10-Q 1 cmbm-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number: 001-38952

 

CAMBIUM NETWORKS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Cayman Islands

 

Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

c/o Cambium Networks, Inc.

 

 

3800 Golf Road, Suite 360

Rolling Meadows, Illinois 60008

 

(345) 943-3100

(Address of principal executive offices, including zip code)

 

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Ordinary shares, $0.0001 par value

 

CMBM

 

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of May 2, 2022, the registrant had 26,827,554 shares of ordinary shares, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Income

3

 

Condensed Consolidated Statements of Shareholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

37

 

 

i


 

Note regarding forward-looking statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, forward-looking statements may be identified by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, they should not be relied upon as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

 

the impact of continued shutdowns related to COVID-19;
the impact of the invasion of Ukraine by Russia and related sanctions imposed by Russia, Belarus and certain regions of Ukraine;
the impact of geopolitical actions, including growing tensions between the U.S. and China;
the impact of increases in logistics, freight and other shipping costs and constraints on logistics and shipping due to labor shortages, container shortages or other constraints;
the impact of continued shortages in supply of key components used in the manufacture of our products;
the unpredictability of our operating results;
our inability to predict and respond to emerging technological trends and network operators' changing needs;
the impact of competitive pressures on the development of new products;
the impact of actual or threatened health epidemics and other outbreaks including the impact of the COVID-19 pandemic;
our limited or sole source suppliers' inability to acquire or produce third-party components to build our products and the impact of supply shortages, extended lead times or changes in supply of components and other parts required to manufacture our products;
our reliance on third-party manufacturers, which subjects us to risks of product delivery delays and reduced control over product costs and quality;
our reliance on distributors and value-added resellers for the substantial majority of our sales;
the inability of our third-party logistics and warehousing providers to deliver products to our channel partners and network operators in a timely manner;
our distributors' and channel partners' inability to attract new network operators or sell additional products to network operators that currently use our products;
the technological complexity of our products, which may contain undetected hardware defects or software bugs or subject our products to the risks of ransomware or malware or other cyber attacks;
our channel partners' inability to effectively manage inventory of our products, timely resell our products or estimate expected future demand;
credit risk of our channel partners, which could adversely affect their ability to purchase or pay for our products;
our inability to maintain an effective system of internal controls, produce timely and accurate financial statements or comply with applicable regulations;
our reliance on the availability of third-party licenses;
risks associated with international sales and operations including risks caused by political tensions;
current or future unfavorable economic conditions, both domestically and in foreign markets; and
our inability to obtain intellectual property protections for our products.

ii


 

 

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

 

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Cambium Networks Corporation

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share data)

 

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2022

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$

59,291

 

 

$

38,397

 

Receivables, net of allowances of $683 and $735

 

 

69,773

 

 

 

64,506

 

Inventories, net

 

 

33,777

 

 

 

40,210

 

Recoverable income taxes

 

 

860

 

 

 

468

 

Prepaid expenses

 

 

12,170

 

 

 

12,741

 

Other current assets

 

 

4,718

 

 

 

5,130

 

Total current assets

 

 

180,589

 

 

 

161,452

 

Noncurrent assets

 

 

 

 

 

 

Property and equipment, net

 

 

10,490

 

 

 

10,732

 

Software, net

 

 

5,867

 

 

 

6,433

 

Operating lease assets

 

 

5,899

 

 

 

5,399

 

Intangible assets, net

 

 

10,777

 

 

 

10,357

 

Goodwill

 

 

9,842

 

 

 

9,842

 

Deferred tax assets, net

 

 

7,604

 

 

 

8,978

 

Other noncurrent assets

 

 

1,200

 

 

 

1,150

 

TOTAL ASSETS

 

$

232,268

 

 

$

214,343

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

28,241

 

 

$

16,543

 

Accrued liabilities

 

 

21,948

 

 

 

25,016

 

Employee compensation

 

 

16,601

 

 

 

6,875

 

Current portion of long-term external debt, net

 

 

2,489

 

 

 

3,138

 

Deferred revenues

 

 

6,880

 

 

 

6,964

 

Other current liabilities

 

 

5,981

 

 

 

6,273

 

Total current liabilities

 

 

82,140

 

 

 

64,809

 

Noncurrent liabilities

 

 

 

 

 

 

Long-term external debt, net

 

 

26,965

 

 

 

26,351

 

Deferred revenues

 

 

5,363

 

 

 

5,647

 

Noncurrent operating lease liabilities

 

 

4,112

 

 

 

3,574

 

Other noncurrent liabilities

 

 

1,551

 

 

 

1,554

 

Total liabilities

 

 

120,131

 

 

 

101,935

 

Shareholders' equity

 

 

 

 

 

 

Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2021 and
  March 31, 2022;
26,892,082 shares issued and 26,735,175 outstanding at December 31, 2021
   and
27,000,204 shares issued and 26,825,097 outstanding at March 31, 2022

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

124,117

 

 

 

126,437

 

