Ceragon Networks Ltd 6-K, filed Aug 22, 2024
Ceragon Networks Ltd (CRNT)
6-K
2024-08-22
For: 2024-06-30
View Original
Added on
April 11, 2026
About this 6-K
Ceragon Networks Ltd filed this 6-K on August 22, 2024.
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Washington, D. C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2024
Commission File Number: 0-30862
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(Translation of registrant’s name into English)
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(Address of principal executive offices)
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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
EXPLANANTORY NOTE
Ceragon Networks Ltd. (the “Registrant”) is furnishing on this Form 6-K its unaudited interim consolidated financial statements for the six months ended June 30, 2023, and the related Operating and Financial Review and Prospects for such period. The Registrant is also furnishing the consent of its independent registered accounting firms to the incorporation by reference into Registrant’s Registration Statement on Form F-3 (No. 333-217194) of its opinion on the Registrant’s consolidated financial statements included in Registrant’s Annual Report on Form 20-F for the year ended December 31, 2022.
Exhibits
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Exhibit Number
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Description
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101
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Interactive Data File relating to the materials in this report on Form 6-K is formatted in Extensible Business Reporting Language (XBRL).
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This Report on Form 6-K and the exhibits hereto are hereby incorporated by reference into the Registrant’s Registration Statement on Form F-3 (No. 333-217194), as amended and supplemented from time to time.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CERAGON NETWORKS LTD.
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Date: August 22, 2024
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By: /s/ Ronen Stein
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Name: Ronen Stein
Title: Chief Financial Officer |
Exhibit 99.1
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
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2 - 3 | |
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6 | |
7 | |
8 - 19 |
- - - - - - - - - - - - -
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30,
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December 31,
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||||||||||
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Note
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2024
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2023
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|||||||||
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Unaudited
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|||||||||||
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$ thousands
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|||||||||||
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ASSETS
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|||||||||||
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CURRENT ASSETS:
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|||||||||||
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Cash and cash equivalents
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3
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||||||||
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Trade receivables (net of allowance for credit losses
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|||||||||||
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of $
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|||||||||
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Inventories
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4
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||||||||
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Other accounts receivable and prepaid expenses
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|||||||||
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Total current assets
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|||||||||
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NON-CURRENT ASSETS:
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|||||||||||
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Severance pay and pension fund
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|||||||||
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Property and equipment, net
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|||||||||
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Operating lease right-of-use assets
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|||||||||
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Intangible assets, net
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|||||||||
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Goodwill
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|||||||||
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Other non-current assets
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|||||||||
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Total non-current assets
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|||||||||
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Total assets
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|||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
2
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30,
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December 31,
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||||||||||
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Note
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2024 |
2023
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|||||||||
| Unaudited | |||||||||||
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$ thousands
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|||||||||||
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LIABILITIES AND SHAREHOLDERS' EQUITY
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|||||||||||
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CURRENT LIABILITIES:
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|||||||||||
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Trade payables
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|||||||||
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Deferred revenues
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|||||||||
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Short-term loans
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|||||||||
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Operating lease liabilities
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|||||||||
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Other accounts payable and accrued expenses
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|||||||||
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Total current liabilities
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|||||||||
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LONG-TERM LIABILITIES:
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|||||||||||
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Accrued severance pay and pensions
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|||||||||
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Deferred revenues
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|||||||||
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Operating lease liabilities
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|||||||||
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Other long-term payables
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|||||||||
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Total long-term liabilities
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|||||||||
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COMMITMENTS AND CONTINGENT LIABILITIES
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7
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||||||||||
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SHAREHOLDERS' EQUITY:
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8
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||||||||||
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Share capital:
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|||||||||||
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Ordinary shares of NIS
Authorized:
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|||||||||
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Additional paid-in capital
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|||||||||
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Treasury shares at cost –
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(
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)
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(
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)
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|||||||
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Accumulated other comprehensive loss
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(
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)
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(
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)
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|||||||
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Accumulated deficit
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(
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)
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(
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)
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|||||||
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Total shareholders' equity
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|||||||||
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Total liabilities and shareholders' equity
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|||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
3
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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June 30,
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June 30,
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|||||||
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2024
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2023
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|||||||
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Unaudited
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||||||||
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$ thousands
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||||||||
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Revenues
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||||||
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Cost of revenues
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Gross profit
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Operating expenses:
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Research and development, net
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Sales and Marketing
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General and administrative
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Restructuring and related charges
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Acquisition and integration related charges
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||||||
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Total operating expenses
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||||||
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Operating income
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Financial expenses and others, net
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Income before taxes
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Taxes on income
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||||||
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Net income
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Basic net income per share
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Diluted net income per share
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Weighted average number of shares used in computing basic net income per share
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Weighted average number of shares used in computing diluted net income per share
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||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
4
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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June 30,
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June 30,
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|||||||
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2024
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2023
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|||||||
| Unaudited | ||||||||
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$ thousands
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||||||||
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Net income
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||||||
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Other comprehensive income (loss)
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||||||||
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Change in foreign currency translation adjustment
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(
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)
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|||||
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Cash flow hedges:
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Change in net unrealized losses
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(
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(
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||||
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Amounts reclassified into net income
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Net change
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(
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(
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Other comprehensive income (loss), net
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(
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|||||
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Total of comprehensive income
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||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
5
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Six months ended June 30, 2023:
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Ordinary shares
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Share
capital
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Additional
paid-in
capital
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Treasury shares at cost
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Accumulated other comprehensive income
(loss)
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Accumulated deficit
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Total shareholders' equity
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||||||||||||||||||||||
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$ thousands
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$ thousands
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$ thousands
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$ thousands
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$ thousands
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$ thousands
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|||||||||||||||||||||||
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Balance as of January 1, 2023
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(
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)
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(
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)
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(
