The #1 Wireless Backhaul Specialist - Ceragon · PDF fileselection process for wireless...

Proprietary and ConfidentialProprietary and Confidential

The #1 Wireless Backhaul Specialist

Investor Presentation

November, 2016

Proprietary and Confidential

This presentation contains statements concerning Ceragon’s future prospects that are “forward-looking statements” as defined in the Private

Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of

Ceragon’s management. Examples of forward-looking statements include: revenues, growth prospects, projections of gross margins, operating and

other expenses, capital expenditures, profitability and liquidity, competitive pressures, product development, financial resources, cost savings and

other financial matters. You may identify these and other forward-looking statements by the use of words such as “may”, “plans”, “anticipates”,

“believes”, “estimates”, “targets”, “expects”, “intends”, “potential”, or the negative of such terms, or other comparable terminology. These forward

looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the risk that Ceragon’s

expectations regarding future revenues and profitability will not materialize; risks relating to the concentration of our business in India, Latin

America, Africa and in developing nations in other regions, including political, economic and regulatory risks from doing business in those regions and

nations including in relation to local business practices that may be inconsistent with international regulatory requirements such as anti-corruption

and anti-bribery regulations, currency export control issues and recent economic concerns; the risk that the business coming from our bigger

customers will go down significantly or cease, the risk that Ceragon will not achieve the benefits it expects from its expense reduction plans and profit

enhancement programs, as may be implemented from time to time; the risk of significant expenses in connection with potential contingent tax

liability; ad other risks and uncertainties detailed from time to time in Ceragon’s Annual Report on Form 20-F and Ceragon’s other filings with the

Securities and Exchange Commission, and represent our views only as of the date they are made and should not be relied upon as representing our

views as of any subsequent date. We do not assume any obligation to update any forward-looking statements.

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Safe Harbor


100Mbps – 2Gbps 500Mbps – 2.5Gbps > 5Gbps

Wireless Backhaul

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The #1 Wireless Backhaul Specialist

WirelessBackhaul

Global reach>750,000 radios installed in

over 130 countries

Focus on high-value dealsProjects where customer is

seeking best-of-breed solution

Most advanced technologyLeveraging vertical integration

Macro-cells and HubsSmall Cells Macro-cells Backbone

Proprietary and Confidential 4

With diverse wireless backhaul solutionsServing global markets

Public SafetyMobile

Oil & Gas

Wireless ISP’s Utilities


Investment Highlights

Leader in premium segment of the market

Time-to-market advantage with technologically-advanced IP-20 platform

Competitive strengths provide ability to be selective, obtain major share of highest-value opportunities

Financial stability enables continuous innovation and design-to-cost investment

Further profit improvement in 2016 vs. 2015

Positioned to benefit from industry shake-out and network evolution to 5G


Sustainable profitability requires vetting every deal in a fragmented, competitive market

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Our Approach to Wireless Backhaul Market: Selective

Seek Best-of-Breed Focused Deals

• Service providers seek the best wireless backhaul

solution as main factor for vendor selection

• Customers invest resources to assess solutions’

ability to address their network-specific challenges

• (Non-mobile customers are part of this category)

• End-to-end network bundling; no specific vendor

selection process for wireless backhaul

• Customers lack the skills/ resources for thorough

evaluation of wireless backhaul vendors

• Customers evaluate suppliers separately but use

price as main factor for vendor selection

Avoid Bundled/Price Focused Deals


To offer differentiated solutions for select high value opportunitiesExecuting on a 3-Pillar Strategy

Continue to Invest in

Best Technology

and Solutions

Leverage OurStrong Position in All

Geographies

FocusOn Highest Value

Opportunities


We continue to Invest in Best Technology

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We Enable Customer Value Through Vertical IntegrationIndustry Leadership

Copyright © 2016, Current Analysis, Inc.

Ceragon IP-20

Huawei RTN900

Ericsson MINI-LINK

DragonwaveAvenue Harmony & Horizon

Nokia 9500 MPR

FibeAir IP-20 Platform 4th Generation Modems and RFICs


Single platform for all your wireless backhaul needsFibeAir IP-20 Platform

For enhanced security

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• We’ve found ways to increase backhaul capacity, but with less resources

• We’ve designed equipment that takes up less energy, less real-estate, and

less spectrum

• Operators can modernize their networks whenever they’re ready

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We Increase Customers’ Operational Efficiency

Remotely double capacity

Smart-energy mode

Simple & QuickNetwork modernization

4x4 LoSMIMO

Multicarrier AdaptiveBandwidth Control Technology CeraOS


• We’ve built products that customers can rely on

• We have experts ready to provide support

• We’ve introduced solutions that provide enhanced security for customers

who are facing network security challenges

• We’ve always got one eye on the future so our customers’ networks are

ready for whatever is around the corner

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We Give Customers Peace of Mind

Enhanced security

20Gbps mmWstrategy

NetworkOptimization

New spectrum 100GHz+


Our solutions give operators reliability and performance – so their end

customers get the same

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We Enable the Best Possible Wireless Experience

HierarchicalQoS

AdvancedFrequencyReuse

SDN for Wireless Backhaul


Tier 1 USA operator challenged us to upgrade &

expand the 3G backhaul network to 4G in a very

short time, yet incurring low operational costs

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Select Examples

• We helped increase operational efficiency, saving $3M, making 4G services available in more markets, faster.


