Ceragon Networks Ltd (CRNT) 2017 Q4 法說會逐字稿

Good day, everyone. Welcome to the Ceragon Networks Ltd. Fourth Quarter and Full Year 2017 Result 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 statement concerning Ceragon's future prospects that are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon's management. For examples of forward-looking statements, please refer to the forward-looking statements paragraph in our press release that was published earlier today. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the risks associated with the decline in revenues due to our focus on a single market segment; risks relating to the concentration of Ceragon's business in certain geographic regions, such as India, Latin America and in developing nations and the political and economic and regulatory risks from doing business in those regions, including potential currency restrictions; risks associated with the change in Ceragon's gross margin as a result of changes in geographic mix of revenues; risks associated with the loss of a single customer or customer group, which represents a significant portion of Ceragon's revenues; risks associated with Ceragon's failure to effectively compete with other wireless equipment providers; 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 and 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 website at www.sec.gov or may be obtained from Ceragon's website at www.ceragon.com.

Also, today's call will include certain non-GAAP numbers. For reconciliation between GAAP and non-GAAP results, please see the table attached to the press release that was issued earlier today.

It's now my pleasure 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 Doron Arazi, our CFO. We had a strong finish to the year in Q4, and the full year 2017 was excellent as well. It was the third year in a row of net income growth. We are very proud of that.

To be more specific, we reported revenue growth of 13% for 2017, in a year where the overall market clearly declined. More important, net income was up 36% for the year, and we achieved this magnitude of improvement in net income with a far from optimal geographic mix. In addition, bookings for the year approached our previous record and were over $400 million. In Q4, we set a new all-time record for booking. We recorded the highest quarterly booking ever with several regions showing improvement. It was obviously encouraging with respect to the outlook for 2018.

To put all these into some perspective, if we take the revenue of the last 3 years, '15, '16 and '17, and calculate an average quarterly run rate, we get a bit above the top end of the $75 million to $80 million quarterly run rate we have been talking about during most of this period. The reality is that despite all macroeconomic issues, competitive issues or operator rollout issues causing quarterly lumpiness, we have been achieving average of around $325 million in annual revenue for a while now and probably will continue to do so for a while longer. And then we will target a higher level on a sustained basis. At the same time, we also become more profitable, generated substantial free cash flow and paid off all our debt. This is an achievement we believe that we are not getting from the market a full credit for in our evaluation.

In a minute, Doron is going to tell you that we are targeting another modest increase in net income for 2018 despite some pretty strong currency headwinds because of the strength of the shekel. So we're in a great shape, and we're expecting more of our sales each year. That's the summary of the financial picture today.

We also realized that without a major shift in geographic mix, there is a practical limit to how much additional profit growth we can generate from the same general level of revenue. So today, I want to talk about the trends, the opportunities and the strategies that will enable us to target higher top line growth and drive higher profit and cash flow longer term because this is our final goal, to keep net income and cash flow growing. Revenue growth is one of the components of the strategy for doing this over the long term.

I'll take the geographic trends first. India. India has obviously been a very strong driver of our recent success and will continue to be an important region. We expect India to continue the aggressive build-out for another 1.5 year to 2 years. Therefore, spending in India is expected to remain strong during 2018 but a somewhat slower pace than the super aggressive level in 2017.

Africa. Africa has been weak because one of the major operators has been focusing elsewhere. But recently, it has shown signs of improvement, so we are expecting some gradual improvement in Africa.

Latin America. As we reported on our last call, overall demand from Latin America is likely to remain steady going forward. Lately, we see some specific opportunities that could provide upside in that region later this year.

APAC. Asia Pacific continues to be a bright spot, where we are continuing to have good success in increasing our market share. We want to keep this trend going in the future.

Europe. Mainly, Europe has been kind of flat at relatively low levels, and we are assuming it will remain that way, though there are some signs of gradual improvement and we hope to become more optimistic about Europe as the year progresses. Long term, it remains an important region for us. It's one of the regions we are engaged in 4G/LTE gigabit and 5G trials.

North America. In North America, one of our major customers has resumed ordering, and we have seen some of the operator-specific issues at the other gradually resolved. So we are expecting to see further improvement as we move through 2018. We are also continuing to increase our market share in vertical markets in North America. This, combined with more traction in the carrier markets, is something we are very focused on.

