Ladies and gentlemen, thank you for standing by and welcome to the Saragon Network's Earnings Conference Call. Our presentation today will be followed by a question and answer session, at which time, if you wish to ask a question, you will need to raise your hand using your mobile or desktop application or press star 9 on your telephone keypad and wait for your name to be announced. I must advise you that today's call is being recorded. I'd like to hand the call over now to our first speaker today, Rob Fink, Head of Investor Relations. Rob, please go ahead.

Thank you, Operator, and good morning, everyone. Hosting the call today is Daron Arazi, Sarah Guns' Chief Executive Officer, and Ronan Stein, Chief Financial Officer. Before we start, I would like to note that certain statements made on this call will constitute as forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Private Security Litigation Reform Act of 1995. Saragon intends forward-looking terminology such as may, plans, anticipates, believes, estimates, targets, expects, intends, potential, or other comparable terminology, although not all forward-looking statements contain these identifying words. Such statements reflect current expectations and assumptions of Saragon 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 these forward-looking statements. A full list of risk and uncertainties are disclosed in Saragon's annual report on Form 20-F that was published on March 21st, 2024, as well as with other documents that have been subsequently filed by Saragon from time to time with the Securities and Exchange Commission. Forward-looking statements relate to the date initially made, and they are not prediction of future events or results, and there can be no assurance that they will prove to be accurate, and Saragon undertakes no obligation to update them. saragon's public filings are available on the securities and exchange commissions website at scc.gov and they may also be obtained from saragon's website at saragon.com in addition today's call will include certain non-gap financials for a reconciliation between gap and non-gap results please see the table attached to the press release that was issued earlier today which is posted on the investor relations section of saragon's website with all that said i'd now like to turn the call over to Daron. Daron, the call is yours.

