Proprietary and ConfidentialProprietary and Confidential
The #1 Wireless Backhaul Specialist
Investor Presentation
February, 2017
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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
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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
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With diverse wireless backhaul solutionsServing Global Markets
Public SafetyMobile
Oil & Gas
Wireless ISP’s Utilities
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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
Targeting third consecutive year of profit improvement in 2017
Positioned to benefit from industry shake-out and network evolution to 5G
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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
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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
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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
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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
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• 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+
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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
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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.
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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
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•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
FY 2016
India , 27%
Africa, 7%
Europe, 15%
North America, 14%
Asia Pacific, 10%
Latin America, 27%
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• 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
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With the industry-leading wireless backhaul platform – FibeAir IP-20 Enabling Key Worldwide 4G Expansions
USA, Mexico, India
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Global Reach – Local Presence
Over900,000Radios installed inover 130 countries
with globalTier 1 operators
33%of sales
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* Based on internal analysis of available data
Ceragon is one of the top two players inBest-of-Breed Portion of the Market*
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• 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
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Improving Profitability
0
5
10
15
20
25
30
35
40
45
50
0
10
20
30
40
50
60
70
80
90
100
Q4:15 Q1:16 Q2:16 Q3:16 Q4:16
Revenue Non-GAAP Gross Profit Non-GAAP Opex
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P&L – Managing for Profitability (Non - GAAP)
(US$M) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16Q1:17
Guidance2016 Target for FY17
Revenues $75.6 $59.8 $70.0 $79.1 $84.7Seasonally
lower vs. Q4$293.6 Higher than 2016
Gross profit 25.1 21.7 24.9 26.8 27.9 101.2
Gross margin 33.2% 36.3% 35.5% 33.8% 32.9%Sequentially
lower34.5% >32%
Operating Expenses
20.2 19.6 20.0 19.9 20.7 20-21 80.1Flat at 20-21 per
quarter
Operating profit
5.0 2.2 4.9 6.9 7.2 21.1
Finance & tax 2.9 2.3 3.3 2.1 1.9 9.6 Lower than 2016
Net profit (loss)
2.1 (0.1) 1.6 4.8 5.2 11.5 Higher than 2016*
EPS (loss) $0.03 0.00 $0.02 $0.06 $0.07 $0.15
* Based on constant currency from December 31, 2016
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Continued to reduce debt in Q4
Substantial unused borrowing capacity
under revolving credit facility
Expect positive cash flow in 2017
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Restored Financial Stability
(U.S. dollars in millions)(Unaudited)
a/o December 31, 2016
Cash & cash equivalents 36.3
Bank debt 17.0
Inventory 45.6
AR 107.4
DSOs 133
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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
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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
25
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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
Targeting third consecutive year of profit improvement in 2017
Positioned to benefit from industry shake-out and network evolution to 5G