Ceragon Networks Ltd. (CRNT) Cash Flow Statement

The recurring gap between negative reported earnings and positive operating cash flow appears largely structural: D&A of roughly $3.3-3.9M per quarter is consistently larger than the company's reported net income in loss periods, mechanically converting losses into cash. This is not a quality-of-earnings red flag in the classic sense, since the non-cash addback is real, but it means operating cash generation currently does not validate the operating model. Investors should note that when working capital reversed in 2026Q2 (a -$6.0M swing), operating cash flow fell to $5.1M from $12.0M in 2025Q4 despite similar depreciation, suggesting cash conversion is more sensitive to balance-sheet movement than to earnings trajectory.

The FCF trajectory lacks a stable trend: three of ten quarters produced negative free cash flow (-$3.2M, -$1.4M, and -$0.4M), and the strongest quarters (2024Q3 at $10.6M and 2025Q4 at $8.6M) both coincided with favorable working-capital contributions of -$2.4M and +$6.4M respectively. Cumulative FCF over the ten quarters is approximately $31.5M, which is materially above cumulative net income of roughly $18.5M, but the volatility suggests the company's cash generation is episodic rather than compounding. Given the margin compression flagged in the income statement analysis, the sustainability of even the mid-single-digit FCF margins appears contingent on revenue stabilization that has not yet been demonstrated.

The pattern is instructive: through 2024, working capital was a consistent cash consumer (-$7.7M in 2024Q2, -$2.4M in 2024Q3, -$6.7M in 2024Q4), consistent with a business building inventory and receivables ahead of demand. The reversal in 2025 freed cash, but that dynamic is self-limiting — once the balance sheet is leaner, the same release cannot repeat. The -${6.0M} draw in 2026Q2, occurring alongside a reported 14.2% YoY revenue rebound, suggests the company may be rebuilding receivables and inventory to support the recovery, which would compress operating cash flow until those balances convert back to sales. Analysts should monitor whether subsequent quarters show a return to cash absorption, which would confirm the build-cycle interpretation.

This divergence is primarily explained by depreciation of roughly $33M cumulatively against cumulative capital expenditures of $37M — meaning the asset base is being replaced at close to its consumption rate, which is a sign of a mature, not overstated, capital cycle. The remainder of the gap is attributable to the 2025 working-capital releases described above. What this implies is nuanced: the favorable divergence flatters cash generation in a way that may not persist if, as 2026Q2 suggests, working capital turns back into a use of cash. The structural takeaway is that Ceragon's cash generation is real but modest, and the earnings-based picture is the more conservative lens for valuation purposes.

Capex of $3.3M in 2026Q2 against $3.5M of depreciation implies the company is investing slightly below its asset consumption rate on a run-rate basis, which may be sustainable for a hardware-light model but bears watching if it persists. The elevated 2025Q3-Q4 capex levels (5.5-5.6% of revenue) could reflect either facility or systems investment, though the supplied data does not break out maintenance versus growth spend. With cumulative capex of approximately $37M over ten quarters versus $33M of accumulated depreciation, the capex-to-depreciation ratio is near parity, which is consistent with a business in replacement mode rather than one funding a transformative expansion — a profile that limits both cash drag and growth optionality.