Thank you, Rob, and good morning, everyone. This was a record year for Saragon financially, achieving record operating profit on the highest revenue levels since 2012. Importantly, we made significant progress in our strategy to expand our time and diversify our revenue streams. To remind everyone, our growth strategy consists of three pillars focusing on millimeter wave products that are expected to be the fastest growing part in the wireless transport market increasing our market share in private networks of end-to-end solutions and increasing our recurring revenue primarily by helping our customers in network operation and optimization let me highlight some of the achievements in disregard. We grew our annual revenue during 2024 by more than 13%, even as the wireless transport market, according to industry analysts, declined more than 10% year over year. About half of that growth was organic and the balance was contributed by Ciclu acquisition. We grew our bookings from private networks by more than 50 percent and we secured additional recurring revenue from managed services with approximately seven million dollars annual recurring revenue which is more than 30 percent of our current arr these additional revenues are expected to have gradual impact on our recurring revenue in 2025 and 2026 simultaneously we continue to execute against our product roadmap extending our technological lead we have introduced the ip50 cx enabling us to win a significant new business and take market share in india we have introduced the new millimeter wave series ip50ex that we believe is the best price performance millimeter wave product in the industry as demonstrated by the recent indication of demand for the ip50exa product in india on that same front we have finished the tests of our proprietary neptune chip successfully and have been developing the first 25 gigabit per second in a single box our ip5100e that once again is expected to be the best price performance product in the industry enabling us to also provide a multi-band solution in a split mount configuration of 29 gigabit per second likely the highest in our space and finally on the millimeter wave we have launched the new product version of cyclo by serragon product the 8020 that many cyclo by serragon customers have been waiting for during 2024 we also started developing a new split month product after many years of focusing primarily on an all outdoor solution this product can address the needs of a large part of the market including private networks that still prefers split mount products and we expect it to be commercially available within the first half of 2025. on the software front we've introduced the smart activation key that enables more flexibility and ease of use of different features and configurations of our products, opening the door for software as a service business models. We have recently seen an increased interest in our encryption features due to the increased threats of cyber attacks. This can drive higher software revenue for us from both our install base and future purchases. Our smart activation key can make this feature even easier to use with these achievements we enter 2025 in a strong competitive position i believe our position is the strongest it has been since i became ceo we are making our strides and seeing the signals of success tied to the continued execution of our strategy the recent acquisition of e2e technologies is another attestation of our determination to pursue the private network market organically and inorganically the two acquisitions completed over the last 14 months improve our ability to compete in this domain i firmly believe that we can continue increasing our market share significantly said that the dynamics of the private network market results in projects shifting from quarter to quarter and this impacts our visibility on revenue until we reach a critical mass of projects in our backlog on the managed services front we had a few recent successes that are reflected in our increased committed ARR and make us more optimistic or even much more optimistic about this path of growth. We have seen increasing interest in the market for full turnkey deals where we are expected to design, deliver, deploy and manage the performance of our products over periods that can range between five to ten years. We expect to continue this approach even if it impacts our growth pace in the short run. Saragon has been outperforming the market in 2024 and we expect to continue to outperform the market in 2025. That said, data from analysts as well as other companies' performance in the telecommunication technology space suggest that the CSP market has been soft for at least a year. Recently, some of the companies, especially in the run and fiber domain, are reporting on signs of potential recovery. Run and fiber deployments typically come before wireless transport deployments, serving as a leading indicator for growth for us. In 2024, Saragon outperformed the industry in this respect due to being the vendor of choice in particular parts of the market, primarily in India and North America. Yet, we are not immune to the global market trends. But with the huge progress we have made with our offerings, we are very well positioned to benefit from a recovery in the industry. To summarize, I'm very optimistic about long-term direction. 2025 is indeed starting with low visibility, but can also turn into another successful year for Saragon if CSP markets recovers and subject to the pace of success in private networks. As we navigate this period, I continue to believe that Saragon is well positioned and we expect to continue to outperform the market. I'd now like to provide an overview of our Q4 highlights by region. In North America, revenue was $13.4 million. This reflects the lower levels of booking we had in Q3 as previously discussed and into Q4. We saw a nice uptick in bookings in Q4, and we expect another sequential growth in Q1 of 2025. This trend reinforces our confidence that lower bookings in Q3 were reflective of timing issues, not demand. We also see opportunities for deployment of our encryption capabilities as cybersecurity is getting more attention. In India, revenue was $55.6 million, an all-time record quarter for Saragon, exceeding the $50.5 million reported in the third quarter, our previous record. We have been shipping and deploying equipment related to several projects in India, including the new customer we won in Q4 2023 these deployments are supporting customers in both the expansions of 4g and 5g networks during the last few months we have finished negotiations of the commercial terms with two of our customers securing our market share with the potential for a certain increase on account of competition. We have started receiving orders for delivery in 2025 based on the new commercial terms, and we expect more orders in the coming quarters for both our microwave and even products. Importantly, our IP50 EXA has generated significant traction, being most probably the best price performance product in our space our strong relationship with one of our customers and their trust in us and its appreciation of our strong technological capabilities are opening for us more opportunities that are beyond our core domain and current roadmap while these opportunities are in the initial exploration phase they are another attestation to a strong position in india in our asia pacific region we finished the year strong winning business that included significant ciclo by serragon products this was primarily in the point to multipoint access solutions for municipality projects which included managed services following deployment we also were awarded a project worth of approximately 20 million dollars in collaboration with the tower company to provide capacity as a service to certain communications service providers as well as a 3.5 million dollars win in the energy domain we expect to have final agreements signed by this final agreement signed by the first half of 2025 with that i'll turn the call over to Ronen Stein, our CFO, to discuss the results in more detail. Ronen, over to you.

