Ceragon Networks Reports Third Quarter 2010 Financial Results

Achieves Record Revenues, Higher Gross Margins and Improved Operating Margin

Oct 25, 2010, 08:03 ET from Ceragon Networks Ltd

PARAMUS, New Jersey, October 25, 2010 /PRNewswire-FirstCall/ -- Ceragon Networks Ltd. (NASDAQ: CRNT), the provider of high-capacity, LTE/4G-ready wireless backhaul networks, today reported results for the third quarter which ended September 30, 2010.

Revenues for the third quarter of 2010 reached an all-time high of $62.3 million, up 39% from $44.7 million for the third quarter of 2009 and up 2% from $60.9 million in the second quarter of 2010.

Net income in accordance with US Generally Accepted Accounting Principles (GAAP) for the third quarter of 2010 was $4.6 million or $0.13 per basic share and diluted share. Net income in the third quarter of 2009 was $1.1 million, or $0.03 per basic and diluted share.

On a non-GAAP basis, net income for the third quarter of 2010, excluding $843,000 of equity-based compensation expenses, was $5.5 million, or $0.16 per basic share and $0.15 per diluted share. Non-GAAP net income for the third quarter of 2009 was $1.8 million, or $0.05 per basic and diluted share (please refer to the accompanying financial table for reconciliation of GAAP financial information to non-GAAP).

Gross margin on a GAAP basis in the third quarter of 2010 was 36.6%. Gross margin on a non-GAAP basis was 36.7% of revenues.

Cash and cash investments at the end of the quarter were $77.3 million.

"In Q3, we again reported record revenues, higher gross margin and improved operating margin," said Ira Palti, President and CEO of Ceragon. "With new security procedures now in place, business from India is beginning to return to normal. Our book-to-bill ratio in Q3 was about one and, excluding India, it was higher. As a result of strong demand throughout the world, we now expect to achieve annual revenue growth toward the upper end of our target range of 30-35% for the full year."

    Supplemental revenue breakouts:

    Geographical breakdown, third quarter of 2010:
    EMEA:                23%
    North America:       15%
    Asia Pacific:        51%
    Latin America:       11%

A conference call will follow, beginning at 9:00 a.m. EDT. Investors are invited to join the Company's teleconference by calling (800) 230-1092, or international (612)234-9960 at 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) (320)365-3844, Access Code: 173717.

A replay of both the call and the webcast will be available through November 25, 2010.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is a leading provider of high capacity LTE/4G-ready wireless backhaul solutions that enable cellular operators and other wireless service providers to deliver voice and data services, enabling smart-phone applications such as Internet browsing, music and video. With unmatched technology and cost innovation, Ceragon's advanced point-to-point microwave systems allow wireless service providers to evolve their networks from circuit-switched and hybrid concepts to all IP networks. Ceragon solutions are designed to support all wireless access technologies, delivering more capacity over longer distances under any given deployment scenario. Ceragon's solutions are deployed by more than 200 service providers of all sizes, and hundreds of private networks in more than 130 countries. Visit Ceragon at http://www.ceragon.com.

Ceragon Networks(R), CeraView(R), FibeAir(R), the FibeAir(R) design mark and Native2(R) are registered trademarks., and Ceragon(TM), PolyView(TM), ConfigAir(TM), CeraMon(TM), QuickAir(TM), QuickAir Partner Program(TM), QuickAir Partner Certification Program(TM), QuickAir Partner Zone(TM) and EncryptAir(TM) are trademarks of Ceragon Networks Ltd.

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. These risks and uncertainties, as well as others, 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.

                 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,
                               2010           2009        2010           2009