So for my geographic update, you can see that we do expect improvement in several regions, first, to compensate for India returning to a more normal order pattern and then for some potential upside later in the year.

Next let's talk about opportunities driven by technology. I want to share some of our thinking about 5G and the implications for the business. I logged a lot of air miles in the last several weeks and met with investors from New York to Taipei, and everywhere I went, the main question was the same. What about 5G? When will it happen? And what will it mean to Ceragon? The short answer is portions of it have already begun, and it represents a major growth opportunity for Ceragon.

The industry hike has created a lot of confusion. 5G means something different depending on what part of the ecosystem you serve and what part of the world you are in. The common ground is this, 5G is about next-generation technology to support all sorts of new services and user experiences and aided by connecting billions of devices from the Internet, some stationary, some moving, but collectively, transmitting more data. So that means, orders of magnitude, more devices with vastly different types of traffic, from low kilobytes of data, from a meter or verbal device to massive data content for artificial intelligence or augmented reality applications. Close, different requirements on applications like autonomous driving that require ultra-low latency. These requirements cannot be addressed by a one-size-fits-all network. For mobile operators, 5G is about 3 things: capacity, complexity and, because of the 2, it must also be about costs.

All these challenges apply to the backhaul portion of every network, and we are extremely well-positioned to help operators deal with all those challenges, not only in providing additional backhaul capacity. We'll talk about capacity first because it's, obvious, going to be a huge challenge. Providing all these magnitude of additional capacity requires densification of the network, but even that isn't enough. It also requires new network architecture that make everything much more complex.

When your carrier face is providing vastly graded capacity using scarce and expensive resources, like spectrum, power space and electricity, you can't afford to look at the issues in a simple matter of buying more of the same kind of equipment as cheaply as possible. You need best of breed. Operators have to do something about all their costs of delivering services, and they'll have to think ahead and plan ahead.

A recently published summary of a study by recent technology research, called MNO Choices in 5G; Slash costs or die, is consistent with our own expectations. We do not expect a sudden wave of huge contracts for 5G equipment providing a CapEx windfall to equipment vendors, not next year or the year after. Instead, operators will spread the investment over a longer period than they did with 3G or 4G, but they will begin now before 5G is officially here. In anticipation of 5G world, operators will invest where it will be -- where it will accomplish one or more of these objectives: reduce total cost of delivering services and data, fill gaps cost effectively, support new revenue streams, enable them to penetrate a new market and gain competitive advantage in existing ones.

From the network perspective, as I said, this means new network architectures with hyper-densification and virtualization of some of the network functions via software. The backhaul network will be a part of this change. Because cost and speed of deployment is such a critical aspect, fiber cannot be the complete answer to the backhaul portion of this new set of network challenges. Because carriers can't afford to wait because network planning and operation is becoming more complex and because carriers can no longer afford to consider only the cost of hardware, implementing 5G will be a process, not an event. When will it begin? The answer is now. That's why comprehensive, future-proof, scalable and cost effective to operate solutions are required now. This is what we offer, and this is why we are gaining market share and believe we will continue to do so.

In the telecom equipment industry, it is widely known that the major technology transition is the single-best opportunity to successfully go after market share. We know 5G planning is happening now, because lately, we are getting inbound calls from T1 operators in developed countries who have been settling for good-enough solutions because of a discounted price. And now they are reengaging with us, saying, "Please come help us." They're ready to look for the best-of-breed solution for now and also for later. Operators are still going to be extremely price-sensitive. That's not changing. But more operators are willing to look at other factors in addition to price. This bodes well for the potential growth in our served market, the best-of-breed segment. So even if the overall market is likely to have weak growth near term, we are seeing signs that our segment can do better even in the short term.

Because of the looming requirements of 5G, it's too early to accurately estimate at what pace we can grow. But we do not think we'll have to wait until most of the operator around the world are actually deploying 4G networks to see growth in our markets. So this is the thinking that is driving our strategic initiatives. In order to take advantage of the evolution to 5G, we need to be the strongest, most advanced specialist. We need to be what one of the specialist fiber guys called a specialist at scale. In other words, a specialist with enough scale to have a global presence, invest in technology leadership, have a comprehensive family of solutions and so on. That is the position we are in. Having even more scale would be nice, but we're already at the -- we are already the largest specialist, and we are in good shape as we are now. This cannot be said for some of our specialist competitors.

