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, shipping, cost of royalties, and cost of our operations related facilities, as well as inventory write off costs, depreciation of equipment and amortization of intangible assets. In addition, we pay salaries and related costs, primarily to our delivery, operations, engineering and customer support 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 systems 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 a reduction in workforce, 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 other services fees, such as legal, audit, consulting, paying agent, and other fees. In addition, Acquisition-related expenses include the fair value adjustment of the Earn-Out liability. 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 primarily third-party consulting and other third-party services related to merging the previously separate companies' systems and processes.

Financial and other expenses, net. Our financial and other expenses, net, consist primarily of gains and losses arising from the re-measurement of transactions and balances denominated in non-dollar currencies into dollars,  interest paid on bank loans and factoring activities, holdback amount fair value adjustments, other fees and commissions paid to banks, actuarial losses, and other expenses.

Taxes on income. 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.

Critical Accounting Estimates

 

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S (“U.S. GAAP”). These accounting principles require management to make certain estimates, judgments and assumptions based upon information available at the time they are made, historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented.

 

Our management believes the accounting policies that affect its more significant judgments and estimates used in the preparation of its consolidated financial statements and which are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

 

•	Revenue recognition;

•	Inventory valuation;

•	Business combination.

 

Revenue recognition. We generate revenues from selling products and services to end users, distributors, system integrators, and original equipment manufacturers (“OEM”). The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

 

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer tangible products, software products and licenses, network roll-out, professional services and customer support, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to any variable consideration, to determine the net consideration which the Company expects to receive. As the Company’s standard payment terms are less than one year, the contracts have no significant financing component. The Company allocates the transaction price to each distinct performance obligation, based on their relative standalone selling price. Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied).

 

The revenues from customer support and extended warranty are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. Revenues from network roll-out and professional services are recognized when the Company's performance obligation is satisfied, usually upon customer acceptance.

 

The Company accounts for rebates and stock rotations provided to customers as variable consideration, based on historical analysis of credit memo data, rebate plans and stock rotation arrangements, as a deduction from revenue in the period in which the revenue is recognized.

 

Inventory valuation. Our inventories are stated at the lower of cost or net realizable value. Cost is determined by using the moving average cost method. At each balance sheet date, we evaluate our inventory balance for excess quantities and obsolescence. This evaluation includes an analysis of slow-moving items and sales levels by product and projections of future demand. If needed, we write off inventories that are considered obsolete or excessive. If future demand or market conditions are less favorable than our projections, additional inventory write-offs may be required and would be reflected in cost of revenues in the period the revision is made.

 

Business Combination. We apply the provisions of ASC 805, “Business Combination” and we allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships, acquired technology and acquired trademarks from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

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, 2026, compared to six months ended June 30, 2025

 

Revenues totaled $178.9 million in the first six months of 2026 as compared to $170.9 million in the first six months of 2025, an increase of $8.0 million, or 4.7%. Revenues in the North America region increased to $52.2 million in the first six months of 2026, from $44.4 million in the first six months of 2025. Revenues in the India region increased to $75.0 million in the first six months of 2026, from $67.7 million in the first six months of 2025.  Revenues in the EMEA region decreased to $24.9 million in the first six months of 2026, from $26.6 million in the first six months of 2025. Revenues in the Latin America region decreased to $14.2 million in the first six months of 2026, from $15.0 million in the first six months of 2025. Revenues in the APAC region decreased to $12.7 million in the first six months of 2026, from $17.2 million in the first six months of 2025.

 

 

 Sales and Marketing Expenses. Sales and Marketing expenses totaled $26.9 million in the first six months of 2026, compared to $24.0 million in the first six months of 2025, an increase of $2.9 million, or 12%.  This increase was primarily attributed to an increase of $2.0 million in salaries and related expenses, an increase of $0.6 million in travel expenses, an increase of $0.5 million in software and hardware maintenance, an increase of $0.4 million in overhead, offset by a decrease of $0.3 million in agents’ commissions and a decrease of $0.3 million in other sales and marketing expenses. As a percentage of revenues, sales and marketing expenses represent 15.0% and 14.1% in the first six months of 2026 and 2025, respectively.

