Ceragon Networks Reports Third Quarter 2012 Financial Results Continued improvement in gross margin and operating profitability

PARAMUS, New Jersey, October 29, 2012 /PRNewswire/ --

Ceragon Networks Ltd. (NASDAQ: CRNT), the premier wireless backhaul specialist today reported results for the third quarter which ended September 30, 2012.

Revenues for the third quarter of 2012 reached $118.0 million, up 2% from $116.1 million for the third quarter of 2011, and down 1% from $119.1 million in the second quarter of 2012.

Net loss in accordance with US Generally Accepted Accounting Principles (GAAP) for the third quarter of 2012 was $(2.7) million or $(0.07) per basic share and diluted share, compared to net loss of $(6.7) million in the third quarter of 2011, or $(0.19) per basic share and diluted share.

On a non-GAAP basis, net income for the third quarter, excluding (a) $1.4 million of equity-based compensation expenses, (b) $0.9 million amortization of intangible assets, (c) $2.9 million inventory step up related to the Nera acquisition and (d) $0.8 million of changes in pre-acquisition indirect tax positions, was $3.3 million, or $0.09 per basic share and diluted share. Non-GAAP net income for the third quarter of 2011 was $0.6 million, or $0.02 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 2012 was 31.0% of revenues. Gross margin on a non-GAAP basis was 34.5% of revenues.

Operating loss on a GAAP basis in the third quarter of 2012 was $(1.3) million. On a non-GAAP basis operating profit was $4.7 million.

Cash and cash investments at the end of the quarter were $48.6 million.

  "We are pleased to achieve a gross margin near our target and reach an operating profit margin of 4%," said Ira Palti, President and CEO of Ceragon. "We are making excellent progress toward our profitability goal.

"We remain optimistic about the business because we are well-positioned in an attractive sector that is likely to enjoy numerous growth drivers for years to come, but we are not immune to macroeconomic factors that are causing the second half of the year to be slower than originally expected.  After a dramatic pickup in bookings to record levels in Q2, we experienced a reversal in the order pattern in Q3. Although a portion of this change is accounted for by some large orders being delayed until Q4, due to the macroeconomic environment, we expect Q4 revenues to decline sequentially. With operators showing extreme caution regarding spending, sales cycles are lengthening and we are assuming no improvement from Q4 levels as we move into 2013.

"In light of our revised revenue assumptions, we are accelerating the implementation of some organizational changes to integrate certain administrative functions and combine our two solutions groups. We will also streamline our regional management structure in Asia. This will reduce our quarterly operating expenses by about 11% and help ensure that we can increase net profits next year despite temporary macro headwinds and provide additional operating leverage once top line growth resumes," concluded Mr. Palti.

Supplemental geographical breakdown  of revenue,  third  quarter of 2012:

  • Europe:              23%    
  • Africa:               7%        
  • North America:        7%
  • Latin America:       34%
  • India:               13%
  • APAC:                16%

A conference call will follow beginning at 9:00 a.m. EDT. Investors are invited to join the Company's teleconference by calling (USA) (877) 260-8900 or international +1 (612) 332-0802 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: Telephone:   (USA)   (USA) (800) 475-6701 or international +1 (320) 365-3844   Access Code: 267371. A replay of both the call and the webcast will be available through November 29, 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 include the 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, risks associated with increased working capital needs, 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 athttp://www.sec.gov  or may be obtained on Ceragon's website at http://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,
                                2012           2011        2012           2011
 
    Revenues               $ 118,046      $ 116,120   $ 354,879      $ 326,782
    Cost of revenues          81,476         81,651     243,401        239,095
 
    Gross profit              36,570         34,469     111,478         87,687
 
    Operating expenses:
    Research and
    development               11,425         12,805      35,480         37,922
    Selling and
    marketing                 19,193         20,988      59,169         61,176
    General and
    administrative             7,216          6,452      20,594         18,187
    Restructuring costs            -              -           -          7,834
    Acquisition related                                                  
    costs                          -              -           -          4,919
 
