Ceragon Networks Reports Second Quarter 2014 Financial Results

        Ceragon Networks Reports Second Quarter 2014 Financial Results

PR Newswire

PARAMUS, N.J., July 28, 2014

PARAMUS, N.J., July 28, 2014 /PRNewswire/ --Ceragon Networks Ltd. (NASDAQ:
CRNT), the #1 high-capacity wireless hauling specialist today reported results
for the second quarter which ended June 30, 2014.

Revenues for the second quarter of 2014 were $90.4 million, about the same as
the $90.1 million reported for the second quarter of 2013, and up 28% from
$70.5 million in the first quarter of 2014.

Gross margin in accordance with US Generally Accepted Accounting Principles
(GAAP) in the second quarter of 2014 was 26.3% of revenues, compared to 31.7%
of revenues in the second quarter of 2013, and compared to 22.1% of revenues
in the first quarter of 2014. Gross margin on a non-GAAP basis was 27.0% of
revenues in the second quarter of 2014, compared to 32.4% of revenues in the
second quarter of 2013, and compared to 23.3% of revenues in the first quarter
of 2014.

Operating income on a GAAP basis in the second quarter of 2014 was $11.8
million, compared to an operating loss of $(4.6) million in the second quarter
of 2013, and compared to an operating loss of $(17.1) million in the first
quarter of 2014. On a non-GAAP basis, the operating loss was $(2.6) million in
the second quarter of 2014, compared to an operating loss of $(2.8) million in
the second quarter of 2013, and compared to an operating loss of $(10.8)
million in the first quarter of 2014.

Net income on a GAAP basis for the second quarter of 2014 was $8.0 million or
$0.15 per basic share and diluted share, primarily due to $16.8 million of
non-recurring other income resulting from a settlement agreement with Eltek
ASA. Net loss for the second quarter of 2013 was $(7.5) million, or $(0.20)
per basic share and diluted share. Net loss for the first quarter of 2014 was
$(27.0) million or $(0.51) per basic share and diluted share.

On a non-GAAP basis, net loss for the second quarter of 2014 was $(5.0)
million, or $(0.10) per basic share and diluted share, compared to a non-GAAP
net loss for the second quarter of 2013 of $(5.7) million, or $(0.15) per
basic share and diluted share. The non-GAAP net loss for the first quarter of
2014 was $(12.9) million or $(0.25) cents per basic share and diluted share.

For reconciliations of GAAP to non-GAAP results, see the attached tables.

"We are pleased to report a continuation of the improved booking pattern that
began in the first quarter, when bookings were 19% above the average quarterly
bookings in 2013," said Ira Palti, President and CEO of Ceragon. "Bookings in
the second quarter were 30% higher than the 2013 quarterly average. This
provides tangible evidenceof a further improvement in revenues in the second
half, compared with the first half of 2014. We are especially encouraged by
the penetration of the new IP-20 platform, which accounted for 39% of total
bookings during the first six months of 2014. We believe the second half of
2014 will mark the beginning of a sustainable uptrend in revenues, followed by
a return to profitability with substantial operating leverage, based on a
lower expense profile from the recent restructuring.

"In addition to the orders in hand from two quarters of very strong bookings,
we expectsignificant additional orders during the second half of 2014 related
to customers' modernization and expansionprograms for whichwe have already
been chosen as avendor. Therefore,with demand picking up faster with larger
orders than we anticipated, we are moving immediately to raiseadditional
equity capital in order to ensurethat we have the necessary working capital
and financial flexibility to fund our growth and avoid any potential liquidity
issues."

Cash and cash investments at the end of the quarter were $36.4 million,
including $16.8 million received during the second quarter pursuant to a
settlement agreement with Eltek ASA.

In order to provide sufficient liquidity to maintain our operations and the
expected level of growth from improved demand for our products, and in order
to address the cash flow impact of the losses in the first half of 2014, the
Company will be required to seek funding from external sources during the
second half of 2014. Delays in obtaining additional funding could also result
in Ceragon requesting covenant waivers from its lenders. Ceragon's board of
directors and management are confident in the Company's ability to address
these cash needs and, in this context, as mentioned above, the Company
announced separately today that it intends to offer and sell its ordinary
shares in an underwritten public offering pursuant to its existing shelf
registration statement.

