Ceragon Networks Reports First Quarter 2012 Financial Results Achieves Revenues of $117.8 Million With Improving Gross Margin and Profitability

PARAMUS, New Jersey, May 7, 2012 /PRNewswire/ --

Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the first quarter which ended March 31, 2012.

Revenues for the first quarter of 2012 reached $117.8 million, up 17% from $100.3 million for the first quarter of 2011, the first quarter of combined revenues following the acquisition of Nera Networks, and down 1% from $118.5 million in the fourth quarter of 2011.

Net loss in accordance with US Generally Accepted Accounting Principles (GAAP) for the first quarter of 2012 was $(3.5) million or $(0.10) per basic share and diluted share, compared to net loss of $(21.4) million in the first quarter of 2011, or $(0.60) per basic share and diluted share.

On a non-GAAP basis, net income for the first quarter of 2012, excluding (a) $1.6 million of equity-based compensation expenses and (b) $3.6 million charges related to the Nera acquisition and integration plan, was $1.7 million or $0.05 per basic share and diluted share. Non-GAAP net loss for the first quarter of 2011 was $(0.9) million, or $(0.02) per basic share 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 first quarter of 2012 was 31.4% of revenues. Gross margin on a non-GAAP basis was 33.3% of revenues.

Operating loss on a GAAP basis in the first quarter of 2012 was $(2.3) million. On a non-GAAP basis operating profit was $2.9 million.

Cash and cash investments at the end of the quarter were $49.5 million.

"Strength in Africa and Latin America drove revenues in Q1 as expected," said Ira Palti, President and CEO of Ceragon. "We are continuing to penetrate these markets according to our plan, adding new customers as well as increasing sales to existing ones. During Q1, our sales in North America grew sequentially and we expanded our market share in India, another indication of our strong execution.  

"Most of the pickup in bookings occurred during April, which we expect will bring the book to bill ratio above 1:1 in Q2 and increases our confidence for the outlook for the second half of the year," continued Mr. Palti. "We remain on track to continue improving gross margin in the second half of 2012 after extending our design-to-cost capabilities to the long haul product. We believe that we will meet our expectations and exit 2012 with a revenue run rate of around $130 million per quarter with gross margin in the mid 30's and a non-GAAP operating margin of around 8%."

Supplemental revenue breakouts:

Geographical breakdown, first quarter of 2012:

  • Europe:            19%
  • Africa:            27%
  • North America:     12%
  • Latin America:     26%
  • India:              9%
  • APAC:               7%

A conference call will follow today, May 7, 2012, beginning at 9:00 a.m. EDT. Investors are invited to join the Company's teleconference by calling (800) 230-1093, or international +1(612) 288-0337 from 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/ir_events.asp?lang=0 selecting the webcast link, and following the registration instructions.

If you are unable to join us live, the replay numbers are: (USA) (800) 475-6701, or (International) +1 320-365-3844, Access Code: 242686.

A replay of both the call and the webcast will be available through June 7, 2012.

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 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® is a registered trademark of Ceragon Networks Ltd. in the United States and other countries. Other names mentioned are owned by their respective holders.

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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 press release includethe risk of significant expenses in connection with potential contingent tax liability associated with Nera's prior operations or facilities, the risk that the combined Ceragon and Nera business may not perform as expected, , 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 http://www.sec.gov  or may be obtained on Ceragon's website at http://www.ceragon.com.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

                                                     Three months ended
                                                          March 31,
                                                     2012            2011
 
    Revenues                                    $ 117,783       $ 100,312
    Cost of revenues                               80,844          70,728
 
    Gross profit                                   36,939          29,584
 
    Operating expenses:
    Research and development, net                  12,155          12,457
    Selling and marketing                          19,847          19,185
    General and administrative                      7,215           5,523
    Restructuring costs                                 -           7,834
    Acquisition related costs                           -           4,919
 
    Total operating expenses                     $ 39,217        $ 49,918
 
    Operating loss                                (2,278)        (20,334)
    Financial expenses, net                         (906)           (447)
 
    Loss before taxes                             (3,184)        (20,781)
 
    Taxes on income                                 (290)           (595)
 
