Cambium Networks Reports First Quarter 2020 Financial Results
- Revenues of
$60.4 million , above the high-end of outlook - Enterprise Wi-Fi revenues, increased 106% year-over-year
- Gross margin of 50.7%, non-GAAP(1) gross margin of 51.0%
- Net loss of
$0.8 million or$0.03 per diluted share, non-GAAP(1) net income of$1.4 million or$0.05 per diluted share - Adjusted EBITDA(1) of
$4.4 million or 7.3% of revenues
GAAP | Non-GAAP (1) | ||||||||||||||||||||||
(in millions, except percentages) | Q1 2020 | Q4 2019 | Q1 2019 | Q1 2020 | Q4 2019 | Q1 2019 | |||||||||||||||||
Revenues | $ | 60.4 | $ | 64.1 | $ | 68.1 | $ | 60.4 | $ | 64.1 | $ | 68.1 | |||||||||||
Gross margin | 50.7 | % | 52.0 | % | 46.7 | % | 51.0 | % | 52.4 | % | 46.8 | % | |||||||||||
Operating margin | 0.6 | % | 2.9 | % | 6.9 | % | 5.0 | % | 6.6 | % | 7.4 | % | |||||||||||
Adjusted EBITDA margin | 7.3 | % | 8.2 | % | 8.9 | % | |||||||||||||||||
[1]Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers and for reconciliation of adjusted EBITDA for the first quarter ended
“I am pleased revenues came in above the high-end of our outlook during a period of extreme uncertainty in the world,” said
Bhatnagar continued, “Our technology leadership in fixed wireless broadband infrastructure will be driven by a new upgrade cycle to gigabit wireless solutions including our 60 GHz and 28 GHz millimeter wave and cloud powered enterprise Wi-Fi 6 solutions.”
Revenues of
Non-GAAP gross margin for the first quarter 2020 was 51.0%, compared to 46.8% for the first quarter 2019, and 52.4% for the fourth quarter 2019. Non-GAAP operating income for the first quarter 2020 was
Cash used in operating activities was
First Quarter 2020 Highlights
- Revenues of
$60.4 million , above the high-end of outlook. - Enterprise Wi-Fi revenues increased 106% year-over-year.
- GAAP gross margin of 50.7%, up 400 basis points from 46.7% for the first quarter 2019.
- Non-GAAP gross margin of 51.0%, up 420 basis points from 46.8% for the first quarter 2019.
- GAAP net loss of
$0.8 million or$0.03 per diluted share, non-GAAP net income of$1.4 million or$0.05 per diluted share. - Adjusted EBITDA of
$4.4 million or 7.3% of revenues, compared to$6.0 million or 8.9% of revenues for the first quarter 2019, and$5.3 million or 8.2% of revenues for the fourth quarter 2019. - Increased new channel partners by over 1,550 year-over-year, an increase of 26%.
- Added Arrow in
North America andNuvias Group in EMEA as distribution partners forXirrus enterprise Wi-Fi solutions. - Devices under cnMaestro® Cloud management increased 61% year-over-year.
- Over 7,800 devices are managed by Cambium Networks’ CBRS SaaS Service.
Second Quarter 2020 Financial Outlook
Taking into account our current visibility, the financial outlook as of
- GAAP revenues between
$51.0-$56.0 million - GAAP gross margin between 48.2%-49.2%; and non-GAAP gross margin between 48.5%-49.5%
- GAAP operating (loss) income between (
$1.1 )-$0.8 million ; and non-GAAP operating income between$1.1-$3.0 million - GAAP net loss between
$1.9-$0.5 million or between$0.07 and$0.02 per diluted share; and non-GAAP net (loss) income between ($0.1 )-$1.3 million or between ($0.00 ) and$0.05 per diluted share - Adjusted EBITDA between
$2.1-$4.0 million ; and adjusted EBITDA margin between 4.2%-7.2% - GAAP taxes between 19.0%-21.0%; and a non-GAAP effective tax rate of approximately 17.0%-19.0%
- Approximately 25.7 million weighted average diluted shares outstanding
Cash requirements are expected to be as follows:
- Paydown of debt:
$2.5 million - Interest expense: approximately
$1.1 million - Capital expenditures:
$0.7-$0.9 million - Pre-tax restructuring charges:
$0.2-$0.3 million
Full Year 2020 Financial Outlook
- The company has withdrawn its previously announced full year 2020 financial outlook due to the rapidly evolving uncertainty surrounding the effects of the COVID-19 virus although we do expect to generate positive cash flow during 2020.
