☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Ordinary Shares, Par Value NIS 0.01 | CRNT | Nasdaq Global Select Market |
Large accelerated filer ☐ | Accelerated filer ☑ | Non-accelerated filer ☐ |
Emerging growth company ☐ |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐
Other ☐
Page | ||
PART I | ||
3 | ||
3 | ||
3 | ||
37 | ||
55 | ||
55 | ||
67 | ||
86 | ||
87 | ||
91 | ||
91 | ||
100 | ||
100 | ||
PART II | ||
100 | ||
100 | ||
100 | ||
101 | ||
101 | ||
102 | ||
102 | ||
102 | ||
102 | ||
103 | ||
103 | ||
103 | ||
103 | ||
103 | ||
PART III | ||
104 | ||
104 | ||
105 |
• | references to “Ceragon,” the “Company,” “us,” “we,” “our” and the “registrant” refer to Ceragon Networks Ltd., an Israeli company, and its consolidated subsidiaries; |
• | references to “ordinary shares,” “our shares” and similar expressions refer to our Ordinary Shares, NIS 0.01 nominal (par) value per share; |
• | references to “dollars,” “U.S. dollars”, “USD” and “$” are to United States Dollars; |
• | references to “shekels” and “NIS” are to New Israeli Shekels, the Israeli currency; |
• | references to the “Companies Law” are to Israel’s Companies Law, 5759-1999; |
• | references to the “SEC” are to the United States Securities and Exchange Commission; and |
• | references to the "Nasdaq Rules" are to the rules of the Nasdaq Global Select Market. |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
• | the effects of global economic trends, including recession, rising inflation, rising interest rates, commodity price increases and fluctuations, commodity shortages and exposure to economic slowdown, on our and our customers’ business, financial condition and results of operations; |
• | the impact of delays in the transition to 5G technologies and in the 5G rollout on our revenues if such transition is developed differently than we anticipated, either in terms of technology, use-case, timeline or otherwise; |
• | if we fail to effectively cope with the high volatility in the supply needs of our customers, we may be unable to timely fulfill our customer commitments (for example, delivery issues due to long lead time and availability of components and manufacturing power), and may be obligated to pay expediting fees to our contract manufacturers, penalties to our customers for delays, and may be subject to order cancelation, all of which would adversely affect our business and results of operations; |
• | the effect of the concentration of a major portion of our business on large mobile operators around the world from which we derive a significant portion of our ordering, that due to their significant weight compared to the overall ordering by other customers during the same time period, coupled with inconsistent ordering patterns and volume of business directed to us (which may deviate as a result of parameters such as buying decisions, price lists, roll-out strategy, local market conditions and regulatory environment), creates high volatility with respect to our financial results and results of operations, including our revenues, gross margin and cash flow; |
• | the effects of volatility in our revenues, margins and working capital needs and the incurrence of substantial losses and negative cash flows that we have experienced in recent years, which if continue, would adversely affect our business and financial condition and in such case we cannot assure that we will be able to maintain improving trends and convert our current backlog into profitability and positive operating cash flows; |
• | we may be exposed to inventory-related losses on inventory purchased by our contract manufacturers and other suppliers, or to increased expenses should unexpected production ramp up be required due to inaccurate forecasts or business changes. In addition, part of our inventory may be written off, which would increase our cost of revenues; |
• | competition from other wireless transport equipment providers and from other communication solutions that compete with our wireless solutions; |
• | we rely on third-party manufacturers, suppliers and service providers and such reliance may disrupt the proper and timely management of deliveries of our products, a risk that is intensified in the case of a single source supplier; |
• | the global supply of electronic components, including integrated circuits has experienced a sharp increase in demand in the past several years, coupled with a lack of sufficient production capacity, which has effected and may still effect the lead-time for our components and their prices; |
• | increased breaches of network or information technology security along with an increase in cyber-attack activities, either on our or our customers’ networks, could have an adverse effect on our business; |
• | merger and acquisition activities expose us to risks and liabilities, potential adverse reactions or changes to business relationships, including those resulting from the completion of the transaction with Siklu and our revenues, net income and operating cash flow attributed to the Siklu business might deviate significantly from anticipated levels; |
• | the expansion of our service offering to new areas, including managed services, software-based services (SaaS) and solutions for wireless communication networks design, might pose product development, marketing, sales, operation, implementation and support challenges that might result in significant losses and may adversely affect our financial results and achievement of projected revenues levels; |
• | risks related to expansion into new market segments, such as the private networks market, the development and commercialization of new products, and the rapid change in the markets for our products and in related technologies and operational concepts development; |
• | risks related to our forward-looking forecasts, with respect to which there is no assurance that such forecasts will materialize as we predicted; |
• | risks relating to the failure to attract or retain qualified and skilled “talents” and personnel and the intense competition for such “talents” and personnel; |
• | difficulties in predicting our gross margin as it is exposed to significant fluctuations as a result of potential changes in the various geographical locations where we generate revenues as well as product mix and software and services portions; |
• | our engagement in providing installation or rollout projects for our customers and end users whether directly or via third party prime contractor, which are long-term projects that are subject to inherent risks, including early delivery of our products with delayed payment terms, delays or failures in acceptance testing procedures, and potential significant collection risk from our customers all of which may result in substantial period-to-period fluctuations in our results of operations, cash flow and financial condition; |
• | changes in privacy and data protection laws and regulations could have an adverse effect on our business prospects, results of operations, and financial condition; |
• | the impact of complex and evolving regulatory requirements in which we operate, on our business, results of operations and financial condition; |
• | risks relating to macro and micro adverse effects on the global and European markets in which we operate due to the invasion of Ukraine by Russia, such as, among others, cancellation or suspension of orders placed by Russian customers or for Russian end-users, disruption of delivery of raw materials, oil and gas, goods, and supplies’ price increases, disruption to deliveries, shipping and transportation, imposition of sanctions, export control restrictions and embargoes, loss of business, cyber-attacks, commodity shortages and other effects that could have an adverse effect on us, our business, suppliers and customers; |
• | risks related to fluctuations in currency exchange rates and restrictions related to foreign currency exchange controls; |
• | the occurrence of international, political, regulatory or economic events in emerging markets, where the majority of our sales is made; |
• | risks relating to disagreements with tax authorities regarding tax positions that we have taken which may result in increased tax liabilities; |
• | the impact of industry downturn, reduction in our customers’ profitability due to increased regulation or new mobile services requirements; |
• | the impact of the latest Israel-Hamas war, as well as the conditions in the Middle East, could impede our ability to sell, operate and develop, manufacture and deliver products and components and harm our business and financial results; and |
• | risks relating to attempts for a hostile takeover, or shareholder activism, which may, divert our management’s and Board’s attention and resources from our business and could give rise to perceived uncertainties as to our future direction, could result in the loss of potential business opportunities, limit our ability to raise funds and make it more difficult for us to attract and retain qualified personnel for positions in both management and Board levels. |
• | new generations of products replacing older ones, including changes in products because of technological advances and cost reduction measures; and |
• | the need of our contract manufacturers to order raw materials that have long lead times, our need to order a Last Time Buy of end of life components and our inability to estimate exact amounts and types of items thus needed. |
• | The component suppliers may experience shortages in components and interrupt or delay their shipments to our contract manufacturers. Consequently, these shortages could delay the manufacture of our products and shipments to our customers. |
• | The component suppliers could discontinue the manufacture or supply of components used in our systems. In such an event, we or our contract manufacturers may be unable to develop alternative sources for the components necessary to manufacture our products, which could force us to redesign our products or buy a large stock of the component into inventory before it is discontinued. Any such redesign of our products would likely interrupt the manufacturing process and could cause delays in our product shipments. Moreover, a significant modification in our product design may increase our manufacturing costs and bring about lower gross margins. In addition, we may be exposed to excess inventory of such component, which we will have to write-down in case the demand is not as high as we anticipated at the time of buying these components. |
• | The component suppliers may significantly increase component prices at any time and particularly if demand for certain components increases dramatically in the global market which would have an adverse effect on the Company’s business. |
• | The component suppliers may significantly increase the time to produce and deliver their components at any time resulting in an immediate effect, as evidenced recently with respect to the semiconductors foundry industry. These lead time increases would delay our products’ delivery timetable and could expose us to shortage in supply or late supplies that may trigger penalties, orders cancellation and losing some of our customers. |
• | The component suppliers may refuse or be unable to further supply such component for various reasons, including, among other things, their prioritization, focus, regulations, force majeure events or financial situation. |
• | we may not be able to discover, or the target company may fail to provide us with, all relevant information and documents in relation to the transaction, which could lead to a failure to achieve the objectives of acquisition and to a substantial loss; |
• | we may fail to reveal that the due diligence materials and documents provided contain untrue statements of material facts or omit to state a material fact necessary to make the statements therein not misleading, hence fail to achieve the objectives of acquisition and suffer a substantial loss; |
• | we may fail to correctly assess the due diligence investigation findings, establish a correct investment thesis or establish a correct post-merger integration plan; |
• | the process of integrating an acquired business including, for example, the operations, systems, technologies, products, and personnel of the combined companies, particularly companies with large and widespread operations and/or complex products, may be prolonged due to unforeseen difficulties; |
• | the implementation of the transaction may distract and divert management’s attention from the normal daily operations of our business; |
• | we may sustain and record significant expenditure and costs associated with outstanding transactions that either did not or will not materialize or would fail to achieve its objectives; |
• | there will be increased expenses associated with the transaction, and we may need to use a substantial portion of our cash resources or incur debt in order to cover such expenses; expenses which the combined merged companies may not be sufficient to offset; |
• | we may generate negative cash flow as a result of such transaction, which may require fund raising that may not be available for us; |
• | we may incur unexpected accounting and other expenses associated with the transaction, such as tax expenses, write offs, amortization expenses related to intangible assets, restructuring costs, litigation costs or such other costs derived from the acquisition; |
• | the transaction may harm our business as currently conducted (for example, there may be a temporary loss of revenues, we may experience loss of current key employees, customers, resellers, vendors and other business partners or companies with whom we engage today or which relate to any acquired company); |
• | we may be required to issue ordinary shares as part of the transaction, which would dilute our current shareholders; |
• | we may need to assume material liabilities of the merged entity; |
• | in certain cases, mergers and acquisitions require special approvals, or are subject to scrutiny by the local authorities, and failing to comply with such requirements or to receive such approvals, may prevent or limit our ability to complete the acquisitions as well as expose us to legal proceedings prior or following the consummation of such acquisitions. In some cases, such proceedings, if initiated, may conclude in a requirement to divest portions of the acquired business; |
• | the failure to successfully complete the integration associated with the transaction (including integrating any acquired technology into our products), which may cause new markets we were aiming for not to materialize or in which competitors may have a stronger market position; or |
• | we may fail to effectively obtain the technological improvement. |
