EX-99 2 exhibit_a.htm EXHIBIT A
Exhibit A
 
Ceragon Reports Fourth Quarter 2016
February 15, 2017
 
CERAGON NETWORKS REPORTS FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS
 
Net income increased during both fourth quarter and full year; strong cash flow used to reduce debt over 50% versus prior year
 
Little Falls, New Jersey, February 15, 2017 - Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist, today reported results for the fourth quarter and full year ended December 31, 2016.
 
Fourth Quarter 2016 Highlights:
 
Revenues – $84.7 million, up 12% from the fourth quarter of 2015, and up 7% from the third quarter of 2016.
 
Gross margin – 32.5%, compared to 32.8% in the fourth quarter of 2015 and 32.9% in the third quarter of 2016.
 
Operating income – $8.5 million, compared to an operating income of $8.9 million in the fourth quarter of 2015 and an operating income of $5.8 million in the third quarter of 2016.
 
Net income – $8.3 million, or $0.10 per diluted share. Net income for the fourth quarter of 2015 was $5.2 million, or $0.07 per diluted share. Net income for the third quarter of 2016 was $3.5 million, or $0.04 per diluted share.
 
Non-GAAP results –gross margin was 32.9%, operating income was $7.2 million, and net income was $5.2 million, or $0.07 per diluted share. Non-GAAP results exclude adjustments of $(3.1) million. For a reconciliation of GAAP to non-GAAP results, see the attached tables.
 
Cash and cash equivalents – $36.3 million at December 31, 2016, compared to $32.4 million at September 30, 2016, after reducing debt by $3.3 million to $17.0 million.
 
Full Year 2016 Highlights:
 
Revenues – $293.6 million, down 16% from 2015.
 
Gross margin – 33.8%, compared to 29.5% in 2015.
 
Operating income – $19.5 million, compared to an operating income of $ 21.6 million in 2015.
 
Net income – $11.4 million, or $0.15 per diluted share. Net income for 2015 was $ 1.0 million, or $ 0.01 per diluted share.
 
 
Non-GAAP results – gross margin was 34.5%, operating income was $21.1 million, and net income was $11.5 million, or $0.15 per diluted share. Non-GAAP results exclude adjustments of $42,000. For a reconciliation of GAAP to non-GAAP results, see the attached tables.
 
“The continued success of our strategy to focus on increasing net income and free cash flow resulted in significant improvement in these key metrics in 2016, and enabled us to maintain a strong cash position while also substantially reducing debt,” said Ira Palti, president and CEO of Ceragon. “We have a strong order book, particularly with the large orders we received in Q1 from a customer in India. However, the timing of delivering various elements of these orders may cause greater than normal quarter-to-quarter fluctuations in our results during the year. After integrating these orders into our overall operating plan, we now feel comfortable raising our net income target for 2017, on a constant currency basis, from the one we set in November 2016.” 
 
 Supplemental revenue breakouts by geography:
 
Fourth quarter 2016:
 		  
·
Europe:
14%
·
Africa:
  4%
·
North America:
14%
·
Latin America:
27%
·
India:
32%
·
APAC:
9%
 
Full year 2016:
 		  
·
Europe:
15%
·
Africa:
  7%
·
North America:
14%
·
Latin America:
27%
·
India:
27%
·
APAC:
10%
 
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) 230-1074 or International: +1 (612) 332-0107, 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/events-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: 414711. A replay of both the call and the webcast will be available through March 15, 2017.
 
2
 
About Ceragon Networks Ltd.

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 4G, mission-critical multimedia services and other applications at high reliability and speed. Ceragon’s unique multicore technology provides highly reliable, high-capacity 4G 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.

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: revenues, growth prospects, projections of gross margins, operating and other expenses, capital expenditures, profitability and liquidity, competitive pressures, 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 risk that Ceragon’s expectations regarding future revenues and profitability will not materialize; risks relating to the concentration of our business in India, Latin America, Africa and in developing nations in other regions, including political, economic and regulatory risks from doing business in those regions and nations, including in relation to local business practices that  may be inconsistent with international regulatory requirements, such as anti-corruption and anti-bribery regulations, currency export control issues and recent economic concerns; the risk that the business coming from our bigger customers will go down significantly or cease, the risk that Ceragon will not achieve the benefits it expects from its expense reduction plans and profit enhancement programs, as may be implemented from time to time; the risk of significant expenses in connection with potential contingent tax liability; 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, and 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


