Ceragon Networks (CRNT) Q4 2020 Earnings Call Transcript

Ceragon Networks (CRNT -3.23%)
Q4 2020 Earnings Call
Feb 08, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Greetings and welcome to Ceragon Networks Ltd. fourth quarter and full-year 2020 earnings conference call. [Operator instructions] As a reminder, your conference today is being recorded.

It is now my pleasure to introduce your host, Maya Lustig, head of investor relations of Ceragon. Thank you. You may begin.

Maya Lustig -- Head of Investor Relations

Thank you, Alan, and good morning, everyone. I'm joined by Ira Palti, Ceragon's president and chief executive officer; and Ran Vered, Ceragon's chief financial officer. Before we start, I would like to note that this call includes information that constitutes 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 Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or if any deviation therefrom will not be material.

Such statements involve risks and uncertainties that may cause future results to differ materially from those anticipated. These risks and uncertainties include but are not limited to such risks, uncertainties, and other factors that could affect our results as detailed in our press release that was published earlier today and is further detailed in Ceragon's most recent annual report on Form 20-F and in Ceragon's against other filings with the Securities and Exchange Commission. Such forward-looking statements 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 dates. Such forward-looking statements do not purport to -- to be predictions of future events or results, and there can be no assurance that they will prove to be inaccurate.

Ceragon may elect to update these forward-looking statements at some point in the future but it specifically disclaims any obligation to do so. Ceragon's public filings are available on the Securities and Exchange Commission's website at www.sec.gov and may also be obtained from Ceragon's website at www.ceragon.com. Also, today's call will include certain non-GAAP numbers. For a reconciliation between GAAP and non-GAAP results, please see the table attached to the press release that was is -- that was issued earlier today.

I will now turn the call over to Ira. Please go ahead.

Ira Palti -- President and Chief Executive Officer

Thank you, Maya, and good morning, everyone. In the fourth quarter of 2020, as well as almost the entire year, the macroenvironment remained challenging. Fast forward to the present, the vaccine rollout in Israel is inspiring setting a world record and an example to other nations. Personally, I got my second shot already and I'm happy to share with you that I'm feeling perfectly fine.

For Ceragon, the fourth quarter was a relatively good end to a volatile year with revenues and business activities returning to the normal run rate. Ran will give you the details later in the call. I would like to take the opportunity to say a few words about our most recent technology focus, the evolving market, and our emerging roadmap. 2020 was a unique year for business and as an economist once said, a crisis is a terrible thing to waste.

A big opportunity for us this past year was to be a key player in moving the 5G evolution from hype to reality. As you would agree, 2020 created a deep cultural change in our global society. Due to the lockdowns, limited face-to-face interactions, and reduced level, online services became the lifeline. We all adopted new ways of communicating, doing business, shopping, entertaining ourselves, and more.

This has generated massive traffic and complexity that strain existing networks, creating an urgent need for more network capacity. To keep pace, operators are pushing 5G from initial trials into the field. And this -- what we have been -- is what we have been waiting for and are very excited about. We believe we are poised to provide operators with the technology, expertise, and services they need to make this transition happen.

And we foresee a significant opportunity to grow and take market share. At Ceragon, we have a history of benefiting from the transition between wireless generations. As 5G services and networks build momentum, we believe that once again, we will do what we do best, leverage this transition, and continue our successful company story in 2021 and beyond. When we look back, we see that the three main technological breakthroughs that empowered us to become a true global player were wireless SDH, wireless IP, and compact, multi-core, all-outdoor wireless backhaul solutions.

And more than that, we became present in all corners of the world, positioned to benefit from the wave when it took years where it took years, which is something our best-of-breed competitors cannot boast. Our first big revenue jump was a decade and a half ago when our wireless SDH solution drove the transition from 2G to 3G. This almost tripled our revenues at the time from $55 million to above $160 million per year. We were the first to introduce wireless SDH technologies, a game-changer that opened a world of possibilities for operators to bring the Internet to mobile devices.

Our next big step was over the next 10 years when we were the first to introduce wireless IP hauling, compact, all-outdoor solutions, dual-core chipsets which allowed us to ride the 4G wave globally and took us from $160 million to a yearly run rate of about $300 million. And that's exactly the position we are in today. We expect to continue to be a key enabler of the exciting 5G evolution. I'd now like to spend just a few minutes to explain why, especially for those of you who are new to Ceragon, it might help to break down the elements that contribute to our 5G positioning.

