Press Release

CERAGON NETWORKS REPORTS THIRD QUARTER 2016 FINANCIAL RESULTS

November 14, 2016

Strategic focus continues to deliver improving net income

Little Falls, New Jersey, November 14, 2016 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist, today reported results for the third quarter which ended September 30, 2016.

Third Quarter 2016 Highlights:

Revenues – $79.1 million, down 7% from the third quarter of 2015, and up 13% from the second quarter of 2016.

Gross margin – 32.9%, compared to 31.9% in the third quarter of 2015, and compared to 34.7% in the second quarter of 2016.

Operating income – $5.8 million, compared to $6.2 million in the third quarter of 2015, and $4.0 million in the second quarter of 2016.

Net income – Net income of $3.5 million or $0.04 per diluted share for the third quarter of 2016. Net income for the third quarter of 2015 was $1.4 million or $0.02 per diluted share. Net income for the second quarter of 2016 was $0.1 million or $0.00 per diluted share.

Non-GAAP results – Gross margin was 33.8%, operating income was $6.9 million, and net income was $4.8 million, or $0.06 per diluted share. For reconciliation of GAAP to non-GAAP results, see attached tables.

Cash and cash equivalents– $32.4 million at September 30, 2016 compared to $34.4 million at June 30, 2016.

“We continue to reap the benefits of our strategic focus on delivering the most value to best-of-breed oriented customers,” said Ira Palti, president and CEO of Ceragon. “In Q3, we reported the highest net income in many quarters. We are targeting significant improvement in our net income in 2016, and further improvement in 2017 as well.”

Supplemental geographical breakdown of revenue for the third quarter of 2016:

  • Europe:13%
  • Africa:8%
  • North America:10%
  • Latin America:30%
  • India:31%
  • APAC:8%

A conference call to discuss the results will begin at 9:00 a.m. EDT on November 14, 2016. 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: 403910. A replay of both the call and the webcast will be available through December 15, 2016.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We help operators and other service providers worldwide increase operational efficiency and enhance end customers’ quality of experience with innovative wireless backhaul solutions. Our customers include wireless service providers, public safety organizations, government agencies and utility companies, which use our solutions to deliver 4G, mission-critical multimedia services and other applications at high reliability and speed. Ceragon’s unique multicore technology provides highly reliable, high-capacity 4G wireless backhaul with minimal use of spectrum, power and other resources. This technology enables increased productivity, as well as simple and quick network modernization. We deliver a range of professional services that ensure efficient network rollout and optimization to achieve the highest value for our customers. Our solutions are deployed by more than 460 service providers, as well as hundreds of private network owners, in more than 130 countries.

Ceragon Networks® and FibeAir® are registered trademarks of Ceragon Networks Ltd. in the United States and other countries. CERAGON ® is a trademark of Ceragon Networks Ltd., registered in various countries. Other names mentioned are owned by their respective holders.

This press release contains statements concerning Ceragon’s future prospects that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon’s management. Examples of forward-looking statements include: revenues, growth prospects, projections of gross margins, operating and other expenses, capital expenditures, profitability and liquidity, competitive pressures, product development, financial resources, cost savings and other financial matters. You may identify these and other forward-looking statements by the use of words such as “may” “plans” “anticipates” “believes” “estimates” “targets” “expects” “intends” “potential” or the negative of such terms, or other comparable terminology. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the risk that Ceragon’s expectations regarding future revenues and profitability will not materialize; risks relating to the concentration of our business in India, Latin America, Africa and in developing nations in other regions, including political, economic and regulatory risks from doing business in those regions and nations, including in relation to local business practices that may be inconsistent with international regulatory requirements, such as anti-corruption and anti-bribery regulations, currency export control issues and recent economic concerns; the risk that the business coming from our bigger customers will go down significantly or cease, the risk that Ceragon will not achieve the benefits it expects from its expense reduction plans and profit enhancement programs, as may be implemented from time to time; the risk of significant expenses in connection with potential contingent tax liability; and other risks and uncertainties detailed from time to time in Ceragon’s Annual Report on Form 20-F and Ceragon’s other filings with the Securities and Exchange Commission, and represent our views only as of the date they are made and should not be relied upon as representing our views as of any subsequent date. We do not assume any obligation to update any forward-looking statements.

