Ceragon Networks Ltd. (NASDAQ:CRNT) Q2 2022 Earnings Conference Call August 1, 2022 9:00 AM ET Company Participants Maya Lustig - IR Doron Arazi - CEO Ran Vered - Chief Financial Officer Conference Call Participants Alex Henderson - Needham & Company George Iwanyc - Oppenheimer & Co., Inc. Operator Ladies and gentlemen, thank you for standing by and welcome to the Ceragon Networks' Q2 2022 Earnings Call. Our presentation today will be followed a question-and-answer session. [Operator Instructions]. I would ...

Ceragon Networks Ltd. (NASDAQ:CRNT) Q1 2022 Earnings Conference Call May 2, 2022 9:00 AM ET Company Participants Maya Lustig - Investor Relations Doron Arazi - Chief Executive Officer Ran Vered - Chief Financial Officer Conference Call Participants Alex Henderson - Needham & Company George Iwanyc - Oppenheimer & Co., Inc. Operator Ladies and gentlemen, thank you for standing by and welcome to the Ceragon Networks' Q1 2022 Earnings Call. [Operator Instructions] I would like to hand over the call now to our f ...

Company Overview and Market Position - Ceragon is a global innovator and provider of 5G wireless transport solutions, capitalizing on 5G evolution[1] - The company connects approximately 45% of all cell sites globally and has deployed systems in over 140 countries[11, 12] - Ceragon is positioned as an innovative market leader and 4G & 5G network enabler, with a balanced revenue mix[12] - Ceragon's customers who choose based on value of technology select Ceragon, which accounts for 25% of the units in 2021[12] Growth Drivers and Market Opportunity - Disruption in the market drives Ceragon's growth, with a growing Total Addressable Market (TAM) due to 5G era and OpenRAN adoption[14] - The company has experienced significant growth, from $55 million in 2005 to $160 million in 2009 and $300 million in 2018[14] - 5G transition requires higher backhaul investment and densification, expected to increase TAM for the first time in years[18] - Ceragon is focusing on growing fronthaul & CSR in best-of-breed segment, with 79+ operators increasing fronthaul & CSR[20] - The best-of-breed segment is larger at $2.28 billion compared to the bundled deals segment at $1.52 billion[21] Product Strategy and Competitive Advantages - Ceragon's product strategy focuses on flexible, open all-outdoor wireless transport, leveraging mmWave acceleration[27] - The company has a unique position with its in-house SoC, offering higher performance at speeds up to 100Gbps[18, 36] - Ceragon is pioneering open networks in the wireless transport domain, offering low total network investment, fast network rollout, and simpler network evolution[31] - Ceragon held 37% of the all-outdoor unit market share in 2021[30] Financial Performance - In Q1 2022, Ceragon's revenue was $70.3 million, with a gross margin of 33.5%[32] - The company's geographic revenue mix includes 28% from India, 20% from Latin America, 17% from North America, 16% from Europe and 11% from APAC and 8% from Africa[33] - As of Q1 2022, Ceragon had $25 million in cash and $27 million in debt, resulting in a net cash position of $(2) million and a shareholder equity ratio of 45%[33]

PART I [ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](index=5&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) Information regarding directors, senior management, and advisers is not applicable - Information regarding the identity of directors, senior management, and advisers is not applicable[22](index=22&type=chunk) [ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE](index=5&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) Offer statistics and expected timetable information is not applicable - Information on offer statistics and expected timetable is not applicable[23](index=23&type=chunk) [ITEM 3. KEY INFORMATION](index=5&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section outlines key information, primarily focusing on a comprehensive list of risk factors affecting Ceragon's business and financial condition [Risk Factors](index=5&type=section&id=Risk%20Factors) Ceragon faces numerous risks including supply chain disruptions, 5G transition uncertainty, customer concentration, intense competition, and the ongoing impact of COVID-19 - Global shortage in components and semiconductors adversely affects supply chain, manufacturing capacity, delivery times, revenue, and **gross margins**[25](index=25&type=chunk)[30](index=30&type=chunk) - Impact of **5G transition** on revenues is difficult to predict due to uncertain technology developments, standardization, and deployment pace[25](index=25&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Significant portion of business concentrated on large mobile operators (e.g., two customers in India accounted for **28.3% of 2021 revenues**), leading to high volatility[25](index=25&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - Intense competition from larger 'generalists' (Huawei, Ericsson, NEC, Nokia, ZTE) and smaller specialists, and from fiber optics and other wireless technologies[25](index=25&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - **COVID-19 pandemic** continues to negatively impact global economy, increasing shipment/logistical costs, disrupting marketing/sales, and affecting employee health[25](index=25&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) - Risks related to rapid market changes and failure to timely develop and commercialize new products (e.g., **5G SoC delays**) could lead to loss of market share[25](index=25&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - Expansion into new business domains (WISPs, private networks, software solutions) poses product development, marketing, sales, and cybersecurity challenges[25](index=25&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - Failure to attract or retain qualified and skilled personnel, especially in R&D and high-tech, due to intense competition and increasing employment costs, could adversely affect business[26](index=26&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - Increased breaches of network/IT security and changes in privacy/data protection laws (e.g., GDPR) pose risks of equipment failures, data leaks, litigation, and fines[27](index=27&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - Gross margin is difficult to predict and exposed to significant fluctuations due to potential changes in the geographical mix of revenues, as margins vary significantly between regions[27](index=27&type=chunk)[90](index=90&type=chunk) - Operating results and revenue are hard to predict and may vary significantly quarter-to-quarter due to delays in product delivery, acceptance tests, and customer spending decisions[27](index=27&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - High volatility in customer supply needs leads to delivery issues due to long lead times and component availability, potentially causing increased costs, penalties, and order cancellations[27](index=27&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - Reliance on third-party manufacturers, suppliers, and service providers, especially single-source suppliers, risks disruptions, price increases, and delays in product deliveries[27](index=27&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Engagement in long-term installation/rollout projects involves risks such as early product delivery with delayed payment terms, delays in acceptance testing, and credit risks[27](index=27&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) - Exposure to complex and evolving regulatory requirements (trade compliance, export controls, data privacy, environmental laws) in multiple jurisdictions, with non-compliance risking fines and reputational damage[27](index=27&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) - Geopolitical risks, such as the invasion of Ukraine by Russia, negatively impact European markets, leading to sanctions, supply chain disruptions, and increased cyber-attack risks[27](index=27&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - International operations expose the company to currency exchange rate fluctuations (devaluation of local currencies against USD, NIS-denominated expenses) and foreign currency exchange controls, despite hedging efforts[27](index=27&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Additional tax liabilities could arise from changes in tax rates, legislation, international guidelines (BEPS), or audit results, materially affecting financial condition[27](index=27&type=chunk)[133](index=133&type=chunk) - Majority of sales in emerging markets (Latin America, India, Asia Pacific, Africa) expose the company to political, economic, and regulatory risks, including unexpected tax changes and collection delays[27](index=27&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - Industry downturns, increased regulation, or new mobile service requirements can cause telecom operators to slow or stop