Challenge us Q2 2020 Financial Review August 2020 Proprietary and Confidential August 2020 Safe Harbor Statement This presentation contains statements that constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon's management about C ...

Challenge us Q1 2020 Financial Review May 2020 Proprietary and Confidential May 2020 Safe Harbor Statement This presentation contains statements concerning Ceragon's future prospects that are "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Cer ...

Ceragon Networks Ltd. (NASDAQ:CRNT) Q1 2020 Earnings Conference Call May 4, 2020 9:00 AM ET Company Participants Ira Palti - President and CEO Ran Vered - CFO Conference Call Participants Alex Henderson - Needham & Company George Iwanyc - Oppenheimer Gunther Karger - Discovery Group Operator Good day, everyone. Welcome to the Ceragon Networks Limited First Quarter 2020 Results Conference Call. Today's call is being recorded and will be hosted by Mr. Ira Palti, President and CEO of Ceragon Networks. Today's ...

As filed with the Securities and Exchange Commission on March 31, 2020 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ ...

Challenge us Q4 2019 Financial Review February 2020 Proprietary and Confidential Feb 2020 Safe Harbor Statement This presentation contains statements concerning Ceragon's future prospects that are "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions o ...

Ceragon Networks Ltd. (NASDAQ:CRNT) Q4 2019 Earnings Conference Call February 10, 2020 9:00 AM ET Company Participants Ira Palti - President and CEO Ran Vered - CFO Conference Call Participants George Iwanyc - Oppenheimer Alex Henderson - Needham & Company Gunther Karger - Discovery Group Operator Good day, everyone. Welcome to the Ceragon Networks Limited Fourth Quarter and Full Year 2019 Results Conference Call. Today's call is being recorded and will be hosted by Mr. Ira Palti, President and CEO of Cerag ...

Challenge us Q3 2019 Financial Review Nov 2019 Proprietary and Confidential Aug 2019 Safe Harbor Statement This presentation contains statements concerning Ceragon's future prospects that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon's management. Examples of forward-looking statements include: projections of demand, revenues, net income, gross marg ...

Ceragon Networks Ltd. (NASDAQ:CRNT) Q3 2019 Earnings Conference Call November 4, 2019 8:00 AM ET Company Participants Ira Palti - President & Chief Executive Officer Ran Vered - Chief Financial Officer Conference Call Participants Alex Henderson - Needham George Iwanyc - Oppenheimer David Allen - Advisory Group Operator Good day everyone and welcome to Ceragon Networks Limited Third Quarter 2019 Results Conference Call. Today's call is being recorded and will be hosted by Mr. Ira Palti, President and CEO of ...

Part I [Identity of Directors, Senior Management and Advisers](index=4&type=section&id=ITEM%201.%20Identity%20of%20Directors%2C%20Senior%20Management%20and%20Advisers) This section is marked 'Not applicable', providing no specific information on directors, senior management, or advisers [Offer Statistics and Expected Timetable](index=4&type=section&id=ITEM%202.%20Offer%20Statistics%20and%20Expected%20Timetable) This section is marked 'Not applicable', providing no specific information on offer statistics or expected timetable [Key Information](index=4&type=section&id=ITEM%203.%20Key%20Information) This section presents selected consolidated financial data from 2014-2018 and details significant risk factors impacting the company's business, shares, and Israeli operations [Selected Consolidated Financial Data](index=5&type=section&id=Selected%20Consolidated%20Financial%20Data) Selected consolidated financial data for 2014-2018 shows fluctuating revenues, increasing gross profit and net income, and growth in total assets and shareholders' equity Consolidated Statement of Operations Data (2014-2018, in thousands of dollars) | Indicator | 2014 | 2015 | 2016 | 2017 | 2018 | |:---|:---|:---|:---|:---|:---| | Revenues | 371,112 | 349,435 | 293,641 | 332,033 | 343,874 | | Cost of revenues | 286,670 | 246,487 | 194,479 | 224,698 | 227,705 | | Gross profit | 84,442 | 102,948 | 99,162 | 107,335 | 116,169 | | Operating expenses | 116,474 | 81,357 | 79,669 | 84,189 | 90,025 | | Operating income (loss) | (32,032) | 21,591 | 19,493 | 23,146 | 26,144 | | Financial expenses, net | (37,946) | (14,738) | (6,303) | (5,889) | (6,349) | | Income (loss) before taxes | (69,978) | 6,853 | 13,190 | 17,257 | 19,795 | | Tax benefit (taxes) on income | (6,501) | (5,842) | (1,761) | (1,697) | 3,251 | | Net income (loss) | (76,479) | 1,011 | 11,429 | 15,560 | 23,046 | | Basic net earnings (loss) per share | (1.22) | 0.01 | 0.15 | 0.20 | 0.29 | | Diluted net earnings (loss) per share | (1.22) | 0.01 | 0.15 | 0.19 | 0.28 | Consolidated Balance Sheet Data (2014-2018, in thousands of dollars) | Indicator | 2014 | 2015 | 2016 | 2017 | 2018 | |:---|:---|:---|:---|:---|:---|\ | Cash and cash equivalents, bank deposits, short and long term marketable securities | 42,371 | 36,318 | 36,338 | 26,873 | 36,600 | | Working capital | 87,748 | 81,957 | 95,950 | 105,362 | 115,170 | | Total assets | 341,873 | 267,249 | 244,225 | 253,593 | 283,000 | | Total long term liabilities | 31,822 | 19,915 | 17,555 | 14,245 | 13,411 | | Shareholders' equity | 104,552 | 102,821 | 116,164 | 133,898 | 159,568 | [Risk Factors](index=6&type=section&id=Risk%20Factors) The company faces diverse risks including revenue concentration, intense competition, new product challenges, financial volatility, operational dependencies, and unique legal and geopolitical risks from Israeli operations [Risks Relating to Our Business](index=7&type=section&id=Risks%20Relating%20to%20Our%20Business) Business risks include high revenue concentration, reliance on a single product line, intense competition, unpredictable gross margins, supply chain volatility, M&A challenges, and currency fluctuations in international operations - Approximately **37.0%** of total revenues in 2018 came from two customers in India, highlighting significant customer concentration, which fluctuated from **24.2%** in 2016 to **37.9%** in 2017[28](index=28&type=chunk) - The company focuses on the 'best-of-breed' segment of the wireless backhaul market with a single product line (point-to-point wireless backhaul), making it sensitive to demand changes in this niche[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The market for wireless backhaul equipment is highly competitive, with primary competitors including large 'generalists' like Huawei, Ericsson, NEC, Nokia, and ZTE, as well as smaller specialists[33](index=33&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) - Gross margins are difficult to predict and can fluctuate significantly due to changes in the geographical mix of revenues, as different regions have varying margin percentages[41](index=41&type=chunk)[42](index=42&type=chunk) - Quarterly operating results are highly unpredictable due to factors like product delivery delays, geographical and product mix, and customer spending decisions, especially from large customers[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - Merger and acquisition activities, pursued for growth or technological improvement, involve risks such as integration problems, distraction of management, increased expenses, potential negative cash flow, and dilution of shareholder equity[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - The company faces high volatility in customer supply needs, leading to delivery pressures and potential inability to fulfill commitments, increased costs, and penalties if supply chain and production cannot synchronize with demand[53](index=53&type=chunk)[54](index=54&type=chunk) - Long-term rollout projects, which include installation and other services, carry additional risks such as unpredictable revenue timing, dependence on third-party service providers, and financial risks related to acceptance certificates and potential product damage or theft[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) - Reliance on third-party manufacturers, suppliers, and service providers, especially