Good day, everyone. Welcome to the Ceragon Networks Limited Fourth Quarter and Full Year 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 certain 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 the risks relating to the concentration of a significant portion of Ceragon's expected business in certain geographic regions, and particularly, in India, where a small number of customers are expected to represent significant portions of our revenues including the risk of deviations from our expectations of timing and size of orders from these customers; the risk that the current slowdown in revenue from India could extend for a longer period than anticipated; the risks of delays in converting design wins into revenue; the risk of a disruption to our and our customers business related to the outbreak and potential spread of the novel coronavirus; risks associated with any failure to effectively compete with other wireless equipment providers; the risk that the rollout of 5G services could take longer than anticipated; and other risks and uncertainties detailed from time-to-time in Ceragon's Annual Report on Form 20-F and Ceragon's other filings with the Securities and Exchange Commission that represent our views only 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 Web site at www.sec.gov, or may be obtained from Ceragon's Web site 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 will now 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. I would like to introduce you also to our new Head of Investor Relations, Ms. Osi Sessler. Since the topic of the 4G to 5G transition and the timing around it seems to be on everyone's mind, I’ll begin my remarks with an overview from our perspective. The transition to 5G has begun in 2019 in a few countries around the world. In general, operators are taking small steps toward implementation by creating coverage in certain spots, focusing on broadband mobile services, and experimenting with additional 5G use cases. Meanwhile, there's still significant investment in 4G necessary to expand coverage and capacity in areas where it’s lacking while preparing for the transition to 5G. Once the 5G rollout intensifies, we are likely to witness investments in two main areas to ensure adequate 5G coverage is available and to ensure that the service experience is greatly enhanced with network densification, mainly in urban areas. In 2019, we continued to deploy many 4G projects worldwide such as continued network expansion in LatAm as well as network densification in the cities in preparation for 5G; a 4G network expansion project in Mexico with a returning Tier 1 operator which will help the operator prepare for the transition to 5G. In Southeast Asia, we are working on a large project to increase coverage and capacity for one of the region’s largest mobile operators as well as providing them with headroom network capacity for 5G as the country prepares for spectrum auctions, and we have a few 4G densification projects with operators in Western Europe who were focusing on preparing for an initial 5G rollout. The fact that we are being successful in securing new 5G design…

Thank you, Ira. Since you have all seen the press release, I’ll just highlight some of the significant aspects of the results. First, I’d like to put 2019 into some context from a financial perspective. At the beginning of 2019, we expected some softening in the business from India for the simple reason that it had been so strong for so long that a pause would be consistent with general patterns we have seen in carrier deployments. Also, it was time for the operators in India to begin to look toward upcoming 5G spectrum auctions. As Ira summarized a moment ago, the biggest factor that caused our actual revenue for 2019 to be below our target was the dramatic slowdown in India, causing revenue from India to decline over 60% year-over-year, a much larger drop than we had expected. Meanwhile, some offsetting momentum we might have enjoyed from the U.S. was stalled along with the T-Mobile-Sprint merger decision. After being generally flat for three years, we thought 2019 would see an uptrend, which turned out to be very small. Nevertheless, the improvement we had seen in 2017 and 2018 in some other regions such as Latin America and Asia Pacific continued in 2019 so that, excluding India, we grew almost 11% in the rest of the world. So, if you are looking for a simple explanation for what happened in 2019, the answer is that the slowdown in India significantly offset the growth in other regions. Adjusting for lower-than-expected volume, our gross margin for 2019 was in line with expectations. We were able to maintain our gross margin above 34%, excluding the impact of the one-time inventory write-off in Q4. This was achieved mainly due to our continuous focus on managing our costs and not compromising on deals’ margin. With…

Thank you. [Operator Instructions]. And we have the first line of George Iwanyc with Oppenheimer. Please go ahead.

Thank you for taking my questions. Ira, when you look at the full year outlook and the chance of growing, can you give us a bit more on the visibility into the second half of the year and the puts and takes? Do you need much of a 5G contribution to have that growth or is the base primarily being driven by 4G at this point?