network investments, harming business[27](index=27&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - Company incurred net losses in **2019, 2020, and 2021**, and negative operating cash flows in **2019 and 2021**, with no assurance of future profitability[27](index=27&type=chunk)[145](index=145&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - Consolidation within the customer base (telecommunications industry mergers) can reduce or eliminate sales to existing customers and decrease opportunities for new customers[27](index=27&type=chunk)[146](index=146&type=chunk) - Failure to maintain effective internal control over financial reporting could lead to material misstatements, reporting failures, fines, and loss of investor confidence[27](index=27&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - Inaccurate forecasts or business changes may lead to inventory-related losses (excess, obsolescence) or increased expenses for accelerated production, impacting gross profit[27](index=27&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Lengthy sales cycles for competitive bids or prospective customers (**3-12 months**) require substantial resources and increase uncertainty in forecasting results[27](index=27&type=chunk)[158](index=158&type=chunk) - Failure to obtain regulatory approval for products or insufficient allocation of radio frequency spectrum could restrict marketability and increase competition[27](index=27&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Products used in critical communications networks expose the company to significant liability claims if products malfunction, potentially leading to litigation and reputational damage[27](index=27&type=chunk)[164](index=164&type=chunk) - Failure to comply with credit agreement covenants or a bank's failure to provide committed credit facilities could materially adversely affect financial condition and liquidity[27](index=27&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - Inability to protect intellectual property rights (patents, trade secrets) could harm competitive position, and defending against infringement claims is expensive and disruptive[27](index=27&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Unintentional breaches of Open Source licenses could compel publication of proprietary code, incur damages, and result in intellectual property infringement claims[27](index=27&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - Merger and acquisition activities expose the company to risks like failure to discover relevant information, integration problems, increased expenses, and potential dilution of shareholders[28](index=28&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - Global operations expose the company to effects of global economic trends such as rising inflation, interest rates, and economic slowdowns, leading to unpredictable results[29](index=29&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Risk of being 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. holders[29](index=29&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Price and trading volume of ordinary shares are subject to volatility due to various factors (technological innovations, competition, financial results, macroeconomic developments), potentially limiting investor profit[29](index=29&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[197](index=197&type=chunk) - Future financings involving the sale of ordinary shares or convertible securities may cause immediate dilution for existing shareholders and a decline in share price[31](index=31&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Operations in Israel are adversely affected by political, economic, and military conditions in the Middle East, including armed conflicts, boycotts, and mandatory military service for employees[31](index=31&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - Grants from the **Israel Innovation Authority (IIA)** require royalty payments and restrict the transfer of Financed Know-How or manufacturing activities outside of Israel, potentially limiting business flexibility[32](index=32&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[214](index=214&type=chunk) - Tax benefits from approved enterprise programs require satisfying specified conditions; failure to meet them or future reduction/elimination of benefits would increase tax liabilities[33](index=33&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - As a foreign private issuer, the company is exempt from certain SEC requirements and Nasdaq Rules, which may result in less protection for U.S. investors compared to domestic issuers[33](index=33&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Loss of foreign private issuer status would increase compliance costs and negatively impact operations due to stricter U.S. reporting and governance requirements[34](index=34&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - Difficulty in enforcing U.S. judgments against the company or its officers/directors in Israel, or asserting U.S. securities laws claims in Israeli courts, due to differences in legal systems[34](index=34&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - Shareholder rights and responsibilities are governed by Israeli law, which differs from U.S. company laws, potentially imposing additional obligations on shareholders[34](index=34&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Provisions of Israeli law (corporate law, Economic Competition Law, R&D Law) may delay, prevent, or make undesirable an acquisition of the company or its assets, even if beneficial to shareholders[35](index=35&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=35&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides an overview of Ceragon Networks Ltd., detailing its history, business operations, and strategic initiatives [A. History and Development of the Company](index=35&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Ceragon Networks Ltd. was incorporated in Israel in **1996**, with its registered office in Rosh Ha'Ayin and a U.S. subsidiary for service of process - Ceragon Networks Ltd. was incorporated in Israel on **July 23, 1996**, as Giganet Ltd., changing its name on **September 6, 2000**[234](index=234&type=chunk) - The company's registered office is in Rosh Ha'Ayin, Israel, and its U.S. subsidiary, Ceragon Networks, Inc., serves as its agent for service of process in the United States[234](index=234&type=chunk)[235](index=235&type=chunk) [B. Business Overview](index=35&type=section&id=B.%20Business%20Overview) Ceragon is a leading wireless transport specialist, providing high-capacity connectivity solutions for 4G and 5G networks, leveraging multicore™ technology and offering turn-key services - Ceragon is a leading wireless transport specialist, providing high-capacity wireless connectivity solutions to global markets, mainly wireless (mobile) network service providers[236](index=236&type=chunk) - Wireless transport connects mobile network sites to the rest of the network, used when high-speed wireline connectivity (like fiber optics) is unavailable or rapid deployment is needed, accounting for about **45% of global telecom site connections**[237](index=237&type=chunk) - The company's technology, including **multicore™** and disaggregated wireless transport architecture, positions it as a leader in the global wireless transport market, especially for **5G evolution**[238](index=238&type=chunk)[240](index=240&type=chunk) - Ceragon's solutions support various wireless access technologies (**5G-NR, 4G, 3G**, etc.) and network architectures, enabling cost-effective and seamless network evolution[245](index=245&type=chunk) - The company serves over **460 service providers** and more than **1,500 private networks** in approximately **140 countries**[246](index=246&type=chunk) - Ceragon primarily serves the 'best-of-breed' market segment, where operators prioritize selecting the best wireless transport solution for business efficiency and service reliability[249](index=249&type=chunk)[250](index=250&type=chunk) - Key product offerings include Short-haul solutions (up to **2 Gbps backhaul, 20 Gbps fronthaul** for distances up to **10 miles**) and Long-haul solutions (up to **20 Gbps** for **10 to 50 miles**, or even **100 miles**)[250](index=250&type=chunk)[251](index=251&type=chunk) - The company's **multicore™ technology**, integrated into in-house developed chipsets, enables advanced capabilities like **Line-of-Sight Multiple Input Multiple Output (LoS MIMO)** and **Advanced Frequency Reuse (AFR)**[252](index=252&type=chunk) - Ceragon is investing in a new **8-core (Octa-core) chipset**, expected in **2022**, to offer industry-leading performance and capacity for **5G**, and plans to expand product coverage to **W-band (up to 110 GHz)** and **D-band (up to 170 GHz)**[254](index=254&type=chunk)[317](index=317&type=chunk) - Industry trends driving demand