Ceragon Networks Reports Financial Results For the Second Quarter of 2020

LITTLE FALLS, N.J., Aug. 3, 2020 /PRNewswire/ -- Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless hauling specialist, today reported results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights:

    --  $4 million in positive cash flow from operating and investing
        activities, along with rising revenues, margins and net results compared
        with Q1'20, reflecting an improving business environment in most regions
        and the Company's successful focus on execution.
    --  Book-to-bill ratio above 1 as multiple service providers accelerate
        their 4G expansion projects and ISPs move swiftly to fill capacity
        needs.
    --  Effect of COVID-19 differed from region to region: business in North
        America, Europe and APAC remained stable; India emerged from lockdown in
        mid-quarter; a major new project with a new customer was signed in
        Africa; and Latin America bookings were weaker.
    --  Management expects trends created by the COVID-19 crisis to accelerate
        5G network rollouts, serving as a future growth driver. However, for the
        short-term, the COVID-19 environment creates uncertainty.

Primary Financial Results:

Revenues: $62.4 million compared with $73.0 million for Q2'19 and $55.9 million for Q1'20.

Gross margin: 26.4% compared to 36.1% for Q2'19 and 25.1% for Q1'20.

Operating income (loss): $(3.5) million compared with $4.1 million for Q2'19 and $(6.0) million for Q1'20.

Net income (loss): $(5.5) million, or $(0.07) per diluted share compared with $0.8 million, or $0.01 per diluted share for Q2'19 and $(6.9) million, or $(0.09) per diluted share for Q1'20.

Non-GAAP results: gross margin 26.5%, operating loss $(3.0) million, and net loss $(4.9) million, or $(0.06) per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.

Cash and cash equivalents: $35.2 million at June 30, 2020, compared to $44.1 million at March 31, 2020.

Ira Palti, President and CEO of Ceragon, commented, "Our results for the second quarter show improvement as compared with Q1, reflecting the return of many of our customers to their ongoing infrastructure projects and the beginning of the 'new normal.' Our focus has been to maintain an uninterrupted flow of services and equipment to these customers. At the same time, we have been strengthening our balance sheet and cash position, as evident by the quarter's reduction in inventories and healthy $4 million in positive cash flow, while also focusing on improving our results, increasing our revenues, margins and net results as compared with the first quarter."

"The new COVID-19 reality has brought a new urgency to 5G rollout and 4G network expansion plans, a trend that we expect to persist long after COVID-19 has passed. While no one knows exactly what the next few months will look like, we believe the situation plays to our strengths and will have a positive long-term effect. Meanwhile, we are financially stable, we expect our business to continue returning towards normal, and we are positioned to benefit from future opportunities."

Supplemental revenue breakouts by geography:

Second quarter 2020:

    --  Europe:             21%
    --  Africa:               4%
    --  North America:  15%
    --  Latin America:   19%
    --  India:                22%
    --  APAC:              19%

A conference call will follow beginning at 9:00 a.m. EST. Investors are invited to join the company's teleconference by calling (USA) (844) 291-6360 or international +1 (234) 720-6993 and using the following access code: 154231.

Investors can also listen to the call live via the Internet by accessing Ceragon Networks' website on the webcasts page in the section for investors: 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) (866) 207-1041 (International) +1 (402) 970-0847, with access code: 9886196. This audio replay will be available through September 4, 2020.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless hauling specialist. We help operators and other service providers worldwide increase operational efficiency and enhance end customers' quality of experience with innovative wireless backhaul and fronthaul solutions. Our customers include wireless service providers, public safety organizations, government agencies and utility companies, which use our solutions to deliver 5G & 4G, mission-critical multimedia services and other applications at high reliability and speed.

