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Ceragon Networks Reports Third Quarter 2013 Financial Results

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PARAMUS, N.J., Nov. 11, 2013 /PRNewswire/ -- Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 high-capacity wireless hauling specialist today reported results for the third quarter which ended September 30, 2013.

Revenues for the third quarter of 2013 reached $92.1 million, down 21% from $117.1 million for the third quarter of 2012, and up 2% from $90.1 million in the second quarter of 2013.

Net loss in accordance with US Generally Accepted Accounting Principles (GAAP) for the third quarter of 2013 was $(10.4) million or $(0.28) per basic share and diluted share, compared to net loss of $(4.7) million in the third quarter of 2012, or $(0.13) per basic share and diluted share.

On a non-GAAP basis, net loss for the third quarter, excluding (a) $0.7 million of equity-based compensation expenses, (b) $0.6 million amortization of intangible assets, (c) $0.6 million of changes in pre-acquisition indirect tax positions, and (d) $4.0 million of non-recurring adjustment of valuation allowance on tax assets, was $(4.5) million, or $(0.12) per basic share and diluted share. Non-GAAP net income for the third quarter of 2012 was $1.6 million, or $0.04 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 2013 was 30.9% of revenues. Gross margin on a non-GAAP basis was 31.9% of revenues.

Operating loss on a GAAP basis in the third quarter of 2013 was $(4.1) million. On a non-GAAP basis operating loss was $(2.2) million.

Cash and cash investments at the end of the quarter were $44.8 million.

Cost Reduction Initiatives

The company indicated that it will realign its operations, reduce head count and undertake other cost reduction measures in order to lower its breakeven point and improve profitability. The restructuring is expected to result in annual savings of approximately $25 million. Actions will include consolidating research and development activities worldwide and realigning teams on enhancing the newly released IP-20 platform, consolidating or relocating certain offices, and reducing staff functions and some operations positions, as well as other measures. No customer-facing activities will be affected. Total restructuring charges are expected to be approximately $18-$21 million, comprised of a non-recurring provision in the fourth quarter of 2013 of approximately $11-$13 million, as well as ongoing restructuring charges totaling $7-$8 million, which will begin in Q4 and will continue during the first half of 2014, mainly in the first quarter.

"Our bookings and revenues remain stable in a challenging operator spending environment," said Ira Palti, President and CEO of Ceragon. "We continue to garner excellent feedback on our new products, whether deployed in live networks or in ongoing trials with Tier 1 operators, as they prepare to deploy LTE networks."

"We recently launched our full IP-20 portfolio. This is a premium SDN-ready platform merging long haul and short haul products into a single hardware architecture managed by a common operating system. Introducing  the IP-20 platform represents the attainment of an important strategic milestone. Now that we have completed this major development phase, we are implementing an organizational restructuring aimed at lowering our revenue breakeven point by reducing our operating expenses by 15%. We believe this new cost structure will be sustainable as revenue growth resumes and will position us to achieve substantial additional operating leverage," concluded Mr. Palti.

Supplemental geographical breakdown of revenue, third quarter of 2013:

  • Europe:                                 18%    
  • Africa:                                   23%                
  • North America:                      10%
  • Latin America:                       29%
  • India:                                    11%
  • APAC:                                  9%

A conference call will follow beginning at 9:00 a.m. EST. Investors are invited to join the Company's teleconference by calling (USA) (800) 230-1096  or international +1 (612) 332-0107 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: 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: 304945. A replay of both the call and the webcast will be available through December, 11 2013.

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.

Media Contact:

Media Contact:

Company & Investor Contact:

Justine Schneider

Abigail Levy-Gurwitz

Yoel Knoll

Calysto Communications

Ceragon Networks

Ceragon Networks

Tel: +1-(404)-266-2060 x507

Tel: +1-(201)-853-0271

Tel. +1-(201)-853-0228

jschneider@calysto.com  

abigaill@ceragon.com

yoelk@ceragon.com

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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.  

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 presentation include risks associated with the impact of restructuring activities, risks associated with continuing losses and possible liquidity issues, risks associated with the possibility that new products will not be accepted in the market, 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, 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 www.sec.gov  or may be obtained on Ceragon's website at 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

September 30


Nine months ended

September 30,




2013


2012


2013


2012



















Revenues


$     92,099


$     117,087


$     272,280


$     339,802

Cost of revenues


63,610


82,559


187,792


236,552










Gross profit


28,489


34,528


84,488


103,250










Operating expenses:









