Ceragon Networks Reports Fourth Quarter and Full Year 2018 Financial Results

LITTLE FALLS, New Jersey, Feb. 20, 2019 /PRNewswire/ -- Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Highlights:

Revenues - $85.7 million, down 1.1% from the fourth quarter of 2017, and down 0.9% from the third quarter of 2018.

Gross margin - 34.4%, compared to 33.6% in the fourth quarter of 2017 and 35.0% in the third quarter of 2018.

Operating income - $6.5 million, compared to $7.5 million in the fourth quarter of 2017, and $7.9 million in the third quarter of 2018.

Net income - $11.6 million, or $0.14 per diluted share for the fourth quarter of 2018. This includes $7.2 million of income related to the creation of a deferred tax asset reflecting projected utilization of NOLs. Net income for the fourth quarter of 2017 was $7.2 million, or $0.09 per diluted share. Net income for the third quarter of 2018 was $6.2 million or $0.08 per diluted share.

Non-GAAP results - gross margin was 34.7%, operating income was $6.8 million, and net income was $5.0 million, or $0.06 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.

Cash and cash equivalents - $35.6 million at December 31, 2018, compared to $41.3 million at September 30, 2018.

Full Year 2018 Highlights:

Revenues - $343.9 million, up 3.6% from 2017.

Gross margin - 33.8%, compared to 32.3% in 2017.

Operating income - $26.1 million, compared to an operating income of $23.1 million in 2017.

Net income - $23.0 million, or $0.28 per diluted share. This includes $7.2 million of income related to the creation of a deferred tax asset reflecting projected utilization of NOLs. Net income for 2017 was $15.6 million, or $ 0.19 per diluted share.

Non-GAAP results - gross margin was 33.9%, operating income was $27.9 million, and net income was $17.5 million, or $0.22 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.

"Our fourth quarter constituted a strong finish to the year, with revenue, gross margin and net income exceeding our expectations," said Ira Palti, president and CEO of Ceragon. "We achieved our primary goal of growing net income for the fourth consecutive year in 2018. We are also targeting a fifth consecutive year of non-GAAP net income growth in 2019, although the first quarter is expected to dip due to seasonal factors and timing of orders and revenue recognition. We continue to see a high level of customer activity in most geographic regions due to the continued expansion of 4G in some areas and the beginning of the transition to 5G in others. To help our customers address their specific challenges, we are offering constantly expanding capabilities from both existing and new platforms, as we also continue to invest aggressively in our next generation technology."

Supplemental revenue breakouts by geography:

Fourth quarter 2018:

    --  Europe: 13%
    --  Africa: 12%
    --  North America: 15%
    --  Latin America: 20%
    --  India: 25%
    --  APAC: 15%

Full year 2018:

    --  Europe: 11%
    --  Africa: 7%
    --  North America: 12%
    --  Latin America: 18%
    --  India: 38%
    --  APAC: 14%

A conference call to discuss the results will begin at 9:00 a.m. EST. Investors are invited to join the Company's teleconference by calling USA: (800) 230-1085 or International: +1 (612) 288-0329, 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: https://www.ceragon.com/about-ceragon/investor-relations/, 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 +1 (320) 365-3844 Access Code: 462292. A replay of both the call and the webcast will be available through March 20, 2019.

About Ceragon

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We help operators and other service providers worldwide smoothly evolve their networks towards 5G, while increasing operational efficiency and enhancing end customers' quality of experience, with innovative wireless backhaul solutions. Our customers include wireless service providers, public safety organizations, government agencies and utility companies, that use our solutions to deliver mission-critical multimedia services and other applications at high reliability and speed.

Ceragon's unique multicore technology and wireless backhaul solutions provide highly reliable, 5G high-capacity connectivity with minimal use of spectrum, power and other resources. Our solutions enable increased productivity, as well as simple and quick network modernization. We deliver a range of professional services that ensure efficient network rollout and optimization to achieve the highest value for our customers. Ceragon's solutions are deployed by more than 460 service providers, as well as hundreds of private network owners, in more than 130 countries.