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)
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||||||||||||||||||
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Exercise of options and vesting of RSUs
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Share-based compensation
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-
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|||||||||||||||||||||
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Other comprehensive income, net
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-
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|||||||||||||||||||||
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Net income
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-
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|||||||||||||||||||||
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Balance as of June 30, 2023 (Unaudited)
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(
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)
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(
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)
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(
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)
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||||||||||||||||||
Six months ended June 30, 2024:
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Ordinary shares
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Share
capital
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Additional
paid-in
capital
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Treasury shares at cost
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Accumulated other comprehensive loss
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Accumulated deficit
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Total shareholders' equity
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||||||||||||||||||||||
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$ thousands
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$ thousands
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$ thousands
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$ thousands
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$ thousands
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$ thousands
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|||||||||||||||||||||||
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Balance as of January 1, 2024
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|
|
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(
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)
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(
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)
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(
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)
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||||||||||||||||||
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Exercise of options and vesting of RSUs
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|||||||||||||||||||||
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Share-based compensation
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-
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|||||||||||||||||||||
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Other comprehensive loss, net
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-
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(
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)
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(
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|||||||||||||||||||
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Net income
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-
|
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|||||||||||||||||||||
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Balance as of June 30,2024 (Unaudited)
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|
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(
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)
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(
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)
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(
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)
|
|
||||||||||||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
6
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Six months ended
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||||||||
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June 30,
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||||||||
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2024
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2023
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|||||||
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Unaudited
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||||||||
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$ thousands
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||||||||
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Cash flow from operating activities:
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||||||||
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Net income
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||||||
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Adjustments required to reconcile net income to net cash provided
by operating activities:
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||||||||
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Depreciation and amortization
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||||||
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Loss from sale of property and equipment
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||||||
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Share-based compensation
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||||||
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Decrease in accrued severance pay and pensions, net
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(
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)
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(
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)
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||||
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Increase in trade receivables, net
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(
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)
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(
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)
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||||
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Decrease (increase) in other accounts receivables and prepaid expenses (including other long-term assets)
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(
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)
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|
|||||
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Decrease in inventories
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||||||
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Decrease in operating lease right-of-use assets
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||||||
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Increase (decrease) in trade payables
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(
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)
|
|||||
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Increase (decrease) in other accounts payable and accrued expenses
(including other long-term liabilities)
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(
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)
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|
|||||
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Decrease in operating lease liability
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(
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)
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(
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)
|
||||
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Increase (decrease) in deferred revenues
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(
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)
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|
|||||
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Net cash provided by operating activities
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|
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||||||
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Cash flow from investing activities:
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||||||||
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Purchase of property and equipment
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(
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)
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(
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)
|
||||
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Software development costs capitalized
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(
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)
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(
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)
|
||||
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Net cash used in investing activities
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(
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)
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(
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)
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||||
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Cash flow from financing activities:
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||||||||
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Proceeds from exercise of stock options
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||||||
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Proceeds from (repayments of) bank credits and loans, net
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(
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)
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|
|||||
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Net cash provided by (used in) financing activities
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(
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)
|
|
|||||
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Effect of exchange rate changes on cash and cash equivalents
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(
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)
|
|
|||||
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Increase (decrease) in cash and cash equivalents
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(
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)
|
|
|||||
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Cash and cash equivalents at the beginning of the period
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||||||
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Cash and cash equivalents at the end of the period
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|
||||||
Non-cash purchases of property and equipment as of June 30, 2024, and 2023 amounted to $542 thousand and $638 thousand.
The accompanying notes are an integral part of the interim consolidated financial statements.
7
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1: |
GENERAL
|
| a. |
Ceragon Networks Ltd. ("the Company") is a global innovator and leading solutions provider of end-to-end wireless connectivity, specializing in transport, access, and AI-powered managed & professional services. The Company helps operators and other service providers worldwide increase operational efficiency and enhance end customers’ quality of experience with innovative wireless backhaul and fronthaul solutions. The Company’s unique multicore technology and disaggregated approach to wireless transport provides highly reliable, fast to deploy, high-capacity wireless transport for a wide range of communication network use cases with minimal use of spectrum, power, real estate, and labor resources. It enables increased productivity, as well as simple and quick network modernization. The Company delivers a complete portfolio of turnkey end-to-end AI-based managed and professional services that ensure efficient network rollout and optimization to achieve the highest value for its customers.
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The Company sells its products through a direct sales force, systems integrators, distributors and original equipment manufacturers.
The Company's wholly owned subsidiaries provide research and development, marketing, manufacturing, distribution, sales and technical support to the Company's customers worldwide.
| b. |
On December 4,2023 the Company completed a series of definitive agreements with Siklu Communication Ltd. (“Siklu”) and Siklu Inc. (the “Seller”), referred to as the “Siklu Acquisition”. In the framework of the Siklu Acquisition, the Company acquired all of the outstanding shares of Siklu and the assets and business activities of the Seller. Siklu is a privately held Israeli-based company which is a provider of multi-Gigabit “wireless fiber” connectivity in urban, suburban and rural areas. In connection with the Siklu acquisition, during the six months ended June 30, 2024, the Company recorded an adjustment to the fair value of its Holdback Consideration of $
|
| NOTE 2: |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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a.
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Interim condensed consolidated financial statements
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The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. In the management`s opinion, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s unaudited interim consolidated financial position as of June 30, 2024, as well as its results of operations and cash flows for the six months ended June 30, 2024, and 2023. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the year ending December 31, 2024.
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b.
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Use of estimates
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The preparation of the unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. On an ongoing basis, the Company's management evaluates estimates, including those related to the fair value of acquired intangible assets and goodwill and the useful life of intangible assets, tax assets and liabilities, fair values of share-based awards, inventory write-offs, warranty provision and allowance for credit loss. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.
8
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2: |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| c. |
Significant accounting policies
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The accompanying unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the "SEC") on March 21, 2024. There have been no significant changes to these policies during the six months ended June 30, 2024.
| d. |
Recently issued but not yet updated Accounting Standards
|
In November 2023, the Financial Accounting Standard Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment. The guidance will be effective for the Company for annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid. The guidance will be effective for the Company for annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact on its financial statement disclosures.
|
e.
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Restructuring and related charges
|
During 2023, the Company approved a cost reduction and re-organization plan that included, among other things, downsizing the Company's number of employees in a certain territory (the "2023 Restructuring Plan"). During 2024, the Company approved a cost reduction and re-organization plan that included, among other things, downsizing the Company’s number of employees (the “2024 Restructuring Plan”).
The Company recorded contractual and termination severance pay and other related costs for the impacted employees.
