region as long term contributor to our business growth.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Zooming out, the variety of opportunities in front of Saragon is the strongest I can recall. While near term visibility remained limited, we are seeing positive and accelerating signals of success across our portfolio. Our strategy is resonating, our commercial traction is expanding and our technology is opening doors to further penetrate markets, enter new segments and reach new customers. Most importantly, the bottom line results we reported today reflect the meaningful improvements we have made to our business over the past several years, enabling us to continue investments in our strategic initiatives even at times when revenue is low. As a result, we remain confident in our ability to translate future growth into stronger earnings and sustained value creation.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

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

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Thank you, Doron, and good morning, everyone. The second quarter was impacted by revenue headwinds in India, as Doron described, with improving strength in North America and continued progress against our strategy to create sustainable 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 second quarter results.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Revenue for the second quarter was $82,300,000 down 14.4% from $96,100,000 in the 2024. North America was the strongest region in terms of revenue and contributed $26,800,000 India contributed $24,800,000 in Q2 twenty twenty five and was the second strongest region. We had two customers in the second quarter that contributed at least 10% of our revenue. Gross profit in the second quarter on a non GAAP basis was $29,000,000 which was down 14.2% from $33,800,000 in Q2 twenty twenty four. Our non GAAP gross margin was 35.2%, unchanged from the prior year period.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

The sustained gross margin, even on lower revenue, was mainly attributable to our success in North America. Moving on to operating expenses. I'd note that we have now consolidated E2E into our results, impacting total operating expenses. Research and development expenses in Q2 twenty twenty five on a non GAAP basis were $7,200,000 down from $8,200,000 in Q2 twenty twenty four. As a percentage of revenue, R and D expenses on a non GAAP basis were 8.8% in the second quarter versus 8.5% in the prior year period.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Sales and marketing expenses on a non GAAP basis in the second quarter were $11,100,000 up from $11,000,000 in Q2 twenty twenty four. As a percentage of revenue, sales and marketing expenses on a non GAAP basis were 13.5% in the second quarter as compared to 11.5% in the 2024. General and administrative expenses on a non GAAP basis for the second quarter were $5,900,000 as compared to $1,400,000 in Q2 twenty twenty four. Keep in mind that our G and A last year included the impact of a $4,000,000 benefit related to an initial collection from a $12,000,000 debt settlement agreement reached with a South American customer for which we accounted a credit loss at the 2022. As a percentage of revenue, G and A expenses on a non GAAP basis were 7.2% in Q2 twenty twenty five versus 1.5% in the year ago period.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Operating income on a non GAAP basis for the second quarter was 4,700,000 versus operating income of $13,100,000 in Q2 twenty twenty four. The absence of the $4,000,000 credit loss recovery benefit I mentioned earlier, combined with 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 second quarter were $1,700,000 an improvement from $2,600,000 in the prior year period. The change was positively impacted by favorable exchange rate changes and lower interest expenses. Our tax expenses on a non GAAP basis for the second quarter were $600,000 Non GAAP net income for Q2 twenty twenty five was $2,500,000 or $03 per diluted share versus non GAAP net income of $9,900,000 or $0.11 per diluted share in Q2 twenty twenty four.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Moving over to our balance sheet. Our cash position at 06/30/2025, was $29,200,000 down from $35,300,000 at the 2024, primarily due to cash payments made in Q1 in connection with the acquisition of E2E amounting to $6,600,000 net of acquired cash. Short term loans were $20,500,000 at the end of the second quarter, down from $25,200,000 at the 2024. Thus, our net cash position was approximately $8,700,000 as opposed to $10,100,000 at 12/31/2024, again largely due to the acquisition of E2E, offset mainly by a positive free cash flow in Q2. We believe we have cash and facilities that are sufficient for our operations and working capital needs.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

