Ceragon Networks Reports Second Quarter 2010 Financial Results

Ceragon Networks Reports Second Quarter 2010 Financial Results

Achieves Record Revenues, Higher Gross Margins and Improved Operating Margin

PR Newswire -- July 26, 2010

PARAMUS, New Jersey, July 26, 2010 /PRNewswire-FirstCall/ -- Ceragon Networks Ltd. (NASDAQ: CRNT), the provider of high-capacity, LTE/4G-ready wireless backhaul networks, today reported results for the second quarter which ended June 30, 2010.

Revenues for the second quarter of 2010 reached an all-time high of $60.9 million, up 44% from $42.2 million for the second quarter of 2009 and up 2% from $59.7 million in the first quarter of 2010.

Net income in accordance with US Generally Accepted Accounting Principles (GAAP) for the second quarter of 2010 was $2.6 million or $0.07 per basic share and diluted share, including a one-time expense of $1.15 million to acquire technology for further development. Net income in the second quarter of 2009 was $0.2 million, or $0.01 per basic and diluted share.

On a non-GAAP basis, net income for the first quarter, excluding $852,000 of equity-based compensation expenses and the $1.15 million one-time expense for technology, was $4.6 million, or $0.13 per basic and diluted share. Non-GAAP net income for the second quarter of 2009 was $1.04 million, or $0.03 per basic and diluted share (please refer to the accompanying financial table for reconciliation of GAAP financial information to non-GAAP).

Gross margin on a GAAP basis in the second quarter of 2010 was 35.3%. Gross margin on a non-GAAP basis was 35.4% of revenues.

Cash and cash investments at the end of the quarter were $94.9 million.

"We had an excellent second quarter with record revenues, higher gross margin, and improved operating margin," said Ira Palti, President and CEO of Ceragon. "Global demand remains very strong. Outside of India, where orders are being delayed pending a security-related process being implemented by the government, our book-to-bill was above one. We expect revenues in the third and fourth quarters to be similar to the second quarter. For the full year, we continue to target revenue growth in the range of 30-35%, with profits growing at a higher rate than revenue."

Supplemental revenue breakouts:

Geographical breakdown, first quarter of 2010:

EMEA: 25%

North America: 16%

Asia Pacific: 53%

Latin America: 6%

A conference call will follow, beginning at 9:00 a.m. EDT. Investors are invited to join the Company's teleconference by calling (800)-230-1059 or international (612)-234-9959 at 8:50 a.m. EDT. 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/ir_events.asp?lang=0 selecting the webcast link, and following the registration instructions.

If you are unable to join us live, the replay numbers are: (800)-475-6701 or international (320)-365-3844, Access Code 162768.

A replay of both the call and the webcast will be available through August 26, 2010.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is a leading provider of high capacity LTE/4G ready wireless backhaul solutions that enable cellular operators and other wireless service providers to deliver voice and data services, such as Internet browsing, music and video applications. Our wireless backhaul solutions use microwave technology to transfer large amounts of telecommunication traffic between base stations and the core of the service provider's network. Designed to enable risk-free migration from legacy to next-generation backhaul networks, our solutions provide fiber-like connectivity for circuit-switched, or SONET/SDH, networks, next generation Ethernet/Internet Protocol, or IP-based, networks, and hybrid networks that combine circuit-switched and IP-based networks. Our solutions support all wireless access technologies, including GSM, CDMA, EV-DO, HSPA, LTE and WiMAX. These solutions allow wireless service providers to cost-effectively and seamlessly evolve their network from circuit-switched and hybrid concepts to all IP thereby meeting the increasing demands by the growing numbers of subscribers and the increasing demand for mobile data services. We also provide our solutions to businesses and public institutions that operate their own private communications networks. Our solutions are deployed by more than 200 service providers of all sizes, as well as in hundreds of private networks, in more than 130 countries. More information is available at http://www.ceragon.com.

Ceragon Networks(R), CeraView(R), FibeAir(R), the FibeAir(R) design mark and Native2(R) are registered trademarks., and Ceragon(TM), PolyView(TM), ConfigAir (TM), CeraMon(TM), EtherAir(TM), QuickAir(TM), QuickAir Partner Program(TM), QuickAir Partner Certification Program(TM), QuickAir Partner Zone(TM), EncryptAir(TM) and Microwave Fiber(TM) are trademarks of Ceragon Networks Ltd.

