Ceragon Networks Ltd (CRNT) 2012 Q1 法說會逐字稿

Good day, everyone. Welcome to the Ceragon Networks Ltd. first-quarter 2012 results conference call. Today's call is being recorded and will be hosted by Mr. Ira Palti, President and CEO of Ceragon Networks, and Mr. Aviram Steinhart, CFO of Ceragon.

Today's call will include forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections that involve a number of risks and uncertainties. There can be no assurance that future results will be achieved, and actual results could differ materially from forecasts and estimates. These are important factors that could cause actual results to differ materially from forecasts and estimates.

Some of the facts that could significantly impact the forward-looking statements in this result -- in this include the risk of significant expenses and the connection with potential tax liberties associated with the nearest prior operations of facilities and risks that combine Ceragon and their business may not perform as expected, and other risks and uncertainties, which are discussed in greater detail in Ceragon's Annual Report on Form 20-F, and Ceragon's other filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date on which they are made, as Ceragon undertakes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. Ceragon's public filings are available from the Securities and Exchange Commission's website at www.sec.gov or may be obtained on Ceragon's website at www.ceragon.com.

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 Aviram Steinhart, our CFO. We began 2012 on a strong footing. Revenues were within the range we expected. Gross margin continued to improve sequentially. We kept price control of our operating expenses and we generated positive cash flow from operations. Both the short and the longhaul business are performing according to our expectations, and we continue to be pleased with our execution.

During Q1, we began to see signs that bookings were improving, but the real pickup in orders came in April. So our book-to-bill for Q1 was below 1. Although we consumed some of it during the quarter, we ended Q1 with more than 1.5 quarters worth of backlog. With the current pace of orders, we expect our book-to-bill for Q2 to be above 1.

Geographically, our experience was consistent with what we've been hearing from others in the industry. Europe and APAC were a little bit soft, while Latin America, Africa, and the US grew. Africa and Latin America deserve a few more words because our success there illustrates the strong benefit we have gained from the NERA acquisition a year ago.

Let's talk about Africa first. We are seeing good traction with our longhaul solutions, as carriers continue to expand the network's coverage. And we sold more shorthaul products in Africa during Q1 than we sold there during the entire year in 2010 before we acquired NERA. Today, we are active throughout the continent, particularly in Nigeria, which is the largest mobile market on the continent.

As you know, we recently announced a follow-on deal with Globacom for building out their backhaul infrastructure in Lagos. Globacom is an important win because, in addition to being the second largest mobile operator in Nigeria, it is the fastest growing telecom company on the continent of Africa, and has recently acquired licenses to operate in several other countries.

Looking at Latin America, we had 24% quarter-over-quarter. We expect the strength in this region to continue, driven by a win at Telefonica as well as another new Tier 1 customer. New deals with regional carriers and wireless broadband access providers contributed to the increase in North America. The deal we announced last week with the Florida Rural Broadband Alliance is a good example.

In addition to penetrating this segment, based on our growing services capabilities in North America, we are providing equipment to all the major US carriers, either through direct relations or via carriers of carriers. And we are well-positioned to satisfy the microwave backhaul needs as they evolve.

As we expected, India is slowly picking up and we are continuing to be successful there. We recently acquired two customers in India, which we took away from a competitor. In one case, the operator asked us to provide the solution for an OEM that is providing the full managed network service, because they preferred our solution the technology stacks and local service to that of the OEM. Based on this success, we are encouraged that we will increase our participation in India as the business comes back.

Current industry trends all relate in some way to the same issue -- how operators can meet the capacity challenges held by the exploding data demand at a reasonable cost, CapEx and OpEx, while conserving precious spectrum assets. The bells around the role of small cells and the deployment of new HetNet architecture is growing. And we are participating with several products we are showcasing at the CTIA this week.

We believe that small cell growth will be incremental to macro sites rather than displacing them, because they serve areas where macro sites need more capacity. As operators try to design networks with optimal combination of technologies, microwave backhaul will continue to be the high-capacity solution of choice when fiber is not available or too costly or time-consuming to deploy.

The most successful microwave backhaul vendor will manage to combine the most advanced features with the lowest total cost of ownership, including service and support appropriate to the complexity of the network. When picking the potential winners in our space, we would argue that rather than just focusing on trends that can impact the revenue line, there should be more focus on the factors that impact margins over the immediate to long-term.

