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CERAGON NETWORKS REPORTS THIRD QUARTER 2015 FINANCIAL RESULTS

November 2, 2015

Little Falls, New Jersey, November 2, 2015 - Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist, today reported results for the third quarter which ended September 30, 2015.

Third Quarter 2015 Highlights:

Revenues - $85.4 million, compared to $99.0 million for the third quarter of 2014, and compared to $94.8 million in the second quarter of 2015.

Gross margin – 31.9% of revenues, compared to 25.6% of revenues in the third quarter of 2014, and compared to 28.2% of revenues in the second quarter of 2015.

Operating income (loss) – Operating income of $6.2 million, compared to an operating loss of $(0.8) million in the third quarter of 2014, and compared to an operating income of $5.9 million in the second quarter of 2015.

Net income (loss) – Net income of $1.4 million or $0.02 per basic share and diluted share for the third quarter of 2015. Net loss for the third quarter of 2014 was $(5.6) million, or $(0.08) per basic share and diluted share. Net income for the second quarter of 2015 was $1.3 million or $0.02 per basic share and diluted share.

Non-GAAP results – Gross margin was 32.4%, operating profit was $7.5 million, and net income was $3.7 million, or $0.05 per basic share and diluted share. For reconciliation of GAAP to non-GAAP results, see attached table.

Cash and cash equivalents - $39.2 million at September 30, 2015 compared to $39.5 million at June 30, 2015.

 “We are continuing to make progress with our strategy to capitalize on the strengths of our IP-20 platform by focusing on high-value opportunities where the customer is seeking best-of-breed solutions,” said Ira Palti, president and CEO of Ceragon. In the third quarter, we improved gross margin, continued to tightly control our operating expenses, and achieved an operating profit margin of 7.2%, compared to 6.2% in the second quarter. The lower level of revenue resulted primarily from our ongoing profit improvement initiatives such as more in-depth analysis and a more selective approach to business opportunities.

“We also generated over $7 million in positive cash flow during the third quarter, which we used to reduce debt,” Palti added.

Supplemental geographical breakdown of revenue for the third quarter of 2015:

  •         Europe:                  12%
  •     Africa:                    12%
  •     North America:      15%
  •     Latin America:       20%
  •     India:                      30%
  •     APAC:                     11%

A conference call will follow beginning at 9:00 a.m. EST. Investors are invited to join the Company’s teleconference by calling (USA) (888) 276-0010 or international +1 (612) 332-0630 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 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: 371263. A replay of both the call and the webcast will be available through December 2, 2015.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We provide innovative, flexible and cost-effective wireless backhaul solutions that enable mobile operators and other service providers to deliver 4G/LTE, 3G/2G, and other wireless broadband services to their subscribers with high quality of experience. Our solutions are deployed by public utilities, government and defense organizations for delivering mission critical multimedia and other applications at high reliability and speed. Ceragon’s high-capacity solutions use microwave technology to transfer multimedia, 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 modernization to all-IP networks. As the demand for multimedia services 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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 

 

   

Three months ended

September 30,

 

Nine months ended

September 30,

 
   

2015

 

2014

 

2015

 

2014

                 
                 
Revenues   $      85,367   $      99,013   $    273,792   $    259,948
Cost of revenues   58,156   73,695   195,647   195,238
                 
Gross profit   27,211   25,318   78,145   64,710
                 
Operating expenses:                
Research and development   5,493   7,999   17,662   26,892
Selling and marketing   10,045   12,842   30,834   42,917
General and administrative   5,501   5,267   15,762   16,893
Restructuring costs   -   -   1,225   936
Other income   -   -   -   16,800
                 
Total operating expenses   21,039   26,108   65,483   70,838
                 
Operating income (loss)   6,172   (790)   12,662   (6,128)
                 
Financial expenses, net   2,966   3,311   12,473   13,650
                 
Income (loss) before taxes   3,206   (4,101)   189   (19,778)
                 
Taxes on income   1,763   1,457   4,410   4,745
                 
Net income (loss)   $        1,443   $     (5,558)   $     (4,221)   $   (24,523)
                 
                 
Basic net income (loss) per share   $          0.02   $      (0.08)   $         (0.05)   $       (0.42)
                 
Diluted net income (loss) per share   $          0.02   $      (0.08)   $         (0.05)   $       (0.42)
                   
Weighted average number of shares used in computing basic net income (loss) per share   77,221,170   68,047,913   77,179,760   57,711,192
                 
Weighted average number of shares used in computing diluted net income (loss) per share   77,355,761   68,047,913   77,179,760   57,711,192

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

   

September 30,

2015

 

December 31, 2014

   

Unaudited

 

Audited

ASSETS        
         
CURRENT ASSETS:        
Cash and cash equivalents  

$    39,204

 

$    41,423

Short-term bank deposits  

368

 

413

Marketable securities  

-

 

535

Trade receivables, net  

122,245

 