• | Market Acceptance: There is no guarantee that our products, solutions or services will gain acceptance in the new market segment, which may be significantly different from our existing markets in terms of customer preferences, culture, regulations, and competition. |
• | Brand Development Risks: Establishing and building our brand in a new market segment, could require significant time and resources, potentially delaying our planned growth trajectory. A prolonged brand-building process may also reduce the speed at which we can realize revenues from new segments. |
• | Customer Service and Support: As we acquire new customers, our customer service and support operations will need to expand and adapt to meet their needs. If we are unable to provide high-quality customer service and support, our reputation and brand value could suffer, which may adversely affect our customer retention rates and our company's overall performance. |
• | Regulatory Compliance: Each new market segment is subject to specific regulations and compliance requirements that we must adhere to. Non-compliance or changes in these regulations could result in fines, sanctions, or other legal consequences that may have a material adverse effect on our business and operations. |
• | Increased Competition: New market segments often come with established competitors who have a better understanding of the local market dynamics and customer base. We may face significant competition, which can hinder our market penetration efforts and negatively impact our profitability. |
• | Sales and Marketing Challenges: Successfully entering a new market segment typically requires substantial sales and marketing efforts. There can be no assurance that our marketing strategies will be effective in attracting new customers or that we can do so cost-effectively. Ineffective sales and marketing efforts may lead to lower than expected sales and adversely affect our revenue and profitability. |
• | Innovation Uncertainty: The process of developing new products is lengthy, complex and uncertain. It requires significant research, development, and testing, all of which may fail to result in viable products. Our R&D efforts may not yield new products that can be commercialized. |
• | Market Acceptance: There is a risk that new products may not achieve market acceptance, as our target markets may not be receptive to our new products, or competitors may offer superior or more cost-effective products. |
• | Intellectual Property Risks: There is the risk associated with protecting new intellectual property and potential infringement upon the intellectual property rights of others. If we cannot adequately protect our intellectual property or if we infringe upon the rights of others, our competitive position may suffer. |
• | Manufacturing and Supply Chain Risks: We may encounter difficulties in scaling up production to meet demand, including problems involving production yields, quality control and assurance, and shortages of essential components. |
• | Pricing and Reimbursement: There could be pricing pressure from competitors and difficulty in obtaining adequate reimbursement for new products, which could affect their profitability. |
• | Product Liability: New products are susceptible to defects, which could lead to liability and harm our reputation. |
• | unexpected or inconsistent changes in regulatory requirements, including security regulations, licensing and allocation processes; |
• | unexpected changes in or imposition of tax, tariffs, customs levies or other barriers and restrictions; |
• | fluctuations in foreign currency exchange rates; |
• | restrictions on currency and cash repatriation; |
• | the burden of complying with a variety of foreign laws, including foreign import restrictions which may be applicable to our products; |
• | difficulties in protecting intellectual property; |
• | laws and business practices favoring local competitors; |
• | collection delays and uncertainties; |
• | difficulties in transferring or obtaining funds from certain countries within these emerging markets; |
• | requirements to do business in local currency; and |
• | judicial systems that do not apply the principals of natural justice with regard to disputes with foreign nationals. |
• | announcements of technological innovations or new commercial products by us or by our competitors; |
• | announcement of significant deals won by us or by our competitors; |
• | competitors’ positions and other events related to our market; |
• | changes in the Company’s estimations regarding forward looking statements and/or announcement of actual results that vary significantly from such estimations; |
• | the announcement of corporate transactions, merger and acquisition activities or other similar events by companies in our field or industry; |
• | changes and developments effecting our field or industry; |
• | period to period fluctuations in our results of operations and cash flow; |
• | changes in financial estimates by securities analysts; |
• | our earnings releases and the earnings releases of our competitors; |
• | our ability to show and accurately predict revenues; |
• | our need to raise additional funds and the success or failure thereof; |
• | other announcements, whether by the Company or others, referring to the Company’s financial condition, results of operations and changes in strategy; |
• | changes in senior management or the board of directors; |
• | the general state of the securities markets (with a particular emphasis on the technology and Israeli sectors thereof); |
• | the general state of the credit markets, the volatility of which could have an adverse effect on our investments; |
• | developments concerning material proprietary rights, including material patents; |
• | whether we or our competitors receive or are denied regulatory approvals; and |
• | global and local macroeconomic developments, components shortage, effects of the Russia-Ukraine war, the conflict between China and Taiwan, and the state of war declared in Israel in October 2023, and other global occurrences, such as an outbreak of pandemic with similar effect. |
• | hostilities involving Israel; |
• | the interruption or curtailment of trade between Israel and its present trading partners; |
• | a downturn in the economic or financial condition of Israel; and |
• | a full or partial mobilization of the reserve forces of the Israeli army. |
• | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q and current reports on Form 8-K; |
• | the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of securities registered under the Exchange Act, including extensive disclosure of compensation paid or payable to certain of our highly compensated executives as well as disclosure of the compensation determination process; |
• | the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; and |
• | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profit realized from any “short-swing” trading transaction (a purchase and sale, or sale and purchase, of the issuer’s equity securities within less than six months). |
• | Short-haul solutions, which typically provide a wireless link capacity of up to 2 Gbps per link for backhaul, and/or a link capacity of up to 20Gbps for fronthaul. These solutions are available for distances of several hundred feet to 10 miles. Short-haul links are deployed in access applications (macro cells and small cells and distributed cells) wirelessly connecting the individual base-stations or base-station element (i.e. a “central unit”, a “distributed unit” or a “radio unit”) towers to the core network. Short-haul solutions are also used in a range of non-carrier “vertical” applications such as state and local government, public safety, education and off-shore communication for oil and gas platforms. |
• | Long-haul solutions, which typically provide a capacity of up to 20 Gbps, are used in the “highways” of the telecommunication backbone network. These links are typically used to carry services at distances of 10 to 50 miles, and, using the right planning, configuration and equipment, can also bridge distances of 100 miles and more. Long-haul solutions are also used in a range of non-carrier “vertical” applications such as broadcast, state and local government, public safety, utilities and offshore communication for oil and gas platforms. |
• | In 4G, the fronthaul transport network connects Remote Radio Heads (RRHs) to distant centralized/cloud Baseband Units (BBUs), while backhaul connects BBUs back to 4G Evolved Packet Core (EPC). In 5G, the New Radios (NR) are connected to the BBU, which can be disaggregated into a Central Unit (CU) and a Distributed Unit (DU). The new midhaul interconnects the CU to the DU via a new, standardized 3GPP interface. |
• | With help from organizations such as the operator-led O-RAN Alliance, 5G fronthaul and midhaul network interface specifications are open and defined in a structured format. This allows MNOs to purchase RUs, DUs, CUs, and the associated transport networks between them, from anyone. We believe that this presents new market opportunities for Ceragon’s leading wireless transport solutions with our open network architecture. |
• | The widespread surge in network traffic in 2020 to 2023 emerging from the COVID-19 pandemic has significantly affected the way business and individuals access information for work and leisure. National lock-ins for large parts of the population and labor market trends brought many businesses to exercise company-wide work-from-home activities with massive use of video conferencing and cloud network communication. Entire families stay longer at home and extensively consume video streaming and online gaming, along with video chats with friends and relatives. The result is an increase in home broadband demand, while today’s home broadband networks are not designed for such usage patterns. Some countries, even developed ones, lack broadband communication networks in rural areas. As a result, service providers are required to increase network investment to match the network capabilities to the surge in broadband demand. We anticipate that the increase in network traffic which service providers experienced amidst the pandemic will remain and may even increase, as companies and employees adapt to broader use of telecommuting, and families adopt higher use of video calls/chats as larger portions of the world population, young and elderly alike, use highly visual remote communication tools and high-volume communication transactions. |
• | 5G enables operators to enhance their services portfolio with more use cases such as enhanced mobile broadband (eMBB) delivering gigabit broadband, as well as address new market segments such as IoT & IIoTand mission critical applications with URLLC (Ultra Reliable Low Latency Communications) and mMTC (Massive Machine Type Communications) services. Those services, combined with new network architectures require higher capacity, lower latency networks and in particular higher transport capacity, far denser macro cells and small/distributed cells grids and the implementation of network virtualization technologies and architectures, namely network slicing using SDN. Our wireless transport solutions resolve both higher capacity, lower latency and network densification requirements with advanced capabilities, based on our multicore™ technology for microwave narrowband spectrum (up to 224Mhz) and the use of wider bands in millimeter-wave spectrum, up to 2,000MHz. Network virtualization requirements are addressed with layer 3 capabilities and SDN support. |
• | Software Defined Networking (SDN) is an emerging concept aimed at simplifying network operations and allowing network engineers and administrators to quickly respond to a fast-changing business environment. SDN delivers network architectures that transition networks from a world of task-specific dedicated network devices, to a world of optimization of network performance through network intelligence incorporated within network controllers performing control functions and network devices, which perform traffic (data-plane) transport. Our wireless transport solutions are SDN-ready, built around a powerful software-defined engine and may be incorporated within the SDN network architecture. Our SDN architecture is envisioned to provide a set of applications that can achieve end-to-end wireless transport network optimization by intelligently making use of the scarce network resources, such as spectrum and power consumption. |
• | The emergence of distributed cells presents transport challenges that differ from those of traditional macro-cells. Distributed cells are used to provide connectivity and capacity in hot spots and underserved spots, as well as increase coordination between adjacent cells, leading to improved service level. They also significantly reduce the cost of cell-site equipment. This new architecture is forecasted to be present in a high percentage of advanced 5G network deployments. Our distributed-cells wireless transport portfolio includes a variety of compact all-outdoor solutions that provide operators with optimal flexibility in meeting their unique physical, capacity, networking, and regulatory requirements. |
• | The introduction of a disaggregated model for hardware and software. This model allows better scalability, simplicity and flexibility for network operators as it offers independent elements for hardware and software, allowing the use of commercial off-the-shelf hardware, to accelerate delivery of new solutions and innovations. Different domains in the network are being opened these days, such as the Radio Access Network - OpenRAN, the Routing in the cell-sites – DCSG (Disaggregated Cell Site Router), and the Disaggregated Wireless Transport. |
• | The network sharing business model is growing in popularity among mobile network operators (MNOs) who are faced with increasing competition from over-the-top players and an ever-growing capacity crunch. Network sharing can be particularly effective in the transport portion of mobile networks, especially as conventional macro cells evolve into super-sized macro sites that require exponentially more bandwidth for wireless transport. It has become abundantly clear that in these new scenarios, a new breed of wireless transport solutions with a significant investment is required. Our wireless transport solutions support network sharing concepts by addressing both the ultra-high capacities required for carrying multiple operator traffic, as well as the policing for ensuring that each operator’s service level agreement is maintained. |
