Ceragon Networks Reports Third Quarter 2011 Financial Results
Company Increases Revenue; Improves Gross Margin And Operating Profitability
PARAMUS, New Jersey, November 7, 2011 /PRNewswire/ --
Ceragon Networks Ltd. (NASDAQ: CRNT), the premier wireless backhaul specialist today reported results for the third quarter which ended September 30, 2011.
Revenues for the third quarter of 2011 reached a record of $116.1 million, up 86% from $62.3 million for the third quarter of 2010, and up 5% from $110.4 million in the second quarter of 2011.
Net loss in accordance with US Generally Accepted Accounting Principles (GAAP) for the third quarter of 2011 was ($6.7) million or ($0.19) per basic share and diluted share, compared to net income of $4.6 million in the third quarter of 2010, or $0.13 per basic share and diluted share.
On a non-GAAP basis, net income for the third quarter, excluding (a) $1.7 million of equity-based compensation expenses, and (b) $5.7 million charges related to the Nera acquisition and integration plan, was $595,000, or $0.02 per basic share and diluted share. Non-GAAP net income for the third quarter of 2010 was $5.5 million, or $0.16 and $0.15 per basic and diluted share, respectively (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 2011 was 29.7% of revenues, compared to GAAP gross margin of 21.4% in the second quarter of 2011. Gross margin on a non-GAAP basis was 32.3% of revenues, compared to non-GAAP gross margin of 31.9% in the second quarter of 2011.
Operating loss on a GAAP basis in the third quarter of 2011 was ($5.8) million compared to GAAP operating loss of ($16.2) million in the second quarter of 2011. On a non-GAAP basis operating income was $1.6 million, compared to non-GAAP operating loss of ($470,000) in the second quarter of 2011.
Cash and cash investments at the end of the quarter were $45.9 million.
"We are pleased to report another quarter of excellent progress with the integration leading to a sequential increase in revenues, improved gross margin and profitability," said Ira Palti, President and CEO of Ceragon. "Business remains good with our book-to-bill ratio for the first nine months of 2011 above one," continued Mr. Palti. "We expect to continue growing revenues, probably at a slower pace than originally expected because we cannot ignore the macro economic uncertainty and the issues in India affecting order patterns. Our plan to migrate customers to lower-cost higher functionality and capacity products is proceeding smoothly, and we continue to expect we will reach our gross margin target of the mid-30s by the end of next year. Given the current level of visibility, we believe targeting a non-GAAP operating margin of 8%-9% by the end of 2012 is realistic."
Supplemental revenue breakouts:
Geographical breakdown, third quarter of 2011:
- Europe: 17%
- Africa: 17%
- North America: 13%
- Latin America: 25%
- India: 12%
- APAC: 16%
A conference call will follow today, November 7, 2011, beginning at 9:00 a.m. EST. Investors are invited to join the Company's teleconference by calling (800) 230-1074 or international +1-612-332 -0226 at 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/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 (International) +1-320-365-3844, Access Code: 220279. A replay of both the call and the webcast will be available through December 7, 2011.
About Ceragon Networks Ltd.
Ceragon Networks Ltd. (NASDAQ: CRNT) is the premier wireless backhaul specialist. Ceragon's high capacity wireless backhaul solutions enable cellular operators and other wireless service providers to deliver 2G/3G and LTE/4G voice and data services that enable 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 230 service providers of all sizes, and hundreds of private networks in more than 130 countries. Visit Ceragon at http://www.ceragon.com.