5G networks require massive capacity, density, and flexibility with extremely low latency. And we believe our differentiated solution lead the market in all these areas. We enable operators to utilize a much wider range of spectrum and our open-network architecture supports more flexible and operationally efficient network rollouts and quicker time to revenue. We are one of the only players that develops all-network components in-house.

We believe this gives our customers' networks a performance advantage along with several years lead in network capacity and network resource management such as spectrum, energy, and site acquisition. Thanks -- thanks to all this, we believe our customers succeeded more often and more efficiently in today's competitive markets. I'd like to speak a bit more about our leadership in the best-of-breed portion of the wireless hauling market. We were at the forefront leading a change that created more possibilities for operators to build and manage higher performance and more operationally efficient networks by integrating the best solution for every network domain.

This is what made us the No. 1 wireless wholesaling specialist in first in the 3G days with wireless SDH, and then in 4G days with wireless IP and multi-core, all-outdoor solutions. Today, another change is already picking up speed. The industry's move, led by operators toward open networks, the Open RAN, for this aggregated environment.

This enables operators to integrate specialty solution for each network domain from different vendors. The market is becoming more democratized which plays to our favor. Just a couple of weeks ago, we learned that Europe's Deutsche Telekom, Orange, Telefonica, and Vodafone formed a collaboration around the rollout and development of Open RAN technology in a bid to ensure that Europe keeps up with the U.S. and Japan.

In the wireless hauling best-of-breed market segment, we believe the leading provider is us Ceragon. We believe we have the most advanced and flexible set of technologies and solutions, the largest market share, and the most comprehensive services and expertise, and the widest geographical coverage. The transition from 4G to 5G is creating a huge change in the way networks are designed and architected. That's why often, we help operators achieve an evolutionary approach.

We provide a wireless-based backhaul network that is supporting 4G networks and that can be upgraded cost-effectively to 5G at any point, its capacity by tenfold. We help them optimize their network performance and network resources including reuse of equipment where needed. This total-support approach is how we have built our extensive customer base worldwide, some of whom are recently acquired. This include major Tier 1 operators in North America, Europe, and Southeast Asia, as well as Tier 1 and Tier 2 operators across the globe, plus smaller ISPs and regional players.

It's what we believe makes us an essential partner for operators as they evolve to 5G. So, what makes us the technology leader of wireless hauling and even more so when it comes to wireless hauling for 5G? The answer is the combination of four elements. First of all, we are the only player that builds our own purpose-driven chipsets, giving us the tightest integration in the market, functionality, and cost-wise. Second, total vertical integration.

We are the only player that does everything in-house from chipset development for microwave and millimeter-wave to complete radio and networking system. Third, we are the only player with leadership in all three domains of the disaggregated wireless hauling network, networking software, networking hardware, and radios. And finally, we believe we are the kings of compact, all-outdoor solutions with nearly 40% market share of the segment as measured by Skylight research firm. Putting all these together, you'll see the full extent of our capabilities, solutions, and roadmap.

Two gigabits per second to 100 gigabits per second over a wide range of spectrum going well above 100 gigahertz. This is what is needed to support the capacities and capabilities for any and every possible 5G scenario. Now that we believe we are perfectly positioned to leverage the 5G evolution, the open question is the timing. We see signs that this evolution will start building at a larger scale through the end of 2021 and then go through 2022 and 2023.

The exact timetable might be impacted by COVID but we believe this is the general direction. The U.S. has been deploying 5G since late 2019 and shares leadership of the transition today with China. Network build-outs using wireless hauling for transport across networks have recently begun.

We've increased our 5G design wins to nine this quarter and we are participating in numerous 5G proofs of concepts and initial rollouts in the U.S., Europe, and the Pacific Rim. And plans are being finalized for mass rollouts. We anticipate that the first large-scale networks to make use of wireless hauling en masse are likely to pick off toward the end of 2021 and then to pick up speed at first gradually through 2022 and 2023. We expect to benefit from the growth of this market and also to take market share.