The base, as I said on the call, is still being driven mainly by 4G deployment around most of the world. But if I need to look at the growth, we will need some of the 5G design wins towards the second half to start showing, I won’t say very large number, but start showing numbers which will contribute mainly towards Q3 and Q4 to the base of the 4G deployments. Looking at the timing of this point from what we see on our 5G design wins, this is a very high possibility that some of those will be turning already into early deployments. We do not, on the other hand, expect what I would call massive rollouts at that point to drive on top of the base. This is more of a 2021-type phenomenon where it will start replacing 4G types of rollouts that we see today.

And can you give us a bit of color on the competitive dynamic? And specifically from an IP-50 positioning, how do you feel that you’re going to pick up share? Are you going to make the chipset available to any potential customers or are you also looking at any OEM agreement at an equipment level?

In general, let’s first understand that the IP-50 family is a product towards the customers and the network and the deployment. And from a competitive positioning in between product capabilities, disaggregation, and others, we think we have an advantage in the market versus the other solutions that are available today, especially all-outdoor quick-to-deploy type configurations that’s where we will take the share. The new chipset will come online as products only in 2021. It’s target towards the very high end of the 5G and design to cost initiatives in 5G scenarios, and that chipset will drive the product at that point in time. We are looking on a continual basis as you have seen sharing technologies and joint development as we announced this year with NEC and some of the other competitors and looking at OEM-ing our products with other players within the market.

And last question from me. If the growth doesn’t materialize in the second half of the year, would you be in a position to maybe keep that spending closer to 20 million to 21 million or is it structurally your anticipation to be over that 22 million type of number at the end of the year even if growth isn’t materializing yet this year?

You’re asking a hard question. If you are asking me, yes, if it won’t – growth won’t materialize, I’d probably have to look at what we can do, although the built in right now is heavily related to our R&D activities of new products and especially around the fact that we are toward our chipset -- design cycle towards the end of it, and the end of it is more heavily burdened with all sorts of expenses. So, in that cycle, probably the second half and some of it is almost built in into where we are. While we expect that when we go into 2021, because again of the R&D cycles and mainly on the chipset, the OpEx level would start coming down quite rapidly.

Thank you.

[Operator Instructions]. And we’ll go to Alex Henderson with Needham. Please go ahead.

Thank you very much. So, Ira, I really wanted to talk about that chip design cycle time. Clearly taping down and getting these chips out for the next generation of your product is critical and no question you should do everything you can on that front, but it’s also expensive. Can you talk a little bit about how you see the R&D between 1H and 2H for anticipating the tape down in shipment of those to the fab in the back half? I would think that the expenses would be considerably higher in the back half of the year?

I think Ran gave the indication we do expect the second half to be a little bit higher on the OpEx. And if we’re talking about 2021 in the first half, talking about ‘22 and above for the second half, this takes most of the activities into account while we do the final steps around the chipset and the tape out.

Okay. So, the spending in the first half has another variable, which is hard for us to forecast. So your G&A if I modeled it correctly here has jumped up quite a bit in the December quarter. Can you level set that for us? Are we dropping from 6.8 million down to say 5 million-ish kind of number in the G&A? What’s going on there?

Hi, Alex. It’s Ran. So I do expect the G&A level will actually be return more in the Q3 level which is roughly $4.5 million to maximum $5 million. So, we had the write-off of the AR [ph], as I discussed in my prepared remarks, and some other year-end items, some of it related to departure of executives. So we do expect that Q1 will return to normal, which means the spending as it was in Q3 '19, roughly $4.5 million.

I see. Okay. And then could you just talk a little bit about what your full year tax line ought to look like? It seems like while you’re turning to profitability or sustaining profitability that it’s at the barest minimum levels. So I would think your tax line would come down year-over-year.

So actually, most of our tax is related to the taxes we are paying outside of Israel, and the fact that our tax base would need to keep some profits in the countries that we’re working [ph] abroad, and I do expect it in 2020 to be at the same level as it was – and I’m talking about non-GAAP, as it was in 2019 and in previous years as such. Keep in mind that we are still not profitable from a tax perspective in Israel, and this is why we generated the tax assets back in 2019 and we’ll continue to focus that we are going to utilize these tax assets, but most of our tax expense is related to the taxes that we are paying outside of Israel, and I do not expect any change to that going forward.

So still around $2.5 million or so for the year?

Yes.

And then just on the interest line, you obviously had a little bit of a spike sequentially up to little over $2 million in that line from $1.5 million. Should we be at the 2 million level or should we revert back to the 1.5 million level?