Research and development


10,065


11,425


32,553


35,480

Selling and marketing


16,296


19,175


50,637


58,762

General and administrative


6,189


7,216


18,668


20,594










Total operating expenses


$    32,550


$    37,816


$    101,858


$    114,836










Operating loss


4,061


3,288


17,370


11,586










Financial expenses, net


1,980


1,149


8,856


2,609










Loss before taxes


6,041


4,437


26,226


14,195










Taxes on income


4,399


261


5,875


796










Net loss


$   10,440


$   4,698


$     32,101


$    14,991



















Basic and diluted net loss per share


$     0.28


$     0.13


$      0.87


$      0.41











Weighted average number of shares 
     used in computing basic and 
     diluted net loss per share


 

 

36,815,864


 

 

36,495,563


 

 

36,736,417


 

 

36,397,410










 

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

(Unaudited)




September 30,
2013


December
31, 2012

ASSETS










CURRENT ASSETS:





Cash and cash equivalents


$    40,582


$    47,099

Short-term bank deposits


321


422

Trade receivables, net


128,766


149,120

Deferred taxes


2,651


8,589

Other accounts receivable and prepaid expenses


37,529


38,743

Inventories


57,438


65,554

Total current assets


267,287


309,527






NON-CURRENT ASSETS:





Marketable securities


3,923


4,068

   Deferred tax assets, net


10,984


9,140

   Severance pay and pension fund


7,673


7,163

   Property and equipment, net


36,403


33,642

Intangible assets, net


7,866


9,809

Goodwill


15,061


15,283

   Other non-current  assets


4,882


4,964



86,792


84,069



$      354,079


$      393,596

 

LIABILITIES AND SHAREHOLDERS' EQUITY





 

CURRENT LIABILITIES:





Short term loan, including current maturities of long term bank loan


$    49,222


$    25,232

Trade payables


81,041


102,079

Deferred revenues


8,501


16,719

Other accounts payable and accrued expenses


39,421


36,090

Total current liabilities


178,185


180,120

 

LONG-TERM LIABILITIES





Long term bank loan, net of current maturities


12,362


18,536

Accrued severance pay and pension


12,818


12,311

Other long term payables


35,969


38,920



61,149


69,767

SHAREHOLDERS' EQUITY:





Share capital:





     Ordinary shares


98


98

Additional paid-in capital


322,025


318,106

Treasury shares at cost


(20,091)


(20,091)

Other comprehensive loss


(1,272)


(490)

Accumulated deficits


(186,015)


(153,914)






Total shareholders' equity


114,745


143,709






Total liabilities and shareholders' equity


$      354,079


$    393,596

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)



Three months ended
September 30,


Nine months ended
 
September 30,


2013


2012


2013


2012

Cash flow from operating activities:








Net loss

$  (10,440)


$  (4,698)


$   (32,101)


$   (14,991)

Adjustments to reconcile net loss to net cash 
    used in operating activities:
















Depreciation and amortization

3,885


3,809


11,656


11,228

Stock-based compensation expense

701


1,403


2,774


4,245

Decrease (increase) in trade and other  
    receivables, net

(6,130)


(15,712)


20,334


(39,521)

Decrease in inventory, net of write off

91


11,193


7,493


28,809

 Increase (decrease) in trade payables and 
          accrued liabilities

4,604


7,107


(19,069)


17,438

Decrease in deferred revenues

(3,683)


(4,028)


(8,218)


(16,419)

Decrease (increase) in deferred tax asset, net

3,228


(156)


3,743


(419)

Other adjustments

299


183


(22)


(246)

Net cash used in operating activities

$ (7,445)


$ (899)


$ (13,410)


$ (9,876)

Cash flow from investing activities:








  Purchase of property and equipment

(4,009)


(3,845)


(11,706)


(10,213)

Investment in short-term bank deposits

-


-


(255)


(1,266)

Proceeds from short-term bank deposits

-


2,484


336


7,920

Investment in available for sale marketable securities

-


-


-


(64)

 Proceeds from maturities of available for sale 
          marketable securities, net

-


64


301


9,781

Net cash provided by (used in) investing
          activities

$ (4,009)


$ (1,297)


$  (11,324)


$  6,158









Cash flow from financing activities:








Proceeds from exercise of options

-


270


1,145


734

Proceeds from bank loans

9,300


10,400


25,990


25,000

Repayment of bank loans

(2,058)


(2,058)


(8,174)


(6,174)

Net cash provided by financing activities

 

$  7,242


 

$  8,612


 

$  18,961


 

$  19,560









Translation adjustments on cash and cash equivalents

 

$ (114)


 

$ (9)


 

$  (744)


 

$  (482)

Increase (Decrease) in cash and cash equivalents

$  (4,326)


$  6,407


$  (6,517)


$  15,360

Cash and cash equivalents at the beginning of the period

44,908


37,944


47,099


28,991

Cash and cash equivalents at the end of the period

$  40,582


$  44,351


$  40,582


$  44,351









 

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)