• | A growing market for non-mobile transport applications which includes: offshore communications for the oil and gas industry, as well as the shipping industry, which require a unique set of solutions for use on moving rigs and vessels; broadcast networks that require robust, highly reliable communication for the distribution of live video content either as a cost efficient alternative to fiber, or as a backup for fiber installations; and Smart Grid networks for utilities, as well as local and national governments that seek greater energy efficiency, reliability and scale. |
• | A growing demand for high capacity, IP-based long-haul solutions in emerging markets where telecom and broadband infrastructure, such as fiber, is lacking. This demand is driven by the need of service providers to connect more communities in order to bridge the digital divide, using 4G and eventually 5G services. |
• | Subscriber growth continues mainly in emerging markets such as India, Africa and Latin America, but is getting close to saturation. |
• | Increase business operational efficiency by reducing network-related expenses. Our customers are able to obtain the required capacity with one-quarter of the spectrum needed otherwise, double network capacity without adding more equipment simply by remotely expanding wireless link capacity, significantly reduce energy related expenses by utilizing our energy efficient products, use smaller antennas thereby reducing telecommunication tower leasing costs, and improve their staff productivity with the use of a single wireless transport platform for their long-haul, short-haul and small/distributed cells transport needs. We offer a range of solutions for quick and simple modernization of wireless networks to 4G and 5G, which significantly contribute to our customers’ ability to modernize and expand their services. |
• | Enhance service portfolio, quality of experience and reach. Our multicore™ technology allows our customers to introduce new services (e.g. 5G use cases), to improve subscriber (user) quality of experience generated from the voice, data and multimedia services that they provide to their customers and to extend their network and services reach in order to address new markets. Our All-outdoor offering enables quicker installation and deployment, hence improving time-to-market of our customers’ services to their subscribers. |
• | Ensure peace of mind. Our solutions utilize the latest in microwave and millimeter-wave technology, incorporated in-house developed System-on-Chips (baseband and RF integrated circuits), and use the latest advances in SMT (Surface-mount technologies) based manufacturing – allowing our customers to benefit from the highest service availability across their Ceragon-based wireless transport network. |
• | All-outdoor solutions combine the functionality of both the indoor and outdoor units in a single, compact device. This weather-proof enclosure is fastened to an antenna, eliminating the need for rack space or sheltering, as well as the need for air conditioning, and is more environmentally friendly due to its lower footprint and power consumption. |
• | Split-mount solutions consist of: |
➢ | Indoor units which are used to process and manage information transmitted to and from the outdoor unit, aggregate multiple transmission signals and provide a physical interface to wire-line networks. |
➢ | Outdoor units or Radio Frequency Units (RFU), which are used to control power transmission, and provide an interface between antennas and indoor units. They are contained in compact weather-proof enclosures fastened to antennas. Indoor units are connected to outdoor units by standard coaxial or Cat-5 baseband cables. |
• | All-indoor solutions refer to solutions in which the entire system (indoor unit and RFU) resides in a single rack inside a transmission equipment room. A waveguide connection transports the radio signals to the antenna mounted on a tower. All indoor equipment is typically used in long-haul applications. |
• | Disaggregated wireless transport solutions offer a single radio suitable for all-outdoor, a split-mount scenario, and a networking unit, which provides versatile and scalable hardware options based on merchant routing silicon and also provides routing capabilities (L3) that are radio technologies aware. |
• | Pointing out accurate solutions for high movement environments. These are advanced microwave radio systems for use on moving rigs/vessels where the antenna is stabilized in one or two axes, azimuth or azimuth/elevation. |
• | Antennas are used to transmit and receive microwave radio signals from one side of the wireless link to the other. These devices are mounted on poles typically placed on rooftops, towers or buildings. We rely on third party vendors to supply this component. |
• | End-to-End Network Management. Our network management system uses standard management protocol to monitor and control managed devices at both the element and network level and can be easily integrated into our customers’ existing network management systems. |
• | PtMP - We acquired a new type of solution that provides Point to Multi-Point offering. This solution is ideal for the emerging 5G Gigabit Wireless Access (GWA) market for residential customers and many enterprise market segments that require dense gigabit connectivity. |
Product | Frequency range | Application | Networking & transport technologies |
IP-20C | 6-42GHz, dual-carrier | Shorthaul, small cells, enterprise | Carrier Ethernet |
IP-20C-HP | 4-11GHz, dual-carrier | Longhaul | Carrier Ethernet |
IP-20S | 6-42GHz | Shorthaul, enterprise | Carrier Ethernet |
IP-20E | 71-86GHz | Shorthaul, small cells, enterprise | Carrier Ethernet |
IP-20V | 57-66GHz | Shorthaul, small cells, enterprise | Carrier Ethernet |
Product | Frequency range | Application | Networking & transport technologies |
IP-20N / IP-20A | 4-86GHz | Shorthaul, Long-haul | Carrier Ethernet, TDM |
IP-20F | 4-86GHz | Shorthaul | Carrier Ethernet, TDM |
IP-20G | 6-42GHz | Shorthaul | Carrier Ethernet, TDM |
Product | Frequency range | Application | Networking & transport technologies |
IP-50E | 71-86GHz | Shorthaul, Fronthaul, Enterprise access | CE |
IP-50EX | 71-86GHz | Shorthaul, Enterprise access | CE |
IP-50C | 6-42GHz, dual-carrier | Shorthaul | CE |
IP-50CX | 6-42GHz, dual-carrier | Shorthaul | CE |
IP-50FX | 6-86GHz | Shorthaul, Long-haul, Routing | IP/MPLS, CE |
Product | Frequency range | Application | Networking & transport technologies |
EH-600TX, EH-614TX | 57-68GHz | Smart City, Street level, Broadband Access, Private Network | PtP, CE & transparent bridge, PoE-in/out |
EH-710TX | 71-76GHz | Smart City, Street level, Broadband Access, Private Network | PtP, CE & transparent bridge, PoE-in/out |
EH-8010FX | 71-86GHz | Broadband Access, Private Network | PtP, transparent bridge |
MH-B100 & MH-T200 | 59-64GHz | Smart City, Street level, Broadband Access, Private Network | PtMP, transparent bridge to full VLAN, PoE-in/out |
MH-N36x, MH-N265 MH-T280, MH-T265, MH-T260/1 | 57-66GHz | Smart City, Street level, Broadband Access, Private Network | PtMP, MESH, transparent bridge to full VLAN, PoE-in/out |
• | SDN Controller – Ceragon’s SDN Master is a complete controller supporting SDN protocols that can monitor and control Ceragon’s products in an SDN environment. The SDN Master can work as a ‘standalone’ controller, or as part of an SDN solution managed by a higher level SDN controller offered by a third-party vendor (sometimes referred to as an SDN Orchestrator), allowing full flexibility to our customers. |
• | SDN support in our wireless transport products - all Ceragon IP-20 and IP-50 products support the needed SDN protocols allowing the operator to manage these products with Ceragon SDN controllers but also with third party SDN controllers, again, allowing full flexibility to our customers. |
• | SDN applications – Software (SW) tools with significant impact on our customers’ TCO (total cost of ownership), network availability, and fast network rollout. These applications enable operators to increase their network efficiency and effectiveness with operational optimization and automatization capabilities. With the SDN technology, Ceragon SW solutions are entering into the cloud domain allowing multiple open and flexible deployment scenarios for our customers. Currently, Ceragon is developing and enhancing those and other SW tools in order to expand our offering also to stand-alone SW solutions and services either as on-premises, remote or SaaS services. Ceragon recently launched “Ceragon Insight”, which is a unified network intelligence and management software suite for wireless transport network. It aims to provide NOC and Engineering teams with deep insight and analytics tools that save money by enabling highly effective operations, assuring quality of service, and speeding response to ongoing and upcoming issues. |
Year Ended December 31, | ||||||||||||
Region | 2023 | 2022 | 2021 | |||||||||
North America | 27 | % | 23 | % | 16 | % | ||||||
Europe | 11 | % | 14 | % | 16 | % | ||||||
Africa | 8 | % | 7 | % | 8 | % | ||||||
India | 34 | % | 27 | % | 30 | % | ||||||
APAC (excluding India) | 7 | % | 11 | % | 11 | % | ||||||
Latin America | 13 | % | 18 | % | 19 | % |
• | Proactively planning and executing marketing campaigns and developing content as well as communications material to promote the Ceragon products, solutions and services to customers and prospects over the entire course of the sales-cycle. Activities include advertising, e-mail, press releases, newsletters, marketing collateral (white papers, e-books, brochures, case studies, etc.), blogs, promotional videos and more. This content is produced and written with search engine optimization in mind to ensure Ceragon high ranking in customer organic search results. |
• | Organizing and running exhibitions, seminars and events. This goes far beyond the mere planning the logistics of the event, but customizing messaging for target audience, creating event materials, such as displays, presentations, animated videos, demos, and most importantly promoting the event to customers and prospects to ensure successful attendance and secure customer meetings. |
- | for the standard character mark Ceragon Networks in Canada; |
- | for the standard character mark CERAGON, national registrations in Morocco, Malaysia, Indonesia (under the name of Ceragon Networks AS), Japan, Israel, Mexico, the United States, South Africa, the Philippines, Argentina, Venezuela, Peru, Canada, Nigeria, Brazil and Colombia, United Kingdom and India, and International Registration (protection granted in Australia, Iceland, Bosnia & Herzegovina, Korea, Switzerland, Croatia, Norway, Russia, China, Ukraine, CTM (European Union), Turkey, Singapore, Macedonia, Egypt, Kenya and Vietnam); |
- | for our design mark for FibeAir in United Kingdom and the European Union; |
- | for the standard character mark FibeAir in the United States; and |
- | for the standard character mark CeraView in United Kingdom and the European Union. |
• | the diversification of our technologies and capabilities, which allows flexible vertical integration options, including the development of the core technology – RFIC and modems, including SoC (System on Chip); |
• | our focus and active involvement in shaping next generation standards and technologies, which deliver best customer value; |
• | our product performance, reliability and functionality, which assist our customers to achieve the highest value; |
• | the range and maturity of our product portfolio, including the ability to provide solutions in every widely available microwave and millimeter-wave licensed and license-exempt frequency, as well as our ability to provide both IP and circuit switch solutions and therefore to facilitate a migration path for circuit-switched to IP-based networks; |
• | our deign to cost structure; |
• | our time-to-market advantage, due to having our own technology and our own chipsets; |
• | our focus on high-capacity, point-to-point microwave and point-to-point as well as point-to-multipoint millimeter-wave technologies, which allows us to quickly adapt to our customers’ evolving needs; |
• | the range of rollout services offering for faster deployment of an entire network and reduced total cost of ownership; |
• | our support and technical service, experience and commitment to high quality customer service, and |
• | our ability to expand to other vertical markets such as oil and gas and public safety, by drawing upon the capabilities of our technologies and solutions. |
Company | Place of Incorporation | Ownership Interest | ||||
Ceragon Networks, Inc. | New Jersey | 100 | % | |||
Ceragon Networks (India) Private Limited | India | 100 | % |
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
• | The widespread surge in network traffic in 2020 to 2023 emerging from the COVID-19 pandemic has significantly affected the way business and individuals access information for work and leisure. National lock-ins for large parts of the population and labor market trends brought many businesses to exercise company-wide work-from-home activities with massive use of video conferencing and cloud network communication. Entire families stay longer at home and extensively consume video streaming and online gaming, along with video chats with friends and relatives. The result is an increase in home broadband demand, while today’s home broadband networks are not designed for such usage patterns. Some countries, even developed ones, lack broadband communication networks in rural areas. As a result, service providers are required to increase network investment to match the network capabilities to the surge in broadband demand. We anticipate that the increase in network traffic which service providers experienced amidst the pandemic will remain and may even increase, as companies and employees adapt to broader use of telecommuting, and families adopt higher use of video calls/chats as larger portions of the world population, young and elderly alike, use highly visual remote communication tools and high-volume communication transactions. |
• | 5G enables operators to enhance their services portfolio with more use cases such as enhanced mobile broadband (eMBB) delivering gigabit broadband, as well as address new market segments such as IoT & IIoT and mission critical applications with URLLC (Ultra Reliable Low Latency Communications) and mMTC (Massive Machine Type Communications) services. Those services, combined with new network architectures require higher capacity, lower latency networks and in particular higher transport capacity, far denser macro cells and small/distributed cells grids and the implementation of network virtualization technologies and architectures, namely network slicing using SDN. Our wireless transport solutions resolve both higher capacity, lower latency and network densification requirements with advanced capabilities, based on our multicore™ technology for microwave narrowband spectrum (up to 224Mhz) and the use of wider bands in millimeter-wave spectrum, up to 2,000MHz. Network virtualization requirements are addressed with layer 3 capabilities and SDN support. |