Thank you, Doron, and good morning, everyone. Q4 2024 was another successful quarter, closing 2024 with 13.5% revenue growth year over year and more than 10% in non-GAAP operating profit, even when eliminating an approximately $9.1 million benefit related to collection on account of a debt settlement agreement from a South American customer. While further strengthening our financial position and increasing our operating leverage, we have invested organically and inorganically in positioning ourselves better in the fastest growing segments of now more diversified markets. 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 you to today's press release. Let me now review the fourth quarter results. Revenues for the fourth quarter were 106.9 million dollars, up 18.3% from 90.4 million dollars in Q4 2023. Our strongest regions in terms of revenues for the quarter were India and EMEA with 55.5 million dollars and 16.2 million dollars respectively, followed by North America. We had three customers in the fourth quarter that contributed more than 10% of our revenues. Gross profit for the fourth quarter on a non-GAAP basis was $36.7 million, an increase of 15.5% compared to $31.8 million in Q4 2023. Our non-GAAP gross margin was 34.3% compared with gross margin of 35.1% in Q4 2023. We continue to achieve this gross margin despite the change in regional revenue mix. We achieve this by increasing revenues, continuous focus on improving product costs and maintaining control over our fixed costs our gross margins may continue to fluctuate from quarter to quarter due to changes in volumes and revenue mix as for operating expenses in general operating expenses in 2024 fully include the impact of the cyclo acquisition at the end of 2023 and thus impact the comparison to 2023 operating expenses. Research and development expenses for the fourth quarter on a non-gap basis were $8.8 million, up from $7.7 million in Q4 2023. As a percentage of revenue, our R&D expenses were 8.2% in the fourth quarter compared to 8.5% in the fourth quarter last year. Sales and marketing expenses for the 4th quarter on an on-gap basis were $10.6 million, up from $10.2 million in Q4 2023. As a percentage of revenue, sales and marketing expenses were 9.9% in the 4th quarter compared to 11.3% in the 4th quarter last year. General and administrative expenses for the fourth quarter on an on-gap basis were $5.1 million, compared to $6.1 million in Q4 2023. As a percentage of revenues, GNA expenses were 4.8% in the fourth quarter, compared to 6.7% in the fourth quarter last year. Operating income for the fourth quarter on a non-GAAP basis was $12.2 million, compared with $7.8 million for Q4 2023. As a percentage of revenues, non-GAAP operating income was 11.4% in the fourth quarter, compared to 8.6% in the fourth quarter last year. Financial and other expenses for the 4th quarter on a non-gap basis were $3.5 million, negatively impacted by foreign exchange fluctuations and the strengthening of the U.S. dollar versus several currencies, offset by a continuous reduction in interest expenses. Our tax expenses for the 4th quarter on a non-gap basis were $1 million. dollars net income for the fourth quarter on an ongoing basis was 7.7 million dollars or nine cents per diluted share compared to 3.7 million dollars or four cents per diluted share for q4 2023 turning to the full year results revenues were 394.2 million dollars up 13.5 percent from 347.2 million dollars in 2023 gross profit for 2024 on a non-gap basis was 138.2 million dollars an increase of 14.3 percent compared to 120.9 million dollars in 2023 our non-gap gross margin was 35.1% compared with gross margin of 34.8% in 2023. Operating income for the year on a non-GAAP basis was $48.8 million, an all-time record, compared with $29 million for 2023. As a percentage of revenues non-GAAP operating income was 12.4% for the year compared to 8.4% last year. Net income for the year on a non-GAAP basis was $36.4 million or $0.41 per diluted share compared to $16.7 million or $0.20 per diluted share for 2023. As for our balance sheet, our cash position at the end of the year was $35.3 million compared to $28.2 million at the end of 2023. Short-term loans were $25.2 million compared to $32.6 million as of December 31st, 2023. We had a net positive cash position of $10.1 million compared to a negative net cash position of $4.4 million at December 31, 2023. We believe we have cash and facilities that are sufficient for operations and working capital needs. Our inventory at the end of 2024 was $59.7 million, down from $68.8 million at the end of December 2023. The reduction is mainly related to our continued efforts since 2023 to streamline inventory levels following the improvement in components, availability and substantial shipments to India. Our trade receivables at the end of 2024 are at $149.6 million as compared to $104.3 million at the end of December 2023, reflecting the growth of our business in India. Our DSO now stands at 126 days. As for cash flow, net cash flow generated by operations and investing activities in 2023 was $8.6 million. Turning to our 2025 outlook, we expect 2025 revenues to be between $390 million to $430 million inclusive of E2E acquisition. We expect non-GAAP operating margins of at least 10% even at the low end of our revenue range as we continue improving our cost structure and look carefully at our expenses, especially in times like these lower visibility. We also expect to increase our free cash flow compared to 2024 levels. With that, I now open the call for your questions. Operator.