162,626

Deferred taxes  

1,349

 

3,522

Other accounts receivable and prepaid expenses  

20,303

 

22,898

Inventories  

48,634

 

61,830

Total current assets  

232,103

 

293,247

         
NON-CURRENT ASSETS:        
   Deferred taxes  

-

 

239

   Severance pay and pension fund  

4,912

 

5,669

   Property and equipment, net  

29,236

 

33,138

Intangible assets, net  

3,650

 

5,070

   Other non-current assets  

1,599

 

4,510

Total long-term assets  

39,397

 

48,626

Total assets  

$  271,500

 

$  341,873

         
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Short term loan, including current maturities of long term bank loan  

43,930

 

48,832

Trade payables  

68,366

 

101,752

Deferred revenues  

10,063

 

17,667

Other accounts payable and accrued expenses  

29,769

 

37,248

Total current liabilities  

152,128

 

205,499

         
LONG-TERM LIABILITIES:        
Long term bank loan, net of current maturities  

-

 

2,072

Accrued severance pay and pension  

9,581

 

11,452

Other long term payables  

13,530

 

18,298

Total long-term liabilities  

23,111

 

31,822

SHAREHOLDERS' EQUITY:        
Share capital:        
    Ordinary shares  

212

 

212

Additional paid-in capital  

407,698

 

406,413

Treasury shares at cost  

(20,091)

 

(20,091)

Other comprehensive loss  

(9,466)

 

(4,111)

Accumulated deficits  

(282,092)

 

(277,871)

         
Total shareholders' equity  

96,261

 

104,552

         
Total liabilities and shareholders' equity  

$  271,500

 

$  341,873

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

 

Three months ended

September 30,

 

Nine months ended

September 30,

 
 

2015

 

2014

 

2015

 

2014

Cash flow from operating activities:              
Net income (loss)

$   1,443

 

$ (5,558)

 

$ (4,221)

 

$ (24,523)

Adjustments to reconcile net income (loss) to net cash used in operating activities:              
Depreciation and amortization

2,844

 

3,486

 

9,066

 

10,394

Stock-based compensation expense

600

 

568

 

1,172

 

2,691

Decrease (increase) in trade and other  receivables, net

17,306

 

(14,918)

 

36,662

 

(28,824)

Decrease in inventory

1,563

 

1,046

 

11,211

 

4,075

 Increase (decrease) in trade payables and ccrued liabilities

(13,140)

 

7,131

 

(38,471)

 

(1,788)

Increase (decrease) in deferred revenues

(3,176)

 

(455)

 

(7,604)

 

592

Decrease in deferred tax asset, net

988

 

1,360

 

2,441

 

4,004

Other adjustments

(595)

 

(562)

 

(784)

 

(291)

Net cash provided by (used in) operating activities

$   7,833

 

$ (7,902)

 

$   9,472

 

$ (33,670)

Cash flow from investing activities:              
  Purchase of property and equipment

(847)

 

(2,286)

 

(4,320)

 

(8,464)

Investment in short-term bank deposits

(15)

 

-

 

(19)

 

-

Proceeds from short-term bank deposits

-

 

11

 

64

 

69

 Proceeds from sale of available for sale marketable securities, net

-

 

-

 

122

 

5,161

               
Net cash used in investing activities

$    (862)

 

$ (2,275)

 

$ (4,153)

 

$ (3,234)

               
Cash flow from financing activities:              
Proceeds from exercise of options

112

 

-

 

112

 

-

Proceeds from issuance of shares, net

-

 

45,150

 

-

 

45,150

Proceeds from bank loans

-

 

-

 

4,200

 

20,190

Repayment of bank loans

(7,058)

 

(22,838)

 

(11,174)

 

(26,954)

Net cash provided by (used in) financing activities

$ (6,946)

 

$ 22,312

 

$ (6,862)

 

$ 38,386

               
Translation adjustments on cash and cash equivalents

$    (356)

 

$      (66)

 

$    (676)

 

$        55

Increase (decrease) in cash and cash equivalents

$    (331)

 

$ 12,069

 

$ (2,219)

 

$   1,537

Cash and cash equivalents at the beginning of the period

39,535

 

31,875

 

41,423

 

42,407

Cash and cash equivalents at the end of the period

$ 39,204

 

$ 43,944

 

$ 39,204

 

$ 43,944

                 
RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

               
                     Three months ended September 30, 2015  

2014

   

GAAP (as reported)

 

Adjustments

 

Non-GAAP

 

Non-GAAP

                 
Revenues  

$    85,367

     

$  85,367

 

$  99,013

 
Cost of revenues  

58,156

  (a)     473  

57,683

 

     73,579

 
                   
Gross profit  

27,211

     

27,684

 

25,434

 
                   
Operating expenses:                  
Research and development  

5,493

  (b)    215  

5,278

 

7,623

 
Selling and marketing  

10,045

  (c)     453  

9,592

 