No. It’s going to – it’s a near-end item and you should expect it to go down to the 1.5 million level as we had in the previous quarters.

I see. Okay, great. Thank you very much. Now just if I could on the operational side, obviously 5G is well out there, but pre-5G builds – 4G builds that are pre-5G setup look like they are starting to develop. So is that going to help you deliver a little bit of an acceleration in non-India environments? Obviously 11% is pretty damn good, but is there some chance for that to accelerate a little bit as a result of the shift in the emphasis to anticipate the 5G within the 4G networks?

I think what you’re saying is right on the dot. That’s what we are seeing. 4G in most places – there’s a mixture between 4G for 4G purposes only and 4G as an anticipation for 5G and densifying increasing capacity and densification as people prepare for 5G, it’s a mixture. Most of the 4G deployments we see in what I would call developed places is an anticipation for 5G where we see sometimes, for example, in Europe a lot of use of millimeter wave with very high capacities out there. I do expect that type of slow growth and 11% is not slow, but around those numbers outside of India to continue and that’s why we are focusing a little bit of an increase in revenues into 2020, which is basically on India staying flat and continual growth outside of India.

So then my last question, if I could, clearly India has been horrific after being wonderful. Obviously the pressures that occurred in the back half of the year with the court rulings, the pull-forward of the 5G license timing is pressuring 4Q and into 1Q. When do you see that starting to not just stabilize but start to revert to a little bit healthier growth? Clearly the traffic growth in India is still very strong. So I would think at some point India will have to get back on the growth curve. Is that a two or three-quarter kind of phenomenon or is that something that at this point you just write-off until the '21, '22 timeframe?

Very hard to predict, but let’s start on what you are saying which you are right. The operators in India didn’t stop deploying. Remember we are still focusing significant number out of India for this year with the customers. I just returned end of last week from India with discussions with all our customers and all of them are talking about densifying increasing capacity, solving bottlenecks within the network because of the network usage is increasing as they move forward. At this point, I will refrain from predicting when the shift will happen again. Probably my guess is outside of 2020 into 2021 as numbers jump there. But again, it’s very, very early to tell because the dynamics are so much on the political operator government side that in relationship which is very hard to predict as well as talking to a lot of people in India last week, and one of the questions, okay, one is 5G auctions, for example. I think I got more answers than the people I talked to [indiscernible] between very now and then to much later. The only thing I will say is that all the operators are looking in deploying 5G tests or trials within this year in India.

I see. Okay. Thank you very much.

Thank you very much, Alex.

And next, we’ll go to the line of Gunther Karger with Discovery Group. Please go ahead.

Yes. Good morning and good afternoon. My question has to do with the USA market. And recently, there’s been comments on the Trump administration regarding the buy of USA products at the expense of no longer buying Huawei and other products in that area of the world. Ceragon, being an Israeli company, I don’t know where you produce most of your products. You do have a USA office. And the question is, how does Ceragon stand in this emerging policy even though it may be temporary?

Hello, Gunther. Let’s remember that in general that trend is more on the edge of do not buy Chinese or Huawei products in most of the places. So we are benefitting from that trend in different places around the world. There are two deals that we have won over significant one in this year, which come from that trend of mainly the U.S. government pushing a lot of places around the world into buy non-Chinese or mainly not buy Huawei equipment. On the other side I will caution that because of that are seeing Huawei and some of the other Chinese vendors being in other areas being very, very aggressive. And just to the other side of that, I’ve seen a deal in one of the other areas where one of the Chinese vendors went out to all measures to push us out of the customers and became a lot more aggressive than usual. On that trend at this point if you ask me, yes, we are benefitting in some places, but we are hurting in other places and in general it stays almost neutral. Let’s remember with everything that goes for the backwards on that, we do believe that outside of India we gained market share while in India we maintained, although at a much lower level, our market share of the Indian market. So, overall, we are gaining market share versus the other vendors in our space.

Mr. Palti, with no further questions in queue, I’ll turn it back to you if you have any closing comments.

I’d like to thank you all for participating in the call with us. If anyone has further questions, please feel free to contact us; contact myself, contact Ran, contact Osi and we’ll be happy to entertain one-on-one discussions on the way we look forward and on our results. Thank you for joining us today.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.