Press Release

CERAGON NETWORKS REPORTS FIRST QUARTER 2015 FINANCIAL RESULTS

May 06, 2015

Company increases non-GAAP operating profit and further reduces cash consumption

Paramus, New Jersey, May 6, 2015 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the first quarter ended March 31, 2015.

First Quarter 2015 Highlights:

Revenues — $93.7 million, up 33% from the first quarter of 2014, and down 16% from the fourth quarter of 2014.

Gross margin – 25.9%, compared to 22.1% in the first quarter of 2014 and 20.5% in the fourth quarter of 2014.

Operating income – $0.6 million, compared to an operating loss of $(17.1) million in the first quarter of 2014 and an operating loss of $(25.9) million in the fourth quarter of 2014.

Net loss $(7.0) million or $(0.09) per diluted share. Net loss for the first quarter of 2014 was $(27.0) million, or $(0.51) per diluted share. Net loss for the fourth quarter of 2014 was $(52.0) million or $(0.68) per diluted share.

One-time items – First quarter 2015 net loss includes a total of $4.2 million of one-time charges. This amount consists of $1.2 million in restructuring costs and additional financial expense of $3.0 million resulting from re-measurement of certain assets related to Venezuela.

Non-GAAP results – gross margin was 26.3%, operating profit was $2.5 million, and net loss was $(1.3) million, or $(0.02) per diluted share. Non-GAAP results exclude one-time items as well as recurring adjustments of $1.5 million.  For a reconciliation of GAAP to non-GAAP results, see the attached tables.

Cash and cash equivalents – $37.3 million at March 31, 2015, compared to $41.4 million at December 31, 2014. The decrease represents a combination of $1.2 million of cash consumption and a currency devaluation, primarily in Venezuela, of approximately $3 million.

“Our first quarter performance clearly reflects the initiatives we have been pursuing to improve profitability,” said Ira Palti, president and CEO of Ceragon. “Gross margin improved and operating expenses declined significantly, resulting in further improvement in our operating result, and we managed to lower our cash consumption to $1.2 million in Q1. We continue to expect to generate positive cash flow in Q2 and will continue to focus on improving profitability with a target of reaching a mid-single-digit non-GAAP operating margin by the end of this year.”

Supplemental revenue breakouts:

Geographical breakdown, first quarter of 2015:

·         Europe:                        16%

·         Africa:                          8%

·         North America:             10%

·         Latin America:             28%

·         India:                           31%

·         APAC:                           7%

A conference call to discuss the results will begin at 9:00 a.m. EDT. Investors are invited to join the Company’s teleconference by calling USA: (800) 230-1074 or International: +1 (612) 234-9959, from 8:50 a.m. EDT.

The call-in lines will be available on a first-come, first-serve basis.

Investors can also listen to the call live via the Internet by accessing Ceragon Networks’ website at the investors’ page: http://www.ceragon.com/about-us/ceragon/investor-relations, selecting the webcast link, and

following the registration instructions.

If you are unable to join us live, the replay numbers are: USA: (800) 475-6701 or International +1 (320) 365-3844 Access Code: 357142. A replay of both the call and the webcast will be available through June 6, 2015.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We provide innovative, flexible and cost-effective wireless backhaul and fronthaul solutions that enable mobile operators and other wired/wireless service providers to deliver 2G/3G, 4G/LTE and other broadband services to their subscribers. Ceragon’s high-capacity, solutions use microwave technology to transfer voice and data traffic while maximizing bandwidth efficiency, to deliver more capacity over longer distances under any deployment scenario. Based on our extensive global experience, Ceragon delivers turnkey solutions that support service provider profitability at every stage of the network lifecycle enabling faster time to revenue, cost-effective operation and simple migration to all-IP networks. As the demand for data pushes the need for ever-increasing capacity, Ceragon is committed to serve the market with unmatched technology and innovation, ensuring effective solutions for the evolving needs of the marketplace. Our solutions are deployed by more than 430 service providers in over 130 countries.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

Three months ended

March 31,

2015

2014

Revenues

$     93,653

$     70,515

Cost of revenues

69,413

54,936

Gross profit

24,240

15,579

Operating expenses:
Research and development, net

6,399

10,439

Selling and marketing

11,308

15,420

General and administrative

4,736

5,906

Restructuring costs

1,225

936

Total operating expenses

$      23,668

$      32,701

Operating income (loss)

572

(17,122)

Financial expenses, net

6,346

8,164

Loss before taxes

5,774

25,286

Taxes on income

1,221

1,677

Net loss

$    6,995

$    26,963

Basic and diluted net loss per share

$    0.09

$    0.51

Weighted average number of shares used in computing basic and diluted net loss per share

77,145,265

52,457,168

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

March 31,

2015

December 31, 2014

ASSETS

Unaudited

Audited

CURRENT ASSETS:
Cash and cash equivalents

$     37,270

$     41,423

Short-term bank deposits

349

413

Marketable securities

535

Trade receivables, net

141,961

162,626

Other accounts receivable and prepaid expenses

23,270

22,898

Deferred taxes, net

2,993

3,522

Inventories

55,700

61,830

Total current assets

261,543

293,247

NON-CURRENT ASSETS:
   Deferred taxes, net

167

239

   Severance pay funds and pension

5,313

5,669

   Property and equipment, net

31,731

33,138

   Intangible assets, net

4,586

5,070

   Other non-current assets

4,460

4,510

Total non-current assets

46,257

48,626

Total assets

$  307,800

$  341,873

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

CURRENT LIABILITIES:
Short term loans, including current maturities of long term loan