single-source suppliers, exposes the company to risks of delivery disruptions, production problems, quality control issues, and increased operating costs[68](index=68&type=chunk)[69](index=69&type=chunk)[72](index=72&type=chunk) - International operations expose the company to currency exchange rate fluctuations (e.g., NIS, INR, Euro, BRL, ARS, NOK) and foreign currency exchange controls, which can negatively impact revenues, operating expenses, and cash reserves[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - A majority of sales are in emerging markets (**77%** in 2018, **74%** in 2017), making the company susceptible to political, economic, and regulatory risks in these regions, including currency controls and collection risks[81](index=81&type=chunk)[82](index=82&type=chunk) - The telecommunications industry faces downward price pressure due to global competition, market conditions, and increased demand from Tier 1 customers and emerging markets, impacting revenues, gross margins, and profitability[92](index=92&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) - Failure to develop and market new products that keep pace with rapid technological advances, changing industry standards, and customer needs could hinder business growth and sustainability[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Breaches of network or information technology security, including cyber-attacks, malware, and unauthorized access, could lead to equipment failures, operational disruptions, significant expenses, loss of market share, and damage to reputation[110](index=110&type=chunk)[111](index=111&type=chunk) - The emergence of new 5G radio access technologies, utilizing high-frequency microwave and millimeter-wave spectrum in different network architectures, could lead to new wireless backhaul solutions from competitors and potentially decrease the company's revenues[121](index=121&type=chunk)[122](index=122&type=chunk) - Consolidation of the potential customer base in the telecommunications industry could reduce or eliminate sales to existing customers if consolidated entities adopt competitor products, and may delay purchasing decisions[124](index=124&type=chunk) - Intense competition from other high-speed communication solutions, such as fiber optic lines and alternative wireless technologies, could reduce demand for the company's point-to-point wireless products[125](index=125&type=chunk)[126](index=126&type=chunk)[128](index=128&type=chunk) - Inaccurate forecasts can lead to inventory-related losses, such as excess or obsolete inventory purchased by contract manufacturers, or increased expenses if unexpected production ramp-ups are required[135](index=135&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) - Lengthy sales cycles, particularly for competitive bids or new customers, require substantial time and resources, leading to greater uncertainty in sales forecasting and potential delays in orders[142](index=142&type=chunk) - Failure to obtain regulatory approval for products or insufficient allocation of radio frequency spectrum can restrict the company's ability to market its products and adversely affect business and financial results[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - The use of products in critical communications networks exposes the company to significant liability claims if products malfunction, potentially leading to costly litigation, damages, and reputational harm[148](index=148&type=chunk) [Risks Related to Our Ordinary Shares](index=24&type=section&id=Risks%20Related%20to%20Our%20Ordinary%20Shares) Risks include potential PFIC classification, impacts from U.S. tax law changes, high share price volatility, and significant shareholder influence on corporate decisions - There is a risk of classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in reduced after-tax returns and lower share value for U.S. holders[164](index=164&type=chunk)[165](index=165&type=chunk) - Changes to U.S. federal tax laws, including the Tax Act of 2017, could impact shareholder investments by altering corporate tax rates and other tax provisions, potentially affecting the company's effective tax rates[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - The price of ordinary shares is subject to high volatility, influenced by technological innovations, competitor actions, financial estimates, corporate transactions, and macroeconomic developments, which can lead to substantial losses for investors and potential class actions[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk) - Zohar Zisapel (**13.22%**) and Yehuda Zisapel (**4.46%**) hold significant influence over matters requiring shareholder approval due to their shareholdings[175](index=175&type=chunk)[176](index=176&type=chunk) - The company is subject to 'conflict minerals' regulations (Dodd-Frank Act Section 1502), requiring due diligence and disclosure, with potential reputational and sales impacts if products contain non-conflict-free minerals[177](index=177&type=chunk) [Risks Related to Operations in Israel](index=26&type=section&id=Risks%20Related%20to%20Operations%20in%20Israel) Israeli operations face political, economic, and military instability, military service obligations, IIA grant restrictions, conditional tax benefits, and challenges related to foreign private issuer status and U.S. judgment enforcement - Operations in Israel are directly influenced by political, economic, and military conditions in the Middle East, including hostilities, trade interruptions, and military mobilization, which could adversely affect business and financial results[178](index=178&type=chunk)[179](index=179&type=chunk)[184](index=184&type=chunk) - The continued conflict with Palestinians and boycotts of Israeli businesses could disrupt international trading activities and negatively impact the company's business conditions and share price[185](index=185&type=chunk) - Grants from the Israel Innovation Authority (IIA) restrict the ability to manufacture products or transfer technologies/know-how outside of Israel without prior consent and potential increased royalty payments, limiting strategic flexibility[188](index=188&type=chunk)[189](index=189&type=chunk) - Tax benefits from approved and beneficiary enterprise programs in Israel require satisfying specified conditions; failure to meet these or future reductions/eliminations of benefits could lead to increased tax liabilities[191](index=191&type=chunk)[192](index=192&type=chunk)[194](index=194&type=chunk) - As a foreign private issuer, the company is exempt from certain SEC and Nasdaq Rule requirements, potentially offering less protection to investors than rules applicable to domestic issuers[195](index=195&type=chunk) - Enforcing U.S. judgments against the company or its officers and directors in Israel may be difficult due to differences in legal systems and the location of assets and personnel[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk) - Shareholder rights and responsibilities are governed by Israeli law, which differs from U.S. company laws, potentially imposing additional obligations and liabilities on shareholders[201](index=201&type=chunk)[202](index=202&type=chunk) - Provisions of Israeli law, including corporate law regulations on mergers and tender offers, and IIA approvals, may delay, prevent, or make undesirable an acquisition of the company or a significant portion of its shares or assets[203](index=203&type=chunk)[204](index=204&type=chunk) [Information on the Company](index=29&type=section&id=ITEM%204.%20Information%20on%20the%20Company) Ceragon Networks Ltd. is a leading wireless backhaul specialist providing 4G/5G solutions and services globally, emphasizing R&D, proprietary technology, and an outsourced manufacturing model, with details on structure and properties [A. History and Development of the Company](index=29&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Ceragon Networks Ltd., incorporated in Israel in 1996 as Giganet Ltd., changed its name in 2000 and maintains its registered office in Tel Aviv - Ceragon Networks Ltd. was incorporated in Israel on July 23, 1996, as Giganet Ltd., and changed its name on September 6, 2000[205](index=205&type=chunk) - The company's registered office is at 24 Raoul Wallenberg Street, Tel Aviv, Israel, and its U.S. agent is Ceragon Networks, Inc. in Little Falls, NJ[205](index=205&type=chunk)[207](index=207&type=chunk) [B. Business Overview](index=30&type=section&id=B.