Supplemental geographical breakdown of revenue for the second quarter of 2014:

  oEurope:16%
  oAfrica: 19%
  oNorth America:  12%
  oLatin America:  22%
  oIndia: 17%
  oAPAC: 14%

A conference call will follow beginning 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) 234-9959from 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: Telephone:USA:
(800) 475-6701; International: +1 (320) 365-3844; Access Code: 330547. A
replay of both the call and the webcast will be available through August 28,
2014.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, Ceragon uses non-GAAP measures of its
financial results. Ceragon's management believes the non-GAAP financial
information provided in this release is useful to investors' understanding and
assessment of Ceragon's ongoing core operations and prospects for the future.
Historically, Ceragon has also publicly presented these supplemental non-GAAP
financial measures in order to assist the investment community to see the
Company "through the eyes of management," and thereby enhance understanding of
its operating performance. The presentation of this non-GAAP financial
information is not intended to be considered in isolation or as a substitute
for results prepared in accordance with GAAP. A reconciliation of the non-GAAP
financial measures discussed in this press release to the most directly
comparable GAAP financial measures is included with the financial statements
contained in the tables attached to this press release. Management uses both
GAAP and non-GAAP information in evaluating and operating business internally
and as such has determined that it is important to provide this information to
investors.

This press release does not constitute an offer to sell or the solicitation of
an offer to buy any of the securities described herein, nor shall there be any
sale of these securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or jurisdiction.

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.

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.

Safe Harbor
This press release contains statements concerning Ceragon's future prospects
that are "forward-looking statements" under the Private Securities Litigation
Reform Act of 1995.Examples of forward-looking statements include: projections
of capital expenditures and liquidity, competitive pressures, revenues, growth
prospects, product development, financial resources, restructuring costs, cost
savings and other financial matters. You can identify these and other
forward-looking statements by the use of words such as "may," "plans,"
"anticipates," "believes," "estimates," "predicts," "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 risks associated with
increased working capital needs; risks associated with the ability of Ceragon
to meet its liquidity needs; risks associated with the ability of Ceragon to
successfully complete its announced follow on public offering; the risk that
sales of Ceragon's new IP-20 products will not meet expectations; risks
associated with doing business in Latin America, including currency export
controls and recent economic concerns; risks relating to the concentration of
our business in developing nations; 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 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.

Investors:                             Media:
Aviram Steinhart   or Claudia Gatlin Jonathon Gordon
+972 3 5431 443                 +1 201 853 0228          +972 3 5431 480
avirams@ceragon.com          claudiag@ceragon.com    jonathang@ceragon.com
                                





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
                        Three months ended          Six months ended
                        June 30,                    June 30,
                        2014          2013          2014          2013
Revenues                $   90,420  $   90,084  $  160,935  $  180,181
Cost of revenues        66,607        61,545        121,543       124,182
Gross profit            23,813        28,539        39,392        55,999
Operating expenses:
 Research and        8,454         10,582        18,893        22,488
development
 Selling and         14,655        16,808        30,075        34,341
marketing
 General and         5,720         5,764         11,626        12,479
administrative
Restructuring       -             -             936           -
costs
 Other income        16,800        -             16,800        -
Total operating         $  12,029   $  33,154   $  44,730   $  69,308
expenses
Operating income        11,784        (4,615)       (5,338)       (13,309)
(loss)
Financial expenses,     2,175         2,247         10,339        6,876
net
Income (loss) before    9,609         (6,862)       (15,677)      (20,185)
taxes
Taxes on income         1,611         658           3,288         1,476
Net income (loss)       $   7,998  $  (7,520)  $  (18,965)  $  (21,661)
                                                   
Basic net income        $   0.15                                $  
(loss) per share                      $   (0.20)  $           (0.59)
                                                    (0.36)
                                                   
Diluted net income      $   0.15                                $  
(loss) per share                      $   (0.20)  $           (0.59)
                                                    (0.36)
Weighted average                                               
number of shares used
in                                                             
computing basic net
income (loss) per       52,457,168    36,806,059    52,457,168    36,673,228
share
Weighted average                                               
number of shares used
in                                                             
computing diluted net
income (loss) per       52,861,134    36,806,059    52,457,168    36,673,228
share





CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
(Unaudited)
                                             June 30,         December 31,
                                             2014             2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                    $  31,875      $  42,407
Short-term bank deposits                     388              446
Marketable securities                        -                5,499
Trade receivables, net                       145,878          131,166
Deferred taxes, net                          6,141            7,198
Other accounts receivable and prepaid        33,794           34,205
expenses
Inventories                                  61,784           64,239
Total current assets                         279,860          285,160
NON-CURRENT ASSETS:
Marketable securities                        4,121            3,985
Deferred tax assets, net                 5,184            6,542
 Severance pay and pension fund           7,103            7,065
 Property and equipment, net              34,874           35,245
Intangible assets, net                       6,183            7,213
Goodwill                                     15,110           14,935
 Other non-current assets                 7,381            5,826
Total non-current assets                     79,956           80,811
Total assets                                 $    359,816  $    365,971