Ceragon's unique multicore technology and disaggregated approach to wireless hauling provides highly reliable, fast to deploy, high-capacity wireless hauling for 5G and 4G networks with minimal use of spectrum, power and other resources. It enables increased productivity, as well as simple and quick network modernization, positioning Ceragon as a leading solutions provider for the 5G era. We deliver a range of professional services that ensure efficient network rollout and optimization to achieve the highest value for our customers. Our 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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Safe Harbor
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 that constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of 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 about Ceragon's business, financial condition, results of operations, micro and macro market trends and other issues addressed or reflected therein. 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.
Although we believe that the projections reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations therefrom will not be material. Such statements involve risks and uncertainties that may cause future results to differ materially from those anticipated. These risks and uncertainties include, but are not limited to, the effects of general economic conditions, the effect of the COVID-19 crisis on the global markets and on the markets in which we operate, including the risk of a continued disruption to our and our customers', providers', business partners and contractors' business as a result of the outbreak and effects of the COVID-19 pandemic and of an adverse effect on our and our customers' financial performance, cash flow, revenue and financial results, available cash and financing, and our ability to bill and collect amounts due from our customers as a result therefrom; the risks relating to the concentration of a significant portion of Ceragon's expected business in certain countries and particularly in India, where a small number of customers are expected to represent a significant portion of our revenues; risks associated with any failure to meet our product development timetable; the risk that the rollout of 5G services could take longer or differently than anticipated and such other risks, uncertainties and other factors that could affect our results, as detailed in our press release that was published earlier today and as further detailed in Ceragon's most recent Annual Report on Form 20-F and in Ceragon's other filings with the Securities and Exchange Commission.
Such forward-looking statements, including the risks, uncertainties and other factors that could affect our results, 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. Such forward-looking statements do not purport to be predictions of future events or results and there can be no assurance that it will prove to be accurate. Ceragon may elect to update these forward-looking statements at some point in the future but the company specifically disclaims any obligation to do so.
Ceragon's public filings are available from the Securities and Exchange Commission's website at www.sec.gov and may also be obtained from Ceragon's website at
www.ceragon.com.

Investors:
Osi Sessler
+972 3 5431047
investor@ceragon.com

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

-tables follow-


                                 
            
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


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


                                                   
            
              (Unaudited)




                                                                           Three months ended                         Six months ended
                                                                                    June 30,                                  June 30,



                                                               2020                        2019                  2020                 2019






            Revenues                                       $62,427                     $73,001              $118,298             $142,164



            Cost of revenues                                45,925                      46,640                87,786               91,171






            Gross profit                                    16,502                      26,361                30,512               50,993






            Operating expenses:


             Research and development, net                    6,770                       6,254                14,060               12,418



            Selling and marketing                            8,200                      10,121                16,473               19,583


             General and administrative                       4,985                       5,854                 9,441               11,636





                        Total operating expenses            $19,955                     $22,229               $39,974              $43,637

    ---




            Operating income (loss)                        (3,453)                      4,132               (9,462)               7,356




             Financial expenses and others,
              net                                             1,464                       1,830                 1,772                2,939





             Income (loss) before taxes                     (4,917)                      2,302              (11,234)               4,417





            Taxes on income                                    400                       1,398                   780                2,532


             Equity loss in affiliates                          160                         141                   343                  314






            Net income (loss)                             $(5,477)                       $763             $(12,357)              $1,571





             Basic net income (loss) per
              share                                         $(0.07)                      $0.01               $(0.15)               $0.02





             Diluted net income (loss) per
              share                                                                                         $(0.15)               $0.02

                                                            $(0.07)                      $0.01





             Weighted average number of
              shares                                     81,012,896                  80,192,036            80,889,022           80,153,038
    used in computing basic net
     income
    (loss) per share





             Weighted average number of
              shares                                     81,012,896                  82,051,028            80,889,022           82,192,544
    used in computing diluted net
    income (loss) per share


                                                         
            CONDENSED CONSOLIDATED BALANCE SHEETS


                                                       
            
                (U.S. dollars in thousands)




                                                                           
              
                June 30,               December 31,
                                                                                                    20
                20             2019




       ASSETS                                                                                     Unaudited          
     
        Audited





       CURRENT ASSETS:



       Cash and cash equivalents                                                                             $35,167           $23,939



       Trade receivables, net                                                                                 97,547           118,531


        Other accounts receivable and prepaid expenses                                                         12,935            11,033



       Inventories                                                                                            53,593            62,132






       
                Total current assets                                                                     199,242           215,635

    ---




       NON-CURRENT ASSETS:



            Long-term bank deposits                                                                               16                17



            Deferred tax assets                                                                                8,215             8,106



           Severance pay and pension fund                                                                      5,748             5,661



           Property and equipment, net                                                                        33,171            34,865



           Intangible assets, net                                                                              8,113             7,898



       Other non-current assets                                                                               17,592            17,707





                     Total non-current assets                                                                  72,855            74,254

    ---




       
                Total assets                                                                            $272,097          $289,889