Treasury shares, at cost, 156,907 shares at December 31, 2021 and 175,107 shares at
 March 31, 2022

 

 

(3,906

)

 

 

(4,321

)

Accumulated deficit

 

 

(7,378

)

 

 

(8,946

)

Accumulated other comprehensive loss

 

 

(699

)

 

 

(765

)

Total shareholders' equity

 

 

112,137

 

 

 

112,408

 

TOTAL LIABILITIES AND EQUITY

 

$

232,268

 

 

$

214,343

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

Cambium Networks Corporation

Condensed Consolidated Statements of Operations

(in thousands, except for share and per share data)

(unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2022

 

Revenues

 

$

88,515

 

 

$

61,896

 

Cost of revenues

 

 

44,345

 

 

 

32,730

 

Gross profit

 

 

44,170

 

 

 

29,166

 

Operating expenses

 

 

 

 

 

 

Research and development

 

 

11,603

 

 

 

12,102

 

Sales and marketing

 

 

10,040

 

 

 

10,148

 

General and administrative

 

 

7,529

 

 

 

7,665

 

Depreciation and amortization

 

 

1,595

 

 

 

1,446

 

Total operating expenses

 

 

30,767

 

 

 

31,361

 

Operating income (loss)

 

 

13,403

 

 

 

(2,195

)

Interest expense, net

 

 

1,140

 

 

 

497

 

Other expense, net

 

 

42

 

 

 

77

 

Income (loss) before income taxes

 

 

12,221

 

 

 

(2,769

)

Benefit for income taxes

 

 

(7,639

)

 

 

(1,201

)

Net income (loss)

 

$

19,860

 

 

$

(1,568

)

 

 

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

 

 

Basic

 

$

0.76

 

 

$

(0.06

)

Diluted

 

$

0.70

 

 

$

(0.06

)

Weighted-average number of shares outstanding to compute
   net earnings (loss) per share

 

 

 

 

 

 

Basic

 

 

26,115,615

 

 

 

26,749,675

 

Diluted

 

 

28,517,713

 

 

 

26,749,675

 

 

 

 

 

 

 

 

Share-based compensation included in costs and expenses:

 

 

 

 

 

 

Cost of revenues

 

$

19

 

 

$

57

 

Research and development

 

 

517

 

 

 

1,022

 

Sales and marketing

 

 

295

 

 

 

627

 

General and administrative

 

 

579

 

 

 

714

 

Total share-based compensation

 

$

1,410

 

 

$

2,420

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

Cambium Networks Corporation

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2022

 

Net income (loss)

 

$

19,860

 

 

$

(1,568

)

Other comprehensive loss

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(65

)

 

 

(66

)

Comprehensive income (loss)

 

$

19,795

 

 

$

(1,634

)

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

Cambium Networks Corporation

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31, 2021

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
paid in
capital

 

 

Treasury
shares

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total
shareholders'
equity

 

Balance at December 31, 2020

 

 

26,035

 

 

$

3

 

 

$

109,837

 

 

$

(1,090

)

 

$

(44,799

)

 

$

(564

)

 

$

63,387

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,860

 

 

 

 

 

 

19,860

 

Share-based compensation

 

 

 

 

 

 

 

 

1,259

 

 

 

 

 

 

 

 

 

 

 

 

1,259

 

Issuance of vested shares

 

 

121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares withheld for net settlement

 

 

(41

)

 

 

 

 

 

 

 

 

(2,011

)

 

 

 

 

 

 

 

 

(2,011

)

Share options exercised

 

 

184

 

 

 

 

 

 

1,971

 

 

 

 

 

 

 

 

 

 

 

 

1,971

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

(65

)

Balance at March 31, 2021

 

 

26,299

 

 

$

3

 

 

$

113,067

 

 

$

(3,101

)

 

$

(24,939

)

 

$

(629

)

 

$

84,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
paid in
capital

 

 

Treasury
shares

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total
shareholders'
equity

 

Balance at December 31, 2021

 

 

26,735

 

 

$

3

 

 

$

124,117

 

 

$

(3,906

)

 

$

(7,378

)

 

$

(699

)

 

$

112,137

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,568

)

 

 

 

 

 

(1,568

)

Share-based compensation

 

 

 

 

 

 

 

 

2,174

 

 

 

 

 

 

 

 

 

 

 

 

2,174

 

Issuance of vested shares

 

 

94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares withheld for net settlement

 

 

(18

)

 

 

 

 

 

 

 

 

(415

)

 

 

 

 

 

 

 

 

(415

)

Share options exercised

 

 

14

 

 

 

 

 

 

146

 

 

 

 

 

 

 

 

 

 

 

 

146

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66

)

 

 

(66

)

Balance at March 31, 2022

 

 

26,825

 

 

$

3

 

 

$

126,437

 

 

$

(4,321

)

 

$

(8,946

)

 

$

(765

)

 

$

112,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

Cambium Networks Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months ended March 31,

 

 

 

2021

 

 

2022

 

Cash flows from operating activities:

 

 

Net income (loss)

 