    Total operating
    expenses               $ 37,834       $ 40,245    $ 115,243      $ 130,038
 
    Operating loss           (1,264)        (5,776)     (3,765)       (42,351)
 
    Financial expenses,
    net                      (1,149)          (241)     (2,609)        (1,000)
 
    Loss before taxes        (2,413)        (6,017)     (6,374)       (43,351)
 
    Taxes on income              261            724         796          2,136
 
    Net loss              $ (2,674)      $ (6,741)   $ ( 7,170)     $ (45,487)
 
    Basic net loss per
    share                   $ (0.07)       $ (0.19)    $ (0.20)       $ (1.27)
 
    Diluted net loss per
    share                   $ (0.07)       $ (0.19)    $ (0.20)       $ (1.27)
 
    Weighted average
    number of shares
    used in computing
    basic net loss per
    share                 36,495,563     36,065,381  36,397,410     35,885,904
 
    Weighted average
    number of shares
    used in computing
    diluted net loss per
    share                 36,495,563     36,065,381  36,397,410     35,885,904


CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

(Unaudited)

                                                    September 30,    December 31,
                                                            2012            2011
    ASSETS
 
    CURRENT ASSETS:
    Cash and cash equivalents                            $ 44,351     $ 28,991
    Short-term bank deposits                                  417        7,159
    Marketable securities                                       -        9,665
    Trade receivables, net                                192,616      143,247
    Deferred taxes                                          7,619        8,622
    Other accounts receivable and prepaid
    expenses                                               35,182       37,281
    Inventories                                            58,991       93,465
    Total current assets                                  339,176      328,430
 
    LONG-TERM INVESTMENTS:
    Long-term marketable securities                         3,864        3,716
    Severance pay funds                                     6,738        6,360
    Total long-term investments                            10,602       10,076
 
    OTHER ASSETS:
    Deferred taxes                                          9,884        8,898
    Goodwill and intangible assets, net                    25,186       28,032
    Other long-term receivables                             6,706        5,257
    Total other assets                                     41,776       42,187
 
    PROPERTY AND EQUIPMENT, NET                            32,595       30,465
    Total assets                                        $ 424,149    $ 411,158
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Short-term loan, including current
    maturities of long term bank loan                    $ 33,232      $ 8,232
    Trade payables                                        101,363       77,395
    Deferred revenues                                      21,889       38,308
    Other accounts payable and accrued expenses            38,811       49,508
    Total current liabilities                             195,295      173,443
    LONG-TERM LIABILITIES
    Long term bank loan, net of current
    maturities                                             20,594       26,768
    Accrued severance pay and pension                      12,315       11,996
    Other long term payables                               37,598       37,900
                                                           70,507       76,664
    SHAREHOLDERS' EQUITY:
    Share capital:
    Ordinary shares                                            97           97
    Additional paid-in capital                            316,890      311,911
    Treasury shares at cost                              (20,091)     (20,091)
    Other comprehensive loss                                (856)        (343)
    Accumulated deficits                                (137,693)    (130,523)
 
    Total shareholders' equity                            158,347      161,051
 
    Total liabilities and shareholders' equity          $ 424,149    $ 411,158


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

                                           Three months ended         Nine months ended
 
                                                September 30,             September 30,
                                         2012             2011      2012            2011
    Cash flow from operating activities:
                                    
    Net loss                         $ (2,674)       $ (6,741)  $ (7,170)      $ (45,487)
    Adjustments to reconcile net 
    loss to net cash used in 
    operating activities:
 
