Global / North America

Press Release

CERAGON NETWORKS REPORTS SECOND QUARTER 2015 FINANCIAL RESULTS

August 13, 2015

Company returns to profitability and generates positive cash flow

Paramus, New Jersey, August 13, 2015 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the second quarter which ended June 30, 2015.

Second Quarter 2015 Highlights:

Revenues – $94.8 million, up 4.8% from the second quarter of 2014, and up 1.2% from the first quarter of 2015.

Gross margin – 28.2%, compared to 26.3% in the second quarter of 2014 and 25.9% in the first quarter of 2015.

Operating income – $5.9 million, compared to $11.8 million in the second quarter of 2014, which included $16.8 million of non-recurring other income, and compared to $0.6 million in the first quarter of 2015.

Net income (loss) – Net income of $1.3 million, or $0.02 per diluted share for the second quarter of 2015. Net income for the second quarter of 2014, including non-recurring other income, was $8.0 million, or $0.15 per diluted share. Net loss for the first quarter of 2015 was $(7.0) million or $(0.09) per diluted share.

Non-GAAP results– gross margin was 28.6%, operating profit was $6.7 million, and net income was $3.0 million, or $0.04 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached table.

Cash and cash equivalents– $39.5 million at June 30, 2015, compared to $37.3 million at March 31, 2015.

“We reached a very important milestone in the second quarter by clearly restoring our financial stability with solid profitability and positive cash flow,” said Ira Palti, president and CEO of Ceragon. “More important, we are much more confident that we can continue the trend of profit improvement.

“Reaching our initial financial targets more quickly than expected demonstrates the effectiveness of our strategic initiatives aimed at capitalizing on our best-of-breed technology and global reach by focusing on high-value opportunities worldwide with telecom carriers and private network operators seeking best-of-breed solutions. Now, as we continue to refine our strategy and improve our execution, we are setting new, higher profit goals for the company.”

Supplemental geographical breakdown of revenue for the second quarter of 2015:

  • Europe:                     12%
  • Africa:                        8%
  • North America:          18%
  • Latin America:           22%
  • India:                        30%
  • APAC:                       10%

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) 230-1059 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: 363874. A replay of both the call and the webcast will be available through September 13, 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 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 solution 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

June 30,

Six months ended

June 30,

2015

2014

2015

2014

Revenues

$     94,772

$     90,420

$     188,425

$     160,935

Cost of revenues

68,078

66,607

       137,491

       121,543

Gross profit

26,694

23,813

50,934

39,392

Operating expenses:
Research and development

         5,770

         8,454

12,169

18,893

Selling and marketing

9,481

14,655

       20,789

       30,075

General and administrative

Restructuring costs

5,525

5,720

10,261

1,225

11,626

936

Other income

16,800

         –

16,800

Total operating expenses

 $    20,776

 $    12,029

 $    44,444

 $    44,730

Operating income (loss)

5,918

11,784

 6,490

 (5,338)

Financial expenses, net

3,161

2,175

        9,507

        10,339

Income (loss) before taxes

2,757

9,609

(3,017)

(15,677)

Taxes on income

1,426

1,611

2,647

3,288

Net income (loss)

  $      1,331

  $      7,998

 $   (5,664)  $   (18,965)
Basic net income (loss) per share

$     0.02

$     0.15

 $      (0.07)

 $      (0.36)

Diluted net income (loss) per share

$     0.02

$     0.15

 $      (0.07)

 $      (0.36)

