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Ceragon Networks Reports Third Quarter 2013 Financial Results

        Ceragon Networks Reports Third Quarter 2013 Financial Results

PR Newswire

PARAMUS, N.J., Nov. 11, 2013

PARAMUS, N.J., Nov.11, 2013 /PRNewswire/ -- Ceragon Networks Ltd. (NASDAQ:
CRNT), the #1 high-capacity wireless hauling specialist today reported results
for the third quarter which ended September 30, 2013.

Revenues for the third quarter of 2013 reached $92.1 million, down 21% from
$117.1 million for the third quarter of 2012, and up 2% from $90.1 million in
the second quarter of 2013.

Net loss in accordance with US Generally Accepted Accounting Principles (GAAP)
for the third quarter of 2013 was $(10.4) million or $(0.28) per basic share
and diluted share, compared to net loss of $(4.7) million in the third quarter
of 2012, or $(0.13) per basic share and diluted share.

On a non-GAAP basis, net loss for the third quarter, excluding (a) $0.7
million of equity-based compensation expenses, (b) $0.6 million amortization
of intangible assets, (c) $0.6 million of changes in pre-acquisition indirect
tax positions, and (d) $4.0 million of non-recurring adjustment of valuation
allowance on tax assets, was $(4.5) million, or $(0.12) per basic share and
diluted share. Non-GAAP net income for the third quarter of 2012 was $1.6
million, or $0.04 per basic and diluted share (please refer to the
accompanying financial tables for reconciliation of GAAP financial information
to non-GAAP).

Gross margin on a GAAP basis in the third quarter of 2013 was 30.9% of
revenues. Gross margin on a non-GAAP basis was 31.9% of revenues.

Operating loss on a GAAP basis in the third quarter of 2013 was $(4.1)
million. On a non-GAAP basis operating loss was $(2.2) million.

Cash and cash investments at the end of the quarter were $44.8 million.

Cost Reduction Initiatives

The company indicated that it will realign its operations, reduce head count
and undertake other cost reduction measures in order to lower its breakeven
point and improve profitability. The restructuring is expected to result in
annual savings of approximately $25 million.Actions will include
consolidating research and development activities worldwide and realigning
teams on enhancing the newly released IP-20 platform, consolidating or
relocating certain offices, and reducing staff functions and some operations
positions, as well as other measures. No customer-facing activities will be
affected. Total restructuring charges are expected to be approximately $18-$21
million, comprised of a non-recurring provision in the fourth quarter of 2013
of approximately $11-$13 million, as well as ongoing restructuring charges
totaling $7-$8 million, which will begin in Q4 and will continue during the
first half of 2014, mainly in the first quarter.

"Our bookings and revenues remain stable in a challenging operator spending
environment," said Ira Palti, President and CEO of Ceragon. "We continue to
garner excellent feedback on our new products, whether deployed in live
networks or in ongoing trials with Tier 1 operators, as they prepare to deploy
LTE networks."

"We recently launched our full IP-20 portfolio. This is a premium SDN-ready
platform merging long haul and short haul products into a single hardware
architecture managed by a common operating system. Introducing the IP-20
platform represents the attainment of an important strategic milestone. Now
that we have completed this major development phase, we are implementing an
organizational restructuring aimed at lowering our revenue breakeven point by
reducing our operating expenses by 15%. We believe this new cost structure
will be sustainable as revenue growth resumes and will position us to achieve
substantial additional operating leverage," concluded Mr. Palti.

Supplemental geographical breakdown of revenue, third quarter of 2013:

  oEurope: 18%
  oAfrica: 23%
  oNorth America:10%
  oLatin America: 29%
  oIndia:11%
  oAPAC: 9%

A conference call will follow beginning at 9:00 a.m. EST. Investors are
invited to join the Company's teleconference by calling (USA) (800) 230-1096
or international +1 (612) 332-0107from 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-relationsselecting the
webcast link, and following the registration instructions.

If you are unable to join us live, the replay numbers are: Telephone:USA:
(800) 475-6701; International: +1 (320) 365-3844; Access Code: 304945. A
replay of both the call and the webcast will be available through December, 11
2013.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 high-capacity wireless hauling
specialist. We provide innovative, flexible and cost-effective wireless
backhaul and fronthaul solutions that enable mobile operators and other
wired/wireless service providers to deliver 2G/3G, 4G/LTE and other broadband
services to their subscribers. Ceragon's high-capacity, solutions use
microwave technology to transfer 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 migration to all-IP networks. As the
demand for data 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.

