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
- 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.
- Research and development expenses include $0.4 million of stock based compensation expenses in the three months ended September 30, 2012.
- 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.
- 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
- 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.
- 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.
- 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.
- 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
[email protected]
Media Contact:
Abigail Levy Gurwitz
Ceragon Networks Ltd.
US: +1-(201)-853-0271
Office (Int'l): +972(0)3-5431166
[email protected]
SOURCE Ceragon Networks Ltd
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