-tables follow-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)

Three months ended
September 30,
Nine months ended
September 30,
2016 2015 2016 2015
Revenues $79,132 $85,367 $208,976 $273,792
Cost of revenues 53,094 58,156 137,357 195,647
Gross profit 26,038 27,211 71,619 78,145
Operating expenses
Research and development 5,339 5,493 15,977 17,662
Selling and marketing 9,608 10,045 29,181 30,834
General and administrative 5,328 5,501 15,438 15,762
Restructuring costs 1,225
Total operating expenses 20,275 21,039 60,596 65,483
Operating income 5,763 6,172 11,023 12,662
Financial expenses, net 1,519 2,966 4,809 12,473
Income before taxes 4,244 3,206 6,214 189
Taxes on income 761 1,763 3,118 4,410
Net income (loss) $3,483 $1,443 $3,096 $(4,221)
Basic net income (loss) per share $0.04 $0.02 $0.04 $(0.05)
Diluted net income (loss) per share $0.04 $0.02 $0.04 $(0.05)
Weighted average number of shares used in computing basic net income (loss) per share 77,711,946 77,221,170 77,680,541 77,179,760
Weighted average number of shares used in computing diluted net income (loss) per share 79,284,558 77,355,761 78,286,712 77,179,760

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

 

September 30,

2016

 

December 31, 2015

 

 

Unaudited

 

Audited

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$32,374

 

$36,318

Trade receivables, net

 

109,615

 

116,683

Deferred taxes

 

534

 

1,633

Other accounts receivable and prepaid expenses

 

20,868

 

22,583

Inventories

 

44,182

 

49,690

Total current assets

 

207,573

 

226,907

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

  Deferred tax assets, net

 

 

189

  Severance pay and pension fund

 

4,546

 

4,681

  Property and equipment, net

 

26,748

 

28,906

Intangible assets, net

 

1,958

 

3,192

  Other non-current  assets

 

1,738

 

1,457

Total long-term assets

 

34,990

 

38,425

Total assets

 

$242,563

 

$       265,332

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Short term loan, including current maturities of long term bank loan

 

$     20,300

 

$        34,922    

Trade payables

 

64,212

 

71,721

Deferred revenues

 

4,426

 

8,901

Other accounts payable and accrued expenses

 

23,383

 

27,052

Total current liabilities

 

112,321

 

142,596

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

Accrued severance pay and pension

 

9,310

 

9,276

Other long term payables

 

12,569

 

10,639

Total long-term liabilities

 

21,879

 

19,915

SHAREHOLDERS’ EQUITY:

 

 

 

 

Share capital:

 

 

 

 

   Ordinary shares

 

214

 

214

Additional paid-in capital

 

409,114

 

408,174

Treasury shares at cost

 

(20,091)

 

(20,091)

Other comprehensive loss

 

(7,110)

 

(8,616)

Accumulated deficits

 

(273,764)

 

(276,860)

 

 

 

 

 

Total shareholders’ equity

 

108,363

 

102,821

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$242,563

 

$   265,332


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

2016

 

2015

 

2016

 

2015

Cash flow from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$   3,483

 

$1,443

 

$  3,096

 

$(4,221)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

2,527

 

2,844

 

7,503

 

9,066

Stock-based compensation expense

281

 

600

 

873

 

1,172

Decrease (increase) in trade and other  receivables, net

(19,180)

 

17,306

 

11,323

 

36,662

Decrease in inventory, net of write off

4,565

 

1,563

 

6,168

 

11,211

Increase (decrease) in trade payables and ccrued liabilities

8,269

 

(13,140)

 

(10,176)

 

(38,471)

Increase (decrease) in deferred revenues

459

 

(3,176)

 

(4,475)

 

(7,604)

Decrease in deferred tax asset, net

84

 

988

 

1,289

 

2,441

Other adjustments

276

 

(595)

 

168

 

(784)

Net cash provided by operating activities

$   764

 

$7,833

 

$   15,769

 

$9,472

Cash flow from investing activities:

 

 

 

 

 

 

 

 Purchase of property and equipment

(1,825)

 

(847)

 

(5,433)

 

(4,320)

Investment in short-term bank deposits

 

(15)

 

(153)

 

(19)

Proceeds from short-term bank deposits

153

 

 

153

 

64

Proceeds from sale of available for sale marketable securities, net

 

 

 

122

 

 

 

 

 

 

 

 

Net cash used in investing activities

$ (1,672)

 

$(862)

 

$ (5,433)

 

$(4,153)

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of options

60

 

112

 

67

 

112

Proceeds from issuance of shares, net

 

 

 

Proceeds from bank loans

 

 

 

4,200

Repayment of bank loans

(1,150)

 

(7,058)

 

(14,622)

 

(11,174)

Net cash used in financing activities

$ (1,090)

 

$(6,946)

 

$ (14,555)

 

$(6,862)

 

 

 

 

 

 

 

 

Translation adjustments on cash and cash equivalents

$        (5)

 

$(356)

 

$       275

 