Media Contact:              Media Contact:         Company & Investor Contact:
Justine Schneider           Abigail Levy-Gurwitz   Yoel Knoll
Calysto Communications      Ceragon Networks       Ceragon Networks
Tel: +1-(404)-266-2060 x507 Tel: +1-(201)-853-0271 Tel. +1-(201)-853-0228
jschneider@calysto.com     abigaill@ceragon.com   yoelk@ceragon.com

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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 may contain statements concerning Ceragon's future
prospects that are "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and projections that involve a number of risks and uncertainties.
There can be no assurance that future results will be achieved, and actual
results could differ materially from forecasts and estimates. These are
important factors that could cause actual results to differ materially from
forecasts and estimates. Some of the factors that could significantly impact
the forward-looking statements in this presentation include risks associated
with the impact of restructuring activities, risks associated with continuing
losses and possible liquidity issues, risks associated with the possibility
that new products will not be accepted in the market, the risk of significant
expenses in connection with potential contingent tax liability associated with
Nera's prior operations or facilities, and other risks and uncertainties,
which are discussed in greater detail in Ceragon's Annual Report on Form 20-F
and Ceragon's other filings with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date on which they are made
and Ceragon undertakes no commitment to revise or update any forward-looking
statement in order to reflect events or circumstances after the date any such
statement is made. Ceragon's public filings are available from the Securities
and Exchange Commission's website at www.sec.gov or may be obtained on
Ceragon's website at www.ceragon.com.

Use of non-GAAP Measures:

This press release provides financial measures that exclude certain items and
are therefore not calculated in accordance with generally accepted accounting
principles (GAAP). Management believes that these Non-GAAP financial measures
provide meaningful supplemental information regarding our performance. The
presentation of this non-GAAP financial information is not intended to be
considered in isolation or as a substitute for the financial information
prepared and presented in accordance with GAAP. Management uses both GAAP and
non-GAAP measures when evaluating the business internally and therefore felt
it is important to make these non-GAAP adjustments available to investors





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
                     Three months ended           Nine months ended

                     September 30                 September 30,
                     2013          2012           2013           2012
Revenues             $   92,099  $   117,087  $   272,280  $   339,802
Cost of revenues     63,610        82,559         187,792        236,552
Gross profit         28,489        34,528         84,488         103,250
Operating expenses:
Research and         10,065        11,425         32,553         35,480
development
Selling and          16,296        19,175         50,637         58,762
marketing
General and          6,189         7,216          18,668         20,594
administrative
Total operating      $  32,550   $  37,816    $  101,858   $  114,836
expenses
Operating loss       4,061         3,288          17,370         11,586
Financial expenses,  1,980         1,149          8,856          2,609
net
Loss before taxes    6,041         4,437          26,226         14,195
Taxes on income      4,399         261            5,875          796
Net loss             $  10,440    $  4,698      $   32,101   $  14,991
Basic and diluted    $   0.28    $   0.13     $   0.87    $   0.41
net loss per share
Weighted average
number of shares                                             
used in
computing basic                                               
and
diluted net     36,815,864    36,495,563     36,736,417     36,397,410
loss per share



CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
(Unaudited)
                                                September 30,   December
                                                2013            31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                       $  40,582     $  47,099
Short-term bank deposits                        321             422
Trade receivables, net                          128,766         149,120
Deferred taxes                                  2,651           8,589
Other accounts receivable and prepaid expenses  37,529          38,743
Inventories                                     57,438          65,554
Total current assets                            267,287         309,527
NON-CURRENT ASSETS:
Marketable securities                           3,923           4,068
 Deferred tax assets, net                     10,984          9,140
 Severance pay and pension fund               7,673           7,163
 Property and equipment, net                  36,403          33,642
Intangible assets, net                          7,866           9,809
Goodwill                                        15,061          15,283
 Other non-current assets                    4,882           4,964
                                                86,792          84,069
                                                $   354,079  $   393,596


