EX-99 2 exhibit_a.htm EXHIBIT A
Exhibt A


Ceragon Networks Reports Fourth Quarter and Full Year 2018 Financial Results
February 20, 2019


 
CERAGON NETWORKS REPORTS FOURTH QUARTER AND FULL YEAR 2018 FINANCIAL RESULTS
 
Fourth consecutive year of net income growth; positive cash flow of $9.7 million in 2018
 
Little Falls, New Jersey, February 20, 2019 - Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the fourth quarter and full year ended December 31, 2018.
 
Fourth Quarter 2018 Highlights:
 
Revenues - $85.7 million, down 1.1% from the fourth quarter of 2017, and down 0.9% from the third quarter of 2018.
 
Gross margin - 34.4%, compared to 33.6% in the fourth quarter of 2017 and 35.0% in the third quarter of 2018.
 
Operating income - $6.5 million, compared to $7.5 million in the fourth quarter of 2017, and $7.9 million in the third quarter of 2018.
 
Net income - $11.6 million, or $0.14 per diluted share for the fourth quarter of 2018. This includes $7.2 million of income related to the creation of a deferred tax asset reflecting projected utilization of NOLs. Net income for the fourth quarter of 2017 was $7.2 million, or $0.09 per diluted share. Net income for the third quarter of 2018 was $6.2 million or $0.08 per diluted share.
 
Non-GAAP results - gross margin was 34.7%, operating income was $6.8 million, and net income was $5.0 million, or $0.06 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.
 
Cash and cash equivalents - $35.6 million at December 31, 2018, compared to $41.3 million at September 30, 2018.
 
Full Year 2018 Highlights:
 
Revenues – $343.9 million, up 3.6% from 2017.
 
Gross margin – 33.8%, compared to 32.3% in 2017.
 
Operating income – $26.1 million, compared to an operating income of $23.1 million in 2017.
 
 
Net income – $23.0 million, or $0.28 per diluted share. This includes $7.2 million of income related to the creation of a deferred tax asset reflecting projected utilization of NOLs. Net income for 2017 was $15.6 million, or $ 0.19 per diluted share.
 
Non-GAAP results - gross margin was 33.9%, operating income was $27.9 million, and net income was $17.5 million, or $0.22 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.
 
"Our fourth quarter constituted a strong finish to the year, with revenue, gross margin and net income exceeding our expectations,” said Ira Palti, president and CEO of Ceragon. "We achieved our primary goal of growing net income for the fourth consecutive year in 2018. We are also targeting a fifth consecutive year of non-GAAP net income growth in 2019, although the first quarter is expected to dip due to seasonal factors and timing of orders and revenue recognition. We continue to see a high level of customer activity in most geographic regions due to the continued expansion of 4G in some areas and the beginning of the transition to 5G in others. To help our customers address their specific challenges, we are offering constantly expanding capabilities from both existing and new platforms, as we also continue to invest aggressively in our next generation technology.”
 
Supplemental revenue breakouts by geography:
 
Fourth quarter 2018:

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

Full year 2018:

·
Europe:
11%
·
Africa:
  7%
·
North America:
12%
·
Latin America:
18%
·
India:
38%
·
APAC:
14%
 
2

A conference call to discuss the results will begin at 9:00 a.m. EST. Investors are invited to join the Company’s teleconference by calling USA: (800) 230-1085 or International: +1 (612) 288-0329, from 8:50 a.m. EST. The call-in lines will be available on a first-come, first-serve basis.

Investors can also listen to the call live via the Internet by accessing Ceragon Networks’ website at the investors’ page: https://www.ceragon.com/about-ceragon/investor-relations/, selecting the webcast link, and following the registration instructions.

If you are unable to join us live, the replay numbers are: USA: (800) 475-6701 or International +1 (320) 365-3844 Access Code: 462292. A replay of both the call and the webcast will be available through March 20, 2019.

