Press Release

CERAGON NETWORKS REPORTS FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS

February 15, 2017

Net income increased during both fourth quarter and full year; strong cash flow used to reduce debt over 50% versus prior year

Little Falls, New Jersey, February 15, 2017 – Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist, today reported results for the fourth quarter and full year ended December 31, 2016.

 

Fourth Quarter 2016 Highlights:

 

Revenues – $84.7 million, up 12% from the fourth quarter of 2015, and up 7% from the third quarter of 2016.

 

Gross margin – 32.5%, compared to 32.8% in the fourth quarter of 2015 and 32.9% in the third quarter of 2016.

 

Operating income – $8.5 million, compared to an operating income of $8.9 million in the fourth quarter of 2015 and an operating income of $5.8 million in the third quarter of 2016.

 

Net income $8.3 million, or $0.10 per diluted share. Net income for the fourth quarter of 2015 was $5.2 million, or $0.07 per diluted share. Net income for the third quarter of 2016 was $3.5 million, or $0.04 per diluted share.

 

Non-GAAP results –gross margin was 32.9%, operating income was $7.2 million, and net income was $5.2 million, or $0.07 per diluted share. Non-GAAP results exclude adjustments of $(3.1) million. For a reconciliation of GAAP to non-GAAP results, see the attached tables.

 

Cash and cash equivalents – $36.3 million at December 31, 2016, compared to $32.4 million at September 30, 2016, after reducing debt by $3.3 million to $17.0 million.

 

Full Year 2016 Highlights:

 

Revenues $293.6 million, down 16% from 2015.

 

Gross margin – 33.8%, compared to 29.5% in 2015.

 

Operating income – $19.5 million, compared to an operating income of $ 21.6 million in 2015.

 

Net income – $11.4 million, or $0.15 per diluted share. Net income for 2015 was $ 1.0 million, or $ 0.01 per diluted share.

 

Non-GAAP results – gross margin was 34.5%, operating income was $21.1 million, and net income was $11.5 million, or $0.15 per diluted share. Non-GAAP results exclude adjustments of $42,000. For a reconciliation of GAAP to non-GAAP results, see the attached tables.

 

“The continued success of our strategy to focus on increasing net income and free cash flow resulted in significant improvement in these key metrics in 2016, and enabled us to maintain a strong cash position while also substantially reducing debt,” said Ira Palti, president and CEO of Ceragon. “We have a strong order book, particularly with the large orders we received in Q1 from a customer in India. However, the timing of delivering various elements of these orders may cause greater than normal quarter-to-quarter fluctuations in our results during the year. After integrating these orders into our overall operating plan, we now feel comfortable raising our net income target for 2017, on a constant currency basis, from the one we set in November 2016.”

 

Supplemental revenue breakouts by geography:

Fourth quarter 2016:

  • Europe: 14%
  • Africa: 4%
  • North America: 14%
  • Latin America: 27%
  • India: 32%
  • APAC: 9%

Full year 2016:

  • Europe: 15%
  • Africa: 7%
  • North America: 14%
  • Latin America: 27%
  • India: 27%
  • APAC: 10%

 

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) 230-1074 or International: +1 (612) 332-0107, 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: https://www.ceragon.com/about-ceragon/investor-relations/events-webcasts/, 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: 414711. A replay of both the call and the webcast will be available through March 15, 2017.

 

About Ceragon Networks Ltd.

 

Ceragon Networks Ltd. (NASDAQ: CRNT) is the world’s #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. It 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-

 

 

Ceragon Reports Fourth Quarter and Year End 2016 Results

 

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,

2016 2015 2016 2015
(Audited)
Revenues $ 84,665 $ 75,643 $ 293,641 $ 349,435
Cost of revenues 57,122 50,840 194,479 246,487
Gross profit 27,543 24,803 99,162 102,948
Operating expenses:
Research and development, net 5,718 5,268 21,695 22,930
Selling and marketing 10,334 9,982 39,515 40,816
General and administrative

Restructuring costs

4,942
5,473

20,380
21,235

1,225

Other income (1,921) (4,849) (1,921) (4,849)
Total operating expenses $ 19,073 $ 15,874 $ 79,669 $ 81,357
Operating income 8,470 8,929 19,493 21,591
Financial expenses, net 1,494 2,265 6,303 14,738
Income before taxes 6,976 6,664 13,190 6,853
Taxes on income (1,357) 1,432 1,761 5,842
Net income $ 8,333 $ 5,232 $ 11,429 $ 1,011
Basic net income per share $ 0.11  