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 that Nera Networks and Ceragon's businesses will not be integrated successfully; the risk that any synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the Nera Networks transaction making it more difficult to maintain relationships with customers, employees or suppliers, the risk that Nera Networks 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
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,
2011 2010 2011 2010
Revenues $ 116,120 $ 62,293 $ 326,782 $ 182,869
Cost of
revenues 81,651 39,514 239,095 118,245
Gross profit 34,469 22,779 87,687 64,624
Operating
expenses:
Research and
development 12,805 6,191 37,922 18,383
Selling and
marketing 20,988 9,397 61,176 27,538
General and
administrative 6,452 2,940 18,187 8,716
Restructuring
costs - - 7,834 -
Acquisition
related costs - - 4,919 -
Total
operating
expenses $ 40,245 $ 18,528 $ 130,038 $ 54,637
Operating
profit (loss) (5,776) 4,251 (42,351) 9,987
Financial
income
(expenses),
net (241) 621 (1,000) 1,131
Income (loss)
before taxes (6,017) 4,872 (43,351) 11,118
Taxes on
income 724 249 2,136 874
Net Income
(loss) $ (6,741) $ 4,623 $ (45,487) $ 10,244
Basic net
earnings per
share $ (0.19) $ 0.13 $ (1.27) $ 0.29
Diluted net
earnings per
share $ (0.19) $ 0.13 $ (1.27) $ 0.28
Weighted
average number
of shares used
in computing
basic net
earnings
(loss) per
share 36,065,381 34,933,437 35,885,904 34,769,657
Weighted
average number
of shares used
in computing
diluted net
earnings
(loss) per
share 36,065,381 36,233,612 35,885,904 36,440,599
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
(Unaudited)
September 30, December
2011 31, 2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 22,941 $ 37,725
Short-term bank deposits 9,569 23,357
Marketable securities 8,821 7,363
Trade receivables, net 135,849 88,074
Deferred taxes 4,446 4,057
Other accounts receivable and prepaid expenses 38,398 15,425
Inventories 95,925 65,921
Total current assets 315,949 241,922
LONG-TERM INVESTMENTS:
Long-term marketable securities 4,608 13,088
Severance pay funds 5,611 6,039
Total long-term investments 10,219 19,127
OTHER ASSETS:
Long-term receivables 4,756 -
Deferred taxes 8,408 8,829
Goodwill and intangible assets, net 44,646 1,093
Total other assets 57,810 9,922
PROPERTY AND EQUIPMENT, NET 29,173 16,211
Total assets $ 413,151 $ 287,182
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term bank loan $ 6,174 $ -
Trade payables 71,582 40,537
Deferred revenues 37,638 20,661
Other accounts payable and accrued expenses 62,109 13,215
Total current liabilities 177,503 74,413
LONG-TERM LIABILITIES
Long term bank loan, net of current maturities 26,107 -
Accrued severance pay and pension 10,660 8,600
Other long term payables 36,915 -
73,682 8,600
SHAREHOLDERS' EQUITY:
Share capital:
Ordinary shares 97 95
Additional paid-in capital 309,362 300,875
Treasury shares at cost (20,091) (20,091)
Other comprehensive income (loss) (5,046) 159
Accumulated deficits (122,356) (76,869)
Total shareholders' equity 161,966 204,169
Total liabilities and shareholders' equity $ 413,151 $ 287,182
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars, in thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2011 2010 2011 2010
Cash flow from operating
activities:
Net income (loss) $ (6,741) $ 4,623 $ (45,487) $ 10,244
Adjustments to reconcile
net income to net cash
used in operating activities:
Depreciation and amortization 3,744 1,213 9,896 3,391
Stock-based compensation
expense 1,677 843 4,533 2,666
Increase in trade and other
receivables, net (32,624) (12,603) (3,490) (1,485)
Decrease in inventory,
net of write off 9,033 6,727 33,026 4,075
Increase (decrease) in trade
payables and accrued
liabilities 9,531 (10,422) (15,894) (28,407)
Increase (decrease) in deferred
revenues 882 (5,047) (11,883) (5,789)
Other adjustments (689) (497) 1,738 (320)
Net cash used in operating
activities $ (15,187) $(15,163) $ (27,561) $ (15,625)
Cash flow from investing
activities:
Purchase of property and
equipment (3,722) (2,244) (9,751) (7,715)
Payment for business
acquisition *) - (1,232) (42,405) (1,232)
Investment in short and
long-term bank deposits - (750) (7,304) (11,782)
Proceeds from short and
long-term bank deposits 1,766 5,420 23,296 25,100
Investment in held-to-maturity
marketable securities - - - (18,339)
Proceeds from held-to-maturity
and available-for- sale
marketable securities 6,000 3,000 10,258 7,500
Net cash provided (used in)
investing activities $ 4,044 $ 4,194 $ (25,906) $ (6,468)
Cash flow from financing
activities:
Proceeds from exercise
of options 376 284 3,956 3,300
Long-term bank loan raised
in connection with business
acquisition - - 35,000 -
Net cash provided by financing
activities $ 376 $ 284 $ 38,956 $ 3,300
Translation adjustments on
cash and cash equivalents $ 162 $ - $ (273) $ -
Decrease in cash and cash
equivalents $ (10,605) $(10,685) $ (14,784) $ (18,793)
Cash and cash equivalents at
the beginning of the period 33,546 30,231 37,725 38,339
Cash and cash equivalents at
the end of the period $ 22,941 $ 19,546 $ 22,941 $ 19,546
*) 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,
2011 2010
GAAP Adjustments Non-GAAP Non-GAAP
(as reported)
Revenues $ 116,120 $ 116,120 $ 62,293
Cost of revenues 81,651 2,984 (a) 78,667 39,420
Gross profit 34,469 37,453 22,873
Operating expenses:
Research and
development 12,805 782 (b) 12,023 5,998
Selling and marketing 20,988 2,629 (c) 18,359 9,073
General and
administrative 6,452 941 (d) 5,511 2,708
Total operating
expenses $ 40,245 $ 35,893 $ 17,779
Operating profit
(loss) (5,776) 1,560 5,094
Financial income
(expenses), net (241) (241) 621
Income (loss) before
taxes (6,017) 1,319 5,715
Taxes on income 724 724 249
Net income (loss) $ (6,741) $ 595 $ 5,466
Basic net earnings
(loss) per share $ (0.19) $ 0.02 $ 0.16
Diluted net earnings
(loss) per share $ (0.19) $ 0.02 $ 0.15
Weighted average
number of shares
used in computing
basic net earnings
(loss) per share 36,065,381 36,065,381 34,933,437
Weighted average
number of shares
used in computing
diluted net
earnings (loss)
per share 36,065,381 37,527,749 36,233,612
Total adjustments 7,336
a) Cost of revenues includes $0.3 million of amortization of purchased intangible assets, $1.4 million of inventory step-up, $0.1 million of stock based compensation expenses and $1.2 million of integration plan related costs in the three months ended September 30, 2011.
