Financial Data and Key Metrics Changes - The company reported Q4 2021 revenue of $77.8 million, a 5.1% increase from $74 million in Q4 2020, with full-year revenue reaching $291 million, up nearly 11% from 2020 [31][32] - Gross margin for Q4 was 29%, unchanged from Q4 2020, while the full-year gross margin improved to 30.3% from 28.7% in 2020 [33] - The net loss on a GAAP basis for Q4 was $2 million, or $0.02 per diluted share, primarily due to a write-off of a tax asset of $8.5 million [38][36] Business Line Data and Key Metrics Changes - The majority of business in 2021 came from 4G, but 5G bookings accounted for over one-third of all bookings in North America, Europe, and parts of APAC [12][22] - New products like the IP-50E and IP-50C have seen significant sales, contributing to the company's growth in the 5G segment [13][18] Market Data and Key Metrics Changes - North America had a record year in 2021, with 5G design win customers generating over 50% of bookings in the region [23][27] - India experienced strong demand for network upgrades, surpassing previous records since 2018, while Europe also had a strong year with significant bookings [25][26] Company Strategy and Development Direction - The company aims to expand its traditional business while increasing its focus on managed services and new markets, including cell site routing [22][21] - The strategy includes leveraging technological capabilities to provide a one-stop-shop solution for customers, particularly in underserved markets [20][65] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, expecting revenue between $305 million and $320 million, contingent on improvements in supply chain conditions [40][22] - The company anticipates that supply chain issues will ease in the second half of 2022, allowing for smoother operations [46][49] Other Important Information - The company has a presence in over 140 countries and has served more than 2000 customers, indicating a strong global footprint [20] - The IP-50FX product has been awarded the Telecom Infra Project Requirements Compliant Ribbon, highlighting its technological leadership [17] Q&A Session Summary Question: Can you provide more granularity on the backlog? - Management indicated that the backlog has increased compared to the beginning of the year, providing confidence for 2022 [43] Question: What is the outlook for the first quarter? - Management noted that supply constraints are expected to impact the first half of the year, with better growth anticipated in the second half [44][46] Question: Are you seeing success in raising prices to offset margin pressures? - Management confirmed that they have successfully increased prices for some customers, which will contribute positively to gross margins [59] Question: How quickly will managed services become a meaningful part of revenue? - Management expects a gradual ramp-up in managed services revenue, with significant contributions more likely in 2023 and beyond [57] Question: What is the status of the IP-100 product? - Management stated that the product is on track for development, with expectations to have it ready by the end of 2022 [50] Question: Can you elaborate on the restructuring in North America? - The company is shifting focus to Tier 3 and Tier 4 ISPs and private networks, aiming to provide comprehensive network solutions [64][65]

Ceragon Networks Ltd. (NASDAQ:CRNT) Q3 2021 Earnings Conference Call November 1, 2021 9:00 AM ET Company Participants Maya Lustig - Investor Relations Doron Arazi - Chief Executive Officer Ran Vered - Chief Financial Officer Conference Call Participants George Iwanyc - Oppenheimer Alex Henderson - Needham & Company Rommel Dionisio - Aegis Capital Brian Kinstlinger - Alliance Global Partners Operator Ladies and gentlemen, thank you for standing by, and welcome to the Ceragon Networks' Third Quarter Earnings ...