include the surge in network traffic (accelerated by **COVID-19**), **5G adoption** requiring higher capacity and lower latency, **Open RAN**, **SDN**, distributed cells, and network sharing models[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[263](index=263&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) - Wireless transport offers a scalable, flexible, and cost-effective alternative to fiber optics, especially for rapid deployment and bridging the digital divide in emerging markets[264](index=264&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - Ceragon offers both licensed (**4-86GHz**) and license-exempt (**V-band 57-66GHz, sub 6GHz**) wireless transport solutions, catering to different capacity, range, and regulatory needs[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - The company's solutions aim to increase operational efficiency (e.g., spectrum utilization, energy reduction), enhance service portfolio (**5G use cases**), and ensure high service availability through advanced technology[288](index=288&type=chunk)[289](index=289&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - Product portfolio includes All-outdoor, Split-mount, All-indoor, and Disaggregated transport configurations, with **IP-20** and **IP-50** platforms supporting various frequencies and networking technologies[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) - **SDN solutions** include an **SDN Controller (SDN Master)**, SDN support in **IP-20** and **IP-50** products, and SDN applications for network optimization, with plans to expand to stand-alone software solutions and **SaaS**[313](index=313&type=chunk)[314](index=314&type=chunk)[316](index=316&type=chunk) - Services include turn-key solutions for network design, implementation, operation, monitoring, and maintenance, leveraging project management tools and experienced teams[320](index=320&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk) - Sales channels include direct sales (**77% in 2021**), OEMs (**5%**), and system integrators/distributors/resellers (**18%**), with a global sales and marketing staff of **648 employees**[328](index=328&type=chunk)[329](index=329&type=chunk) - Manufacturing is outsourced to contract manufacturers in Israel and Singapore, with exploration of additional lines in the Philippines and India, adhering to **ISO standards** and **EU Directives (RoHS)**[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk) - Research and Development (R&D) is a key focus, with **229 employees** globally (mainly in Israel, Greece, Romania), designing proprietary solutions from chip-level to system integration[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) - Intellectual property is protected through patents (**19 granted, 2 pending**), copyrights, trademarks (Ceragon Networks, CERAGON, FibeAir, CeraView), and contractual agreements[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - Competition is intense and fragmented, with primary competitors being large generalists (Huawei, Ericsson, NEC, Nokia, ZTE) and smaller specialists; Ceragon competes on technology diversification and product performance[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk) - The company receives grants from the **Israel Innovation Authority (IIA)** for R&D, which may require royalty payments and restrict technology transfer or manufacturing outside Israel[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk) [C. Organizational Structure](index=52&type=section&id=C.%20Organizational%20Structure) Ceragon Networks Ltd. is an Israeli company with wholly-owned subsidiaries in the U.S. and India - Ceragon Networks Ltd. is an Israeli company established in **1996**[368](index=368&type=chunk) 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=52&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) Ceragon's headquarters are in Rosh Ha'Ayin, Israel, with additional leased office and warehouse spaces in the U.S., India, and Romania - Corporate headquarters and principal administrative, finance, and operations departments are located in Nitsba Park, Rosh Ha'Ayin, Israel, with **66,600 sq ft of office space** and **5,800 sq ft of warehouse space**[369](index=369&type=chunk) - Additional leased spaces include **8,200 sq ft** in Richardson, Texas (expiring **March 2024**), **9,800 sq ft** in New Delhi, India (expiring **December 2024**), and **20,000 sq ft** in Bucharest, Romania (expiring **November 2023**)[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) [ITEM 4A. UNRESOLVED STAFF COMMENTS](index=52&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) No unresolved staff comments are applicable to this report - No unresolved staff comments are applicable[374](index=374&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=52&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes Ceragon's operating results, financial condition, and future prospects, covering industry trends, liquidity, and capital resources [A. Operating Results](index=53&type=section&id=A.%20Operating%20Results) Ceragon's **2021** revenues increased by **10.6%** to **$290.8 million**, with gross profit at **30.4%**, but a net loss of **$14.8 million** due to expenses and taxes - Ceragon is the number one wireless transport specialist in terms of unit shipments and global distribution, providing solutions for mobile broadband, fixed broadband, and IoT services[378](index=378&type=chunk) - Industry trends include a surge in network traffic due to **COVID-19**, **5G adoption** requiring higher capacity and lower latency, **Open RAN**, **SDN**, distributed cells, network sharing, and modernization of existing cell sites[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk) - The company faces pricing pressures from increased competition, regional dynamics (e.g., India sales at lower gross margins), and demand for volume discounts on larger equipment orders[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk) - **COVID-19 pandemic** continues to cause macro-economic uncertainty, disrupting business activities, increasing lead times and shipping costs, and impacting revenue recognition due to travel limitations and project delays[401](index=401&type=chunk) Consolidated Statement of Operations Data (as % of total revenues) | | Year Ended 2020 | December 31, 2021 | |:---|:---|:---| | Revenues | 100% | 100% | | Cost of revenues | 71.2 | 69.6 | | Gross profit | 28.8 | 30.4 | | Operating expenses: | | | | Research and development, net | 11.8 | 10.1 | | Sales and marketing | 12.6 | 11.5 | | General and administrative | 7.3 | 7.1 | | Total operating expenses | 31.7 | 28.7 | | Operating income (loss) | (2.9) | 1.7 | | Financial expenses and others, net | 2.2 | 3.0 | | Taxes on income | 1.0 | 3.8 | | Equity loss in affiliates | 0.4 | - | | Net loss | (6.5) | (5.1) | Revenue and Cost of Revenue Comparison (2020 vs. 2021) | Metric | 2020 (USD Million) | 2021 (USD Million) | Change (USD Million) | Change (%) | |:---|:---|:---|:---|:---|\ | Revenues | 262.9 | 290.8 | 27.9 | 10.6% | | Cost of Revenues | 187.2 | 202.4 | 15.2 | 8.1% | | Gross Profit % | 28.8% | 30.4% | 1.6 pp | - | Revenue by Region (2020 vs. 2021) | Region | 2020 (USD Million) | 2021 (USD Million) | Change (USD Million) | |:---|:---|:---|:---|\ | Latin America | 46.7 | 54.6 | 7.9 | | APAC | 47.7 | 32.0 | (15.7) | | North America | 38.2 | 47.5 | 9.3 | | Africa | 23.5 | 23.2 | (0.3) | | Europe | 44.8 | 47.4 | 2.6 | | India | 62.0 | 86.1 | 24.1 | Operating Expenses Comparison (2020 vs. 2021) | Expense Category | 2020 (USD Million) | 2021 (USD Million) | Change (USD Million) | Change (%) | |:---|:---|:---|:---|:---|\ | Research and Development, Net | 31.0 | 29.5 | (1.5) | (4.8%) | | Sales and Marketing | 33.0 | 33.5 | 0.5 | 1.5% | | General and Administrative | 19.2 | 20.6 | 1.4 | 7.3% | | Financial expenses and others, Net | 5.9 | 8.6 | 2.7 | 45.8% | | Taxes on income | 2.6 | 11.0 | 8.4 | 323.1% | | Net Loss | (17.1) | (14.8) | 2.3 | (13.5%) | - Net loss decreased from **$17.1 million in 2020** to **$14.8 million in 2021**, primarily due to higher revenues and gross profit, partially offset by increased financial expenses and taxes[434](index=434&type=chunk) - Currency fluctuations significantly impact results, as a substantial portion of revenues and costs are in non-U.S. dollar currencies (NIS, INR, EUR, BRL, ARS, NOK); the company uses hedging instruments to mitigate this risk[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk) [B. Liquidity and Capital Resources](index=60&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Ceragon's liquidity is financed by public offerings, IIA grants, and a revolving credit facility, with **$17.1 million** cash and **$15.0 million** cash used in operations in **2021** - Financing operations primarily through initial public offering, follow-on offerings, and grants from the **Israel Innovation Authority (IIA)**[441](index=441&type=chunk) - A revolving Credit Facility of **$50 