Ceragon Networks Reports Third Quarter 2019 Financial Results

LITTLE FALLS, New Jersey, Nov. 4, 2019 /PRNewswire/ -- Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the third quarter which ended September 30, 2019.

Third Quarter 2019 Highlights:

Revenues - $72.2 million, down 16.6% from the third quarter of 2018, and down 1.1% from the second quarter of 2019.

Gross margin - 32.2%, compared to 35.0% in the third quarter of 2018 and 36.1% in the second quarter of 2019.

Operating income - $2.1 million, compared to $7.9 million in the third quarter of 2018, and $4.1 million in the second quarter of 2019.

Net income - $0.2 million, or $0.00 per diluted share for the third quarter of 2019, compared to $6.2 million, or $0.08 per diluted share, in the third quarter of 2018. Net income for the second quarter of 2019 was $0.8 million, or $0.01 per diluted share.

Non-GAAP results - Gross margin was 32.2%, operating income was $2.6 million, and net income was $0.5 million, or $0.01 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.

Cash and cash equivalents - $20.5 million at September 30, 2019, compared to $29.0 million at June 30, 2019.

"Results in Q3 were affected mainly by the slowdown in India and a delay in one large project in Latin America," said Ira Palti, president and CEO of Ceragon. "We are seeing areas of strength in demand, excluding India, and we expect revenue in most regions to improve in Q4 and also during 2020, allowing for typical seasonality in Q1. Driving overall growth next year, particularly in the second half, will be new 5G design wins we currently have in hand.

"Like many other companies in our industry, we have found it necessary to adjust our short-term expectations based on growing global uncertainties such as trade and economic trends causing a more cautious spending environment, coupled with the specific challenges facing operators as they gear up to 5G technology. During this period of transition, we intend to focus on reinforcing our technology leadership with ongoing investment in R&D, maintaining our financial strength with tight expense control, strong working capital management and remaining resilient in order to fully capitalize on the ramp in 5G deployments."

Supplemental geographical breakdown of revenue for the third quarter of 2019:

    --  Europe:                15%
    --  Africa:                    6%
    --  North America:     11%
    --  Latin America:      17%
    --  India:                    29%
    --  APAC:                  22%

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) 230-1092 or International: +1 (612) 288-0337, 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/investors/webcasts, 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: 473032. A replay of both the call and the webcast will be available through December 4, 2019.

About Ceragon Networks Ltd.

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 demand, revenues, net income, gross margin, capital expenditures and liquidity, competitive pressures, order timing, 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 the risks relating to the concentration of a significant portion of Ceragon's expected business in certain geographic regions and particularly in India, where a small number of customers are expected to represent a significant portion of our revenues, including the risks of deviations from our expectations of timing and size of orders from these customers; the risk that the current slowdown in revenue from India could extend for a longer period than anticipated; the risk of delays in converting design wins into revenue; risks associated with any failure to effectively compete with other wireless equipment providers; the risk that the rollout of 5G services could take longer than anticipated; 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.

-tables follow-



            
              Ceragon Reports Third Quarter 2019 Results




                            
            
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


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


                                          
            
              (Unaudited)




                                                                          Three months ended                               Nine months ended
                                                               S
                                                          
                eptember
                                                                      30,                                         September 30,



                                                             2019                     2018                   2019                   2018








            Revenues                                     $72,163                  $86,529               $214,327               $258,132



            Cost of revenues                              48,924                   56,245                140,095                171,495




            Gross profit                                  23,239                   30,284                 74,232                 86,637




            Operating expenses:


             Research and development, net                  6,736                    7,436                 19,154                 21,471



            Selling and marketing                          9,756                   10,510                 29,339                 31,441


             General and administrative                     4,610                    4,438                 16,246                 14,087






                        Total operating expenses          $21,102                  $22,384                $64,739                $66,999

    ---


            Operating income                               2,137                    7,900                  9,493                 19,638


             Financial expenses, net                        1,378                      797                  4,317                  5,477




            Income before taxes                              759                    7,103                  5,176                 14,161



            Taxes on income                                  415                      952                  2,947                  2,714


             Equity loss in affiliates                        158                                            472




            Net income                                      $186                   $6,151                 $1,757                $11,447



             Basic net income per share

                                                            $0.00                    $0.08                  $0.02                  $0.15



             Diluted net income per share

                                                            $0.00                    $0.08                  $0.02                  $0.14



             Weighted average number of
              shares
    used in computing basic net
     income per share


                                                       80,303,699               78,455,128             80,202,791             78,256,060



             Weighted average number of
              shares used in
    computing diluted net income
     per share


                                                       81,652,356               81,172,392             82,012,013             80,696,365



       
                Ceragon Reports Third Quarter 2019 Results




                                                                
       
       CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                  
       
          (U.S. dollars in thousands)




                                                                                                 September 30,                 December 31,
                                                                                                     201
          
