Paramus, New Jersey, December 15, 2014 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless hauling specialist, today announced further progress on several initiatives aimed at returning to profitability and increasing shareholder value. Ceragon is taking immediate action which is expected to reduce operating expenses by approximately 17% in 2015 compared to 2014. In addition, the company has begun implementing initiatives aimed at gradually improving gross margin, cash flow and working capital during 2015. Through the combination of these efforts, Ceragon intends to reach profitability in the second quarter of 2015.
“We are determined to return Ceragon to profitability as quickly as possible and to preserve our financial flexibility,” said Ira Palti, CEO of Ceragon. “The positive worldwide reception of our IP-20platform gives us confidence that our geographic revenue mix will improve. Meanwhile, steps are being taken to manage the revenue mix more carefully, and to seek revised pricing, payment and other terms on new orders in certain situations. We are encouraged by initial discussions with our customers in this regard. “In addition, we are making difficult but necessary changes at the operational level to further streamline the management organization, prioritize R&D projects, and improve product cost in order to further improve our competitive position. When fully reflected in our financial results in the second quarter of 2015, we expect to reduce quarterly operating expenses to approximately $21-$22 million from the current level of $26 to $27 million. This expense level will be achieved primarily through an immediate headcount reduction of approximately 14%. The reason it is even possible for us to achieve a reduction of this magnitude is the significant time-to-market and technological advantage we have achieved with the IP-20 platform,” Palti added.
The company anticipates that the expense reduction initiative will be substantially complete by the end of 2014 and expects to record a charge of approximately $10-$12 million in the fourth quarter, of which approximately $5-$6 million will be cash, primarily related to severance, which will be paid mainly during the first quarter of 2015.
In a separate and unrelated development, in the fourth quarter of 2014, the company expects to record additional financial expense in the amount of approximately $19 million, reflecting a re-measurement charge related to certain assets in Venezuela at current book value of approximately $20 million, primarily accounts receivable, denominated in or linked to the U.S. dollar, due to the continued Venezuelan government policy that limits our customers’ ability to pay such receivables in U.S. dollars.
A conference call to discuss these matters will begin at 9:00 a.m. EST. Investors are invited to join the teleconference by calling (USA) (800) 230-1074 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://ceragon.com/about-us/ceragon/investor-relations selecting the webcast link, and following the registration instructions. A replay of the webcast will be available.
If you are unable to join us live, the replay numbers are: Telephone: (USA) (800) 475-6701 (International) +1 320-365-3844, Access Code: 347377. A replay of the call will be available through January 15, 2015.