Paramus, New Jersey, February 24, 2015 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the fourth quarter and full year ended December 31, 2014.
Fourth Quarter 2014 Highlights:
Revenues — $111.2 million, up 24% from the fourth quarter of 2013, and up 12% from the third quarter of 2014.
Gross margin – 20.5%, which includes the impact of $4.4 million of one-time items, compared to 31.0% in the fourth quarter of 2013 and 25.6% in the third quarter of 2014.
Operating loss – $(25.9) million, which includes the impact of $26.0 million of one-time items, compared to an operating loss of $(9.6) million in the fourth quarter of 2013 and an operating loss of $(0.8) million in the third quarter of 2014.
Net loss – $(52.0) million or $(0.68) per diluted share, which includes $46.4 million of one-time items. Net loss for the fourth quarter of 2013 was $(15.4) million, or $(0.35) per diluted share. Net loss for the third quarter of 2014 was $(5.6) million or $(0.08) per diluted share.
One-time items – Fourth quarter 2014 net loss includes a total of $46.4 million of one-time charges. This amount consists of $11.2 million in restructuring costs, including a $4.4 million write-off of discontinued product inventory and other one-time charges, a charge of $14.8 million for impairment of goodwill from the Nera acquisition, and additional financial expenses of $20.5 million resulting from re-measurement of certain assets in Venezuela denominated in or linked to the U.S. dollar.
Non-GAAP results –gross margin was 24.4%, operating profit was $0.9 million, and net loss was $(3.7) million, or $(0.05) per diluted share. Non-GAAP results exclude one-time items as well as recurring adjustments of $1.8 million. For a reconciliation of GAAP to non-GAAP results, see the attached tables.
Cash and cash equivalents – $41.4 million at December 31, 2014, compared to $43.9 million at September 30, 2014.
Full Year 2014 Highlights:
Revenues – $371.1 million, up 3% from 2013.
Gross margin – 23.6%, which includes the impact of $4.7 million of one-time items, compared to 31.0% in 2013.
Operating loss – $(32.0) million, which includes $14.3 million of one-time items, compared to $(23.6) million in 2013.
Net loss – $(76.5) million, or $(1.22) per diluted share, which includes $41.1 million of one-time items. Net loss for 2013 was $(47.5) million, or $(1.23) per diluted share in 2013.
One-time items – Full year 2014 net loss includes a total of $41.1 million one-time charges. This amount consists of $20.3 million of restructuring costs, including a $4.4 million write-off of discontinued product inventory and other onetime charges, a charge of $14.8 million for impairment of goodwill, primarily from the Nera acquisition, which was more than offset by $16.8 million received as the result of a settlement agreement with Eltek ASA, and additional financial expenses of $24.6 million resulting from a devaluation of the local currency in Venezuela and re-measurement of certain assets denominated in or linked to the U.S. dollar, as well as $2.2 million related to transactions to expatriate cash from Venezuela and Argentina.
Non-GAAP results – gross margin was 25.2%, operating loss was $(12.5) million, and net loss was $(25.2) million, or $(0.40) per diluted share. Non-GAAP results exclude one-time items and recurring adjustments of $10.3 million. For a reconciliation of GAAP to non-GAAP results, see the attached tables.
“The significant sequential increase in our Q4 revenue was the result of the strong order pattern from India, mainly from one large customer, which also impacted our gross margin,” said Ira Palti, president and CEO of Ceragon. “Primarily due to the completion of the major portion of the large orders from India in 2014, we expect Q1 revenues to be in the range of $90 to $100 million. We expect to begin a gradual improvement in non-GAAP gross margin during the first quarter and, as our expense reduction measures begin to take effect, we also target an improvement in operating profit in the first quarter.
“As previously discussed, we are primarily focused on improving profitability and generating positive cash flow,” Palti added. “Our goal is to achieve a non-GAAP net profit in Q2 when our results reflect the full effect of our expense reduction measures, and as we continue to pursue other profit improvement initiatives.”
Commenting on the company’s financial position, Doron Arazi, chief financial officer, said, “Conducting our asset impairment test, as required by GAAP, resulted in an impairment charge of $14.8 million of goodwill, which caused us to be in breach of one of our equity-related loan covenants. We are engaged in constructive discussions with our lenders to address this issue while redefining our credit facility terms in a manner that will enable the Company to address its expected cash needs, including certain relaxation of covenants, extension of term and certain gradual decrease of credit amount. We expect to finalize this agreement soon.”
Doron Arazi also added, “We are pleased with the progress we have made toward improving our working capital management. We continue to pursue our ongoing initiatives to control our working capital requirements and generate positive cash flow.”
Supplemental revenue breakouts by geography:
Fourth quarter 2014:
- Europe: 14%
- Africa: 11%
- North America: 12%
- Latin America: 15%
- India: 37%
- APAC: 11%
Full year 2014:
- Europe: 16%
- Africa: 15%
- North America: 11%
- Latin America: 22%
- India: 25%
- APAC: 11%
A conference call to discuss the results will begin at 9:00 a.m. EST. Investors are invited to join the Company’s teleconference by calling USA: (800) 230-1085 or International: +1 (612) 234-9960, from 8:50 a.m. EST. 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://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: 349833. A replay of both the call and the webcast will be available through March 24, 2015.