As part of our evaluation of strategic opportunities, we have been talking -- we have been taking a close look at various potential opportunities around the world to gain additional scale quickly. We must report today that, at the present time, we do not see any available consolidation opportunities with the right economics and acceptable risk profile that we believe would create sufficient value for Ceragon's shareholders. So we are putting our dollars and exercising other strategic opportunities for now.

As I mentioned we have made progress in this year in our goal of increasing our market share, which is a gradual way to achieve more scale without buying someone else revenue. It's difficult to measure market share gains accurately in the short term, but we have added at least 10 important new customers this year with orders range from around $1 million to $5 million each. And we are just getting started. These new customers are in different regions around the world, including several from North America.

Another aspect of our strategic process is our go-to-market strategy. We have identified some interesting opportunities to enhance our global and local reach in a cost-effective way. We have recently concluded 2 new relationship that you will be hearing more about at the appropriate time.

Another strategic important focus is technology. We have identified some specific opportunities to bring complementary technologies from outside the company while making good progress in the first stage of one of such relationship that relates to the intelligence of the network and the software layers. As I mentioned earlier, this is an important aspect of moving to full 5G capabilities. We will share more details about this when we get beyond the initial stage and can describe more accurately what this can mean for the company in a financial sense.

We want to emphasize that our overall strategic process is ongoing, and we will continue to identify and evaluate new strategic opportunities of all types. Meanwhile, we will position ourselves for more profitable growth the old-fashioned way, building a better mousetrap and keeping tight control of costs. We are planning our 5G generation platform chipsets to support full 5G requirements, including all network intelligence capabilities to, again, widen the gap between us and our competitors. Our design-to-cost capabilities, enabled by our complete vertical integration, is going to enable us to raise the bar much higher with our next-generation platform with lots of incremental improvements in between now and then.

We think there have been some confusion about what capabilities can provided in what time frame. So we lay out some of this for you in some new slides that will be available in our investor presentation posted on our website after this call is over. How we plan to offer these capabilities is sensitive information. We operate in a highly competitive environment and while we want to be as transparent as possible to investors, we are not willing to teach our competition what to do via our investor communication.

To summarize, the message today is that we have a very robust technology roadmap that anticipate the requirement for 5G networks, and we are improving our go-to-market capabilities and capturing a greater share of the market.

Now I'll turn the call over to Doron for some detailed remarks on our financials. Doron?

Thank you, Ira. Since you have all seen the press release, I'll just highlight some of the significant items. Our fourth quarter revenue of $86.7 million represented a 14.1% sequential increase from Q3. This revenue is above even the high end of our indicated run rate, mainly due to receiving large orders from India at the beginning of December.

I want to stop here to make a point about quarterly lumpiness. It's a characteristic of our business. It's not something we can avoid or fix. The fact is that a very minor timing difference in orders or revenue recognition can dramatically affect the optics of a single quarter or even the annual comparisons, that these timing issues have little or no significance with respect to better conditions, the general health of the company or prospects of the further future. This is why we insist on the importance of measuring over a long period of time.

Returning to the analysis of Q4, we had 2 above-10% customers in the quarter, both in India. Some of the developments in the various geographies that Ira have been talking about can be seen in the geographic breakdowns for Q4 and for the full year 2017. India was 34% of revenue in Q4 and 39% for the full year. As we have said in the past, it's difficult to define what is normal for India but we don't think revenue from India will be as high in 2018 as it was in 2017. Having said that, we expect India to still be a significant percentage of our total revenue.

The other thing to note is that revenue in North America was up significantly to 14% of revenue in a very strong quarter in Q4. North America was also part of the reason for our record bookings in Q4 with the highest level of booking in that region for any quarter in 2017.

All these bodes well for our ability to target higher gross margins in 2018. Non-GAAP gross margin was 33.8% in Q4, well above our guidance of about 32% but lower than Q3, which we explained was not a sustainable level. As we look at gross margin for 2018, we think that for the year as a whole, we will be above 33% but Q1 could be a little bit below that level because India will still be a very large contributor to Q1 revenue due to the large batch of orders we received in December. So around 32% or slightly above is still the right way to think about Q1 of 2018 with some improvement in subsequent quarters.

