EX-99 2 exhibit_a.htm EXHIBIT A
Exhibit A

Ceragon Networks Reports Third Quarter 2019 Financial Results

November 4, 2019


CERAGON NETWORKS REPORTS THIRD QUARTER 2019
FINANCIAL RESULTS
 
Little Falls, New Jersey, November 4, 2019 - Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the third quarter which ended September 30, 2019.
 
Third Quarter 2019 Highlights:
 
Revenues - $72.2 million, down 16.6% from the third quarter of 2018, and down 1.1% from the second quarter of 2019.
 
Gross margin – 32.2%, compared to 35.0% in the third quarter of 2018 and 36.1% in the second quarter of 2019.
 
Operating income - $2.1 million, compared to $7.9 million in the third quarter of 2018, and $4.1 million in the second quarter of 2019.
 
Net income - $0.2 million, or $0.00 per diluted share for the third quarter of 2019, compared to $6.2 million, or $0.08 per diluted share, in the third quarter of 2018. Net income for the second quarter of 2019 was $0.8 million, or $0.01 per diluted share.
 
Non-GAAP results – Gross margin was 32.2%, operating income was $2.6 million, and net income was $0.5 million, or $0.01 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached tables.
 
Cash and cash equivalents - $20.5 million at September 30, 2019, compared to $29.0 million at June 30, 2019.
 
“Results in Q3 were affected mainly by the slowdown in India and a delay in one large project in Latin America,” said Ira Palti, president and CEO of Ceragon. “We are seeing areas of strength in demand, excluding India, and we expect revenue in most regions to improve in Q4 and also during 2020, allowing for typical seasonality in Q1. Driving overall growth next year, particularly in the second half, will be new 5G design wins we currently have in hand.
 
“Like many other companies in our industry, we have found it necessary to adjust our short-term expectations based on growing global uncertainties such as trade and economic trends causing a more cautious spending environment, coupled with the specific challenges facing operators as they gear up to 5G technology. During this period of transition, we intend to focus on reinforcing our technology leadership with ongoing investment in R&D, maintaining our financial strength with tight expense control, strong working capital management and remaining resilient in order to fully capitalize on the ramp in 5G deployments.”
 
 Supplemental geographical breakdown of revenue for the third quarter of 2019:
 
•          Europe:
15%
   
•          Africa:
6%
   
•          North America:
11%
   
•          Latin America:
17%
   
•          India:
29%
   
•          APAC:
22%
 
A conference call to discuss the results will begin at 9:00 a.m. EST. Investors are invited to join the Company’s teleconference by calling USA: (800) 230-1092 or International: +1 (612) 288-0337, from 8:50 a.m. EST. The call-in lines will be available on a first-come, first-serve basis.
 
Investors can also listen to the call live via the Internet by accessing Ceragon Networks’ website at the investors’ page: https://www.ceragon.com/investors/webcasts, selecting the webcast link, and following the registration instructions.
 
If you are unable to join us live, the replay numbers are: USA: (800) 475-6701 or International +1 (320) 365-3844 Access Code: 473032. A replay of both the call and the webcast will be available through December 4, 2019.
 
About Ceragon Networks Ltd.
 
Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We help operators and other service providers worldwide smoothly evolve their networks towards 5G, while increasing operational efficiency and enhancing end customers’ quality of experience, with innovative wireless backhaul solutions. Our customers include wireless service providers, public safety organizations, government agencies and utility companies, that use our solutions to deliver mission-critical multimedia services and other applications at high reliability and speed. Ceragon’s unique multicore technology and wireless backhaul solutions provide highly reliable, 5G high-capacity connectivity with minimal use of spectrum, power and other resources. Our solutions enable increased productivity, as well as simple and quick network modernization. We deliver a range of professional services that ensure efficient network rollout and optimization to achieve the highest value for our customers. Ceragon’s solutions are deployed by more than 460 service providers, as well as hundreds of private network owners, in more than 130 countries.