%20Business%20Overview) Ceragon, a leading wireless backhaul specialist, offers high-capacity 4G/5G microwave and millimeter-wave solutions and comprehensive services globally, driven by multicore™ technology and continuous innovation - Ceragon is the leading wireless backhaul specialist in terms of unit shipments and global distribution, connecting mobile network sites to the rest of the network where wireline connectivity is unavailable[208](index=208&type=chunk)[209](index=209&type=chunk) - Wireless backhaul offers network operators a cost-efficient, high-speed, and reliable alternative to wire-line connectivity, enabling faster setup and time-to-market[210](index=210&type=chunk) - The company provides wireless backhaul solutions and services for 4G (LTE, LTE-A) and 5G networks, supporting voice, mobile/fixed broadband, M2M, IoT, and public safety services, deployed by over **460** service providers in **130+** countries[211](index=211&type=chunk)[214](index=214&type=chunk) - Ceragon serves the 'best-of-breed' market segment, where operators prioritize optimal wireless backhaul solutions for operational efficiency, service reliability, and customer experience, rather than 'bundled-deals' where backhaul is a commodity[218](index=218&type=chunk)[219](index=219&type=chunk) - The company offers Shorthaul solutions (up to **2 Gbps**, **10 miles**) for access applications and Long-haul solutions (up to **20 Gbps**, **10-50+ miles**) for backbone networks, also serving non-carrier vertical markets[219](index=219&type=chunk)[220](index=220&type=chunk) - Ceragon's multicore™ technology, based on in-house developed chipsets, enables advanced capabilities like Line-of-Sight MIMO, Advanced Frequency Reuse, and Advanced Space Diversity, with an **8-core** chipset planned for 2021-2022[221](index=221&type=chunk) - Market demand for wireless backhaul is driven by continuous customer growth in developing countries and the explosion in mobile data usage in developed countries, fueled by 4G/LTE and 5G services[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - Key industry trends include the deployment of Gigabit LTE and 5G, increasing demand for mobile broadband, the emergence of small cells, transition to IP-based networks, Software Defined Networking (SDN), network sharing models, and modernization of existing cell sites[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Ceragon's solutions, incorporating multicore™ technology, aim to increase operational efficiency, enhance service portfolios, and ensure high service availability through vertical integration from system-on-a-chip design to complete solutions[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[259](index=259&type=chunk) - The product portfolio includes IP-20 and IP-50 Platforms, offering all-outdoor, split-mount, all-indoor, and disaggregated backhaul configurations across a wide range of microwave and millimeter-wave frequencies (**4GHz to 86GHz**)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[276](index=276&type=chunk) - The company offers comprehensive turn-key services, including network planning, site survey, solutions development, network rollout, maintenance, and training, with experienced teams capable of deploying hundreds of wireless backhaul links weekly[281](index=281&type=chunk)[282](index=282&type=chunk) Revenue Distribution by Region (Percentage of Total Revenues) | Region | 2016 | 2017 | 2018 | |:---|:---|:---|:---|\ | North America | 14% | 12% | 12% | | Europe | 15% | 14% | 11% | | Africa | 7% | 4% | 7% | | India | 27% | 39% | 38% | | APAC (excluding India) | 10% | 13% | 14% | | Latin America | 27% | 18% | 18% | - Sales channels include direct sales (**79%** in 2018), OEMs (**4%**), and system integrators, distributors, and resellers (**17%**)[288](index=288&type=chunk) - Manufacturing is outsourced to contract manufacturers in Israel, Singapore, and Ukraine, with warehouse operations outsourced to subcontractors in Israel, the Netherlands, the U.S., and Singapore[290](index=290&type=chunk)[292](index=292&type=chunk) - Research and development activities are primarily conducted in Tel Aviv, Israel, with additional facilities in Greece and Romania, focusing on improving existing products, developing new ones, and reducing costs[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - The company protects its proprietary technology through **19** granted patents (U.S., EPO, other foreign jurisdictions) and **2** pending applications, along with trademarks for 'Ceragon Networks', 'FibeAir', and 'CeraView'[299](index=299&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - Competition in the wireless equipment market is intense and fragmented, with major competitors including Huawei, Ericsson, NEC, Nokia, and ZTE, as well as smaller specialists. The company competes based on product performance, cost structure, service offerings, and technology innovation[304](index=304&type=chunk)[305](index=305&type=chunk)[311](index=311&type=chunk) - The company receives grants from the Israel Innovation Authority (IIA) for R&D, which may impose restrictions on manufacturing or transferring technology outside Israel, but do not require royalty payments on sales of products developed with these grants[313](index=313&type=chunk)[315](index=315&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) [C. Organizational Structure](index=45&type=section&id=C.%20Organizational%20Structure) Ceragon Networks Ltd. is an Israeli company with wholly-owned subsidiaries in New Jersey, USA, and India Significant Subsidiaries | Company | Place of Incorporation | Ownership Interest | |:---|:---|:---|\ | Ceragon Networks, Inc. | New Jersey | 100% | | Ceragon Networks (India) Private Limited | India | 100% | [D. Property, Plants and Equipment](index=45&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) The company's headquarters are in a leased Tel Aviv facility, with additional leased operational and marketing spaces in the U.S., India, and Romania - Corporate headquarters and principal administrative, finance, and operations departments are in a leased facility in Tel Aviv, Israel (**67,500 sq ft** office, **9,300 sq ft** warehouse), with the lease extended to December 31, 2020[323](index=323&type=chunk) - Additional leased spaces include approximately **5,300 sq ft** in New Jersey (expiring Sept 2021), **8,200 sq ft** in Richardson, Texas (expiring March 2024), **11,700 sq ft** in New Delhi, India (expiring Oct 2019), **1,348 sq ft** in Mumbai, India (expiring July 2020), and **20,000 sq ft** in Bucharest, Romania (expiring Nov 2020)[324](index=324&type=chunk)[326](index=326&type=chunk) [Unresolved Staff Comments](index=46&type=section&id=ITEM%204A%20Unresolved%20Staff%20Comments) This section is marked 'Not applicable', providing no specific information on unresolved staff comments [Operating and Financial Review and Prospects](index=46&type=section&id=ITEM%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section details operating results, financial condition, and future prospects, covering industry trends, financial performance, critical accounting policies, liquidity, capital resources, and strategic R&D efforts [A. Operating Results](index=46&type=section&id=A.