The liabilities related to the restructuring plans as of June 30, 2024, and 2023 amounted to $763 thousand and $838 thousand, respectively.
The Company does not expect to incur additional costs related to the 2024 and 2023 Restructuring plans.
9
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3: |
CREDIT LOSSES
|
The Company is exposed to credit losses primarily through sales to customers. The Company’s expected loss allowance methodology for trade receivables is developed using historical collection experience and current and future economic and market conditions.
The estimate of amount of trade receivable that may not be collected is based on the geographic location of the trade receivable balances, aging of the trade receivable balances, the financial condition of customers and the Company’s historical experience with customers in similar geographies. Additionally, specific allowance amounts are established to record the appropriate provision for customers who have a higher probability of default.
The following table provides a roll-forward of the allowance for credit losses that is deducted from the trade receivables balance to present the net amount expected to be collected:
|
June 30,
|
December 31,
|
|||||||
|
2024
|
2023 | |||||||
|
$ thousands
|
||||||||
|
Balance, at beginning of period
|
|
|
||||||
|
Provision for expected credit losses
|
|
|
||||||
|
Balance added in business combination
|
|
|
||||||
|
Recoveries collected, net of write-offs
|
(
|
)
|
(
|
)
|
||||
|
Balance, at end of period
|
|
|
||||||
The Company has reached an agreement to collect a debt from a South American customer (the “Settlement Agreement”). Such Settlement Agreement relates to a debt for which the Company fully recorded a credit loss provision in the fourth quarter of 2022 and to an arbitration proceeding against the Company and its subsidiary. Under the Settlement Agreement, the Company expects to receive a total of $
| NOTE 4: |
INVENTORIES
|
|
June 30,
|
December 31,
|
|||||||
|
2024
|
2023
|
|||||||
|
$ thousands
|
||||||||
|
Raw materials
|
|
|
||||||
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Work in progress
|
|
|
||||||
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Finished products
|
|
|
||||||
|
|
|
|||||||
During the six-month period ended June 30, 2024, and 2023 the Company recorded inventory write-offs for excess inventory and slow-moving inventory in a total amount of $2,311 thousand and $3,528 thousand respectively that have been included in cost of revenues.
As of June 30, 2024, the Company has an outstanding inventory purchase orders with its suppliers in the amount of $39,527 thousand. The commitments are due primarily within one year.
10
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 5: |
FAIR VALUE MEASUREMENT
|
The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, short-term deposits, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, approximate their fair value due to the short-term maturities of such instruments.
The following table sets forth the Company’s assets that were measured at fair value on a recurring bases as of June 30, 2024, and December 31, 2023, by level within the fair value hierarchy:
|
Fair value measurements using input type
|
||||||||||||
|
Fair value
|
June 30,
|
December 31,
|
||||||||||
|
hierarchy
|
2024
|
2023
|
||||||||||
|
$ thousands
|
||||||||||||
|
Derivatives instruments
|
Level 2
|
|
|
|||||||||
|
Total assets, net
|
|
|
||||||||||
| NOTE 6: |
DERIVATIVE INSTRUMENTS
|
The Company enters into foreign currency forward and option contracts with financial institutions to protect against the exposure to changes in exchange rates of several foreign currencies that are associated with forecasted cash flows and existing assets and liabilities. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.
The fair value of derivative contracts in the interim consolidated balance sheets at June 30, 2024 and December 31, 2023 were as follows:
|
Other accounts receivable and prepaid expenses
|
Other accounts payable and accrued expenses
|
|||||||
|
June 30, 2024
|
||||||||
|
$ thousands
|
||||||||
|
Derivatives designated as hedging instruments:
|
||||||||
|
Currency forward contracts
|
|
|
||||||
|
Total derivatives
|
|
|
||||||
|
Other accounts receivable and prepaid expenses
|
Other accounts payable and accrued expenses
|
|||||||
|
December 31, 2023
|
||||||||
|
$ thousands
|
||||||||
|
Derivatives designated as hedging instruments:
|
||||||||
|
Currency forward contracts
|
|
|
||||||
|
Total derivatives
|
|
|
||||||
11
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 6: |
DERIVATIVE INSTRUMENTS (Cont.)
|
The notional amounts of outstanding derivative contracts in U.S. dollars at June 30, 2024 and December 31, 2023 were as follows:
|
June 30,
|
December 31,
|
|||||||
|
2024
|
2023
|
|||||||
|
$ thousands
|
||||||||
|
Derivatives designated as hedging instruments
|
||||||||
|
Currency forward contracts
|
|
|
||||||
|
Total derivatives
|
|
|
||||||
The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is up to 12 months.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains or losses from contracts that were not designated as hedging instruments are recognized in "financial expenses and others, net".
The effect of total income (loss) from derivative contracts designated as cash flow hedges in the interim consolidated statements of operations for the six months ended June 30, 2024, and 2023 was as follows:
|
Six months ended
|
||||||||
|
June 30,
|
||||||||
|
2024
|
2023 | |||||||
|
$ thousands
|
||||||||
|
|
(
|
)
|
|
|||||
|
|
(
|
)
|
|
|||||
|
|
(
|
)
|
|
|||||
|
|
(
|
)
|
|
|||||
|
|
|
|
||||||
| NOTE 7: |
COMMITMENTS AND CONTINGENT LIABILITIES
|
| a. |
Israel Innovation Authority:
|
During the six months ended June 30, 2024, and 2023, the Company received several grants from the Israel Innovation Authority (“IIA”). The grants require the Company to comply with the requirements of the Research and Development Law, however, the Company is not obligated to pay royalties on sales of products based on technology or know how developed from the grants. In a case involving the transfer of technology or know how developed from the grants outside of Israel, the Company may be required to pay royalties related to past sales of products based on the technology or the developed know how. The Company recorded the IIA grants as a reduction of research and development expenses in the six months ended June 30, 2024, and 2023 in the amount of $765 thousand and $277 thousand respectively.