2
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 demand, revenues, net income, gross margin, capital expenditures and liquidity, competitive pressures, order timing, growth prospects, product development, financial resources, cost savings and other financial matters. You may identify these and other forward-looking statements by the use of words such as "may", "plans", "anticipates", "believes", "estimates", "targets", "expects", "intends", "potential" or the negative of such terms, or other comparable terminology. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the  risks relating to the concentration of a significant portion of Ceragon's expected business in certain geographic regions and particularly in India, where a small number of customers are expected to represent a significant portion of our revenues, including the risks of deviations from our expectations of timing and size of orders from these customers; the risk that the current slowdown in revenue from India could extend for a longer period than anticipated; the risk of delays in converting design wins into revenue; risks associated with any failure to effectively compete with other wireless equipment providers; the risk that the rollout of 5G services could take longer than anticipated; and other risks and uncertainties detailed from time to time in Ceragon's Annual Report on Form 20-F and Ceragon's other filings with the Securities and Exchange Commission, that represent our views only as of the date they are made and should not be relied upon as representing our views as of any subsequent date. We do not assume any obligation to update any forward-looking statements.

Investors:
Ran Vered
+972 3 543 1595
investor@ceragon.com
 
Media:
Tanya Solomon
+972 3 5431163
media@ceragon.com
 
-tables follow-

3
Ceragon Reports Third Quarter 2019 Results

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

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2019
    
2018
    
2019
    
2018
  
                         
Revenues
  
$
72,163
    
$
86,529
    
$
214,327
    
$
258,132
  
Cost of revenues
    
48,924
      
56,245
      
140,095
      
171,495
  
                                 
Gross profit
    
23,239
      
30,284
      
74,232
      
86,637
  
                                 
Operating expenses:
                                
Research and development, net
    
6,736
      
7,436
      
19,154
      
21,471
  
Selling and marketing
    
9,756
      
10,510
      
29,339
      
31,441
  
General and administrative
    
4,610
      
4,438
      
16,246
      
14,087
  
                                 
Total operating expenses
  
$
21,102
    
$
22,384
    
$
64,739
    
$
66,999
  
                                 
Operating income
    
2,137
      
7,900
      
9,493
      
19,638
  
                                 
Financial expenses, net
    
1,378
      
797
      
4,317
      
5,477
  
                                 
Income before taxes
    
759
      
7,103
      
5,176
      
14,161
  
                                 
Taxes on income
    
415
      
952
      
2,947
      
2,714
  
Equity loss in affiliates
    
158
      
-
      
472
      
-
  
                                 
Net income
  
$
186
    
$
6,151
    
$
1,757
    
$
11,447
  
                                 
Basic net income per share
  
$
0.00
    
$
0.08
    
$
0.02
    
$
0.15
  
Diluted net income per share
  
$
0.00
    
$
0.08
    
$
0.02
    
$
0.14
  
                                 
Weighted average number of shares used in computing basic net income per share
    
80,303,699
      
78,455,128
      
80,202,791
      
78,256,060
  
                                 
Weighted average number of shares used in computing diluted net income per share
    
81,652,356
      
81,172,392
      
82,012,013
      
80,696,365
  

4

Ceragon Reports Third Quarter 2019 Results

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

   
September 30,
2019
    
December31,
2018
  

 
Unaudited
    
Audited
  
ASSETS
            
             
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
20,524
    
$
35,581
  
Short - term bank deposits
    
-
      
515
  
Trade receivables, net
    
126,196
      
123,451
  
Other accounts receivable and prepaid expenses
    
14,270
      
12,135
  
Inventories
    
67,717
      
53,509
  
                 
Total current assets
    
228,707
      
225,191
  
                 
NON-CURRENT ASSETS:
                
Long-term bank deposits
    
16
      
504
  
Deferred tax assets
    
6,824
      
7,476
  
   Severance pay and pension fund
    
5,773
      
5,096
  
   Property and equipment, net
    
34,890
      
33,613
  
   Intangible assets, net
    
8,003
      
6,576
  
Other non-current assets
    
17,854
      
4,544
  
                 
Total non-current assets
    
73,360
      
57,809
  
                 
Total assets
  
$
302,067
    
$
283,000
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
                 
CURRENT LIABILITIES:
                
Trade payables
  
$
60,357
    
$
78,892
  
Deferred revenues
    
4,734
      
3,873
  
Short- term loans
    
17,400
      
-
  
Other accounts payable and accrued expenses
    
27,291
      
27,256
  
                 
Total current liabilities
    
109,782
      
110,021
  
                 
LONG-TERM LIABILITIES:
                