Three months ended September 30,

 





2013




2012




GAAP (as
reported)


Adjustments


Non-GAAP


Non-GAAP











Revenues


$  92,099




$  92,099


$ 117,087


Cost of revenues


63,610


(a)     902


62,708


78,149












Gross profit


28,489




29,391


38,938












Operating expenses:










Research and development


10,065


(b)     128


9,937


11,021


Selling and marketing


16,296


(c)      660


15,636


18,103


General and administrative


6,189


(d)     200


5,989


6,793












Total operating expenses


$   32,550




$   31,562


$ 35,917












Operating profit (loss)


(4,061)




(2,171)


3,021


Financial expenses, net


1,980




1,980


1,149












Income (loss) before taxes


(6,041)




(4,151)


1,872












Taxes on income


4,399


(e)    4,037


362


261












Net income (loss)


$  (10,440)




$   (4,513)


$      1,611












Basic net earnings (loss) per share


$    (0.28)




$    (0.12)


$     0.04












Diluted net earnings (loss) per share


$    (0.28)




$    (0.12)


$     0.04












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


36,815,864




36,815,864


36,495,563


 

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


36,815,864




36,815,864


37,091,849


 

Total adjustments



 

5,927















(a) Cost of revenues includes $0.3 million of amortization of intangible assets, $40 thousand of stock based compensation expenses and $0.6 million of changes in pre-acquisition indirect tax positions in the three months ended September 30, 2013.

(b) Research and development expenses include $0.1 million of stock based compensation expenses in the three months ended September 30, 2013.

(c) Selling and marketing expenses include $0.3 million of amortization of intangible assets and $0.3 million of stock based compensation expenses in the three months ended September 30, 2013.

(d) General and administrative expenses include $0.2 million of stock based compensation expenses in the three months ended September 30, 2013.

(e) Taxes on income include $4.0 million of non-recurring adjustment of valuation allowance on tax assets.

 

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

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

(Unaudited)






Nine months ended September 30,

 



2013


2012



GAAP (as
reported)


Adjustments


Non-GAAP


Non-GAAP










Revenues


$  272,280




$ 272,280


$ 339,802

Cost of revenues


187,792


(a)   2,802


184,990


228,474

Gross profit


84,488




87,290


111,328










Operating expenses:









Research and development


32,553


(b)   1,988


30,565


34,045

Selling and marketing


50,637


(c)    2,738


47,899


54,963

General and administrative


18,668


(d)   1,516


17,152


19,272










Total operating expenses


$   101,858




$ 95,616


$ 108,280










Operating profit (loss)


(17,370)




(8,326)


3,048

Financial expenses, net


8,856


(e)    3,133


5,723


2,609










Income (loss) before taxes


(26,226)




(14,049)


439










Taxes on income


5,875


(f)    4,037


1,838


796










Net loss


$   32,101




$   15,887


$   357










 

Basic and diluted net loss per share


$      0.87




$     0.43


$     0.01

 

Weighted average number of shares 
     used in computing basic and  diluted 
     net loss  per share


36,736,417




36,736,417


36,397,410










Total adjustments




16,214














(a) Cost of revenues includes $0.9 million of amortization of intangible assets, $0.5 million of inventory step-up, $0.1 million of stock based compensation expenses, $0.2 million of integration plan related costs and $1.1 million of changes in pre-acquisition indirect tax positions in the nine months ended September 30, 2013.

(b) Research and development expenses include $1.2 million of integration plan related costs and $0.8 million of stock based compensation expenses in the nine months ended September 30, 2013.

(c) Selling and marketing expenses include $1.0 million of amortization of intangible assets, $0.7 million of integration plan related costs and $1.1 million of stock based compensation expenses in the nine months ended September 30, 2013.

(d) General and administrative expenses include $0.7 million of integration plan related costs and $0.8 million of stock based compensation expenses in the nine months ended September 30, 2013.

(e) Financial expenses include $3.1 million non-recurring currency devaluation in Venezuela in the nine months ended September 30, 2013.

(f) Taxes on income include $4.0 million non-recurring adjustment of valuation allowance on tax assets.

 

RECONCILIATION BETWEEN REPORTED AND NON-GAAP

OPERATING LOSS

(U.S. dollars in thousands)

(Unaudited)




Three months
ended



Nine months
ended



September 30, 2013








Reported GAAP net operating loss


4,061



17,370









Stock based compensation expenses


701



2,774


Amortization of intangible assets


632



1,902


Inventory step up


-



459


Integration plan related costs


-



2,844


Changes in pre-acquisition indirect tax positions


557



1,065









Non-GAAP net operating profit


2,171



8,326










SOURCE Ceragon Networks Ltd.



RELATED LINKS
http://www.ceragon.com

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