After Japan and Western Europe, we expect to see 5G momentum build in the rest of Europe, APAC, and Lat-Am, followed by Africa three years down the road. In the meantime, we continue to benefit from large expedited 4G projects to increase network reach and capacity. In some of these projects, the operators are already fitting in the wireless hauling infrastructure required for 5G. To conclude, we are moving into a new kind of future, building on a growing collective online mobile presence and global hyper-connectivity with full ramification and potential we wait to witness.

In this new context, we believe there are and will be an increasing number of business opportunities for us across the globe starting already this year. We are working hard to leverage these opportunities and to continue to be a key enabler of the multi-year 5G evolution. I would now like to turn the call over to Ran to discuss our financials in more detail. Ran?

Ran Vered -- Chief Financial Officer

Thank you, Ira, and good morning, everyone. To help you understand the results, I will be referring mainly to non-GAAP numbers. For more information regarding our use of non-GAAP financial measures including reconciliations of these measures, we refer you to today's press release. During the fourth quarter, we made further progress moving back toward normal operations, continuing the positive trend that began in Q3 2020.

Our revenues returned to a strong level and at the high end of our projections for the quarter, as well as high end of our normal quarterly revenue run rate range pre-COVID. The reflected return through strong execution of almost all our ongoing activities in an industry, the thrills in new urgency for network building. At the same time, COVID has increased our supply chain expenses significantly, reducing our gross margin. These, compounded with the large technology write off and some indirect expenses for COVID in the quarter, gave us a low gross margin and took us into a net loss for the quarter despite the strong revenues.

Nevertheless, our financial performance in the fourth quarter remains strong with strong collections enabling us to generate $9.3 million in cash flow from operating and investing activities and to repay almost $12 billion in loans. Nevertheless, our financial performance in the fourth quarter remains strong with strong collections, enabling us to generate $9.3 million in cash flow from operating and investing activities and to repay almost $12 million in loans. In fact, all main balance sheet indicators, DSO, inventory, short-term loans, and cash flow moved in the right direction this quarter despite the very challenging environment. Let me now review the actual numbers with you.

Revenues for the fourth quarter were $74 million, up 5% compared with the third-quarter 2020, and up 4% compared with Q4 last year. The revenues varied from region to region in line with the effect that COVID has had on local business operations and network buildout plans. Europe had its strongest quarter in the last three years, reflecting some initial revenue from 5G projects. Our strongest revenue for the quarter were from India, reflecting ongoing deliveries for Bharti.

Revenues in North America were strong, the second continued positive momentum with ISP and smaller carriers. Africa, too, had a strong quarter. The second shipments for the Orange Niger project we announced in August, as well as to another customer we won this quarter. This is further proof of our strong 4G success in Africa.

Latin America had the strongest quarter in 2020, reflecting some gradual return to activity in our project in Peru. However, we are still facing frozen cap -- capex budget in the face of COVID-19. APAC has a relatively weak quarter with one above 10% customer in the fourth quarter. For the year, revenues were almost $263 million, down 8% from 2019.

This reflected the weak first half of the year due to COVID, following a much stronger second half. The booking to revenue ratio for the quarter were slightly below one. Overall, our annual book-to-bill -- bill ratio for 2020 was above one, while overall bookings were slightly higher than 2019. Gross profit for the quarter on a non-GAAP basis was $21.4 million, giving us a non-GAAP gross margin of 28.9%, compared with 31.3% for the for -- fourth quarter of 2019.

This reflects few one-time negative effects, some of which are agreements with -- with several customers which we believe will improve our future business with them, as well as less favorable customer mix. It also reflects the continued high supply chain costs that we have had to deal with the COVID environment with the major increase in air freight cost, higher my -- material cost, and more. This is likely to continue to fluctuate over the next few quarters until there is a full recovery. For the full 2020 year ended, the non-GAAP gross margin was 28.7%, compared with 33.8% in 2019.

This is not the level we are pleased with and we have taken so -- some operational steps to improve it for 2021. Operating expenses on a non-GAAP basis for the fourth quarter were $20.8 million, in line with our expectations. Research and development expenses for the fourth quarter on non-GAAP basis were $7.7 million, a slight increase from Q4 2019 mainly due to our progress with chip development. As planned, these expenses will continue to stay high until we reach tape-out in mid-2021.