             9             2018




       ASSETS                                                             
              
                Unaudited               
     
        Audited





       CURRENT ASSETS:



       Cash and cash equivalents                                                                                  $20,524           $35,581



       Short - term bank deposits                                                                                                      515



       Trade receivables, net                                                                                     126,196           123,451


        Other accounts receivable and prepaid expenses                                                              14,270            12,135



       Inventories                                                                                                 67,717            53,509




       
                Total current assets                                                                          228,707           225,191

    ---


       NON-CURRENT ASSETS:



       Long-term bank deposits                                                                                         16               504



       Deferred tax assets                                                                                          6,824             7,476



           Severance pay and pension fund                                                                           5,773             5,096



           Property and equipment, net                                                                             34,890            33,613



           Intangible assets, net                                                                                   8,003             6,576



       Other non-current assets                                                                                    17,854             4,544



                     Total non-current assets                                                                       73,360            57,809

    ---


       
                Total assets                                                                                 $302,067          $283,000

    ---


       LIABILITIES AND SHAREHOLDERS' EQUITY



       CURRENT LIABILITIES:



       Trade payables                                                                                             $60,357           $78,892



       Deferred revenues                                                                                            4,734             3,873



       Short- term loans                                                                                           17,400


        Other accounts payable and accrued expenses                                                                 27,291            27,256



                     Total current liabilities                                                                     109,782           110,021

    ---


       LONG-TERM LIABILITIES:



       Deferred tax liability                                                                                          18                28



       Accrued severance pay and pension                                                                           10,595             9,711



       Deferred revenues                                                                                            6,265



       Other long-term payables                                                                                    11,529             3,672



                     Total long-term liabilities                                                                    28,407            13,411

    ---


       SHAREHOLDERS' EQUITY:



       Share capital:



            Ordinary shares                                                                                           215               214



       Additional paid-in capital                                                                                 417,392           415,408



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



       Other comprehensive loss                                                                                   (8,640)          (9,208)



       Accumulated deficits                                                                                     (224,998)        (226,755)



                     Total shareholders' equity                                                                    163,878           159,568

    ---

                     Total liabilities and shareholders' equity                                                   $302,067          $283,000

    ---



              
                Ceragon Reports Third Quarter 2019 Results




                                                                         
              
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW


                                                                                  
              
               (U.S. dollars, in thousands)


                                                                                       
             
                (Unaudited)




                                                                                                                                                         Three months ended                               Nine months ended

                                                                                                                                                         September 30,                               September 30,

                                                                                                                                                                                    ---

                                                                                                                                                    2019             2018                2019                                      2018

                                                                                                                                                                                                                                 ---


              
                Cash flow from operating activities:



              Net income                                                                                                                           $186           $6,151              $1,757                                   $11,447



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



              Depreciation and amortization                                                                                                       2,573            2,094               7,011                                     5,595



              Stock-based compensation expense                                                                                                      422              450               1,594                                     1,482



              Decrease (increase) in trade and other receivables, net                                                                             6,616            3,804             (3,572)                                    3,695



              Decrease (increase) in inventory, net of write off                                                                                  5,736          (1,719)           (15,077)                                    5,330



              Decrease (increase) in deferred tax asset, net                                                                                      (194)            (62)              1,042                                       348



               Increase (decrease) in trade payables and                                                                                       (30,760)           2,824            (21,297)                                  (7,413)

              accrued liabilities



              Increase in long and short - term deferred revenues                                                                                 1,023            1,684               7,173                                     3,480



              Other adjustments                                                                                                                    (33)             295               (169)                                      109

                                                                                                                                                                                                                                 ---


              
                Net cash provided by (used in) operating activities                                                                $(14,431)         $15,521           $(21,538)                                  $24,073








              
                Cash flow from investing activities:



              Purchase of property and equipment, net                                                                                           (2,409)         (2,276)            (9,116)                                  (6,233)



              Purchase of intangible assets, net                                                                                                  (249)         (1,488)            (3,041)                                  (2,824)



                Proceeds from bank deposits                                                                                                                                            920                                         -




              
                Net cash used in investing activities                                                                               $(2,658)        $(3,764)          $(11,237)                                 $(9,057)






              
                Cash flow from financing activities:



              Proceeds from share options exercise                                                                                                  135              189                 391                                       563



              Proceeds of short-term bank credits and loans, net                                                                                  8,500                              17,400                                         -



              
                Net cash 
                provided by 
                financing activities                                                   $8,635             $189             $17,791                                      $563




              
                Translation adjustments on cash and cash equivalents                                                                   $(63)           $(22)

                                                                                                                                                                            $(73)             $(134)




              
                Increase (decrease) in cash and cash equivalents                                                                    $(8,517)         $11,924           $(15,057)                                  $15,445




              Cash and cash equivalents at the beginning of the period                                                                           29,041           29,398              35,581                                    25,877