Conference Call and Webcast
In addition,
About
Cautionary Note Regarding Forward-Looking Statements
This release contains certain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this document, 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, you can identify forward-looking statements 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 document 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 document and are subject to a number of risks, uncertainties and assumptions including those described in the “Risk factors” section of our 2019 Form 10-K filed with the
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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION | |||||||||||
(In thousands, except share and per share amounts) | |||||||||||
(Unaudited) | |||||||||||
Three months ended | |||||||||||
Revenues | $ | 60,429 | $ | 64,062 | $ | 68,112 | |||||
Cost of revenues | 29,797 | 30,767 | 36,322 | ||||||||
Gross profit | 30,632 | 33,295 | 31,790 | ||||||||
Gross margin | 50.7 | % | 52.0 | % | 46.7 | % | |||||
Operating expenses | |||||||||||
Research and development | 11,814 | 12,126 | 10,482 | ||||||||
Sales and marketing | 10,304 | 11,445 | 10,218 | ||||||||
General and administrative | 6,446 | 5,936 | 5,130 | ||||||||
Depreciation and amortization | 1,695 | 1,901 | 1,281 | ||||||||
Total operating expenses | 30,259 | 31,408 | 27,111 | ||||||||
Operating income | 373 | 1,887 | 4,679 | ||||||||
Operating margin | 0.6 | % | 2.9 | % | 6.9 | % | |||||
Interest expense, net | 1,345 | 1,402 | 2,268 | ||||||||
Other (income) expense, net | (216 | ) | 295 | 134 | |||||||
(Loss) income before income taxes | (756 | ) | 190 | 2,277 | |||||||
Provision for income taxes | 82 | 1,239 | 415 | ||||||||
Net (loss) income | $ | (838 | ) | $ | (1,049 | ) | $ | 1,862 | |||
(Loss) income per share | |||||||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.04 | ) | $ | 0.14 | |||
Weighted-average number of shares outstanding to compute net (loss) income per share | |||||||||||
Basic and diluted | 25,677,179 | 25,635,050 | 13,600,411 | ||||||||
Share-based compensation included in costs and expenses: | |||||||||||
Cost of revenues | $ | 17 | $ | 15 | $ | — | |||||
Research and development | 368 | 301 | — | ||||||||
Sales and marketing | 232 | 204 | — | ||||||||
General and administrative | 194 | 270 | — | ||||||||
Total share-based compensation expense | $ | 811 | $ | 790 | $ | — | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
ASSETS | (Unaudited) | ||||||
Current assets | |||||||
Cash | $ | 24,493 | $ | 19,346 | |||
Accounts receivable, net of allowance | 61,606 | 58,628 | |||||
Inventories, net | 32,499 | 41,670 | |||||
Recoverable income taxes | 46 | — | |||||
Prepaid expenses | 4,078 | 5,323 | |||||
Other current assets | 4,944 | 4,350 | |||||
Total current assets | 127,666 | 129,317 | |||||
Noncurrent assets | |||||||
Property and equipment, net | 8,264 | 8,314 | |||||
Software, net | 3,185 | 3,395 | |||||
Operating lease assets | 6,443 | 6,872 | |||||
Intangible assets, net | 14,548 | 15,100 | |||||
9,493 | 8,552 | ||||||
Deferred tax assets, net | 815 | 929 | |||||
Other noncurrent assets | 417 | — | |||||
TOTAL ASSETS | $ | 170,831 | $ | 172,479 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 16,528 | $ | 25,214 | |||
Accrued liabilities | 15,017 | 15,034 | |||||
Employee compensation | 5,097 | 4,652 | |||||
Current portion of long-term external debt, net | 9,454 | 9,454 | |||||
Deferred revenues | 6,331 | 7,430 | |||||
Other current liabilities | 7,400 | 6,084 | |||||
Total current liabilities | 59,827 | 67,868 | |||||
Noncurrent liabilities | |||||||
Long-term external debt, net | 61,795 | 54,158 | |||||
Deferred revenues | 4,337 | 4,852 | |||||
Noncurrent operating lease liabilities | 4,724 | 5,335 | |||||
Deferred tax liabilities, net | 61 | 337 | |||||
Other noncurrent liabilities | 520 | — | |||||
Total liabilities | 131,264 | 132,550 | |||||
Shareholders' equity | |||||||
Share capital; |
3 | 3 | |||||
