Press Release

CERAGON NETWORKS REPORTS FOURTH QUARTER AND FULL YEAR 2015 FINANCIAL RESULTS

February 16, 2016

Returned to profitability for full year; Q4 positive cash flow used to further reduce debt

Paramus, New Jersey, February 16, 2016 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist, today reported results for the fourth quarter and full year ended December 31, 2015.

Fourth Quarter 2015 Highlights:

Revenues — $75.6 million, down 32% from the fourth quarter of 2014, and down 11% from the third quarter of 2015.

Gross margin – 32.8%, compared to 17.8% in the fourth quarter of 2014 and 31.9% in the third quarter of 2015.

Operating income – $8.9 million, compared to an operating loss of $(25.9) million in the fourth quarter of 2014 and an operating income of $6.2 million in the third quarter of 2015.

Net income $5.2 million or $0.07 per diluted share. Net loss for the fourth quarter of 2014 was $(52.0) million, or $(0.68) per diluted share. Net income for the third quarter of 2015 was $1.4 million or $0.02 per diluted share.

Non-GAAP results –gross margin was 33.2%, operating income was $5.0 million, and net income was $2.1 million, or $0.03 per diluted share. Non-GAAP results exclude adjustments of $(3.2) million. For a reconciliation of GAAP to non-GAAP results, see the attached tables.

Cash and cash equivalents – $36.3 million at December 31, 2015, compared to $39.2 million at September 30, 2015, after reducing debt by $9.0 million to $35.0 million.

Full Year 2015 Highlights:

Revenues $349.4 million, down 6% from 2014.

Gross margin – 29.5%, compared to 22.8% in 2014.

Operating income – $21.6 million, compared to an operating loss of $(32.0) million in 2014.

Net income – $1.0 million, or $0.01 per diluted share. Net loss for 2014 was $(76.5) million, or $(1.22) per diluted share.

Non-GAAP results – gross margin was 29.9%, operating income was $21.7 million, and net income was $7.4 million, or $0.10 per diluted share. Non-GAAP results exclude adjustments of $6.4 million. For a reconciliation of GAAP to non-GAAP results, see the attached tables.

“Our strategy, focused on improving profitability, resulted in further improvement in our gross margin in the fourth quarter,” said Ira Palti, president and CEO of Ceragon. “With continued stringent control of our operating expenses, we achieved another solidly profitable quarter and used the cash flow we generated to further reduce debt. We achieved our profit goal for the year, and we are targeting a further increase in 2016, as we continue to pursue the same strategy. Meanwhile, we are carefully watching developing macroeconomic headwinds and the extent to which they may affect demand and the timing of projects during 2016.”

Supplemental revenue breakouts by geography:

Fourth quarter 2015:

  • Europe:                      15%
  • Africa:                        12%
  • North America:          10%
  • Latin America:           24%
  • India:                         30%
  • APAC:                         9%

Full year 2015:

  • Europe:                      14%
  • Africa:                        10%
  • North America:          13%
  • Latin America:           24%
  • India:                         30%
  • APAC:                         9%

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) 230-1059 or International: +1 (612) 234-9959, 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://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: 382915. A replay of both the call and the webcast will be available through March 16, 2016.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We provide innovative, flexible and cost-effective wireless backhaul solutions that enable mobile operators and other service providers to deliver 4G/LTE, 3G/2G, and other wireless broadband services to their subscribers with high quality of experience. Our solutions are deployed by public utilities, government and defense organizations for delivering mission critical multimedia and other applications at high reliability and speed. Ceragon’s high-capacity solutions use microwave technology to transfer multimedia, 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 modernization to all-IP networks. As the demand for multimedia services 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

December 31,

Year ended

December 31,

2015

2014

2015

2014

(Audited)

Revenues $       75,643 $     111,164

$     349,435

$     371,112

Cost of revenues

50,840

91,432

       246,487

       286,670

Gross profit

24,803

19,732

102,948

84,442

Operating expenses:
Research and development, net

5,268

8,112

22,930

35,004

Selling and marketing

9,982

13,142

40,816

56,059

General and administrative

Restructuring costs

         5,473

         6,764

5,880

         21,235

1,225

         23,657

6,816

Other expense (income)

(4,849)

11,738

(4,849)

(5,062)

Total operating expenses  $     15,874  $     45,636

 $    81,357

 $    116,474

Operating income (loss)

8,929

(25,904)

21,591

(32,032)

Financial expenses, net

2,265

24,296

14,738

37,946

Income (loss) before taxes

6,664

(50,200)

6,853

(69,978)

Taxes on income

1,432

1,756

5,842

6,501

Net income (loss) $         5,232 $    (51,956)  $        1,011  $   (76,479)
Basic and diluted net income (loss) per share  