For example, the current trend towards customers installing very high-capacity capable equipment, and upgrading as needed, works well for gross margins, because margins are higher on capacity licenses and softer than on basic infrastructure. Microwave backhaul vendors tend to benefit from capacity upgrades later in the cycle, assuming, of course, that the product is the right combination of advanced features and cost effectiveness to win the customers in the first place.

Going forward, we are well-positioned to gain additional share as the number one wireless backhaul specialist, with the most advanced product features, a smooth upgrade path, locally-based professional services, and the cost structure to compete effectively with the system vendors, including the Chinese system vendors.

To point out about the cost structure is important, because once you fall behind the cost curve, it becomes very difficult to catch up. It's precisely this product design to cost issue that will separate the winners from the losers, an increasingly complex network design, and management challenges created by new architectures and technologies.

To summarize, if business in Europe remains soft or if India continues to struggle with political issues, there's not much we can do about it. However, by focusing on what we can control, our product cost structure and our operating expenses will enable the Company to gain a larger share of the available business, grow faster than the industry over the long-term, and be more profitable on a sustainable level. This is what we have been doing for the past eight years in the shorthaul business, and we now have demonstrated that we can do it in the longhaul area as well.

We look forward to seeing the impact of improving our gross margin via cost reduced longhaul solution in the second half of this year. Longer-term, we'll apply this relentless focus on the design to cost in our product development efforts to every product we offer.

Now, I'd like to turn the call over to Aviram to discuss the financial results in more details. Aviram?

Thank you, Ira. Our first-quarter revenue was $117.8 million, slightly above the midpoint of our guidance. Our GAAP gross margin of 31.4% reflected about $2.2 million of costs related to the acquisition. Excluding those acquisition-related costs and $100,000 of stock-based compensation, non-GAAP gross margin improved to 33.3% to 33% in Q4.

Fourth-quarter GAAP operating expenses were $39.2 million, excluding $1.3 million of acquisition-related expenses, and $1.6 million of stock-based compensation. Our non-GAAP operating expenses were $36.3 million compared with $35.7 million in Q4. As indicated in our last call, we are holding quarterly non-GAAP operating expenses at the $36 million to $37 million range, and expect to maintain this level for the balance of the year.

On a non-GAAP basis, we reported an operating loss of $2.3 million. On a non-GAAP operating profit, for the first quarter was $2.9 million or 2.5% operating margin. We expect to improve our operating margin during 2012, as gross margin improves and we hold operating expenses steady. Finance expenses in Q1 were about $900,000 and tax expenses was $290,000. On a GAAP basis, we reported a net loss of $3.5 million or $0.10 per share. On a non-GAAP basis, we reported a net profit in Q1 of $1.7 million or $0.05 per share.

The geographical breakdown of revenue appears in the press release. Europe and Asia was softer in Q1, while Africa and Latin America continued to show strong growth. North America also grew sequentially. It was too soon for India to show improvement.

On a combined basis, our OEM accounted for 6.3% of total revenue. This was up compared to recent quarters, reflecting an operator we work with directly requesting that we send to them our product through an OEM that was providing a full managed network. We had no single 10% customer in Q4.

Turning to the balance sheet, trade receivable increased by $4 million, putting DSO at 112 days. This is a result of more T-1 creditworthy customers insisting on extending payment terms. Meanwhile, inventory decreased by about $90 million, reflecting a combine of reduction in operating inventory, and the fact that inventory at customer sites has been going down.

Turning to our cash position, we had a positive cash flow from operations of $5 million in Q1. Cash and cash investments totaled $49.5 million at March 31, 2011. Looking ahead to Q2, we are expecting revenue to range between $116 million to $123 million, reflecting the fact that the pickup in orders will come in late March and April. We expect that the improved order pattern to continue and be, and we believe that Q4 revenue run rate of about $130 million, implied by our previous revenue growth target, is attainable. We continue to expect the gross margin improvement to occur mainly in the second half of the year, and continue to see our goal of mid-30's gross margin by the end of 2012 as attainable.

With gradual topline growth during the year and -- okay, sorry. I'll repeat the last sentence. We expect the improved order pattern to continue, and we believe the Q4 revenue run rate of about $130 million, implied by our previous revenue growth target, is attainable. We continue to expect the gross margin improvement to occur mainly in the second half of the year, and continue to see our goal of mid-30's gross margin by the end of 2012 as attainable.

With gradual topline growth during the year and holding operating expenses relatively steady, we believe that the goal of around 8% non-GAAP operating margin is existing realistically in 2012. The timing for achieving our target of 10% non-GAAP operating margin at the $150 million quarterly run rate continues to depend on the pace of improvement in the macro environment, and how quickly business returns to normal in India. And we continue to believe we can reach the goal by the end of next year.