Thank you. In order to ask a question, please raise your hand using your mobile or desktop application and wait for your name to be announced. Once again, please raise your hand using your mobile or desktop application and wait for your name to be announced. Our first question today comes from the line of Ryan Kuntz of Needham Company. Please go ahead. Ryan, you should be able to unmute.

Sorry for the delay. Thank you for the question. Yeah, my question was about the end-to-end acquisition. Can you maybe outline for us the role that this company plays in the energy industry and what types of customer relationships they have that they can bring to the company related to this new target market? Thank you.

Hi, Ryan. This is Doron. So thank you for your question. E2E is a very well-known system integrator, primarily in North America, for networks within the energy and utilities domain. uh they uh they have very uh uh uh good reputation and they have a very nice portfolio of customers some of them are very prominent in those industries and um their relationship are very strong and over time they were able even to kind of a a build the relationship uh to a level that they are providing a software to their customers that is helping them very nicely in managing the network post deployment and this software is actually also being OEM'd via one of the other technology vendors to this particular space that is using this software for his own customers. I think the combination of a strong understanding of the needs of these two segments in the private network market, together with the very strong relationship they were able to build over time. And the additional capabilities in terms of software development can boost our success in the private networks market in North America and outside, predominantly in the energy and the utilities space.

That's really helpful, Daron. Thanks. These Is there energy producers or distributors or kind of broadly in the cross?

It's broadly. You see different use cases. This could be producers. This could be oil and gas manufacturers that have both offshore and onshore networks. It could be mining. There's a lot of different use cases under the energy segment. And I would dare say that probably their solutions can be applicable for 80% to 90% of the use cases.

Nice. Sounds like a great opportunity. You mentioned on the call here on the private network side, maybe some deal slips. Are these coming to you from channels? And what types of customer opportunities are these in terms of market verticals you're seeing some slips in?

Yeah, so usually the reporting about private networks is focusing primarily on deals where either we go direct or we go via system integrator, but we have the ultimate relationship with the end user, helping them and the integrator to come up with the best solution. So eventually the slippage is driven by a pattern in this industry that it takes time to close deals, especially if you are working with some government institutions that may make the decision based on an available budget and sometimes defer the decision. But generally speaking, it's either direct or system integrators where we have a very strong direct impact on the architecture and the solution.

Got it. Thank you. And you talked about some contract renewals or expansions in India. Any color you can share with us there? These are the big mobile operators that have been your traditional customers there?

Yeah, so we're still talking about the large players. We're starting 2025 probably with the best position, I think, since 2013 or 2014, when we just announced the IP20C at the time. This was a product that was winning for us the market. It was like a silver bullet. I feel that we are kind of repeating this same position at the beginning of 2025. This time, we obviously continue being very successful with the microwave product with our CX series, but more importantly, especially nowadays, when the demand for even for millimeter wave solutions is higher, I think that the IP50 EXA is a winning product. And actually, the pricing and the conditions of delivering this product to the India market, at least to two customers out of the three we own, are already closed. And they are waiting for this product to be in mass production, which is going to happen starting Q3.

Got it. That's great. And one last one, if I can, around gross margins and new products. You know, a lot of times new products have lower yields and higher startup costs. How should we think about shaping gross margins for the year in consideration of kind of the new products ramping?

Look, this is also associated for sure with the original mix in each and every quarter. But generally speaking, I believe that as we introduce these new products, although we may face a certain period of, I would say, more investment, generally speaking, I would expect our gross margins to improve during the second part of the year.

Great. Thanks for that.

That's all I've got.

Thank you. Thank you.

Thank you very much.

Our next question comes from the line of Scott Surrill from Roth Capital. Please go ahead.

Hey, good morning. Good afternoon. Thanks for taking my questions. Maybe just to follow up on some of Ryan's questions on the private networks front. Duran, I'm wondering if you could give some of your longer term expectations in terms of growth for private networks. I know there's a little bit of softness in North America this quarter. What's the comfort level with that returning in the second half of this year? And also on the M&A front, you have been acquisitive in that area with Ciclu now and end-to-end. Are you still looking around in the space to continue to add to and enhance the portfolio?