Additional paid in capital | 105,584 | 104,773 | |||||
(1,041 | ) | (1,094 | ) | ||||
Accumulated deficit | (64,212 | ) | (63,374 | ) | |||
Accumulated other comprehensive loss | (767 | ) | (379 | ) | |||
Total shareholders’ equity | 39,567 | 39,929 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 170,831 | $ | 172,479 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | |||||||||||
Cash flows from operating activities: | |||||||||||
Net (loss) income | $ | (838 | ) | $ | (1,049 | ) | $ | 1,862 | |||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||||||||
Depreciation and amortization | 1,845 | 2,046 | 1,360 | ||||||||
Amortization of debt issuance costs | 137 | 136 | 165 | ||||||||
Share-based compensation | 811 | 790 | — | ||||||||
Deferred income taxes | (162 | ) | (97 | ) | 310 | ||||||
Other | 522 | (95 | ) | 866 | |||||||
Change in assets and liabilities: | |||||||||||
Receivables | (2,172 | ) | (31 | ) | (3,487 | ) | |||||
Inventories | 8,698 | 1,028 | (2,651 | ) | |||||||
Accounts payable | (8,546 | ) | 3,753 | 1,830 | |||||||
Accrued employee compensation | 547 | (329 | ) | 1,391 | |||||||
Other assets and liabilities | (1,633 | ) | (7 | ) | 1,609 | ||||||
Net cash (used in) provided by operating activities | (791 | ) | 6,145 | 3,255 | |||||||
Cash flows from investing activities: | |||||||||||
Purchase of property and equipment | (1,053 | ) | (467 | ) | (1,128 | ) | |||||
Purchase of software | (157 | ) | (72 | ) | (383 | ) | |||||
Cash paid for acquisition | (334 | ) | (2,666 | ) | — | ||||||
Net cash used in investing activities | (1,544 | ) | (3,205 | ) | (1,511 | ) | |||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of revolver debt | 10,000 | — | — | ||||||||
Repayment of term loan | (2,500 | ) | (2,375 | ) | (2,375 | ) | |||||
Payment of deferred offering costs | — | (181 | ) | — | |||||||
Taxes paid related to net share settlement of equity awards | 52 | — | — | ||||||||
Net cash provided by (used in) financing activities | 7,552 | (2,556 | ) | (2,375 | ) | ||||||
Effect of exchange rate on cash | (70 | ) | 12 | (9 | ) | ||||||
Net increase (decrease) in cash | 5,147 | 396 | (640 | ) | |||||||
Cash, beginning of period | 19,346 | 18,950 | 4,441 | ||||||||
Cash, end of period | $ | 24,493 | $ | 19,346 | $ | 3,801 | |||||
Supplemental disclosure of cash flow information: | |||||||||||
Income taxes paid | $ | 149 | $ | 270 | $ | 201 | |||||
Interest paid | $ | 1,117 | $ | 1,185 | $ | 1,950 | |||||
SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
REVENUES BY PRODUCT TYPE | ||||||||
Three Months Ended | ||||||||
Point-to-Multi-Point | $ | 34,867 | $ | 33,244 | $ | 42,327 | ||
13,110 | 18,178 | 19,634 | ||||||
Wi-Fi | 11,481 | 11,521 | 5,586 | |||||
Other | 971 | 1,119 | 565 | |||||
Total Revenues | $ | 60,429 | $ | 64,062 | $ | 68,112 | ||
REVENUES BY REGION | ||||||||
Three Months Ended | ||||||||
$ | 31,035 | $ | 29,113 | $ | 34,364 | |||
18,744 | 19,217 | 21,970 | ||||||
5,230 | 8,240 | 7,099 | ||||||
5,420 | 7,492 | 4,679 | ||||||
Total Revenues | $ | 60,429 | $ | 64,062 | $ | 68,112 | ||
Use of non-GAAP (Adjusted) Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in
Accordingly, we believe that these financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business and provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects. Excluding these non-GAAP measures eliminate the variability caused by share-based compensation as a result of the variety of equity awards used by other companies and the varying methodologies and assumptions used, the variability caused by purchase accounting and provide a more relevant measure of operating performance. Although the calculation of non-GAAP financial measures may vary from company to company, our detailed presentation may facilitate analysis and comparison of our operating results by management and investors with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results in their public disclosures. These non-GAAP financial measures are discussed below.