Ceragon Reports Fourth Quarter and Year End 2016 Results

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)

   
Three months ended
December 31,
    
Year ended
December 31,
  
   
2016
    
2015
    
2016
    
2015
  
                     
(Audited)
  
                         
Revenues
  
$
84,665
    
$
75,643
    
$
293,641
    
$
349,435
  
Cost of revenues
    
57,122
      
50,840
      
194,479
      
246,487
  
                                 
Gross profit
    
27,543
      
24,803
      
99,162
      
102,948
  
                                 
Operating expenses:
                                
Research and development, net
    
5,718
      
5,268
      
21,695
      
22,930
  
Selling and marketing
    
10,334
      
9,982
      
39,515
      
40,816
  
General and administrative
     4,942       5,473       20,380       21,235  
Restructuring costs
    
-
      
-
      
-
      
1,225
  
Other income
    
(1,921
)
    
(4,849
)
    
(1,921
)
    
(4,849
)
                                 
Total operating expenses
  
$
19,073
    
$
15,874
    
$
79,669
    
$
81,357
  
                                 
Operating income
    
8,470
      
8,929
      
19,493
      
21,591
  
                                 
Financial expenses, net
    
1,494
      
2,265
      
6,303
      
14,738
  
                                 
Income before taxes
    
6,976
      
6,664
      
13,190
      
6,853
  
                                 
Taxes on income
    
(1,357
)
    
1,432
      
1,761
      
5,842
  
                                 
Net income
  
$
8,333
    
$
5,232
    
$
11,429
    
$
1,011
  
                                 
Basic net income per share
  
$
0.11
    
$
0.07
    
$
0.15
    
$
0.01
  
                                 
 Diluted net income per share
  
$
0.10
    
$
0.07
    
$
0.15
    
$
0.01
  
                                 
 Weighted average number of shares used in computing basic net income per share
    
77,759,346
      
77,416,409
      
77,702,788
      
77,239,409
  
 
Weighted average number of shares used in computing diluted net income per share
    
79,583,792
      
78,432,387
      
78,613,528
      
77,296,681
  

4

Ceragon Reports Fourth Quarter and Year End 2016 Results

CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
(Unaudited)
 
   
December 31,
2016
    
December 31,
2015
  
ASSETS
        
(Audited)
  
             
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
36,338
    
$
36,318
  
Trade receivables, net
    
107,395
      
116,683
  
Deferred taxes, net
    
1,327
      
1,633
  
Other accounts receivable and prepaid expenses
    
18,516
      
22,583
  
Inventories
    
45,647
      
49,690
  
Total current assets
    
209,223
      
226,907
  
                 
NON-CURRENT ASSETS:
                
Deferred tax assets, net
    
17
      
189
  
   Severance pay and pension funds
    
4,575
      
4,681
  
   Property and equipment, net
    
27,560
      
28,906
  
   Intangible assets, net
    
1,544
      
3,192
  
Other non-current assets
    
1,306
      
1,457
  
                 
Total non-current assets
    
35,002
      
38,425
  
                 
  Total assets
  
$
244,225
    
$
265,332
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
                 
CURRENT LIABILITIES:
                
Short term loan, including current maturities of long term bank loan
  
$
17,000
    
$
34,922
  
Trade payables
    
68,408
      
71,721
  
Deferred revenues
    
2,673
      
8,901
  
Other accounts payable and accrued expenses
    
22,425
      
27,052
  
Total current liabilities
    
110,506
      
142,596
  
                 
LONG-TERM LIABILITIES:
                
Accrued severance pay and pension
    
9,198
      
9,276
  
Other long term payables
    
8,357
      
10,639
  
Total long-term liabilities
    
17,555
      
19,915
  
                 
SHAREHOLDERS' EQUITY:
                
Share capital:
                
    Ordinary shares
    
214
      
214
  
Additional paid-in capital
    
409,320
      
408,174
  
Treasury shares at cost
    
(20,091
)
    
(20,091
)
Other comprehensive loss
    
(7,846
)
    
(8,616
)
Accumulated deficits
    
(265,433
)
    
(276,860
)
                 
Total shareholders' equity
    
116,164
      
102,821
  
                 
Total liabilities and shareholders' equity
  
$
244,225
    
$
265,332
  

5
 
Ceragon Reports Fourth Quarter and Year End 2016 Results

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars, in thousands)
(Unaudited)
 