$(676)

Decrease in cash and cash equivalents

$ (2,003)

 

$(331)

 

$ (3,944)

 

$(2,219)

Cash and cash equivalents at the beginning of the period

34,377

 

39,535

 

36,318

 

41,423

Cash and cash equivalents at the end of the period

$ 32,374

 

$39,204

 

$ 32,374

 

$39,204

 

 

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS

 

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

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP cost of revenues

 

$

53,094

 

$

58,156

 

$

137,357

 

$

195,647

 

Amortization of intangible assets

 

 

(309)

 

 

(310)

 

 

(922)

 

 

(919)

 

Stock based compensation expenses

 

 

(5)

 

 

(34)

 

 

(26)

 

 

(44)

 

Changes in pre-acquisition indirect tax positions

 

 

(403)

 

 

(129)

 

 

(806)

 

 

(277)

 

Non-GAAP cost of revenues

 

$

52,377

 

$

57,683

 

$

135,603

 

$

194,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

26,038

 

$

27,211

 

$

71,619

 

$

78,145

 

Gross profit adjustments

 

 

717

 

 

473

 

 

1,754

 

 

1,240

 

Non-GAAP gross profit

 

$

26,755

 

$

27,684

 

$

73,373

 

$

79,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Research and development expenses

 

$

5,339

 

$

5,493

 

$

15,977

 

$

17,662

 

Stock based compensation expenses

 

 

(8)

 

 

(215)

 

 

(134)

 

 

(556)

 

Non-GAAP Research and development expenses

 

$

5,331

 

$

5,278

 

$

15,843

 

$

17,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Sales and Marketing expenses

 

$

9,608

 

$

10,045

 

$

29,181

 

$

30,834

 

Amortization of intangible assets

 

 

(105)

 

 

(280)

 

 

(311)

 

 

(489)

 

Stock based compensation expenses

 

 

(96)

 

 

(173)

 

 

(315)

 

 

(386)

 

Non-GAAP Sales and Marketing expenses

 

$

9,407

 

$

9,592

 

$

28,555

 

$

29,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP General and Administrative expenses

 

$

5,328

 

$

5,501

 

$

15,438

 

$

15,762

 

Stock based compensation expenses

 

 

(174)

 

 

(178)

 

 

(399)

 

 

(186)

 

Non-GAAP General and Administrative expenses

 

$

5,154

 

$

5,323

 

$

15,039

 

$

15,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP financial expenses

 

$

1,519

 

$

2,966

 

$

4,809

 

$

12,473

 

Currency devaluation in Venezuela related expenses

 

 

 

 

 

 

907

 

 

(2,973)

 

Non-GAAP financial expenses

 

$

1,519

 

$

2,966

 

$

5,716

 

$

9,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP taxes on income

 

$

761

 

$

1,763

 

$

3,118

 

$

4,410

 

Changes in pre-acquisition tax liability

 

 

 

 

 

 

(453)

 

 

 

Other non-cash tax adjustments

 

 

(189)

 

 

(945)

 

 

(677)

 

 

(2,535)

 

Non-GAAP taxes on income

 

$

572

 

$

818

 

$

1,988

 

$

1,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS

 

 

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

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Three months ended

 

Nine months ended

September 30,

 

 

       

September 30,

 

 

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) 

 

$

3,483

 

$

1,443

 

$

3,096

 

$

(4,221)

 

Amortization of intangible assets

 

 

414

 

 

590

 

 

1,223

 

 

1,408

 

Stock based compensation expenses

 

 

283

 

 

600

 

 

874

 

 

1,172

 

Restructuring expenses

 

 

 

 

 

 

 

 

1,225

 

Changes in pre-acquisition tax exposures

 

 

403

 

 

129

 

 

1,259

 

 

277

 

Currency devaluation in Venezuela related expenses

 

 

 

 

 

 

(907)

 

 

2,973

 

Non-cash tax adjustments

 

 

189

 

 

945

 

 

677

 

 

2,535

 

Non-GAAP net income 

 

$

4,772

 

$

3,707

 

$

6,232

 

$

5,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP basic and diluted net income (loss) per share

 

$

0.04

 

$

0.02

 

$

0.04

 

$

(0.05)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP basic and diluted net income (loss) per share

 

$

0.06

 

$

0.05

 

$

0.08

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

77,711,946

 

 

77,221,170

 

 

77,680,541

 

 

77,179,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

79,284,558

 

 

77,355,761

 

 

78,286,712

 

 

77,179,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing
Non-GAAP diluted net income per share

 

 

79,780,138

 

 

78,011,917

 

 

78,682,661

 

 

77,868,331

 


###

 

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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