million** for loans and **$70 million** for bank guarantees was amended in **June 2021**, extending its term to **June 30, 2022**, and increasing the allowed factoring facility to **$100 million**[441](index=441&type=chunk)[442](index=442&type=chunk) - As of **December 31, 2021**, **$11.8 million** of the **$50 million** credit line for short-term loans was utilized, and **$3 million** from an additional **$5 million** credit facility was used[443](index=443&type=chunk) - The Credit Facility is secured by a floating charge over all assets and contains financial covenants, all of which were met as of **December 31, 2020 and 2021**[444](index=444&type=chunk)[445](index=445&type=chunk) - Cash and cash equivalents decreased to **$17.1 million** as of **December 31, 2021**, from **$27.1 million in 2020**[447](index=447&type=chunk) Cash Flow from Operating Activities (2020 vs. 2021) | Factor | 2020 (USD Million) | 2021 (USD Million) | |:---|:---|:---|\ | Net cash provided by (used in) operating activities | 17.2 | (15.0) | | Net loss | (17.1) | (14.8) | | Increase in trade and other accounts receivable and prepaid expenses | - | (18.1) | | Increase in inventories | - | (11.9) | | Depreciation and amortization | 12.9 | 12.2 | | Increase in trade payables, other accounts payable and accrued expenses | 3.9 | 4.3 | | Increase in deferred revenues paid in advance | 3.0 | 1.7 | | Increase in deferred tax assets, net | (0.2) | 8.3 | Cash Flow from Investing and Financing Activities (2020 vs. 2021) | Activity | 2020 (USD Million) | 2021 (USD Million) | |:---|:---|:---|\ | Net cash used in investing activities | (6.5) | (9.4) | | Net cash provided by (used in) financing activities | (7.4) | 14.5 | | Purchase of property and equipment | (6.1) | (9.4) | | Proceeds from bank loan | - | 9.8 | | Proceeds from share options exercise | 1.2 | 4.7 | - Material cash requirements include capital expenditures (**$9.4 million in 2021**), lease obligations (**$5.0 million in 2021**), and purchase obligations (**$63.9 million** outstanding as of **December 31, 2021**)[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk) - Management believes current working capital, cash, and credit facilities will be sufficient for expected requirements for at least the next **12 months**[460](index=460&type=chunk) [C. Research and Development](index=63&type=section&id=C.%20Research%20and%20Development) Ceragon emphasizes R&D to enhance products and reduce costs, with **229** employees globally focusing on chip-level design and system integration - Considerable emphasis on R&D to improve and expand existing products, develop new ones (especially for emerging IP-based networks), and lower production costs[461](index=461&type=chunk) - R&D activities are mainly conducted in Rosh Ha'Ayin, Israel, and at subsidiaries in Greece and Romania[462](index=462&type=chunk) - As of **December 31, 2021**, the R&D staff consisted of **229 employees** globally, with expertise in millimeter-wave design, modem and signal processing, data communications, and networking solutions[462](index=462&type=chunk) - R&D department designs and develops proprietary solutions from chip-level (ASICs, RFICs) to full system integration, focusing on extensions to IP-based networking product lines and new technologies[463](index=463&type=chunk) [D. Trend Information](index=64&type=section&id=D.%20Trend%20Information) Trend information is discussed in Parts A and B of Item 5, covering industry trends and global event impacts on performance - Trend information relevant to the company is discussed in Parts A and B of Item 5, covering operating results and liquidity/capital resources[468](index=468&type=chunk) [E. Critical Accounting Estimates](index=64&type=section&id=E.%20Critical%20Accounting%20Estimates) Critical accounting estimates are detailed in the 'Critical Accounting Policies and Estimates' section of Item 5 - Critical accounting estimates are detailed in the 'Critical Accounting Policies and Estimates' section of Item 5[469](index=469&type=chunk) [Effect of Recent Accounting Pronouncements](index=64&type=section&id=Effect%20of%20Recent%20Accounting%20Pronouncements) Recent accounting pronouncements and their estimated effects are described in Note 2 of the Consolidated Financial Statements - Recent accounting pronouncements, including **ASU 2021-10** on government assistance, are described in Note 2 of the Consolidated Financial Statements[470](index=470&type=chunk)[918](index=918&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=64&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details Ceragon's leadership, compensation, corporate governance, and employee information, including stock ownership [A. Directors and Senior Management](index=64&type=section&id=A.%20Directors%20and%20Senior%20Management) This section lists Ceragon's directors and executive officers, including key appointments and biographical summaries highlighting their experience Directors and Executive Officers | Name | Age | Position | |:---|:---|:---|\ | Zohar Zisapel | 73 | Chairman of the Board of Directors | | Shlomo Liran (1) | 71 | Director | | Yael Langer | 57 | Director | | (1) Rami Hadar | 58 | Director | | Ilan Rosen (1) | 65 | Director | | David (Dudi) Ripstein (1) | 55 | Director | | Ira Palti | 64 | Director | | (2) Doron Arazi | 58 | Chief Executive Officer | | Ran Vered | 44 | Chief Financial Officer | | Oz Zimerman | 58 | Executive Vice President, Marketing & Corporate Development | | Guy Toibin | 49 | Executive Vice President Chief Information Officer (CIO), IT | | Muki Bourla | 47 | Executive Vice President Global Delivery | | Zvi Maayan | 54 | Executive Vice President, General Counsel & Corporate Secretary | | Michal Goldstein | 50 | Executive Vice President, Global Human Resources | | Ram Prakash Tripathi | 54 | Regional President, India | | Adrian Hipkiss | 55 | Regional President, Europe and Oil & Gas | | Mario Querner | 59 | Regional President, Asia-Pacific and Africa | | (3) Ulik Broida | 54 | Executive Vice President Products | | Ronen Rotstein (4) | 45 | Regional President, North America | - Doron Arazi commenced service as CEO on **July 17, 2021**; Ulik Broida commenced as Executive Vice President Solutions Management in **April 2021** and Executive Vice President Products in **February 2022**; Ronen Rotstein commenced as Regional President, North America, in **February 2022**[471](index=471&type=chunk) - Biographical summaries highlight extensive experience in telecommunications, finance, and technology sectors for directors and executive officers[473](index=473&type=chunk)[474](index=474&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk)[477](index=477&type=chunk)[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk)[481](index=481&type=chunk)[482](index=482&type=chunk)[483](index=483&type=chunk)[485](index=485&type=chunk)[486](index=486&type=chunk)[487](index=487&type=chunk)[488](index=488&type=chunk)[489](index=489&type=chunk)[491](index=491&type=chunk)[492](index=492&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk)[495](index=495&type=chunk) [B. Compensation](index=68&type=section&id=B.%20Compensation) Aggregate compensation for directors and senior management in **2021** was **$3.9 million** in salary and bonuses, plus **$0.7 million** for benefits - Aggregate compensation for all directors and senior management in **2021** was approximately **$3.9 million** in salary, fees, bonuses, and commissions, plus **$0.7 million** for pension/retirement benefits[497](index=497&type=chunk) - Executive officers are part of a performance-based bonus plan, reviewed and approved annually by the Compensation Committee and Board of Directors, based on financial and individual performance objectives[499](index=499&type=chunk) - Non-executive directors receive cash compensation (annual and participation fees) in accordance with Israeli Remuneration Regulations and annual equity grants (options to purchase ordinary shares) for their three-year terms[500](index=500&type=chunk)[501](index=501&type=chunk) - In **2021**, directors and senior management were granted options to purchase **1,190,335 ordinary shares**, with exercise prices ranging from **$3.12 to $3.70 per share**[508](index=508&type=chunk) - As of **December 31, 2021**, directors and senior management held **2,987,500 outstanding options** and **18,568 RSUs**[508](index=508&type=chunk) Individual Compensation of Five Most Highly Compensated Office Holders (2021) | Office Holder | Salary Costs (USD) | Performance Bonus Costs (USD) | Equity Costs (USD) | |:---|:---|:---|:---|\ | Ira Palti (CEO until July 17, 2021) | 376,506 | 0 | 256,977 | | Doron Arazi (CEO commencing July 17, 2021) | 212,231 | 0 | 197,429 | | Adrian Hipkiss (Regional President, Europe and Oil & Gas) | 322,885 | 158,941 | 76,541 | | Erez Schwartz (Executive Vice President of Products until Feb 2022) | 306,589 | 0 | 64,511 | | Mario Querner (Regional President, Asia-Pacific and Africa) | 254,563 | 42,676 | 93,874 | - The Compensation Policy, last revised and adopted by shareholders in **July 2020**, aims to provide proper incentives, manage risks, and align compensation with corporate objectives and long-term performance[515](index=515&type=chunk)[516](index=516&type=chunk)[517](index=517&type=chunk)[519](index=519&type=chunk) [C. Board Practices](index=72&type=section&id=C.