Deferred tax liability
    
18
      
28
  
Accrued severance pay and pension
    
10,595
      
9,711
  
Deferred revenues
    
6,265
      
-
  
Other long-term payables
    
11,529
      
3,672
  
                 
Total long-term liabilities
    
28,407
      
13,411
  
                 
SHAREHOLDERS' EQUITY:
                
Share capital:
                
    Ordinary shares
    
215
      
214
  
Additional paid-in capital
    
417,392
      
415,408
  
Treasury shares at cost
    
(20,091
)
    
(20,091
)
Other comprehensive loss
    
(8,640
)
    
(9,208
)
Accumulated deficits
    
(224,998
)
    
(226,755
)
                 
Total shareholders' equity
    
163,878
      
159,568
  
                 
Total liabilities and shareholders' equity
  
$
302,067
    
$
283,000
  

5
Ceragon Reports Third Quarter 2019 Results

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

   
Three months ended
September 30,
    
Nine months ended
September 30,
  
   
2019
    
2018
    
2019
    
2018
  
Cash flow from operating activities:
                        
Net income
  
$
186
    
$
6,151
    
$
1,757
    
$
11,447
  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                                
Depreciation and amortization
    
2,573
      
2,094
      
7,011
      
5,595
  
Stock-based compensation expense
    
422
      
450
      
1,594
      
1,482
  
Decrease (increase) in trade and other receivables, net
    
6,616
      
3,804
      
(3,572
)
    
3,695
  
Decrease (increase) in inventory, net of write off
    
5,736
      
(1,719
)
    
(15,077
)
    
5,330
  
Decrease (increase) in deferred tax asset, net
    
(194
)
    
(62
)
    
1,042
      
348
  
 Increase (decrease) in trade payables and  accrued liabilities
    
(30,760
)
    
2,824
      
(21,297
)
    
(7,413
)
Increase in long and short – term deferred revenues
    
1,023
      
1,684
      
7,173
      
3,480
  
Other adjustments
    
(33
)
    
295
      
(169
)
    
109
  
Net cash provided by (used in) operating activities
  
$
(14,431
)
  
$
15,521
    
$
(21,538
)
  
$
24,073
  
                                 
Cash flow from investing activities:
                                
Purchase of property and equipment, net
    
(2,409
)
    
(2,276
)
    
(9,116
)
    
(6,233
)
Purchase of intangible assets, net
    
(249
)
    
(1,488
)
    
(3,041
)
    
(2,824
)
  Proceeds from bank deposits
    
-
      
-
      
920
      
-
  
Net cash used in investing activities
  
$
(2,658
)
  
$
(3,764
)
  
$
(11,237
)
  
$
(9,057
)
                                 
Cash flow from financing activities:
                                
Proceeds from share options exercise
    
135
      
189
      
391
      
563
  
Proceeds of short-term bank credits and loans, net
    
8,500
      
-
      
17,400
      
-
  
Net cash provided by financing activities
  
$
8,635
    
$
189
    
$
17,791
    
$
563
  
                                 
Translation adjustments on cash and cash equivalents
  
$
(63
)
  
$
(22
)
  
$
(73
)
  
$
(134
)
Increase (decrease) in cash and cash equivalents
  
$
(8,517
)
  
$
11,924
    
$
(15,057
)
  
$
15,445
  
Cash and cash equivalents at the beginning of the period
    
29,041
      
29,398
      
35,581
      
25,877
  
Cash and cash equivalents at the end of the period
  
$
20,524
    
$
41,322
    
$
20,524
    
$
41,322
  

6
Ceragon Reports Third Quarter 2019 Results

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
  
(U.S. dollars in thousands)
  
(Unaudited)
  
                         
   
Three months ended
    
Nine months ended
  
   
September 30,
    
September 30,
  
   
2019
    
2018
    
2019
    
2018
    
                         
GAAP cost of revenues
  
$
48,924
    
$
56,245
    
$
140,095
    
$
171,495
  
Stock based compensation expenses
    
(13
)
    
(15
)
    
(44
)
    
(33
)
Changes in indirect tax positions
    
(4
)
    
(11
)
    
(34
)
    