   
Three months ended
December 31,
    
Year ended
December 31,
  
   
2016
    
2015
    
2016
    
2015
  
                     
(Audited)
  
Cash flow from operating activities:
                        
Net income
  
$
8,333
    
$
5,232
    
$
11,429
    
$
1,011
  
Adjustments to reconcile net loss to net cash provided by operating activities:
                                
Depreciation and amortization
    
2,534
      
3,137
      
10,037
      
12,203
  
Stock-based compensation expense
    
198
      
453
      
1,071
      
1,625
  
Decrease in trade and other receivables, net
    
4,361
      
3,509
      
15,684
      
40,171
  
Decrease (increase) in inventory, net of write off
    
(1,462
)
    
(971
)
    
4,706
      
10,240
  
Decrease in trade payables and accrued liabilities
    
(1,258
)
    
(3,009
)
    
(11,434
)
    
(41,480
)
Decrease in deferred revenues
    
(1,753
)
    
(1,162
)
    
(6,228
)
    
(8,766
)
Decrease (increase) in deferred tax asset, net
    
(811
)
    
(466
)
    
478
      
1,975
  
Other adjustments
    
(140
)
    
(74
)
    
28
      
(858
)
Net cash provided by operating activities
  
$
10,002
    
$
6,649
    
$
25,771
    
$
16,121
  
                                 
Cash flow from investing activities:
                                
Purchase of property and equipment, net
    
(2,757
)
    
(946
)
    
(8,190
)
    
(5,266
)
Investment in short and long-term bank deposit
    
-
      
-
      
(153
)
    
(19
)
Proceeds from maturities of short and long-term bank deposits
    
-
      
368
      
153
      
432
  
Proceeds from sales of available for sale marketable securities
    
-
      
-
      
-
      
122
  
Net cash used in investing activities
  
$
(2,757
)
  
$
(578
)
  
$
(8,190
)
  
$
(4,731
)
                                 
Cash flow from financing activities:
                                
Proceeds from exercise of options
    
8
      
26
      
75
      
138
  
Proceeds from financial institutions, net
    
-
      
-
      
-
      
4,200
  
Repayments of bank loans
    
(3,300
)
    
(9,008
)
    
(17,922
)
    
(20,182
)
Net cash used in financing activities
  
$
(3,292
)
  
$
(8,982
)
  
$
(17,847
)
  
$
(15,844
)
                                 
Translation adjustments on cash and cash equivalents
  
$
11
    
$
25
    
$
286
    
$
(651
)
Increase (decrease) in cash and cash equivalents
  
$
3,964
    
$
(2,886
)
  
$
20
    
$
(5,105
)
Cash and cash equivalents at the beginning of the period
    
32,374
      
39,204
      
36,318
      
41,423
  
Cash and cash equivalents at the end of the period
  
$
36,338
    
$
36,318
    
$
36,338
    
$
36,318
  

6
 

Ceragon Reports Fourth Quarter and Year End 2016 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,
  
   
2016
    
2015
    
2016
    
2015
  
                         
GAAP cost of revenues
  
$
57,122
    
$
50,840
    
$
194,479
    
$
246,487
  
Amortization of intangible assets
    
(310
)
    
(309
)
    
(1,232
)
    
(1,228
)
Stock based compensation expenses
    
(4
)
    
(29
)
    
(30
)
    
(73
)
Changes in pre-acquisition indirect tax positions
    
-
      
(1
)
    
(806
)
    
(278
)
Non-GAAP cost of revenues
  
$
56,808
    
$
50,501
    
$
192,411
    
$
244,908
  
                                 
GAAP gross profit
  
$
27,543
    
$
24,803
    
$
99,162
    
$
102,948
  
Gross profit adjustments
    
314
      
339
      
2,068
      
1,579
  
Non-GAAP gross profit
  
$
27,857
    
$
25,142
    
$
101,230
    
$
104,527
  
                                 
GAAP Research and development expenses
  
$
5,718
    
$
5,268
    
$
21,695
    
$
22,930
  
Stock based compensation expenses
    
(17
)
    
(179
)
    
(151
)
    
(735
)
Non-GAAP Research and development expenses
  
$
5,701
    
$
5,089
    
$
21,544
    
$
22,195
  
                                 
GAAP Sales and Marketing expenses
  
$
10,334
    
$
9,982
    
$
39,515
    
$
40,816
  
Amortization of intangible assets
    
(106
)
    