b)Research and development expenses include $0.3 million of integration plan related costs and $0.5 million of stock based compensation expenses in the three months ended September 30, 2011.
c)Selling and marketing expenses includes $1.1 million of amortization of purchased intangible assets, $0.8 million of integration plan related costs and $0.7 million of stock based compensation expenses in the three months ended September 30, 2011.
d)General and administration expenses includes, $0.5 million of integration plan related costs and $0.4 million of stock based compensation expenses in the three months ended September 30, 2011.
RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
Nine months ended September 30,
2011 2010
GAAP Adjustments Non-GAAP Non-GAAP
(as reported)
Revenues $ 326,782 $ 326,782 $ 182,869
Cost of revenues 239,095 17,466 (a) 221,629 118,013
Gross profit 87,687 105,153
64,856
Operating expenses:
Research and
development 37,922 3,405 (b) 34,517 16,680
Selling and marketing 61,176 7,426 (c) 53,750 26,600
General and
administrative 18,187 2,575 (d) 15,612 7,773
Restructuring costs 7,834 7,834 - -
Acquisition
related costs 4,919 4,919 - -
Total operating
expenses $ 130,038 $ 103,879 51,053
Operating profit
(loss) (42,351) 1,274 13,803
Financial income
(expenses), net (1,000) (1,000) 1,131
Income (loss) before
taxes (43,351) 274 14,934
Taxes on income 2,136 2,136 874
Net income (loss) $ (45,487) $ (1,862) $ 14,060
Basic net earnings (loss)
per share $ (1.27) $ (0.05) $ 0.40
Diluted net earnings (loss)
per share $ (1.27) $ (0.05) $ 0.39
Weighted average number
of shares
used in computing basic
net earnings
(loss) per share 35,885,904 35,885,904 34,769,657
Weighted average number
of shares
used in computing
diluted net earnings
(loss) per share 35,885,904 35,885,904 36,440,599
Total adjustments 43,625
(a) Cost of revenues includes $0.8 million of amortization of purchased intangible assets, $12.6 million of inventory step-up, $0.2 million of stock based compensation expenses and $3.9 million of integration plan related costs in the nine months ended September 30, 2011.
(b) Research and development expenses include $2.2 million of integration plan related costs and $1.2 million of stock based compensation expenses in the nine months ended September 30, 2011.
(c) Selling and marketing expenses includes $1.9 million of amortization of purchased intangible assets, $3.7 million of integration plan related costs and $1.8 million of stock based compensation expenses in the nine months ended September 30, 2011.
(d)General and administration expenses include, $1.0 million of integration plan related costs and $1.5 million of stock based compensation expenses in the nine months ended September 30, 2011.
RECONCILIATION BETWEEN REPORTED AND NON-GAAP
OPERATING LOSS
(U.S. dollars in thousands)
(Unaudited)
Three months Nine months
ended ended
September 30, 2011
Reported GAAP net operating loss (5,776) (42,351)
Stock based compensation expenses 1,677 4,533
Amortization of purchased intangible assets 1,430 2,704
Inventory step up 1,348 12,628
Integration plan related costs 2,881 11,007
Restructuring costs - 7,834
Acquisition related costs - 4,919
Non-GAAP net operating profit 1,560 1,274
Company and Investor Contact: Media Contact:
Yoel Knoll Abigail Levy Gurwitz
Ceragon Networks Ltd. Ceragon Networks Ltd.
Tel. +1-201-853-0228 Tel. +1-201-853-0271
[email protected] [email protected]
SOURCE Ceragon Networks Ltd
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