%20Operating%20Results) Operating results show 2018 revenue growth driven by Africa and APAC, improved gross profit, increased operating expenses, and significant net income growth, influenced by new accounting standards and currency fluctuations - Ceragon is the number one wireless backhaul specialist, providing solutions to over **460** service providers and **1,000** private network owners in **130+** countries[330](index=330&type=chunk)[331](index=331&type=chunk) - Industry trends include Gigabit-LTE and 5G deployments, growing global wireless subscribers (especially in developing countries), increasing demand for mobile broadband, emergence of small cells, transition to IP-based networks, Software Defined Networking (SDN), and network sharing business models[332](index=332&type=chunk)[333](index=333&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk) - The company faces pricing pressures due to increased competition, regional pricing dynamics (e.g., India, which accounted for **38.2%** of revenues in 2018), and demand for volume discounts on larger orders[340](index=340&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk) - Revenues increased by **$11.9 million** (**3.6%**) to **$343.9 million** in 2018 from **$332.0 million** in 2017, driven by increases in Africa and APAC, partially offset by a decrease in Europe[372](index=372&type=chunk) - Gross profit as a percentage of revenues increased to **33.8%** in 2018 from **32.3%** in 2017, mainly due to a change in geographic mix of revenues with higher margins and product cost reduction[374](index=374&type=chunk) - Net income increased to **$23.0 million** in 2018 from **$15.6 million** in 2017, with net profit as a percentage of revenues rising to **6.7%** from **4.7%**[382](index=382&type=chunk) Consolidated Statement of Operations Data (Percentage of Total Revenues) | Indicator | 2016 | 2017 | 2018 | |:---|:---|:---|:---|\ | Revenues | 100% | 100% | 100% | | Cost of revenues | 66.2% | 67.7% | 66.2% | | Gross profit | 33.8% | 32.3% | 33.8% | | Research and development, net | 7.4% | 7.7% | 8.2% | | Selling and marketing | 13.5% | 12.5% | 12.5% | | General and administrative | 6.9% | 5.6% | 5.6% | | Other income | (0.7)% | (0.5)% | (0.1)% | | Total operating expenses | 27.1% | 25.3% | 26.2% | | Operating income | 6.7% | 7.0% | 7.6% | | Financial expenses, net | 2.1% | 1.8% | 1.8% | | Taxes on income (benefit) | 0.6% | 0.5% | (0.9)% | | Net income | 4.0% | 4.7% | 6.7% | - Critical accounting policies include revenue recognition (ASC 606-10 adopted Jan 1, 2018), inventory valuation (lower of cost or net realizable value), and provision for doubtful accounts (based on credit evaluations and historical experience)[356](index=356&type=chunk)[357](index=357&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk) - The company adopted ASU 2016-02 (Leases) effective January 1, 2019, expecting to recognize approximately **$7.0 million** in right-of-use assets and lease liabilities[366](index=366&type=chunk) - Fluctuations in exchange rates between the U.S. dollar and other currencies (NIS, INR, EUR, BRL, ARS, NOK) significantly impact results of operations, with hedging strategies in place to mitigate some of this risk[395](index=395&type=chunk)[396](index=396&type=chunk) [B. Liquidity and Capital Resources](index=54&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Operations are financed by public offerings and IIA grants, supported by a $125 million credit facility, with $22.5 million cash from operations in 2018 and sufficient liquidity for the next 12 months - The company has a **$125 million** revolving credit facility with four financial institutions, extended until June 30, 2020, comprising **$40 million** for short-term loans and **$85 million** for bank guarantees[216](index=216&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk) - As of December 31, 2018, the company had not utilized any of the **$40 million** credit line for short-term loans and met all financial covenants[401](index=401&type=chunk)[403](index=403&type=chunk) - Cash and cash equivalents totaled approximately **$35.6 million** as of December 31, 2018[405](index=405&type=chunk) - Net cash provided by operating activities was **$22.5 million** in 2018, driven by net income (**$23.0 million**) and depreciation/amortization (**$7.8 million**), offset by increases in receivables and deferred tax assets[406](index=406&type=chunk)[407](index=407&type=chunk) - Net cash used in investing activities was **$15.3 million** in 2018, primarily for property and equipment (**$10.3 million**), intangible assets (**$3.4 million**), and equity investments (**$1.6 million**)[404](index=404&type=chunk)[412](index=412&type=chunk) - Net cash provided by financing activities was **$2.6 million** in 2018, mainly from share options exercise[413](index=413&type=chunk) - The company believes current cash and credit facilities will be sufficient for requirements through at least the next **12 months**[416](index=416&type=chunk) [C. Research and Development](index=56&type=section&id=C.%20Research%20and%20Development) Ceragon prioritizes R&D to enhance products, develop new IP-based network solutions, and reduce costs, with 210 staff in Israel, Greece, and Romania focusing on chip-level design and system integration - Significant emphasis is placed on R&D to improve existing products, develop new ones for IP-based networks, and lower production costs[417](index=417&type=chunk) - R&D activities are mainly conducted in Tel Aviv, Israel, and subsidiaries in Greece and Romania, with **210** employees as of December 31, 2018[418](index=418&type=chunk) - The R&D department designs and develops proprietary solutions from chip-level (ASICs and RFICs) to full system integration, focusing on extensions to IP-based networking product lines and new technologies for future products[419](index=419&type=chunk) [D. Trend Information](index=56&type=section&id=D.%20Trend%20Information) Relevant trend information is detailed within the 'Operating Results' and 'Liquidity and Capital Resources' sections of Item 5 [E. Off Balance Sheet Arrangements](index=56&type=section&id=E.%20Off%20Balance%20Sheet%20Arrangements) The company has no material off-balance sheet arrangements or unconsolidated special purpose entities that would create material contingent liabilities - The company is not party to any material off-balance sheet arrangements and has no unconsolidated special purpose financing or partnership entities that are likely to create material contingent liabilities[420](index=420&type=chunk) [F. Tabular Disclosure of Contractual Obligations](index=57&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2018, total contractual obligations were **$38.2 million**, primarily purchase and operating lease obligations, alongside other long-term commitments Contractual Obligations as of December 31, 2018 (in thousands of dollars) | Contractual Obligations | Total | Payments due by Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |:---|:---|:---|:---|:---|:---|\ | Operating lease obligations | 7,316 | 5,104 | 2,092 | 120 | - | | Purchase obligations | 23,922 | 23,922 | - | - | - | | Other long-term commitment | 4,615 | 180 | 369 | - | 4,066 | | Uncertain income tax positions | 2,373 | - | - | - | 2,373 | | **Total** | **38,226** | **29,206** | **2,461** | **120** | **6,439** | - Other long-term commitments include accrued severance pay under Israel's Severance Pay Law (net commitment of **$2.3 million**) and pension accruals in other subsidiaries (approximately **$2.3 million**)[423](index=423&type=chunk) [Directors, Senior Management and Employees](index=57&type=section&id=ITEM%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details directors, senior management, compensation, and corporate governance, outlining Board structure, committee responsibilities, office holder duties, and employee information, all compliant with Israeli and Nasdaq regulations [A. Directors and Senior Management](index=57&type=section&id=A.%20Directors%20and%20Senior%20Management) The company's leadership includes Chairman Zohar Zisapel and CEO Ira Palti, with a seven-member Board of Directors comprising independent and external directors, with no family relationships or special election arrangements Directors and Executive Officers | Name | Age | Position | |:---|:---|:---|\ | Zohar Zisapel | 70 | Chairman of the Board of Directors | | Ira Palti | 61 | President and Chief Executive Officer, Director | | Doron Arazi | 55 | Deputy Chief Executive Officer & Chief Financial Officer | | Nurit Kruk-Zilca | 45 | Executive Vice President, Human Resources | | Yuval Reina | 52 | Chief Operating Officer | | Oz Zimerman | 55 | Executive Vice President, Global Corporate Development | | Shai Yaniv | 48 | Executive Vice President Marketing | | Flavio Perrucchetti | 51 | Regional President, Europe | | Ram Prakash Tripathi | 52 | Regional President, India | | Amit Ancikovsky | 48 | Regional President, Latin America & Africa | | Charles Meyo | 55 | Regional President, North America | | Shlomo Liran | 68 | Director (Independent) | | Yael Langer | 54 | Director | | Avi Berger | 56 | Director (External, Independent) | | Avi Eizenman | 62 | Director (Independent) | | Meir Sperling | 70 | Director (External, Independent) | - There are no arrangements or understandings relating to the election of current directors or appointment of executive officers, and no family relationships among them[447](index=447&type=chunk) [B. Compensation](index=60&type=section&id=B.