Turning to expenses. At $23.1 million, Q4 non-GAAP expenses were quite a bit above the high end of our $20 million to $21 million range. This abnormally high level was mainly because the extremely strong bookings grow our provisions for incentive compensation significantly higher and, to a lesser extent, because of salary-related adjustments. For all of 2017, expenses were at the high end but still within the range we were targeting on an annual basis.

Looking ahead to 2018, we remind you that we expect the strength of the Israel shekel to create a headwind of around $2 million on our OpEx for the year as our previous year hedges rolls off. In addition, we expect that -- to have a lower amount of grants coming in from the Office of Chief Scientist in Israel. In order to maintain our high level of R&D effort, that this means we will have to see some increase in R&D expenses. By becoming more efficient and reallocating some resources, we think we'll be able to reduce sales and marketing expenses slightly in 2018 versus 2017. Taking everything into account, we think $21 million to $22 million per quarter on a non-GAAP basis is the right range for operating expenses in 2018.

On a GAAP basis, we reported $7.2 million in net income compared to non-GAAP net income of $4.1 million. That's mainly due to changes in certain pre-acquisition indirect tax liabilities pertaining to the acquisition of NERA as well as noncash direct tax adjustments that were reported in our GAAP figures under other key income and tax benefit, respectively. The way to think about non-GAAP financial expenses going forward is that as long as foreign exchange levels do not fluctuate more than planned, we will have lower financial expenses in 2018, primarily the result of paying off our debt on the revolving credit agreement. However, in the future, we intend to use our borrowing capacity under the revolving credit agreement as one of our business tools and make sure borrowing on our balance sheet and increase the interest expenses from time to time if we have a higher short-term working capital needs.

Turning to the balance sheet. At December 31, the receivables were $113.7 million with DSOs of 125 days, returning to more normal levels after we collected a large payment from India as expected. At the end of 2017, we had cash and cash equivalents of $25.9 million, which is also our net cash, compared to $19.3 million of net cash at the end of 2016. This leaves us with a $50 million of unused line of credit. With our strong balance sheet and borrowing capacity, we don't see any need to access the capital markets in the foreseeable future. We intend to keep the self-registration in effect by renewing it periodically so that we are in a position to make a large bold move if and when we identify one that will create value.

To summarize the outlook, Q1 is usually -- are seasonally softer. But due to Q4 2017 strong booking, we think we can have Q1 2018 revenue towards the high end of our current $75 million to $80 million run rate. We expect around or slightly above 32% gross margin and OpEx at the $21 million to $22 million range, which is the quarterly range we expect for the entire year. Looking at the full year, we're currently assuming that we will continue to cruise along somewhere around the $325 million average revenue of recent years that Ira spoke about.

As we mentioned, we see some opportunities for upside later in the year. As we get deeper into 2018, we are hopeful that we will be able to raise our quarterly run rate target to something like $80 million to $85 million for the back half of the year, but it is too early to have enough visibility to do that now. We also remind you again, that individual quarters can be outside the assumed run rate. It's simply the nature of our business.

We believe gross margin for the full 2018 will be above 33%, assuming no major shift in geographic mix relative to our current plans. We're heading into the year expecting a total amount of around $2.5 million in currency headwind, only because of the Israel shekel, which is the equivalent of $0.03 per share. Nevertheless, we are challenging ourselves to execute extremely well and to report a fourth consecutive year of net income growth. At this point, we believe that it is possible for us to achieve a small increase in net income in 2018 that would not be as small if it was currency adjusted for the Israeli shekel impact.

Now we would like to open the call to questions. Operator?

(Operator Instructions) And first in line is George Iwanyc with Oppenheimer.

So Ira, when you look at the overall market in 2018, are you anticipating a decline in revenue again?

I think that if we look at the numbers, I think I indicated just the opposite. I think what I indicated that if we believe that during '17, we were at the $75 million to $80 million range, I think both myself and Doron were saying that we'll be at the high end of that range and, if not, a little bit above that and maintain the yearly run rate of around $325 million. And I think this is a good achievement, even though we think that we'll see a mix change, a little bit less India, more in the other regions. And this is specifically, as I said, we are gaining market share and taking advantage of our best-of-breed products across the world to be able to do that, yes, where the overall backhaul market will probably decline a little bit in 2018. And I think we will make the performance of also increasing our bottom line as well during the year.