Financial Data and Key Metrics Changes - Revenue for Q2 2021 was $68.6 million, up by 10% compared to Q2 2020, attributed mainly to strong sales in North America and India [24] - Gross profit for Q2 2021 on a non-GAAP basis was $21.6 million, resulting in a gross margin of approximately 72%, compared to 26% in Q2 2020 [25] - Net loss on a non-GAAP basis for the quarter was $1.2 million, or $0.01 per diluted share, while on a GAAP basis, the net loss was $1.7 million, or $0.02 per diluted share [29] Business Line Data and Key Metrics Changes - In North America, 52% of year-to-date bookings were 5G-related, with strong momentum from Tier 1 operators [9] - In India, multiple Tier 1 operators placed follow-on orders, contributing to the company holding around 50% market share in the region [11] - European 5G-related bookings accounted for 31% of all European bookings year-to-date, indicating positive momentum [12] Market Data and Key Metrics Changes - Q2 bookings were the highest in three years, particularly strong in North America, Europe, and India [7] - The company reported a book-to-bill ratio significantly above 1, indicating strong demand [23] - Latin America showed signs of recovery, with new contracts awarded in Mexico, Brazil, Colombia, and Peru, despite ongoing COVID-19 impacts [12] Company Strategy and Development Direction - The company aims to expand its total addressable market and reinforce its solutions as the go-to for wireless transport, particularly in the context of 5G [15] - The transition to OpenRAN architecture is seen as an opportunity for the company, as it allows for vendor-neutral component selection [17] - Managed services are being positioned as a significant recurring revenue source, with a focus on network monitoring and optimization [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue growth for 2021, expecting it to be at the higher end of the annual guidance of $275 million to $295 million [30] - The company is optimistic about returning to profitability in the second half of the year, despite ongoing component shortages [31] - Management acknowledged challenges related to component shortages and high supply chain costs, which may impact gross margins [26] Other Important Information - The company has 16 5G design wins, with five being new additions to the customer base [13] - A new system-on-chip is expected to be a significant technological breakthrough, with a focus on reliability and capacity [21] - The company is committed to improving gross margins to 33% to 34% and above in the long term [14] Q&A Session Summary Question: How many quarters have you run a book-to-bill above one? - Management indicated it has been three or four quarters with a book-to-bill above 1, with the last two quarters being particularly significant [33] Question: Can you discuss the timeline for realizing large orders? - Management noted that some projects will last more than one year, and while they are comfortable with visibility for the remainder of 2021, challenges remain due to component shortages [35][37] Question: What is the status of gaining share from the Huawei install base? - Management stated that Huawei's presence has diminished in key markets, opening up opportunities for the company [39] Question: What opportunities do you see for managed services globally? - Management highlighted the development of strong operational capabilities and the increasing demand for managed services as networks become more complex [42][44] Question: What are the trends in your supply chain? - Management noted improvements in supply chain issues but acknowledged that challenges remain, impacting timelines and expectations [47] Question: What is the outlook for gross margins? - Management indicated that while they aim for long-term gross margins of 33% to 34%, current challenges may keep margins flat in the near term [50][52]

Exhibit A Ceragon Ushers in a New Era of 5G Accessibility in Urban & Rural North America Selected by three leading North American operators to deploy and improve 5G connectivity in dense urban & in rural areas Little Falls, New Jersey, June 30, 2021 - Ceragon Networks Ltd. (NASDAQ: CRNT), the global innovator and leading solutions provider of 5G wireless transport, has announced new orders and renewed partnerships with large North American service providers. These orders focus on expanding 5G network reach ...