I'd note that we generated $6,100,000 in free cash flow, enabling us to reduce our debt in Q2 despite significant short term revenue headwinds. This speaks to the progress we have made in our business model. Inventory at the end of the second quarter was $59,900,000 essentially unchanged from $59,700,000 at the 2024. Our trade receivables at the end of the second quarter were $124,100,000 versus $149,600,000 at the December 2024. Our DSO now stands at one hundred and nineteen days.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Looking at our statements of cash flow. Net cash flow used by operations and investing activities in Q2 twenty twenty five was $6,100,000 I'd like to now turn the call back over to Doron to provide a summary and review our outlook. Doron?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Thanks, Ronen. Before we open the call for questions, I want to briefly summarize the key takeaways and update our outlook. Q2 highlighted the strength of the foundation we have built as we delivered non GAAP profitability and generated free cash flow despite the revenue headwinds while advancing our strategic roadmap. Traction across regions is growing and our technology is opening new doors across both service provider and private network segments. Our strategy has not changed and challenges primarily in India do not necessitate changes.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

We are on the right path, positioned to navigate these timing issues while expanding our strategic position globally. Turning now to our outlook. Our visibility this quarter has been adversely impacted primarily by dynamics in India as discussed. As a result, we are not currently in a position to reaffirm our prior guidance or provide an updated range. That said, we believe this is a matter of timing.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

In the meantime, this has placed greater weight on individual projects in other regions, some of which were expected to contribute meaningfully to our revenue and are currently delayed. Importantly, we strongly believe we have not lost market share in India or globally. In fact, we are expanding our opportunity set, particularly in North America, primarily due to technological leadership delivering stronger radio performance at a lower total cost of ownership. Looking ahead, we assume second half revenue to be roughly in line with the first half. Based on this assumption, we believe we can deliver non GAAP profit and generate cash while continuing to invest in our strategic pillars, advanced wireless connectivity solutions, private networks and managed services. With that, I'll now open the call for questions.

Operator

Our first question will be from Scott Searle from ROTH Capital. Scott, please go ahead. Scott?

Scott Searle
MD & Senior Research Analyst at Roth Capital Partners, LLC

Oh, my apologies. Good morning. Good afternoon, guys. Thanks for taking the questions. Doron, maybe just to dive in on India, the obvious, region talked about.

Scott Searle
MD & Senior Research Analyst at Roth Capital Partners, LLC

What gives you the confidence that this isn't a share loss, that this isn't some sort of permanent impairment in terms of some of the customer relationships there? And could you extrapolate a little bit in terms of your visibility into the second half as it relates to India? You did about 25,000,000 in the current quarter. Is that a sustainable level accounting for customers that are, I think, doing a little bit better from an economic standpoint now? And this '26 opportunity, I'm wondering if you could maybe gauge the size and timing of when we should see that really starting to play into the p and l?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Okay. So thank you for this question, Scott. So let's start with the competitive landscape and our stake in this market. We have a very strong inroads into this market, and we have a constant dialogue with all of our customers, both existing and potential. And Ceragon, generally speaking, is perceived as one of the strongest vendor to this industry.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

And we are aware of the main drivers for the changes in the pace or in the cases where projects are stalled, talking to our customers constantly. And it's clear to us based on these discussions that it's not that they are now preferring other vendors over us. It's just a matter of the rollout pace that is driven by other factors that are totally nor associated with our strength in this market. So that's the main, so to speak, indications we have for not losing market share. I would even dare say that in some new opportunities with new technology, we already finished the the technical phase.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

And we're now talking about commercials, and that can also fuel our business in 2026. I was referring more explicitly to a new opportunity that is not that one, but it's another one more on the traditional microwave business. And that opportunity is in terms of tens of millions of dollars to be, I would say, delivered during 2026 or I would say the majority of this opportunity will be delivered during 2026. Obviously, the RFP is still out there, and we don't know the results. Of course, we don't know the results yet, but we believe that we are in a very good position to win at least a big portion of this opportunity.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

So so all in all, when I look at the at the trends, I would say the following. The loss of the the I would say the interim loss of the business from this specific provider or service provider that stopped the investment due to its financial issues is something that we cannot predict the resumption yet. And we are not baking or hardly baking any potential revenue from this one into our second half of the year. With the others, each and everyone has its own, so to speak, pace that is driven by different factors. And I would say that $25,000,000 that we've seen in q two might even be the high end in our most likely scenario.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

But still, there's so many unknowns that this number could could fluctuate easily up and down. And if it fluctuates up, I can assure you that we have a very good, so to speak, operational preparation and readiness to, capture and capitalize on any trend up that will happen if indeed, this happens during the second half of the year. For 2026, I'm by far much more optimistic.