• | OPEN RAN transforms Radio Access Network (RAN) technology from design to operation of the network. OPEN RAN creates the possibility of an open RAN environment, with interoperability between different vendors over defined interfaces. In a legacy mobile network ecosystem, RAN is proprietary where a single vendor provides proprietary radio hardware, software, and interface to enable the mobile network to function. |
• | RAN ecosystem is evolving towards proving the competitive landscape of RAN supplier ecosystem and network operators embracing the transformation. Opening up RAN horizontally brings in a new range of low-cost radio players, and it gives mobile operators a choice to optimize deployment options for specific performance requirements at a much better cost. This trend is expected to increase the size of Best-of-Breed segment (on the account of the end-to-end market segment) that Ceragon is focusing on. |
• | Software Defined Networking (SDN) is an emerging concept aimed at simplifying network operations and allowing network engineers and administrators to quickly respond to a fast-changing business environment. SDN delivers network architectures that transition networks from a world of task-specific dedicated network devices, to a world of optimization of network performance through network intelligence incorporated within network controllers performing control functions and network devices, which perform traffic (data-plane) transport. Our wireless transport solutions are SDN-ready, built around a powerful software-defined engine and can be incorporated within the SDN network architecture. Our SDN architecture is envisioned to provide a set of applications that can achieve end-to-end wireless transport network optimization by intelligently making use of the scarce network resources, such as spectrum and power consumption. |
• | The emergence of distributed cells presents transport challenges that differ from those of traditional macro-cells. Distributed cells are used to provide connectivity and capacity in hot spots and underserved spots, as well as increase coordination between adjacent cells, leading to improved service level. They also significantly reduce the cost of cell-site equipment. This new architecture is forecasted to be present in a high percentage of advanced 5G network deployments. Our distributed-cells wireless transport portfolio includes a variety of compact all-outdoor solutions that provide operators with optimal flexibility in meeting their unique physical, capacity, networking, and regulatory requirements. |
• | The introduction of a disaggregated model for hardware and software. This model allows better scalability, simplicity and flexibility for network operators as it offers endent elements for hardware and software, allowing the use of commercial off-the-shelf hardware, to accelerate delivery of new solutions and innovations. |
• | The network sharing business model is growing in popularity among mobile network operators (MNOs) who are faced with increasing competition from over-the-top players and an ever-growing capacity crunch. Network sharing can be particularly effective in the transport portion of mobile networks, especially as conventional macro cells evolve into super-sized macro sites that require exponentially more bandwidth for wireless transport. It has become abundantly clear that in these new scenarios, a new breed of wireless transport solutions with a significant investment is required. Our wireless transport solutions support network sharing concepts by addressing both the ultra-high capacities required for carrying multiple operator traffic, as well as the policing for ensuring that each operator’s service level agreement is maintained. |
• | While green-field deployments tend to be all IP-based, the overwhelming portion of network infrastructure investments goes into upgrading, or “modernizing” existing cell-sites to fit new services with a lower total cost of ownership. Modernizing is more than a simple replacement of network equipment. It helps operators build up a network with enhanced performance, capacity and service support. For example, Ceragon offers a variety of innovative mediation devices that eliminate the need to replace costly antennas, which are already deployed. In doing so, we help our customers to reduce the time and the costs associated with network upgrades. The result: a smoother upgrade cycle, short network down-time during upgrades and faster time to revenue. |
• | A growing market for non-mobile transport applications which includes: offshore communications for the oil and gas industry, as well as the shipping industry, which require a unique set of solutions for use on moving rigs and vessels; broadcast networks that require robust, highly reliable communication for the distribution of live video content either as a cost efficient alternative to fiber, or as a backup for fiber installations; and Smart Grid networks for utilities, as well as local and national governments that seek greater energy efficiency, reliability and scale. |
• | A growing demand for high capacity, IP-based long-haul solutions in emerging markets where telecom and broadband infrastructure, such as fiber, is lacking. This demand is driven by the need of service providers to connect more communities in order to bridge the digital divide, using 4G and even 5G services. |
• | Subscriber growth continues mainly in emerging markets such as India, Africa and Latin America, but is getting close to saturation. |
• | Increased competition. Our target market is characterized by vigorous, worldwide competition for market share and rapid technological development. These factors have resulted in aggressive pricing practices and downward pricing pressures and growing competition. |
• | Regional pricing pressures. A significant portion of our sales derives from India, in response to the rapid build-out of cellular networks in that country. For the years ended December 31, 2022 and 2023, 27.4% and 30.9%, respectively, of our revenues were earned in India. Sales of our products in these markets are generally at lower gross margins in comparison to other regions. |
• | Revenue recognition; |
• | Inventory valuation; |
• | Provision for credit loss (doubtful debts); and |
• | Business combination. |
Year Ended December 31 | ||||||||
2023 | 2022 | |||||||
Revenues | 100 | % | 100 | % | ||||
Cost of revenues | 65.5 | 68.5 | ||||||
Gross profit | 34.5 | 31.5 | ||||||
Operating expenses: | ||||||||
Research and development, net | 9.3 | 10.1 | ||||||
Sales and marketing | 11.7 | 12.1 | ||||||
General and administrative | 6.9 | 11.6 | ||||||
Restructuring and related charges | 0.3 | - | ||||||
Acquisition and integration-related charges | 0.3 | - | ||||||
Other operating expenses | - | 1.4 | ||||||
Total operating expenses | 28.5 | 35.2 | ||||||
Operating income (loss) | 6.1 | (3.7 | ) | |||||
Financial expenses and others, net | 2.4 | 2.1 | ||||||
Taxes on income | 1.9 | 0.8 | ||||||
Net Income (loss) | 1.8 | (6.7 | ) |
B. | Liquidity and Capital Resources |
• | Our net income of $6.2 million; |
• | $14.6 million decrease in trade and other accounts receivable and prepaid expenses, net; |
• | $10.0 million of depreciation and amortization expenses; |
• | $6.3 million decrease in inventories; and |
• | $4.0 million share-based compensation expenses; and |
• | $3.8 million decrease in operating lease right-of-use assets. |
• | $9.6 million decrease in deferred revenues; |
• | $4.0 million decrease in operating lease liability; |
• | $0.2 million decrease in trade and other accounts payable and accrued expenses, net; and |
• | $0.2 million decrease in accrued severance pay and pensions, net |
• | Our net loss of $19.7 million |
• | $11.2 million increase in inventories; |
• | $6.2 million increase in trade payables, other accounts payable and accrued expenses; |
• | $5.9 million decrease in operating lease liability; and |
• | $0.4 million accrued severance pay and pensions, net. |
• | $18.1 million decrease in trade and other accounts receivable and prepaid expenses; |
• | $11.0 million of depreciation and amortization expenses; |
• | $3.6 million decrease in operating lease right-of-use assets; |
• | $3.6 million share-based compensation expenses; and |
• | $2.2 million increase in deferred revenues paid in advance; |
C. | Research and Development |
D. | Trend Information |
E. | Critical Accounting Estimates – see Item 5 “Critical Accounting Policies and Estimates” above. |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. | Directors and Senior Management |
Name | Age | Position | ||||
Ilan Rosen(1) | 67 | Chairman of the Board of Directors | ||||
Shlomo Liran (1) | 73 | Director | ||||
Efrat Makov (1) | 56 | Director | ||||
Rami Hadar (1) | 60 | Director | ||||
David (Dudi) Ripstein (1) | 57 | Director | ||||
Ira Palti | 66 | Director | ||||
Yael Shaham (1) | 54 | Director | ||||
Doron Arazi | 60 | Chief Executive Officer | ||||
Ronen Stein | 56 | Chief Financial Officer | ||||
Oz Zimerman | 60 | Chief Marketing Officer & EVP Corporate Development | ||||
Hadar Vismunski Weinberg | 50 | Chief Legal Officer & Corporate Secretary | ||||
Michal Goldstein | 52 | Chief People Officer | ||||
Ulik Broida | 56 | Chief Product Officer | ||||
Alon Klomek | 54 | Chief Revenue Officer | ||||
Dima Friedman | 55 | Chief Operating Officer | ||||
Ronen Ben-Hamou | 52 | Chief Growth Officer |
(1) | Independent Director. |
B. | Compensation |
a) | Aggregate Executive Compensation |
• | Salary Costs. Salary Costs include gross salary, benefits and perquisites, including those mandated by applicable law which may include, to the extent applicable to each Covered Office Holder, payments, contributions and/or allocations for pension, severance, car or car allowance, medical insurance and risk insurance (e.g., life, disability, accidents), phone, convalescence pay, relocation, payments for social security, and other benefits consistent with the Company’s guidelines. |
• | Performance Bonus Costs. Performance Bonus Costs represent bonuses granted to the Covered Office Holder with respect to the year ended December 31, 2023, paid in accordance with the Covered Office Holder’s performance of targets as set forth in his bonus plan, and approved by the Company’s Compensation Committee and Board of Directors. |
• | Equity Costs represent the expense recorded in our financial statements for the year ended December 31, 2023, with respect to equity-based compensation granted in 2023 and in previous years. For assumptions and key variables used in the calculation of such amounts see Note 2U of our audited consolidated financial statements. |
• | Doron Arazi – CEO: Salary Costs - $368,200; Performance Bonus Costs - $296,262; Equity Costs - $380,673. |
• | Alon Klomek – Chief Revenue Officer: Salary Costs - $317,487; Performance Bonus Costs - $324,307; Equity Costs - $248,866. |
• | Ronen Stein – CFO: Salary Costs - $301,310; Performance Bonus Costs - $122,189; Equity Costs - $106,017. |
• | Ulik Broida – Chief Product Officer: Salary Costs - $245,247; Performance Bonus Costs - $107,903; Equity Costs - $128,226. |
• | Michal Goldstein – Chief People Officer: Salary Costs - $234,314; Performance Bonus Costs - $100,440; Equity Costs - $87,458. |
C. | Board Practices |
• | transactions with office holders and third parties, where an office holder has a personal interest in the transaction; |
• | employment terms of office holders; and |
• | extraordinary transactions with controlling parties, and extraordinary transactions with a third party where a controlling party has a personal interest in the transaction, or any transaction with the controlling shareholder or his relative regarding terms of service provided directly or indirectly (including through a company controlled by the controlling shareholder) and terms of employment (for a controlling shareholder who is not an office holder). A “relative” is defined in the Companies Law as spouse, sibling, parent, grandparent, descendant, spouse’s descendant, sibling or parent and the spouse of any of the foregoing. |
• | the majority of the shares of shareholders who have no personal interest in the transaction and who are present and voting, not taking into account any abstentions, vote in favor; or |
• | shareholders who have no personal interest in the transaction who vote against the transaction do not represent more than two percent of the aggregate voting rights in the company. |
• | a breach of his or her duty of care to us or to another person; |
• | a breach of his or her duty of loyalty to us, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice our interests; |
• | monetary liabilities or obligations imposed upon him or her in favor of another person; and/or |
• | any other event, occurrence or circumstance in respect of which we may lawfully insure an office holder. |
• | a financial liability imposed on him or her in favor of another person by any judgment, including a settlement or an arbitration award approved by a court. |
• | reasonable litigation expenses, including attorney’s fees, incurred by the office holder as a result of an investigation or proceeding instituted against him by a competent authority which concluded without the filing of an indictment against him and without the imposition of any financial liability in lieu of criminal proceedings, or which concluded without the filing of an indictment against him but with the imposition of a financial liability in lieu of criminal proceedings concerning a criminal offense that does not require proof of criminal intent or in connection with a financial sanction (the phrases “proceeding concluded without the filing of an indictment” and “financial liability in lieu of criminal proceeding” shall have the meaning ascribed to such phrases in section 260(a)(1a) of the Companies Law); |
• | reasonable litigation expenses, including attorneys’ fees, expended by an office holder or charged to the office holder by a court, in a proceeding instituted against the office holder by the Company or on its behalf or by another person, or in a criminal charge from which the office holder was acquitted, or in a criminal proceeding in which the office holder was convicted of an offense that does not require proof of criminal intent; |
• | expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or payment required to be made to an injured party, pursuant to certain provisions of the Securities Law; and/or |