Sales and marketing expenses for the fourth quarter on a non-GAAP basis were $8.5 million, down from $10 million in Q4 2019, reflecting the reduced travel and variable compensation that have come with COVID. General and administrative expenses for the fourth quarter on a non-GAAP basis was $4.7 million, in line with our expectations and down from $6.8 million in Q4 2019, which was impacted by one-time provision. Operating expenses on non-GAAP basis for the full-year period were $79.9 million, down from $87.6 million in 2019, primarily due to reduced sales and marketing expenses. For 2021, we expect to have higher R&D expenses during the first half as we complete the new chip and to gradually increase our sales and marketing expenses throughout the year as markets open post-COVID.

Financial and other expenses for the fourth quarter on a non-GAAP basis were $2.5 million, which is a lot higher than expect --than the normal expected level. We do expect them to return to the regular levels in Q1 2021. Our tax expenses for the quarter on a non-GAAP basis were $1.6 million, which was higher than expected. However, when we take a step back and look at the annual 2020 tax expenses, we see that they are in line with our typical annual tax expenses.

During the fourth-quarter 2020, we had $0.5 million equity loss, together with $1.8 million impairment of intangible assets related to the write-off of technology investment. This was taken in view of our decision to use an alternative solution which we believe is a better fit for our customers and the market. Net loss on non-GAAP basis for the quarter was $3.5 million or $0.04 per diluted share. On a GAAP basis, net loss was $6.3 million or $0.08 per diluted share.

And to our balance sheet, we continue to improve our stability and working capital, and you can see our success in the following parameters. We reduced our inventory to $50.6 million, down from $62.1 million at the end of 2019. Our receivables are now at $107.4 million, down for $118.5 million at the end of 2019. Our DSO now stand at for -- at 140 days, which is a bit lower than in Q4 2019.

Cash flow from operating activities for the -- for the fourth quarter was $11.1 million. Net cash used this quarter for investing in activities was $1.8 million. This strong cash flow enabled us to repay $11.9 million of our short-term loans. Looking forward, we continue to expect to see significant operating activities alongside continued uncertainty.

Although the situation remains volatile, we believe that we are maintaining good control and are well-positioned to take full advantage of long-term opportunities. We are targeting revenue growth in 2021. Although we expect a slow start for the first half of the year based on Q4 book-to-bill below one, plus typical seasonal -- seasonal factors negatively affecting the first half, we continue to expect our revenue to be between $275 million to $295 million. We are aiming to reach non-GAAP gross margin in the range of 30% to 34% in 2021.

However, with the continued COVID impacts on supply chain expenses and other cost factors, the gross margin might deviate from that range. For Q1 2021, we expect our non-GAAP operating expenses to be in the range of $20 million to $21.5 million, taking into consideration the investment needed in our unique multicore chipset technology. With that, I will now open the call for your questions. Operator.

Questions & Answers:

Operator

Thank you. [Operator instructions] One moment please for our first question. For our first question, we'll go to the line of Alex Henderson. One moment please while we open your line.

Your line is open. Go ahead, please.

Alex Henderson -- Needham & Co. -- Analyst

Thank you very much. Hey, I was hoping you could talk a little bit about the gross margin variance in the quarter. Quite a bit steeper than we had anticipated. Obviously, the guide for 30 to 34 for CY '21 gives us some sense of the trajectory.

But I would hope to have some sense of whether you think you'll stay in that band throughout the '21 period. And to what extent we should be at the very low end of that seasonally weak first quarter with COVID probably having a bigger impact? But could you just give us a little bit of a waterfall of what caused the decline in the gross margins in the -- or the pressure on the gross margins in the December quarter to start with?

Ran Vered -- Chief Financial Officer

Hi, Alex. Thanks for your question. So yes, it was a low gross margin and this was actually compounded for your almost say four buckets of reason. The first one is the -- the higher cost of supply chain, impacted by the COVID, higher air freights, higher shipments cost.

And this is actually probably going to keep staying with us until we see some relief on that in the next few quarters. The second item is we had some impact on the arrangements with several customers that we will believe will improve our future business with them and had a negative one-time effect in Q4. In addition with some one-time year-end expenses recorded in a -- to the quarter that also impacted the -- the gross margin, it's really in terms of the timing of several expenses that impacted us specifically in Q4. And the last item I would say is that in between the regions, we had some -- some quarters between the specific region with some less favorable customer mix in specific regions.