Adjusted EBITDA is defined as net income as reported in our consolidated statements of income excluding the impact of (i) interest expense (income), net; (ii) income tax provision (benefit); (iii) depreciation and amortization expense; (iv) Sponsor management fees associated with advisory services, (v) share-based compensation expense, (vi) one-time acquisition costs, and (vii) restructuring expenses. EBITDA is widely used by securities analysts, investors and other interested parties to evaluate the profitability of companies. EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting net finance costs), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). We adjust EBITDA to also exclude Sponsor management fees, in order to eliminate the impact on reported performance caused by these fees, which are related to our past ownership structure. We adjust EBITDA for share-based compensation expense which is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond
Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP operating margin, non-GAAP effective tax rate and non-GAAP net income are used as a supplement to our unaudited condensed consolidated financial statements presented in accordance with GAAP. We believe these non-GAAP measures are the most meaningful for period to period comparisons because they exclude the impact of share-based compensation expense, amortization of acquired intangibles, and amortization of capitalized software costs as we do not consider these costs and expenses to be indicative of our ongoing operations.
Share-based compensation expense and associated employment taxes paid are excluded. Management may issue different types of awards, including share options, restricted share awards and restricted share units, as well as awards with performance or other market characteristics, and excludes the associated expense in this non-GAAP measure. Share-based compensation expense is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond
Amortization of acquired intangibles includes customer relationships, unpatented technology, patents, software, and trademarks, and are excluded since these are not indicative of continuing operations.
Amortization of capitalized software costs include capitalized research and development activities amortized over their useful life and included in cost of revenues and are excluded since these are not indicative of continuing operations.
Acquisition and integration costs consist of legal and professional fees relating to the acquisition of
One-time charges associated with the completion of an acquisition including items such as contract termination costs, severance and other acquisition-related restructuring costs; costs incurred in connection with integration activities; and legal and accounting costs.
Restructuring expenses primarily consist of severance costs for employees which are not related to future operating expenses.
Our non-GAAP tax adjustments include the tax impacts from share-based compensation expense including excess or decremental tax benefits available to the company that are recorded when incurred, one-time and ongoing impacts from the company's valuation allowance recognized in the quarter ended
Non-GAAP fully weighted basic and diluted shares are shown as outstanding during the entire period presented and include dilutive shares, if their effect to earnings per share is dilutive. We also use non-GAAP fully weighted basic and diluted shares to provide more comparable per-share results across periods.
These non-GAAP financial measures do not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP. There are limitations in the use of non-GAAP measures, because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment concerning exclusions of items from the comparable non-GAAP financial measure. In addition, other companies may use other measures to evaluate their performance, or may calculate non-GAAP measures differently, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. We present a “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” in the tables below.
The following table reconciles net (loss) income to Adjusted EBITDA, the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):
SUPPLEMENTAL SCHEDULE OF NON-GAAP ADJUSTED EBITDA | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
Three months ended | |||||||||||
Net (loss) income | $ | (838 | ) | $ | (1,049 | ) | $ | 1,862 | |||