$       50,896

$       48,832

Trade payables

89,916

101,752

Deferred revenues

12,190

17,667

Other accounts payable and accrued expenses

33,816

37,248

Total current liabilities

186,818

205,499

 

LONG-TERM LIABILITIES

Long term bank loan, net of current maturities

2,072

Accrued severance pay and pension

10,660

11,452

Other long term liabilities

16,878

18,298

Total long-term liabilities

27,538

31,822

 

SHAREHOLDERS’ EQUITY:

Share capital:
    Ordinary shares

212

212

Additional paid-in capital

406,607

406,413

Treasury shares at cost

(20,091)

(20,091)

Accumulated other comprehensive loss, net of taxes

(8,418)

(4,111)

Accumulated deficit

(284,866)

(277,871)

Total shareholders’ equity

93,444

104,552

Total liabilities and shareholders’ equity

$   307,800

$   341,873

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

Three months ended

March 31,

2015

2014

Cash flow from operating activities:
Net loss

$    (6,995)

$    (26,963)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization

3,503

3,378

Stock-based compensation expense

194

1,047

Decrease in trade and other receivables, net

14,869

1,894

Decrease in inventory, net of write-off

5,109

1,609

Decrease in deferred tax asset, net

730

1,317

Decrease in trade payables and accrued liabilities

(13,719)

(15,058)

Decrease in deferred revenues

(5,477)

(2,899)

Other adjustments

(106)

841

Net cash used in operating activities

$    (1,892)

$    (34,834)

Cash flow from investing activities:
Purchase of property and equipment ,net

(2,042)

(2,850)

Proceeds from short and long-term bank deposits

64

50

Proceeds from sale and maturities of marketable securities

122

5,161

Net cash provided by (used in) investing activities

$    (1,856)

$    2,361

Cash flow from financing activities:
Proceeds from short-term bank loans

2,050

18,110

Repayment of loans from financial institutions

(2,058)

(2,058)

Net cash provided by (used in) financing activities

$    (8)

$    16,052

Translation adjustments on cash and cash equivalents

$    (397)

$    69

Decrease in cash and cash equivalents

    $  (4,153)

    $    (16,352)

Cash and cash equivalents at the beginning of the period

41,423

42,407

Cash and cash equivalents at the end of the period

$    37,270

$    26,055

 

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

Three months ended March 31,

  2015

2014

GAAP (as reported)

Adjustments

Non-GAAP

Non-GAAP

Revenues

$   93,653

$   93,653

$   70,515

Cost of revenues

69,413

$1(a)   364

69,049

54,070

Gross profit

24,240

24,604

16,445

Operating expenses:
Research and development, net

  6,399

$1(b)   96

6,303

7,853

Selling and marketing

  11,308

$1(c)    271

  11,037

  14,405

General and administrative

4,736

$1(d)   (16)

4,752

5,022

Restructuring costs

1,225

1,225

Total operating expenses

$  23,668

$  22,092

$  27,280

Operating income (loss)

572

     2,512

     (10,835)

Financial expenses, net

6,346

$1(e)    2,974

       3,372

       1,854

Loss before taxes

5,774

860

12,689

Taxes on income

1,221

$1(f)    734

          487

          187

Net loss

$   6,995

$   1,347

$   12,876

Basic and diluted net loss per share

$     0.09

$     0.02

$     0.25

Weighted average number of shares used in computing basic and diluted net loss  per share

77,145,265

77,145,265

52,457,168

Total adjustments

5,648

  1. (a) Cost of revenues includes $0.3 million of amortization of intangible assets, $30 thousand of changes in pre-acquisition indirect tax positions and $30 thousand of stock based compensation expenses in the three months ended March 31, 2015.
  2. (b) Research and development expenses include stock-based compensation expenses in the three months ended March 31, 2015.
  3. (c) Selling and marketing expenses include $0.2 million of amortization of intangible assets and $0.1 million of stock based compensation expenses in the three months ended March 31, 2015.
  4. (d) General and administrative expenses include net stock based compensation expenses in the three months ended March 31, 2015.
  5. (e) Financial expenses include the effect of re-measurement of certain assets denominated in or linked to the U.S. dollar in Venezuela, due to restrictive government policies on payments in foreign currency in the three months ended March 31, 2015.
  6. (f) Taxes on income include non-cash tax adjustments in the three months ended March 31, 2015.

RECONCILIATION BETWEEN REPORTED AND NON-GAAP

NET LOSS

(U.S. dollars in thousands)

(Unaudited)

Three months ended

March 31,

2015

2014

Reported GAAP net loss

6,995

26,963

Stock based compensation expenses

194

1,047

Amortization of intangible assets

492

523

Restructuring expenses

1,225

4,440

Changes in pre-acquisition indirect tax positions

30

277

Currency devaluation in Venezuela

2,973

4,140

Expenses related to certain transactions to expatriate cash from Venezuela and Argentina

2,170

Non-cash tax adjustments

734

1,490

Non-GAAP net loss

1,347

12,876

$1(a

Media Contact

Matthew Krieger

GK Public Relations

Phone: (914) 768-4219

Email: matthew@gkpr.com

Tanya Solomon

Ceragon Networks Ltd.

Phone: (201) 853-0271

Email: tanyas@ceragon.com

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