Ceragon's Strategic Positioning - Ceragon is positioned to capitalize on the 5G evolution as a global innovator and leading solutions provider of 5G wireless transport[1] - Ceragon has a long history of innovating on transitions between wireless generations, with significant growth during the transitions from 2G to 3G and 3G to 4G[13] - Ceragon is well-positioned to leverage the transition from 4G to 5G, providing operators with the technology, expertise, and services they need[14] - Ceragon's in-house built chipset is a key differentiator, offering higher performance at speeds of 100GB, lower costs, and shorter time to market[14] - Ceragon is positioned to be the technology leader of wireless hauling for 5G due to disruption in the market[14] Market Dynamics and Growth - The urgent need for more network capacity was created because 2020 brought a mass exodus to the online world[12] - Telecommunications companies (Telcos) are pushed to accelerate their 5G plans, driving the transition from 4G to 5G[12] - Approximately 45% of all cell sites globally are connected by wireless hauling, making it an essential part of any network evolution for faster and more cost-effective deployments[17] Financial Performance and Metrics - Ceragon's revenue mix is balanced across different regions[15] - Ceragon's Q1 2021 revenues were $68.3 million, and the gross margin was 29.6%[26] - Ceragon sees a path to returning to historical gross margin levels, with a 2021E gross margin of 30%-34%[27] - Ceragon's cash balance increased from $27.1 million in Q4 2020 to $33 million in Q1 2021[28]

Financial Performance - Q1 2021 revenues reached $68.27 million[9] - Q1 2021 gross profit was $20.183 million[9] - Q1 2021 gross margin was 29.6%[9] - Q1 2021 Non-GAAP net loss was $879 thousand[9] Revenue Distribution by Region (Q1 2021) - Europe accounted for 19% of revenues[7] - Africa contributed 9% to revenues[7] - North America represented 17% of revenues[7] - India's share of revenues was 26%[7] - APAC accounted for 14% of revenues[7] - Latin America made up 15% of revenues[7] Balance Sheet Data (Q1 2021) - Cash and cash equivalents totaled $33.011 million[13] - Trade receivables amounted to $106.712 million[13] - Inventory was valued at $48.542 million[13] - Shareholders' equity stood at $146.397 million, representing 50% of total assets[13]

Financial Data and Key Metrics Changes - Revenues for Q1 2021 were $68.3 million, up 22% compared to Q1 2020 [36] - Non-GAAP gross profit was $20.2 million, resulting in a gross margin of approximately 30%, compared to 25% in Q1 2020 [40] - Net loss on a non-GAAP basis was $0.9 million or $0.01 per diluted share, while GAAP net loss was $1.2 million or $0.01 per diluted share [44] Business Line Data and Key Metrics Changes - Strong bookings were reported across all regions, with Q1 being the strongest in terms of bookings in the last two years [35] - In North America, bookings were the strongest since 2016, driven by demand from Tier 1 customers for 5G network expansion [9] - In Europe, over 20% of bookings were from 5G-related orders, indicating a positive trend in the region [11] Market Data and Key Metrics Changes - The Indian market showed strong performance, with expectations for 2021 to be even stronger than 2020, assuming no significant impact from COVID-19 [14] - Latin America is experiencing renewed momentum towards 4G and readiness for 5G, with bookings more than double compared to Q4 2020 [16] - In APAC, a follow-on frame contract worth $23 million was signed with a Tier-1 operator, indicating a recovery in the region [17] Company Strategy and Development Direction - The company is focused on leveraging its technological leadership to meet the growing 5G needs and expand into new verticals [32] - There is a commitment to continue enhancing existing customer relationships while exploring new opportunities in critical infrastructure markets [10] - The company is developing a new high-capacity low-latency system-on-chip to support future 5G and OpenRAN technology demands [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong bookings and healthy funnel for Q2, despite concerns over global component shortages affecting delivery capabilities [46] - The company anticipates revenue growth in 2021, with a forecast between $275 million and $295 million, although the component shortage may impact quarterly revenue timing [47] - Management remains optimistic about long-term prospects, expecting to navigate supply chain challenges effectively [60] Other Important Information - The company is participating in 5G OpenRAN trials in Brazil, showcasing its commitment to innovation and technology leadership [24] - The transition of CEO responsibilities from Ira Palti to Doron Arazi is set for July, with Palti continuing as Vice Chairman of the Board [29][30] Q&A Session Summary Question: Concerns about tape-out timing and supply chain constraints - Management indicated that current processes for new chipsets are on time, but future manufacturing capacity may be a concern [50][51] Question: Strong performance in India despite COVID conditions - Management confirmed that demand remains strong, and they are cautiously optimistic about installation capabilities under current conditions [54][56] Question: Impact of supply constraints on customer choices - Management believes they have sufficient cloud in critical areas and are working to mitigate supply chain issues [57][58] Question: Guidance and revenue expectations - Management acknowledged that revenue may decrease quarter-over-quarter due to supply constraints, but demand remains strong [65] Question: Cash position and liquidity - The company has $33 million in cash and an additional $40 million available from a credit revolver, indicating strong liquidity [78]

