EX-99 2 exhibit_a.htm EXHIBIT A

Exhibit A
 
Ceragon Networks Reports Third Quarter 2018 Financial Results
November 5, 2018
 
 
 
CERAGON NETWORKS REPORTS THIRD QUARTER 2018 FINANCIAL RESULTS
 
Little Falls, New Jersey, November 5, 2018 - Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the third quarter which ended September 30, 2018.
 
Third Quarter 2018 Highlights:
 
Revenues - $86.5 million, up 13.9% from the third quarter of 2017, and down 2.0% from the second quarter of 2018.
 
Gross margin - 35.0%, compared to 35.1% in the third quarter of 2017 and 32.5% in the second quarter of 2018.
 
Operating income - $7.9 million, compared to $5.7 million in the third quarter of 2017, and $6.4 million in the second quarter of 2018.
 
Net income - $6.2 million, or $0.08 per diluted share for the third quarter of 2018.  Net income for the third quarter of 2017 was $3.5 million, or $0.04 per diluted share. Net income for the second quarter of 2018 was $3.2 million or $0.04 per diluted share.
 
Non-GAAP results - gross margin was 35.0%, operating income was $8.4 million, and net income was $5.7 million, or $0.07 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.
 
Cash and cash equivalents - $41.3 million at September 30, 2018, compared to $29.4 million at June 30, 2018.
 
"We are pleased to report an excellent third quarter, with revenues above the upper end of our quarterly run rate and net income growing both sequentially and versus Q3 of 2017," said Ira Palti, president and CEO of Ceragon. "We are achieving our goal of growing net income and delivering strong cash flow, even as we continue to invest aggressively in our next generation 5G solutions, and we remain on track to attain an increase in non-GAAP net income in 2018 compared to 2017. We manage the business with net income growth as our most important metric, and our goal is to report further growth in non-GAAP net income for 2019 as well."
 

 
Supplemental geographical breakdown of revenue for the third quarter of 2018:
 
·          Europe:
9%
·          Africa:
10%
·          North America:
13%
·          Latin America:
21%
·          India:
34%
·          APAC:
13%
 
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) 230-1059 or International: +1 (612) 234-9959, 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: http://www.ceragon.com/about-us/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: 455394. A replay of both the call and the webcast will be available through December 5, 2018.
 
About Ceragon
 
Ceragon Networks Ltd. (NASDAQ: CRNT) is the world’s #1 wireless backhaul specialist. We help operators and other service providers worldwide increase operational efficiency and enhance end customers’ quality of experience with innovative wireless backhaul solutions. Our customers include wireless service providers, public safety organizations, government agencies and utility companies, which use our solutions to deliver mission-critical multimedia services and other applications at high reliability and speed. Ceragon’s unique multicore technology provides a highly reliable, high-capacity 4G and 5G wireless backhaul with minimal use of spectrum, power and other resources. It enables 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. Our solutions are deployed by more than 460 service providers, as well as hundreds of private network owners, in more than 130 countries. 
 
Join the Discussion
 
    
 
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.
 
2
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 associated with a decline in revenues due to our focus on a single market segment; risks relating to the concentration of Ceragon's business in certain geographic regions such as India, and in other developing nations; risk relating to certain guarantees granted by Ceragon on behalf of Orocom to FITEL, in the framework of the FITEL project; political, economic and regulatory risks from doing business in developing regions, including potential currency restrictions and fluctuations; risks related to our ability to meet the demand for our products due to shortages in raw materials, including certain passive components; risks associated with a change in Ceragon’s gross margin as a result of changes in the geographic mix of revenues and/or as a result of increase in costs of raw materials, including certain passive components; risks associated with the loss of a single customer or customer group, which represents a significant portion of Ceragon’s revenues; risks associated with Ceragon’s failure to effectively compete with other wireless equipment providers; 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.
 
Investors:
Doron Arazi                  or           Claudia Gatlin
+972 3 5431 660                           +1 212 830-9080
dorona@ceragon.com               claudiag@ceragon.com
 
Media:
Tanya Solomon
+972 3 5431163
tanyas@ceragon.com
 
 
-tables follow-
 
3
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
 
   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2018
    
2017
    
2018
    
2017
  
                         
Revenues
  
$
86,529
    
$
75,999
    
$
258,132
    
$
245,354
  
Cost of revenues
    
56,245
      
49,326
      
171,495
      
167,174
  
                                 
Gross profit
    
30,284
      
26,673
      
86,637
      
78,180
  
                                 
Operating expenses:
                                