    Depreciation and amortization       3,809           3,744     11,228           9,896
    Stock-based compensation expense    1,403           1,677      4,245           4,533
    Increase in trade and other 
    receivables, net                  (16,393)        (32,624)   (52,856)         (3,490)
    Decrease in inventory, net 
    of write off                        9,833           9,033     33,916          33,026
    Increase (decrease) in trade 
    payables and accrued liabilities    7,124           9,531     17,845         (15,894)
    Increase (decrease) in deferred 
    revenues                           (4,028)            882    (16,419)        (11,883)
    Decrease (increase) in deferred 
    tax asset, net                       (156)              -       (419)             32
    Other adjustments                     183            (689)      (246)          1,706
                                     
    Net cash used in operating 
    activities                         $ (899)      $ (15,187)  $ (9,876)      $ (27,561)
    Cash flow from investing 
    activities:
    Purchase of property and 
    equipment                          (3,845)         (3,722)   (10,213)         (9,751)
    Payment for business 
    acquisition *)                          -               -          -         (42,405)
    Investment in short and 
    long-term bank deposits                 -               -     (1,266)         (7,304)
    Proceeds from short and 
    long-term bank deposits             2,484           1,766      7,920          23,296
    Investment in held-to-maturity 
    marketable securities                   -               -        (64)              -
    Proceeds from maturities of 
    held-to-maturity marketable 
    securities, net                        64           6,000      9,781          10,258
    Net cash provided by (used in) 
    investing activities             $ (1,297)        $ 4,044    $ 6,158       $ (25,906)
 
    Cash flow from financing activities:
    Proceeds from exercise of options     270             376        734           3,956
    Proceeds from bank loans           10,400                     25,000          35,000
    Repayment of bank loans            (2,058)              -     (6,174)              -
    Net cash provided by financing 
    activities                        $ 8,612           $ 376   $ 19,560        $ 38,956
 
    Translation adjustments on cash 
    and cash equivalents                 $ (9)          $ 162     $ (482)         $ (273)
                                     
    Increase (Decrease) in cash and 
    cash equivalents                  $ 6,407       $ (10,605)  $ 15,360       $ (14,784)
    Cash and cash equivalents at 
    the beginning of the period        37,944          33,546     28,991          37,725
    Cash and cash equivalents at 
    the end of the period            $ 44,351        $ 22,941   $ 44,351        $ 22,941
    *) Excluding cash and cash 
    equivalents


RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

 
                                           Three months ended September 30,
 
                                               2012                              2011
                       GAAP (as reported)       Adjustments   Non-GAAP         Non-GAAP

    Revenues                   $ 118,046                     $ 118,046        $ 116,120
    Cost of revenues              81,476       4,111 (a)        77,365           78,667
 
    Gross profit                  36,570                        40,681           37,453
 
    Operating expenses:
    Research and development      11,425         404 (b)        11,021           12,023
    Selling and marketing         19,193       1,071 (c)        18,122           18,359
    General and administrative     7,216         423 (d)         6,793            5,511
 
    Total operating expenses    $ 37,834                      $ 35,936         $ 35,893
 
    Operating profit (loss)       (1,264)                        4,745            1,560
    Financial expenses, net       (1,149)                       (1,149)            (241)
 
    Income (loss) before taxes    (2,413)                        3,596            1,319
 
    Taxes on income                  261                           261              724
 
    Net income (loss)           $ (2,674)                      $ 3,335            $ 595
 
    Basic net earnings 
    (loss) per share             $ (0.07)                       $ 0.09           $ 0.02
 
    Diluted net earnings 
    (loss) per share             $ (0.07)                       $ 0.09           $ 0.02
 
    Weighted average number 
    of shares used in 
    computing basic net 
    earnings (loss) per 
    share                     36,495,563                    36,495,563       36,065,381
 
    Weighted average number 
    of shares used in 
    computing diluted net 
    earnings (loss) per 
    share                     36,495,563                    37,091,849       37,527,749
 
    Total adjustments                         6,009
 


  1. Cost of revenues includes $0.3 million of amortization of intangible assets, $2.9 million of inventory step-up, $0.1 million of stock based compensation expenses and $0.8 million of changes in pre-acquisition indirect tax positions in the three months ended September 30, 2012.
  2. Research and development expenses include $0.4 million of stock based compensation expenses in the three months ended September 30, 2012.
  3. Selling and marketing expenses include $0.6 million of amortization of intangible assets and $0.5 million of stock based compensation expenses in the three months ended September 30, 2012.
  4. General and administrative expenses include $0.4 million of stock based compensation expenses in the three months ended September 30, 2012.