LIABILITIES AND SHAREHOLDERS' EQUITY


CURRENT LIABILITIES:
Short term loan, including current maturities   $  49,222     $  25,232
of long term bank loan
Trade payables                                  81,041          102,079
Deferred revenues                               8,501           16,719
Other accounts payable and accrued expenses     39,421          36,090
Total current liabilities                       178,185         180,120


LONG-TERM LIABILITIES
Long term bank loan, net of current maturities  12,362          18,536
Accrued severance pay and pension               12,818          12,311
Other long term payables                        35,969          38,920
                                                61,149          69,767
SHAREHOLDERS' EQUITY:
Share capital:
 Ordinary shares                            98              98
Additional paid-in capital                      322,025         318,106
Treasury shares at cost                         (20,091)        (20,091)
Other comprehensive loss                        (1,272)         (490)
Accumulated deficits                            (186,015)       (153,914)
Total shareholders' equity                      114,745         143,709
Total liabilities and shareholders' equity      $   354,079  $  393,596



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars, in thousands)
(Unaudited)
                              Three months ended       Nine months ended
                              September 30,            September 30,
                              2013         2012        2013          2012
Cash flow from operating
activities:
Net loss                      $ (10,440)  $ (4,698)  $  (32,101)  $ 
                                                                     (14,991)
Adjustments to reconcile net
loss to net cash
used in operating
activities:
Depreciation and amortization 3,885        3,809       11,656        11,228
Stock-based compensation      701          1,403       2,774         4,245
expense
Decrease (increase) in trade
and other                   (6,130)      (15,712)    20,334        (39,521)
receivables, net
Decrease in inventory, net of 91           11,193      7,493         28,809
write off
Increase (decrease) in trade
payables and                 4,604        7,107       (19,069)      17,438
accrued liabilities
Decrease in deferred revenues (3,683)      (4,028)     (8,218)       (16,419)
Decrease (increase) in        3,228        (156)       3,743         (419)
deferred tax asset, net
Other adjustments             299          183         (22)          (246)
Net cash used in operating    $ (7,445)    $ (899)     $ (13,410)    $ (9,876)
activities
Cash flow from investing
activities:
 Purchase of property and    (4,009)      (3,845)     (11,706)      (10,213)
equipment
Investment in short-term bank -            -           (255)         (1,266)
deposits
Proceeds from short-term bank -            2,484       336           7,920
deposits
Investment in available for   -            -           -             (64)
sale marketable securities
Proceeds from maturities of
available for sale           -            64          301           9,781
marketable
securities, net
Net cash provided by (used
in) investing                 $ (4,009)    $ (1,297)   $ (11,324)   $ 6,158
activities
Cash flow from financing
activities:
Proceeds from exercise of     -            270         1,145         734
options
Proceeds from bank loans      9,300        10,400      25,990        25,000
Repayment of bank loans       (2,058)      (2,058)     (8,174)       (6,174)
Net cash provided by                                              
financing activities
                              $ 7,242     $ 8,612    $ 18,961     $ 19,560
Translation adjustments on                                        
cash and cash equivalents
                              $ (114)      $ (9)       $ (744)      $ (482)
Increase (Decrease) in cash   $ (4,326)   $ 6,407    $ (6,517)    $ 15,360
and cash equivalents
Cash and cash equivalents at  44,908       37,944      47,099        28,991
the beginning of the period
Cash and cash equivalents at  $ 40,582    $ 44,351   $ 40,582     $ 44,351
the end of the period



RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
                               Three months ended September 30,

                               
                                       2013                         2012
                       GAAP (as        Adjustments     Non-GAAP     Non-GAAP
                       reported)
Revenues               $ 92,099                     $ 92,099     $ 117,087
Cost of revenues       63,610         (a) 902     62,708       78,149
Gross profit           28,489                         29,391       38,938
Operating
expenses:
Research and           10,065         (b) 128     9,937        11,021
development
Selling and            16,296         (c) 660    15,636       18,103
marketing
General and            6,189          (d) 200     5,989        6,793
administrative
Total operating        $  32,550                     $  31,562   $ 35,917
expenses
Operating profit       (4,061)                        (2,171)      3,021
(loss)
Financial              1,980                          1,980        1,149
expenses, net
Income (loss)          (6,041)                        (4,151)      1,872
before taxes
Taxes on income        4,399          (e) 4,037    362          261
Net income (loss)      $ (10,440)                    $           $  
                                                      (4,513)      1,611
Basic net earnings     $  (0.28)                    $           $   0.04
(loss) per share                                      (0.12)
Diluted net                                           $ 
earnings (loss)        $  (0.28)                    (0.12)      $   0.04
per share
Weighted average
number of shares
used in computing      36,815,864                     36,815,864  36,495,563
basic net earnings
(loss) per share