12,623

 
General and administrative  

5,501

  (d)    178  

5,323

 

5,124

 
                   
Total operating expenses  

$   21,039

     

$    20,193

 

$   25,370

 
                   
Operating income  

6,172

     

7,491

 

64

 
Financial expenses, net  

2,966

     

2,966

 

           3,311

 
                   
Income (loss) before taxes  

3,206

     

4,525

 

(3,247)

 
                   
Taxes on income  

1,763

  (e)    945  

818

 

      307

 
                   
Net income (loss)  

1,443

     

 $    3,707

 

 $   (3,554)

 
Basic net income (loss) per share  

$      0.02

     

  $     0.05

 

  $    (0.05)

 
Diluted net income (loss) per share  

$      0.02

     

  $     0.05

 

  $    (0.05)

 
                   
Weighted average number of shares used in computing basic net income (loss) per share  

77,221,170

     

  77,221,170

 

68,047,913

 
                 
Weighted average number of shares used in computing diluted net income (loss) per share  

77,355,761

     

78,011, 917

 

68,047,913

 
 

Total adjustments

     

2,264

       
                 
                                                     
(a)    Cost of revenues includes $0.3 million of amortization of intangible assets, $30 thousand of stock based compensation expenses and $0.1 million of changes in pre-acquisition indirect tax positions in the three months ended September 30, 2015.
(b)    Research and development expenses include $0.2 million of stock based compensation expenses in the three months ended September 30, 2015.

(c)    Selling and marketing expenses include $0.3 million of amortization of intangible assets and $0.2 million of stock based compensation expenses in the three months ended September 30, 2015.

(d)    General and administrative expenses include $0.2 million of stock based compensation expenses in the three months ended September 30, 2015.

(e)    Taxes on income include $0.9 million of non-cash tax adjustments in the three months ended September 30, 2015.

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

   

Nine months ended September 30,

   

2015

 

2014

   

GAAP (as reported)

 

Adjustments

 

Non-GAAP

 

Non-GAAP

                 
Revenues   $ 273,792       $ 273,792   $ 259,948
Cost of revenues   195,647   (a)   1,240   194,407   193,694
Gross profit   78,145       79,385   66,254
                 
Operating expenses:                
Research and development   17,662   (b)     556   17,106   23,165
Selling and marketing   30,834   (c)      875   29,959   41,017
General and administrative   15,762   (d)     186   15,576   15,429
Restructuring costs   1,225            1,225   -   -
                 
Total operating expenses   65,483       62,641   79,611
Operating income (loss)   12,662       16,744   (13,357)
Financial expenses, net   12,473   (e)    2,973   9,500   7,340
                 
Income (loss) before taxes   189       7,244   (20,697)
Taxes on income   4,410   (f)    2,535   1,875   754
                 
Net income (loss)   $    (4,221)       $     5,369   $  (21,451)
                 
Basic net income (loss) per share   (0.05)       0.07   (0.37)
                   
Diluted net income (loss) per share   (0.05)       0.07   (0.37)  
                 
Weighted average number of shares used in computing basic net income (loss) per share   77,179,760       77,179,760   57,711,192
                 
Weighted average number of shares used in computing diluted net income (loss) per share   77,179,760       77,868,331   57,711,192
 

Total adjustments

      9,590        
                       
(a)   Cost of revenues includes $0.9 million of amortization of intangible assets, $40 thousands of stock based compensation expenses, and $0.3 million of changes in pre-acquisition indirect tax positions in the nine months ended September 30, 2015.
(b)   Research and development expenses include $0.6 million of stock based compensation expenses in the nine months ended September 30, 2015.

(c)   Selling and marketing expenses include $0.5 million of amortization of intangible assets, and $0.4 million of stock based compensation expenses in the nine months endedSeptember 30, 2015.

(d)   General and administrative expenses include $0.2 million of stock based compensation expenses in the nine months ended September 30, 2015.

(e)   Financial expenses include the effect of re-measurement of certain assets denominated in or linked to the U.S. dollar in Venezuela, due to restrictive government policies on payments in foreign currency in the nine months ended September 30, 2015.

(f)    Taxes on income include non-cash tax adjustments in the nine months ended September 30, 2015.

RECONCILIATION BETWEEN REPORTED AND NON-GAAP

NET INCOME (LOSS)

(U.S. dollars in thousands)

(Unaudited)

   

Three months ended

 

Nine months ended

   

September 30, 2015

 

September 30, 2015

         
Reported GAAP net income (loss)   1,443   (4,221)
         
Stock based compensation expenses   600   1,172
Amortization of intangible assets   590   1,408
Restructuring plan related costs   -   1,225
Changes in pre-acquisition indirect tax positions   129   277
Currency devaluation in Venezuela   -   2,973
Non-cash tax adjustments   945   2,535
         
Non-GAAP net income   3,707   5,369

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