• | any other event, occurrence or circumstance in respect of which we may lawfully indemnify an office holder. |
• | a breach by the office holder of his or her duty of loyalty, except that the company may enter into an insurance contract or indemnify an office holder if the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
• | a breach by the office holder of his or her duty of care, if such breach was intentional or reckless, but unless such breach was solely negligent; |
• | any act or omission intended to derive an illegal personal benefit; or |
• | any fine, civil fine, financial sanction or monetary settlement in lieu of criminal proceedings imposed on such office holder. |
Name | Number of Ordinary Shares Beneficially Owned (1) | Percentage of Outstanding Ordinary Shares Beneficially Owned | Number of Stock Options Held(2) | Exercise price of Options | Number of RSUs Held(2) | |||||||||||||||
All directors and senior management as a group consisting of 16 people (3) | 1,664,807 | 1.91 | 1,659,807 | $ | 1.68 – 4.21 | 463,084 |
(1) | Consists of 5,000 ordinary shares and 1,659,807 options to purchase ordinary shares which are vested or shall become vested within 60 days of March 21, 2024. |
(2) | Each stock option is exercisable into one ordinary share and expires 6 years from the date of its grant. Of the number of stock options listed 1,659,807 options are vested or shall become vested within 60 days of March 21, 2024 for senior management as a group. No RSUs are expected to vest within 60 days of March 21, 2024. |
(3) | Each of the directors and senior management beneficially owns less than 1% of the outstanding ordinary shares as of March 21, 2024 (including options held by each such person and which are vested or shall become vested within 60 days of March 21, 2024) and have therefore not been separately listed. |
Remaining Reserved Shares Available for Option and RSU Grants * | Options and RSUs Outstanding | Weighted Average Exercise Price | ||||||||
324,620 | (1) | 8,247,677 | (2) | $ | 2.71 | (3) |
(1) | Total under all grants approved by the Board under the Company’s existing Share Option and RSU plan as of 2014. |
(2) | Total of 2,622,195 relates to RSUs outstanding and 5,625,482 relates to options outstanding, under all the Company’s Share Option and RSU plans. |
(3) | Weighted average price refers only to options. |
Options and RSUs Outstanding | Unvested Options and RSUs | |||||||
Directors and senior management | 3,236,496 | 1,756,531 | ||||||
All other grantees | 5,011,181 | 3,308,341 |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Name | Number of Ordinary Shares (1) | Percentage of Outstanding Ordinary Shares (2) | ||||||
Zohar Zisapel Estate (3) | 7,117,174 | 8.32 | % | |||||
Joseph D. Samberg (4) | 8,280,000 | 9.68 | % |
(1) | Consists of ordinary shares and options to purchase ordinary shares, which are vested or shall become vested within 60 days as of March 21, 2024. |
(2) | Based on 85,556,663 ordinary shares outstanding as of March 4, 2024, excluding options to purchase ordinary shares which are vested or shall become vested within 60 days of March 21, 2024. |
(3) | (i) 3,694,986 ordinary shares held by Zohar Zisapel Estate; (ii) 200,000 ordinary shares issuable upon the exercise of options granted to Mr. Zisapel exercisable as of March 21, 2024 or within 60 days thereafter; (iii) 1,101,245 ordinary shares are held of record by Lomsha Ltd., an Israeli company controlled by Mr. Zisapel; (iv) 18,717 ordinary shares are held by RAD Data Communications Ltd., an Israeli company of which Mr. Zisapel is a principal shareholder and a director. Mr. Zisapel and his brother, Mr. Yehuda Zisapel, and Ms. Nava Zisapel, have shared voting and dispositive power with respect to the ordinary shares held by RAD Data Communications Ltd.; and (v) 2,102,226 Ordinary Shares are held by Michael and Klil Holdings (93) Ltd., an Israeli company controlled by Mr. Zisapel. The number of ordinary shares beneficially held by Zohar Zisapel is based on a Schedule 13D/A filed by Mr. Zisapel with the SEC on February 16, 2021. |
(4) | Joseph D. Samberg’s address is 1091 Boston Post Road, Rye, NY 10580. |
ITEM 8. | FINANCIAL INFORMATION |
ITEM 9. | THE OFFER AND LISTING |
• | the expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
• | the research and development are for the promotion or development of the company; and |
• | the research and development are carried out by or on behalf of the company seeking the deduction. |
• | deduction of purchases of know-how, patents and the right to use a patent over an eight-year period for tax purposes; |
• | deduction over a three-year period of specified expenses incurred with the issuance and listing of shares on the Tel Aviv Stock Exchange or on a recognized stock exchange outside of Israel (including Nasdaq); |
• | the right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli industrial companies; and |
• | accelerated depreciation rates on equipment and buildings. |
• | holds the ordinary shares as a capital asset; |
• | qualifies as a resident of the United States within the meaning of the U.S.-Israel tax treaty; and |
• | is entitled to claim the benefits available to the person by the U.S.-Israel tax treaty. |
• | an individual citizen or resident of the United States; |
• | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any political subdivision thereof or the District of Columbia; |
• | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
• | a trust (i) if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (ii) that has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person. |
• | are broker-dealers or insurance companies; |
• | have elected mark-to-market accounting; |
• | are tax-exempt organizations or retirement plans; |
• | are grantor trusts; |
• | are S corporations; |
• | are certain former citizens or long-term residents of the United States; |
• | are financial institutions; |
• | hold ordinary shares as part of a straddle, hedge or conversion transaction with other investments; |
• | acquired their ordinary shares upon the exercise of employee stock options or otherwise as compensation; |
• | are real estate investment trusts or regulated investment companies; |
• | own directly, indirectly or by attribution at least 10% of our shares (by vote or value); or |
• | have a functional currency that is not the U.S. dollar. |
• | the item is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States and, in the case of a resident of a country which has a treaty with the United States, the item is attributable to a permanent establishment, or in the case of an individual, the item is attributable to a fixed place of business in the United States; or |
• | the non-U.S. Holder is an individual who holds the ordinary shares as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition, and certain other conditions are met. |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. |
ITEM 15. | CONTROLS AND PROCEDURES |
(a) | Disclosure Controls and Procedures |
(b) | Management’s Annual Report on Internal Control Over Financial Reporting |
(i) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
(ii) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
(iii) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
(d) | Changes in Internal Controls Over Financial Reporting |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Year Ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Services Rendered | Fees | Percentages | Fees | Percentages | ||||||||||||
Audit Fees (1) | $ | 742,500 | 88 | % | $ | 706,142 | 91 | % | ||||||||
Audit-Related Fees (2) | $ | 26,000 | 3 | % | $ | 5,000 | 1 | % | ||||||||
Tax Fees (3) | $ | 79,400 | 9 | % | $ | 59,644 | 8 | % | ||||||||
Total | $ | 847,900 | 100 | % | $ | 770,786 | 100 | % |
(1) | Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide. |
(2) | Audit related fees principally relates to assistance with audit services and consultation |
(3) | Tax fees relate to tax compliance, planning and advice |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
- | Compensation Committee Charter: We have opted out of the requirement to adopt and file a compensation committee charter as set forth in Nasdaq Rule 5605(d)(1). Instead, our Compensation Committee conducts itself in accordance with provisions governing the establishment (but not the composition) and the responsibilities of a compensation committee as set forth in the Companies Law and as further stipulated in our Compensation Policy. |
- | Shareholder Approval: We have opted out of the requirement for shareholder approval of stock option plans and other equity-based compensation arrangements as set forth in Nasdaq Rule 5635. Nevertheless, as required under the Companies Law, shareholder voting procedures are followed for the approval of equity-based compensation of certain office holders or employees, such as our CEO and members of our Board of Directors. Equity based compensation arrangements with other office holders are approved by our Compensation Committee and our Board of Directors, provided they are consistent with our Compensation Policy, and in special circumstances in deviation therefrom, taking into account certain considerations as set forth in the Companies Law. |
- | Annual General Meetings of Shareholders: We have opted out of the requirement for conducting annual meetings as set forth in Nasdaq Rule 5620(a), which requires Ceragon to hold its annual meetings of shareholders within twelve months of the end of its fiscal year end. Instead, Ceragon is following home country practice and law in this respect. The Companies Law requires that an annual meeting of shareholders be held every year, and not later than 15 months following the last annual meeting (see in Item 10.B above – ”Additional Information – Voting, Shareholders’ Meetings and Resolutions”). |
- | Quorum at General Meetings of Shareholders: We have opted out of the requirement set under Rule 5620(c) of the Nasdaq Rules, which requires the presence of two or more shareholders holding at least 33 1/3%, and in lieu follow our home country practice and Israeli law, according to which the quorum for any shareholders meeting will be the presence (in person or by Proxy) of two or more shareholders holding at least 25% of the voting rights in the aggregate - within half an hour from the time set for opening the meeting. |
- | Distribution of Annual Reports: We have chosen to follow our home country practice in lieu of the requirements of Nasdaq Rule 5250(d)(1), relating to an issuer’s furnishing of its annual report to shareholders. Specifically, we file annual reports on Form 20-F, which contain financial statements audited by an independent accounting firm, electronically with the SEC, and also post a copy on our website. |
ITEM 16H. | MINE SAFETY DISCLOSURE |
ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
Index to Consolidated Financial Statements | Page |
Reports of Independent Registered Public Accounting Firm | F-2 - F-6 |
Consolidated Balance Sheets | F-7 - F-8 |
Consolidated Statements of Operations | F-9 |
Consolidated Statements of Comprehensive Income (loss) | F-10 |
Consolidated Statements of Changes in Shareholders’ Equity | F-11 |
Consolidated Statements of Cash Flows | F-12 - F-13 |
Notes to Consolidated Financial Statements | F-14 - F-52 |
1.1 |
2.1 |
4.1 |
4.2 |
4.3 |
4.4 |
4.5 |
4.6 |
4.7 |
4.8 |
4.9 |
4.10 |
4.11 |
4.12 |
4.13 |
4.14 |
4.15 |
4.16 |
4.17 |
4.18 |
4.19 |
4.20 |
8.1 |
12.1 |
12.2 |
13.1 |
15.1 |
97.1 |
101 | Inline XBRL Instance Document |
101 | SCH Inline XBRL Taxonomy Extension Schema Document |
101 | CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101 | DEF Inline XBRL Taxonomy Extension Definition Linkbase Document |
101 | LAB Inline XBRL Taxonomy Extension Labels Linkbase Document |
101 | PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
By: | /s/ Doron Arazi | |
Name: | Doron Arazi | |
Title: | Chief Executive Officer |
Page | |
Reports of Independent Registered Public Accounting Firm (PCAOB ID:1281) | F-2 – F-6 |
F-7 – F-8 | |
F-9 | |
F-10 | |
F-11 | |
F-12 - F-13 | |
F-14 - F- 52 |
Valuation of technology acquired in the acquisition of Siklu Communication Ltd. | ||
Description of the Matter | As describe in Note 3 to the consolidated financial statements, on December 4, 2023, the Company completed its acquisition of Siklu Communication Ltd. for total consideration of approximately $ 10.9 million. The transaction was accounted for as a business combination. The Company recognized technology ( “the Intangible Asset”) at its estimated fair value as of the date of the acquisition. This valuation required management to make significant judgments, estimates, and assumptions. Auditing the Company’s determination of the fair value of the Intangible Asset was complex due to the significant estimation required by management. The complexity was primarily due to the sensitivity of certain of the significant underlying assumptions. The Company used discounted cash flow model to measure the fair value of the Intangible Asset. The significant assumptions used to estimate the fair value of the Intangible Asset included, among others, discount rates, projected financial information revenue growth rates and profit margins. These significant assumptions are forward-looking and could be affected by future economic and market conditions. We identified auditing the valuation of the intangible Asset of Siklu Communication Ltd. as a critical audit matter. An extensive audit effort as well as a high degree of subjective auditor judgment was required to evaluate the significant estimation in determining the fair value of the Intangible Asset. | |
How we Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for accounting for the acquired intangible asset. For example, we tested controls over management's review of the valuation model and the significant assumptions used, as discussed above, to develop the prospective financial information. We also tested management's controls to validate that the data used in the valuation was complete and accurate. To test the estimated fair value of the Intangible Asset, we performed audit procedures that included, among others, evaluating the Company’s selection of the appropriate valuation methodology, testing prospective financial information, evaluating the significant assumptions used by management and testing the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to current industry, market and economic trends, historical results of the acquired business and to other relevant factors. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and certain assumptions included in the fair value estimates. For example, our valuation professionals performed independent comparative calculations to estimate the discount rate used in the model. We have also evaluated the Company’s disclosures regarding the business combination. |