LIABILITIES AND SHAREHOLDERS' EQUITY


CURRENT LIABILITIES:
Short term loan, including current           $  67,112      $  46,922
maturities of long term loan
Trade payables                               78,396           77,979
Deferred revenues                            9,015            7,968
Other accounts payable and accrued expenses  36,506           45,526
Total current liabilities                    191,029          178,395


LONG-TERM LIABILITIES
Long term loan, net of current maturities    6,188            10,304
Accrued severance pay and pension            13,604           13,635
Other long term payables                     29,869           28,559
Total long-term liabilities                  49,661           52,498


SHAREHOLDERS' EQUITY:
Share capital:
 Ordinary shares                         141              141
Additional paid-in capital                   360,112          357,989
Treasury shares at cost                      (20,091)         (20,091)
Other comprehensive loss                     (679)            (1,569)
Accumulated deficits                         (220,357)        (201,392)
Total shareholders' equity                   119,126          135,078
Total liabilities and shareholders' equity   $   359,816   $  365,971



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars, in thousands)
(Unaudited)
                            Three months ended      Six months ended

                            June 30,                June 30,
                            2014       2013         2014          2013
Cash flow from operating
activities:
Net income (loss)           $ 7,998   $ (7,520)    $  (18,965)  $  (21,661)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and            3,530      3,733        6,908         7,771
amortization
Stock-based compensation    1,076      998          2,123         2,073
expense
Decrease (increase) in
trade and other            (15,800)   2,812        (13,906)      26,464
receivables, net
Decrease in inventory, net  1,420      4,539        3,029         7,402
of write off
Increase (decrease) in
trade payables and accrued  6,139      (10,248)     (8,919)       (23,673)
liabilities
Increase (decrease) in      3,946      (3,283)      1,047         (4,535)
deferred revenues
Decrease in deferred tax    1,327      365          2,644         515
asset, net
Other adjustments           (570)      (220)        271           (321)
Net cash provided by (used  $ 9,066    $ (8,824)    $ (25,768)    $ (5,965)
in) operating activities
Cash flow from investing
activities:
Purchase of property and   (3,328)    (4,802)      (6,178)       (7,697)
equipment
Investment in short-term    -          (38)         -             (255)
bank deposits
Proceeds from short-term    8          336          58            336
bank deposits
Proceeds from sale of
available for sale       -          301          5,161         301
marketable
securities, net
Net cash used in investing  $ (3,320)  $ (4,203)    $ (959)      $ (7,315)
activities
Cash flow from financing
activities:
Proceeds from exercise of   -          8            -             1,145
options
Proceeds from bank loans    2,080      13,690       20,190        16,690
Repayment of bank loans     (2,058)    (2,058)      (4,116)       (6,116)
Net cash provided by        $ 22      $ 11,640    $ 16,074     $ 11,719
financing activities
Translation adjustments on  $   52   $   (510)  $    121  $   (630)
cash and cash equivalents
Increase (Decrease) in cash $ 5,820   $ (1,897)   $ (10,532)   $ (2,191)
and cash equivalents
Cash and cash equivalents
at the beginning of the     26,055     46,805       42,407        47,099
period
Cash and cash equivalents   $ 31,875  $ 44,908    $  31,875   $ 44,908
at 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 June 30,
                      2014                                         2013
                      GAAP                                        
                      (as                               Non-GAAP
                      reported)      Adjustments                   Non-GAAP
Revenues              $ 90,420                      $ 90,420     $ 90,084
Cost of revenues      66,607         (a)562       66,045        60,940
Gross profit          23,813                         24,375        29,144
Operating
expenses:
Research and          8,454          (b)765       7,689         10,245
development
Selling and           14,655         (c)666       13,989        16,153
marketing
General and           5,720          (d)437       5,283         5,515
administrative
Other income          16,800         (e)16,800    -             -
Total operating       $  12,029                     $  26,961    $ 31,913
expenses
Operating income      11,784                         (2,586)       (2,769)
(loss)
Financial             2,175                          2,175         2,247
expenses, net
Income (loss)         9,609                          (4,761)       (5,016)
before taxes
Taxes on income       1,611          (f)1,351     260           658
Net income (loss)     $ 7,998                       $  (5,021)   $ 
                                                                   (5,674)
Basic net                                                          $  
earnings (loss)       $  0.15                      $  (0.10)   (0.15)
per share
Diluted net                                                        $  
earnings (loss)       $  0.15                      $  (0.10)   (0.15)
per share
Weighted average
number of shares
 used in
computing basic       52,457,168                     52,457,168    36,806,059
net earnings
 (loss) per
share
Weighted average
number of shares
 used in
computing diluted     52,861,134                     52,457,168    36,806,059
net
 earnings (loss)
per share
Total adjustments                    13,019
(a) Cost of revenues includes $0.3 million of amortization of intangible
assets, $0.2 million of changes in pre-acquisition indirect tax positions, $60
thousand of stock based compensation expenses and $40 thousand of
restructuring plan related costs in the three months ended June 30, 2014.