12
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 7: |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
Prior to the Siklu Acquisition, Siklu had received research and development grants from the IIA. The Company assumed Siklu's contract with the IIA, which requires the Company to pay royalties to the IIA on sales of products based on technology or know-how developed from the grants. The royalties were calculated at the rates of 3 % to 4 % of the aggregated proceeds from the sale of such products. As of June 30, 2024, the Company's maximum possible future royalties commitment, including $3,035 thousand of unpaid royalties accrued, was $10,573 thousand, based on grants received from the IIA and not yet repaid.
| b. |
Charges and guarantees:
|
As of June 30, 2024, and December 31, 2023, the Company provided bank guarantees in an aggregate amount of $20,864 thousand and $26,686 thousand, respectively, with respect to tender offer guarantees, financial guarantees, warranty guarantees and performance guarantees to its customers.
| c. |
Litigations:
|
The Company is currently involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.
| 1) |
Motion to Approve a Class Action (District Court of Tel Aviv - Economic Department)
|
On January 6, 2015 the Company was served with a motion to approve a purported class action, naming the Company, its Chief Executive Officer and its directors as defendants (the “Defendants”). The motion was filed with the District Court of Tel-Aviv (the “Court”). The purported class action alleges breaches of duties by making false and misleading statements in the Company's SEC filings and public statements. The class action claimed amount is $78,768 thousand (294,750 NIS thousand).
| 1.1 |
On June 21, 2015, the Defendants filed their response to the motion, arguing that the motion should be dismissed.
|
| 1.2 |
On May 27, 2021, following a lengthy procedure that included filing of various pleadings and affidavits, evidentiary hearings, and submission of summaries, the Court ruled to certify the motion as a class action, while applying the Israeli Law (the “Ruling”). According to the Ruling, the class action shall include several causes of action according to the Israeli Securities Act and the Israeli Torts Ordinance, concerning the alleged misleading statements in the Company’s SEC filings.
|
| 1.3 |
On June 9, 2021, the Court issued a decision suggesting that the parties refer the case to a mediation procedure.
|
| 1.4 |
The Company believes that the Ruling is erroneous and that the Defendants have strong defense arguments, and therefore, on September 12, 2021, filed a motion for a rehearing on behalf of the Defendants in order to revert the Ruling (the “Rehearing Motion”).
|
| 1.5 |
On October 20, 2021, the Plaintiff submitted his response to the Rehearing Motion and the Defendants submitted their reply to the Plaintiff’s response on November 23, 2021.
|
| 1.6 |
Without delaying or derogating from the Rehearing Motion, the Company agreed to the Court’s suggestion that the parties refer the case to a mediation procedure and designated the retired Judge B. Arnon as a mediator. After several mediation meetings were held, the mediation process ended without reaching a settlement.
|
13
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 7: |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
| 1.7 |
On January 3, 2022, a hearing was held in Court in the Rehearing Motion before the Honorable Justices K. Kabub, R. Ronen and T. Avrahami.
|
| 1.8 |
On January 27, 2022, a judgment was rendered in the Rehearing Motion. The Court ruled that the Ruling was erroneous as it applied Israeli Law, instead of foreign law, and held accordingly that the law that will apply is U.S. law. The Court further held that the case will be returned to the first judicial instance and will be adjudicated as a class claim under U.S. law. The Court commented that the Company’s claims based upon the Statute of Limitations should prima facie also be adjudicated under U.S. law.
|
| 1.9 |
On March 20, 2022, following the Court's decision, the Plaintiff filed to the first judicial instance, an amended class action claim, based on provisions of U.S. law. The Plaintiff estimated the amended claim amount at $
|
| 1.10 |
On June 28, 2022, following a joint application filed by the parties in order to approve certain procedural matters, the Court issued a decision suggesting that the parties should consider initiating another mediation procedure. On July 5, 2022, following the Court's decision, the parties filed a notice, informing the Court that they believe that the time to consider initiating another mediation procedure, will be only after the parties submit their pleadings.
|
| 1.11 |
On November 3rd, 2022, the Defendants submitted their Statement of Defense, based on U.S law. On February 5th, 2023, the plaintiff submitted his response to the Defendants’ Statement of Defense.
|
| 1.12 |
On June 15th, 2023, the court rejected a motion filed by the Defendants to rule on the issues of Statute of Repose and Limitations as a preliminary matter, and held that those issues will be dealt with as part of the main hearing. Additionally, the parties conducted preliminary procedures, including discovery and questionnaires, and filed related motions, which are still pending.
|
| 1.13 |
On September 21, 2023, a preliminary hearing was held. At the conclusion of the hearing, the court ruled that it would issue written decisions on the discovery issues and then set dates for further proceedings.
|
| 1.14 |
On September 28, 2023, the court approved the defendants’ motion for document discovery and determined that the documents in question are indeed relevant. As a result, the court has directed the plaintiff to furnish the requested documents by October 28, 2023. Alternatively, the court has given the plaintiff the option to waive any claims associated with these documents.
|
| 1.15 |
On October 1, 2023, the court granted the plaintiff's motion for document discovery and ordered the Company to produce all requested documents and to complete some of the answers to the questions included in the plaintiff questionnaire within 45 days. In making this decision, it was determined that, in addition to the documents already provided to the plaintiff, the Company is required to disclose thousands of additional documents and document types. These materials, however, were deemed irrelevant and extended beyond the approved grounds for the class action request. The discovery and disclosure of such documents would impose a substantial burden on the Company.
|
| 1.16 |
As a result, on December 31, 2023, the Company sought permission to appeal the District Court's decision and requested a delay in its implementation. The Supreme Court granted a stay on the execution of the District Court's decision and scheduled a hearing for January 25, 2024.
|
14
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 7: |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
| 1.17 |
During the hearing, the Supreme Court, presided over by the Honorable Judge Grosskopf, acknowledged the Company's contentions. It clarified that the extensive disclosure mandated by the District Court exceeded the necessary requirements accordance with the law, and suggested that the plaintiff negotiate agreements with the Company. These agreements aimed at significantly reducing the scope of disclosure, particularly concerning the period for which documents and correspondence must be provided.
|
| 1.18 |
Following discussions both outside the courtroom and before the Honorable Judge, where the parties presented their arguments on each dispute demand, partial agreements were reached. These agreements outline the documents the Company will provide to the plaintiff.