Scott Searle
MD & Senior Research Analyst at Roth Capital Partners, LLC

Great. Very helpful. Thank you, Doron. And and if I could maybe shifting to a a healthier region, North America was a great quarter. You know, I think it's the best quarter you've had in five or six quarters.

Scott Searle
MD & Senior Research Analyst at Roth Capital Partners, LLC

How sustainable is that as we're looking into the second half of this year? And maybe give us an idea. I think you've referenced private networks being strong, but maybe a little bit more color on that front versus the work with the tier one operator, and it sounds like you've got a second tier one that's now starting to play into the mix. Thank you.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Sure. Thank you, Song. Thank you for this question. So so look, obviously, the business in Seragon is still based on relatively imminent orders. And based on what we see today and the pattern and the pace of the business, we believe that the second part of the year can be more or less at the same level of the first part of the year.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

It it is based on, first of all, the backlog we have accumulated as of the end of this quarter. And obviously, some forecasts that we have for Q3 and for Q4 from different customers. In terms of private networks, generally speaking, we are very excited about some new opportunities. And we just finished a few POCs that we see a very clear path that this will return into significant orders, and I hope that this will happen shortly. I don't want to to kind of be ahead of my skis, but it looks very promising.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

I would say that we hardly build on these opportunities for the second part of the year. Obviously, if this happens, it will definitely fuel our business in North America further. But if not, I think it could be a very strong baseline for increased business from private networks in North America in 2026.

Scott Searle
MD & Senior Research Analyst at Roth Capital Partners, LLC

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

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Thank you.

Operator

Our next question is from Ryan Koons from Needham. Ryan, please go ahead.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Hey. Can you hear me?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yes, Ryan. Hi, Ryan. Good morning.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Hi. Good morning. In terms of your 10% customers, maybe some housekeeping upfront. Were those both from India region, your 10% customers, or different regions?

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

The 10% customers are coming from both, from India and North America.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Great. Thank you for that. And, you just you discussed some emerging tier one, North American opportunities here. Can maybe you kinda outline, you know, what kind of shape and timing you think those opportunities might present you and, you know, how you're investing in in terms of those emerging opportunities?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yeah. Actually, I'm very excited with this particular win and some other opportunities that I see to just to generalize the trend that we see, and I would even they're saying that I see that as almost a global trend. One of the big observations I had is that the f r two as part of the five g rollout is being looked at from various angles, and operators are looking at in different ways to use and to utilize these frequencies other than just mobility. And that opens up many new use cases in North America, but also outside North America Starting from a very simple model of frequency preservation just to make sure that they have the license and they can use it later on. And all the way into fixed wireless access, multi dwelling units.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

And as I said, this is a phenomenon that we see not only in North America. I referred to to our success in India in a previous question. It's more or less the same story there. And there, we are also in a great position since we've passed all the technical barriers, so to speak. And now we're starting to discuss commercials.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

So I'm obviously very optimistic. Specifically, the the one we won is expected to add to our revenue quite significantly in North America in 2026. And as we speak, we see more operators looking for very similar solutions in this region.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

That's a great update. Appreciate that. Maybe one last one, if I could squeeze it in. On your your acquisition of end to end recently, how is that business trending in terms of, you know, private networks? And I think I think you were penetrating the the energy sector with that.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Can maybe give us a few updates on how that business is performing?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yeah. So so so far, it's in accordance with our plan. I would even they're saying that in terms of booking, we are ahead of our plan. And that's even, I would say, despite some slowdown that we've seen in the private networks in different segments in North America due to the tariffs and many other things that have different implications on different segments in the private network. So the bottom line is that we are in accord we're in accordance with their plan. And in terms of booking, we're even exceeding it.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Right. So you're saying the tariffs not necessarily on your product, but tariffs on

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yeah. Yeah.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Core business. Yeah.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Exactly. It's not necessarily associated with communication, infrastructure, and with our product particularly. Sometimes there are other factors that are impacting these industries, and that may create certain delays in the decision to move forward on the connectivity part.