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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 contains statements concerning Ceragon's future prospects that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon's management. Examples of forward-looking statements include: projections of revenues, net income, gross margin, capital expenditures and liquidity, competitive pressures, growth prospects, product development, financial resources, cost savings and other financial matters. You may identify these and other forward-looking statements by the use of words such as "may", "plans", "anticipates", "believes", "estimates", "targets", "expects", "intends", "potential" or the negative of such terms, or other comparable terminology. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including risks relating to the concentration of Ceragon's business in certain geographic regions and particularly in India, risks associated with a decline in demand from the single market segment on which we focus; risk relating to certain guarantees granted by Ceragon on behalf of Orocom to FITEL, in the framework of the FITEL project; risks associated with any failure to effectively compete with other wireless equipment providers; risks associated with a change in our gross margin as a result of changes in the geographic mix of revenue; risks related to the fact that our operating results may vary significantly from quarter to quarter and from our expectations for any specific period; risks related to our ability to meet the supply demands of our customers in a timely manner due to the high volatility in their supply needs; risks associated with difficulties in obtaining market acceptance of newly introduced product; risks associated with technical difficulties that may be discovered in newly developed products; and other risks and uncertainties detailed from time to time in Ceragon's Annual Report on Form 20-F and Ceragon's other filings with the Securities and Exchange Commission, that represent our views only as of the date they are made and should not be relied upon as representing our views as of any subsequent date. We do not assume any obligation to update any forward-looking statements.

Ceragon Reports Fourth Quarter and Year End 2018 Results




                                                     
         
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


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


                                                                  
            
              (Unaudited)




                                                               Three months ended               
            
              Year ended


                                                   
         
            December 31,                                     December 31,



                                                                              2018                                          2017       2018       2017



                                                                                                                                            Audited





            Revenues                                                      $85,742                                       $86,679   $343,874   $332,033



            Cost of revenues                                               56,210                                        57,524    227,705    224,698






            Gross profit                                                   29,532                                        29,155    116,169    107,335






            Operating expenses:



            Research and development                                        6,709                                         6,493     28,180     25,703



            Selling and marketing                                          11,520                                        12,337     42,961     41,656



            General and administrative                                      5,267                                         4,544     19,354     18,576



            Other income                                                    (470)                                      (1,746)     (470)   (1,746)





            
              Total operating expenses                            23,026                                        21,628     90,025     84,189

    ---




            Operating income                                                6,506                                         7,527     26,144     23,146





            Financial expenses, net                                           872                                         1,155      6,349      5,889






            Income before taxes                                             5,634                                         6,372     19,795     17,257





            Taxes on income (benefit)                                     (5,965)                                        (838)   (3,251)     1,697






            Net income                                                    $11,599                                        $7,210    $23,046    $15,560








            Basic net income per share                                      $0.15                                         $0.09      $0.29      $0.20






            Diluted net income per share                                    $0.14                                         $0.09      $0.28      $0.19






            Weighted average number of shares                          79,538,654                                    78,010,416 78,579,013 77,916,912
       used in computing basic net income
         per share






            Weighted average number of shares                          81,987,796                                    79,452,404 81,021,527 79,942,353
       used in computing diluted net
       income per share



       
                Ceragon Reports Fourth Quarter and Year end 2018 Results




                                                                              
       
       CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                
       
          (U.S. dollars in thousands)






                                                                                                                  Year ended December 31



                                                                                                                                    2018           2017




       ASSETS                                                                                                                           
     
       Audited





       CURRENT ASSETS:



       Cash and cash equivalents                                                                                                $35,581        $25,877



       Short -term bank deposits                                                                                                    515



       Trade receivables, net                                                                                                   123,451        113,719



       Other accounts receivable and prepaid expenses                                                                            12,135         17,052



       Inventories                                                                                                               53,509         54,164




       
                Total current assets                                                                                        225,191        210,812

    ---




       NON-CURRENT ASSETS:



          
              Long-term bank deposits                                                                                        504            996



          Deferred tax assets                                                                                                     7,476            988



          Severance pay and pension fund                                                                                          5,096          5,459



          Property and equipment, net                                                                                            33,613         29,870



       Intangible assets, net                                                                                                     6,576          2,199



          Other non-current assets                                                                                                4,544          3,269




       
                Total non-current assets                                                                                     57,809         42,781

    ---


       
                Total assets                                                                                               $283,000       $253,593

    ---




       LIABILITIES AND SHAREHOLDERS' EQUITY



       CURRENT LIABILITIES:



       Trade payables                                                                                                           $78,892        $75,476



       Deferred revenues                                                                                                          3,873          5,193



       Other accounts payable and accrued expenses                                                                               27,256         24,781




       
                Total current liabilities                                                                                   110,021        105,450

    ---




       LONG-TERM LIABILITIES:



            Deferred tax liability                                                                                                   28            141



       Accrued severance pay and pension                                                                                          9,711         10,085