(b) Research and development expenses include $0.3 million of restructuring
plan related costs and $0.5 million of stock-based compensation expenses in
the three months ended June 30, 2014.

(c) Selling and marketing expenses include $0.2 million of amortization of
intangible assets, $0.1 million of restructuring plan related costs and $0.3
million of stock based compensation expenses in the three months ended June
30, 2014.

(d) General and administrative expenses include $0.2 million of
restructuring plan related costs and $0.2 million of stock based compensation
expenses in the three months ended June 30, 2014.

(e) Other income represents net cash received as a result of an agreement
with Eltek ASA to settle all claims related to the purchase of Nera from Eltek
in January 2011.

(f) Taxes on income include $1.4 million of non-cash tax adjustments in
the three months ended June 30, 2014.





RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
                     Six months ended June 30,
                     2014                                         2013
                     GAAP
                     (as           Adjustments     Non-GAAP       Non-GAAP
                     reported)
Revenues             $ 160,935                    $  160,935    $  180,181
Cost of revenues     121,543       (a) 1,428      120,115        122,282
Gross profit         39,392                        40,820         57,899
Operating
expenses:
Research and         18,893        (b)            15,542         20,628
development                        3,351
Selling and          30,075        (c) 1,681      28,394         32,263
marketing
General and          11,626        (d) 1,321      10,305         11,163
administrative
Restructuring        936           936             -              -
costs
Other income         16,800        (e) 16,800      -              -
Total operating      $  44,730                    $ 54,241      $ 64,054
expenses
Operating loss       5,338                         13,421         6,155
Financial            10,339        (f) 6,310    4,029          3,743
expenses, net
Loss before taxes    15,677                        17,450         9,898
Taxes on income      3,288         (g) 2,841    447            1,476
Net loss             $  18,965                    $  17,897     $  11,374


                    $   0.36                    $   0.34     $   0.31

Basic and diluted
net loss per share
Weighted average
number of shares
 used in
computing basic      52,457,168                    52,457,168     36,673,228
and diluted
 net loss per
share
Total adjustments                  1,068
(a) Cost of revenues includes $0.6 million of amortization of intangible
assets, $0.4 million of changes in pre-acquisition indirect tax positions,
$0.1 million of stock based compensation expenses and $0.3 million of
restructuring plan related costs in the six months ended June 30,
2014.

(b) Research and development expenses include $2.4 million of
restructuring plan related costs and $0.9 million of stock-based compensation
expenses in the six months ended June 30, 2014.

(c) Selling and marketing expenses include $0.4 million of amortization
ofintangible assets, $0.7 million of restructuring plan related costs and
$0.6 million of stock based compensation expenses in the six months ended June
30, 2014.

(d) General and administrative expenses include $0.8 million of
restructuring plan related costs and $0.5 million of stock based compensation
expenses in the six months ended June 30, 2014.

(e) Other income represents net cash received as a result of an agreement
with Eltek ASA to settle all claims related to the purchase of Nera from Eltek
in January 2011.

(f) Financial expenses include $4.1 million of currency devaluation in
Venezuela and $2.2 million related to certain transactions to expatriate cash
from Venezuela and Argentina in the six months ended June 30,
2014.
(g)Taxes on income include $2.8 million of non-cash tax adjustments in the
six months ended June 30, 2014.



RECONCILIATION BETWEEN REPORTED AND NON-GAAP NET INCOME (LOSS)
(U.S. dollars in thousands)
(Unaudited)
                                                   Three months    Six months
                                                   ended           ended
                                                   June 30, 2014
Reported GAAP net income (loss)                    7,998           (18,965)
Stock based compensation expenses                  1,076           2,123
Amortization of intangible assets                  530             1,053
Restructuring expenses                             667             5,107
Changes in pre-acquisition indirect tax positions  157             434
Currency devaluation in Venezuela                  -               4,140
Expenses related to certain transactions to        -               2,170
expatriate cash from Venezuela and Argentina
Non-cash tax adjustments                           1,351           2,841
Income from settlement agreement with Eltek        (16,800)        (16,800)
Non-GAAP net income (loss)                         (5,021)         (17,897)

SOURCE Ceragon Networks Ltd.
 
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