(148
)
    
(417
)
    
(637
)
Stock based compensation expenses
    
(54
)
    
(109
)
    
(369
)
    
(495
)
Non-GAAP Sales and Marketing expenses
  
$
10,174
    
$
9,725
    
$
38,729
    
$
39,684
  
                                 
GAAP General and Administrative expenses
  
$
4,942
    
$
5,473
    
$
20,380
    
$
21,235
  
Stock based compensation expenses
    
(122
)
    
(135
)
    
(521
)
    
(321
)
Non-GAAP General and Administrative expenses
  
$
4,820
    
$
5,338
    
$
19,859
    
$
20,914
  
                                 
GAAP restructuring cost
  
$
-
    
$
-
    
$
-
    
$
1,225
  
Restructuring plan related cost
    
-
      
-
      
-
      
(1,225
)
Non-GAAP restructuring cost
  
$
-
    
$
-
    
$
-
    
$
-
  
                                 
GAAP other income
  
$
(1,921
)
  
$
(4,849
)
  
$
(1,921
)
  
$
(4,849
)
Statute of limitation on certain pre-acquisition indirect tax liabilities
    
1,921
      
4,849
      
1,921
      
4,849
  
Non-GAAP other income
  
$
-
    
$
-
    
$
-
    
$
-
  

7
Ceragon Reports Fourth Quarter and Year End 2016 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,
  
   
2016
    
2015
    
2016
    
2015
  
GAAP financial expenses
  
$
1,494
    
$
2,265
    
$
6,303
    
$
14,738
  
Currency devaluation in Venezuela related expenses
    
-
      
-
      
907
      
(2,973
)
Non-GAAP financial expenses
  
$
1,494
    
$
2,265
    
$
7,210
    
$
11,765
  
                                 
GAAP taxes on income
  
$
(1,357
)
  
$
1,432
    
$
1,761
    
$
5,842
  
Changes in pre-acquisition tax liability
    
-
      
-
      
(453
)
    
-
  
Other non-cash tax adjustments
    
1,786
      
(762
)
    
1,109
      
(3,297
)
Non-GAAP taxes on income
  
$
429
    
$
670
    
$
2,417
    
$
2,545
  
8
 
Ceragon Reports Fourth Quarter and Year End 2016 Results
 
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)

   
Three months ended
December 31,   
    
Year ended
December 31,
  
   
2016
    
2015
    
2016
    
2015
  
                         
GAAP net income 
  
$
8,333
    
$
5,232
    
$
11,429
    
$
1,011
  
Amortization of intangible assets
    
416
      
457
      
1,649
      
1,865
  
Stock based compensation expenses
    
197
      
452
      
1,071
      
1,624
  
Restructuring expenses
    
-
      
-
      
-
      
1,225
  
Changes in pre-acquisition indirect tax positions
    
-
      
1
      
1,259
      
278
  
Currency devaluation in Venezuela related expenses
    
-
      
-
      
(907
)
    
2,973
  
Non-cash tax adjustments
    
(1,786
)
    
762
      
(1,109
)
    
3,297
  
Statute of limitation on certain pre-acquisition indirect tax liabilities
    
(1,921
)
    
(4,849
)
    
(1,921
)
    
(4,849
)
Non-GAAP net income 
  
$
5,239
    
$
2,055
    
$
11,471
    
$
7,424
  
                                 
GAAP basic net income per share
  
$
0.11
    
$
0.07
    
$
0.15
    
$
0.01
  
                                 
GAAP diluted net income per share
  
$
0.10
    
$
0.07
    
$
0.15
    
$
0.01
  
                                 
Non-GAAP basic and diluted net income per share
  
$
0.07
    
$
0.03
    
$
0.15
    
$
0.10
  
                                 
Weighted average number of shares used in computing
 basic net income per share
    
77,759,346
      
77,416,409
      
77,702,788
      
77,239,409
  
                                 
Weighted average number of shares used in computing
 GAAP diluted net income per share
    
79,583,792
      
77,432,387
      
78,613,528
      
77,296,681
  
                                 
Weighted average number of shares used in computing
 Non-GAAP diluted net income per share
    
79,888,786
      
78,264,309
      
78,986,738
      
77,967,811
  
 
 
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