$         0.07

 

$        (0.68)

 

$        0.01

 

$       (1.22)

Weighted average number of shares used in computing basic net income (loss) per share

77,416,409

76,784,068

77,239,409

62,518,602

Weighted average number of shares used in computing diluted net income (loss) per share

78,432,387

76,784,068

77,296,681

62,518,602

CONDENSED CONSOLIDATED BALANCE SHEETS

 (U.S. dollars in thousands)

 (Unaudited)

December 31,

2015

December 31, 2014

ASSETS

(Audited)

CURRENT ASSETS:
Cash and cash equivalents

$    36,318

$    41,423

Short-term bank deposits

413

Marketable securities

535

Trade receivables, net

120,397

162,626

Deferred taxes, net

1,333

3,522

Other accounts receivable and prepaid expenses

21,471

22,898

Inventories

49,690

61,830

Total current assets

229,209

293,247

NON-CURRENT ASSETS:
Deferred tax assets, net

189

239

   Severance pay and pension funds

4,681

5,669

   Property and equipment, net

28,906

33,138

   Intangible assets, net

3,192

5,070

Other non-current assets

1,457

4,510

Total non-current assets

38,425

48,626

Total assets

$     267,634

$     341,873

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

CURRENT LIABILITIES:
Short term loan, including current maturities of long term bank loan       $       34,922       $      48,832
Trade payables

    71,721

    101,752

Deferred revenues

        8,901

        17,667

Other accounts payable and accrued expenses

29,654

37,248

Total current liabilities

145,198

205,499

 

LONG-TERM LIABILITIES:

Long term bank loan, net of current maturities

2,072

Accrued severance pay and pension

9,276

11,452

Other long term payables

10,339

18,298

Total long-term liabilities

19,615

31,822

 

SHAREHOLDERS’ EQUITY:

Share capital:
    Ordinary shares

              214

              212

Additional paid-in capital

    408,174

    406,413

Treasury shares at cost

    (20,091)

    (20,091)

Other comprehensive loss

           (8,616)

           (4,111)

Accumulated deficits

    (276,860)

    (277,871)

Total shareholders’ equity

   102,821

   104,552

Total liabilities and shareholders’ equity

$    267,634

$    341,873

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

Three months ended

December 31,

Year ended

December 31,

2015

2014

2015

2014

(Audited)

Cash flow from operating activities:
Net income (loss)

$   5,232

$   (51,956)

$   1,011

$   (76,479)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization

         3,138

         3,104

         12,204

         13,498

Stock-based compensation expense

         452

         654

         1,624

         3,345

Write off of property and equipment

2,367

2,367

Write off of goodwill

14,765

14,765

Decrease (increase) in trade and other receivables, net

906

6,231

         37,568

         (22,593)

Decrease (increase) in inventory, net of write off

(971)

(2,283)

10,240

1,792

Increase (decrease) in trade payables and accrued liabilities

788

10,643

(37,683)

8,855

Increase (decrease) in deferred revenues

        (1,162)

        9,107

(8,766)

        9,699
Decrease (increase) in deferred tax asset, net

(166)

5,784

2,275

9,788

Other adjustments

(74)

2,975

(858)

2,684

Net cash provided by (used in) operating activities

$  8,143

$  1,391

$  17,615

$  (32,279)

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

    (2,441)

    (4,227)

    (6,761)

    (12,691)

Investment in short and long-term bank deposit

(36)

(19)

(36)

Proceeds from maturities of short and long-term bank deposits

368

432

69

Proceeds from sales of available for sale marketable securities

   –

   –

   122

   5,161

Net cash used in investing activities

 $  (2,073)

 $  (4,263)

 $  (6,226)

 $  (7,497)

Cash flow from financing activities:
Proceeds from exercise of options

26

138

Proceeds from issuance of shares, net

45,150

Proceeds from financial institutions, net

2,500

4,200

22,690

Repayments of bank loans

(9,008)

(2,058)

(20,182)

(29,012)

Net cash provided by (used in)financing activities

$  (8,982)

$  442

$  (15,844)

$  38,828

Translation adjustments on cash and cash equivalents

$ 26

$ (91)

$  (650)

$  (36)

Decrease in cash and cash equivalents

$  (2,886)

$  (2,521)

$  (5,105)

$  (984)

Cash and cash equivalents at the beginning of the period

39,204

43,944

41,423

42,407

Cash and cash equivalents at the end of the period

$  36,318

$  41,423

$  36,318

$  41,423

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

 (Unaudited)

Three months ended December 31,

  2015

2014

GAAP (as reported)