                                                                                                                                                                                                                                 ---


              
                Cash and cash equivalents at the end of the period                                                                   $20,524          $41,322             $20,524                                   $41,322



              
                Ceragon Reports Third Quarter 2019 Results


                                                     
              
              RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS


                                                                  
            
                (U.S. dollars in thousands)


                                                                         
             
                (Unaudited)


                                                                                                           Three months ended                        Nine months ended


                                                                                                             September 30,                             September 30,



                                                                                                 2019                                 2018                  2019    2018






              GAAP cost of revenues                                                 $
              48,924                         $
          56,245     $
              140,095    171,495



              Stock based compensation                                                            (13)                                  (15)                   (44)      (33)
    expenses



              Changes in indirect tax positions                                                    (4)                                  (11)                   (34)      (38)




              Non-GAAP cost of revenues                                             $
              48,907                         $
          56,219     $
              140,017    171,424






              GAAP gross profit                                                     $
              23,239                         $
          30,284      $
              74,232     86,637



              Gross profit adjustments                                                              17                                     26                      78         71




              Non-GAAP gross profit                                                 $
              23,256                         $
          30,310      $
              74,310     86,708






              GAAP Research and development                                          $
              6,736                          $
          7,436      $
              19,154     21,471
    expenses



              Stock based compensation                                                            (84)                                  (83)                  (285)     (210)
    expenses




              Non-GAAP Research and                                                  $
              6,652                          $
          7,353      $
              18,869     21,261
    development expenses





                                                                                      $
              9,756                         $
          10,510      $
              29,339     31,441


              GAAP Sales and Marketing
    expenses



              Stock based compensation                                                           (171)                                 (161)                  (553)     (447)
    expenses




              Non-GAAP Sales and Marketing                                           $
              9,585                         $
          10,349      $
              28,786     30,994


               expenses






              GAAP General and Administrative                                        $
              4,610                          $
          4,438      $
              16,246     14,087
    expenses



              Stock based compensation                                                           (154)                                 (191)                  (712)     (792)
    expenses




              Non-GAAP General and                                                   $
              4,456                          $
          4,247      $
              15,534     13,295
    Administrative expenses




              GAAP financial expenses                                                $
              1,378                            $
          797       $
              4,317      5,477



              Recovery of devaluation related                                                                                            969                               969
    expenses in Venezuela



              Leases - financial income (expenses)                                                  91                                                         (101)




              Non-GAAP financial expenses                                            $
              1,469                          $
          1,766       $
              4,216      6,446






              GAAP Tax expenses                                                        $
              415                            $
          952       $
              2,947      2,714



              Non cash tax adjustments                                                             182                                   (58)                (1,090)     (526)




              Non-GAAP Tax expenses                                                    $
              597                            $
          894       $
              1,857      2,188






              GAAP equity loss in affiliates                                           $
              158          
              $                         $
              472



              Other non-cash adjustments                                                         (158)                                                        (472)




              Non-GAAP equity loss in affiliates                      
             $                              
              $                   
     $



              
                Ceragon Reports Third Quarter 2019 Results




                                                                        
       
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS


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


                                                                               
              
                (Unaudited)




                                                                                                         Three months ended                         Nine months ended,


                                                                                 
              
                September 30,   
              
              September 30,


                                                                                                          2019                                        2018                       2019            2018






              GAAP net income                                                                 $
              186                             $
            6,151             $
           1,757 $
           11,447



              Stock based compensation expenses                                                           422                                         450                      1,594           1,482



              Changes in indirect tax positions                                                             4                                          11                         34              38



              Leases - financial expenses (income)                                                       (91)                                                                  101



              Non-cash tax adjustments                                                                  (182)                                         58                      1,090             526



              Recovery of devaluation related                                                                                                      (969)                                    (969)
    expenses in Venezuela



              Other non-cash adjustment                                                                   158                                                                   472



              Non-GAAP net income                                                             $
              497                             $
            5,701             $
           5,048 $
           12,524





                                                                                              $
              0.00                              $
            0.08              $
           0.02   $
           0.15


              GAAP basic net income per share





                                                                                              $
              0.00                              $
            0.08              $
           0.02   $
           0.14


              GAAP diluted net income per share



                                                                                              $
              0.01                              $
            0.07              $
           0.06   $
           0.15


              Non-GAAP diluted net income per share





                                                                                                    80,303,699                                  78,455,128                 80,202,791      78,256,060


              Weighted average number of shares
    used in computing GAAP
    basic net income per share





                                                                                                    81,652,356                                  81,172,392                 82,012,013      80,696,365


              Weighted average number of shares
    used in computing GAAP diluted net
    income per share





                                                                                                    81,814,367                                  81,546,013                 82,254,919      81,027,179


              Weighted average number of shares
    used in computing
    Non-GAAP diluted net income per
    share

Contact:

Investors:
Ran Vered
+972-3-543-1595
investor@ceragon.com

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

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SOURCE Ceragon Networks Ltd