    ---




       LIABILITIES AND SHAREHOLDERS' EQUITY





       CURRENT LIABILITIES:



       Trade payables                                                                                        $54,357           $59,635



       Deferred revenues                                                                                       2,537             1,734



       Short-term loans                                                                                       19,679            14,600


        Other accounts payable and accrued expenses                                                            24,463            28,399





                     Total current liabilities                                                                101,036           104,368

    ---




       LONG-TERM LIABILITIES:



       Accrued severance pay and pension                                                                      10,509            10,709



       Deferred revenues                                                                                       6,265             6,265



       Other long-term payables                                                                                6,958             8,126





                     Total long-term liabilities                                                               23,732            25,100

    ---




       SHAREHOLDERS' EQUITY:



       Share capital:



           Ordinary shares                                                                                       215               215



       Additional paid-in capital                                                                            419,483           418,062



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



       Other comprehensive loss                                                                             (10,122)          (8,666)



       Accumulated deficits                                                                                (242,156)        (229,099)





                     Total shareholders' equity                                                               147,329           160,421

    ---



                     Total liabilities and shareholders' equity                                              $272,097          $289,889

    ---


                                                          
              
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW


                                                                   
            
              (U.S. dollars, in thousands)


                                                                          
           
                (Unaudited)




                                                                                                                             Three months ended                             Six months ended

                                                                                                                             June 30,                              June 30,

                                                                                                                                                      ---

                                                                                                                      2020            2019                 2020                                     2019

                                                                                                                                                                                                  ---


              
                Cash flow from operating activities:



              Net income (loss)                                                                                  $(5,477)           $763            $(12,357)                                  $1,571



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



              Depreciation and amortization                                                                         2,680           2,318                5,384                                    4,438



              Stock-based compensation expense                                                                        441             697                  867                                    1,172



              Decrease (increase) in trade and other                                                                5,094         (3,797)              16,962                                 (10,188)
    receivables, net



              Decrease (increase) in inventory, net of write off                                                    5,529         (6,663)               7,526                                 (20,813)



              Decrease (increase) in deferred tax asset, net                                                         (85)            646                (109)                                   1,236



              Increase (decrease) in trade payables and                                                             (865)        (6,120)             (8,995)                                   9,463


              accrued liabilities



              Increase (decrease) in deferred revenues                                                              (806)          5,774                  803                                    6,150



              Other adjustments                                                                                       155           (105)               (288)                                   (136)

                                                                                                                                                                                                  ---


              
                Net cash provided by (used in) operating                                                $6,666        $(6,487)              $9,793                                 $(7,107)
    activities








              
                Cash flow from investing activities:



              Purchase of property and equipment, net                                                             (2,679)        (2,716)             (3,638)                                 (6,707)



              Purchase of intangible assets, net                                                                     (36)          (603)               (279)                                 (2,792)



              Proceeds from (repayment of) bank deposits                                                                            (20)                                                         920




              
                Net cash used in investing activities                                                 $(2,715)       $(3,339)            $(3,917)                                $(8,579)






              
                Cash flow from financing activities:



              Proceeds from exercise of options                                                                       308             190                  554                                      256



              Proceeds from (repayment of) bank credits                                                          (13,176)          8,900                5,079                                    8,900
    and loans, net



              
                Net cash 
                provided by (used in) 
            financing                       $(12,868)         $9,090               $5,633                                   $9,156
    activities






              
                Translation adjustments on cash and cash                                                 $(36)            $23
    equivalents
                                                                                                                                              $(281)            $(10)




              
                Increase (decrease) in cash and cash                                                  $(8,953)         $(713)             $11,228                                 $(6,540)


              
                equivalents




              Cash and cash equivalents at the beginning                                                           44,120          29,754               23,939                                   35,581
    of the period

                                                                                                                                                                                                  ---


              
                Cash and cash equivalents at the end of                                                $35,167         $29,041              $35,167                                  $29,041
    the period


                                                         
     
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS


                                                            
       
                (U.S. dollars in thousands)


                                                              
             
                (Unaudited)




                                                                 Three months ended                                          Six months ended


                                                                      June 30,                                
              
       June 30,



                                                                               2020                                 2019                         2020   2019






            GAAP cost of revenues                                                       $
              45,925                         $
            46,640         $
         87,786     $
          91,171