PART I [Key Information](index=4&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section summarizes historical financial data and outlines key business risks, including pandemic impact and 5G transition challenges [Selected Consolidated Financial Data](index=4&type=section&id=Selected%20Consolidated%20Financial%20Data) Selected consolidated financial data for 2016-2020 shows declining revenues, a shift to net losses, and decreased assets and equity Selected Consolidated Statement of Operations Data (In millions of dollars) | Indicator | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $343.87M | $285.58M | $262.88M | | Gross profit | $116.17M | $96.84M | $75.65M | | Operating income (loss) | $26.14M | $7.30M | $(7.57M) | | Net income (loss) | $23.05M | $(2.34M) | $(17.09M) | | Diluted net earnings (loss) per share | $0.28 | $(0.03) | $(0.21) | Selected Consolidated Balance Sheet Data (In millions of dollars) | Indicator | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $36.60M | $23.96M | $27.12M | | Working capital | $114.99M | $111.27M | $99.45M | | Total assets | $283.00M | $289.89M | $272.42M | | Shareholders' equity | $159.57M | $160.42M | $146.13M | [Risk Factors](index=7&type=section&id=Risk%20Factors) The company identifies various material risks, including COVID-19 impact, 5G transition uncertainty, customer concentration, and geopolitical instability - The COVID-19 pandemic poses significant risks, including disruptions to production, supply chain, sales activities, and employee health, which could lead to monetary penalties and damage to the company's reputation[31](index=31&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) - The company's business is highly concentrated, with one customer group in India accounting for **19.7%** of total revenues in 2020. A reduction in orders from this region has adversely affected results[46](index=46&type=chunk)[47](index=47&type=chunk) - Delays in the market transition from 4G to 5G technologies could adversely affect future revenues, as the company's growth strategy and product development are heavily focused on 5G[44](index=44&type=chunk)[45](index=45&type=chunk) - The company faces intense competition from larger 'generalists' like Huawei, Ericsson, and Nokia, as well as other wireless hauling specialists. These competitors may have greater resources, brand recognition, and the ability to offer bundled solutions and more attractive pricing[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - A majority of sales (**69%** in 2020) are in emerging markets (Latin America, India, Asia Pacific, Africa), exposing the company to political, economic, and regulatory risks, including currency fluctuations and trade restrictions[113](index=113&type=chunk)[114](index=114&type=chunk) - There is a risk that the company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. shareholders[177](index=177&type=chunk)[178](index=178&type=chunk) - The company's headquarters and significant R&D facilities are in Israel, making it susceptible to political, economic, and military instability in the Middle East[191](index=191&type=chunk) [Information on the Company](index=34&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details Ceragon's business as a wireless hauling specialist, covering its history, 4G/5G solutions, key technologies, products, and operations [History and Development of the Company](index=34&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Ceragon Networks Ltd. was incorporated in Israel in 1996, with principal executive offices in Tel Aviv and a U.S. subsidiary - The company was incorporated in Israel in 1996 as Giganet Ltd. and changed its name to Ceragon Networks Ltd. in 2000[223](index=223&type=chunk) [Business Overview](index=35&type=section&id=B.