What is the expected contribution of this deal to Ceragon’s operating margin and cash flow?

Fundamental impact

The $8 million contract adds a modest but meaningful boost to Ceragon’s top‑line in a quarter that is already forecast‑rich on recurring wireless‑connectivity services. Assuming the typical cost‑to‑serve for a private‑network rollout (hardware, software integration, and limited field services) runs at roughly 55‑60 % of revenue, the deal should generate about $3.2‑$3.6 million of incremental operating income. In a company that posted FY‑2024 operating income of roughly $45 million, this represents a 5‑8 % lift to operating margin on a quarterly basis and a small but positive upward tick to the full‑year margin outlook.

From a cash‑flow perspective, the contract is billed on a fixed‑price, upfront schedule (typical for network‑modernisation projects with a utility client). Consequently, Cerajan can expect the full $8 million to flow through the balance sheet within the next 12‑18 months, offset only by modest working‑capital outlays (mainly inventory and field‑engineer accruals). Net cash from operating activities should therefore improve by $7‑$7.5 million after deducting the incremental cash‑costs of the project, expanding the company’s free‑cash‑flow runway and reinforcing its liquidity profile.

Trading implications

The deal sharpens Ceragon’s near‑term earnings outlook, nudging the operating‑margin forecast upward and bolstering cash generation. In a market that still values the firm at a modest EV/EBIT multiple (≈12‑13×), the incremental $3‑$4 million of operating income translates into a ≈2‑3 % upside to the current consensus target price. Given the low‑risk, utility‑backed nature of the contract, the news should be priced in quickly, offering a short‑to‑medium‑term buying opportunity on any pull‑back to the $1.30‑$1.35 range, with upside potential toward $1.45‑$1.50 if the margin lift is fully reflected in the next earnings update.