Ryan Koontz
Ryan Koontz
MD - Research Analyst at Needham & Company

Got it. Super. That's all I've got. Thanks thanks for the questions.

Operator

Thank you. Our next question is from Christian Schwab from Craig Hallum. Christian, please go ahead.

Christian Schwab
Senior Research Analyst at Craig-Hallum Capital Group LLC

Hey, it's Christian here. Thanks for letting me ask a question. Given the near term, I appreciate the fact that we'll still be profitable and generate cash this year. But given the revenue headwinds this year, at what point would it take for you to address OpEx, which looks heavy for these revenue levels?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

So so I would start by giving a general comment and maybe Ronen can can complement. Look. We, are investing in our new strategy, and we intend to continue investing in our new strategy, especially after we have seen, so many, strong signals that this is this strategy is probably the right strategy for Ceragon. So I would they're saying that as long as we are profitable and generating cash, it is our intention to continue investing in this in this strategic initiatives. Obviously, if at a certain point we see a situation that the that the relevant parameters for us deteriorate significantly, we'll reconsider.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

But at this point, it's our intention to keep our investments intact, because of the momentum and because of our belief that, this is the right path, for this company. And as we already said, we believe that the situation is a temporary situation, and we can resume growth as early as 2026.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

Let me just add good morning, Cristiano. Let me just add that in the last two years, I would say, we have been restructuring our operating models and operating expenses, and we were very disciplined. So we shifted budgets. We opened new centers of excellence both in Paraguay and in India. And we have been able now to reduce our OpEx while still continue to, as Don mentioned, still continue to spend and invest on growth initiatives.

Ronen Stein
Ronen Stein
CFO at Ceragon Networks

So I think that with assumptions on our revenues for the second half and the fact that we expect North America to more or less continue in the same level, we think that gross margin should be okay and to cover and enable us the profitability that we just mentioned.

Christian Schwab
Senior Research Analyst at Craig-Hallum Capital Group LLC

Great. Thank you for that answer. No other questions. Thank you.

Operator

Our next question is from Theodore O'Neill from Hill's Research. Theodore, please go ahead.

Theodore O'Neill
Theodore O'Neill
CEO at Litchfield Hills Research

Yes. Thank you very much. First question about about the Cyclu point to multipoint solution. I think you've given us, I think in your previously talked about use case examples, but can you give us some use case examples and what the potential market size is for those for that product line?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yeah. Sure. Look. The the most common use cases we've seen so far are around smart cities and and public safety. This product is very suitable for a situation where you need to carry data from video cameras either in in a relatively short distances or using a mesh technology that can help very nicely in building a network or an access network that on the one hand is very strong in terms of capacity, very high capacity, and at the same token is very cheap at street level connectivity.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

So we see that in projects of small cities. One of them is in North America. There's another one, the biggest one I was talking about in Latin America. And we see more of that coming from other regions. So this is a very common use case, and it can also develop to other ideas such as managing traffic lights and other and other things that are associated with improved, so to speak, quality of managing a city city public services elements.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

The other piece that we see as an opportunity and we have trialed for relatively long time by now with huge success is actually in the CSP domain. And while I tend to give this opportunity slightly less emphasis in terms of volumes. We are talking about street level connectivity as a solution for small cells backhauling. We've seen that predominantly in Europe, in countries where, generally speaking, it's very difficult to bring the fiber to to the last point. And it's also even very difficult to put a microwave and millimeter wave, the traditional one, over the roofs.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

And that could also become a a very common, alternative, in such cases. Based on the the the opportunities we are engaged at, this could become a tens of millions of dollars a year. Obviously, it depends on the size of the project. But at this point, I would say that it's, between a few single million dollars to to tens of millions of dollars a year.