So we'll take Q3, for example, where in several regions, better customer mix in this specific reasons. All in all, if I need to balance a -- if I take the revenue -- if I take the average revenue quarterly run rate and you look in Q3 and Q4, the average of the gross margin is between 31%, 32%, with some volatility between quarters. And this is why we also provided I will say wide range for the full 2021 between 30% to 34%. And again, with the possibility to deviate below or above in specific quarters.

Alex Henderson -- Needham & Co. -- Analyst

Can -- can you give us any kind of waterfall, the 33.5 to 28.9 delta? How much of it was supply chain? Is that 200 basis points and isn't that [Inaudible] in the September quarter as well? I'm a little confused why that would be meaningfully different.

Ran Vered -- Chief Financial Officer

So the ballpark of -- of --of the things was I would say roughly 50 or 30% to 50% out of this deviation was the impact of the agreement we reached with several customers. Twenty to 30% of it was specifically less favorable customer mix. And I will say the remainder of it was supply chain issues that we faced, specific supply chain such as higher air freights and air shipments cost. This was the remainder of that.

Alex Henderson -- Needham & Co. -- Analyst

OK. So as I'm looking at the first quarter, which is normally a seasonally weak quarter, where COVID pressures are higher than they were in the December quarter. I guess the -- several of those, the one-timers should fall out. That would suggest that you get a -- you -- you'd be above 30% at least in the March quarter.

Is that a fair calibration of 1Q?

Ran Vered -- Chief Financial Officer

Yes, it's a fair calibration.

Alex Henderson -- Needham & Co. -- Analyst

OK. And then on the opex side, can you remind us your position relative to hedging the shekel-dollar relationship? And obviously, the shekel has been quite strong. Are -- are you anticipating a little bit of pressure from that and therefore toward the higher end of your guidance span of '20 to '21 on -- on a quarterly basis?

Ran Vered -- Chief Financial Officer

So, Alex, I will -- so I will compare it to 2020. So our policy is to hedge 100% or close to 100% before shekel expenses. Last year or -- or in -- in -- in 2020, our hedging rate was close to 3.44. On 2021, the hedging is fixed to 3.335.

So actually, the current shekel, we are OK. And it's going to be fixed, so you don't see the impact of the shekel on our costs because it's 100% hedged. The issue is going to be with this shekel, what we're going to do with 2022 because it does impact us even on -- on 20 -- on -- on 2021. It's a weak shekel.

It's impact us. And even the hedging rate is not -- is not that great. But for 2021, it's a fixed hedge of 3.335. And this is fixed.

Alex Henderson -- Needham & Co. -- Analyst

Down on the interest line, you said you expect that to normalize. You've paid down a bunch of debt. What is the normal rate on interest income expense line?

Ran Vered -- Chief Financial Officer

I will say -- I will say any number between $1.1 million to $1.5 million.

Alex Henderson -- Needham & Co. -- Analyst

I see, one to 1.5. OK. I'll save the store and let somebody else go, and I'll get back in queue. Thanks.

Ran Vered -- Chief Financial Officer

Thanks, Alex.

Operator

For our next question, we'll go to the line of George Iwanyc. Please go ahead.

George Iwanyc -- Oppenheimer & Co. Inc. -- Analyst

Thank you for taking my question. So Ran, just following up on your opex discussion. When you look at the potential cost savings from R&D starting to normalize after you tape-out, and then the increases on the sales and marketing side, do you expect that to be necessarily a wash for the full year and you stay in that $20 million to $22 million range for opex throughout 2021 end?

Ran Vered -- Chief Financial Officer

Yes, George. This is the expectation exactly. This -- that this will be a wash, a slight decrease in the R&D in return to an increase in the sales and marketing. But eventually, it's in the range that you mentioned.

George Iwanyc -- Oppenheimer & Co. Inc. -- Analyst

OK. And then when you look at taping out, and this might be a question for you, Ira. How soon after you tape-out do you start to fill in the portfolio with products that you end up having available to customers?