George, this is Doron. I would just like to add one thing that is more on the financial side. We're trying to emphasize that, and I think some times, it's very hard to understand, obviously, if you are not within the company. We could end up Q4 with $5 million or $8 million lower, but that would not have changed the trajectory. And the trajectory we see is growth in our business. Will it eventually create a situation where in 2018 we will even exceed the number of 2017? Yes, it could happen. But once again, sometimes, it all depends on the timing of a specific order or certain revenue recognition terms that impact this result. So I think the message is the business is healthy. We think that the demand, at least for our solution, is improving and increasing. And eventually, we believe that the average that we have seen of $325 million as an average of the last 3 years can be sustained and we hope even to do better, but this is yet to be seen into 2018.

Okay. So 2 follow-up questions on that. The type of seasonality that -- when you're looking at that $325 million to $330 million type of annual number, is it heavily first quarter and fourth quarter? Or do you see a pretty stable year going forward from quarter-to-quarter?

At this point, because of the tailwinds that the strong booking of Q4 is giving us, Q1 is going to look relatively less seasonal than what we were used to in previous years. So I believe that between quarters, you won't see big fluctuations. But as I said, it's under a big, big caveat because you know that we have a limited visibility. Obviously, now it's better because of the strong booking of Q4, but I still cannot comment with that level of confidence about the second half of the year. Generally speaking, we hope to see lower fluctuations. But as I said, this is not necessarily the nature of the business.

Okay. Now I know you see an earlier contribution from 5G opportunities with some early spend starting to already happen or happening soon. How much of that is embedded in the 2018 upside opportunity? And is that more of a '19, 2020 type of market catalyst for you?

Depending in -- again, on how we see the 5G evolution happening. Some of it is baked into our 2018 numbers. But remember what I said is that operators are planning for 5G, and today, they are looking at 4G gigabit -- 4G/LTE gigabit capabilities, which are very close to the 5G capabilities, and you see a transition within the operators. So it's baked into our numbers for '18, but it's part of the potential growth as we move forward into '19 and '20. And it's really the hand-in-hand going of people deploying backhauls, densification, hyper-densification and then slowly shifting into 5G total type of trials. So from a technology perspective, we believe in an evolution which puts pressure on the networks, and that pressure is already there now, well, some of our customers, which, in their thinking, need to build the backhaul network to support 5G equipment will start being deployed in 2019 and 2020. So it's a continuum. From our perspective, it's part of why we believe that we are very strong in the market and can slowly take market share.

Okay. So one last question, and then I'll turn it over to someone else. Your market share comment, are you seeing that primarily from other merchant suppliers? Are you also seeing it from some of the Nokias and Ericssons of the world? And with that, as a lead-in, how do you look at the competitive landscape right now?

We think we take market share from all of them, mainly from the specialists, what you call merchant, but also from somewhat the bigger guys in some places. Now let's address it again. It's a slow market share that we are gaining. It's very hard to judge on a short timeframe, but I think I indicated 10 new customers and that I'm getting calls from Q1 customers, "Come and help us with best-of-breed." All of this will be translated over time to gradual gaining market out there. Yes, about competitive landscape, I think all the specialists around us are weakening because they don't have neither global reach nor the technology in place and are trying to play catch-up, which is hard for them. And I think that also from the very big guys, we do see competition and stages of tough competition. But I think that from that perspective, we do have an advantage because if I look at the big guys right now and you will know the numbers, the focus is probably elsewhere, not from the backhaul. They need to compete on the run and win on the 5G radio access network first. So it gives us off an opportunity to open the gap again against them.

Our next question is from Alex Henderson with Needham.

A lot of material on the call today. So I guess there's a couple of pieces that jumped off the page at me. First was 10 new customers is a pretty big improvement over the course of the year. Do you expect to be able to achieve that level of new customer additions again in '18?

Probably, yes.

And then the second one that jumped off the page was 2 new relationships without indicating what kind of relationships we're talking about, very cryptic, lack of detail in that. Could you give us a little bit in some interest there?

I'll give some insight -- okay. I'll give an insight on that. And that's on the top there, we said it's part of the go-to market strategy, go to market means ways to do distribution and ways to reach the -- of the customers. When we announce them, I'll get into the details but it gives us a channels to enhance our sales and touch on customers in places where it's been very hard for us over the last few years, sometimes because of the type of the customer, sometimes because of the geographies. It helps us in those areas.