Inventory valuation | ||
Description of the Matter | The Company’s inventories totaled $ 68.8 million as of December 31, 2023. As explained in Note 2 to the consolidated financial statements, the Company assesses the value of all inventories, including raw materials, finished goods and spare parts, in each reporting period. Reserves for potentially obsolete inventory are made based on management's analysis of inventory aging, future sales forecasts, and market conditions. Auditing the valuation of obsolete inventory reserves involved subjective auditor judgment because management’s estimate relies on significant assumptions such as the future salability of the inventory, the assessment by inventory age, future usage and market demand for the Company's products. | |
How we Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s obsolete inventory reserve process. This included management’s assessment of the assumptions and data underlying the obsolete inventory valuation. Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying data that management used to value obsolete inventory. We performed inquiries of appropriate non-financial personnel including operational employees, regarding obsolete inventory items and other factors to corroborate management's assertions regarding qualitative judgments about obsolete inventories. We also compared the cost of on-hand inventories to customer demand forecasts and historical sales and evaluated adjustments to sales forecasts for specific product considerations such as technological changes or alternative uses. We also assessed the historical accuracy of management estimates by comparing the forecasted sales to actual utilization of inventory. |
2023 | 2022 | |||||||||||
Note | $ thousands | $ thousands | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 28,237 | 22,948 | ||||||||||
Trade receivables (net of allowance for credit losses of $24,602 | ||||||||||||
and $22,410 at December 31, 2023 and 2022, respectively) | 11 | 104,321 | 100,034 | |||||||||
Other accounts receivable and prepaid expenses | 4 | 16,571 | 15,756 | |||||||||
Inventories | 5 | 68,811 | 72,009 | |||||||||
Total current assets | 217,940 | 210,747 | ||||||||||
Non-current assets: | ||||||||||||
Severance pay and pension fund | 4,985 | 4,633 | ||||||||||
Property and equipment, net | 6 | 30,659 | 29,456 | |||||||||
Operating lease right-of-use assets | 14 | 18,837 | 17,962 | |||||||||
Intangible assets, net | 7 | 16,401 | 8,208 | |||||||||
Goodwill | 7 | 7,749 | - | |||||||||
Other non-current assets | 1,954 | 18,312 | ||||||||||
Total long-term assets | 80,585 | 78,571 | ||||||||||
Total assets | 298,525 | 289,318 |
F - 7 |
2023 | 2022 | |||||||||||
Note | $ thousands | $ thousands | ||||||||||
Liabilities and shareholders’ equity | ||||||||||||
Current Liabilities: | ||||||||||||
Trade payables | 67,032 | 67,384 | ||||||||||
Deferred revenues | 17 | 5,507 | 3,343 | |||||||||
Short-term loans | 9 | 32,600 | 37,500 | |||||||||
Operating lease liabilities | 14 | 3,889 | 3,745 | |||||||||
Other accounts payable and accrued expenses | 8 | 23,925 | 20,864 | |||||||||
Total current liabilities | 132,953 | 132,836 | ||||||||||
Long-term liabilities: | ||||||||||||
Accrued severance pay and pensions | 9,399 | 9,314 | ||||||||||
Deferred revenues | 17 | 670 | 11,545 | |||||||||
Operating lease liabilities | 14 | 13,716 | 13,187 | |||||||||
Other long-term payables | 7,768 | 2,653 | ||||||||||
Total long-term liabilities | 31,553 | 36,699 | ||||||||||
Commitments and contingent liabilities | 13 | |||||||||||
Shareholders’ Equity: | 15 | |||||||||||
Share capital - | ||||||||||||
Ordinary shares of NIS 0.01 par value – Authorized: 120,000,000 shares on December 31, 2023 and 2022; Issued: 88,899,844 and 87,834,902 shares on December 31, 2023 and 2022, respectively; Outstanding: 85,418,321 and 84,353,379 shares on December 31, 2023 and 2022, respectively | 224 | 224 | ||||||||||
Additional paid-in capital | 437,161 | 432,214 | ||||||||||
Treasury shares at cost – 3,481,523 ordinary shares on December 31, 2023 and 2022 | (20,091 | ) | (20,091 | ) | ||||||||
Accumulated other comprehensive loss | (8,087 | ) | (11,156 | ) | ||||||||
Accumulated deficit | (275,188 | ) | (281,408 | ) | ||||||||
Total shareholders' equity | 134,019 | 119,783 | ||||||||||
Total liabilities and shareholders' equity | 298,525 | 289,318 |
F - 8 |
Year ended December 31, | ||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||
Note | $ thousands | $ thousands | $ thousands | |||||||||||||
Revenues | 18 | 347,179 | 295,173 | 290,766 | ||||||||||||
Cost of revenues | 227,310 | 202,110 | 202,389 | |||||||||||||
Gross profit | 119,869 | 93,063 | 88,377 | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development, net | 32,274 | 29,690 | 29,473 | |||||||||||||
Sales and marketing | 40,577 | 35,795 | 33,509 | |||||||||||||
General and administrative | 23,793 | 34,295 | 20,589 | |||||||||||||
Restructuring and related charges | 897 | - | - | |||||||||||||
Acquisition and integration-related charges | 3c | 1,118 | - | - | ||||||||||||
Other operating expenses | 1b | - | 4,220 | - | ||||||||||||
Total operating expenses | 98,659 | 104,000 | 83,571 | |||||||||||||
Operating income (loss) | 21,210 | (10,937 | ) | 4,806 | ||||||||||||
Financial expenses and others, net | 19 | 8,468 | 6,306 | 8,625 | ||||||||||||
Income (loss) before taxes on income | 12,742 | (17,243 | ) | (3,819 | ) | |||||||||||
Taxes on income | 16c | 6,522 | 2,446 | 11,009 | ||||||||||||
Net income (loss) | 6,220 | (19,689 | ) | (14,828 | ) | |||||||||||
Net income (loss) per share: | ||||||||||||||||
Basic net income (loss) per share | 0.07 | (0.23 | ) | (0.18 | ) | |||||||||||
Weighted average number of ordinary shares used in computing basic net income (loss) per share | 84,617,774 | 84,132,982 | 83,414,831 | |||||||||||||
Diluted net income (loss) per share | 0.07 | (0.23 | ) | (0.18 | ) | |||||||||||
Weighted average number of ordinary shares used in computing diluted net income (loss) per share | 85,482,626 | 84,132,982 | 83,414,831 |
F - 9 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Net income (loss) | 6,220 | (19,689 | ) | (14,828 | ) | |||||||
Other comprehensive income (loss): | ||||||||||||
Change in foreign currency translation adjustment | 878 | 353 | (325 | ) | ||||||||
Change in unrealized gains (losses) on cash flow hedges: | ||||||||||||
Unrealized gains (losses) during the period | (1,418 | ) | (4,057 | ) | 346 | |||||||
Losses (gains) reclassified into net income (loss) | 3,609 | 2,055 | (1,460 | ) | ||||||||
Net change | 2,191 | (2,002 | ) | (1,114 | ) | |||||||
Other comprehensive income (loss) | 3,069 | (1,649 | ) | (1,439 | ) | |||||||
Comprehensive income (loss) | 9,289 | (21,338 | ) | (16,267 | ) |
F - 10 |
Ordinary shares | Share capital | Additional paid-in capital | Treasury shares at cost | Accumulated other comprehensive loss | Accumulated deficit | Total shareholders' equity | ||||||||||||||||||||||
$ thousands | $ thousands | $ thousands | $ thousands | $ thousands | $ thousands | |||||||||||||||||||||||
Balance as of January 1, 2021 | 81,703,366 | 218 | 420,958 | (20,091 | ) | (8,068 | ) | (246,891 | ) | 146,126 | ||||||||||||||||||
Exercise of options and vesting of RSUs | 2,228,230 | 6 | 4,724 | - | - | - | 4,730 | |||||||||||||||||||||
Share-based compensation | - | - | 2,562 | - | - | - | 2,562 | |||||||||||||||||||||
Other comprehensive loss, net | - | - | - | - | (1,439 | ) | - | (1,439 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (14,828 | ) | (14,828 | ) | |||||||||||||||||||
Balance as of December 31, 2021 | 83,931,596 | 224 | 428,244 | (20,091 | ) | (9,507 | ) | (261,719 | ) | 137,151 | ||||||||||||||||||
Exercise of options and vesting of RSUs | 422,085 | * | ) | 410 | - | - | - | 410 | ||||||||||||||||||||
Share-based compensation | - | - | 3,560 | - | - | - | 3,560 | |||||||||||||||||||||
Other comprehensive loss, net | - | - | - | - | (1,649 | ) | - | (1,649 | ) | |||||||||||||||||||
Net loss | - | - | - | - | - | (19,689 | ) | (19,689 | ) | |||||||||||||||||||
Balance as of December 31, 2022 | 84,353,681 | 224 | 432,214 | (20,091 | ) | (11,156 | ) | (281,408 | ) | 119,783 | ||||||||||||||||||
Exercise of options and vesting of RSUs | 559,738 | * | ) | 39 | - | - | - | 39 | ||||||||||||||||||||
Share-based compensation | - | - | 3,964 | - | - | - | 3,964 | |||||||||||||||||||||
Shares issued as consideration in connection with the acquisition of Siklu Communication Ltd. | 504,902 | * | ) | 944 | - | - | - | 944 | ||||||||||||||||||||
Other comprehensive income, net | - | - | - | - | 3,069 | - | 3,069 | |||||||||||||||||||||
Net income | - | - | - | - | - | 6,220 | 6,220 | |||||||||||||||||||||
Balance as of December 31, 2023 | 85,418,321 | 224 | 437,161 | (20,091 | ) | (8,087 | ) | (275,188 | ) | 134,019 |
F - 11 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | 6,220 | (19,689 | ) | (14,828 | ) | |||||||
Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 9,967 | 11,040 | 12,246 | |||||||||
Loss from sale of property and equipment, net | 61 | 20 | 82 | |||||||||
Share-based compensation | 3,964 | 3,560 | 2,562 | |||||||||
Decrease in accrued severance pay and pensions, net | (267 | ) | (445 | ) | (418 | ) | ||||||
Decrease (increase) in trade receivables, net | (2,370 | ) | 18,428 | (11,150 | ) | |||||||
Decrease (increase) in other accounts receivable and prepaid expenses (including other long-term assets) | 16,994 | (345 | ) | (6,976 | ) | |||||||
Decrease (increase) in inventories | 6,303 | (11,155 | ) | (11,908 | ) | |||||||
Decrease in operating lease right-of-use assets | 3,781 | 3,571 | 5,713 | |||||||||
Increase (decrease) in trade payables | (1,847 | ) | (2,018 | ) | 5,883 | |||||||
Increase (decrease) in deferred revenues | (9,562 | ) | 2,229 | 1,672 | ||||||||
Decrease in deferred tax assets, net | - | - | 8,279 | |||||||||
Decrease in operating lease liability | (4,034 | ) | (5,937 | ) | (4,620 | ) | ||||||
Increase (decrease) in other accounts payable and accrued expenses (including other long-term liabilities) | 1,677 | (4,154 | ) | (1,556 | ) | |||||||
Net cash provided by (used in) operating activities | 30,887 | (4,895 | ) | (15,019 | ) | |||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (9,955 | ) | (10,464 | ) | (9,383 | ) | ||||||
Proceeds from sale of property and equipment | - | - | 200 | |||||||||
Purchase of intangible assets | (2,944 | ) | (1,957 | ) | (212 | ) | ||||||
Payments made in connection with business acquisitions, net of acquired cash | (7,971 | ) | - | - | ||||||||
Net cash used in investing activities | (20,870 | ) | (12,421 | ) | (9,395 | ) |
F - 12 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from exercise of stock options | 39 | 410 | 4,730 | |||||||||
Proceeds from (repayments of) bank credits and loans, net | (4,900 | ) | 22,700 | 9,800 | ||||||||
Net cash provided by (used in) financing activities | (4,861 | ) | 23,110 | 14,530 | ||||||||
Translation adjustments on cash and cash equivalents | 133 | 75 | (138 | ) | ||||||||
Increase (decrease) in cash and cash equivalents | 5,289 | 5,869 | (10,022 | ) | ||||||||
Cash and cash equivalents at the beginning of the year | 22,948 | 17,079 | 27,101 | |||||||||
Cash and cash equivalents at the end of the year | 28,237 | 22,948 | 17,079 | |||||||||
Supplemental disclosure of non - cash investing activities: | ||||||||||||
Fair value of ordinary shares issued and contingent holdback obligations to selling shareholders provided as consideration for business combination | 2,561 | - | - | |||||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid for income taxes | 2,839 | 1,871 | 1,995 | |||||||||
Cash paid for interest on bank loans and factoring fees | 6,040 | 3,456 | 1,280 |
F - 13 |
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
A. | Ceragon Networks Ltd. ("the Company") is a global innovator and leading solutions provider of wireless transport. The Company helps operators and other service providers worldwide increase operational efficiency and enhance end customers’ quality of experience with innovative wireless backhaul and fronthaul solutions. The Company’s unique multicore technology and disaggregated approach to wireless transport provides highly reliable, fast to deploy, high-capacity wireless transport for 5G and 4G networks with minimal use of spectrum, power, real estate, and labor resources. It enables increased productivity, as well as simple and quick network modernization. The Company delivers a complete portfolio of turnkey end-to-end AI-based managed and professional services that ensure efficient network rollout and optimization to achieve the highest value for its customers. |
B. | On December 4, 2023 the Company completed a series of definitive agreements with Siklu Communication Ltd. (“Siklu”) and Siklu Inc. (the “Seller”), referred to as the “Siklu Acquisition”. In the framework of the Siklu Acquisition, the Company acquired all of the outstanding shares of Siklu and the assets and business activities of the Seller. Siklu is a privately held Israeli-based company which is a provider of multi-Gigabit “wireless fiber” connectivity in urban, suburban and rural areas. See also note 3. |
C. | In the summer of 2022, Aviat Networks Inc a competitor of the Company has launched a hostile takeover attempt against the Company, after purchasing more than 5% of the Company outstanding shares. Total expenses associated with the hostile takeover amounted to $4,220 thousand for the year ended December 31, 2022 and presented as part of the other operating expenses in the Company's consolidated financial statements. |
A. | Basis of presentation |
B. | Use of estimates |
F - 14
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
C. | Financial statements in U.S. dollars |
D. | Principles of consolidation |
E. | Cash equivalents |
F. | Inventories |
F - 15
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
F. | Inventories (cont’d) |
G. | Property and equipment |
% | |
Computers, manufacturing and peripheral equipment | 6 – 33 |
Office, furniture and equipment | Mainly 15 |
Leasehold improvements | Over the shorter of the term of the lease or useful life of the asset |
H. | Leases |
I. | Intangible assets, net |
F - 16
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
I. | Intangible assets, net (cont’d) |
J. | Business Combinations |
K. | Goodwill |
F - 17
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
L. | Impairment of long-lived assets |
The Company's long-lived assets are reviewed for impairment in accordance with ASC topic 360," Property Plant and Equipment", ("ASC 360"), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. During the years 2023, 2022 and 2021, no impairment losses have been recognized.