Now I'll turn the call back to Ira.

Thank you, Aviram. I'll close by saying that it's really gratifying to see the rationale for the NERA acquisition playing out in one account after another. In addition to successfully integrating acquired customers to our shorthaul products, we have been able to increase overall sales to several of those customers.

The feedback from the field is growing more positive. We are winning the deals we expect to win, and we are seeing customers specify our solution to OEM partners. All of these developments increase our confidence in our long-term future.

Now, we would be happy to take your questions. Operator? Operator?

George Iwanyc, Oppenheimer.

Thank you for taking my questions. (multiple speakers) Following up on your comments on margins, can you give us a sense of how much the very high-capacity radios in your new products would help the gross margin line, relative to your, let's say, your average product that's shipping right now?

Overall, we do believe that our running rate and moving forward will reach the mid-30's of gross margins. They do help and the capacity goes up. The margins go up. It's a few points between the low -- I would say the mid capacities to the very high capacities, which have to do with licensing of capacity and software, mainly.

Okay. And can you give us a sense of what the margin difference looks like from a regional standpoint, from Africa and Latin America versus Europe and North America?

You probably can play -- it depends on the deals and the margins is always a tough question, because it has to do with the deal size, the geographies, the product mix. Longhaul, shorthaul -- and this at the end will range from probably the low 20s to the 40s as a range overall. And depending on -- and you can take the geographies across, so you can take deal sizes across, so you can take longhaul versus shorthaul. So it's a complex mixture.

Okay, and then one last question. On the OEM percentage, with the uptick that you seen in this quarter, is that a level that you think is sustainable? Or the 3% seen last quarter a more normal level?

My assumption is it's sustainable for the next few quarters.

If you look at the last -- George, the last four quarters, the OEM is running between 3% to 10%. We believe that it's again dependent on the specific deals that are coming. But in general, we believe that the range -- this is the range. We -- between the 3% to 10% going forward is the range we should look at.

Thank you.

Thank you, George.

Daniel Meron, RBC Capital Markets.

So first of all, Ira, can you provide us with a little bit more sense as to bookings increase, which regions was it coming from? Or specific customers? And while you're at it, if you can provide a little bit more color on the regional perspective. You did mention Latin America and Africa, but we did see some pickup in North America and maybe in India as well. So just can you provide us a little bit more on the dynamics there? Thank you.

I think we saw pickup in most of the regions. I think that's where we saw the pickup is Latin America, Africa. We started -- as I said on the call, we started seeing India coming back and picking up. And that's including what we discussed as a pickup in April of the orders. We still see a little bit of weakness in Europe, mainly having to do with deals which go into non-mobile operators and networks, which are sometimes government-funded, EU funded, where those things are a little bit slowing down at this point. And APAC is also flat at this point.

Okay. And when it comes to the other one on the operating cash generation, you had positive cash flow this quarter of $5 million, pretty encouraging. What do you think would be the trajectory for the balance of the year?

We said that the trajectory, as we said last year at the conference call, we said that we are going with -- we are focusing for now to generate around $10 million over the year. We started with the $5 million operating net of $1.5 million, including everything except the loan repayment that we did. So, over the year, we should look at it like this -- with $10 million for the year. Again, with fluctuations could be quarters that we'll have negatives and quarters that we'll have positive. But in general, this is the trajectory, no change from the guidance that we gave last quarter.

Okay. And then circling back, I think you touched upon it in your -- a lot of parts of the commentary, on reaching a 10% operating margin. You did mention that India is coming back, and the macro seat does seem to be improving a little bit. So, what do you think we're seeing now as we look into beyond the fourth quarter? Is that within reach in your view?

It's probably within reach sometime next year.

Okay, very good. Thank you. Good luck.

Joseph Wolf, Barclays.

I guess two questions. The fist is if you talk about, I guess, pickup in the business and I guess economically-driven hesitation with your customers to deploy, is the pickup that you're seeing, do you think it's going to be as gradual? And -- or do you think that there will be a time perhaps later on in the year where we'll see some sort of a wave of pent-up demand, that could actually surprise you to the upside, just in terms of customer behavior?