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)

 
                                            Nine months ended September 30,
 
                                         2012                                 2011
                               GAAP (as reported)   Adjustments   Non-GAAP       Non-GAAP
 
    Revenues                            $ 354,879                $ 354,879      $ 326,782
    Cost of revenues                      243,401   8,628 (a)      234,773        221,629
    Gross profit                          111,478                  120,106        105,153
 
    Operating expenses:
    Research and development               35,480   1,435 (b)       34,045         34,517
    Selling and marketing                  59,169   3,799 (c)       55,370         53,750
    General and administrative             20,594   1,322 (d)       19,272         15,612
 
    Total operating expenses            $ 115,243                $ 108,687      $ 103,879
 
    Operating profit (loss)                (3,765)                  11,419          1,274
    Financial expenses, net               (2,609)                  (2,609)        (1,000)
 
    Income (loss) before taxes             (6,374)                   8,810            274
 
    Taxes on income                           796                      796          2,136
 
    Net income (loss)                    $ (7,170)                 $ 8,014       $ (1,862)
 
    Basic net earnings (loss) 
    per share                             $ (0.20)                  $ 0.22        $ (0.05)
 
    Diluted net earnings (loss) 
    per share $ (0.20)                     $ 0.22   $ (0.05)

    Weighted average number 
    of shares used in computing 
    basic net earnings
    (loss) per share                   36,397,410                36,397,410    35,885,904
 
    Weighted average number of shares
    used in computing diluted net
    earnings (loss) per share          36,397,410                37,218,356    35,885,904
 
    Total adjustments                                15,184
 


  1. Cost of revenues includes $0.9 million of amortization of intangible assets, $4.9 million of inventory step-up, $0.2 million of stock based compensation expenses, $0.2 million of integration plan related costs and $2.4 million of changes in pre-acquisition indirect tax positions in the nine months ended September 30, 2012.
  2. Research and development expenses include $40 thousand of integration plan related costs and $1.4 million of stock based compensation expenses in the nine months ended September 30, 2012.
  3. Selling and marketing expenses include $1.8 million of amortization of intangible assets, $0.4 million of integration plan related costs and $1.6 million of stock based compensation expenses in the nine months ended September 30, 2012.
  4. General and administrative expenses include $0.3 million of integration plan related costs and $1.0 million of stock based compensation expenses in the nine months ended September 30, 2012.

RECONCILIATION BETWEEN REPORTED AND NON-GAAP

OPERATING LOSS

(U.S. dollars in thousands)

(Unaudited)

                                     Three months ended             Nine months ended
                                                    September 30, 2012
 
    Reported GAAP net operating loss         (1,264)                       (3,765)
 
    Stock based compensation expenses         1,403                         4,245
    Amortization of intangible assets           854                         2,656
    Inventory step up                         2,952                         4,969
    Integration plan related costs                -                           955
    Changes in pre-acquisition indirect 
    tax positions                               800                         2,359
 
    Non-GAAP net operating profit             4,745                        11,419


Company and Investor Contact:
Yoel Knoll
Ceragon Networks Ltd.
US: + Tel. +1-(201)-853-0228
Cell (Int'l): +972(0)52-830-6419
Office (Int'l): +972(0)3-54310132
yoelk@ceragon.com

Media Contact:
Abigail Levy Gurwitz
Ceragon Networks Ltd.
US: +1-(201)-853-0271
Office (Int'l): +972(0)3-5431166
abigaill@ceragon.com  

SOURCE Ceragon Networks Ltd



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