M. | Income taxes |
N. | Revenue recognition |
F - 18
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
N. | Revenue recognition (cont’d) |
O. | Research and development expenses, net |
P. | Warranty costs |
F - 19
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Q. | Derivative instruments |
R. | Concentrations of credit risk |
F - 20
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
S. | Transfers of financial assets |
T. | Severance pay |
F - 21
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
U. | Accounting for stock-based compensation |
December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Dividend yield | 0% | 0% | 0% | |||||||||
Volatility | 41% - 63% | 47% - 73% | 66% - 87% | |||||||||
Risk-free interest | 4.1% - 5.5% | 2.1% - 4.1% | 0.1% - 1.3% | |||||||||
Early exercise multiple | 2.10 | 2.20 | 1.55 |
V. | Fair value of financial instruments |
F - 22
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
V. | Fair value of financial instruments (cont’d) |
The liability with respect to the Holdback Consideration regarding the Siklu Acquisition is classified within Level 3, as this liability is valued using valuation models. Some of the inputs to these models are unobservable in the market.
W. | Comprehensive income |
F - 23
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
W. | Comprehensive income (cont'd) |
Unrealized Gains (Losses) on Cash Flow Hedges | Foreign Currency Translation Adjustments | Total | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Balance as of January 1, 2023 | (1,271 | ) | (9,885 | ) | (11,156 | ) | ||||||
Other comprehensive income (loss) before | ||||||||||||
reclassifications | (1,418 | ) | 878 | (540 | ) | |||||||
Amounts reclassified from AOCI | 3,609 | - | 3,609 | |||||||||
Other comprehensive income | 2,191 | 878 | 3,069 | |||||||||
Balance as of December 31, 2023 | 920 | (9,007 | ) | (8,087 | ) |
X. | Treasury shares |
Y. | Basic and diluted net earnings per share |
Z. | Recently issued but not yet updated Accounting Standards |
F - 24
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
A. | Siklu |
Amortization Period | Amount | |||||||
(years) | $ thousands | |||||||
Repayment of Siklu's outstanding debt obligations | 8,341 | |||||||
Share Consideration | 944 | |||||||
Holdback Consideration | 1,617 | |||||||
Fair value of total consideration | 10,902 | |||||||
Fair value of assets acquired and liabilities assumed: | ||||||||
Current assets (including cash and cash equivalents of $370 thousand) | 5,732 | |||||||
Non-current assets | 2,047 | |||||||
Trademark | 2 | 440 | ||||||
Customer Relationships | 4-5 | 1,209 | ||||||
Technology | 2-6 | 3,638 | ||||||
Goodwill | 7,749 | |||||||
Other current liabilities | (6,694 | ) | ||||||
Long-term liabilities | (3,219 | ) | ||||||
10,902 |
The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the acquired developed technology, customer relationships and trade mark intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company's estimates of customer attrition, technology obsolescence and revenue growth projections. The Company is amortizing the identifiable intangible assets arising from the Siklu Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a useful life range of 2-10 years (see Note 7). Goodwill results from assets that are not separately identifiable as part of the transaction and is not deductible for tax purposes.
F - 25
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
B. | Acquisition- and Integration-Related Charges |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Acquisition-related professional and services fees | 720 | - | - | |||||||||
Integration-related expenses | 398 | - | - | |||||||||
Total acquisition- and integration-related expense | 1,118 | - | - |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Government authorities | 6,263 | 7,867 | ||||||
Deferred charges and prepaid expenses | 5,158 | 6,087 | ||||||
Deposits receivable | 2,750 | 473 | ||||||
Advances to suppliers | 963 | 405 | ||||||
Hedging asset | 920 | 8 | ||||||
Other | 517 | 916 | ||||||
16,571 | 15,756 |
F - 26
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Raw materials | 33,790 | 35,111 | ||||||
Work in progress | 486 | 143 | ||||||
Finished products | 34,535 | 36,755 | ||||||
68,811 | 72,009 |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Cost | ||||||||
Computers, manufacturing, peripheral | ||||||||
equipment | 157,528 | 143,522 | ||||||
Office furniture and equipment | 2,754 | 2,372 | ||||||
Leasehold improvements | 1,949 | 1,694 | ||||||
162,231 | 147,588 | |||||||
Accumulated depreciation | ||||||||
Computers, manufacturing, peripheral | ||||||||
equipment | 128,206 | 115,260 | ||||||
Office furniture and equipment | 1,942 | 1,724 | ||||||
Leasehold improvements | 1,424 | 1,148 | ||||||
131,572 | 118,132 | |||||||
Depreciated cost | 30,659 | 29,456 |
F - 27
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Useful | December 31, | December 31, | ||||||||||
Life | 2023 | 2022 | ||||||||||
$ thousands | $ thousands | |||||||||||
Original amounts: | ||||||||||||
Software development costs | 5 – 10 | 13,096 | 9,558 | |||||||||
Core technology | 2 – 6 | 3,638 | - | |||||||||
Customer relationship | 2 – 5 | 1,209 | - | |||||||||
Trademark | 2 | 440 | - | |||||||||
18,383 | 9,558 | |||||||||||
Accumulated amortization: | ||||||||||||
Software development costs | (1,889 | ) | (1,350 | ) | ||||||||
Core technology | (57 | ) | - | |||||||||
Customer relationship | (19 | ) | - | |||||||||
Trademark | (17 | ) | - | |||||||||
(1,982 | ) | (1,350 | ) | |||||||||
Other Intangible assets, net: | ||||||||||||
Software development costs | 11,207 | 8,208 | ||||||||||
Core technology | 3,581 | - | ||||||||||
Customer relationship | 1,190 | - | ||||||||||
Trademark | 423 | - | ||||||||||
Other Intangible assets, net: | 16,401 | 8,208 |
$ thousands | ||||
2024 | 1,806 | |||
2025 | 2,594 | |||
2026 | 2,252 | |||
2027 | 1,916 | |||
2028 | 1,856 | |||
2029 and thereafter | 5,977 | |||
Total expected amortization | 16,401 |
F - 28
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Employees and payroll accruals | 14,079 | 10,047 | ||||||
Provision for warranty costs | 1,694 | 1,401 | ||||||
Government authorities | 2,364 | 1,815 | ||||||
Accrued expenses | 2,491 | 2,376 | ||||||
Advanced payments from customers | 3,282 | 3,604 | ||||||
Hedging Liability | - | 1,423 | ||||||
Other | 15 | 198 | ||||||
23,925 | 20,864 |
F - 29
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Other accounts receivable and prepaid expenses | Other accounts payable and accrued expenses | |||||||
December 31, 2023 | ||||||||
$ thousands | $ thousands | |||||||
Derivatives designated as hedging instruments: | ||||||||
Currency forward contracts | 920 | - | ||||||
Total derivatives | 920 | - |
Other accounts receivable and prepaid expenses | Other accounts payable and accrued expenses | |||||||
December 31, 2022 | ||||||||
$ thousands | $ thousands | |||||||
Derivatives designated as hedging instruments: | ||||||||
Currency forward contracts | - | (1,271 | ) | |||||
Derivatives not designated as hedging instruments: | ||||||||
Currency forward and option contracts | 8 | (152 | ) | |||||
Total derivatives | 8 | (1,423 | ) |
F - 30
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Derivatives designated as hedging instruments: | ||||||||
Currency forward contracts | 19,482 | 42,848 | ||||||
Derivatives not designated as hedging instruments: | ||||||||
Currency forward and option contracts | - | 16,082 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Cost of revenues | (901 | ) | (515 | ) | 317 | |||||||
Research and development, net | (1,544 | ) | (939 | ) | 699 | |||||||
Sales and marketing | (443 | ) | (215 | ) | 165 | |||||||
General and administrative | (721 | ) | (386 | ) | 279 | |||||||
Financial expenses and others, net | (498 | ) | (170 | ) | 304 |
F - 31
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Balance, at beginning of period | 22,410 | 8,587 | ||||||
Provision for expected credit losses | 3,898 | 14,489 | ||||||
Balance added in business combination | 259 | - | ||||||
Amounts written off charged against the allowance and others | (1,965 | ) | (666 | ) | ||||
Balance, at end of period | 24,602 | 22,410 |
F - 32
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Change in projected benefit obligation | ||||||||
Projected benefit obligation at beginning of year | 2,170 | 2,512 | ||||||
Interest cost | 61 | 37 | ||||||
Expenses paid | (135 | ) | (153 | ) | ||||
Exchange rates differences | (78 | ) | (252 | ) | ||||
Actuarial loss | 105 | 26 | ||||||
Projected benefit obligation at end of year | 2,123 | 2,170 |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Weighted-average assumptions | ||||||||
Discount rate | 3.10 | % | 3.00 | % | ||||
Rate of compensation increase | 3.25 | % | 3.50 | % |
The following table provides the components of net periodic benefits cost for the years ended December 31, 2023, 2022 and 2021:
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Components of net periodic benefit cost | ||||||||||||
Interest cost | 61 | 37 | 38 | |||||||||
Net periodic benefit cost | 61 | 37 | 38 |
F - 33
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
$ thousands | ||||
2024 | 144 | |||
2025 | 136 | |||
2026 | 141 | |||
2027 | 168 | |||
2028 and thereafter | 1,534 | |||
2,123 |
A. | Leases |
B. | Liabilities for Royalty Payments to the IIA |
F - 34
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
C. | Charges and guarantees |
D. | Litigations |
F - 35
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
D. | Litigations (cont’d) | |
1) | Class action claim (District Court of Tel Aviv - Economic Department) (cont’d) | |
F - 36
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
D. | Litigations (cont’d) | |
F - 37
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
D. | Litigations (cont’d) | |
3) Arbitration proceeding against Ceragon and one of its subsidiaries
A sole arbitrator was appointed during December 2023.
On February 9, 2024 the arbitrator issued the final procedural rules and accepted the parties’ suggestions and, therefore, bifurcated the proceeding.
We are not a party to any other material legal proceedings.