And then my second question, just in terms of (technical difficulty) -- reduce the noise, here is -- for Aviram, you've been with the Company for a quarter now. I'm just wondering as you look at the costs that you found internally for your own organization, are you comfortable with where you are on the cost side? Or are there some programs that you think you should implement that weren't in the Company before? And where are you going in terms of the financial controls across the Company, given the redistribution of geographically?

I'll start with the pent-up demand question. I believe things grow gradually. With the size that we are in, and with the geographical distribution and the number of the operators, almost nothing happens everything at the same time. By the way, that's a good point and that's always plays both, by the way, on the downside and the upside on a lot of stuff.

We do believe we see pickup in the orders in different geographies, but I don't believe it will be a pent-up demand that we'll see a huge jump. From a revenue perspective, by the way, it's always gradual. You see bookings fluctuate a little bit more, but there are times that you deploy, you install to recognize the revenue at the end of the day flatten things out. And that's why we believe we'll continue growing throughout the year, gradually reaching with a little bit more growth of the second half, reaching the [$130 million] at the end of the year. But I don't see major jumps between here and there.

Aviram, to the second part?

To the second part, I will address your question on the two elements of the gross margin and on the OpEx control. On the gross margin, I think when we're looking here, you asked me as a new comment, on the cost structure and the plan around the gross margin.

I think looking at the plans and how they will materialize over the last five months within the Company, and also looking at the track record of over the last three quarters, you see that there is a gradual improvement quarter-over-quarter on the gross margin. And I believe that a 35% exiting the year percent gross margin is attainable. And the plans around this are materializing and just need to convert it over time from booking from the deferred revenue backlog into the revenue.

On the OpEx side, we ended the quarter non-GAAP at $36.3 million. We also gave the guidance for the year it will be between the $36 million to $37 million, as well looking in here. And the overall OpEx, I believe that this is attainable. And while we're growing the top line, I think the infrastructure that we have, both on the sell side, R&D and G&A, is sustainable for a business at [113] up that we are planning for now.

So, I think yes, $36 million to $37 million is -- this is the right cost structure for the Company at this level of business that we are planning.

Thank you very much.

Mike Walkley, Canaccord Genuity.

Ira, I just wanted to build on your competitive environment comments. Congratulations on the two wins in India from a competitor. Can you maybe elaborate on the competitive environment? And then how you believe you can stay ahead of your competitors on the cost structure to drive these gross margins? Thank you.

Competitive environment is highly competitive but that's nothing new. That's the same environment we have been seeing here for the last five or six years. I don't think any of that has changed.

It's a very competitive out there and we're winning. We win the business on all factors, starting with technology, with technology investment and design to cost, which drive a better cost structure, and the availability of low-cost services, which are specialized for the microwave backhaul with the understanding and the capabilities to build quicker deployments,. and a much more professional role than doing everything at the same time. That's how we win the business, one by one with advantages versus the competition and all the different geographies. And that's why we stay and that's why we gain marketshare versus the competition.

Okay, great. Thank you. And Aviram, just a question on some of the below-the-line items. How should we think of tax and interest expense type line item? Is that still around $5 million for the total year?

Again, I recreate the guidance that you gave in the last call. You should plan around $5.5 million for the year. And you can look at it quarterly with some fluctuation but not major ones.

Okay, great, that's helpful. Just one last question and I'll pass it on. Just in terms of US is a little stronger than what I was expecting, especially for a seasonally weak Q1. Is there any macro items out there that give you better visibility in that region this year? Thank you.

I think that all the operators are enhancing their networks at this point to support the current data growth that is needed. And that's what we are doing with the operators in the US, both with some of those direct and with some of those via carriers to provide the capacity with our network expansions. And again, going back to one of the prior questions, I don't expect to see a spike in the US. I'm seeing [regional] growth within the market.

Great. Thank you very much and look forward to seeing you at CTI.

Alex Henderson, Miller Tabak.

So it really seems like the two primary drivers of the investment thesis in this Company is, one, the expansion of the geographical footprint. But more importantly, within that, the eventual rebound in India, which has been depressing the results for so long.

And two, the substantial cost advantage of the Company relative to the competition. Relative to that latter point, I understand you guys are going to be more aggressive with new products in the back half of the year. Can you update us on where you are on the development of -- or the completion of the development of the chip set that gives you that next gen product line? And to what extent that drives the competitive advantage in the field in the back half of the year?

I assume that that's more of a 2013 benefit to revenues. But can you give some sense about what timing might be around that?

I'll start at products we announce when we announce products. You are hinting to have continued on developing chip sets and that's correct, because it's part of the strategy of being vertically integrated also in our current product with chip sets. And there's a very, very aggressive design to cost.