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

77,170,030

52,457,168

77,158,982

52,457,168

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

77,243,249

52,861,134

77,158,982

52,457,168

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

June 30,

2015

December 31, 2014

ASSETS

Unaudited

CURRENT ASSETS:
Cash and cash equivalents

$    39,535

$    41,423

Short-term bank deposits

353

      413

Marketable securities

535

Trade receivables, net

      138,110

      162,626

Deferred taxes, net

25,186

22,898

Other accounts receivable and prepaid expenses

2,085

3,522

Inventories

51,337

61,830

Total current assets

256,606

    293,247

NON-CURRENT ASSETS:
   Deferred tax assets, net

103

239

   Severance pay and pension fund

5,327

5,669

   Property and equipment, net

30,646

33,138

Intangible assets, net

4,300

5,070

   Other non-current  assets

3,681

4,510

Total non-current assets

44,057

48,626

Total assets

$      300,663

$      341,873

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

Short term loan, including current maturities of long term loan

$    50,988

$    48,832

Trade payables

81,491

    101,752

Deferred revenues

        13,239

17,667

Other accounts payable and accrued expenses

31,291

        37,248

Total current liabilities

177,009

    205,499

 

LONG-TERM LIABILITIES:

Long term loan, net of current maturities

2,072

Accrued severance pay and pension

10,589

11,452

Other long term payables

16,261

18,298

Total long-term liabilities

26,850

31,822

 

SHAREHOLDERS’ EQUITY:

Share capital:
    Ordinary shares

              212

              212

Additional paid-in capital

406,986

    406,413

Treasury shares at cost

    (20,091)

    (20,091)

Other comprehensive loss

           (6,768)

           (4,111)

Accumulated deficits

    (283,535)

    (277,871)

Total shareholders’ equity

   96,804

   104,552

Total liabilities and shareholders’ equity

$      300,663

$    341,873

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

Three months ended

June 30,

Six months ended

June 30,

2015

2014

2015

2014

Cash flow from operating activities:
Net income (loss)

$  1,331

$  7,998

$   (5,664)

$   (18,965)

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

2,719

3,530

         6,222

         6,908

Stock-based compensation expense

378

1,076

572

         2,123

Decrease (increase) in trade and other  receivables, net

4,487

(15,800)

19,356

(13,906)

Decrease in inventory, net of write off

4,539

1,420

9,648

3,029

Decrease in deferred tax asset, net

723

1,327

        1,453

        2,644

 Increase (decrease) in trade payables and accrued liabilities

(11,612)

6,139

(25,331)

(8,919)

Increase (decrease) in deferred revenues

1,049

3,946

(4,428)

1,047

Other adjustments

(83)

(570)

  (189)

   271

Net cash provided by (used in) operating activities

$ 3,531

$ 9,066

$ 1,639

$ (25,768)

Cash flow from investing activities:
 Purchase of property and equipment

(1,431)

(3,328)

    (3,473)

    (6,178)

Investment in short-term bank deposits

(4)

(4)

Proceeds from short-term bank deposits

8

64

58

 Proceeds from sale and maturities of   marketable securities, net

122

5,161

Net cash used in investing activities

$ (1,435)

$ (3,320)

$  (3,291)

$  (959)

Cash flow from financing activities:
Proceeds from bank loans

2,150

2,080

4,200

20,190

Repayment of bank loans

(2,058)

(2,058)

     (4,116)

     (4,116)

Net cash provided by financing activities

$  92

$  22

$  84

$  16,074

Translation adjustments on cash and cash equivalents

    $  77

$  52

$  (320)

$  121

Increase (decrease) in cash and cash equivalents

$  2,265

$  5,820

$  (1,888)

$  (10,532)

Cash and cash equivalents at the beginning of the period

37,270

26,055

41,423

42,407

Cash and cash equivalents at the end of the period

$  39,535

$  31,875

$  39,535

$  31,875

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

Three months ended June 30,

  2015

2014

GAAP (as reported)

Adjustments

Non-GAAP

Non-GAAP

Revenues

$  94,772

$  94,772

$  90,420

Cost of revenues

     68,078

$1(a)        403

     67,675

     66,045

Gross profit

26,694

27,097

24,375

Operating expenses:
Research and development

5,770

$1(b)        245

5,525

7,689

Selling and marketing

9,481

$1(c)         150

9,331

13,989

General and administrative

5,525

$1(d)        24

5,501

5,283

Total operating expenses

20,776

$   20,357

$   26,961

Operating income (loss)