$ 0.07

 

$ 0.15

 

$ 0.01

Diluted net income per share $ 0.10 $ 0.07 $ 0.15 $ 0.01
Weighted average number of shares used in computing basic net income per share 77,759,346 77,416,409 77,702,788 77,239,409

 

Weighted average number of shares used in computing diluted net income per share 79,583,792 78,432,387 78,613,528 77,296,681

 

 

Ceragon Reports Fourth Quarter and Year End 2016 Results

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

(Unaudited)

December 31,

2016

December 31, 2015
ASSETS (Audited)
CURRENT ASSETS:
Cash and cash equivalents $ 36,338 $ 36,318
Trade receivables, net 107,395 116,683
Deferred taxes, net 1,327 1,633
Other accounts receivable and prepaid expenses 18,516 22,583
Inventories 45,647 49,690
Total current assets 209,223 226,907
NON-CURRENT ASSETS:
Deferred tax assets, net 17 189
Severance pay and pension funds 4,575 4,681
Property and equipment, net 27,560 28,906
Intangible assets, net 1,544 3,192
Other non-current assets 1,306 1,457
Total non-current assets 35,002 38,425
Total assets $ 244,225 $ 265,332
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short term loan, including current maturities of long term bank loan $ 17,000 $ 34,922
Trade payables 68,408 71,721
Deferred revenues 2,673 8,901
Other accounts payable and accrued expenses 22,425 27,052
Total current liabilities 110,506 142,596
LONG-TERM LIABILITIES:
Accrued severance pay and pension 9,198 9,276
Other long term payables 8,357 10,639
Total long-term liabilities 17,555 19,915
SHAREHOLDERS’ EQUITY:
Share capital:
Ordinary shares 214 214
Additional paid-in capital 409,320 408,174
Treasury shares at cost (20,091) (20,091)
Other comprehensive loss (7,846) (8,616)
Accumulated deficits (265,433) (276,860)
Total shareholders’ equity 116,164 102,821
Total liabilities and shareholders’ equity $ 244,225 $ 265,332

 

Ceragon Reports Fourth Quarter and Year End 2016 Results

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

Three months ended

December 31,

Year ended

December 31,

2016 2015 2016 2015
(Audited)
Cash flow from operating activities:
Net income $ 8,333 $ 5,232 $ 11,429 $ 1,011
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 2,534 3,137 10,037 12,203
Stock-based compensation expense 198 453 1,071 1,625
Decrease in trade and other receivables, net 4,361 3,509 15,684 40,171
Decrease (increase) in inventory, net of write off (1,462) (971) 4,706 10,240
Decrease in trade payables and accrued liabilities (1,258) (3,009) (11,434) (41,480)
Decrease in deferred revenues (1,753) (1,162) (6,228) (8,766)
Decrease (increase) in deferred tax asset, net (811) (466) 478 1,975
Other adjustments (140) (74) 28 (858)
Net cash provided by operating activities $ 10,002 $ 6,649 $ 25,771 $ 16,121
Cash flow from investing activities:
Purchase of property and equipment, net (2,757) (946) (8,190) (5,266)
Investment in short and long-term bank deposit (153) (19)
Proceeds from maturities of short and long-term bank deposits 368 153 432
Proceeds from sales of available for sale marketable securities 122
Net cash used in investing activities $ (2,757) $ (578) $ (8,190) $ (4,731)
Cash flow from financing activities:
Proceeds from exercise of options 8 26 75 138
Proceeds from financial institutions, net 4,200
Repayments of bank loans (3,300) (9,008) (17,922) (20,182)
Net cash used in financing activities $ (3,292) $ (8,982) $ (17,847) $ (15,844)
Translation adjustments on cash and cash equivalents $ 11 $ 25 $ 286 $ (651)
Increase (decrease) in cash and cash equivalents $ 3,964 $ (2,886) $ 20 $ (5,105)
Cash and cash equivalents at the beginning of the period 32,374 39,204 36,318 41,423
Cash and cash equivalents at the end of the period $ 36,338 $ 36,318 $ 36,338 $ 36,318

 

Ceragon Reports Fourth Quarter and Year End 2016 Results

 