Research and development
    
7,436
      
6,975
      
21,471
      
19,210
  
Selling and marketing
    
10,510
      
9,543
      
31,441
      
29,319
  
General and administrative
    
4,438
      
4,462
      
14,087
      
14,032
  
                                 
Total operating expenses
    
22,384
      
20,980
      
66,999
      
62,561
  
                                 
Operating income
    
7,900
      
5,693
      
19,638
      
15,619
  
                                 
Financial expenses, net
    
797
      
1,655
      
5,477
      
4,734
  
                                 
Income before taxes
    
7,103
      
4,038
      
14,161
      
10,885
  
                                 
Taxes on income
    
952
      
542
      
2,714
      
2,535
  
                                 
Net income
  
$
6,151
    
$
3,496
    
$
11,447
    
$
8,350
  
                                 
Basic net income per share
  
$
0.08
    
$
0.04
    
$
0.15
    
$
0.11
  
                                 
Diluted net income per share
  
$
0.08
    
$
0.04
    
$
0.14
    
$
0.10
  
                                 
Weighted average number of shares used in computing basic net income per share
    
78,455,128
      
77,964,433
      
78,256,060
      
77,885,555
  
                                 
Weighted average number of shares used in computing diluted net income per share
    
81,172,392
      
79,596,845
      
80,696,365
      
80,105,482
  
 
4
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)

   
September 30,
2018
    
December 31,
2017
  
ASSETS
  
Unaudited
    
Audited
  
             
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
41,322
    
$
25,877
  
Trade receivables, net
    
113,193
      
113,719
  
Other accounts receivable and prepaid expenses
    
11,435
      
17,052
  
Inventories
    
47,435
      
54,164
  
Total current assets
    
213,385
      
210,812
  
                 
 NON-CURRENT ASSETS:                
   Long-term bank deposits
    
997
      
996
  
   Deferred taxes, net
    
564
      
988
  
   Severance pay and pension fund
    
5,271
      
5,459
  
   Property and equipment, net
    
31,096
      
29,870
  
Intangible assets, net
    
4,154
      
2,199
  
   Other non-current assets
    
3,481
      
3,269
  
Total non-current assets
    
45,563
      
42,781
  
Total assets
  
$
258,948
    
$
253,593
  
          LIABILITIES AND SHAREHOLDERS' EQUITY
                
 CURRENT LIABILITIES:
                
Trade payables
  
$
66,168
    
$
75,476
  
Deferred revenues
    
7,926
      
5,193
  
Other accounts payable and accrued expenses
    
25,474
      
24,781
  
Total current liabilities
    
99,568
      
105,450
  
                 
 LONG-TERM LIABILITIES:                
      Deferred tax liability
    
65
      
141
  
Accrued severance pay and pension
    
10,006
      
10,085
  
Other long-term payables
    
3,766
      
4,019
  
Total long-term liabilities
    
13,837
      
14,245
  
                 
 SHAREHOLDERS' EQUITY:
                
Share capital:
                
Ordinary shares
    
214
      
214
  
    Additional paid-in capital
    
412,862
      
410,817
  
Treasury shares at cost
    
(20,091
)
    
(20,091
)
Other comprehensive loss
    
(9,088
)
    
(7,171
)
Accumulated deficits
    
(238,354
)
    
(249,871
)
                 
Total shareholders' equity
    
145,543
      
133,898
  
                 
Total liabilities and shareholders' equity
  
$
258,948
    
$
253,593
  
 
 
5
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars, in thousands)
(Unaudited)
 
   
Three months ended
September 30,
    
Nine months ended
September 30, 
  
   
2018
    
2017
    
2018
    
2017
  
Cash flow from operating activities:
                        
Net income
  
$
6,151
    
$
3,496
    
$
11,447
    
$
8,350
  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                                
Depreciation and amortization
    
2,094
      
2,191
      
5,595
      
6,766
  
Stock-based compensation expense
    
450
      
349
      
1,482
      
968
  
Decrease (increase) in trade and other receivables, net
    
3,804
      
(12,925
)
    
3,695
      
(22,213
)
Decrease (increase) in inventory, net of write off
    
(1,719
)
    
402
      
5,330
      
(10,153
)
 Increase (decrease) in trade payables and accrued liabilities
    
2,824
      
(3,831
)
    
(7,413
)
    
14,944
  
Increase in deferred revenues
    
1,684
      
329
      
3,480
      
1,347
  
Decrease (increase) in deferred tax asset, net
    
(62
)
    
252
      
348
      
392
  
Other adjustments
    
295
      
221
      
109
      
133
  
Net cash provided by (used in) operating activities
  
$
15,521
    
$
(9,516
)
  
$
24,073
    
$
534
  
Cash flow from investing activities:
                                
   Purchase of property and equipment
    
(2,276
)
    
(3,980
)
    
(6,233
)
    
(7,485
)
   Purchase of intangible assets, net
    
(1,488
)
    
-
      
(2,824
)
    
-
  
   Net cash used in investing activities
  
$
(3,764
)
  
$
(3,980
)
   $
(9,057
)
  
$
(7,485
)
                                 
Cash flow from financing activities:
                                
Proceeds from share options exercise
    
189
      
40
      
563
      
229
  
Proceeds from bank loans
    
-
      
15,800
      
-
      
6,800
  
Net cash provided by financing activities
  
$
189
    
$
15,840
    
$
563
    
$
7,029
  
                                 
Translation adjustments on cash and cash equivalents
    
(22
)
    