|
| 1.19 |
Validated by the Supreme Court, these agreements substantially reduced the disclosure requirements outlined in the District Court's decision. The plaintiff, in turn, waived certain demands entirely and significantly narrowed others. For the limited remaining requirements, it was established that the Company would convey its position on transferring the requested documents to the plaintiff in the reduced format proposed during the hearing. It was also decided that if no agreements are reached concerning these documents, the court will make a decision on the matter.
|
| 1.20 |
On March 26, 2024, the Company provided the plaintiff with the required documents, in accordance with the agreements between the parties. On March 12, 2024, following the submission of pleadings by the parties, the Supreme Court reduced the amount of expenses imposed by the District Court against the Company in its decision dated October 1, 2023, since the appeal resulted in a reduction in the extent of disclosure initially determined by the District Court.
|
| 1.21 |
Recently, the parties have agreed to refer the dispute to a mediation procedure before the esteemed retired judge, Dr. Avi Zamir. The first mediation meeting was held on June 10, 2024. A second mediation meeting is expected to take place in the next few weeks.
|
| 1.22 |
On July 10, 2024, the plaintiff filed with the court an update on the mediation procedure's current status. Accordingly, the court instructed the plaintiff to provide a further update on the matter, by October 10, 2024.
|
| 1.23 |
Generally speaking, and as was held in the judgement rendered in the Rehearing Motion, U.S law presents a higher bar for plaintiffs in comparison to Israeli law in proving claims regarding misleading representations to investors. However, given that the class action is being adjudicated under U.S law and that the Court has yet to address the parties’ pleadings, and because of the preliminary stage of the lawsuit, the amount of loss cannot be reasonably estimated.
|
| 2) |
Claim against Station Enterprises Ltd. regarding breach of the Lease Agreement
|
A dispute has arisen between the Company and Station Enterprises Ltd, with respect to the lease agreement signed between the parties on April 11, 2019 (the "Lease Agreement"), under which the Company leases its offices and labs in Rosh Haayin.
| 2.1 |
The Company, the lessee, claims that Station Enterprises was late in delivering the possession to the lessee and has not fulfilled its maintenance and management obligations. Therefore, the Company claims that Station Enterprises breached its contractual obligations, causing the Company damages and expenses.
|
| 2.2 |
Due to the said breaches, the Company has set-off the rent and management fees against outstanding debts of Station Enterprises towards the Company and provided Station Enterprises with a set-off notice.
|
15
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 7: |
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
| 2.3 |
On 8 February 2022 Station Enterprises notified the Company on the termination of the Lease Agreement, and also on the exercise of the bank guarantees provided to it in connection with the Lease Agreement, in amount of NIS
|
| 2.4 |
Under these circumstances, the Company filed a claim against Station Enterprises, in the framework of which the court will be asked to issue a Declarative Order, declaring that the notice of termination was invalid and that the Lease Agreement is valid and in force; to order Station Enterprises to reimburse the Company for the amount of the exercised bank guarantees; to order Station Enterprises to uphold and fulfill its contractual obligation and undertakings under the Lease Agreement and the management agreement; and to compensate the Company for the damages caused to it in an amount of
|
| 2.5 |
On October 13, 2022, Station Enterprises Ltd. submitted a new claim against the Company, for its eviction of from the leased premises. On March 27, 2023, the judge ordered the consolidation of the hearings in the two lawsuits.
|
| 2.6 |
The parties agreed to refer the dispute in both claims to mediation. The first mediation meeting was scheduled for May 8, 2023.
|
| 2.7 |
On June 27, 2023, a mediation meeting took place between the parties. After extensive meetings and negotiations between the parties, the mediation was unsuccessful.
|
| 2.8 |
On July 15, 2024, during the first pre-trial, the judge made another attempt to mediate the dispute between the parties, but without success. Consequently, the court scheduled deposition dates and set another pre-trial for March 5, 2025.
|
| 2.9 |
The amount of loss cannot be reasonably estimated because of the preliminary stage of the lawsuit.
|
| NOTE 8: |
SHAREHOLDERS' EQUITY
|
| a. |
Ordinary shares
|
The ordinary shares of the Company entitle their holders to receive notice to participate and vote in general meetings of the Company, the right to share in distributions upon liquidation of the Company and to receive dividends, if declared.
| b. |
Stock Options and RSUs plans
|
In 2003, the Company adopted a share option plan which has been extended or replaced from time to time. To date, the plan that is currently in effect is the Amended and Restated Share Option and RSU Plan as amended on August 10, 2014 (the “Plan”). Under the Plan, options and RSUs may be granted to officers, directors, employees and consultants of the Company or its subsidiaries. The options vest primarily over four years , subject to certain exceptions. The options expire between to ten years from the date of grant. The Plan was extended to expire on December 31, 2024. In 2024, the Company adopted a new share option plan, the 2024 Equity Incentive Plan, to replace the Plan (the “New Plan”).
The Company has reserved sufficient authorized but unissued Shares for purposes of the Plan and the New Plan (together the “Plans”) subject to adjustments as provided in the Plans.
16
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 8: |
SHAREHOLDERS' EQUITY (Cont.)
|
Since the date of the Plan in 2014, the Company has reserved 17,207,511 units under the Plans. As of June 30, 2024, an aggregated number of 1,631,599 ordinary shares were available for future grants under the Plans.
The following table summarizes the activities for the Company’s stock options for the six months ended June 30, 2024:
|
Six months ended
June 30, 2024
|
||||||||||||||||
|
Number
of options
|
Weighted
average
exercise
price
|
Weighted average remaining contractual term
(in years)
|
Aggregate
intrinsic
value
|
|||||||||||||
|
$ thousands
|
||||||||||||||||
|
Outstanding at beginning of year
|
|
|
|
|
||||||||||||
|
Granted
|
|
|
||||||||||||||
|
Exercised
|
(
|
)
|
|
|||||||||||||
|
Forfeited or expired
|
(
|
)
|
|
|||||||||||||
|
Outstanding at end of the period
|
|
|
|
|
||||||||||||
|
Options exercisable at end of the period
|
|
|
|
|
||||||||||||
|
Vested and expected to vest
|
|
|
|
|
||||||||||||
The weighted average fair value of options granted during the six months ended June 30, 2024, and 2023 was $1.24 and $1.06 , respectively.