    Net loss                                    $ (3,474)      $ (21,376)
 
    Basic net loss per share                     $ (0.10)        $ (0.60)
    Diluted net loss per share                   $ (0.10)        $ (0.60)
    Weighted average number of
    shares used in computing basic
    net loss per share                         36,346,482      35,603,764
 
    Weighted average number of
    shares used in computing diluted
    net loss per share                         36,346,482      35,603,764
 


CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

(Unaudited)

                                                                    
                                             March 31,            December 31,
                                               2012                  2011
 
    ASSETS
 
    CURRENT ASSETS:
    Cash and cash equivalents               $ 39,418             $ 28,991
    Short-term bank deposits                   6,229                7,159
    Marketable securities                          -                9,665
    Trade receivables, net                   147,062              143,247
    Deferred taxes, net                        8,627                8,622
    Other accounts receivable and
    prepaid expenses                          41,630               37,281
    Inventories                               74,177               93,465
 
    Total current assets                     317,143              328,430
 
    LONG-TERM INVESTMENTS:
    Marketable securities                      3,850                3,716
    Severance pay funds and
    pension                                    6,683                6,360
 
    Total long-term investments             $ 10,533             $ 10,076
 
    OTHER ASSETS
    Deferred taxes, net                        8,868                8,898
    Goodwill and Intangible
    assets, net                               27,191               28,032
    Other long-term receivables                7,960                5,257
 
    Total other assets                      $ 44,019             $ 42,187
 
    PROPERTY AND EQUIPMENT, NET               30,964               30,465
 
    Total assets                           $ 402,659            $ 411,158
 
    CURRENT LIABILITIES:
    Current maturities of long
    term bank loan                             8,232                8,232
    Trade payables                            82,847               77,395
    Deferred revenues                         29,136               38,308
    Other accounts payable and
    accrued expenses                          44,234               49,508
 
    Total current liabilities              $ 164,449            $ 173,443
 
    LONG TERM LIABILITIES:
    Long term bank loan, net of
    current maturities                        24,710               26,768
    Accrued severance pay and
    pension                                   12,531               11,996
    Other long term liabilities               40,030               37,900
 
    Total long term liabilities             $ 77,271             $ 76,664
 
    SHAREHOLDERS' EQUITY:
    Share capital:
    Ordinary shares                               97                   97
    Additional paid-in capital               313,709              311,911
    Treasury shares at cost                  (20,091)             (20,091)
    Other comprehensive income
    (loss)                                     1,221                 (343)
    Accumulated deficits                    (133,997)            (130,523)
 
    Total shareholders' equity             $ 160,939            $ 161,051
 
    Total liabilities and
    shareholders' equity                   $ 402,659            $ 411,158
 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

                                                  Three months ended
                                                      March 31,
                                                 2012          2011
    Cash flow from operating
    activities:
    Net loss                                 $ (3,474)        $ (21,376)
    Adjustments to reconcile net
    loss to net cash provided by
    (used in) operating activities:
 
    Depreciation and amortization               3,771             3,201
    Stock-based compensation expense            1,585             1,419
    Decrease (increase) in trade and
    other receivables, net                     (8,651)           22,494
    Decrease in inventory, net of
    write-off                                  19,460             9,825
    Increase (decrease) in trade
    payables and accrued liabilities            1,987           (16,937)
    Decrease in deferred revenues              (9,172)              (10)
    Decrease (increase) in deferred
    tax asset, net                               (377)               31
    Other adjustments                            (104)              (11)
    Net cash provided by (used in)
    operating activities                      $ 5,025          $ (1,364)
 
    Cash flow from investing
    activities:
    Purchase of property and
    equipment ,net                             (3,303)           (2,789)
    Payment for business acquisition                -           (42,405)
    Investment in short and
    long-term bank deposit                     (1,266)           (2,254)
    Proceeds from short and long-term bank
    deposits                                    2,250            13,796
    Proceeds from sale and maturities of
    marketable securities                       9,717             4,235
    Net cash provided by (used in)
    investing activities                      $ 7,398         $ (29,417)
 
