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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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