%20Compensation) In 2018, aggregate compensation for directors and senior management totaled **$4.2 million** in cash and **$0.4 million** in benefits, with executive bonuses tied to performance and directors receiving cash and equity grants - Aggregate compensation for all directors and senior management in 2018 was approximately **$4.2 million** in salary, fees, bonuses, and commissions, plus **$0.4 million** for pension/retirement benefits[448](index=448&type=chunk) - Executive officers' performance-based bonus plan is based on overall company, unit, and individual performance, including financial parameters like revenues, gross profit, and operating income[449](index=449&type=chunk) - Directors (excluding CEO) receive cash compensation (e.g., NIS **80,207** annual fee, NIS **2,985** per-meeting fee) and annual equity grants (options) that vest on grant date, with exercise prices based on a **30-day** average Nasdaq closing price[451](index=451&type=chunk)[452](index=452&type=chunk)[453](index=453&type=chunk) - In 2018, directors and executive officers were granted options to purchase **856,001** ordinary shares and **2,000** restricted share units (RSUs), with exercise prices ranging from **$2.73** to **$3.56**[455](index=455&type=chunk) Individual Compensation of Top 5 Office Holders (2018, in thousands of dollars) | Office Holder | Salary Costs | Performance Bonus Costs | Equity Costs | |:---|:---|:---|:---|\ | Ira Palti (CEO) | 369,572 | 364,565 | 373,956 | | Doron Arazi (Deputy CEO & CFO) | 309,353 | 189,767 | 103,316 | | Amit Ancikovsky (Regional President Latin America & Africa) | 318,957 | 326,499 | 58,571 | | Charles Meyo (Regional President North America) | 343,611 | 278,173 | 41,218 | | Flavio Perrucchetti (Regional President Europe) | 377,579 | 112,664 | 41,713 | [C. Board Practices](index=62&type=section&id=C.%20Board%20Practices) Corporate governance adheres to Israeli law and Nasdaq Rules, with a seven-member Board and committees overseeing financial audit, corporate audit, compensation, and nominations, ensuring multi-level approvals for compensation and related party transactions - The Board of Directors consists of seven members, with a majority required to be independent under Nasdaq Rules. Currently, four directors (Shlomo Liran, Avi Berger, Meir Sperling, Avi Eizenman) qualify as independent[463](index=463&type=chunk)[469](index=469&type=chunk) - Directors, other than external directors, are elected for a three-year term. External directors serve three-year terms and may be re-elected for two additional terms, with further re-elections requiring specific approvals[467](index=467&type=chunk)[480](index=480&type=chunk) - External directors must have 'accounting and financial expertise' or 'professional qualifications', with at least one possessing accounting and financial expertise (Mr. Sperling)[483](index=483&type=chunk)[486](index=486&type=chunk) - Directors' remuneration requires approval from the Compensation Committee, Board of Directors, and shareholders, consistent with the company's compensation policy[487](index=487&type=chunk) - The Financial Audit Committee, composed of independent directors (Messrs. Liran, Berger, Sperling), recommends independent auditors, oversees financial reporting, and handles accounting complaints[490](index=490&type=chunk)[491](index=491&type=chunk) - The Corporate Audit Committee (Messrs. Liran, Berger, Sperling, with Mr. Berger as chairman) identifies irregularities, reviews transactions, recommends internal auditor appointments, and sets procedures for employee complaints[493](index=493&type=chunk)[494](index=494&type=chunk) - The Compensation Committee (Messrs. Liran, Berger, Sperling, with Mr. Sperling as chairman) recommends and reviews the compensation policy, approves office holder employment terms, and administers equity award plans[497](index=497&type=chunk)[499](index=499&type=chunk)[500](index=500&type=chunk) - The Nomination Committee (Messrs. Shlomo Liran and Avi Eizenman) recommends director nominees for Board approval[504](index=504&type=chunk) - Terms of employment for office holders (including CEO) and certain related party transactions require multi-level approvals from the Compensation Committee, Board of Directors, and often shareholders, with specific majority requirements for non-controlling shareholders[506](index=506&type=chunk)[507](index=507&type=chunk)[510](index=510&type=chunk)[514](index=514&type=chunk)[515](index=515&type=chunk) - Office holders have fiduciary duties (duty of care and loyalty), requiring good faith actions and disclosure of personal interests in transactions[523](index=523&type=chunk)[524](index=524&type=chunk)[526](index=526&type=chunk) - Shareholders have duties to act in good faith and refrain from abusing power, particularly in voting on significant corporate matters[529](index=529&type=chunk)[530](index=530&type=chunk) - The company's Articles of Association allow for indemnification and insurance of office holders for certain liabilities, with a directors' and officers' liability insurance policy up to **$45 million** (plus **$180,000** for M&A claims)[533](index=533&type=chunk)[535](index=535&type=chunk)[537](index=537&type=chunk)[545](index=545&type=chunk) - The company has an internal auditor (Chaikin, Cohen, Rubin & Co.) to examine compliance with laws and orderly business procedures[551](index=551&type=chunk)[552](index=552&type=chunk) [D. Employees](index=74&type=section&id=D.%20Employees) As of December 31, 2018, Ceragon had **958** employees globally, with significant presence in R&D and sales/marketing, supplemented by temporary staff, operating under local labor laws and specific employment agreements - As of December 31, 2018, the company had **958** employees worldwide: **210** in R&D, **551** in sales/marketing, **81** in management/administration, and **116** in operations[553](index=553&type=chunk) - Employee distribution: **334** in Israel, **44** in the U.S., **207** in EMEA (ex-Israel), **204** in Latin America, and **139** in Asia Pacific[553](index=553&type=chunk) - An average of **157** temporary employees were engaged in 2018, primarily in India, with costs included in cost of revenues[554](index=554&type=chunk) - Israeli employees are not part of collective bargaining agreements but are subject to Israeli labor laws; some subsidiaries in Brazil and Norway are party to collective bargaining agreements[555](index=555&type=chunk)[559](index=559&type=chunk) - Employment agreements include non-competition, intellectual property assignment, and confidentiality undertakings, though non-competition enforceability is limited in some jurisdictions[558](index=558&type=chunk) [E. Share Ownership](index=75&type=section&id=E.