Is it reasonable to think that that's to reach into non-telco segments of the market?

Some of it is telco, some of it is non-telco. It's both.

I see. Going back to the outlook. Certainly, the shekels, a big headwind, but the other side of the coin is it does look like your balance sheet has improved substantially. Could you give us a little bit of guidance on the interest income line, where that starts the year in the tax line and where -- what we should be thinking there?

On the -- as I said, on the financial expenses line, we do expect some further reduction relative to the amounts we saw this year. Let's not forget that the way we classify our financial expenses, this line also includes commissions and fees we pay for performance, guarantees and so forth that are integral part of our business. So we expect a modest improvement relative to 2017 of approximately a couple of hundreds of thousands of dollars relative to 2017. On the tax line, I think we will still maintain the level of $2.5 million to $3 million of taxes, non-GAAP, that represent more or less our cash out in terms of taxes on an annual basis. I don't think we should expect, at this point, any significant change there.

So just to be clear. So when you say a couple hundred thousand improvement, I assume that you mean from the $1.1 million down towards like $950,000 expense on a quarterly basis, not the full year number?

I'm talking about a couple of hundreds on a full year number. So any number between $100,000 to $150,000 on a quarterly basis. Assuming we average everything out and we don't take into account that there could be some fluctuations, that would be the right assumption.

I'm sorry. So you're saying from $5.889 million, take it down by a couple hundred thousand on a full year basis?

Yes.

I see, okay. Going back to the 5G question. It sounds like you're changing your discussion here considerably. In the past, you had said 5G was a 2020 event. You had also talked about the significant new radio technology that you expect to have ready for that when that market materializes in 2020. Now you seem to be talking about pressures on the network causing people to add capacity in anticipation of more volume of traffic without necessarily being directly related to major deployments but more of in a point-to-point here and piecemeal kind of deployment. Is that what I'm hearing you say? Because I'm a little confused by why the timeline has accelerated so much.

The answer is, yes, I think that's what's you're hearing, and I think that's what we're hearing from our customers. We went in exactly with that thinking 5G is a 2020 event. But when we started talking with the customers, they started telling us, "Oh, okay." Yes, it's end of '19, 2020 event. But we need to deploy 4G gigabit/LTE now in the network. We need to anticipate. We need to densify now. We know 5G will be some kind of an addition overlay in different places. So that's what we've seen from the customers. The customers that's approaching and working with us, it's on their plans. To say that there will be significant 5G run equipment before 2020? Probably not. But we started seeing the pressure from people saying, "Okay. This is coming around the corner." We have things between now and then to do around 4 gigabit, 4G gigabit/LTE. We need to densify the network. We need to do -- they need to do a lot of things, and we see both those requirements on the table and some of the way people think about our product and our capabilities today to deliver capacities in very cost-efficient and very significant way on the table.

And next we'll go to Gunther Karger with the Discovery Group.

First of all, congratulation on an excellent quarter and an outstanding year and especially the third year of executing your original plan. That's actually remarkable in today's environment. And the second is a question. Do you see any inroads into your business on the HTS side of the satellites?

Gunther, can you repeat because I didn't hear your last part of the question? Inroads into...

I'm sorry. We missed that. What was the answer?

Inroads into?

Number two, with the advent of the HTS, the high-throughput satellites, and some aspect in that area of backhaul in some of the systems, do you see any inroads from that into your business?

The answer is no. Let's remember -- and the reason I'm saying no is let's remember that the need for capacity growth all over the place at the same time. So when we are delivering much higher capacities in -- I would say part of it is the urban, suburban and rural areas, satellites are providing capacity in the remote areas. And the same way that the older satellites were providing very low throughput to those very rural area, the high-throughput satellites will do exactly that into those areas and increase the capacity. So as -- in a way, everything grows. Yes, all the technologies need to grow in parallel.

Mr. Palti, no additional questions.

So I'd like to thank all of you for being with us. Yes, it was a little bit of a longer call today, but we felt that we needed to a little bit elaborate on our successful 2017 and the results and where they came from and a little bit gives a head-up on where we're heading, both in the go to market and the technology sections as we head into '18 and '19 and beyond and 5G starts to appear on the horizon.

Thank you very much, everyone. Please feel free to call us and have one-on-one calls and for further elaboration, and we'll be glad to talk. Thank you.

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