Interest expense, net | 1,345 | 1,402 | 2,268 | ||||||||
Provision for income taxes | 82 | 1,239 | 415 | ||||||||
Depreciation and amortization | 1,845 | 2,046 | 1,360 | ||||||||
EBITDA | 2,434 | 3,638 | 5,905 | ||||||||
Share-based compensation | 811 | 915 | — | ||||||||
Sponsor management fee | — | — | 125 | ||||||||
— | 74 | — | |||||||||
Restructuring expense | 1,152 | 644 | — | ||||||||
Adjusted EBITDA | $ | 4,397 | $ | 5,271 | $ | 6,030 | |||||
Adjusted EBITDA Margin | 7.3 | % | 8.2 | % | 8.9 | % | |||||
The following table reconciles all other GAAP to non-GAAP financial measures (in thousands):
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES | |||||||||||
(In thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | |||||||||||
GAAP gross profit | $ | 30,632 | $ | 33,295 | $ | 31,790 | |||||
Share-based compensation expense | 17 | 15 | — | ||||||||
Amortization of capitalized software costs | 150 | 145 | 79 | ||||||||
Restructuring expense | — | 117 | — | ||||||||
Non-GAAP gross profit | $ | 30,799 | $ | 33,572 | $ | 31,869 | |||||
Non-GAAP gross margin | 51.0 | % | 52.4 | % | 46.8 | % | |||||
GAAP research and development expense | $ | 11,814 | $ | 12,126 | $ | 10,482 | |||||
Share-based compensation expense | 368 | 426 | — | ||||||||
Restructuring expense | 639 | 131 | — | ||||||||
Non-GAAP research and development expense | $ | 10,807 | $ | 11,569 | $ | 10,482 | |||||
GAAP sales and marketing expense | $ | 10,304 | $ | 11,445 | $ | 10,218 | |||||
Share-based compensation expense | 232 | 204 | — | ||||||||
Restructuring expense | 513 | 362 | — | ||||||||
Non-GAAP sales and marketing expense | $ | 9,559 | $ | 10,879 | $ | 10,218 | |||||
GAAP general and administrative expense | $ | 6,446 | $ | 5,936 | $ | 5,130 | |||||
Share-based compensation expense | 194 | 270 | — | ||||||||
— | 74 | — | |||||||||
Restructuring expense | — | 34 | — | ||||||||
Non-GAAP general and administrative expense | $ | 6,252 | $ | 5,558 | $ | 5,130 | |||||
GAAP depreciation and amortization | $ | 1,695 | $ | 1,901 | $ | 1,281 | |||||
Amortization of acquired intangibles | 551 | 593 | 293 | ||||||||
Non-GAAP depreciation and amortization | $ | 1,144 | $ | 1,308 | $ | 988 | |||||
GAAP operating income | $ | 373 | $ | 1,887 | $ | 4,679 | |||||
Share-based compensation expense | 811 | 915 | — | ||||||||
Amortization of capitalized software costs | 150 | 145 | 79 | ||||||||
Amortization of acquired intangibles | 551 | 593 | 293 | ||||||||
— | 74 | — | |||||||||
Restructuring expense | 1,152 | 644 | — | ||||||||
Non-GAAP operating income | $ | 3,037 | $ | 4,258 | $ | 5,051 | |||||
GAAP pre-tax income (loss) | $ | (756 | ) | $ | 190 | $ | 2,277 | ||||
Share-based compensation expense | 811 | 915 | — | ||||||||
Amortization of capitalized software costs | 150 | 145 | 79 | ||||||||
Amortization of acquired intangibles | 551 | 593 | 293 | ||||||||
— | 74 | — | |||||||||
Restructuring expense | 1,152 | 644 | — | ||||||||
Non-GAAP pre-tax income | $ | 1,908 | $ | 2,561 | $ | 2,649 | |||||
GAAP provision (benefit) for income taxes | $ | 82 | $ | 1,239 | $ | 415 | |||||
Valuation allowance impacts | — | 1,361 | — | ||||||||
Tax impacts of share vesting | 3 | 277 | — | ||||||||
Tax effect of share-based compensation expense, amortization of acquired intangibles, |
(533 | ) | (688 | ) | (67 | ) | |||||
All other discrete items | 61 | — | 6 | ||||||||
Non-GAAP provision for income taxes | $ | 551 | $ | 289 | $ | 476 | |||||
Non-GAAP ETR | 28.9 | % | 11.3 | % | 18.0 | % | |||||
GAAP net (loss) income | $ | (838 | ) | $ | (1,049 | ) | $ | 1,862 | |||
Share-based compensation expense | 811 | 915 | — | ||||||||
Amortization of capitalized software costs | 150 | 145 | 79 | ||||||||
Amortization of acquired intangibles | 551 | 593 | 293 | ||||||||
— | 74 | — | |||||||||
Restructuring expense | 1,152 | 644 | — | ||||||||
Non-GAAP adjustments to tax | 64 | 1,638 | 6 | ||||||||
Tax effect of share-based compensation expense, amortization of acquired intangibles, |
(533 | ) | (688 | ) | (67 | ) | |||||
Non-GAAP net income | $ | 1,357 | $ | 2,272 | $ | 2,173 | |||||
1.0 | % | ||||||||||
Non-GAAP fully weighted basic and diluted shares | 25,680 | 25,673 | 13,600 | ||||||||
Non-GAAP net income per Non-GAAP fully weighted basic and diluted shares | $ | 0.05 | $ | 0.09 | $ | 0.16 | |||||
Investor Inquiries:
Sr. Director Investor & Industry Analyst Relations
+1 (847) 264-2188
peter.schuman@cambiumnetworks.com
Source: Cambium Networks