39
      
(134
)
    
54
  
Increase in cash and cash equivalents
  
$
11,924
    
$
2,383
    
$
15,445
    
$
132
  
Cash and cash equivalents at the beginning of the period
    
29,398
      
34,087
      
25,877
      
36,338
  
Cash and cash equivalents at the end of the period
  
$
41,322
    
$
36,470
    
$
41,322
    
$
36,470
  
 

6
 
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands)
(Unaudited)
 
   
Three months ended
    
Nine months ended
  
   
September 30,
    
September 30,
  
   
2018
    
2017
    
2018
    
2017
  
                         
GAAP cost of revenues
  
$
56,245
    
$
49,326
    
$
171,495
    
$
167,174
  
Amortization of intangible assets
    
-
      
(310
)
    
-
      
(919
)
Stock based compensation expenses
    
(15
)
    
(10
)
    
(33
)
    
(42
)
Changes in pre-acquisition indirect tax positions
    
(11
)
    
209
      
(38
)
    
(118
)
Non-GAAP cost of revenues
  
$
56,219
    
$
49,215
    
$
171,424
    
$
166,095
  
                                 
GAAP gross profit
  
$
30,284
    
$
26,673
    
$
86,637
    
$
78,180
  
Gross profit adjustments
    
26
      
111
      
71
      
1,079
  
Non-GAAP gross profit
  
$
30,310
    
$
26,784
    
$
86,708
    
$
79,259
  
                                 
GAAP Research and development expenses
  
$
7,436
    
$
6,975
    
$
21,471
    
$
19,210
  
Stock based compensation expenses
    
(83
)
    
(32
)
    
(210
)
    
(156
)
Non-GAAP Research and development expenses
  
$
7,353
    
$
6,943
    
$
21,261
    
$
19,054
  
                                 
GAAP Sales and Marketing expenses
  
$
10,510
    
$
9,543
    
$
31,441
    
$
29,319
  
Amortization of intangible assets
    
-
      
(74
)
    
-
      
(219
)
Stock based compensation expenses
    
(161
)
    
(94
)
    
(447
)
    
(246
)
Non-GAAP Sales and Marketing expenses
  
$
10,349
    
$
9,375
    
$
30,994
    
$
28,854
  
                                 
GAAP General and Administrative expenses
  
$
4,438
    
$
4,462
    
$
14,087
    
$
14,032
  
Stock based compensation expenses
    
(191
)
    
(213
)
    
(792
)
    
(524
)
Non-GAAP General and Administrative expenses
  
$
4,247
    
$
4,249
    
$
13,295
    
$
13,508
  
                                 
GAAP financial expenses
  
$
797
    
$
1,655
    
$
5,477
    
$
4,734
  
Recovery of devaluation related expenses in Venezuela
    
969
      
-
      
969
      
-
  
Non-GAAP financial expenses
  
$
1,766
    
$
1,655
    
$
6,446
    
$
4,734
  
                                 
GAAP taxes on income
  
$
952
    
$
542
    
$
2,714
    
$
2,535
  
Other non-cash tax adjustments
    
(58
)
    
(340
)
    
(526
)
    
(625
)
Non-GAAP taxes on income
  
$
894
    
$
202
    
$
2,188
    
$
1,910
  
 
 
7
 
 
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,
  
   
2018
    
2017
    
2018
    
2017
  
                         
GAAP net income
  
$
6,151
    
$
3,496
    
$
11,447
    
$
8,350
  
Amortization of intangible assets
    
-
      
384
      
-
      
1,138
  
Stock based compensation expenses
    
450
      
349
      
1,482
      
968
  
Changes in pre-acquisition tax exposures
    
11
      
(209
)
    
38
      
118
  
Recovery of devaluation related expenses in Venezuela
    
(969
 )     
-
      
(969
 )     
-
  
Non-cash tax adjustments
    
58
      
340
      
526
      
625
  
Non-GAAP net income 
  
$
5,701
    
$
4,360
    
$
12,524
    
$
11,199
  
                                 
GAAP basic net income per share
  
$
0.08
    
$
0.04
    
$
0.15
    
$
0.11
  
                                 
GAAP diluted net income per share
  
$
0.08
    
$
0.04
    
$
0.14
    
$
0.10
  
                                 
Non-GAAP basic and diluted net income per share
  
$
0.07
    
$
0.05
    
$
0.15
    
$
0.14
  
                                 
Weighted average number of shares used in computing GAAP
basic net income per share
    
78,455,128
      
77,964,433
      
78,256,060
      
77,885,555
  
                                 
Weighted average number of shares used in computing
 GAAP diluted net income per share
    
81,172,392
      
79,596,845
      
80,696,365
      
80,105,482
  
                                 
Weighted average number of shares used in computing
 Non-GAAP diluted net income per share
    
81,546,013
      
79,880,400
      
81,027,179
      
80,347,262
  


8