$

19,860

 

 

$

(1,568

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

863

 

 

 

870

 

Amortization of software and intangible assets

 

 

857

 

 

 

920

 

Amortization of debt issuance costs

 

 

137

 

 

 

77

 

Share-based compensation

 

 

1,410

 

 

 

2,420

 

Deferred income taxes

 

 

(6,367

)

 

 

(1,373

)

Provision for inventory excess and obsolescence

 

 

(709

)

 

 

52

 

Other

 

 

(31

)

 

 

81

 

Change in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(11,700

)

 

 

6,152

 

Inventories

 

 

3,236

 

 

 

(6,485

)

Prepaid expenses

 

 

(3,099

)

 

 

(578

)

Accounts payable

 

 

(6,777

)

 

 

(12,109

)

Accrued employee compensation

 

 

(6,003

)

 

 

(10,276

)

Accrued liabilities

 

 

2,221

 

 

 

2,129

 

Other assets and liabilities

 

 

(1,460

)

 

 

463

 

Net cash used in operating activities

 

 

(7,562

)

 

 

(19,225

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(814

)

 

 

(714

)

Purchase of software

 

 

(798

)

 

 

(1,068

)

Net cash used in investing activities

 

 

(1,612

)

 

 

(1,782

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of term loan

 

 

(2,500

)

 

 

 

Taxes paid from shares withheld

 

 

(1,563

)

 

 

(42

)

Proceeds from share option exercises

 

 

1,971

 

 

 

146

 

Net cash (used in) provided by financing activities

 

 

(2,092

)

 

 

104

 

Effect of exchange rate on cash

 

 

(24

)

 

 

9

 

Net decrease in cash

 

 

(11,290

)

 

 

(20,894

)

Cash, beginning of period

 

 

62,472

 

 

 

59,291

 

Cash, end of period

 

$

51,182

 

 

$

38,397

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Income taxes paid

 

$

92

 

 

$

116

 

Interest paid

 

$

773

 

 

$

95

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

Cambium Networks Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Business and significant accounting policies

Business

Cambium Networks Corporation (“Cambium” or “Cambium Networks” or the “Company”), incorporated under the laws of the Cayman Islands, is a holding company whose principal operating entities are Cambium Networks, Ltd. (UK), Cambium Networks, Inc. (USA), and Cambium Networks Private Limited (India). On October 28, 2011, Cambium acquired the point-to-point (“PTP”) and point-to-multi-point (“PMP”) businesses from Motorola Solutions, Inc. in an acquisition funded by investment funds affiliated with Vector Capital and Cambium Networks became the renamed entity subsequent to the acquisition. Cambium Networks completed an initial public offering of its ordinary shares and listed its ordinary shares on The NASDAQ Global Market in June 2019.

Cambium Networks Corporation and its wholly owned subsidiaries provide fixed wireless broadband and Wi-Fi networking infrastructure solutions that work for businesses, communities and cities worldwide. Cambium Networks’ radios are deployed to connect people, places and things with a unified wireless fabric that spans multiple standards and frequencies of fixed wireless and Wi-Fi, all managed centrally via the cloud. The Company’s solutions are deployed in networks by service providers, enterprises, industrial and government connectivity solutions in urban, suburban and rural environments.

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Cambium Networks Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of March 31, 2022, and for the three-month periods ended March 31, 2021 and 2022, and the related notes are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements, and, in the opinion of management, reflect all adjustments, which comprise only normal recurring adjustments necessary to state fairly the Company’s financial position as of March 31, 2022 and results of operations for the three-month periods ended March 31, 2021 and 2022 and cash flows for the three-month periods ended March 31, 2021 and 2022. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principals generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and related notes thereto for the year ended December 31, 2021 included in the Company’s annual report on Form 10-K and filed with the SEC on February 24, 2022. The results of operations for the three-month period ended March 31, 2022 are not necessarily indicative of the operating results to be expected for the full year.

Update to Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies disclosed in the 2021 Form 10-K, Part II, Item 8.

Note 2. Fair value

The fair value of the Company’s external debt under its BofA Credit Agreement (as defined below) approximates its carrying value due to the floating interest rate (Level 2 of the fair value hierarchy). The fair value of the Company’s BofA Credit Agreement was $30.0 million and $30.0 million as of December 31, 2021 and March 31, 2022, respectively.

The fair value of cash approximates its carrying value (Level 1 of the fair value hierarchy)

6


 

Note 3. Balance sheet components

Inventories, net

Inventories, net consisted of the following (in thousands):

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2022

 

 

 

 

 

 

(unaudited)

 

Finished goods

 

$

31,991

 

 

$

38,520

 

Raw materials

 

 

7,353

 

 

 

7,309

 

Gross inventory

 

 

39,344

 

 

 

45,829

 

Less: Excess and obsolete provision

 

 

(5,567

)

 

 

(5,619

)

Inventories, net

 

$

33,777

 

 

$

40,210

 

 

Accrued liabilities

 

Accrued liabilities consisted of the following (in thousands):