%20Share%20Ownership) As of March 28, 2019, Zohar Zisapel held **13.22%** of shares, with all directors and senior management owning **15.76%** collectively, under an equity plan with **1,109,446** shares available for future grants Share Ownership by Directors and Senior Management (as of March 28, 2019) | Name | Number of Ordinary Shares (1) | % of Outstanding Ordinary Shares | |:---|:---|:---|\ | Zohar Zisapel | 10,593,885 | 13.22% | | Ira Palti | 845,835 | 1.06% | | All directors and senior management as a group (17 people) | 12,633,769 | 15.76% | - The Amended and Restated Share Option and RSU Plan, extended through December 31, 2022, allows for grants to officers, directors, employees, and consultants, with options typically vesting over four years and expiring within six to ten years[565](index=565&type=chunk)[567](index=567&type=chunk)[568](index=568&type=chunk) - As of December 31, 2018, **1,109,446** ordinary shares were available for future grants under the Plan[559](index=559&type=chunk) Stock Options and RSUs Outstanding (as of December 31, 2018) | Category | Options and RSUs Outstanding | Unvested Options and RSUs | |:---|:---|:---|\ | Directors and senior management | 3,915,982 | 1,464,363 | | All other grantees | 3,212,435 | 1,513,467 | - Total unrecognized compensation cost related to non-vested share-based awards was **$2,225,000** as of December 31, 2018, expected to be recognized over a weighted-average period of **1.00 years**[970](index=970&type=chunk) [Major Shareholders and Related Party Transactions](index=76&type=section&id=ITEM%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section identifies major shareholders and details related party transactions, including shared expenses, equipment purchases, and lease arrangements with the 'RAD-BYNET Group,' and bank guarantees for Orocom [Major Shareholders](index=76&type=section&id=Major%20Shareholders) As of March 28, 2019, Zohar Zisapel was the largest beneficial owner with **13.22%** of shares, with **97%** of shares registered for trade in the United States Major Shareholders (as of March 28, 2019) | Name | Number of Ordinary Shares | Percentage of Outstanding Ordinary Shares | |:---|:---|:---|\ | Zohar Zisapel | 10,593,885 | 13.22% | | Joseph D. Samberg | 7,784,842 | 9.71% | | Renaissance Technologies LLC | 4,052,658 | 5.06% | - As of March 25, 2019, approximately **97%** of ordinary shares were registered for trade and held in the United States, with **25** record holders[578](index=578&type=chunk) [Related Party Transactions](index=77&type=section&id=Related%20Party%20Transactions) The company engages in various transactions with the 'RAD-BYNET Group,' totaling approximately **$2.0 million** in 2018, and provided **$29.1 million** in bank guarantees for Orocom, a related company - Zohar Zisapel (Chairman, **13.22%** ownership) and Yehuda Zisapel (**4.46%** ownership) are principal shareholders and control the 'RAD-BYNET Group' of companies[579](index=579&type=chunk) - The company shares expenses and purchases equipment, software, and licenses from members of the RAD-BYNET Group, with aggregate purchases and shared expenses totaling approximately **$2.0 million** in 2018[583](index=583&type=chunk) - All related-party transactions with the RAD-BYNET Group are approved by the Corporate Audit Committee and Board of Directors to ensure they are beneficial and on no less favorable terms than from unaffiliated third parties[586](index=586&type=chunk) - In 2018, the company provided **$29.1 million** in bank guarantees on behalf of Orocom, a new operator in Peru, for a broadband connectivity project, defining Orocom and its shareholders as related companies[588](index=588&type=chunk)[589](index=589&type=chunk) - In December 2018, the company purchased **11%** of Compass Networks LTD's share capital for **$833,000**, accounted for using the equity method[590](index=590&type=chunk)[805](index=805&type=chunk) Related Party Transactions (2016-2018, in thousands of dollars) | Category | 2016 | 2017 | 2018 | |:---|:---|:---|:---|\ | Revenues | 95 | 173 | 3,336 | | Cost of revenues | 3,561 | 2,160 | 1,111 | | Research and development expenses | 1,093 | 1,063 | 1,008 | | Selling and marketing expenses | 733 | 813 | 771 | | General and administrative expenses | 1,109 | 995 | 1,067 | | Purchase of property and equipment | 1,019 | 224 | 148 | Balances with Related Parties (as of December 31, in thousands of dollars) | Category | 2017 | 2018 | |:---|:---|:---|\ | Trade payables, other accounts payable and accrued expenses | 363 | 2,077 | | Trade Receivables | 49 | 1,733 | [Lease Arrangements](index=79&type=section&id=Lease%20Arrangements) Primary office and warehouse space in Tel Aviv is leased from Zisapel-controlled entities, with aggregate rent and maintenance expenses of approximately **$2.0 million** in 2018 - Primary office space in Tel Aviv, Israel, is leased from real estate holding companies controlled by Yehuda and Zohar Zisapel[592](index=592&type=chunk) - Aggregate rent and maintenance expenses for these properties were approximately **$2.0 million** in 2018[592](index=592&type=chunk) [Supply Arrangement](index=79&type=section&id=Supply%20Arrangement) The company purchases products from RAD-BYNET Group companies for integration into its offerings, totaling approximately **$0.1 million** in 2018 - The company purchases products from RAD-BYNET Group companies for integration into its offerings, with aggregate purchases of approximately **$0.1 million** in 2018[593](index=593&type=chunk) [Sales Arrangement](index=79&type=section&id=Sales%20Arrangement) The company sells products through RAD-BYNET Group companies, with aggregate selling price of approximately **$0.1 million** in 2018 - The company sells products through RAD-BYNET Group companies, with aggregate selling price of approximately **$0.1 million** in 2018[594](index=594&type=chunk) [Registration Rights](index=79&type=section&id=Registration%20Rights) Certain shareholders, including Zohar and Yehuda Zisapel, hold registration rights for ordinary shares, allowing their inclusion in the company's registration statements - Shareholders, including Yehuda and Zohar Zisapel, hold registration rights for ordinary shares, allowing their inclusion in the company's registration statements[595](index=595&type=chunk)[596](index=596&type=chunk) [Financial Information](index=79&type=section&id=ITEM%208.%20Financial%20Information) This section provides financial statements, notes **99.2%** export sales in 2018, details a class action lawsuit, confirms no dividend payments, and highlights credit facility amendments as significant changes [Consolidated Statements and Other Financial Information](index=79&type=section&id=Consolidated%20Statements%20and%20Other%20Financial%20Information) Annual financial statements are located at the end of this annual report, starting on Page F-1 - Annual financial statements are provided at the end of the report, starting on Page F-1[597](index=597&type=chunk) [Export Sales](index=79&type=section&id=Export%20Sales) In 2018, export sales totaled **$341.2 million**, representing **99.2%** of the company's total revenues of **$343.9 million** - Export sales in 2018 were **$341.2 million**, accounting for **99.2%** of total revenues (**$343.9 million**)[598](index=598&type=chunk) [Legal Proceedings](index=79&type=section&id=Legal%20Proceedings) The company is defending a 2015 class action lawsuit in Israel alleging misleading financial statements from 2014, seeking up to **$75 million** in damages - A class action lawsuit was filed in Israel in January 2015, alleging false and misleading statements regarding expected financial results for Q3 2014, seeking up to **$75 million** in damages[599](index=599&type=chunk)[600](index=600&type=chunk) - The company believes it has a strong defense, supported by an October 2018 Israeli Supreme Court decision that securities litigation for dual-listed companies should be determined under U.S. law[606](index=606&type=chunk)[608](index=608&type=chunk) [Dividends](index=80&type=section&id=Dividends) The company has never paid ordinary share dividends and does not anticipate future payments, retaining earnings for operations, with dividend distribution restricted by its credit facility - The company has never declared or paid dividends on ordinary shares, except for a share dividend before its IPO[610](index=610&type=chunk) - No future dividends are anticipated; all earnings will be retained for operations and business expansion[610](index=610&type=chunk) - The 2013 credit facility restricts dividend distribution without the lender's prior written consent[610](index=610&type=chunk) [Significant Changes](index=81&type=section&id=Significant%20Changes) Significant changes primarily relate to the February and March 2018 amendments to the company's credit facility, as detailed in Item 5.B - Significant changes refer to the February and March 2018 amendments to the credit facility, detailed in Item 5.B[612](index=612&type=chunk) [The Offer and Listing](index=81&type=section&id=ITEM%209.