Ira Palti -- President and Chief Executive Officer

Usually, having systems deployed in customers about 18 months from tape-out, sometimes shorter than this. We probably be able to demo or could do POCs with the customers out there and really fully operational systems about that number. We target a year, but it's a very aggressive type of targeting, about a year after tape-out. Usually, somewhere between a year and 18 months is the more type of reasonable type of assumption for getting a product out.

But let's remember that this is not the whole strategy. This is the longer-term strategy. The 5G deployment strategy that we're doing today is done around the products we just released over the last two quarters around our IP-50 family, which is winning in the markets right now. The whole chipset is targeted for the second wave of 5G when capacities really, really soar.

For the current design wins and that we're having and where we have a significant lead over the competition, the 50 family gives us the capabilities, both for 20 gigs in E-band, gives us capabilities like very wide channels in Europe for winning -- for being able to deploy macro 5G base stations with 4 and 8-gig capabilities with very, very small footprint. So, it's a whole evolution which I mentioned. And I think that's the same story we had around the 4G, it's a set of products that continuously rides the wave, starts with a certain sort of products in which we have ready at this point, and then additional products and services both in the radio domain, in the networking domain, in the management domains which help the customers really deploy the 5G. So, it's that whole sequence that we are walking -- deployed walking with customers and it's not just one point of time which is OK, yes, that's the next step, a very important step, a leading step, which I think very hard for others will be to catch up there, but that's only part of the story.

The whole story is the whole strategy we've been building on how do we very fast ride the 5G wave in different places around the world starting in Europe, U.S., Pacific Rim, and then later on a in the emerging market types of places where we have seen that. As an interesting point on this, we've been talking that we won and we moved in the last quarter from five to nine design wins, an interesting point this quarter, I think we are close to 10. I got news from one customer, a very important one, that they selected us and -- but I want to see I'll count it as 10 when I'll see the official paper on the table.

George Iwanyc -- Oppenheimer & Co. Inc. -- Analyst

OK. And then, I guess following up on the -- the 9, 10 design wins. Can you give us a sense of how rich the pipeline activity is both on the 4G side and the 5G side for the -- the next six months? And then, just maybe a bigger picture question about that which will be my last question. It's like the puts and takes on your annual guidance like what -- what would be something that accelerates it toward the higher end and what would pull it down toward the lower end of the range?

Ira Palti -- President and Chief Executive Officer

So, let's start, because I think the questions were focused on the profitability, but let's start with Q4 and the pipeline. Q4 was at the high end of our revenue run rate. '19 -- even with COVID we had higher bookings than we had in 2019. So, in 2020, higher bookings with COVID, around 4G, a little bit than in '19.

So, we are running. And I think that we're running in two areas. One, we continue to see significant 4G deployments in a lot of places where we do not see 5G yet for all sorts of reasons like handset pricing, technology readiness, and others, and people are deploying and delivering still a lot of capacity around 4G. See India, see Africa, see LatAm -- LatAm alone time slowed down because of capex from COVID in different places.

The 5G that we see right now and as the pipeline on the table, not large, and that's why we say the second half. Reason is that when we look at the 5G design wins, they are all initial deployments where we start to see the deployments. The initial deployments are mainly on fiber. I won't say even the second wave, but it's when you start going a little bit outside the center of the metropolitan and jyou start densifying metropolitan, you see a lot of wireless hauling, front-hauling, backhauling, all sorts of technologies on the table that drive that change.

And we believe this will start to being converted into -- into revenues and significant orders in the second half of the year. Giving a twist on this and the other side are things that we see is also -- and this is the longer range, and you started and then I'm going back to your question around the chipset in the beginning and the longer range. There is a significant underlying change that we see in the technology of the 5G that moves into the openRAN type of architectures, which then change again the network architecture is probably the second half or the other part of the wave of 5G, where that's what we are mainly targeting chipsets for very, very high -- high capacities, and we are almost on a daily basis seeing news around openRAN, an adoption of openRAN, and increasing -- believing people in openRAN as the technology to drive 5G, where I think will play a significant role because it plays to our sweet spot of best of breed. OpenRAN is all about best of breed.

It's our sweet spot with the customers and it plays very nicely for us as we build both the technology and ride that wave.