The intrinsic value of options exercised during the six months ended June 30, 2024, and 2023 was $141 thousand and $43 thousand, respectively.
The following table summarizes the activities for the Company’s RSUs for the six months ended June 30, 2024:
|
Six months ended
June 30, 2024
|
||||||||
|
Number of
RSUs
|
Weighted average fair value
|
|||||||
|
Unvested at beginning of year
|
|
|
||||||
|
Granted
|
|
|
||||||
|
Vested
|
(
|
)
|
|
|||||
|
Forfeited
|
(
|
)
|
|
|||||
|
Unvested at end of period
|
|
|
||||||
As of June 30, 2024, the total unrecognized estimated compensation cost related to non-vested stock options and RSUs granted prior to that date was $3,564 thousand, which is expected to be recognized over a weighted average period of approximately one year .
17
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 8: |
SHAREHOLDERS' EQUITY (Cont.)
|
The following table sets forth the total share-based compensation expenses included in the interim consolidated statements of operations for the six months ended June 30, 2024, and 2023:
|
Six months ended
June 30,
|
||||||||
|
2024
|
2023
|
|||||||
|
$ thousands
|
||||||||
|
Cost of revenues
|
|
|
||||||
|
Research and development
|
|
|
||||||
|
Sales and Marketing
|
|
|
||||||
|
General and administrative
|
|
|
||||||
|
Total share-based compensation expense
|
|
|
||||||
| NOTE 9: |
REVENUES
|
The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers before performance obligations have been performed. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of the reporting period.
The following table presents the changes in deferred revenues balance during the six months ended June 30, 2024:
|
Six months ended June 30, 2024
|
||||
|
$ thousands
|
||||
|
Balance, beginning of the period
|
|
|||
|
New unsatisfied performance obligations
|
|
|||
|
Reclassification to revenue as a result of satisfying performance obligations
|
(
|
)
|
||
|
Balance, end of the period
|
|
|||
|
Less: long-term portion of deferred revenue
|
|
|||
|
Current portion, end of period
|
|
|||
Remaining performance obligations represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable contracts that will be recognized as revenue in future periods. The following table represents the remaining performance obligations as of June 30, 2024, which are expected to be satisfied and recognized in future periods:
|
2025
|
2026 and thereafter
|
|||||||
|
$ thousands
|
$ thousands
|
|||||||
|
Unsatisfied performance obligations
|
|
|
||||||
The Company elected to apply the optional exemption under ASC 606 paragraph 10-50-14(a) not to disclose the remaining performance obligations that relate to contracts with an original expected duration of one year or less.
18
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 10: |
CUSTOMERS AND GEOGRAPHIC INFORMATION
|
The following table presents the total revenues for the six months ended June 30, 2024, and 2023, allocated to the geographic areas in which it was generated. Revenues are attributed to geographic areas based on the location of the end-users.
|
Six months ended
|
||||||||
|
June 30,
|
||||||||
|
2024
|
2023
|
|||||||
|
$ thousands
|
||||||||
|
North America (*)
|
|
|
||||||
|
EMEA (**)
|
|
|
||||||
|
Asia-Pacific
|
|
|
||||||
|
India
|
|
|
||||||
|
Latin America
|
|
|
||||||
|
|
|
|||||||
(*) As of June 30, 2024, and 2023, 98 % and 93 % represent revenues in the United States.
(**) Including Europe, Middle East and Africa.
| NOTE 11: |
EARNINGS PER SHARE
|
The following table sets forth the computation of basic and diluted income per share:
| a. |
Numerator:
|
|
Six months ended
|
||||||||
|
June 30,
|
||||||||
|
2024
|
2023
|
|||||||
|
$ thousands
|
||||||||
| Numerator for basic and diluted income per share - | ||||||||
| Net income available to holders of ordinary shares | ||||||||
| b. |
Denominator:
|
|
Six months ended
|
||||||||
|
June 30,
|
||||||||
|
2024
|
2023
|
|||||||
|
Denominator for diluted income per share -
|
||||||||
|
Weighted average number of shares
|
|
|
||||||
|
Add – RSUs and stock options
|
|
|
||||||
|
Denominator for diluted income per share - adjusted
|
|
|
||||||
The total weighted average number of shares related to the outstanding options and RSUs excluded from the calculations of diluted net earnings per share due to their anti-dilutive effect was 1,928,259 and 5,132,809 for the six months ended June 30, 2024, and 2023, respectively.
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Components of Results of Operations
Revenues. We generate revenues primarily from the sale of our products, and, to a lesser extent, services. The final price to the customer
may largely vary based on various factors, including but not limited to the size of a given transaction, the geographic location of the customer, the specific application for which products are sold, the channel through which products are sold, the
competitive environment and the results of negotiation.
Cost of Revenues. Our cost of revenues consists primarily of the prices we pay contract manufacturers for the products they manufacture for us, the costs of
off the shelf parts, accessories and antennas, the costs of our manufacturing and operations facilities, estimated and actual warranty costs, costs related to management of our manufacturers’ activity and procurement of our proprietary and other
product parts, supply chain and shipping, as well as inventory write off costs, depreciation of equipment and amortization of intangible assets. In addition, we pay salaries and related costs to our employees and fees to subcontractors relating to
installation, maintenance, and other professional services.
Significant Expenses
Research and Development Expenses, net. Our research and development expenses, net of government grants, consist primarily of salaries and
related costs for research and development personnel, subcontractors’ costs, costs of materials, costs of R&D facilities and depreciation of equipment. All of our research and development costs are expensed as incurred, except for development
expenses, which are capitalized in accordance with ASC 985-20 and ASC 350-40. We believe that continued investment in research and development is essential to attaining our strategic objectives.
Sales and Marketing Expenses. Our sales and marketing expenses consist primarily of compensation and related costs for sales and marketing
personnel, trade show and exhibit expenses, travel expenses, commissions and promotional materials.
General and Administrative Expenses. Our general and administrative expenses consist primarily of compensation and related costs for executive, finance,
information system and human resources personnel, professional fees (including legal and accounting fees), insurance, maintenance costs for information systems software, provisions for credit loss (doubtful debts), depreciation expenses, and other
general corporate expenses.