About Ceragon

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

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

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

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 2018 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,
  
   
2018
    
2017
    
2018
    
2017
  
                         
Revenues
  
$
85,742
    
$
86,679
    
$
343,874
    
$
332,033
  
Cost of revenues
    
56,210
      
57,524
      
227,705
      
224,698
  
                                 
Gross profit
    
29,532
      
29,155
      
116,169
      
107,335
  
                                 
Operating expenses:
                                
Research and development
    
6,709
      
6,493
      
28,180
      
25,703
  
Selling and marketing
    
11,520
      
12,337
      
42,961
      
41,656
  
General and administrative
    
5,267
      
4,544
      
19,354
      
18,576
  
Other income
    
(470
)
    
(1,746
)
    
(470
)
    
(1,746
)
                                 
Total operating expenses
    
23,026
      
21,628
      
90,025
      
84,189
  
                                 
Operating income
    
6,506
      
7,527
      
26,144
      
23,146
  
                                 
Financial expenses, net
    
872
      
1,155
      
6,349
      
5,889
  
                                 
Income before taxes
    
5,634
      
6,372
      
19,795
      
17,257
  
                                 
Taxes on income (benefit)
    
(5,965
)
    
(838
)
    
(3,251
)
    
1,697
  
                                 
Net income
  
$
11,599
    
$
7,210
    
$
23,046
    
$
15,560
  
                                 
Basic net income per share
  
$
0.15
    
$
0.09
    
$
0.29
    
$
0.20
  
                                 
Diluted net income per share
  
$
0.14
    
$
0.09
    
$
0.28
    
$
0.19
  
                                 
Weighted average number of shares used in computing basic net income per share
    
79,538,654
      
78,010,416
      
78,579,013
      
77,916,912
  
                                 
Weighted average number of shares used in computing diluted net income per share
    
81,987,796
      
79,452,404
      
81,021,527
      
79,942,353
  

4
Ceragon Reports Fourth Quarter and Year end 2018 Results

CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)

   
Year ended December 31,
  
   
2018
    
2017
  
         
Audited
  
ASSETS
        

 
             
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
35,581
    
$
25,877
  
Short -term bank deposits
    
515
      
-
  
Trade receivables, net
    
123,451
      
113,719
  
Other accounts receivable and prepaid expenses
    
12,135
      
17,052
  
Inventories
    
53,509
      
54,164
  
Total current assets
    
225,191
      
210,812
  
                 
NON-CURRENT ASSETS:
                
   Long-term bank deposits
    
504
      
996
  
   Deferred tax assets
    
7,476
      
988
  
   Severance pay and pension fund
    
5,096
      
5,459
  
   Property and equipment, net
    
33,613
      
29,870
  
Intangible assets, net
    
6,576
      
2,199
  
   Other non-current assets
    
4,544
      
3,269
  
Total non-current assets
    
57,809
      
42,781
  
Total assets
  
$
283,000
    
$
253,593
  
                 
 LIABILITIES AND SHAREHOLDERS' EQUITY
                
                 
 CURRENT LIABILITIES:
                
Trade payables
  
$
78,892
    
$
75,476
  
Deferred revenues
    
3,873
      
5,193
  
Other accounts payable and accrued expenses
    
27,256
      
24,781
  
Total current liabilities
    
110,021
      
105,450
  
                 
 LONG-TERM LIABILITIES:
                
   Deferred tax liability
    
28
      
141
  
Accrued severance pay and pension
    
9,711
      
10,085
  
Other long-term payables
    
3,672
      
4,019
  
Total long-term liabilities
    
13,411
      
14,245
  
                 
 SHAREHOLDERS' EQUITY:
                
Share capital:
                
Ordinary shares
    
214
      
214
  
    Additional paid-in capital
    
415,408
      
410,817
  
Treasury shares at cost
    
(20,091
)
    
(20,091
)
Other comprehensive loss
    
(9,208
)
    
(7,171
)
Accumulated deficits
    
(226,755
)
    
(249,871
)
                 
Total shareholders' equity
    
159,568
      
133,898
  
                 
Total liabilities and shareholders' equity
  
$
283,000
    
$
253,593
  

5

Ceragon Reports Fourth Quarter and Year end 2018 Results

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars, in thousands)
(Unaudited)