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
Three months ended Year ended
December 31, December 31,
2016 2015 2016 2015
GAAP cost of revenues $ 57,122 $ 50,840 $ 194,479 $ 246,487
Amortization of intangible assets (310) (309) (1,232) (1,228)
Stock based compensation expenses (4) (29) (30) (73)
Changes in pre-acquisition indirect tax positions (1) (806) (278)
Non-GAAP cost of revenues $ 56,808 $ 50,501 $ 192,411 $ 244,908
GAAP gross profit $ 27,543 $ 24,803 $ 99,162 $ 102,948
Gross profit adjustments 314 339 2,068 1,579
Non-GAAP gross profit $ 27,857 $ 25,142 $ 101,230 $ 104,527
GAAP Research and development expenses $ 5,718 $ 5,268 $ 21,695 $ 22,930
Stock based compensation expenses (17) (179) (151) (735)
Non-GAAP Research and development expenses $ 5,701 $ 5,089 $ 21,544 $ 22,195
GAAP Sales and Marketing expenses $ 10,334 $ 9,982 $ 39,515 $ 40,816
Amortization of intangible assets (106) (148) (417) (637)
Stock based compensation expenses (54) (109) (369) (495)
Non-GAAP Sales and Marketing expenses $ 10,174 $ 9,725 $ 38,729 $ 39,684
GAAP General and Administrative expenses $ 4,942 $ 5,473 $ 20,380 $ 21,235
Stock based compensation expenses (122) (135) (521) (321)
Non-GAAP General and Administrative expenses $ 4,820 $ 5,338 $ 19,859 $ 20,914
GAAP restructuring cost $ $ $ $ 1,225
Restructuring plan related cost (1,225)
Non-GAAP restructuring cost $ $ $ $
GAAP other income $ (1,921) $ (4,849) $ (1,921) $ (4,849)
Statute of limitation on certain pre-acquisition indirect tax liabilities 1,921 4,849 1,921 4,849
Non-GAAP other income $ $ $ $

 

Ceragon Reports Fourth Quarter and Year End 2016 Results
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
Three months ended Year ended
December 31, December 31,
2016 2015 2016 2015
GAAP financial expenses $ 1,494 $ 2,265 $ 6,303 $ 14,738
Currency devaluation in Venezuela related expenses 907 (2,973)
Non-GAAP financial expenses $ 1,494 $ 2,265 $ 7,210 $ 11,765
GAAP taxes on income $ (1,357) $ 1,432 $ 1,761 $ 5,842
Changes in pre-acquisition tax liability (453)
Other non-cash tax adjustments 1,786 (762) 1,109 (3,297)
Non-GAAP taxes on income $ 429 $ 670 $ 2,417 $ 2,545
Ceragon Reports Fourth Quarter and Year End 2016 Results

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS

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

 

Three months ended Year ended

December 31,

December 31,

 

2016 2015 2016 2015
GAAP net income $ 8,333 $ 5,232 $ 11,429 $ 1,011
Amortization of intangible assets 416 457 1,649 1,865
Stock based compensation expenses 197 452 1,071 1,624
Restructuring expenses 1,225
Changes in pre-acquisition indirect tax positions 1 1,259 278
Currency devaluation in Venezuela related expenses (907) 2,973
Non-cash tax adjustments (1,786) 762 (1,109) 3,297
Statute of limitation on certain pre-acquisition indirect tax liabilities (1,921) (4,849) (1,921) (4,849)
Non-GAAP net income $ 5,239 $ 2,055 $ 11,471 $ 7,424
GAAP basic net income per share $ 0.11 $ 0.07 $ 0.15 $ 0.01
GAAP diluted net income per share $ 0.10 $ 0.07 $ 0.15 $ 0.01
Non-GAAP basic and diluted net income per share $ 0.07 $ 0.03 $ 0.15 $ 0.10
Weighted average number of shares used in computing
basic net income per share
77,759,346 77,416,409 77,702,788 77,239,409
Weighted average number of shares used in computing
GAAP diluted net income per share
79,583,792 77,432,387 78,613,528 77,296,681
Weighted average number of shares used in computing
Non-GAAP diluted net income per share
79,888,786 78,264,309 78,986,738 77,967,811

 

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Media Contact

Claudia Gatlin

Phone: +1 212 830-9080

Email: claudiag@ceragon.com

Tanya Solomon

Ceragon Networks Ltd.

Phone: (201) 853-0271

Email: tanyas@ceragon.com

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