%20Board%20Practices) Ceragon's corporate governance adheres to Israeli law and Nasdaq Rules, with a **seven-member** Board and established committees, and four independent directors - Ceragon is subject to Israeli Companies Law and Nasdaq Rules, utilizing foreign private issuer exemptions for certain corporate governance practices[520](index=520&type=chunk) - The Board of Directors consists of **seven members** and retains all powers not specifically granted to shareholders, operating through various committees[521](index=521&type=chunk)[523](index=523&type=chunk) - Directors are generally elected for three-year terms; four current directors (Shlomo Liran, Ilan Rosen, Rami Hadar, David Ripstein) qualify as independent under Nasdaq Rules[525](index=525&type=chunk)[531](index=531&type=chunk) - The company opted out of Israeli external director requirements in **August 2019**, complying instead with U.S. securities laws and Nasdaq Rules for independent directors and committee composition[532](index=532&type=chunk)[535](index=535&type=chunk) - Mr. Shlomo Liran is the audit committee financial expert, and Messrs. Zohar Zisapel, Ilan Rosen, Rami Hadar, and David Ripstein satisfy 'accounting and financial expertise' qualifications under Israeli law[537](index=537&type=chunk) - Directors' remuneration requires approval from the Compensation Committee, Board, and generally shareholders, consistent with the company's compensation policy[538](index=538&type=chunk)[539](index=539&type=chunk)[540](index=540&type=chunk)[541](index=541&type=chunk) - The Financial Audit Committee (Shlomo Liran, Ilan Rosen, David Ripstein) oversees independent auditor appointment, compensation, and financial reporting processes, meeting SEC and Nasdaq standards[543](index=543&type=chunk)[544](index=544&type=chunk) - The Corporate Audit Committee (David Ripstein, Shlomo Liran, Ilan Rosen) identifies business irregularities, reviews related party transactions, and recommends internal auditor appointments[545](index=545&type=chunk)[547](index=547&type=chunk) - The Compensation Committee (Ilan Rosen, Shlomo Liran, Rami Hadar) recommends compensation policy, reviews its implementation, and approves office holder employment terms, also administering the share option plan[549](index=549&type=chunk)[550](index=550&type=chunk)[551](index=551&type=chunk)[553](index=553&type=chunk) - The Nomination Committee (Shlomo Liran, Ilan Rosen, Rami Hadar, David Ripstein) recommends director nominees for Board approval[554](index=554&type=chunk) - Terms of employment for office holders (including CEO and directors) require multi-level approvals (Compensation Committee, Board, and sometimes shareholders), with specific rules for related party transactions[556](index=556&type=chunk)[557](index=557&type=chunk)[558](index=558&type=chunk)[559](index=559&type=chunk)[560](index=560&type=chunk)[561](index=561&type=chunk)[562](index=562&type=chunk)[564](index=564&type=chunk)[565](index=565&type=chunk)[566](index=566&type=chunk)[567](index=567&type=chunk)[568](index=568&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk)[571](index=571&type=chunk) - Office holders have fiduciary duties (care and loyalty) under Israeli law, requiring good faith, avoiding conflicts of interest, and disclosure of personal interests in transactions[573](index=573&type=chunk)[574](index=574&type=chunk)[576](index=576&type=chunk)[577](index=577&type=chunk)[578](index=578&type=chunk) - Shareholders have duties to act in good faith and refrain from abusing power, especially controlling shareholders who must act with fairness towards the company[579](index=579&type=chunk)[580](index=580&type=chunk) - The company's Articles of Association allow for indemnification and insurance of office holders for certain liabilities, subject to Companies Law limitations and approvals[582](index=582&type=chunk)[583](index=583&type=chunk)[584](index=584&type=chunk)[585](index=585&type=chunk)[587](index=587&type=chunk)[588](index=588&type=chunk)[589](index=589&type=chunk)[590](index=590&type=chunk)[591](index=591&type=chunk)[592](index=592&type=chunk)[593](index=593&type=chunk)[594](index=594&type=chunk)[595](index=595&type=chunk)[596](index=596&type=chunk)[598](index=598&type=chunk)[599](index=599&type=chunk) - An internal auditor (Chaikin, Cohen, Rubin & Co.) is appointed by the board, proposed by the corporate audit committee, to examine compliance with law and orderly business procedures[600](index=600&type=chunk)[601](index=601&type=chunk) [D. Employees](index=82&type=section&id=D.%20Employees) As of **December 31, 2021**, Ceragon had **1,006 employees** globally, with **339** service contractors, maintaining good employee relations - As of **December 31, 2021**, Ceragon had **1,006 employees** worldwide[602](index=602&type=chunk) Employee Distribution by Function (2021) | Function | Number of Employees | |:---|:---|\ | Research, Development and Engineering | 229 | | Sales and Marketing (including services and supporting functions) | 648 | | Management and Administration | 29 | | Operations | 100 | Employee Distribution by Geography (2021) | Region | Number of Employees | |:---|:---|\ | Israel | 291 | | United States | 37 | | EMEA (excluding Israel) | 258 | | Latin America | 193 | | Asia Pacific (including India) | 227 | - Additionally, **339 Services Contractors** were employed, mainly supporting regional projects[603](index=603&type=chunk) - Israeli employees are subject to Israeli labor laws, including severance pay and pension insurance, with contributions made to pension funds and insurance policies[604](index=604&type=chunk)[605](index=605&type=chunk) - Employment agreements include non-competition, intellectual property assignment, and confidentiality undertakings, though non-competition enforceability is limited in some jurisdictions[607](index=607&type=chunk) - The company has not experienced labor-related work stoppages and maintains good relations with employees[608](index=608&type=chunk) [Share Ownership](index=83&type=section&id=Share%20Ownership) As of **March 27, 2022**, Zohar Zisapel beneficially owned **8.44%** of shares, with all directors and senior management owning **9.72%** Share Ownership of Directors and Senior Management (as of March 27, 2022) | Name | Number of Ordinary Shares (1) | Percentage of Outstanding Ordinary Shares | Number of Stock Options Held (2) | Exercise price of Options | Number of RSUs Held (2) | |:---|:---|:---|:---|:---|:---|\ | Zohar Zisapel | 7,117,174 | 8.44% | 300,000 | $ 2.02 – 3.70 | - | | Ira Palti | 612,500 | 0.72% | 720,000 | $ 2.41 – 9.01 | - | | All directors and senior management as a group (20 people) | 8,302,190 | 9.72% | 2,886,563 | $ 2.02 – 9.01 | 10,469 | - The percentage of outstanding ordinary shares is based on **84,001,666 ordinary shares** outstanding as of **March 27, 2022**, including vested options or those vesting within **60 days**[609](index=609&type=chunk)[610](index=610&type=chunk) - Zohar Zisapel's holdings include shares held directly, through controlled Israeli companies (Lomsha Ltd., Michael and Klil Holdings (93) Ltd.), and through RAD Data Communications Ltd[612](index=612&type=chunk) [Stock Option Plan](index=84&type=section&id=Stock%20Option%20Plan) Ceragon's Share Option and RSU Plan, extended through **2022**, had **5,186,446** options and **699,679** RSUs outstanding as of **December 31, 2021** - The Amended and Restated Share Option and RSU Plan, adopted in **2003** and extended through **December 31, 2022**, allows grants to officers, directors, employees, and consultants[615](index=615&type=chunk)[617](index=617&type=chunk) - Options generally vest over **four years** and expire between **six to ten years** from the grant date[615](index=615&type=chunk) Stock Option and RSU Activity (Year Ended December 31, 2021) | Metric | Number of options | Weighted average exercise price (USD) | Weighted average remaining contractual term (years) | Aggregate intrinsic value (USD) | |:---|:---|:---|:---|:---|\ | Outstanding at beginning of year | 6,238,729 | 3.52 | 3.17 | 2,654 | | Granted | 1,902,868 | 3.72 | - | - | | Exercised | (2,098,957) | 2.25 | - | - | | Forfeited or expired | (856,194) | 7.75 | - | - | | Outstanding at end of the year | 5,186,446 | 3.40 | 4.01 | 534 | | Options exercisable at end of the year | 2,342,399 | 3.57 | 2.75 | 370 | | Vested and expected to vest | 4,664,666 | 3.41 | 3.87 | 508 | RSU Activity (Year Ended December 31, 2021) | Metric | Number of RSUs | Aggregate intrinsic value (USD) | |:---|:---|:---|\ | Unvested at beginning of year | 309,986 | 862 | | Granted | 588,466 | - | | Vested | (129,380) | - | | Forfeited | (69,393) | - | | Unvested at end of the year | 699,679 | 1,805 | | Vested and expected to vest | 493,881 | 1,274 | - Total unrecognized estimated compensation cost related to non-vested stock options and RSUs was **$4,563,000** as of **December 31, 2021**, expected to be recognized over approximately **one year**[1005](index=1005&type=chunk) Equity-Based Compensation Expense by Category (2019-2021) | Category | 2019 (USD) | 2020 (USD) | 2021 (USD) | |:---|:---|:---|:---|\ | Cost of revenues | 71 | 110 | 289 | | Research and development, net | 366 | 243 | 236 | | Sales and marketing | 708 | 545 | 700 | | General and administrative | 908 | 764 | 1,337 | | Total share-based compensation expenses | 2,053 | 1,662 | 2,562 | [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=85&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section identifies major shareholders, including Zohar Zisapel (**8.47%**), and details **$2.7 million** in **2021** related-party transactions with the RAD-BYNET Group [Major Shareholders](index=85&type=section&id=Major%20Shareholders) As of **March 27, 2022**, Zohar Zisapel beneficially owned **8.47%** of shares, with **97%** of shares held in the United States Major Shareholder Ownership (as of March 27, 2022) | Name | Number of Ordinary Shares (2) | Percentage of Outstanding Ordinary (1) Shares | |:---|:---|:---|\ | Zohar Zisapel | 7,117,174 | 8.47% | - Zohar Zisapel's beneficial ownership includes shares held directly, through controlled entities (Lomsha Ltd., Michael and Klil Holdings (93) Ltd.), and through RAD Data Communications Ltd[627](index=627&type=chunk) - Approximately **97% of ordinary shares** were registered for trade and held in the United States as of **March 27, 2022**, with **28 record holders** in the U.S[629](index=629&type=chunk) [Related Party Transactions](index=85&type=section&id=Related%20Party%20Transactions) Ceragon engaged in **$2.7 million** in **2021** arm's length transactions with the RAD-BYNET Group, involving shared expenses and purchases - Zohar Zisapel, Chairman and principal shareholder, beneficially owns **8.47% of ordinary shares** and is involved with the 'RAD-BYNET Group'[630](index=630&type=chunk)[631](index=631&type=chunk) - Ceragon shares expenses with RAD-BYNET Group companies for information systems, administrative services, medical insurance, and logistics, and purchases equipment, software, and licenses from them[632](index=632&type=chunk) - Aggregate purchases and shared expenses with RAD-BYNET Group in **2021** were approximately **$2.7 million**[632](index=632&type=chunk) - All related-party transactions are arm's length and approved in accordance with the Company's Related Party Policy and applicable law[635](index=635&type=chunk) Transactions with Related Parties (2019-2021) | Category | 2019 (USD) | 2020 (USD) | 2021 (USD) | |:---|:---|:---|:---|\ | Revenues | 6,745 | 5,843 | 394 | | Cost of revenues | 1,659 | 4,715 | 1,125 | | Research and development expenses | 1,248 | 1,245 | 608 | | Sales and marketing expenses | 763 | 731 | 617 | | General and administrative expenses | 1,002 | 913 | 1,527 | | Purchase of property and equipment | 46 | 274 | 175 | Balances with Related Parties (as of December 31, 2020 & 2021) | Category | 2020 (USD) | 2021 (USD) | |:---|:---|:---|\ | Trade payables, other accounts payable and accrued expenses | 925 | 376 | | Trade Receivables | 13,117 | 78 | [Registration Rights](index=87&type=section&id=Registration%20Rights) Certain shareholders, including Yehuda and Zohar Zisapel, were granted registration rights for their ordinary shares prior to the **2000** IPO - Registration rights were granted to holders of ordinary shares converted from preferred shares and to Yehuda and Zohar Zisapel, allowing their shares to be included in certain registration statements[640](index=640&type=chunk)[641](index=641&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=87&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section provides an overview of Ceragon's financial information, including statements, export sales, legal proceedings, and dividend policy [Consolidated Statements and Other Financial Information](index=87&type=section&id=Consolidated%20Statements%20and%20Other%20Financial%20Information) Annual financial statements are located at the end of this report, beginning on Page F-1 - Annual financial statements are found at the end of this annual report, beginning on Page F-1[642](index=642&type=chunk) [Export Sales](index=87&type=section&id=Export%20Sales) In **2021**, export sales to end users outside Israel totaled **$289.2 million**, representing **99.4%** of total revenues - In **2021**, export sales to end users outside of Israel totaled **$289.2 million**, accounting for **99.4% of total revenues** (**$290.8 million**)[643](index=643&type=chunk) [Legal Proceedings](index=87&type=section&id=Legal%20Proceedings) Ceragon is involved in a **2015** class action lawsuit, with a **January 2022** ruling applying U.S. law, and the company believes it has a strong defense - A purported class action lawsuit was filed on **January 6, 2015**, in the District Court of Tel-Aviv, alleging breaches of duties by making false and misleading statements in SEC filings, seeking up to **$75 million in damages**[644](index=644&type=chunk) - After several legal proceedings, including a Supreme Court decision on dual-listed companies, a **January 2022** judgment ruled that U.S. law would apply to the class action, overturning a prior ruling that applied Israeli law[648](index=648&type=chunk)[650](index=650&type=chunk)[654](index=654&type=chunk)[655](index=655&type=chunk)[658](index=658&type=chunk)[659](index=659&type=chunk) - On **March 20, 2022**, the plaintiff filed an amended class action claim based on U.S. law, with Ceragon required to submit its Statement of Defense by **June 26, 2022**[661](index=661&type=chunk) - The company believes it has a strong defense, noting that U.S. law presents a higher bar for plaintiffs, but attorneys cannot assess the chances of acceptance at this preliminary stage[662](index=662&type=chunk) [Dividends](index=89&type=section&id=Dividends) Ceragon has never paid cash dividends and does not anticipate future payments, retaining earnings for operations and expansion - Ceragon has never declared or paid any dividends on its ordinary shares, except for a share dividend from a **250-for-1 recapitalization** before its initial public offering[664](index=664&type=chunk) - The company does not anticipate paying future dividends, intending to retain all future earnings for operations and business expansion[664](index=664&type=chunk) - The Credit Facility restricts dividend distribution without prior written consent from lenders, unless certain terms are met[664](index=664&type=chunk) [Significant Changes](index=89&type=section&id=Significant%20Changes) Significant changes, including **June 2021** and **January 2022** credit facility amendments, are detailed in Item 5 - Significant changes, specifically the **June 2021** and **January 2022** amendments to the credit facility, are described in Item 5, 'Operating and Financial Review and Prospects - Liquidity and Capital Resources'[665](index=665&type=chunk) [ITEM 9. THE OFFER AND LISTING](index=89&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) Ceragon's ordinary shares are listed on the Nasdaq Global Select Market under the symbol **'CRNT'** - Ceragon's ordinary shares are listed on the Nasdaq Global Select Market under the symbol **'CRNT'**[666](index=666&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=89&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides additional information on corporate governance, shareholder rights, Israeli and U.S. tax considerations, and public filings [Memorandum and Articles of Association – General](index=89&type=section&id=Memorandum%20and%20Articles%20of%20Association%20%E2%80%93%20General) Description of Ceragon's Memorandum and Articles of Association is incorporated by reference from previous SEC filings - Description of Memorandum and Articles of Association is incorporated by reference from previous registration statements and annual reports (Form 20-F) filed with the SEC[667](index=667&type=chunk)[668](index=668&type=chunk) [Articles of Association](index=89&type=section&id=Articles%20of%20Association) Ceragon's Articles of Association define its purpose, outline rules for shareholder meetings, voting rights, share transferability, and dividend distribution - Company's purpose is to engage in any lawful undertaking or business, as set forth in Article 1 of its Articles of Association[669](index=669&type=chunk) - Annual general meetings must be held once every calendar year, within **15 months** of the preceding one; special meetings can be convened by the Board or upon demand by certain