            Stock based compensation expenses                                                         (33)                                    (16)                 (60)              (31)



            Changes in indirect tax positions                                                          (1)                                     (9)                  (2)              (30)




            Non-GAAP cost of revenues                                                   $
              45,891                         $
            46,615         $
         87,724     $
          91,110






            GAAP gross profit                                                           $
              16,502                         $
            26,361         $
         30,512     $
          50,993



            Gross profit adjustments                                                                    34                                       25                    62                 61




            Non-GAAP gross profit                                                       $
              16,536                         $
            26,386         $
         30,574     $
          51,054






            GAAP Research and development expenses                                       $
              6,770                          $
            6,254         $
         14,060     $
          12,418



            Stock based compensation expenses                                                         (10)                                    (98)                 (99)             (201)




            Non-GAAP Research and development                                            $
              6,760                          $
            6,156         $
         13,961     $
          12,217
    expenses





                                                                                          $
              8,200                         $
            10,121         $
         16,473     $
          19,583


            GAAP Sales and Marketing expenses



            Stock based compensation expenses                                                        (168)                                   (207)                (268)             (382)




            Non-GAAP Sales and Marketing expenses                                        $
              8,032                          $
            9,914         $
         16,205     $
          19,201






            GAAP General and Administrative expenses                                     $
              4,985                          $
            5,854          $
         9,441     $
          11,636



            Stock based compensation expenses                                                        (230)                                   (376)                (440)             (558)




            Non-GAAP General and Administrative                                          $
              4,755                          $
            5,478          $
         9,001     $
          11,078
    expenses






            GAAP financial expenses and others, net                                      $
              1,464                          $
            1,830          $
         1,772      $
          2,939



            Leases - financial income (expenses)                                                     (110)                                   (218)                  340              (192)




            Non-GAAP financial expenses and others, net                                  $
              1,354                          $
            1,612          $
         2,112      $
          2,747






            GAAP Tax expenses                                                              $
              400                          $
            1,398            $
         780      $
          2,532



            Non cash tax adjustments                                                                    87                                    (654)                   72            (1,272)




            Non-GAAP Tax expenses                                                          $
              487                            $
            744            $
         852      $
          1,260






            GAAP equity loss in affiliates                                                 $
              160                            $
            141            $
         343        $
          314



            Other non-cash adjustments                                                               (160)                                   (141)                (343)             (314)




            Non-GAAP equity loss in affiliates                        
              $                                       
     $                         
     $                  
     $


                                            
          
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS


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


                                                     
              
                (Unaudited)




                                                                                                                               Three months ended                   Six months ended
     ,

                                                                                                                                                       
     
     June 30,



                                                                                                                     
           
     June 30,



                                                                          2020                                          2019                        2020                      2019



                GAAP net income (loss)                     $
              (5,477)                              $
              763        $
              (12,357)        $
              1,571


                   Stock based compensation                                441                                           697                         867                     1,172

     
                 expenses


                   Changes in indirect tax
                    positions                                                1                                             9                           2                        30


                   Leases - financial expenses                             110                                           218                       (340)                      192

     
                 (income)


                   Non-cash tax adjustments                               (87)                                          654                        (72)                    1,272


                   Other non-cash adjustment                               160                                           141                         343                       314


                Non-GAAP net income (loss)                 $
              (4,852)                            $
              2,482        $
              (11,557)        $
              4,551





                                                            $
              (0.07)                             $
              0.01          $
              (0.15)         $
              0.02

                GAAP basic net income (loss) per
                 share





                                                            $
              (0.07)                             $
              0.01          $
              (0.15)         $
              0.02

                GAAP diluted net income (loss)
                 per share



                                                            $
              (0.06)                             $
              0.03          $
              (0.14)         $
              0.06

                Non-GAAP basic and diluted net
     income (loss) per share





                Weighted average number of
                 shares                                             81,012,896                                    80,192,036                  80,889,022                80,153,038
     used in computing GAAP
      basic net income (loss) per
      share





                Weighted average number of
                 shares                                             81,012,896                                    82,051,028                  80,889,022                82,192,544
      used in computing GAAP diluted
      net
     income (loss) per share





                Weighted average number of
                 shares                                             81,012,896                                    82,249,605                  80,889,022                82,475,897
     used in computing
      Non-GAAP diluted net income
      (loss)
     per share

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SOURCE Ceragon Networks Ltd