%20Business%20Overview) Ceragon is a leading wireless hauling specialist providing high-capacity 4G/5G solutions, leveraging proprietary technology and competing on performance and cost-effectiveness - Ceragon is the leading wireless hauling specialist, providing solutions for cellular operators and vertical markets like public safety, utilities, and oil and gas[226](index=226&type=chunk)[232](index=232&type=chunk) - The company focuses on the "best-of-breed" market segment, where operators select the best wireless hauling solution, as opposed to "bundled-deals" from large network providers[239](index=239&type=chunk)[240](index=240&type=chunk) - Key innovations include the multicore™ technology, now in its fourth generation, and the introduction of a "disaggregated wireless hauling" architecture in 2019 to support 5G deployments[242](index=242&type=chunk)[243](index=243&type=chunk) Product Platforms | Platform | Description | | :--- | :--- | | **IP-20 Platform** | Provides a wide range of solutions for any configuration (all-outdoor, split-mount, all-indoor) and diverse networking scenarios, supporting Carrier Ethernet services | | **IP-50 Platform** | Offers disaggregated wireless hauling with a single radio type for all scenarios, supporting IP/MPLS and segment routing | | **IP-100 Platform** | A future platform based on a new 8-core (Octa-core) chipset, expected to offer industry-leading performance and capacity for 5G use cases | Revenue by Sales Channel (2020) | Channel | Percentage of Revenue | | :--- | :--- | | Direct Sales | ~75% | | System Integrators, Distributors, Resellers | ~18% | | OEMs | ~7% | - The company outsources most of its manufacturing to contractors in Israel, Singapore, and Ukraine, following a just-in-time strategy to increase capacity and reduce costs[320](index=320&type=chunk)[322](index=322&type=chunk) - Primary competitors include large 'generalists' like Huawei, Ericsson, NEC, and Nokia, as well as smaller specialists like Aviat Networks and SIAE Microelectronica[334](index=334&type=chunk) - The company has received grants from the Israel Innovation Authority (IIA), which require compliance with the R&D Law, including restrictions on transferring know-how and manufacturing outside of Israel[339](index=339&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk) [Organizational Structure](index=54&type=section&id=C.%20Organizational%20Structure) Ceragon Networks Ltd. is an Israeli company with wholly-owned subsidiaries in the United States and India Significant Subsidiaries | Company | Place of Incorporation | Ownership Interest | | :--- | :--- | :--- | | Ceragon Networks, Inc. | New Jersey | 100% | | Ceragon Networks (India) Private Limited | India | 100% | [Property, Plants and Equipment](index=54&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company is relocating its Israeli headquarters to a new leased facility in Rosh Ha'Ain and maintains other leased properties globally - The company is relocating its Israeli headquarters to a new **66,600** sq. ft. office space in Rosh Ha'Ain under a lease expiring in 2031[354](index=354&type=chunk) - Key international leased properties include facilities in New Jersey and Texas (USA), New Delhi (India), and Bucharest (Romania)[355](index=355&type=chunk)[356](index=356&type=chunk) [Operating and Financial Review and Prospects](index=55&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial condition and operations, detailing a **7.9%** revenue decrease, gross margin decline, increased net loss, and liquidity position [Operating Results](index=55&type=section&id=A.%20Operating%20Results) In 2020, revenues decreased by **7.9%**, gross profit margin fell to **28.8%**, and the company reported a net loss of **$17.1 million** Year-over-Year Financial Performance (2020 vs. 2019) | Metric | 2019 | 2020 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $285.6M | $262.9M | $(22.7M) | (7.9%) | | Gross Profit | $96.8M | $75.6M | $(21.2M) | (21.9%) | | Gross Margin | 33.9% | 28.8% | (5.1 p.p.) | - | | Operating Income (Loss) | $7.3M | $(7.6M) | $(14.9M) | - | | Net Loss | $(2.3M) | $(17.1M) | $(14.8M) | - | - The decrease in 2020 revenue was primarily driven by a significant drop in Latin America (**$71.4M** to **$46.7M**) and a decline in the APAC region (**$53.9M** to **$47.7M**)[405](index=405&type=chunk) - Selling and marketing expenses decreased by **16.5%** to **$33.0 million** in 2020, mainly due to reduced travel and event costs during the COVID-19 pandemic[413](index=413&type=chunk) - Research and development expenses increased by **15.7%** to **$31.0 million** in 2020, driven by higher salaries, subcontractor costs, and write-offs of intangibles[411](index=411&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity is financed by cash from operations and credit facilities, with **$27.1 million** in cash and **$17.2 million** generated from operations in 2020 - As of December 31, 2020, the company had **$27.1 million** in cash and cash equivalents[430](index=430&type=chunk) - In June 2020, the company amended its revolving Credit Facility, extending it to June 30, 2021. The facility provides for **$50 million** in loans and **$70 million** in bank guarantees. As of year-end 2020, **$5 million** of the loan facility was utilized[424](index=424&type=chunk)[425](index=425&type=chunk) Cash Flow Summary (In millions) | Cash Flow | 2019 | 2020 | | :--- | :--- | :--- | | From Operating Activities | $(12.9) | $17.2 | | Used in Investing Activities | $(13.9) | $(6.5) | | Provided by (Used in) Financing Activities | $15.2 | $(7.4) | - The company believes its current working capital and available credit will be sufficient to meet requirements for at least the next **12** months[440](index=440&type=chunk) [Tabular Disclosure of Contractual Obligations](index=65&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) The company's contractual obligations total **$36.7 million**, with the majority (**$24.2 million**) due within one year, primarily from purchase obligations Contractual Obligations (in millions of dollars) | Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $7.85M | $3.29M | $3.35M | $0.63M | $0.59M | | Purchase obligations | $20.75M | $20.75M | - | - | - | | Other long-term commitment | $5.73M | $0.19M | $0.32M | $0.30M | $4.92M | | Uncertain income tax positions | $2.42M | - | - | - | $2.42M | | **Total** | **$36.75M** | **$24.23M** | **$3.67M** | **$0.93M** | **$7.93M** | [Directors, Senior Management and Employees](index=65&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, and employee information, including share ownership and stock option plans [Compensation](index=71&type=section&id=B.%20Compensation) Aggregate compensation for directors and senior management in 2020 was **$3.6 million**, governed by a performance-based policy approved in July 2020 - Aggregate compensation paid or accrued for all directors and senior management in 2020 was approximately **$3.6 million** in salary, fees, and bonuses, plus **$0.6 million** in pension/retirement benefits[481](index=481&type=chunk) Compensation of 5 Most Highly Compensated Office Holders for 2020 (Cost to Company) | Name | Position | Salary Costs | Performance Bonus Costs | Equity Costs | | :--- | :--- | :--- | :--- | :--- | | Ira Palti | CEO | $410,503 | $0 | $273,963 | | Amit Ancikovsky | Regional President | $320,051 | $114,329 | $100,744 | | Adrian Hipkiss | Regional President | $313,144 | $99,389 | $25,722 | | Erez Schwartz | EVP Products | $301,138 | $0 | $24,706 | | Muki Bourla | EVP Global Delivery | $243,679 | $53,500 | $28,396 | - The company's Compensation Policy was last revised and approved by shareholders on July **20**, **2020**, and must be re-approved at least every three years[499](index=499&type=chunk) [Board Practices](index=73&type=section&id=C.%20Board%20Practices) The Board of Directors, comprising seven members, operates under Israeli law with four independent directors and established audit, compensation, and nomination committees - As a foreign private issuer, the company follows certain home country (Israeli) corporate governance practices in lieu of Nasdaq rules, particularly regarding compensation committee charters and shareholder approval for equity plans[500](index=500&type=chunk)[757](index=757&type=chunk)[758](index=758&type=chunk) - The Board has four key committees: Financial Audit, Corporate Audit, Compensation, and Nomination. The members and roles of each committee are defined in compliance with both Israeli law and Nasdaq/SEC rules[504](index=504&type=chunk)[523](index=523&type=chunk)[525](index=525&type=chunk)[530](index=530&type=chunk)[536](index=536&type=chunk) - The company has opted out of the Israeli requirement to appoint external directors, instead complying with Nasdaq independence rules applicable to U.S. domestic issuers[513](index=513&type=chunk)[515](index=515&type=chunk) - The company maintains a directors' and officers' liability insurance policy with coverage up to **$45 million**[575](index=575&type=chunk) [Employees](index=84&type=section&id=D.%20Employees) As of December 31, 2020, Ceragon had **1,019** employees globally, with the majority in sales and marketing, and a significant number in R&D Employees by Function (as of Dec 31, 2020) | Function | Number of Employees | | :--- | :--- | | Research, Development & Engineering | 247 | | Sales & Marketing (incl. services) | 630 | | Management & Administration | 36 | | Operations | 106 | | **Total** | **1,019** | Employees by Geography (as of Dec 31, 2020) | Region | Number of Employees | | :--- | :--- | | Israel | 305 | | EMEA (excl. Israel) | 229 | | Latin America | 189 | | Asia Pacific | 78 | | United States | 37 | [Share Ownership](index=85&type=section&id=E.