shareholders/directors[671](index=671&type=chunk) - Quorum for shareholder meetings requires at least two shareholders holding **25% or more** of the voting power; adjourned meetings require any two shareholders[675](index=675&type=chunk) - Holders of fully paid ordinary shares have one vote per share on all matters, with resolutions generally adopted by a majority of voting power present and voting[676](index=676&type=chunk)[678](index=678&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[679](index=679&type=chunk) - Shares are transferable by proper instrument, subject to applicable securities laws[680](index=680&type=chunk) - Rights attached to any class of shares can be modified or abrogated by shareholder resolution, also requiring approval by a majority of that specific class[681](index=681&type=chunk) - Dividends can only be distributed from available profits, as determined by the Companies Law, and the Board of Directors decides on distribution amounts[682](index=682&type=chunk)[683](index=683&type=chunk) - In liquidation, assets are distributed to ordinary shareholders in proportion to the nominal value paid up on their shares[684](index=684&type=chunk) - Israeli corporate law regulates mergers and acquisitions, requiring specific shareholder approvals (e.g., **75%** for pre-Companies Law companies, majority for Ceragon) and tender offers when certain ownership thresholds are exceeded[686](index=686&type=chunk)[687](index=687&type=chunk)[688](index=688&type=chunk) [Material Contracts](index=92&type=section&id=Material%20Contracts) No material contracts are reported - No material contracts are reported[690](index=690&type=chunk) [Exchange Controls](index=93&type=section&id=Exchange%20Controls) No Israeli currency control restrictions currently exist on dividend payments or share sales, but administrative controls could be imposed - No Israeli currency control restrictions on dividend payments or share sale proceeds, except for reporting obligations for Israeli residents[692](index=692&type=chunk) - Legislation allows for administrative imposition of currency controls at any time[692](index=692&type=chunk) - Ownership or voting of ordinary shares by non-residents is unrestricted, except for citizens of countries at war with Israel[693](index=693&type=chunk) [Taxation](index=93&type=section&id=Taxation) This section summarizes Israeli and U.S. federal income tax implications for Ceragon and its shareholders, including corporate tax, capital gains, and PFIC status - Israeli corporate tax rate was **23% in 2021**, but effective rates can be lower for companies with 'approved enterprise' or 'preferred enterprise' status under the Investment Law[696](index=696&type=chunk)[697](index=697&type=chunk) - Ceragon has three 'Approved Enterprise' investment programs, which provided tax exemptions for the first two years of taxable income, but the **14-year benefit period** has passed as of **January 1, 2021**[698](index=698&type=chunk)[699](index=699&type=chunk)[700](index=700&type=chunk)[1010](index=1010&type=chunk)[1011](index=1011&type=chunk)[1014](index=1014&type=chunk)[1015](index=1015&type=chunk) - The **2017 Amendment** to the Investment Law offers reduced corporate tax rates (**12%**, or **7.5%** in Development Zone A) for 'Preferred Technology Enterprises' on qualifying income, but Ceragon has not applied this amendment[703](index=703&type=chunk)[704](index=704&type=chunk)[705](index=705&type=chunk)[706](index=706&type=chunk)[1016](index=1016&type=chunk) - Israeli tax law allows deductions for scientific R&D expenditures, net of government grants, and Ceragon believes it qualifies as an 'industrial company' under the Industry Encouragement Law[707](index=707&type=chunk)[708](index=708&type=chunk)[709](index=709&type=chunk)[710](index=710&type=chunk)[712](index=712&type=chunk)[713](index=713&type=chunk)[1017](index=1017&type=chunk)[1018](index=1018&type=chunk)[1019](index=1019&type=chunk)[1021](index=1021&type=chunk) - Israeli capital gains tax on publicly traded shares is generally **25%** for individuals (**30%** for 'significant shareholders') and **23%** for companies, with exemptions for non-Israeli residents under certain conditions or tax treaties (e.g., U.S.-Israel Tax Treaty)[714](index=714&type=chunk)[715](index=715&type=chunk)[716](index=716&type=chunk)[717](index=717&type=chunk)[718](index=718&type=chunk)[719](index=719&type=chunk)[721](index=721&type=chunk) - Dividends distributed to non-residents are subject to Israeli withholding tax (**25%**, or **30%** for significant shareholders; **20%** from Approved/Benefited/Preferred Enterprises), potentially reduced by tax treaties (e.g., **12.5% or 15%** for U.S. corporations under U.S.-Israel Tax Treaty)[722](index=722&type=chunk) - Israeli Transfer Pricing Regulations (TP Regs) require cross-border transactions between related parties to be conducted on an arm's length basis[723](index=723&type=chunk) - U.S. holders of ordinary shares are subject to U.S. federal income tax on dividends and dispositions, with dividends potentially qualifying for reduced rates if certain conditions are met (e.g., 'qualified dividend income')[731](index=731&type=chunk)[733](index=733&type=chunk)[734](index=734&type=chunk)[735](index=735&type=chunk)[736](index=736&type=chunk) - Gain or loss on disposition of ordinary shares is generally treated as U.S. source capital gain or loss, with long-term capital gains potentially subject to reduced rates for non-corporate U.S. holders[737](index=737&type=chunk)[739](index=739&type=chunk) - Certain non-corporate U.S. holders may be subject to an additional **3.8% Net Investment Income Tax**[740](index=740&type=chunk) - Classification as a **Passive Foreign Investment Company (PFIC)** would result in increased tax liability for U.S. holders upon sale or excess distributions, with complex rules and potential annual reporting requirements[741](index=741&type=chunk)[742](index=742&type=chunk)[744](index=744&type=chunk)[745](index=745&type=chunk)[746](index=746&type=chunk) - Non-U.S. holders are generally not subject to U.S. federal income or withholding tax on dividends or dispositions unless effectively connected with a U.S. trade or business or certain presence conditions are met[747](index=747&type=chunk) - U.S. holders are subject to information reporting and potential backup withholding on dividends and disposition proceeds, unless an exemption is provided[749](index=749&type=chunk)[750](index=750&type=chunk)[751](index=751&type=chunk) [Documents on Display](index=101&type=section&id=Documents%20on%20Display) Ceragon files reports with the SEC, available on its website and http://www.sec.gov - Ceragon files reports with the SEC, available on http://www.sec.gov, and also posts information on its website www.ceragon.com[752](index=752&type=chunk)[753](index=753&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=101&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Ceragon is exposed to foreign currency risk from non-U.S. dollar transactions, mitigated by hedging, with no material market risk requiring tabular disclosures - Ceragon does not use derivative financial instruments for trading purposes and has no material market risk exposure requiring quantitative tabular disclosures[754](index=754&type=chunk) - The company is exposed to foreign currency risk as a significant portion of revenues, cost of revenues, and operating expenses are denominated in non-U.S. dollar currencies (NIS, INR, EUR, BRL, ARS, NOK)[755](index=755&type=chunk) - To mitigate foreign currency risk, Ceragon hedges a portion of cash flow transactions and monetary balance sheet items using foreign exchange forward contracts[755](index=755&type=chunk) - A **10% strengthening of the U.S. dollar** would decrease net monetary assets by approximately **$2.4 million**, while a **10% weakening** would increase them by approximately **$3.0 million** (as of **December 31, 2021**)[755](index=755&type=chunk) - As of **December 31, 2021**, outstanding forward contracts amounted to **$76.1 million** for up to **twelve months**[757](index=757&type=chunk) [ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.](index=102&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES.) No information is applicable regarding securities other than equity securities - No information applicable regarding the description of securities other than equity securities[760](index=7

Exhibit A CERAGON NETWORKS REPORTS FIRST QUARTER 2022 FINANCIAL RESULTS Q1 2022 Financial Highlights: • Revenues of $70.3 million • Operating loss of $(1.3) million on a GAAP basis, or $(0.6) million on a non-GAAP basis • EPS of $(0.03) per diluted share on a GAAP basis, or $(0.02) per diluted share on a non-GAAP basis Q1 2022 Business Highlights: • Strong bookings in North America, India, Europe and LATAM • Book to bill for the trailing 12 months is above 1 • North America: o Current outlook suggests anoth ...