So good morning, Scott, and thank you for your questions. I will start with the last one. So it is part of our strategy to actually execute with continuous search for M&A opportunities. So definitely we'll continue to pursue for such opportunities that can strengthen our position. and that's a part of our daily work here as management in in saragon when it pertains to the private networks we believe that the second part of the year could be stronger for us and i think that also with the last organizational changes we have done internally We are even more well positioned to pursue such opportunities and to take business. There are certain indications that there is an increased demand for that, particularly in North America. But just to remind you, this strategy is not solely focused on North America. We see a lot of other private network opportunities in other places in the world. This deal that we won in APAC that is actually leveraging the Ciclu point-to-multipoint product for municipalities is just another example. So I am very, very optimistic about private networks in general. Yes, I believe that we will continue in high percentage of growth in this domain. And I believe that North America will be much better in 2025. very helpful and maybe to shift over to india for a second i'm wondering if you could talk about the comfort level and visibility in the second half of this year you also indicated you're benefiting from both 4g and 5g builds i'm wondering how e-band you know fits into that particularly as we start to get into the latter portion of this year yeah so so look the the way the process works usually is that we before the next fiscal year for the operators in India that basically starts at April we start the negotiation and the discussions about the volumes that they expect to buy from us the kind of product that they want to buy from us given their plans for rollout and obviously following a negotiation about commercials we get a strong indication about our market share and basically we finish this process with two out of the the three customers the other one is the one that we won back in 2023 and we are still delivering under the the the old contract so there there was no need at least not yet to discuss further the terms now when when we look into 2025 we see a very strong phenomena of operators basically going to increase their fixed wireless part of the network you know order to serve not just mobility but also to serve homes and this is a driving an increase in demand for our event solution as the backhaul for the fixed wireless access that usually will contain much more capacity and this is the main driver for at least some of the customers that we are working with to go back and to start buying e-band products. I believe that we'll see a very significant ramp up on the second part of 2025 but I can tell you that as we speak we already received orders for eBend, both the old product and the new product a few days ago, and we intend to start delivering certain quantities in Q1 and Q2.

Thank you, very helpful. And lastly, if I could, Ronan, on the operating margin, targeting 10% plus for this year, I wonder if you could give us some directional guidance in terms of OPEX as we go into the first quarter. Thanks.

So as I mentioned in the remarks, we are going to align on the OPEX and to ensure that as visibility is not that high, we are monitoring the OPEX as much as possible. So generally, we will align that with the revenues and the gross margin to ensure that the target is actually as close as possible to the targets of the 10%. The gross margins, on the other hand, is obviously dependent on what the one mentioned before, regarding the mixture of the revenues and also the volume of the revenues. Thank you so much.

Thank you. Our next question today comes from the line of Theodore O'Neill from Hill's Research. Please go ahead.

Yeah, thanks. Yes, and congratulations on the revenue of the quarter. That was very good in this challenging environment. I was wondering if you could talk about your success in India just sort of briefly. Is this – talk about the combination of technology wins versus market share there for you?

I would start by saying that the most important thing that drove our strong position in India is our technology. We are not a new vendor to the Indian market and many years of delivering very reliable products and in most cases cutting edge and also coming with a very good price performance factors is creating this ongoing demand for us. I think that this actually has also built for us very strong relationship over time where the customer know that even if we are introducing a new product that they did not fully test, they know that they can rely on us that 90% probability it will be functional from day one. as we did with the IP50CX in 2024. And if it's not, they know that we will do the utmost and find the solutions. And that has created an intimate relationship for us with at least some of the customers. And it actually opens up more opportunities for us where they are coming to ask And asking for specific use cases for specific products that they are pursuing, knowing that if we can eventually commit to meet the spec, they can trust us. So all in all, it's a combination of very strong technology, very in-depth understanding of the Indian market needs in terms of price performance, and over time, obviously, building a strong relationship with the customers' executives.

Okay. And, Theron, I wonder if you could talk about how you manage the challenge of having tier one business ramping up and down and what kind of impact that has in terms of your managing balance sheet, the income statement, your personnel.