This press release may contain statements concerning Ceragon's future prospects that are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections that involve a number of risks and uncertainties. There can be no assurance that future results will be achieved, and actual results could differ materially from forecasts and estimates. These are important factors that could cause actual results to differ materially from forecasts and estimates. These risks and uncertainties, as well as others, are discussed in greater detail in Ceragon's Annual Report on Form 20-F and Ceragon's other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made and Ceragon undertakes no commitment to revise or update any forward-looking statement in order to reflect events or circumstances after the date any such statement is made.

Ceragon Reports Second Quarter 2010 Results

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, 2010 2009 2010 2009

Revenues $ 60,889 $ 42,246 $ 120,576 $ 86,148 Cost of revenues 39,420 28,555 78,731 57,386

Gross profit 21,469 13,691 41,845 28,762

Operating expenses: Research and 6,919 4,323 12,192 9,096 development Selling and marketing 8,959 7,028 18,141 14,807 General and 2,996 2,504 5,776 5,080 administrative

Total operating $ 18,874 $ 13,855 $ 36,109 $ 28,983 expenses

Operating profit (loss) 2,595 (164) 5,736 (221) Financial income, net 276 468 510 822

Income before taxes 2,871 304 6,246 601

Taxes on income 273 71 625 153

Net Income $2,598 $ 233 $5,621 $ 448

Basic net earnings per $ 0.07 $ 0.01 $ 0.16 $ 0.01 share

Diluted net earnings $ 0.07 $ 0.01 $ 0.15 $ 0.01 per share Weighted average number of shares used in computing basic net earnings per share 34,881,532 34,247,005 34,686,410 34,523,460

Weighted average number of shares used in computing diluted net earnings per share 36,317,945 34,994,702 36,542,735 35,157,903

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Ceragon Reports Second Quarter 2010 Results

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

June 30, December 31, 2010 2009

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 30,231 $ 38,339 Short-term bank deposits 22,867 30,183 Marketable securities 16,356 16,724 Trade receivables, net 56,690 68,452 Deferred taxes 3,964 3,462 Other accounts receivable and prepaid expenses 7,724 7,492 Inventories 68,577 65,925

Total current assets 206,409 230,577

LONG-TERM INVESTMENTS: Long-term bank deposits 9,220 10,824 Long-term marketable securities 16,223 2,250 Severance pay funds 5,049 4,971 Deferred taxes 8,899 8,942

Total long-term investments $ 39,391 $ 26,987

PROPERTY AND EQUIPMENT, NET 14,574 11,809

Total assets $ 260,374 $ 269,373

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES: Trade payables 34,358 52,898 Deferred revenues 17,806 18,548 Other accounts payable and accrued expenses 9,874 9,847

Total current liabilities $ 62,038 $ 81,293

LONG-TERM LIABILITIES Accrued severance pay $ 7,282 $ 7,174

SHAREHOLDERS' EQUITY: Share capital: Ordinary shares 94 92 Additional paid-in capital 296,573 291,736 Treasury shares at cost (20,091) (20,091) Other comprehensive income (loss) (212) 100 Accumulated deficits (85,310) (90,931)

Total shareholders' equity $ 191,054 $ 180,906

Total liabilities and shareholders' equity $ 260,374 $ 269,373

Ceragon Reports Second Quarter 2010 Results

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (U.S. dollars in thousands) (Unaudited) 2010 2009 2010 2009

Cash flow from operating activities:

Net income $ 2,598 $ 233 $ 5,621 $ 448

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

Depreciation 1,138 760 2,178 1,471 Stock-based compensation expense 852 805 1,823 1,594 Decrease in trade and other receivables, net 1,673 7,700 11,118 21,237 Decrease (increase) in inventory 5,172 (2,922) (2,652) (2,055) Decrease in trade payables and accrued liabilities (11,213) (145) (17,985) (12,708) Increase (decrease) in deferred revenues (2,063) (1,270) (742) 165 Increase in deferred tax asset (28) - (359) - Other adjustments 557 (95) 536 (233) Net cash provided by (used in) operating activities $ (1,314) $ 5,066 $ (462) $ 9,919

Cash flow from investing activities: Purchase of property and equipment, net (2,577) (1,287) (5,471) (3,774) Investment in short and long-term bank deposit (11,032) (10,495) (11,032) (18,955) Proceeds from short and long-term bank deposits 12,607 3,599 19,680 20,559 Investment in held-to-maturity marketable securities (3,230) - (18,339) (1,500) Proceeds from maturities of held-to-maturity marketable securities - 1,300 4,500 11,754

Net cash provided by (used in) investing activities $ (4,232) $(6,883) $ (10,662) $ 8,084