    Cash flow from financing
    activities:
    Proceeds from exercise of
    options                                       213             3,296
    Proceeds from long-term bank
    loan                                            -            35,000
    Repayment of long-term bank loan           (2,058)                -
    Net cash provided by (used in)
    financing activities                     $ (1,845)         $ 38,296
 
    Translation adjustments on cash and
    cash equivalents                           $ (151)            $ 354
 
    Increase in cash and cash equivalents    $ 10,427           $ 7,869
 
    Cash and cash equivalents at the
    beginning of the period                    28,991            37,725
 
    Cash and cash equivalents at the end
    of the period                            $ 39,418          $ 45,594
 


RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

                                       Three months ended March 31,
                                            2012                          2011
                            GAAP       Adjustments         Non-GAAP     Non-GAAP
                        (as reported)
 
    Revenues              $ 117,783                        $ 117,783    $ 100,312
    Cost of
    revenues                 80,844           2,292 (a)       78,552       67,833
 
    Gross profit             36,939                           39,231       32,479
 
    Operating
    expenses:
    Research and
    development,
    net                      12,155             424 (b)       11,731       11,041
    Selling and
    marketing                19,847           1,615 (c)       18,232       16,661
    General and
    administrative            7,215             852 (d)        6,363        4,592
 
    Total
    operating
    expenses               $ 39,217                         $ 36,326     $ 32,294
 
    Operating
    profit (loss)            (2,278)                           2,905          185
    Financial
    expenses, net              (906)                            (906)        (447)
 
    Income (loss)
    before taxes             (3,184)                           1,999         (262)
 
    Taxes on
    income                     (290)                            (290)        (595)
 
    Net income
    (loss)                 $ (3,474)                         $ 1,709       $ (857)
 
    Basic net
    earnings
    (loss) per
    share                   $ (0.10)                          $ 0.05      $ (0.02)
 
    Diluted net
    earnings
    (loss) per
    share                   $ (0.10)                          $ 0.05      $ (0.02)
 
    Weighted average
    number of shares
    used in computing
    basic net earnings
    (loss) per share     36,346,482                       36,346,482   35,603,764
 
    Weighted average
    number of shares
    used in computing
    diluted net
    earnings (loss) per
    share                36,346,482                       37,253,865   35,603,764
 
    Total
    adjustments                             5,183
 


RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

(a) Cost of revenues includes $0.3 million of amortization of intangible assets, $0.4 million of inventory step-up, $0.1 million of stock based compensation expenses, $0.2 million of integration plan related costs and $1.3 million of changes in pre-acquisition indirect tax positions in the three months ended March 31, 2012.


(b) Research and development expenses include $40 thousand of integration plan related costs and $0.4 million of stock based compensation expenses in the three months ended March 31, 2012.


(c) Selling and marketing expenses include $0.6 million of amortization of intangible assets, $0.4 million of integration plan related costs and $0.6 million of stock based compensation expenses in the three months ended March 31, 2012.


(d) General and administrative expenses include $0.3 million of integration plan related costs and $0.6 million of stock based compensation expenses in the three months ended March 31, 2012.


RECONCILIATION BETWEEN REPORTED AND NON-GAAP

OPERATING LOSS

(U.S. dollars in thousands)

(Unaudited)

                                                             Three months 
                                                                ended
                                                           March 31, 2012
 
    Reported GAAP net operating loss                               (2,278)
 
    Stock based compensation expenses                               1,585
    Amortization of intangible assets                                 901
    Inventory step-up                                                 404
    Integration plan related costs                                    955
    Changes in pre-acquisition indirect tax positions               1,338
 
    Non-GAAP net operating profit                                   2,905
 


Company & Investor Contact:
Yoel Knoll
Ceragon Networks Ltd.
Tel: +1-(201)-853-0228
yoelk@ceragon.com

Media Contact:
Abigail Levy-Gurwitz
Ceragon Networks Ltd.
Tel: +1-(201)-853-0271
abigaill@ceragon.com

Media Contact:
Karen Quatromoni
Rainier Communications
Tel. +1-(508)-475-0025 x150
kquatromoni@rainierco.com


SOURCE Ceragon Networks Ltd



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