Smartfren Indonesia challenged us to quickly

modernize their wireless backhaul network to

support their 4G service launch

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• We migrated their network within 6 months!

• We X3 their network capacity

• We saved them $10M in the process


•Demand for best-of-breed solutions is worldwide

• Investment cycles shift between regions

•Operator consolidation and network sharing causes shifts

•Purchasing decisions made both centrally and regionally

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Leverage our Strong Position in All Geographies

9 mos: 2016

India , 26%

Africa, 8%

Europe, 15%

North America, 13%

Asia Pacific, 10%

Latin America, 28%


• Use competitive strengths to win a large share of most profitable opportunities

• Expanding footprint in profitable vertical markets

• Well-positioned to gain share as industry shake-out continues

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Focus on Highest Value Opportunities

Public Safety Oil & GasMobile


Selected by Operators Seeking Best-of-Breed

Radios installed inover 130 countries

Over750,000

with globalTier 1 operators

33%Of sales

North America


* Based on internal analysis of available data

Ceragon is one of the top two players inBest-of-Breed Portion of the Market*


• Strategy improves gross profit but tempers revenue

• Deeper analysis of each opportunity

• New compensation scheme to better motivate sales force

• Consider impact of deal terms on working capital requirements

• More stringent criteria for extending payment terms

• Continuous design-to-cost improvements lowers product cost

• Controlling expenses enables operating leverage

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Profit Improvement Initiatives Succeeding


Improving Profitability

0

10

20

30

40

50

60

0

20

40

60

80

100

120

Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 Q3:16

Revenue Non-GAAP Gross Profit Non-GAAP Opex


P&L – Managing for Profitability (Non - GAAP)

(US$M) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16Q4:16

GuidanceTarget for FY16

Revenues $85.4 $75.6 $59.8 $70.0 $79.1 Similar to Q3 Lower than 2015

Gross profit 27.7 25.1 21.7 24.9 26.8

Gross-margin 32.4% 33.2% 36.3% 35.5% 33.8% >32% >32%

Operating Expenses

20.2 20.2 19.6 20.0 19.9 20-21Flat at 20-21 per

quarter

Operating profit

7.5 5.0 2.2 4.9 6.9

Finance & tax 3.8 2.9 2.3 3.3 2.1 Similar to Q3 Lower than 2015

Net profit (loss)

3.7 2.1 (0.1) 1.6 4.8 Similar to Q3 Higher than 2015*

EPS (loss) $0.05 $0.03 0.00 $0.02 $0.06

* Based on constant currency from December 31, 2015


Continued to reduce debt in Q3

Substantial unused borrowing capacity

under revolving credit facility

Expect positive cash flow in full year

2016

22

Restored Financial Stability

(U.S. dollars in millions)(Unaudited)

a/o Sept. 30, 2016

Cash & cash equivalents 32.4

Bank debt 20.3

Inventory 44.2

AR 109.6

DSOs 141


Year-long process is yielding promising potential opportunitiesFormulating a Strategy to Accelerate Long-term Growth

New small cell

backhaul approach

Scale/market shareIn core business

IoTnetworking

solutions

5G fixed wireless access

Smart city-related

technology

Mobile network cybersecurity

solutions

Technology Fit/Business Risk Analysis Value Creation/Financial Risk Analysis

• Relevance to core competencies• Potential competitive advantage• Market size and maturity• Market growth potential

• Time to revenue• Magnitude of investment required• Inherent profitability (gross margin)• Impact on cash flow

Seeking best risk-adjusted opportunity to generate profitable growth


Profitability Enables Ongoing Investment to Enhance Our Leadership During Evolution to 5G

1H’08

• 6 – 42GHz: Higher orders of LoS MIMO technology• E-Band

• V-Band

• W-Band (100GHz)• D-Band (140GHz)

• 6 – 42GHz: LoS 4x4 MIMO

• E-Band• V-Band

Today

2018

• E-Band• V-Band• W-Band (100GHz)• D-Band (140GHz)

1 - 2.5 Gbps

10Gbps

20 Gbps

2020

24


Investment Highlights

Leader in premium segment of the market

Time-to-market advantage with technologically-advanced IP-20 platform

Competitive strengths provide ability to be selective, obtain major share of highest-value opportunities

Financial stability enables continuous innovation and design-to-cost investment

Further profit improvement in 2016 vs. 2015

Positioned to benefit from industry shake-out and network evolution to 5G


Thank You

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