Theodore O'Neill
Theodore O'Neill
CEO at Litchfield Hills Research

Okay. Thank you. And you mentioned your participation in multiple RFPs. How do you see the probability for winning these, and what's the competitive landscape look like?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yes. So I I mentioned that particularly referring to EMEA and Latin America. I think, the audience is aware that these are two regions where the Chinese are not, I would say, totally banned. And therefore, the competition continues to be a relatively fierce competition, when Chinese decide to go for a dumping price strategy, which happens quite frequently. Why I'm more enthusiastic about these opportunities is is basically because of two reasons.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

One, we all we start seeing a a phenomena where just using the Chinese as a single vendor is not working that well to many of the operators, both in Latin America and in EMEA. And therefore, these RFPs could create an opportunity for us to chime in and to take the second seat, which is also quite significant. The other reason is that with our new product families, the EX, the CX and the IP50 GP, these products are much more, I would say, price performance effective than our older generations. And that gives us, I would say, good starting point to win in an environment where the prices are relatively low. I would just generalize and say that for a few years, we have not invested that much in split mount.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

And still, when you look at the market, split mount still consists of around 60% of this market. Now after we finished to develop the Neptune chip, and obviously, we're working on the first product that will be publicized or or launched based on this chip, we have basically directed resources from r and d to work on our next generation split mount. The IP 50 GP is the first the early bird in in what I believe is strong a road map that if we execute on will also help us gaining a bigger market share in the split mount business.

Theodore O'Neill
Theodore O'Neill
CEO at Litchfield Hills Research

Okay. Thanks very much.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Thank you.

Operator

Our next question is from Rommel Dionso from Aegis. Rommel, please go ahead.

Rommel Dionisio
Head - Research at Aegis Capital Corporation

Thank you. Can you hear me okay, Toram?

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

Yes. Hi, Rommel.

Rommel Dionisio
Head - Research at Aegis Capital Corporation

Hi. So two questions if I could. First, you've obviously made significant progress on in in North America on managed services business and private networks. And I wonder if you could talk about private networks, the opportunity in Europe and just the progress you've made there. And second, I appreciate your comments earlier about continuing to invest in the core business.

Rommel Dionisio
Head - Research at Aegis Capital Corporation

What about acquisitions? There's a temporary delay in in orders from India slow down your acquisition pace in the in in upcoming periods. Thanks.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

So let me start with the acquisition question and then I will go move to a discussion about the private network in Europe. In terms of acquisition, we have not slowed down. And actually, the positive cash flow and the reduction in the loans or the credit line that is utilized is just creating for us a better, so to speak, funding opportunities to do more acquisitions. I think it's more of finding the suitable acquisitions rather than slowing down or accelerating the pace. We have a funnel. I think the funnel looks good. It will take time to make, obviously, decisions. And I can tell you that during the last couple of months, we looked at a few potential acquisitions, and we reached the conclusion that they are not suitable to us. So it is our strong intention to continue pursuing acquisitions. It's just a matter of suitability.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

As to the private networks in Europe, we see also many opportunities there. I think that we are quite successful, actually, in Europe and, by the way, in Africa, in utilities and to a certain degree in defense and in energy. So generally speaking, we see there many opportunities as well. And, obviously, this, this gives us, even stronger signals that we are on the right, so to speak, strategic path.

Rommel Dionisio
Head - Research at Aegis Capital Corporation

Great. Thanks very much, Doran.

Operator

There are no further questions.

Doron Arazi
Doron Arazi
CEO at Ceragon Networks

So thank you so much, everyone, for participating in our conference call and looking forward to talk to you again in the conference call for Q3 results.

Executives
    • Doron Arazi
      Doron Arazi
      CEO
    • Ronen Stein
      Ronen Stein
      CFO
Analysts
    • Rob Fink
      Managing Partner at FNK IR
    • Scott Searle
      MD & Senior Research Analyst at Roth Capital Partners, LLC
    • Ryan Koontz
      MD - Research Analyst at Needham & Company
    • Christian Schwab
      Senior Research Analyst at Craig-Hallum Capital Group LLC
    • Theodore O'Neill
      CEO at Litchfield Hills Research
    • Rommel Dionisio
      Head - Research at Aegis Capital Corporation
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