Ran Vered -- Chief Financial Officer

George, let -- let me just complement what Ira says on the 5G design wins. I think one important note is that few of them are with the customers that we've never done business with, including the one -- the 10th one that Ira just mentioned that we announced that you got there this morning. So, this means we are penetrating to new customers because of our capabilities in regards to 5G.

George Iwanyc -- Oppenheimer & Co. Inc. -- Analyst

So, just following up on that, and then I'll end the questions. When you penetrate a new customer is there much gross margin variability with, you know, ramping up initially versus when they're an existing mature customer?

Ira Palti -- President and Chief Executive Officer

No, not really. Usually, yes, there's a little bit upfront costs of coming in and investing upfront and it's sometimes the -- having people and things but it's not significant on the overall of the business.

George Iwanyc -- Oppenheimer & Co. Inc. -- Analyst

All right. Well, thank you very much.

Ira Palti -- President and Chief Executive Officer

Thank you, George.

Operator

We have a follow-up question from the line of Alex Henderson. Go ahead, please.

Alex Henderson -- Needham & Co. -- Analyst

Great. Thank you. So, it -- it seems pretty clear that when I look at the numbers that, you know, you're -- you're not going to be looking at meaningful amount of profitability in '21, but it also seems pretty clear that the trajectory of revenues is very heavily back-half weighted. So, is it reasonable to think that we're likely to, you know, see losses in the first half of the year and then turn to profitability in the back half of the year as you just start to see some ramp to these contracts and you get some of the taking costs behind you? Is that kind of the way we should be thinking about the, you know, the way the year is going to unfold?

Ira Palti -- President and Chief Executive Officer

I think, what you are putting on the table is reasonable, although from a manager's perspective, driving everyone crazy here to stay profitable and return to profitability. But, I think that your assumption that the first half is a little bit weaker on profitability and might be also in the loss and then in the second half is positive is a reasonable assumption.

Alex Henderson -- Needham & Co. -- Analyst

The first quarter tends to be seasonally the weakest by -- by a long shot. I assume that you're not thinking that you can get back to the March '19, you know, quarterly run rate of $69 million in the first quarter. So, my assumption is as you're so -- that -- that's the weakest quarter of the year. Is that -- is that -- is that the right [Inaudible]?

Ira Palti -- President and Chief Executive Officer

It usually is -- it usually is the weakest quarter.

Alex Henderson -- Needham & Co. -- Analyst

And, in terms of the, you know, the order book as we're looking into '21, can you talk about what regions you expect to be stronger? It seems like you should, as the year progressed the mix shift to 5G, which tend to be the richer feature set, the richer geographies, you know, the U.S., the European markets tend to combine full features as opposed to say, LatAm and Africa and India that -- that have historically tended to buy the lesser feature system. So, should we see a mix shift as the year progresses?

Ira Palti -- President and Chief Executive Officer

We will see a mix shift, as you say, more toward Europe and the U.S. toward the second half.

Alex Henderson -- Needham & Co. -- Analyst

And then, on the book-to-bill commentary, I mean, it's not surprising, the book-to-bill is, you know, under a little bit pressure here in the COVID world. But as we go through '21, I would assume that you would start to see a book-to-bill solidly above one with that book-to-bill progressing, so that as we exit the year, you're pretty strong order rates setting up much better '22. Is that -- is that kind of how you're thinking about the way things progressed through the year?

Ira Palti -- President and Chief Executive Officer

That's the way -- that's the way we believe that the year needs to look like. A lot of factors around that song timing and timing of orders and timing off -- sometimes you win the big project and -- but the timing of orders is a little bit slower because weak of count. An order is an order I can deliver in the next six months except, you know, SLAs and things like that is something which is very concrete. Sometimes I win very big projects, and then I over three or four years, we see the orders coming in over a gradual basis.

But yes, I think, you assumptions are correct.

Alex Henderson -- Needham & Co. -- Analyst

OK. One -- one more question and this one is a little bit longer trajectory around it. So, clearly, you've got a very strong new technology coming down the pipe. Assuming the tape-in is successful and that you launch these products toward the ball half of '21 that should set up a situation in '22 where you start shipping them.