F - 38
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Components of lease expense | ||||||||||||
Operating lease cost | 4,014 | 4,428 | 4,869 | |||||||||
Short-term lease | 62 | 52 | 100 | |||||||||
Total lease expenses | 4,076 | 4,480 | 4,969 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Supplemental cash flow information | ||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | 3,913 | 4,497 | 4,843 | |||||||||
Supplemental non-cash information related to lease liabilities arising from obtaining ROU assets | 3,503 | 1,300 | 19,166 |
$ thousands | ||||
2024 | 3,937 | |||
2025 | 3,379 | |||
2026 | 2,665 | |||
2027 | 2,465 | |||
2028 and thereafter | 7,886 | |||
Total operating lease payments | 20,332 | |||
Less: imputed interest | 2,727 | |||
Present value of lease liability | 17,605 |
F - 39
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
A. | General |
B. | Stock options plans |
1. | In 2003, the Company adopted a share option plan, which has been extended or replaced from time to time. To date, the plan that is currently in effect is the Amended and Restated Share Option and RSU Plan as amended on August 10, 2014 (the “Plan”). Under the Plan, options and RSUs may be granted to officers, directors, employees and consultants of the Company or its subsidiaries. The options vest primarily over four years, subject to certain exceptions. The options expire between six to ten years from the date of grant. The Plan expires in December 2024. The Company needs to reserve, and the Board of Directors has reserved, sufficient authorized but unissued Shares for purposes of the Plan subject to adjustments as provided in the Plan. Since the last amendment in 2014, the Company has reserved 15,382,891 units under the Plan. As of December 31, 2023, an aggregate of 324,620 ordinary shares were available for future grants under the plan. |
2. | The following table summarizes the activities for the Company’s stock options for the year ended December 31, 2023: |
Year ended December 31, 2023 | ||||||||||||||||
Number of options | Weighted average exercise price | Weighted average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
$ thousands | ||||||||||||||||
Outstanding at beginning of year | 5,305,732 | 2.95 | 3.83 | 19 | ||||||||||||
Granted | 1,466,357 | 2.00 | ||||||||||||||
Exercised | (22,415 | ) | 1.78 | |||||||||||||
Forfeited or expired | (1,124,192 | ) | 2.93 | |||||||||||||
Outstanding at end of the year | 5,625,482 | 2.71 | 3.66 | 300 | ||||||||||||
Options exercisable at end of the year | 3,182,912 | 2.88 | 2.87 | 72 | ||||||||||||
Vested and expected to vest | 5,127,051 | 2.74 | 3.54 | 246 |
F - 40
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
B. | Stock options plans (cont’d) | |
Year ended December 31, 2023 | ||||||||
Number of RSUs | Aggregate intrinsic value | |||||||
$ thousands | ||||||||
Unvested at beginning of year | 2,108,339 | 4,027 | ||||||
Granted | 1,328,447 | |||||||
Vested | (537,323 | ) | ||||||
Forfeited | (277,268 | ) | ||||||
Unvested at end of the year | 2,622,195 | 5,664 |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Cost of revenues | 482 | 587 | 289 | |||||||||
Research and development, net | 828 | 405 | 236 | |||||||||
Sales and marketing | 1,416 | 1,355 | 700 | |||||||||
General and administrative | 1,238 | 1,213 | 1,337 | |||||||||
Total share-based compensation expenses | 3,964 | 3,560 | 2,562 |
F - 41
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
C. | Dividends |
A. | Israeli taxation |
1. | Measurement of taxable income: |
2. | Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the "Law"): |
F - 42
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Note 16 - Taxes on Income (cont’d)
A. | Israeli taxation (cont’d) |
3. | Tax benefits under the Law for the Encouragement of Industry (Taxes), 1969: |
4. | Tax rates: |
F - 43
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Note 16 - Taxes on Income (cont’d)
B. | Income taxes for non-Israeli subsidiaries: |
C. | Tax Assessments: | |
In 2023, the Company and two of its subsidiaries received tax assessments from local tax authorities in two territories in which they operate. The Company’s management believes it has adequately provided for the reasonably foreseeable outcome related to these assessments and is currently challenging them. However, if these tax assessments are accepted, the Company may be subject to additional tax liabilities, which could have a material adverse effect on its results of operations. | ||
D. | The income tax expense for the years ended December 31, 2023, 2022 and 2021 consisted of the following: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Current | 3,746 | 1,140 | 2,181 | |||||||||
Deferred | 2,776 | 1,306 | 8,828 | |||||||||
6,522 | 2,446 | 11,009 | ||||||||||
Domestic (Israel) | 1,048 | 664 | 8,844 | |||||||||
Foreign | 5,474 | 1,782 | 2,165 | |||||||||
6,522 | 2,446 | 11,009 |
E. | Deferred income taxes |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Net operating loss carry forward | 76,348 | 65,148 | ||||||
Temporary differences: | ||||||||
Allowance for credit loss | 15,990 | 17,087 | ||||||
Research and development | 7,796 | 6,092 | ||||||
Lease liabilities | 3,753 | 3,891 | ||||||
Unrealized foreign exchange gains/losses | 2,414 | 2,285 | ||||||
Vacation | 960 | 591 | ||||||
Severance | 1,001 | 1,090 | ||||||
Other | 1,134 | 1,652 | ||||||
Deferred tax assets before valuation allowance | 109,396 | 97,836 | ||||||
Valuation allowance | (103,409 | ) | (93,529 | ) | ||||
Deferred tax assets | 5,987 | 4,307 | ||||||
Deferred tax liabilities: | ||||||||
Right-of-use lease assets | (4,033 | ) | (4,140 | ) | ||||
Intangible assets | (1,258 | ) | - | |||||
Other including property and equipment, net | (696 | ) | (167 | ) | ||||
Deferred tax asset, net | - | - |
F - 44
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Note 16 - Taxes on Income (cont’d)
E. | Deferred income taxes (cont’d) |
F. | Net operating loss carry forward and capital loss |
G. | Income (Loss) before taxes is comprised as follows: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Domestic | 10,880 | (20,850 | ) | (5,430 | ) | |||||||
Foreign | 1,862 | 3,607 | 1,611 | |||||||||
12,742 | (17,243 | ) | (3,819 | ) |
F - 45
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Note 16 - Taxes on Income (cont’d)
H. | Reconciliation of the theoretical tax expense to the actual tax expense |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Income (loss) before taxes as reported in the consolidated statements of operations | 12,742 | (17,243 | ) | (3,819 | ) | |||||||
Statutory tax rate | 23 | % | 23 | % | 23 | % | ||||||
Theoretical tax expenses (income) on the | ||||||||||||
above amount at the Israeli statutory | ||||||||||||
tax rate | 2,931 | (3,966 | ) | (878 | ) | |||||||
Non-deductible expenses and other | ||||||||||||
permanent differences | 2,411 | 265 | (1,602 | ) | ||||||||
Non-deductible expenses related to employee | ||||||||||||
stock options | 946 | 819 | 590 | |||||||||
Deferred tax assets on losses and other | ||||||||||||
temporary differences for which valuation | ||||||||||||
allowance was provided, net | (479 | ) | 5,378 | 12,326 | ||||||||
Other | 713 | (50 | ) | 573 | ||||||||
Actual tax expense | 6,522 | 2,446 | 11,009 |
I. | A reconciliation of the beginning and ending balances of unrecognized tax benefits related to uncertain tax positions is as follows: |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Beginning balance | 2,291 | 2,367 | ||||||
Increases related to tax positions taken during prior years | 626 | 283 | ||||||
Increases related to tax positions taken during the current year | 641 | 330 | ||||||
Decreases related to statute of limitations | (371 | ) | (689 | ) | ||||
Ending balance | 3,187 | 2,291 |
F - 46
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Year ended | Year ended | |||||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Balance, beginning of the period | 14,888 | 12,659 | ||||||
New performance obligations | 9,953 | 6,458 | ||||||
Reclassification to other balance sheet item (*) | (13,800 | ) | - | |||||
Reclassification to revenue as a result of satisfying performance obligations | (4,864 | ) | (4,229 | ) | ||||
Balance, end of the period | 6,177 | 14,888 | ||||||
Less: long-term portion of deferred revenue | 670 | 11,545 | ||||||
Current portion, end of period | 5,507 | 3,343 |
2024 | 2025 and thereafter | |||||||
Unsatisfied performance obligations | - | 670 |
F - 47
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
A. | The Company applies ASC topic 280, "Segment Reporting", ("ASC 820"). The Company operates in one reportable segment (see Note 1 for a brief description of the Company's business). The total revenues are attributed to geographic areas based on the location of the end customer. |
B. | The following tables present total revenues for the years ended December 31, 2023, 2022 and 2021 and long-lived assets as of December 31, 2023 and 2022: |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Revenues: | ||||||||||||
North America (*) | 95,573 | 67,108 | 47,505 | |||||||||
Europe | 42,421 | 42,909 | 47,382 | |||||||||
Africa | 19,602 | 19,324 | 23,165 | |||||||||
Asia-Pacific and Middle East | 35,033 | 32,970 | 32,008 | |||||||||
India | 107,354 | 80,957 | 86,088 | |||||||||
Latin America | 47,196 | 51,905 | 54,618 | |||||||||
347,179 | 295,173 | 290,766 |
(*) | As of December 31, 2023, 2022 and 2021, 94%, 87% and 72% represent revenues in the United States. |
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
$ thousands | $ thousands | |||||||
Long-lived assets, net: | ||||||||
Israel | 40,672 | 41,076 | ||||||
Others | 8,824 | 6,342 | ||||||
Total long-lived assets, net (*) | 49,496 | 47,418 |
(*) | Long-lived assets are comprised of property and equipment, net and operating lease right-of-use assets |
C. | Major customer data as a percentage of total revenues: |
F - 48
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
A. | Restructuring and related charges |
B. | Financial expenses and others, net |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Financial income: | ||||||||||||
Interest on deposits | 93 | 107 | 160 | |||||||||
Foreign currency translation differences and derivatives | 3,296 | 3,054 | 571 | |||||||||
3,389 | 3,161 | 731 | ||||||||||
Financial expenses: | ||||||||||||
Bank charges and interest on loans | (7,538 | ) | (5,016 | ) | (4,650 | ) | ||||||
Foreign currency translation differences and derivatives | (4,049 | ) | (4,451 | ) | (4,449 | ) | ||||||
Others | (270 | ) | - | (257 | ) | |||||||
(11,857 | ) | (9,467 | ) | (9,356 | ) | |||||||
(8,468 | ) | (6,306 | ) | (8,625 | ) |
F - 49
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Note 19 - Selected Statements of Operations Data (cont’d)
C. | Net loss per share |
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Numerator: | ||||||||||||
Numerator for basic and diluted net income (loss) per share – income (loss) available to shareholders of Ordinary shares | 6,220 | (19,689 | ) | (14,828 | ) | |||||||
Denominator: | ||||||||||||
Denominator for basic net income (loss) per share – adjusted weighted average number of Ordinary shares | 84,617,774 | 84,132,982 | 83,414,831 | |||||||||
Add - employee stock options and RSU | 864,852 | - | - | |||||||||
Denominator for diluted net income (loss) per share – adjusted weighted average number of Ordinary shares | 85,482,626 | 84,132,982 | 83,414,831 |
F - 50
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
F - 51
Ceragon Networks Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
Note 20 - Related Party Balances and Transactions (cont’d)
Year ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
$ thousands | $ thousands | $ thousands | ||||||||||
Revenues | 77 | 47 | 394 | |||||||||
Cost of revenues | 295 | 345 | 1,125 | |||||||||
Research and development expenses | 3 | 115 | 608 | |||||||||
Sales and marketing expenses | 252 | 284 | 617 | |||||||||
General and administrative expenses | 495 | 1,040 | 1,527 | |||||||||
Purchase of property and equipment | 37 | 180 | 175 |
December 31, 2023 | December 31, 2022 | |||||||
$ thousands | $ thousands | |||||||
Trade Receivables | - | - | ||||||
Trade payables, other accounts payable and accrued expenses | - | 380 |
F - 52