Ceragon Networks Ltd. Q1 FY2026 earnings call

Core Q1 2026 Financial Results

• Total GAAP revenue was $85 million, a 4.1% decline from $88.7 million in Q1 2025
• Non-GAAP gross profit was $30.6 million, a 3.1% increase year-over-year, with non-GAAP gross margin expanding to 36% from 33.5% in Q1 2025, driven by favorable geographic and product mix
• Non-GAAP operating income was $4.2 million (4.9% of revenue), down from $4.5 million (5.1% of revenue) in Q1 2025, pressured by currency fluctuations and industry-wide cost increases
• Non-GAAP diluted net income per share was $0.01, with positive operating free cash flow of $2.8 million
• Ending net cash position was $22.1 million, up from $19.4 million at the end of 2025

Key Operational Highlights

• India: Secured $86 million in new bookings from two leading operators, with substantial volume for the new IT50 ICSA platform supporting large-scale fixed wireless access (FWA) expansion. Customer demand for Saragon's wireless solutions as a lower-total-cost, faster-deployment alternative to fiber is accelerating, with early signs this trend is expanding beyond India.
• North America: A large tier 1 carrier moderated bookings after strong H2 2025 demand, but full-year 2026 revenue expectations for this customer remain unchanged (similar to or modestly above 2025 levels, with H2 acceleration). Completed a successful proof-of-concept for the new 28 GHz FR2 solution with a second major tier 1 carrier, with commercial discussions advancing and potential meaningful orders starting Q3 2026. Secured $10 million in new private network contracts across multiple use cases, with long-term sales growth expected despite extended project-based sales cycles.
• Global Competitive Landscape: Changes from Nokia's planned divestment of its wireless transmission business have driven increased customer engagement globally, most notably in Europe, with initial orders expected from new European customers in H2 2026. Private network momentum continues to build gradually, with Saragon's end-to-end 5G/LTE + wireless transport capabilities positioned well for growing edge IoT and automation demand.

Saragon reports revenue by geographic segment for Q1 2026:

• North America: $31.3 million in revenue, representing 37% of total Q1 2026 revenue. Execution met management expectations, with one large tier 1 carrier moderating booking activity after strong H2 2025 demand, while progress with a second major tier 1 carrier advanced.
• India: $30 million in revenue, representing 35% of total Q1 2026 revenue. Activity and booking conversion remained strong, with $86 million in new bookings announced in early Q1, driven by major operator demand for fixed wireless access expansion.

• Management reiterates its full-year 2026 revenue guidance range of $355 million to $385 million, unchanged from prior guidance.
• Management also maintains its full-year 2026 profitability targets: a 1 percentage point improvement in non-GAAP gross margin, and a non-GAAP operating margin of 6.5% to 7.5% at the midpoint of the revenue range.
• A temporary component supply delay for a North American tier 1 carrier will shift ~$X billion in expected Q2 2026 revenue to Q3 2026; this is a timing shift, not a demand loss, and does not impact full-year guidance. The Q2 2026 revenue mix will be abnormally weighted to lower-margin India revenue, creating temporary gross margin pressure in Q2, with gross margins expected to rebound sequentially in Q3 as mix normalizes and North America revenue rebounds; the Q2 and Q3 margin impacts are expected to largely offset one another.
• Cost mitigation initiatives to address industry-wide cost headwinds are expected to begin taking effect in Q3 2026.

• Industry-wide cost headwinds: Rising memory prices, elevated copper/metal costs, and continued high freight costs (partially driven by the Straits of Hormuz conflict) are pressuring gross margins company-wide.
• Foreign exchange volatility: Ongoing appreciation of the Israeli shekel versus the U.S. dollar and depreciation of the Indian rupee have negatively impacted profitability, partially mitigated by existing hedging programs, with full-year impact still uncertain due to potential currency swings.
• Geopolitical and supply chain risks: The isolated semiconductor component delay for a North American customer was exacerbated by geopolitical export license processing delays and unexpected cross-industry demand surges for the part, demonstrating ongoing supply chain volatility.
• Regional geopolitical risk: Geopolitical instability in Israel and the broader Middle East is explicitly noted as a core uncertainty that could impact actual results relative to forward-looking projections.
• Customer concentration: Three customers contributed more than 10% of Q1 revenue, creating revenue timing sensitivity to shifts in ordering patterns from large carrier customers.

Q: Scott Searle (Roth Capital) asks for additional color on Q2 2026 margin pressure, sequential revenue trajectory from Q1, and whether Israeli shekel headwinds change product investment plans, plus the impact of Nokia's wireless transmission divestment on Saragon's opportunity. / A: Management confirms total revenue is still expected to grow quarter-over-quarter through 2026. Q2 gross margin will see a several point decline from unfavorable India-heavy mix and unmitigated cost headwinds, with the drop fully offset by a rebound in Q3, leaving full-year targets on track. Shekel appreciation is not dramatic enough to change product investment plans. Management notes Nokia's divestment has driven significantly increased customer engagement, especially in Europe, with some operators already moving forward with Saragon orders, while others wait to see Nokia's buyer; overall, the dynamic is net positive for Saragon, with the strongest impact currently in Europe.

Q: Ryan Coons (Needham) asks for additional detail on the North America Q2 supply chain disruption, and updates on the new 28 GHz FR2 product opportunity with the emerging tier 1 carrier. / A: Management confirms the delayed component is a semiconductor, with delays stemming from two geopolitically driven factors: a cross-industry demand surge for the part that extended lead times, and slower export license processing from geopolitical tensions. Executive teams from Saragon, the customer, and the component vendor are collaborating to resolve the delay, with improved visibility for a Q3 catch-up. The new 28 GHz FR2 product leverages Wi-Fi 7 technology for a lower-cost FWA solution than legacy 5G. After a successful POC, management expects significant orders in Q3 2026, with meaningful revenue contribution starting in 2027, opening a large new FWA market for Saragon.

Q: Tyler Burmeister (Lake Street) asks if strong YTD India bookings raise the baseline revenue outlook for India in 2026, and provides an update on the outstanding RFP for the third Indian tier 1 operator, plus demand trends in other regions and OpEx trajectory in H2. / A: Management confirms the $86 million in YTD India bookings solidifies and increases confidence that full-year India revenue will meet or exceed the $100 million baseline guidance. A decision on the third government-owned tier 1 operator's RFP is still delayed by administrative processes; if awarded in 2026, it would be incremental to 2026 guidance and primarily benefit 2027 revenue. EMEA (Europe) is seeing very strong progress driven by the Nokia divestment, with management on track for a record full-year 2026 in EMEA, with initial new orders expected in H2. OpEx will be slightly higher in H2 due to currency effects and variable sales and marketing investments, but spending remains aligned to hit full-year operating margin targets.

Q: Gunter Karger asks what additional steps Saragon is taking to deliver value to shareholders beyond core operations. / A: Management notes that a weakening competitive landscape has increased Saragon's opportunity to generate shareholder value after years of pressure. Beyond operational excellence, Saragon is actively evaluating merger and acquisition opportunities, and new strategic initiatives are being developed with a newly appointed CTO that could expand the company's addressable market beyond core telco infrastructure; additional details will be shared with investors once plans are finalized.