Weighted average
number of shares       36,815,864                     36,815,864  37,091,849
used in computing
basic net earnings
(loss) per share
                                      

Total adjustments                      5,927
(a) Cost of revenues includes $0.3 million of amortization of intangible
assets, $40 thousand of stock based compensation expenses and $0.6 million of
changes in pre-acquisition indirect tax positions in the three months ended
September 30, 2013.
(b) Research and development expenses include $0.1 million of stock based
compensation expenses in the three months ended September 30, 2013.
(c) Selling and marketing expenses include $0.3 million of amortization of
intangible assets and $0.3 million of stock based compensation expenses in the
three months ended  September 30, 2013.
(d) General and administrative expenses include $0.2 million of stock based
compensation expenses in the three months ended September 30, 2013.
(e) Taxes on income include $4.0 million of non-recurring adjustment of
valuation allowance on tax assets.



RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
                     Nine months ended September 30,

                     
                     2013                                           2012
                     GAAP (as       Adjustments     Non-GAAP        Non-GAAP
                     reported)
Revenues             $ 272,280                       $ 272,280     $ 339,802
Cost of revenues     187,792        (a) 2,802       184,990       228,474
Gross profit         84,488                           87,290        111,328
Operating
expenses:
Research and         32,553         (b) 1,988       30,565        34,045
development
Selling and          50,637         (c) 2,738      47,899        54,963
marketing
General and          18,668         (d) 1,516       17,152        19,272
administrative
Total operating      $  101,858                      $ 95,616      $ 108,280
expenses
Operating profit     (17,370)                         (8,326)       3,048
(loss)
Financial            8,856          (e) 3,133      5,723         2,609
expenses, net
Income (loss)        (26,226)                         (14,049)      439
before taxes
Taxes on income      5,875          (f) 4,037      1,838         796
Net loss             $  32,101                       $  15,887    $  357

                     $   0.87                      $   0.43    $   0.01
Basic and diluted
net loss per share


Weighted average
number of shares
used in         36,736,417                       36,736,417    36,397,410
computing basic
and diluted
net loss per
share
Total adjustments                   16,214
(a) Cost of revenues includes $0.9 million of amortization of intangible
assets, $0.5 million of inventory step-up, $0.1 million of stock based
compensation expenses, $0.2 million of integration plan related costs and $1.1
million of changes in pre-acquisition indirect tax positions in the nine
months ended September 30, 2013.
(b) Research and development expenses include $1.2 million of integration plan
related costs and $0.8 million of stock based compensation expenses in the
nine months ended September 30, 2013.
(c) Selling and marketing expenses include $1.0 million of amortization of
intangible assets, $0.7 million of integration plan related costs and $1.1
million of stock based compensation expenses in the nine months ended 
September 30, 2013.
(d) General and administrative expenses include $0.7 million of integration
plan related costs and $0.8 million of stock based compensation expenses in
the nine months ended September 30, 2013.
(e) Financial expenses include $3.1 million non-recurring currency devaluation
in Venezuela in the nine months ended September 30, 2013.
(f) Taxes on income include $4.0 million non-recurring adjustment of valuation
allowance on tax assets.



RECONCILIATION BETWEEN REPORTED AND NON-GAAP
OPERATING LOSS
(U.S. dollars in thousands)
(Unaudited)
                                                   Three months    Nine months
                                                   ended           ended
                                                   September 30, 2013
Reported GAAP net operating loss                   4,061           17,370
Stock based compensation expenses                  701             2,774
Amortization of intangible assets                  632             1,902
Inventory step up                                  -               459
Integration plan related costs                     -               2,844
Changes in pre-acquisition indirect tax positions  557             1,065
Non-GAAP net operating profit                      2,171           8,326

SOURCE Ceragon Networks Ltd.

Website: http://www.ceragon.com
 
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