 General and Administrative Expenses. General and administrative expenses totaled $12.3 million in the first six months of 2026, compared to $12.4 million in the first six months of 2025, a decrease of $0.1 million, or 0.3%. The decrease was primarily attributed to a change of $0.5 million in credit loss expenses and a decrease of $0.5 million in IT-related costs, offset by an increase of $0.5 million in salary and employee-related expenses and an increase of $0.4 million in office expenses. As a percentage of revenues, general and administrative expenses represent 6.9% and 7.2% in the first six months of 2026 and 2025, respectively.

Restructuring and related charges. Restructuring and related charges totaled $1.7 million in the first six months of 2026 as compared to $3.7 million in the first six months of 2025, a decrease of $2.1 million. The decrease was primarily attributable to lower termination severance pay and related employee costs.

Acquisition- and integration-related charges. Acquisition- and integration-related charges totaled $0.2 million in the first six months of 2026 as compared to $0.7 million in the first six months of 2025, a decrease of $0.5 million.

Taxes on income. Taxes on income totaled $1.2 million in the first six months of 2026 as compared to $1.5 million in the first six months of 2025, a decrease of $0.3 million. The decrease was mainly attributable to a decrease in current tax expenses of $0.3 million.

Net income (loss). The Company had a net loss of ($3.4) million in the first six months of 2026 as compared to a net loss of ($2.2) million in the first six months of 2025, a change of ($1.2) million. As a percentage of revenues, net (loss) was (1.9%) and (1.3%) in the first six months of 2026 and 2025, respectively. Despite a $2.3 million increase in gross profit, net results were affected by a $1.0 million increase in total operating expenses and a $2.6 million increase in finance expenses, partially offset by a $0.3 million decrease in income tax expense.

Liquidity and Capital Resources

 

Since our initial public offering in August 2000, we have financed our operations primarily through the proceeds of that initial public offering, proceeds from exercise of stock options, follow-on offerings, cash provided by operating activities, and various loans and facilities from banks, including factoring and grants from the IIA.

The Company entered into the revolving Credit Facility, dated as of March 14, 2013 by and among the Company and Bank Hapoalim B.M., HSBC Bank Plc, Bank Leumi Le’Israel Ltd. and First International Bank of Israel Ltd. (the “Credit Facility”).  The Credit Facility has been renewed and amended several times during the past years according to the Company’s needs and financial position.

In June 2023, the Company signed an amendment to the Credit Facility pursuant to which the term of the Credit Facility was extended by additional year to June 30, 2024. This amendment also included an increase of $9.8 million to $72 million to the Credit Facility for Loans and a decrease of $11.9 million to the bank guarantees credit lines to $45.9 million.

In December 2023, in connection with the acquisition of Siklu, the Company signed an amendment to the Credit Facility in which it obtained the approval of the syndication of banks to carry out Siklu's acquisition and added additional bank, Bank Mizrahi Tefahot Ltd., to the syndication agreement. This amendment also included an increase of $5 million to $77 million to the Credit Facility for Loans.

In June 2024, the Company signed an amendment to the Credit Facility pursuant to which the term of the Credit Facility was extended by an additional 2 years to June 30, 2026. This amendment also included a decrease of $5 million to the bank guarantees credit lines to $40.9 million.

In June 2026, the Company signed an amendment to the Credit Facility pursuant to which the term of the Credit Facility was extended by an additional 26 months to August 31, 2028. This amendment also included a decrease of $20.9 million to the bank guarantees credit lines to $20.0 million, and the approval of an un-committed bank guarantee credit line of $20.0 million. In addition, the covenants have been updated as following: ratio of financial debt, net to accounts receivable increased from 30% to 50%, ratio of financial debt, net to net working capital increase from 30% to 50%.

As of June 30, 2026, the Company has utilized $12.0 million of the $77 million available under the Credit Facility for short-term loans. During 2026, the credit lines carried interest rates in the range of 4.75% and 5.42%.

The Credit Facility is secured by a floating charge over all Company assets as well as several customary fixed charges on specific assets.

Repayment could be accelerated by the financial institutions in certain events of default including in insolvency events, failure to comply with financial covenants or an event in which a current or future shareholder acquires control (as defined under the Israel Securities Law) of the Company.

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 goodwill) and the total value of its assets (excluding total intangible assets and goodwill) 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, 2026 and 2025, the Company met all of its covenants.

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 we require it, subject to changes in our business activities.