5,918

6,740

(2,586)

Financial expenses, net

3,161

            3,161

             2,175

Income (loss) before taxes

2,757

3,579

(4,761)

Taxes on income

       1,426

$1(e)       856

570

260

Net income (loss)

$  1,331

 $   3,009

 $   (5,021)

 

Basic net earnings (loss) per share

  $    0.02

  $    0.04

  $    (0.10)

Diluted net earnings (loss) per share

  $    0.02

  $    0.04

  $    (0.10)

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

77,170,030

77,170,030

52,457,168

 

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

77,243,249

77,811,594

52,457,168

 

Total adjustments

1,678

(a)     Cost of revenues includes $0.3 million of amortization of intangible assets, $0.1 million of changes in pre-acquisition indirect tax positions and $20 thousand of stock based compensation income in the three months ended June 30, 2015.

(b)     Research and development expenses include $0.2 million of stock-based compensation expenses in the three months ended June 30, 2015.

(c)     Selling and marketing expenses include $20 thousand of amortization of intangible assets and $0.1 million of stock based compensation expenses in the three months ended June 30, 2015.

(d)     General and administrative expenses include stock based compensation expenses in the three months ended June 30, 2015.

(e)     Taxes on income include non-cash tax adjustments in the three months ended June 30, 2015.

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

Six months ended June 30,

  2015

2014

GAAP (as reported)

Adjustments

Non-GAAP

Non-GAAP

Revenues

$  188,425

$   188,425

$   160,935

Cost of revenues

137,491

136,724

120,115

Gross profit

     50,934

51,701

40,820

Operating expenses:
Research and development

12,169

  11,828

  15,542

Selling and marketing

20,789

20,367

28,394

General and administrative

10,261

10,253

10,305

Restructuring costs

1,225

    1,225

Total operating expenses

$   44,444

$  42,448

$  54,241

Operating income (loss)

6,490

9,253

(13,421)

Financial expenses, net

       9,507

 (e)   2,973

     6,534

     4,029

Income (loss) before taxes

(3,017)

2,719

(17,450)

Taxes on income

           2,647

 (f)    1,590

          1,057

          447

Net income (loss)

$  (5,664)

$   1,662

$   (17,897)

 

Basic net income (loss) per share

$     (0.07)

$     0.02

$     (0.34)

Diluted net income (loss) per share

$     (0.07)

$     0.02

$     (0.34)

 

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

77,158,982

77,158,982

52,457,168

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

77,158,982

77,796,494

52,457,168

Total adjustments

    7,326

(a)     Cost of revenues includes $0.6 million of amortization of intangible assets, $0.1 million of changes in pre-acquisition indirect tax positions and $10 thousand of stock based compensation expenses in the six months ended June 30, 2015.

(b)     Research and development expenses include $0.3 million of stock-based compensation expenses in the six months ended June 30, 2015.

(c)      Selling and marketing expenses include $0.2 million of amortization of intangible assets and $0.2 million of stock based compensation expenses in the six months ended June 30, 2015.

(d)     General and administrative expenses include stock based compensation expenses in the six months ended June 30, 2015.

(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 six months ended June 30, 2015.

(f)      Taxes on income include non-cash tax adjustments in the six months ended June 30, 2015.

RECONCILIATION BETWEEN REPORTED AND NON-GAAP

NET INCOME (LOSS)

(U.S. dollars in thousands)

(Unaudited)

Three months ended

Six months ended

June 30, 2015

Reported GAAP net income (loss)

1,331

(5,664)

Stock based compensation expenses

378

572

Amortization of intangible assets

326

818

Restructuring expenses

1,225

Changes in pre-acquisition indirect tax positions

118

148

Currency devaluation in Venezuela

2,973

Non-cash tax adjustments

856

1,590

Non-GAAP net income

3,009

1,662

###

 

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