We are on track with our development and development schedule moving to next gen products. And I think you are right in saying that that type of a contribution is mainly 2013. The gross margin expansion this year is coming from two places. One is the conversion of the deferred and backlog revenue, which is more and more from the new products that -- from the fiber product line, which goes into the customers, and designed to cost efforts we've done around the longhaul, which are showing up this year as the second half.

The other piece of this puzzle was the India rebound. Obviously, there's been some steps forward there but there also seems to be some steps back. Can you give us an update on what you're thinking is going on there, if you've got a crystal ball that's that good?

Well, I don't believe in crystal balls. I'll tell you what we are seeing. What we're seeing in India is that the established operators are continuing to deploy. Okay? And the leading operators are continuing to deploy the people which were most affected by the political and other issues, were the regulatory issues within India, where the new smaller operators, especially if you look at the news, those are the people who got affected by having new licenses in the '09/'10 timeframes, which held stuff back.

The big ones are still continuing to deploy. Moving forward, you see people thinking already beyond 3G and deploying also LTE into some of the regions. And I think that environment is -- it's slowly picking up. One comment on that when we are now very geographically distributed, our growth comes from different places. It comes a lot from Latin America. It comes from Africa. It comes a little bit from North America. It will come also from APAC and India.

We are not dependent on any one of those regions as what you call an investment thesis. It's really the spread being the specialists in all the regions where we can drive the growth and build the growth from the different areas.

Relative to the Indian market, the issue around acquisitions of -- rules around acquisitions of smaller deals of companies that need to be consolidated out, have you heard any change in context around that in India? I know that there was some impediments around that, that you couldn't buy -- a service provider couldn't buy another service provider if they had spectrum. Has that all been resolved at this point?

No, it's not all of it has been resolved. It's still pending on the table. It's an open discussion. We -- even just as a curiosity had the India Minister of Communication, and does other things, had a visit here in Israel over the last few weeks, and even visited us here in the Company. Politics. Politics is something that's very hard to gauge. It's moving forward. How quickly? The Indian papers are probably better guessing than I do.

Okay, great. I'll cede the floor, thanks.

Matt Thornton, Avian Securities.

Maybe a couple of quick questions for Aviram and then I'll come back to one for Ira, if I could. Aviram, for the fourth quarter, you guys are talking about the $130 million in revenue, 35% gross margin. If I do that math, I can't get to an 8% operating margin. So, just this is -- again, at the margin, but I mean, should we be thinking it's $130 million-plus and 35%-plus? Or maybe just help me do the math there for the fourth-quarter target.

$130 million, 35% gross margin; plug in around $36 million of OpEx, you will get very close, and the rest you should take from the topline. This is quite -- a video of the complete simulation. Okay? (laughter)

Got you. The rest on the topline. Okay, no, that's helpful. And then secondly, the previous comment you made on cash, the $10 million for the year, is that an increase to cash balance? Is that the cash flow from operations? I guess which metric were you alluding to there?

Yes, we're moving to increasing the cash -- net cash, because you need to remember that we're returning a little bit more than $8 million to the bank. So our cash reserves should be -- our cash balance will be increased by $2 million. So the net cash will be increased by $10 million. This is what we're targeting for the year and what we're seeing for now.

All right. (multiple speakers)

The gain I would say it was some fluctuations between the quarters. A customer can pay a few days after or before the end of the quarter, it can fluctuate a little bit. But this is the target for the year and what we are seeing for now.

Sure. No, that's helpful, okay. And then, Ira, maybe you can just kind of walk us through and kind of bridge the gap. So, obviously, to hit the $130 million-plus in the fourth quarter, it implies a fairly substantial uptick in acceleration growth in the back-half of the year. We all talk about India, but that's probably more of a bookings issue this year that will impact revenue next year.

So, how do we bridge the gap to get into that $130 million? What areas is it going to come from? Are there particular opportunities, particular customers? And what milestones can we be watching for there to kind of bridge that gap?

We need to bridge that gap. I think when we gave all the indication, we believe a little bit of a stronger in Latin America, stronger Africa; we expect India to come up a little from the level where it is at this point, and US and North America -- sorry. US, North America, a little bit up and Europe flat. Divided across the regions, that's where they are. I think we gave guidance for Q2 -- $116 million to $123 million, and then bringing up the numbers in between.

Okay, fair enough. That's helpful. I'll cede the floor. Thanks, guys.