Well, first of all, I want to start by saying that our three pillar strategy is exactly meant to resolve at least partially for this phenomenon. So by going after private networks and by going after managed services, whether it's for private networks or for service providers, that's exactly the long term answer for this fluctuation in the CSP market that is very cyclical. Now, on the expense and the cost structure side, we are obviously looking into this piece, and as I mentioned in a few previous conference calls, We have a very structured model and strategy where we are changing the baseline of our cost by building low-cost centers of excellence where a lot of back office functions are concentrated in those centers and by that are becoming more efficient. And obviously, in terms of low cost, they are also reducing our cost versus the productivity. So that's one piece. It's a part of our strategy. It's a three-year plan that is being looked at every three years. And then we come up with a new plan. And this is a gradual approach. On top of that, when we see that the visibility is becoming lower, we are taking the measures to do certain alignments, usually in the regions that we see that the weakness is the strongest and we don't expect an immediate recovery. So generally speaking, we are striving to contain our costs and expenses, and we're making the necessary adjustments. Either we use subcontractors or we also make the necessary adjustments in specific activities that we don't see them as very strong as applicable.

No, thanks very much. My last question is, are you seeing any supply chain issues?

The short answer is that so far we have not seen any significant supply chain issues. There might be some cases here and there where a specific component is missing. And since we are managing our inventory and our liabilities to the vendors very meticulously in order to minimize the exposure, sometimes it comes on a component scarcity and sometimes we may need to pay some expedite fees but this is a very tactical situation and eventually i truly believe that this policy is actually driving much better operational and financial results for us okay thanks very much thank you our next question today comes from the line of jonathan pierce please go ahead

can you guys hear me yes hi jonathan awesome how's it going hey just want to say congratulations on a great quarter and a great year it uh seems like you guys are starting to fire on all cylinders which is really really nice to see um my question has to do with the ar issue with their south american customer it seems like the past two quarters um you guys have seen a positive impact from that issue and then from what i understand this quarter actually had a negative impact just wondering if you guys could shed a little bit more light on

that and then also um how you guys see it affecting subsequent quarters if at all um or if that's now behind us okay uh hi jonathan uh the the uh two quarters of q2 and q3 uh impacted it had like a one-time impact of resolving and all the uh debt that was already uh provisioned in 2022 so it's not on our books anymore and the fact that we collected something that was fully provisioned added up about 9.1 million dollars uh all together in q2 and q3 uh the settlement is for a higher amount but we are still chasing further amounts but it's not on our books anymore so the customer is not active the ar is zero there is no anything no impact on the ar anymore the air itself went up as i mentioned in the in the in my uh comments And that is more or less in line with the fact that the business shifted more towards India and obviously DSO in India is higher.

I would just add that on top of Ronan's comments, if you look at our investor presentation, there is a chart that shows the adjusted non-gap operating profit and margin. And there we are actually carving out these two very significant collections just to normalize for the investors community, how do we see the operating non-GAAP profit in the normal course of business?

Okay. All right. Thanks, guys.

Thank you. Our last question today comes from the line of Gunther Karger. Please go ahead.

Can you hear me okay? Hi, Gunther. Yes, we can hear you very well. Yes, thank you. I just want to remark that over the years I've followed your company and yourself, you've done remarkably well through the storms that have been encountered, and it looks like you're on the way. Congratulations. We may not be around the next time, but I wish you well, and congratulations. Thank you.

Ganto, thank you so much for your kind words. I wish that you will continue being with us for as long as possible. I wish you best health, and I wish you to be able to continue following up on us, hopefully with continued success. Yes, thank you. i will do that as long as i can thank you doran sure thank you no further questions please proceed as we enter 2025 following our achievements in 2024 our low-term our long-term outlook and confidence has only grown we remain focused on executing on our strategy towards achieving our stated long-term revenue and profitability targets. In the near term, visibility is limited, hence we are prudent in our projections. Long term, we continue to move forward or towards our target of $500 million in annual revenues. We believe that the pieces are in place for us to achieve this level of scale from a combination of organic growth as well as strategic acquisitions. I look forward to updating you further on our next quarterly call. Have a good day, everyone.