   
Three months ended
December 31,
    
Year ended
December 31,
  
   
2018
    
2017
    
2018
    
2017
  
                     
Audited
  
Cash flow from operating activities:
                    

 
Net income
  
$
11,599
    
$
7,210
    
$
23,046
    
$
15,560
  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                                
Depreciation and amortization
    
2,163
      
2,439
      
7,758
      
9,205
  
Stock-based compensation expense
    
498
      
235
      
1,980
      
1,203
  
Decrease (increase) in trade and other receivables, net
    
(11,797
)
    
15,551
      
(8,102
)
    
(6,662
)
Decrease (increase) in inventory, net of write off
    
(6,286
)
    
1,561
      
(956
)
    
(8,592
)
 Increase (decrease) in trade payables and accrued liabilities
    
11,815
      
(11,582
)
    
4,402
      
3,362
  
Increase (decrease) in deferred revenues
    
(4,130
)
    
1,228
      
(650
)
    
2,575
  
Decrease (increase) in deferred tax asset, net
    
(6,949
)
    
105
      
(6,601
)
    
497
  
Other adjustments
    
(120
)
    
(130
)
    
(11
)
    
3
  
Net cash provided by (used in) operating activities
  
$
(3,207
)
  
$
16,617
    
$
20,866
    
$
17,151
  
                                 
Cash flow from investing activities:
                                
   Purchase of property and equipment
    
(4,070
)
    
(1,048
)
    
(10,303
)
    
(8,533
)
   Purchase of intangible assets, net
    
(588
)
    
(1,407
)
    
(3,412
)
    
(1,407
)
   Investment in short and long-term bank deposit
    
48
      
(996
)
    
48
      
(996
)
   Net cash used in investing activities
  
$
(4,610
)
  
$
(3,451
)
  
$
(13,667
)
  
$
(10,936
)
                                 
Cash flow from financing activities:
                                
Proceeds from share options exercise
    
2,048
      
65
      
2,611
      
294
  
Repayments from bank loans
    
-
      
(23,800
)
    
-
      
(17,000
)
Net cash provided by (used in) financing activities
  
$
2,048
    
$
(23,735
)
  
$
2,611
    
$
(16,706
)
                                 
Translation adjustments on cash and cash equivalents
    
28
      
(24
)
    
(106
)
    
30
  
Increase (decrease) in cash and cash equivalents
  
$
(5,741
)
  
$
(10,593
)
  
$
9,704
    
$
(10,461
)
Cash and cash equivalents at the beginning of the period
    
41,322
      
36,470
      
25,877
      
36,338
  
Cash and cash equivalents at the end of the period
  
$
35,581
    
$
25,877
    
$
35,581
    
$
25,877
  

6

Ceragon Reports Fourth Quarter and year End 2018 Results

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
(U.S. dollars in thousands)
(Unaudited)

   
Three months ended
    
Year ended
  
   
December 31,
    
December 31,
  
   
2018
    
2017
    
2018
    
2017
  
                         
GAAP cost of revenues
  
$
56,210
    
$
57,524
    
$
227,705
    
$
224,698
  
Amortization of intangible assets
    
-
      
(367
)
    
-
      
(1,286
)
Stock based compensation expenses
    
(9
)
    
(12
)
    
(42
)
    
(54
)
Changes in indirect tax positions
    
(240
)
    
237
      
(278
)
    
119
  
Non-GAAP cost of revenues
  
$
55,961
    
$
57,382
    
$
227,385
    
$
223,477
  
                                 
GAAP gross profit
  
$
29,532
    
$
29,155
    
$
116,169
    
$
107,335
  
Gross profit adjustments
    
249
      
142
      
320
      
1,221
  
Non-GAAP gross profit
  
$
29,781
    
$
29,297
    
$
116,489
    
$
108,556
  
                                 
GAAP Research and development expenses
  
$
6,709
    
$
6,493
    
$
28,180
    
$
25,703
  
Stock based compensation expenses
    
(103
)
    