       Other long-term payables                                                                                                   3,672          4,019




       
                Total long-term liabilities                                                                                  13,411         14,245

    ---




       SHAREHOLDERS' EQUITY:



       Share capital:



       Ordinary shares                                                                                                              214            214



            Additional paid-in capital                                                                                          415,408        410,817



       Treasury shares at cost                                                                                                 (20,091)      (20,091)



       Other comprehensive loss                                                                                                 (9,208)       (7,171)



       Accumulated deficits                                                                                                   (226,755)     (249,871)






       
                Total shareholders' equity                                                                                  159,568        133,898

    ---




       
                Total liabilities and shareholders' equity                                                                 $283,000       $253,593

    ---



             
                Ceragon Reports Fourth Quarter and Year end 2018 Results




                                                                                   
              
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW


                                                                                            
              
                (U.S. dollars, in thousands)


                                                                                                     
              
                (Unaudited)




                                                                                                                                                          Three months ended                   Year ended


                                                                                                                                                          December 31,                   December 31,



                                                                                                                                                  2018            2017              2018                          2017




             
                Cash flow from operating activities:                                                                                                                                   Audited



             Net income                                                                                                                       $11,599          $7,210           $23,046                       $15,560



             Adjustments to reconcile net income to net cash provided
      by (used in) operating activities:



             Depreciation and amortization                                                                                                      2,163           2,439             7,758                         9,205



             Stock-based compensation expense                                                                                                     498             235             1,980                         1,203



             Decrease (increase) in trade and other receivables, net                                                                         (11,797)         15,551           (8,102)                      (6,662)



             Decrease (increase) in inventory, net of write off                                                                               (6,286)          1,561             (956)                      (8,592)



              Increase (decrease) in trade payables and accrued liabilities                                                                    11,815        (11,582)            4,402                         3,362



             Increase (decrease) in deferred revenues                                                                                         (4,130)          1,228             (650)                        2,575



             Decrease (increase) in deferred tax asset, net                                                                                   (6,949)            105           (6,601)                          497



             Other adjustments                                                                                                                  (120)          (130)             (11)                            3




             
                Net cash provided by (used in) operating activities                                                                $(3,207)        $16,617           $20,866                       $17,151






             
                Cash flow from investing activities:



                Purchase of property and equipment                                                                                            (4,070)        (1,048)         (10,303)                      (8,533)



                Purchase of intangible assets, net                                                                                              (588)        (1,407)          (3,412)                      (1,407)



                Investment in short and long-term bank deposit                                                                                     48           (996)               48                         (996)




             
                   Net cash used in investing activities                                                                           $(4,610)       $(3,451)        $(13,667)                    $(10,936)






             
                Cash flow from financing activities:



             Proceeds from share options exercise                                                                                               2,048              65             2,611                           294



             Repayments from bank loans                                                                                                                     (23,800)                                      (17,000)




             
                Net cash 
                provided by
                (used in) 
                financing activities                            $2,048       $(23,735)           $2,611                     $(16,706)






             
                Translation adjustments on cash and cash equivalents                                                                     28            (24)            (106)                           30




             
                Increase 
                (decrease)
                 in cash and cash equivalents                                         $(5,741)      $(10,593)           $9,704                     $(10,461)




             Cash and cash equivalents at the beginning of the period                                                                          41,322          36,470            25,877                        36,338




             
                Cash and cash equivalents at the end of the period                                                                  $35,581         $25,877           $35,581                       $25,877



             
                Ceragon Reports Fourth Quarter and year End 2018 Results




                                                                                     
         
             RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS


                                                                                            
           
                (U.S. dollars in thousands)


                                                                                                 
              
                (Unaudited)




                                                                                                    Three months ended                                        Year ended


                                                                                                    December 31,                                       December 31,



                                                                                       2018                               2017                                                        2018   2017






             GAAP cost of revenues                                                            $
              56,210                                                          $
          57,524           $
           227,705        $
          224,698



             Amortization of intangible assets                                                                                                                                    (367)                                         (1,286)



             Stock based compensation expenses                                                               (9)                                                                   (12)                      (42)                  (54)



             Changes in indirect tax positions                                                             (240)                                                                    237                      (278)                   119




             Non-GAAP cost of revenues                                                        $
              55,961                                                          $
          57,382           $
           227,385        $
          223,477






             GAAP gross profit                                                                $
              29,532                                                          $
          29,155           $
           116,169        $
          107,335