Aalok Shah, D.A. Davidson.

Just a couple of follow-up questions. (multiple speakers) A couple of quick follow-ups. In terms of the geographic distribution, especially if we start to see India pick up as a percentage of the mix of total revenue, does that influence your gross margin as it did in the past? And how should we think about just the mix of business overall going forward, in terms of the margin perspective?

Yes, it influences the gross margin; no, it does not influence the gross margin. I think we gave guidance on what we think it will come up at the end of the year, which is an increase versus where we are right now. We took into account the mix; a little bit of a change in the mix. Within that, as I said, deal size, geography, product mix, all affects the gross margins. And so, it's somewhere in there.

And, again, we talk a lot about India because we had interest, but let's remember that right now, we have six regions, all of them about equal, where Latin America and Africa are the bigger regions at this point. And India will come back to be a little bit more significant than it is right now. We do not expect it to come to historical levels before the acquisition, but stay at one-sixth of the business.

Ira, just a quick follow-up. Again, in terms of margins, you talked about, at the time of the acquisition of NERA that there's more room to expand the gross margins. And you've done a good job of that so far. I'm curious, is there more room to be had still on the gross margin from beyond 35% kind of [times] gross margins, can we start to see maybe (multiple speakers) --

Long-term, we are targeting the mid-high-30's -- above the 35%, yes.

Okay, great. Thank you so much.

I think we will return -- if you look at Q4 2010, around those numbers. I think we can attain those levels back. It will take us a little bit -- a little while longer, but I think we can get back to those levels.

Okay, thank you.

James Faucette, Pacific Crest.

Just a couple of quick questions from me. Most of my other questions have been answered, but I did want to ask you quickly about Latin America and Africa. Latin America seems like it has been pretty persistent in terms of it being a reasonably good market.

Can you talk a little bit about what's driving there? Are these technology upgrades that are -- that the carriers are embarking on, that are driving that, the need for throughput? Or kind of what the micro drivers are there? And obviously, you're expecting that to persist, at least for the rest of this year; but how should we think about Latin America as a market long-term?

And then, in Africa, is the improvement there primarily related to the NERA acquisition? Or is there something else going on there that is also improving the fundamentals on the ground?

Okay. Let's talk first about fundamentals.

I said the number one issue around fundamentals or the driver is what some of our bigger systems vendors call modernization. All networks will want to go through a modernization phase, where we excel with that modernization by really upgrading the microwave backhaul network, and really replacing all the equipment to -- with higher equipment, which drives capacity.

And, in some places, old sort of geographical expansion while you do that modernization, you reach the town and now instead of single base station, you have three or four across the town, to give both better capacity and better coverage -- all over the world. Depending on where you are, if you're in Europe, it's mainly modernization. If you are in Latin America and others, you'll see a mixture of modernization and geographical expansion.

If you're in Africa, you'll see more for geographical expansion across that -- all of that having to do with providing higher and higher capacities of [beta]. Right now, in most places around the world, it's still 3G plus-plus HSVPA and other types of technologies, which drive the requirement for the backhaul. And in other places, we already see LTE networks or LTE initial deployments, which drive the network expansions.

If you look both at classical or overtime perspective and the business, it's really what we did is we expanded our geographical reach, and we have today a lot more feet on the street, a lot more people which do local services; a lot of people which really can sell the complete solution, which is not the box but a walk-in link for the customer, across the geographies, including Africa. And that's what drives the expansion of the business. And we are gaining from that.

That's great. Thank you very much.

Alex Henderson, Miller Tabak.

So the deal with DragonWave and NSN just closed. How do you think that transaction is going to impact you guys? Is that creating an opportunity? Because it seems to me that's a lot weaker hand and a lot less incentive on Edison to sell that product going forward.

First, I think the deal did not close. If you look carefully, they signed an amendment deal and they expect to close in the future. I think they even give a date -- somewhere in early June. If I read correctly some of the press releases, the deal is not closed yet. I won't refer to the deal as much, but I think from a market perspective, at this point, is confusion and I think we are taking advantage of it.

On the 10% side, is there any -- can you remind me, was there 10% customers in the quarter?

No 10% customers in the quarter.

Okay. Thank you.

Currently, there are no further questions. Please continue.

I'd like to thank everyone for being with us on the call, and we will be glad to take further questions on one-on-one discussion, which we'll be having with all of you over the next few hours and few days, and go a little bit more into the details. Thank you again and see you soon, both on the phone and face-to-face. Thank you.

Thank you.

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