[Executive Management Change](index=1&type=section&id=Executive%20Management%20Change) Ceragon Networks announces the departure of its CFO, Ran Vered, in May 2022, with an interim succession plan in place [CFO Departure Details](index=1&type=section&id=CFO%20Departure%20Details) Ceragon Networks announced that its Chief Financial Officer, Ran Vered, will depart in May 2022 after three years to pursue other business interests outside the telecom industry - CFO Ran Vered to depart Ceragon Networks in May 2022 after three years[2](index=2&type=chunk) - Mr. Vered will continue to observe his duties as CFO until his departure, including releasing the Company's Q1 2022 financial results[2](index=2&type=chunk) [Succession and Interim Plan](index=1&type=section&id=Succession%20and%20Interim%20Plan) The company has initiated a search for a successor CFO, with CEO Doron Arazi prepared to assume the interim role if needed - Search for a successor CFO is underway[3](index=3&type=chunk) - CEO Doron Arazi will act as interim CFO if a successor is not nominated by May 2022[3](index=3&type=chunk) [Statements from CEO and Departing CFO](index=1&type=section&id=Statements%20from%20CEO%20and%20Departing%20CFO) CEO Doron Arazi praised Ran Vered's leadership in strengthening Ceragon's financial foundations, while Vered expressed confidence in the company's future - CEO Doron Arazi praised Ran Vered's leadership in strengthening Ceragon's financial foundations[4](index=4&type=chunk) - Ran Vered expressed confidence in Ceragon's executive team, strategy, and prospects, particularly in expanding 5G technologies and managed services[4](index=4&type=chunk) [Company Profile](index=1&type=section&id=Company%20Profile) Ceragon Networks is a global innovator and leading provider of 5G wireless transport solutions, leveraging unique multicore technology for high-capacity networks [Business and Solutions](index=1&type=section&id=Business%20and%20Solutions) Ceragon Networks Ltd. is a global innovator and leading provider of 5G wireless transport solutions, serving diverse customers across 150+ countries - Ceragon Networks Ltd. is a global innovator and leading solutions provider of 5G wireless transport[5](index=5&type=chunk) - Customers include service providers, public safety organizations, government agencies, and utility companies[5](index=5&type=chunk) - Solutions deliver 5G & 4G broadband wireless connectivity, mission-critical multimedia services, and stabilized communications[5](index=5&type=chunk) [Technology and Market Position](index=1&type=section&id=Technology%20and%20Market%20Position) Ceragon's unique multicore technology and disaggregated approach provide highly reliable, high-capacity wireless transport for 5G and 4G networks, positioning it as a leading solutions provider - Ceragon's unique multicore technology and disaggregated approach provide highly reliable, fast to deploy, high-capacity wireless transport for 5G and 4G networks with minimal use of spectrum, power, real estate, and labor resources[6](index=6&type=chunk) - The company offers a complete portfolio of turnkey end-to-end AI-based managed and professional services[6](index=6&type=chunk) - Solutions are deployed by more than 400 service providers and over 800 private network owners in more than 150 countries[6](index=6&type=chunk) [Important Disclosures](index=2&type=section&id=Important%20Disclosures) This section outlines forward-looking statements, identifies key risk factors, and provides essential contact and filing information [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements, based on current beliefs and assumptions, which involve known and unknown risks and uncertainties - The press release contains 'forward-looking statements' as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934[9](index=9&type=chunk) - Examples include projections of demand, revenues, net income, gross margin, capital expenditures, liquidity, competitive pressures, and growth prospects[9](index=9&type=chunk) - Such statements are based on current beliefs and assumptions but involve known and unknown risks and uncertainties[9](index=9&type=chunk)[10](index=10&type=chunk) [Risk Factors](index=2&type=section&id=Risk%20Factors) Ceragon's future results may differ materially due to various risks, including economic conditions, supply chain issues, and geopolitical conflicts - Key risks include general economic conditions, continued effects of COVID-19, global increase in shipping costs and decrease in shipping slots availability[10](index=10&type=chunk) - Risks also include continuing impact of component shortages (semiconductors and chipsets), increased breaches of network security and cyber-attack activities, and concentration of business in certain countries (e.g., India)[10](index=10&type=chunk) - Other risks involve failure to meet product development timetables (e.g., delay in new chipset tape-out), slower-than-anticipated 5G rollout, and uncertainty associated with the Russia-Ukraine conflict[10](index=10&type=chunk) [Contact and Filings Information](index=2&type=section&id=Contact%20and%20Filings%20Information) For investor and media inquiries, contact Maya Lustig, with company filings available on the SEC and Ceragon websites - Investor & Media Contact: Maya Lustig, Ceragon Networks[7](index=7&type=chunk) - Annual Report on Form 20-F for fiscal year ended December 31, 2020, and other SEC filings are available on www.sec.gov and www.ceragon.com[7](index=7&type=chunk)[12](index=12&type=chunk) - Ceragon Networks® and FibeAir® are registered trademarks of Ceragon Networks Ltd[8](index=8&type=chunk)

Challenge us Q4 2021 Financial Review February 2022 Proprietary and Confidential February 2022 Safe Harbor Statement This presentation has been prepared by Ceragon Networks Ltd. ("Ceragon" or the "Company") for informational purposes only. This presentation is proprietary to the Company and may not be reproduced (in whole or in part) nor summarized, passed, distributed, disseminated and/or copied without the prior written consent by the Company. Ceragon Networks® and FibeAir® are registered trademarks of Ce ...

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]