Restructuring and related charges. Restructuring expenses consist primarily of costs associated with reduction in workforce, establishment
of new research and development centers in additional countries, consolidation of excess facilities, termination of contracts and the restructuring of certain business functions. Restructuring and related expenses are reported separately in the
consolidated statements of operations.
Acquisition- and integration-related charges. Acquisition-related expenses include those expenses related to acquisitions that would
otherwise not have been incurred by the Company, including professional and services fees, such as legal, audit, consulting, paying agent and other fees. Acquisition-related costs are not included as components of consideration transferred but are
accounted for as expenses in the period in which the costs are incurred.
Integration-related expenses represent incremental costs related to combining the Company and its business acquisitions, such as third-party consulting and other third-party services related to
merging the previously separate companies' systems and processes.
Financial expenses and others, net. Our financial expenses and others, net, consist primarily of gains and losses arising from the
re-measurement of transactions and balances denominated in non-dollar currencies into dollars, gains and losses from our currency hedging activity, interest paid on bank loans and factoring activities, other fees and commissions paid to banks,
actuarial losses, and other expenses.
Taxes. Our taxes on income consist of current corporate tax expenses in various locations and changes in deferred tax assets and
liabilities, as well as changes in reserves for uncertain tax positions.
Results of Operations
The following table presents interim consolidated statement of operations data for the periods indicated and as a percentage of total revenues (in thousands of U.S. dollars).
|
Six months ended
June 30, 2024
(Unaudited)
|
Six months ended
June 30, 2023
(Unaudited)
|
|||||||||||||||
| $ |
|
%
|
$ |
|
%
|
|||||||||||
|
Revenues
|
184,586
|
100.0
|
169,560
|
100.0
|
||||||||||||
|
Cost of revenues
|
119,057
|
64.5
|
111,028
|
65.5
|
||||||||||||
|
Gross profit
|
65,529
|
35.5
|
58,532
|
34.5
|
||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development, net
|
17,232
|
9.3
|
15,750
|
9.3
|
||||||||||||
|
Sales and Marketing
|
22,769
|
12.3
|
19,974
|
11.8
|
||||||||||||
|
General and administrative
|
8,158
|
4.4
|
11,542
|
6.8
|
||||||||||||
|
Restructuring and related charges
|
1,416
|
0.8
|
897
|
0.5
|
||||||||||||
|
Acquisition- and integration related-charges
|
1,377
|
0.7
|
-
|
-
|
||||||||||||
|
Total operating expenses
|
50,952
|
27.5
|
48,163
|
28.4
|
||||||||||||
|
Operating income
|
14,577
|
7.9
|
10,369
|
6.1
|
||||||||||||
|
Financial expenses and others, net
|
4,777
|
2.6
|
3,344
|
1.9
|
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|
Taxes on income
|
1,564
|
0.8
|
2,969
|
1.8
|
||||||||||||
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Net income
|
8,236
|
4.5
|
4,056
|
2.4
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||||||||||||
Six months ended June 30, 2024, compared to six months ended June 30, 2023
Revenues. Revenues totaled $184.6 million in the first six months of 2024 as compared to $169.6 million in the first six months of 2023, an increase of $15.0
million, or 8.9%. Revenues in the India region increased to $61.6 million in the first six months of 2024 from $46.9 million in the first six months of 2023. Revenues in the North America region increased to $52.2 million in the first six months of
2024 from $48.6 million in the first six months of 2023. Revenues in the EMEA region increased to $33.9 million in the first six months of 2024 from $32.0 million in the first six months of 2023. Revenues in the Latin America region decreased to
$19.9 million in the first six months of 2024 from $22.5 million in the first six months of 2023. Revenues in the APAC region decreased to $17.0 million in the first six months of 2024 from $19.6 million in the first six months of 2023.
Cost of revenues. Cost of revenues totaled $119.1 million in the first six months of 2024 compared to $111.0 million in the first six
months of 2023, an increase of $8.1 million, or 7.2%. The increase was primarily attributed to:
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Increase of $7.4 million relates to higher material costs, primarily due to the higher volume of revenues;
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Increase of $1.0 million in shipping and storage costs;
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Increase of $0.5 million relates to amortization of acquired intangible assets;
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Increase of $0.2 million in salaries related expenses;
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Increase of $0.2 million in travel and other indirect expenses;
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Decrease of $1.2 million in inventories write-off.
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Gross Margin. Gross profit as a percentage of revenues increased to 35.5% in the first six months of 2024 from 34.5% in the first six
months of 2023. This increase is mainly attributed to increased revenues coupled with improvement in product costs and better control over our fixed costs.
Research and Development Expenses, Net. Research and development expenses, net, totaled $17.2 million in the first six months of 2024
compared to $15.8 million in the first six months of 2023, an increase of $1.5 million, or 9.4%. The increase was primarily attributed to higher salary and employee-related expenses of $1.6 million, and an increase of $0.4 million in other research
and development expenses, offset by an increase of $0.5 million in IIA (Israeli Innovation Authority) grants. Research and development expenses, net for the first six months of 2024, included Siklu's expenses for a complete six-month period for the
first time. Our research and development efforts are a key element of our strategy and are essential to our success. We intend to maintain our focus on research and development initiatives, and we foresee that an increase or a decrease in our total
revenue would not necessarily result in a proportional increase or decrease in the levels of our research and development expenditures.
Sales and Marketing Expenses. Sales and Marketing expenses totaled $22.8 million in the first six months of 2024 compared to $20.0 million
in the first six months of 2023, an increase of $2.8 million or 14.0%. This increase was primarily attributed to higher salary and employee-related expenses of $1.4 million, an increase of $0.8 million in trade shows, and marketing events and
expenses, an increase of $0.5 million in agents' commissions, and an increase of $0.4 million in amortization of acquired intangible assets, offset by a decrease in sales commissions expenses of $0.3 million. Sales and Marketing expenses for the
first six months of 2024 included Siklu's expenses for a complete six-month period for the first time.
General and Administrative Expenses. General and administrative expenses totaled $8.2 million in the first six months of 2024 compared to
$11.5 million in the first six months of 2023, a decrease of $3.3 million, or 29.3%. The decrease was primarily attributed to a decrease of $4.5 million in doubtful debts, which included a $4.0 million benefit related to an initial collection from a
$12.0 million debt settlement agreement reached with a South American customer. These are offset by an increase of $0.7 million in share-based compensation and an increase of $0.5 million in salary and employee-related expenses. General and
administrative expenses for the first six months of 2024 included Siklu's expenses for a complete six-month period for the first time.