(73
)
    
(313
)
    
(229
)
Non-GAAP Research and development expenses
  
$
6,606
    
$
6,420
    
$
27,867
    
$
25,474
  
                                 
GAAP Sales and Marketing expenses
  
$
11,520
    
$
12,337
    
$
42,961
    
$
41,656
  
Amortization of intangible assets
    
-
      
(39
)
    
-
      
(258
)
Stock based compensation expenses
    
(193
)
    
(46
)
    
(640
)
    
(292
)
Non-GAAP Sales and Marketing expenses
  
$
11,327
    
$
12,252
    
$
42,321
    
$
41,106
  
                                 
GAAP General and Administrative expenses
  
$
5,267
    
$
4,544
    
$
19,354
    
$
18,576
  
Stock based compensation expenses
    
(193
)
    
(104
)
    
(985
)
    
(628
)
Non-GAAP General and Administrative expenses
  
$
5,074
    
$
4,440
    
$
18,369
    
$
17,948
  
                                 
GAAP other income
  
$
(470
)
  
$
(1,746
)
  
$
(470
)
  
$
(1,746
)
Statute of limitation on certain
                                
indirect tax liabilities
  
$
470
    
$
1,746
    
$
470
    
$
1,746
  
Non-GAAP other income
  
$
-
    
$
-
    
$
-
    
$
-
  
                                 
GAAP financial expenses
  
$
872
    
$
1,155
    
$
6,349
    
$
5,889
  
Recovery of devaluation related expenses in Venezuela
    
-
      
-
      
969
      
-
  
Non-GAAP financial expenses
  
$
872
    
$
1,155
    
$
7,318
    
$
5,889
  
                                 
GAAP taxes on income
  
$
(5,965
)
  
$
(838
)
  
$
(3,251
)
  
$
1,697
  
Other non-cash tax adjustments
    
6,869
      
1,802
      
6,343
      
1,177
  
Non-GAAP taxes on income
  
$
904
    
$
964
    
$
3,092
    
$
2,874
  

7

Ceragon Reports Fourth Quarter and Year end 2018 Results

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
 
(U.S. dollars in thousands, except share and per share data)
(Unaudited)

   
Three months ended
    
Year ended
  
   
December 31,
    
December 31,
  
   
2018
    
2017
    
2018
    
2017
  
                         
GAAP net income
  
$
11,599
    
$
7,210
    
$
23,046
    
$
15,560
  
Amortization of intangible assets
    
-
      
406
      
-
      
1,544
  
Stock based compensation expenses
    
498
      
235
      
1,980
      
1,203
  
Changes in indirect tax exposures
    
240
      
(237
)
    
278
      
(119
 )
Recovery of devaluation related expenses in Venezuela
    
-
      
-
      
(969
)
    
-
  
Statute of limitation on certain indirect tax liabilities
    
(470
)
    
(1,746
)
    
(470
)
    
(1,746
)
Non-cash tax adjustments
    
(6,869
)
    
(1,802
)
    
(6,343
)
    
(1,177
 )
Non-GAAP net income 
  
$
4,998
    
$
4,066
    
$
17,522
    
$
15,265
  
                                 
GAAP basic net income per share
  
$
0.15
    
$
0.09
    
$
0.29
    
$
0.20
  
                                 
GAAP diluted net income per share
  
$
0.14
    
$
0.09
    
$
0.28
    
$
0.19
  
                                 
Non-GAAP basic and diluted net income per share
  
$
0.06
    
$
0.05
    
$
0.22
    
$
0.19
  
                                 
Weighted average number of shares used in computing GAAP basic net income per share
    
79,538,654
      
78,010,416
      
78,579,013
      
77,916,912
  
                                 
Weighted average number of shares used in computing GAAP diluted net income per share
    
81,987,796
      
79,452,404
      
81,021,527
      
79,942,353
  
                                 
Weighted average number of shares used in computing Non-GAAP diluted net income per share
    
82,368,838
      
79,784,939
      
81,364,897
      
80,206,822
  

8