    Revenues               $ 62,293       $ 44,715   $ 182,869      $ 130,863
    Cost of revenues         39,514         30,269     118,245         87,655
    Gross profit             22,779         14,446      64,624         43,208
    Operating expenses:
    Research and              6,191          4,378      18,383         13,475
    development
    Selling and               9,397          6,767      27,538         21,576
    marketing
    General and               2,940          2,625       8,716          7,702
    administrative
    Total operating        $ 18,528       $ 13,770    $ 54,637       $ 42,753
    expenses
    Operating profit          4,251            676       9,987            455
    Financial income,           621            446       1,131          1,268
    net
    Income before taxes       4,872          1,122      11,118          1,723
    Taxes on income             249             43         874            196
    Net income              $ 4,623        $ 1,079    $ 10,244        $ 1,527
    Basic net earnings       $ 0.13         $ 0.03      $ 0.29         $ 0.04

    per share
    Diluted net earnings     $ 0.13         $ 0.03      $ 0.28         $ 0.04
    per share
    Weighted average
    number of shares
    used in computing
    basic net earnings
    per share            34,933,437     34,178,001  34,769,657     34,407,042
    Weighted average
    number of shares
    used in computing
    diluted net earnings
    per share            36,233,612     35,542,326  36,440,599     35,278,880




                       CONDENSED CONSOLIDATED BALANCE SHEETS
                           (U.S. dollars in thousands)
                                     (Unaudited)
                                                       September
                                                          30,
                                                                     December
                                                         2010        31, 2009
    ASSETS

    CURRENT ASSETS:
    Cash and cash equivalents                            $ 19,546    $ 38,339
    Short-term bank deposits                               18,652      30,183
    Marketable securities                                  13,701      16,724
    Trade receivables, net                                 69,417      68,452
    Deferred taxes                                          2,836       3,462
    Other accounts receivable and prepaid expenses          8,282       7,492
    Inventories                                            61,850      65,925
    Total current assets                                  194,284     230,577

    LONG-TERM INVESTMENTS:
    Long-term bank deposits                                 9,269      10,824
    Long-term marketable securities                        16,118       2,250
    Severance pay funds                                     5,598       4,971
    Total long-term investments                            30,985      18,045
    OTHER ASSETS
    Deferred taxes                                          9,896       8,942
    Goodwill                                                1,093           -
    Total other assets                                     10,989     $ 8,942
    PROPERTY AND EQUIPMENT, NET                            15,255      11,809
    Total assets                                        $ 251,513   $ 269,373

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Trade payables                                       $ 22,499    $ 52,898
    Deferred revenues                                      12,759      18,548
    Other accounts payable and accrued expenses            10,975       9,847
    Total current liabilities                              46,233      81,293
    ACCRUED SEVERANCE PAY                                   8,074       7,174

    SHAREHOLDERS' EQUITY:
    Share capital:
    Ordinary shares                                            94          92
    Additional paid-in capital                            297,700     291,736
    Treasury shares at cost                              (20,091)    (20,091)
    Other comprehensive income                                190         100
    Accumulated deficits                                 (80,687)    (90,931)
    Total shareholders' equity                            197,206     180,906
    Total liabilities and shareholders' equity           $ 251,513  $ 269,373





                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                            (U.S. dollars, in thousands)
                                   (Unaudited)

                             Three months ended           Nine months ended
                                September 30,               September 30,
                           2010            2009       2010             2009
    Cash flow from operating activities:
    Net income          $ 4,623        $ 1,079    $ 10,244          $ 1,527
    Adjustments to
    reconcile net income
    to net cash provided
    (used in) operating
    activities:
    Depreciation          1,213            852       3,391            2,323
    Stock-based
    compensation expense    843            696       2,666            2,290
    Decrease (increase)
    in trade and other
    receivables, net   (12,603)        (5,348)     (1,485)           15,889
    Decrease (increase)
    in inventory          6,727        (8,002)       4,075         (10,057)
    Increase (decrease)
    in trade payables and
    accrued liabilities(10,422)          7,378    (28,407)          (5,330)
    Increase (decrease)
    in deferred revenues(5,047)          7,932     (5,789)            8,097
    Decrease (increase)
    in deferred tax asset     4              -       (355)                -
    Other adjustments     (501)          (183)          35            (416)
    Net cash provided by
    (used in) operating
    activities       $ (15,163)        $ 4,404  $ (15,625)         $ 14,323
    Cash flow from
     investing activities:
    Purchase of property
    and equipment ,net  (2,244)        (1,323)     (7,715)          (5,097)
    Payment for
    acquisition of
    Elxys *)            (1,232)                    (1,232)
    Investment in
    short and long-term
    bank deposit          (750)        (8,840)    (11,782)         (27,795)
    Proceeds from
    short and long-term
    bank deposits        5,420          6,334      25,100           26,893
    Investment in
    held-to-maturity
    marketable securities    -              -    (18,339)          (1,500)
    Proceeds from
    maturities of
    held-to-maturity
    marketable
    securities           3,000              -       7,500           11,754
    Net cash provided
    by (used in)
    investing
    activities         $ 4,194       $ (3,829)   $ (6,468)          $ 4,255
    Cash flow from
    Financing
    activities:
    Proceeds from
    exercise of
    options                284            569       3,300              784
    Purchase of
    treasury shares at
    cost                     -              -           -          (8,040)
    Net cash provided
    by (used in)
    financing activities $ 284          $ 569     $ 3,300        $ (7,256)
    Increase (decrease)
    in cash and cash
    equivalents     $ (10,685)        $ 1,144  $ (18,793)         $ 11,322
    Cash and cash
    equivalents at
    the beginning of
    the period          30,231         38,402      38,339           28,224
    Cash and cash
    equivalents at
    the end of the
    period            $ 19,546       $ 39,546    $ 19,546         $ 39,546