             Gross profit adjustments                                                                        249                                                                     142                        320                  1,221




             Non-GAAP gross profit                                                            $
              29,781                                                          $
          29,297           $
           116,489        $
          108,556






             GAAP Research and development expenses                                            $
              6,709                                                           $
          6,493            $
           28,180         $
          25,703



             Stock based compensation expenses                                                             (103)                                                                   (73)                     (313)                 (229)




             Non-GAAP Research and development expenses                                        $
              6,606                                                           $
          6,420            $
           27,867         $
          25,474






             GAAP Sales and Marketing expenses                                                $
              11,520                                                          $
          12,337            $
           42,961         $
          41,656



             Amortization of intangible assets                                                                                                                                     (39)                                           (258)



             Stock based compensation expenses                                                             (193)                                                                   (46)                     (640)                 (292)




             Non-GAAP Sales and Marketing expenses                                            $
              11,327                                                          $
          12,252            $
           42,321         $
          41,106






             GAAP General and Administrative expenses                                          $
              5,267                                                           $
          4,544            $
           19,354         $
          18,576



             Stock based compensation expenses                                                             (193)                                                                  (104)                     (985)                 (628)




             Non-GAAP General and Administrative expenses                                      $
              5,074                                                           $
          4,440            $
           18,369         $
          17,948






             GAAP other income                                                                 $
              (470)                                                        $
          (1,746)            $
           (470)       $
          (1,746)



             Statute of limitation on certain



             indirect tax liabilities                                                            $
              470                                                           $
          1,746               $
           470          $
          1,746




             Non-GAAP other income                                                 
         $                                                             
              $                       
     $                       
     $






             GAAP financial expenses                                                             $
              872                                                           $
          1,155             $
           6,349          $
          5,889



             Recovery of devaluation related expenses in                                                                                                                                                      969
    Venezuela




             Non-GAAP financial expenses                                                         $
              872                                                           $
          1,155             $
           7,318          $
          5,889






             GAAP taxes on income                                                            $
              (5,965)                                                          $
          (838)          $
           (3,251)         $
          1,697



             Other non-cash tax adjustments                                                                6,869                                                                   1,802                      6,343                  1,177




             Non-GAAP taxes on income                                                            $
              904                                                             $
          964             $
           3,092          $
          2,874



              
                Ceragon Reports Fourth Quarter and Year end 2018 Results




                                                                                     
       
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS




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


                                                                                           
              
                (Unaudited)




                                                                                                                                                 Three months ended                            Year ended


                                                                                                                                                 December 31,                           December 31,



                                                                                                                                       2018                                   2017               2018                2017




              GAAP net income                                                                                           $
              11,599                         $
           7,210 $
              23,046     $
           15,560



              Amortization of intangible assets                                                                                                                              406                                 1,544



              Stock based compensation                                                                                                 498                                    235              1,980               1,203
    expenses



              Changes in indirect tax                                                                                                  240                                  (237)               278               (119)
    exposures



              Recovery of devaluation related                                                                                                                                                (969)
    expenses in Venezuela



              Statute of limitation on certain indirect tax liabilities                                                              (470)                               (1,746)             (470)            (1,746)



              Non-cash tax adjustments                                                                                             (6,869)                               (1,802)           (6,343)            (1,177)




              Non-GAAP net income                                                                                        $
              4,998                         $
           4,066 $
              17,522     $
           15,265






              GAAP basic net income per share                                                                             $
              0.15                          $
           0.09   $
              0.29       $
           0.20






              GAAP diluted net income per share                                                                           $
              0.14                          $
           0.09   $
              0.28       $
           0.19






              Non-GAAP basic and diluted net                                                                              $
              0.06                          $
           0.05   $
              0.22       $
           0.19
    income per share






              Weighted average number of                                                                                        79,538,654                             78,010,416         78,579,013          77,916,912
    shares used in computing GAAP


              basic net income per share






              Weighted average number of                                                                                        81,987,796                             79,452,404         81,021,527          79,942,353
    shares used in computing


              GAAP diluted net income per share






              Weighted average number of                                                                                        82,368,838                             79,784,939         81,364,897          80,206,822
    shares used in computing


              Non-GAAP diluted net income per
    share

Investors:
Doron Arazi
+972 3 5431 660
dorona@ceragon.com

or

Claudia Gatlin
+1 212 830-9080
claudiag@ceragon.com

Media:
Tanya Solomon
+972 3 5431163
tanyas@ceragon.com

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SOURCE Ceragon Networks Ltd