Cash flow from financing activities: Proceeds from exercise of options 430 215 3,016 215 Purchase of treasury shares at cost - (1,618) - (8,040)

Net cash provided by (used in) financing activities $ 430 (1,403) $ 3,016 $ (7,825)

Increase (decrease) in cash and cash equivalents $ (5,116) (3,220) $ (8,108) $ 10,178

Cash and cash equivalents at the beginning of the period 35,347 41,622 38,339 28,224

Cash and cash equivalents at the end of the period $ 30,231 $ 38,402 $ 30,231 $ 38,402



Ceragon Reports Second Quarter 2010 Results

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



Three months ended June 30 2010 2009 GAAP (as reported) Adjustments Non-GAAP Non-GAAP

Revenues $ 60,889 $ 60,889 $ 42,246 Cost of revenues 39,420 (*)72 39,348 28,494

Gross profit 21,469 21,541 13,752

Operating expenses: Research and development 6,919 (*)184 5,585 4,157 **)1,150 Selling and marketing 8,959 (*)352 8,607 6,706 General and administrative 2,996 (*)244 2,752 2,248

Total operating expenses $ 18,874 $ 16,944 $ 13,111

Operating profit 2,595 4,597 641 Financial income, net 276 276 468

Income before taxes 2,871 4,873 1,109

Taxes on income 273 273 71

Net income $ 2,598 $ 4,600 $ 1,038

Basic net earnings per share $ 0.07 $ 0.13 $ 0.03

Diluted net earnings per share $ 0.07 $ 0.13 $ 0.03

Weighted average number of shares used in computing basic net earnings per share 34,881,532 34,881,532 34,247,005

Weighted average number of shares used in computing diluted net earnings per share 36,317,945 36,317,945 34,994,702

Total adjustments 2,002

(*) Adjustments related to equity based compensation expenses according to SFAS 123 (R)

(**) Adjustment related to purchase of technology for further development



Ceragon Reports Second Quarter 2010 Results

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



Six months ended June 30, 2010 2009 GAAP (as reported) Adjustments(*) Non-GAAP Non-GAAP

Revenues $ 120,576 $ 120,576 $86,148 Cost of revenues 78,731 (*)138 78,593 57,262

Gross profit 41,845 41,983 28,886

Operating expenses: Research and development 12,192 (*)361 10,681 8,770 (**)1,150 Selling and marketing 18,141 (*)614 17,527 14,179 General and administrative 5,776 (*)710 5,066 4,564

Total operating expenses $ 36,109 $ 33,274 $ 27,513

Operating profit 5,736 8,709 1,373 Financial income net 510 510 822

Income before taxes 6,246 9,219 2,195

Taxes on income 625 625 153

Net Income $ 5,621 $ 8,594 $ 2,042

Basic net earnings per share $ 0.16 $ 0.25 $ 0.06

Diluted net earnings per share $ 0.15 $ 0.24 $ 0.06

Weighted average number of shares used in computing basic net earnings per share 34,686,410 34,686,410 34,523,460

Weighted average number of shares used in computing diluted net earnings per share 36,542,735 36,542,735 35,157,903

Total adjustments 2,973

(*) Adjustments related to equity based compensation expenses according to SFAS 123 (R)

(**) Adjustment related to purchase of technology for further development

Contact: Yoel Knoll Director of Investor Relations Ceragon Networks Ltd. Cell (Int'l): +972(0)52-830-6419 Office (Int'l): +972(0)3-766-6419 yoell@ceragon.com

SOURCE Ceragon Networks Ltd

Subject Codes: PC/t.100726081210871, PT/lang.en, PC/ticker, IN/CPR, IN/NET, IN/HRD, IN/STW, IN/TCS, IN/TEQ, SU/ERN, RE/New_Jersey, PC/priority.r, PC/category.f, PC/WAVO_..m.ca, PC/APT_..m.c, PC/DataFeat_metfi, PC/circuit_m, PC/trade_c, PC/wavo3_m, PC/wavo5_c, PC/wavo6_a, PC/Billing_NYM, PC/Billing_TNW, PC/Billing_RWB, PC/Billing_IRW, PC/Billing_FC1, PC/1stAcc_916650, PC/port_26, PC/port_19, PC/port_91, PC/port_32, PC/port_01, PC/port_30, PC/port_33, PC/port_31, PC/prnpriority_P2, PC/contact, PC/id_UKM629

Company Codes: NASDAQ-NMS:CRNT, NASDAQ-NMS:CRNT