(38
)
Non-GAAP cost of revenues
  
$
48,907
    
$
56,219
    
$
140,017
    
$
171,424
  
                                 
GAAP gross profit
  
$
23,239
    
$
30,284
    
$
74,232
    
$
86,637
  
Gross profit adjustments
    
17
      
26
      
78
      
71
  
Non-GAAP gross profit
  
$
23,256
    
$
30,310
    
$
74,310
    
$
86,708
  
                                 
GAAP Research and development expenses
  
$
6,736
    
$
7,436
    
$
19,154
    
$
21,471
  
Stock based compensation expenses
    
(84
)
    
(83
)
    
(285
)
    
(210
)
Non-GAAP Research and development expenses
  
$
6,652
    
$
7,353
    
$
18,869
    
$
21,261
  
                                 
GAAP Sales and Marketing expenses
  
$
9,756
    
$
10,510
    
$
29,339
    
$
31,441
  
Stock based compensation expenses
    
(171
)
    
(161
)
    
(553
)
    
(447
)
Non-GAAP Sales and Marketing expenses
  
$
9,585
    
$
10,349
    
$
28,786
    
$
30,994
  
                                 
GAAP General and Administrative expenses
  
$
4,610
    
$
4,438
    
$
16,246
    
$
14,087
  
Stock based compensation expenses
    
(154
)
    
(191
)
    
(712
)
    
(792
)
Non-GAAP General and Administrative expenses
  
$
4,456
    
$
4,247
    
$
15,534
    
$
13,295
  
                                 
GAAP financial expenses
  
$
1,378
    
$
797
    
$
4,317
    
$
5,477
  
Recovery of devaluation related expenses in Venezuela
    
-
      
969
      
-
      
969
  
Leases – financial income (expenses)
    
91
      
-
      
(101
)
    
-
  
Non-GAAP financial expenses
  
$
1,469
    
$
1,766
    
$
4,216
    
$
6,446
  
                                 
GAAP Tax expenses
  
$
415
    
$
952
    
$
2,947
    
$
2,714
  
Non cash tax adjustments
    
182
      
(58
)
    
(1,090
)
    
(526
)
Non-GAAP Tax expenses
  
$
597
    
$
894
    
$
1,857
    
$
2,188
  
                                 
GAAP equity loss in affiliates
  
$
158
    
$
-
    
$
472
    
$
-
  
Other non-cash adjustments
    
(158
)
    
-
      
(472
)
    
-
  
Non-GAAP equity loss in affiliates
  
$
-
    
$
-
    
$
-
    
$
-
  

7

Ceragon Reports Third Quarter 2019 Results
            
             
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
  
(U.S. dollars in thousands, except share and per share data)
  
(Unaudited)
  
             
   
Three months ended
    
Nine months ended,
  
    September 30,
   
September 30,
  
   
2019
    
2018
    
2019
    
2018
  
                         
GAAP net income 
  
$
186
    
$
6,151
    
$
1,757
    
$
11,447
  
Stock based compensation expenses
    
422
      
450
      
1,594
      
1,482
  
Changes in indirect tax positions
    
4
      
11
      
34
      
38
  
Leases – financial expenses (income)
    
(91
)
    
-
      
101
      
-
  
Non-cash tax adjustments
    
(182
)
    
58
      
1,090
      
526
  
Recovery of devaluation related expenses in Venezuela
    
-
      
(969
)
    
-
      
(969
)
Other non-cash adjustment
    
158
      
-
      
472
      
-
  
Non-GAAP net income 
  
$
497
    
$
5,701
    
$
5,048
    
$
12,524
  
                                 
GAAP basic net income per share
  
$
0.00
    
$
0.08
    
$
0.02
    
$
0.15
  
                                 
GAAP diluted net income per share
  
$
0.00
    
$
0.08
    
$
0.02
    
$
0.14
  
                                 
Non-GAAP diluted net income per share
  
$
0.01
    
$
0.07
    
$
0.06
    
$
0.15
  
                                 
Weighted average number of shares used in computing GAAP basic net income per share
    
80,303,699
      
78,455,128
      
80,202,791
      
78,256,060
  
                                 
Weighted average number of shares used in computing GAAP diluted net income per share
    
81,652,356
      
81,172,392
      
82,012,013
      
80,696,365
  
                                 
Weighted average number of shares used in computing Non-GAAP diluted net income per share
    
81,814,367
      
81,546,013
      
82,254,919
      
81,027,179
  

8