Adjustments

Non-GAAP

Non-GAAP

Revenues

$    75,643

$    75,643

$    111,164

Cost of revenues

50,840

$1(a)       339

50,501

84,049

Gross profit

24,803

25,142

27,115

Operating expenses:
Research and development, net

5,268

$1(b)       179

5,089

7,805

Selling and marketing

9,982

$1(c)        257

9,725

12,804

General and administrative

5,473

$1(d)       135

5,338

5,626

Other income

(4,849)

$1(e)    (4,849)

Total operating expenses

$    15,874

$ 20,152

$ 26,235

Operating income

8,929

4,990

880

Financial expenses, net

2,265

2,265

3,845

Income (loss) before taxes

6,664

2,725

(2,965)

Taxes on income

1,432

$1(f)       762

670

741

Net income (loss)

$    5,232

$     2,055

$     (3,706)

Basic and diluted net income (loss) per share

$      0.07

$      0.03

$      (0.05)

 

Weighted average number of shares used in computing basic net income (loss) per share

77,416,409

77,416,409

76,784,068

 

Weighted average number of shares used in computing diluted net income (loss) per share

77,432,387

78,264,309

76,784,068

Total adjustments

(3,177)

(a)  Cost of revenues includes $0.3 million of amortization of intangible assets and $30 thousand of stock based compensation expenses in the three months ended December 31, 2015.
(b)   Research and development expenses include $0.2 million of stock based compensation expenses in the three months ended December 31, 2015.

(c)  Selling and marketing expenses includes $0.1 million of amortization of intangible assetsand $0.1 million of stock based compensation expenses in the three months endedDecember 31, 2015.

(d)  General and administrative expenses include $0.1 million of stock based compensation expenses in the three months ended December 31, 2015.

(e)   Other income includes statute of limitation on certain pre-acquisition indirect tax liabilities.

(f)   Taxes on income include $0.8 million non-cash tax adjustments in the three months ended December 31, 2015.

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

 (Unaudited)

Year ended December 31,

  2015

2014

GAAP (as reported)

Adjustments

Non-GAAP

Non-GAAP

Revenues

$   349,435

$   349,435

$   371,112

Cost of revenues

246,487

$1(a)     1,579

244,908

277,743

Gross profit

102,948

104,527

93,369

Operating expenses:
Research and development, net

22,930

$1(b)        735

  22,195

  30,970

Selling and marketing

  40,816

$1(c)      1,132

39,684

  53,821

General and administrative

21,235

$1(d)        321

20,914

21,055

Restructuring costs

1,225

           1,225

Other income

(4,849)

$1(e)    (4,849)

Total operating expenses

$   81,357

$   82,793

$   105,846

Operating income (loss)

     21,591

21,734

(12,477)

Financial expenses, net

14,738

$1(f)     2,973

       11,765

       11,185

Income (loss) before taxes

6,853

9,969

(23,662)

Taxes on income

5,842

$1(g)     3,297

2,545

1,495

Net income (loss)

$   1,011

$   7,424

$   (25,157)

Basic and diluted net income (loss) per share

$     0.01

$     0.10

$     (0.40)

Weighted average number of shares used in computing basic net income (loss)  per share

 

77,239,409

77,239,409

62,518,602

Weighted average number of shares used in computing diluted net income (loss)  per share

77,296,681

77,967,811

62,518,602

Total adjustments

6,413

(a) Cost of revenues includes $1.2 million of amortization of intangible assets, $0.3 million of changes in pre-acquisition indirect tax positions and $0.1 million of stock based compensation expenses in the year ended December 31, 2015.
(b) Research and development expenses include $0.7 million of stock based compensation expenses in the year ended December 31, 2015.

(c) Selling and marketing expenses includes $0.6 million of amortization of intangible assets and $0.5 million of stock based compensation expenses in the year ended December 31, 2015.

(d) General and administrative expenses include $0.3 million of stock based compensation expenses in the year ended December 31, 2015.

(e) Other income includes statute of limitation on certain pre-acquisition indirect tax liabilities.

(f) Financial expenses included 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 year ended December 31, 2015.

(g) Taxes on income include $3.3 million non-cash tax adjustments in the year ended December 31, 2015.

 RECONCILIATION BETWEEN REPORTED AND NON-GAAP

NET INCOME

(U.S. dollars in thousands)

(Unaudited)

Three months ended

Year ended

December 31, 2015

Reported GAAP net income

5,232

1,011

Stock based compensation expenses

452

1,624

Amortization of intangible assets

457

1,865

Changes in pre-acquisition indirect tax positions

(4,848)

(4,571)

Restructuring plan related costs

1,225

Currency devaluation in Venezuela

2,973

Non-cash tax adjustments

762

3,297

Non-GAAP net income

2,055

7,424

# # #

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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