%20The%20Offer%20and%20Listing) Ceragon's ordinary shares have been listed on Nasdaq Global Select Market ('CRNT') since January 2011, following voluntary delisting from the Tel Aviv Stock Exchange in 2017 - Ordinary shares have been listed on the Nasdaq Global Select Market (symbol 'CRNT') since January 3, 2011[613](index=613&type=chunk) - Shares were voluntarily delisted from the Tel Aviv Stock Exchange (TASE) on December 11, 2017[613](index=613&type=chunk) [Additional Information](index=81&type=section&id=ITEM%2010.%20Additional%20Information) This section provides comprehensive information on corporate governance, Israeli M&A and tax laws, U.S. federal income tax considerations for shareholders, including PFIC implications, and SEC filing access [Memorandum and Articles of Association – General](index=81&type=section&id=Memorandum%20and%20Articles%20of%20Association%20%E2%80%93%20General) The company's Memorandum and Articles of Association, including amendments, are incorporated by reference from previous SEC filings - The Memorandum and Articles of Association, including amendments, are incorporated by reference from previous SEC filings[614](index=614&type=chunk)[615](index=615&type=chunk) [Articles of Association](index=81&type=section&id=Articles%20of%20Association) The Articles of Association define the company's purpose, shareholder meeting quorum and voting, non-resident ownership, share transferability, dividend distribution, and liquidation rights - The company's purpose is to engage in any lawful undertaking or business[616](index=616&type=chunk) - Shareholder meetings require a quorum of at least two shareholders holding **25%** or more of the voting power, with resolutions adopted by a majority of votes cast[618](index=618&type=chunk)[619](index=619&type=chunk)[621](index=621&type=chunk) - Ownership or voting of ordinary shares by non-residents of Israel is not restricted, except for citizens of countries at war with Israel[622](index=622&type=chunk) - Dividends may be distributed only out of profits available, as determined by the Board of Directors, and the company currently does not intend to pay cash dividends[625](index=625&type=chunk)[626](index=626&type=chunk)[627](index=627&type=chunk) - In liquidation, assets are distributed to ordinary shareholders proportional to the nominal (par) value paid up on their shares[627](index=627&type=chunk) [Mergers and Acquisitions under Israeli Law](index=83&type=section&id=Mergers%20and%20Acquisitions%20under%20Israeli%20Law) Israeli law regulates mergers requiring specific shareholder and court approvals, mandates tender offers for control block acquisitions, and allows other laws and IIA approvals to impact M&A activities - Mergers generally require **75%** shareholder approval for companies incorporated before the Companies Law, or a majority vote for others, and court approval if there's a reasonable concern about the surviving company's ability to meet obligations[629](index=629&type=chunk) - Acquisitions leading to a **25%** or **45%** control block must be made via a tender offer to all shareholders, with specific conditions for consummation (e.g., acquiring at least **5%** of outstanding shares and exceeding objections)[630](index=630&type=chunk)[631](index=631&type=chunk) - Other Israeli laws and IIA approvals may delay, prevent, or complicate acquisitions or mergers[632](index=632&type=chunk) [Material Contracts](index=83&type=section&id=Material%20Contracts) No material contracts are disclosed in this section - No material contracts are disclosed[632](index=632&type=chunk) [Exchange Controls](index=83&type=section&id=Exchange%20Controls) Currently, no Israeli currency control restrictions exist on dividends or share sales, though legislation allows future imposition, and non-resident ownership is generally unrestricted - No Israeli currency control restrictions on dividend payments or share sale proceeds, except for reporting obligations[633](index=633&type=chunk) - Legislation allows for the imposition of currency controls by administrative action at any time[633](index=633&type=chunk) - Non-resident ownership/voting of shares is unrestricted, except for citizens of countries at war with Israel[634](index=634&type=chunk) [Taxation](index=84&type=section&id=Taxation) This section details Israeli taxation, including a **23%** corporate tax rate in 2018, benefits for 'Approved' and 'Preferred Technology' enterprises, R&D deductions, capital gains tax, dividend withholding tax, and transfer pricing regulations - Israeli corporate tax rate was **23%** in 2018 and **24%** in 2017, reduced from **25%** in 2016[638](index=638&type=chunk)[987](index=987&type=chunk)[990](index=990&type=chunk) - The company has 'Approved Enterprise' and 'Benefited Enterprise' statuses under the Investment Law, providing tax exemptions for two years and reduced corporate tax rates (**10%-25%**) for the remaining benefit period, subject to conditions[641](index=641&type=chunk)[646](index=646&type=chunk)[647](index=647&type=chunk)[976](index=976&type=chunk) - The 2017 Amendment introduced 'Preferred Technology Enterprise' (**12%** corporate tax) and 'Special Preferred Technology Enterprise' (**6%** corporate tax) benefits on qualifying income, with reduced withholding tax on dividends[653](index=653&type=chunk)[654](index=654&type=chunk)[656](index=656&type=chunk)[657](index=657&type=chunk) - Israeli tax law allows deductions for scientific R&D expenditures, reduced by government grants, and the company believes it qualifies as an 'industrial company' under the Industry Encouragement Law (1969) for additional tax benefits[658](index=658&type=chunk)[659](index=659&type=chunk)[660](index=660&type=chunk)[661](index=661&type=chunk)[664](index=664&type=chunk) - Israeli capital gains tax applies to residents (**25-30%**) and non-residents (generally exempt for publicly traded shares, with exceptions)[666](index=666&type=chunk)[667](index=667&type=chunk)[670](index=670&type=chunk) - Dividends distributed to non-residents are subject to withholding tax (**25-30%**), potentially reduced by tax treaties (e.g., U.S.-Israel Tax Treaty reduces to **12.5%** for certain U.S. corporations, **15%** for approved/beneficiary enterprise income)[675](index=675&type=chunk) - Israeli Transfer Pricing Regulations (2006) require cross-border transactions between related parties to be conducted on an arm's length basis[676](index=676&type=chunk) [U.S. Federal Income Tax Considerations](index=88&type=section&id=U.S.%20Federal%20Income%20Tax%20Considerations) This section outlines U.S. federal income tax for U.S. holders, covering dividend and disposition taxation, Net Investment Income Tax, and potential PFIC classification, with brief notes on Non-U.S. holder exemptions - U.S. holders must include distributions as dividend income (potentially qualified dividend income taxed at long-term capital gains rates, currently max **20%**) to the extent paid from earnings and profits[684](index=684&type=chunk)[686](index=686&type=chunk) - Gain or loss on the disposition of ordinary shares is generally treated as capital gain or loss, with long-term capital gains (held over one year) potentially subject to reduced rates for non-corporate U.S. holders[690](index=690&type=chunk) - Certain non-corporate U.S. holders may be subject to an additional **3.8%** Net Investment Income Tax on dividends or capital gains[693](index=693&type=chunk) - Classification as a Passive Foreign Investment Company (PFIC) could result in increased tax liability and complex rules for U.S. holders, with options for Qualified Electing Fund (QEF) or mark-to-market elections to mitigate some adverse consequences[694](index=694&type=chunk)[696](index=696&type=chunk)[698](index=698&type=chunk)[699](index=699&type=chunk) - Non-U.S. holders are generally not subject to U.S. federal income or withholding tax on dividends or disposition proceeds, unless