    * 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,
                    2010                                     2009
                  GAAP (as reported)  Adjustments (*)   Non-GAAP     Non-GAAP

    Revenues         $ 62,293                          $ 62,293      $ 44,715
    Cost of revenues   39,514              94            39,420        30,207
    Gross profit       22,779                            22,873        14,508
    Operating expenses:
    Research and
    development         6,191             193             5,998         4,230
    Selling and
    marketing           9,397             324             9,073         6,526
    General and
    administrative      2,940             232             2,708         2,380
    Total operating
    expenses           18,528                            17,779        13,136
    Operating profit    4,251                             5,094         1,372
    Financial income,
    net                   621                               621           446
    Income before taxes 4,872                             5,715         1,818
    Taxes on income       249                               249            43
    Net income        $ 4,623                           $ 5,466       $ 1,775
    Basic net earnings
    per share          $ 0.13                            $ 0.16        $ 0.05
    Diluted net
    earnings per share $ 0.13                            $ 0.15        $ 0.05
    Weighted average
    number of
    shares used in
    computing basic
    net earnings per
    share          34,933,437                        34,933,437    34,178,001
    Weighted average
    number of
    shares used in
    computing
    diluted net
    earnings per
    share          36,233,612                        36,233,612    35,542,326
    Total adjustments                  843

    (*) Adjustments related to equity based compensation expenses according
        to SFAS 123 (R)




                   RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
          (U.S. dollars in thousands, except share and per share data)
                                   (Unaudited)

                             Nine months ended September 30,
                                      2010                        2009
                GAAP (as reported)     Adjustments(*)   Non-GAAP    Non-GAAP
    Revenues          $ 182,869                        $ 182,869   $ 130,863
    Cost of revenues    118,245           (*)232         118,013      87,469
    Gross profit         64,624                           64,856      43,394
    Operating expenses:
    Research and
    development          18,383           (*)553          16,680      13,002
                                       (**)1,150
    Selling and
    marketing            27,538           (*)938          26,600       20,707
    General and
    administrative        8,716           (*)943           7,773        6,940
    Total operating
    expenses             54,637                           51,053       40,649
    Operating profit      9,987                           13,803        2,745
    Financial income, net 1,131                            1,131        1,268
    Income before taxes  11,118                           14,934        4,013
    Taxes on income         874                              874          196
    Net Income         $ 10,244                         $ 14,060      $ 3,817
    Basic net earnings
    per share            $ 0.29                           $ 0.40       $ 0.11
    Diluted net earnings
    per share            $ 0.28                           $ 0.39       $ 0.11
    Weighted average
    number of
    shares used in
    computing basic
    net earnings per
    share
                     34,769,657                         34,769,657 34,407,042
    Weighted average
    number of
    shares used in
    computing
    diluted net
    earnings per
    share
                     36,440,599                         36,440,599 35,278,880
    Total adjustments                      3,816
    (*) Adjustments related to equity based compensation expenses according
        to SFAS 123 (R)
    (**) Adjustment related to purchase of technology for further development



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

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    Rainier Communications
    Tel: +1-508-475-0025 x150
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