Would we be expecting initial margins on the very-first iterations of that product to be low until you get to volume? And then, you know, should we then expect that the margins will be considerably higher than the current, you know, run rates because at that point, A, it's 5G; B, it's advanced technology; C it's going into the more advanced geographies first? Is it possible to get back into that 34% 35% type gross margin of vicinity as that happens?

Ira Palti -- President and Chief Executive Officer

You're asking me two different questions and two different predictions on the table. First, I'll say, yes, I think we can -- I believe we can reach back and get back to 34%, 35% range, although as Ron said, at least initially for the year, next year we don't -- we are not in that range. But I think, with the changes in technology and makeshift and a significant makeshift into Europe and the U.S., the answer is yes. But, remember that the second part of the question, I think, you do the right analysis, but you need to overlay that with quantities.

And let's remember that initially, the quantities of the new products will be small in the whole mix and then they will increase. And when they are increasing, yes, we have better margins on them, but then it's much larger volumes and much larger volumes with the customers usually also mean a little bit of reduction in prices to the customers, which means that it's balancing out. Yes. We believe we can sustain the business where the margins will go up above where we are today and can reach the 34%, 35% range.

And we have seen that when we have large volumes because larger volumes also contribute to our fixed costs are coming down around those numbers. And I believe once we start shipping large quantities of 5G products out there, will be -- we can be, and we believe we can be in those ranges. And as a reminder, I don't need to wait for the next products around the chipset. We just introduced the 50 family, which is leading the change into the 5G.

And over the next second half of this year and into 2022, we'll have a significant ramp-up in those products which are also leading in the market and enabling all sorts of very unique capabilities which are not available there are -- in there. So, I would take your analysis. Yes, it's on the next level of product on the new chipset, but it's also on the current level of product as we introduce them into the market.

Alex Henderson -- Needham & Co. -- Analyst

Perfect. Thank you very much. Great answers.

Ira Palti -- President and Chief Executive Officer

Thank you, Alex.

Operator

We will go next to the line of Gunther Karger. One moment while we open your line. Your line is open. You may go ahead.

Gunther Karger -- Palestra Capital Management -- Analyst

Yes. Thank you for taking the question. And congratulations on a good year and quarter, Ira. The question is this.

There is -- there is talk in the industry that there's a shortage of chipsets and chips, which is inhibiting some companies from delivering on orders. Do I assume correctly, since Ceragon, yourselves, make your own chipsets internally, you don't -- you do not have such an inhibitional problems, is that a correct assumption?

Ira Palti -- President and Chief Executive Officer

That's a partially correct assumption, because, yes, on our own chipsets because we make them, we have less of the shortage although we use outside factories and if TSMC which produces us as a shortage, then -- and I need to order our chipsets at TSMC, I'll get into the same level of problem, sometimes. But yes, we are in a much better control than in other environments. And that's part of the challenges that we talked about COVID on the one hand and going into an era where we are much more digital with a lot more communication, a lot more needs in doing this is is part of the challenges of the day-to-day business, the way we're running them and managing shorter digits as they progress around the table.

Gunther Karger -- Palestra Capital Management -- Analyst

Thank you. A follow up on this. So, do I also assume correctly that the major problem, if there is one, in this case, would be the materials, the raw materials that go into the manufacturer of your chipsets?

Ira Palti -- President and Chief Executive Officer

Not -- you may assume, but that's something I don't know. We order and raw materials going into them, it's there. And it's a whole discussion around the supply chain with its complexity. Gunther, thank you for asking and thank you for being with us this morning.

And I would like all of us and all of you to thank you for joining us today this morning. We believe we've made great strides toward the key enabler of the 5G evolution. But, we think the real story is how Ceragon, once more, will enable and leverage a wireless generation transition. We appreciate your time today.

And we look forward to speaking with you again next quarter or anytime during the quarter, as you know, feel free to call us up call up Maya and we'll entertain more detailed discussion with each and every one of you. Have a good day, everyone.

Operator

[Operator signoff]

Duration: 56 minutes

Call participants:

Maya Lustig -- Head of Investor Relations

Ira Palti -- President and Chief Executive Officer

Ran Vered -- Chief Financial Officer

Alex Henderson -- Needham & Co. -- Analyst

George Iwanyc -- Oppenheimer & Co. Inc. -- Analyst

Gunther Karger -- Palestra Capital Management -- Analyst

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