the income is effectively connected with a U.S. trade or business or certain other conditions are met[701](index=701&type=chunk) [Information Reporting and Back-up Withholding](index=93&type=section&id=Information%20Reporting%20and%20Back-up%20Withholding) U.S. holders face information reporting and backup withholding on dividends and dispositions, with exemptions for non-U.S. holders, and some U.S. holders may need to file IRS Form 8938 - U.S. holders are subject to information reporting and potential backup withholding on dividends and disposition proceeds, unless an exemption or correct taxpayer identification number is provided[703](index=703&type=chunk) - Non-U.S. holders are generally exempt from information reporting or backup withholding if they provide a taxpayer identification number, certify foreign status, or establish another exemption[704](index=704&type=chunk) - Certain U.S. holders holding 'specified foreign financial assets' may be required to file IRS Form 8938[705](index=705&type=chunk) [Documents on Display](index=93&type=section&id=Documents%20on%20Display) The company files reports electronically with the SEC, available on http://www.sec.gov and www.ceragon.com - The company files reports with the SEC, available on http://www.sec.gov and www.ceragon.com[706](index=706&type=chunk)[707](index=707&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=93&type=section&id=ITEM%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company has no material market risk requiring tabular disclosure but manages foreign currency risk from non-U.S. dollar transactions using forward contracts, with a **10%** USD strengthening increasing net monetary assets by **$0.7 million** - The company does not use derivative financial instruments for trading purposes and has no material market risk exposure requiring quantitative tabular disclosures[708](index=708&type=chunk) - Exposed to foreign currency risk from revenues, cost of revenues, and operating expenses denominated in NIS, INR, EUR, BRL, ARS, and NOK[709](index=709&type=chunk) - Uses foreign exchange forward contracts to hedge a portion of cash flow transactions and monetary balance sheet items[709](index=709&type=chunk) - As of December 31, 2018, a **10%** strengthening of the U.S. dollar would increase net monetary assets by approximately **$0.7 million**, while a **10%** weakening would decrease them by approximately **$0.8 million**[709](index=709&type=chunk) - Outstanding forward contracts amounted to **$59.3 million** for up to twelve months as of December 31, 2018[711](index=711&type=chunk) - The company does not invest in interest rate derivative financial instruments[712](index=712&type=chunk) [Description of Securities Other than Equity Securities](index=94&type=section&id=ITEM%2012.%20Description%20of%20Securities%20Other%20than%20Equity%20Securities) This section is marked 'Not applicable', providing no specific information on securities other than equity securities Part II [Defaults, Dividend Arrearages and Delinquencies](index=94&type=section&id=ITEM%2013.%20Defaults%2C%20Dividend%20Arrearages%20and%20Delinquencies) No defaults, dividend arrearages, or delinquencies are reported in this section - No defaults, dividend arrearages, or delinquencies are reported[716](index=716&type=chunk) [Material Modifications to the Rights of Security Holders and Use of Proceeds](index=94&type=section&id=ITEM%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) No material modifications to security holder rights or information on the use of proceeds are reported - No material modifications to the rights of security holders or use of proceeds are reported[718](index=718&type=chunk) [Controls and Procedures](index=94&type=section&id=ITEM%2015.%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with an unqualified attestation report from independent auditors [(a) Disclosure Controls and Procedures](index=94&type=section&id=(a)%20Disclosure%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2018, ensuring timely and accurate material information disclosure - Management, including CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2018, providing reasonable assurance for timely and accurate reporting[718](index=718&type=chunk) [(b) Management's Annual Report on Internal Control Over Financial Reporting](index=94&type=section&id=(b)%20Management's%20Annual%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded that internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework, ensuring reliable financial reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting[719](index=719&type=chunk) - Evaluation based on the COSO (2013 framework) concluded that internal control over financial reporting was effective as of December 31, 2018[723](index=723&type=chunk) [(c) Attestation Report of Independent Registered Public Accounting Firm](index=95&type=section&id=(c)%20Attestation%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Kost, Forer, Gabbay & Kasierer, the independent auditors, issued an unqualified attestation report on the effectiveness of internal control over financial reporting - Kost, Forer, Gabbay & Kasierer issued an unqualified attestation report on the effectiveness of internal control over financial reporting[724](index=724&type=chunk) [(d) Changes in Internal Controls Over Financial Reporting](index=95&type=section&id=(d)%20Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the year ended December 31, 2018 - No material changes in internal control over financial reporting occurred during the year ended December 31, 2018[725](index=725&type=chunk) [Audit Committee Financial Expert](index=95&type=section&id=ITEM%2016A.%20Audit%20Committee%20Financial%20Expert) Mr. Shlomo Liran is designated as the audit committee financial expert and an independent director under Nasdaq Rules - Mr. Shlomo Liran has been determined by the Board of Directors as the audit committee financial expert and is an independent director under Nasdaq Rules[726](index=726&type=chunk) [Code of Ethics](index=95&type=section&id=ITEM%2016B.%20Code%20of%20Ethics) The Board adopted a Code of Ethics in 2003, last amended in 2016, to strengthen its Ethics Compliance Program for senior officers - A Code of Ethics, adopted in November 2003 and last amended in December 2016, applies to the CEO, CFO, controller, and other senior officers to strengthen the Ethics Compliance Program[727](index=727&type=chunk) [Principal Accountant Fees and Services](index=96&type=section&id=ITEM%2016C.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to independent auditors Kost, Forer, Gabbay & Kasierer for audit, tax, and other services in 2017-2018, all approved by the Financial Audit Committee [Fees Paid to Independent Auditors](index=96&type=section&id=Fees%20Paid%20to%20Independent%20Auditors) Fees paid to independent auditors totaled **$817,500** in 2018, with audit fees comprising **83%**, tax fees **14%**, and other services **3%** Fees Paid to Independent Auditors (in thousands of dollars) | Services Rendered | 2017 Fees | 2017 Percentages | 2018 Fees | 2018 Percentages | |:---|:---|:---|:---|:---|\ | Audit Fees | 795,615 | 73% | 678,000 | 83% | | Tax Fees | 187,303 | 17% | 117,500 | 14% | | Other Services | 112,000 | 10% | 22,000 | 3% | | **Total** | **1,094,918** | **100%** | **817,500** | **100%** | [Policies and Procedures](index=96&type=section&id=Policies%20and%20Procedures) The Financial Audit Committee approves all audit and non-audit services to ensure auditor independence and compliance with regulations - The Financial Audit Committee approves audit and non-audit services to ensure auditor independence and compliance with regulations[731](index=731&type=chunk) - All fees paid to independent auditors were approved by the Financial Audit Committee[732](index=732&type=chunk) [Exemptions from the Listing Standards for Audit Committees](index=96&type=section&id=ITEM%2016D.%20Exemptions%20from%20the%20Listing%20Standards%20for%20Audit%20Committees) No exemptions from listing standards for audit committees are reported - No exemptions from the listing standards for audit committees are reported[733](index=733&type=chun