Restructuring and related charges. Restructuring and related charges totaled $1.4 million in the first six months of 2024 as compared to
$0.9 million in the first six months of 2023, an increase of $0.5 million. The increase was primarily attributed to termination severance pay and other related costs for the impacted employees.
Acquisition- and integration-related charges. Acquisition- and integration-related charges totaled
$1.4 million in the first six months of 2024, whereas there were no Acquisition- and integration-related charges in the first six months of 2023. The increase was primarily attributed to the acquisition and integration expenses associated with the
acquisition of Siklu, which would otherwise not have been incurred by the Company, including professional and services fees, such as legal, audit, consulting, paying agent and other fees as well as incremental costs related to combining the Company
and Siklu, such as third-party consulting, facilities consolidation costs and other third-party services related to merging Siklu’s systems and processes.
Financial expenses and others, Net. Financial expenses and others, net, totaled $4.8 million in the first six months of 2024 as compared
to $3.3 million in the first six months of 2023, an increase of $1.5 million. This increase was mainly attributable to an increase of $2.3 million related to exchange rate differences, offset by a decrease of $0.5 million in net interest expenses and
a decrease of $0.3 million in other net finance expenses.
Taxes on income. Tax expenses totaled $1.6 million in the first six months of 2024 as compared to $3.0 million in the first six months of
2023, a decrease of $1.4 million. The decrease was mainly attributable to a decrease in deferred taxes of $1.3 million, and a decrease of $0.3 million in current tax expenses, offset by an increase of $0.2 million in respect of uncertain tax
positions.
Net income. The Company had a net income of $8.2 million in the first six months of 2024 as compared to a net income of $4.1 million in
the first six months of 2023, an increase of $4.1 million. As a percentage of revenues, net income was 4.5% in 2024 compared to 2.4% in 2023. The increase was attributable primarily to higher revenues and gross profit offset by higher operating
expenses.
Liquidity and Capital Resources
As of June 30, 2024, we had approximately $26.3 million in cash and cash equivalents.
On June 27, 2024, the Company renewed a total credit line of $117.9 million with the banks for an additional two years (until June 30, 2026) while maintaining the facility dedicated
for short-term loans on $77.0 million and reducing the facilities dedicated for bank guarantees to $40.9 million.
The credit facility is provided by a bank syndicate, with each bank agreeing severally (and not jointly) to make its agreed portion of the credit lines to us in accordance with the
terms of the credit agreement. Such credit agreement includes a framework for joint decision-making powers by the banks. As of June 30, 2024, we had $48.5 million available under our credit facility in the form of loans and $20.0 million available in
bank guarantees outstanding in respect of tender offer guarantees, financial guarantees, warranty guarantees and performance guarantees to our customers.
The Credit Facility contains financial and other covenants requiring that the Company maintains, among other things, minimum shareholders' equity value and financial assets, a
certain ratio between its shareholders' equity (excluding total intangible assets) and the total value of its assets (excluding total intangible assets) on its balance sheet, a certain ratio between its net financial debt to each of its working
capital and accounts receivable. As of June 30, 2024, the Company met all of its covenants.
The Credit Facility is secured by a floating charge over all Company's assets as well as several customary fixed charges on specific assets.
Net cash provided by operating activities was $11.3 million for the six months ended June 30, 2024. In the first six months of 2024, our cash provided by operating activities was predominantly
affected by the following principal factors:
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•
•
•
•
•
•
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our net income of $8.2 million;
a $8.5 million decrease in inventory;
a $5.9 million of depreciation and amortization expenses;
a $2.5 million of share-based compensation expenses;
a $0.5 million increase in trade payables and accrued liabilities; and
a $0.1 million loss from sale of property and equipment, net.
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These factors were offset mainly by:
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•
•
•
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a $10.6 million increase in trade receivables and other accounts receivables;
a $2.9 million decrease in deferred revenue;
a $0.6 million decrease in accrued severance pay and pensions, net; and
a $0.3 million decrease in operating lease liability, net.
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Net cash used in operating activities was $6.7 million for the six months ended June 30, 2023. In the first six months of 2023, our cash provided by operating activities was predominantly affected
by the following principal factors:
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•
•
•
•
•
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our net income of $4.1 million;
a $5.1 million of depreciation and amortization expenses;
a $4.1 million decrease in inventory;
a $1.9 million increase in share-based compensation expenses; and
a $0.4 million increase in deferred revenue.
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These factors were offset mainly by:
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•
•
•
•
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a $6.4 million increase in trade receivables and other accounts receivables;
a $1.6 million decrease in trade payables and accrued liabilities;
a $0.6 million decrease in operating lease liability, net; and
a $0.3 million decrease in accrued severance pay and pensions, net.
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Net cash used in investing activities was approximately $8.9 million in the first six months of 2024, compared to $7.3 million in the first six months of 2023. In the first six
months of 2024, our investing activities were comprised of $7.9 million paid for the purchase of property and equipment and $1.0 million of software development costs capitalized. In the first six months of 2023, our investing activities were
comprised of $5.5 million paid for the purchase of property and equipment and $1.8 million of software development costs capitalized.
Net cash used in financing activities was approximately $3.6 million in the first six months of 2024, compared to net cash provided by financing activities of $2.1 million in the
first six months of 2023. In the first six months of 2024, our net cash used in financing activities was primarily due to $4.1 million repayments of bank credit and loans, net, offset by $0.5 million of proceeds from stock-options exercise. In the
first six months of 2023, our net cash provided by financing activities was, attributed mainly to $2.1 million proceeds from bank credit and loans, net.
Our capital requirements are dependent on many factors, including, among other things, working capital requirements to finance the business activity of the Company and the
allocation of resources to research and development, marketing and sales activities. We may decide to raise capital if and when we may require it, subject to changes in our business activities.
We believe that current cash and cash equivalent balances, together with the credit facility available with the lenders, will be sufficient for our requirements through at least
the next 12 months.