%20Share%20Ownership) This section details beneficial share ownership by directors and management, and describes the Amended and Restated Share Option and RSU Plan Beneficial Share Ownership (as of Feb 28, 2021) | Name | Position | Number of Ordinary Shares Beneficially Owned | Percentage of Outstanding | | :--- | :--- | :--- | :--- | | Zohar Zisapel | Chairman | 7,117,174 | 8.51% | | Ira Palti | CEO & Director | 768,752 | 0.91% | | All directors & senior management (19 people) | - | 8,282,405 | 9.77% | - The company's Amended and Restated Share Option and RSU Plan is administered by the Compensation Committee. As of Dec **31**, **2020**, **6,548,715** options and RSUs were outstanding, with **1,133,883** shares remaining available for future grants[595](index=595&type=chunk)[596](index=596&type=chunk)[598](index=598&type=chunk)[991](index=991&type=chunk) [Major Shareholders and Related Party Transactions](index=87&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section identifies major shareholders and details related party transactions, including those with the RAD-BYNET Group and an investment write-off Major Shareholders (as of Feb 28, 2021) | Name | Number of Ordinary Shares Beneficially Owned | Percentage of Outstanding | | :--- | :--- | :--- | | Joseph D. Samberg | 8,100,065 | 9.72% | | Zohar Zisapel | 7,117,174 | 8.54% | - The company engages in transactions with the RAD-BYNET Group, a group of independent companies where Chairman Zohar Zisapel has affiliations. These transactions, conducted at arm's length, include shared expenses and equipment purchases, amounting to approximately **$1.8 million** in 2020[608](index=608&type=chunk)[610](index=610&type=chunk) - The company had a related party relationship with Orocom in Peru due to board representation and other rights. Following the return of bank guarantees, this relationship was reduced but Orocom is still considered a related party[615](index=615&type=chunk) - The company's investment in Compass Networks LTD was fully written-off as of December **31**, **2020**, due to equity losses and the assessment that no future economic benefits are expected from the asset[616](index=616&type=chunk) [Financial Information](index=89&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms financial statements, notes high export sales, details a pending class action lawsuit, and states no future cash dividends are planned - Export sales accounted for **$261.8 million**, or **99.6%** of total revenues in 2020[625](index=625&type=chunk) - The company is a defendant in a purported class action lawsuit filed in 2015 in Israel, seeking damages up to **$75 million**. The company believes it has a strong defense and that the court should deny the motion[626](index=626&type=chunk)[637](index=637&type=chunk) - The company has never declared or paid a cash dividend on its ordinary shares and does not intend to in the foreseeable future[639](index=639&type=chunk) [Additional Information](index=91&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides supplementary details on the company's corporate structure, legal framework, and tax environment, including Israeli and U.S. tax considerations [Memorandum and Articles of Association](index=91&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company's Articles of Association, governed by Israeli law, outline provisions for shareholder meetings, voting rights, dividends, and merger procedures - The quorum for a shareholder meeting is the presence of at least two shareholders holding **25%** or more of the company's voting power[651](index=651&type=chunk) - Dividends may be distributed out of profits as determined by the Board of Directors, provided there is no concern about the company's ability to meet its obligations[658](index=658&type=chunk)[659](index=659&type=chunk) - Israeli law requires a tender offer to be made if an acquisition results in a purchaser holding **25%** or more of the voting rights (if no prior control block exists) or **45%** or more under certain conditions[662](index=662&type=chunk) [Taxation](index=95&type=section&id=E.%20Taxation) This section details the company's tax environment, including Israeli corporate tax rates, potential benefits from investment laws, and the risk of PFIC classification for U.S. shareholders - The standard corporate tax rate in Israel was **23%** in 2020. The company has 'Approved Enterprise' programs that could provide tax exemptions or reduced rates, but the benefit periods for its main programs have not yet commenced and are subject to time limitations[672](index=672&type=chunk)[675](index=675&type=chunk)[676](index=676&type=chunk) - The company believes it qualifies as an 'industrial company' under Israeli law, entitling it to benefits like accelerated depreciation and deduction of certain expenses[689](index=689&type=chunk) - For U.S. federal income tax purposes, the company could be classified as a Passive Foreign Investment Company (PFIC) if **75%** of its gross income is passive or **50%** of its assets produce passive income. While the company does not believe it was a PFIC in 2020, this status is determined annually and could have adverse tax consequences for U.S. holders[716](index=716&type=chunk)[717](index=717&type=chunk) - Dividends paid to U.S. holders may be considered 'qualified dividend income' taxed at lower long-term capital gains rates, provided certain holding period requirements are met and the company is not a PFIC[708](index=708&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=104&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) The company faces market risk from foreign currency fluctuations, mitigated by hedging instruments, with a **10%** USD strengthening impacting net monetary assets by **$2.2 million** - The company's primary market risk is foreign currency exposure, as significant revenues and expenses are in non-U.S. dollar currencies like NIS, INR, and EUR[731](index=731&type=chunk) - To manage currency risk, the company uses hedging instruments. As of December **31**, **2020**, it had outstanding forward-like contracts amounting to **$66.3 million** for periods up to twelve months[731](index=731&type=chunk)[732](index=732&type=chunk) - A sensitivity analysis shows that a **10%** strengthening of the U.S. dollar against other currencies would have resulted in a decrease of approximately **$2.2 million** in the company's net monetary assets position as of year-end 2020[731](index=731&type=chunk) [Controls and Procedures](index=104&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting, as concluded by management and attested by auditors - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December **31**, **2020**[739](index=739&type=chunk) - Based on an evaluation using the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of December **31**, **2020**[743](index=743&type=chunk) - The independent registered public accounting firm, Kost, Forer, Gabbay & Kasierer (a member of Ernst & Young Global), issued an unqualified attestation report on the effectiveness of the company's internal control over financial reporting[744](index=744&type=chunk) [Other Governance Items](index=105&type=section&id=ITEM%2016.%20Other%20Governance%20Items) This section covers corporate governance, including the audit committee financial expert, Code of Ethics, accountant fees, and foreign private issuer compliance practices - The Board of Directors has determined that Mr. Shlomo Liran serves as the audit committee financial expert[746](index=746&type=chunk) - The company has adopted a Code of Ethics for its senior officers, which is available upon request and on its website[747](index=747&type=chunk) Principal Accountant Fees (2020) | Service | Fees (USD) | Percentage | | :--- | :--- | :--- | | Audit Fees | $714,000 | 94% | | Tax Fees | $43,000 | 6% | | **Total** | **$757,000** | **100%** | - As a foreign private issuer, the company follows Israeli home country practices instead of certain Nasdaq rules, including those related to compensation committee charters, shareholder approval for equity plans, quorum requirements, and annual report distribution[757](index=757&type=chunk)[758](index=758&type=chunk)[760](index=760&type=chunk)[761](index=761&type=chunk) PART III [Financial Statements](index=107&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the consolidated financial statements for 2020, with an unqualified auditor's opinion and a critical audit matter on inventory valuation - The consolidated financial statements for the years ended December **31**, **2018**, **2019**, and **2020** are presented in conformity with U.S. generally accepted accounting principles[775](index=775&type=chunk) - The independent auditor, Kost, Forer, Gabbay & Kasierer, issued an unqualified opinion on the financial statements and on the company's internal control over financial reporting as of December **31**, **2020**[775](index=775&type=chunk)[787](index=787&type=chunk) - The auditor identified 'Inventory valuation' as a Critical Audit Matter, noting that estimating the reserve for obsolete inventory involves significant management judgment regarding future sales and market conditions[781](index=781&type=chunk)[782](index=782&type=chunk)[784](index=784&type=chunk) [Exhibits](index=109&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including corporate documents, credit facility amendments, equity plans, and Sarbanes-Oxley certifications - Key exhibits filed include the Articles of Association, the Amended and Restated Share Option and RSU Plan, and various amendments to the company's credit facility[766](index=766&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of 2002 are included as exhibits[766](index=766&type=chunk)

Challenge us Q4 2020 Financial Review February 2021 Proprietary and Confidential February 2021 Safe Harbor Statement This presentation contains statements that constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended 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 ma ...

Ceragon Networks Ltd. (NASDAQ:CRNT) Q4 2020 Results Conference Call February 8, 2021 9:00 AM ET Company Participants Maya Lustig - Head, IR Ira Palti - President and CEO Ran Vered - CFO Conference Call Participants Alex Henderson - Needham & Company George Iwanyc - Oppenheimer Gunther Karger - Discovery Group Operator Ladies and gentlemen, thank you for standing by. Greetings, and welcome to Ceragon Networks Limited Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants a ...