cmbm-8k_20201105.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2020

  

CAMBIUM NETWORKS CORPORATION

(Exact name of registrant as specified in its charter)

  

 

Cayman Islands

001-38952

Not Applicable

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification Number)

c/o Cambium Networks, Inc.

3800 Golf Road, Suite 360

Rolling Meadows, Illinois 60008

(Address of principal executive offices)

+1 (345) 943-3100

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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, par value $0.0001 per share

 

CMBM

 

Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

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.

 

 

 


Item 2.02

Results of Operations and Financial Condition

On November 5, 2020, Cambium Networks Corporation (the “Company”) issued a press release announcing financial results for the three-month period ended September 30, 2020. The press release contains forward-looking statements regarding the Company, and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.

The press release dated November 5, 2020 is furnished herewith as Exhibit 99.1. The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

 

Item 9.01(d)

Exhibits

 

Exhibit No.

  

Description

 

 

99.1

  

Press release dated November 5, 2020

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

CAMBIUM NETWORKS CORPORATION

 

 

 

 

Dated: November 5, 2020

 

 

 

By:

 

/s/ STEPHEN CUMMING

 

 

 

 

Name:

 

Stephen Cumming

 

 

 

 

Title:

 

Chief Financial Officer

 

cmbm-ex991_8.htm

Exhibit 99.1

  

 

 

Cambium Networks Reports Third Quarter 2020 Financial Results

 

 

Record revenues of $73.0 million, increased 17% sequentially, up 11% year-over-year

 

Gross margin of 49.4%, non-GAAP(1) gross margin of 49.7%

 

Record net income of $5.6 million or $0.21 per diluted share, record non-GAAP(1) net income of $7.8 million or $0.29 per diluted share

 

Adjusted EBITDA(1) of $11.4 million or 15.6% of revenues

 

Net cash provided by operating activities $16.4 million

 

Launched breakthrough 60 GHz cnWave fixed wireless broadband, offering multi-gigabit performance at a fraction of the cost of fiber

 

ROLLING MEADOWS, IL., Nov. 5, 2020 — Cambium Networks Corporation (“Cambium Networks”) (NASDAQ: CMBM), a leading provider of wireless networking infrastructure solutions, today announced financial results for the third quarter 2020 ended September 30, 2020.

 

 

GAAP

 

 

Non-GAAP (1)

 

(in millions, except percentages)

 

Q3 2020

 

 

Q2 2020

 

 

Q3 2019

 

 

Q3 2020

 

 

Q2 2020

 

 

Q3 2019

 

Revenues

 

$

73.0

 

 

$

62.3

 

 

$

65.7

 

 

$

73.0

 

 

$

62.3

 

 

$

65.7

 

Gross margin

 

 

49.4

%

 

 

48.9

%

 

 

48.4

%

 

 

49.7

%

 

 

49.2

%

 

 

48.7

%

Operating margin

 

 

10.0

%

 

 

7.7

%

 

 

6.3

%

 

 

14.6

%

 

 

10.4

%

 

 

8.8

%

Adjusted EBITDA margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.6

%

 

 

12.3

%

 

 

10.3

%

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 third quarter ended September 30, 2020.

 

“We delivered record revenues and profitability during the third quarter 2020 as demand for wireless broadband connectivity continued to grow,” said Atul Bhatnagar, president and CEO. “We had strong demand across our technology portfolio as Cambium is at the forefront of closing the digital divide with the support of our customers and partners. This need for fixed wireless broadband infrastructure and technology upgrades to new gigabit wireless solutions is now rolling-out with our cloud powered enterprise Wi-Fi 6 solutions, 60 GHz millimeter wave products, CBRS solutions, and during 2021 with our new 5G solutions.”

Bhatnagar continued, “Cambium is one of the few, if not the only wireless company deploying a multi-gigabit wireless fabric under a single pane of glass. With the addition of our new 60 GHz millimeter wave solutions, Cambium is changing the economics of broadband by bringing cost-effective access at multi-gigabit wireless speeds to homes and businesses everywhere. Given our new product momentum, we expect a strong finish to the calendar year and are very well positioned for our next stage of growth.”


Revenues of $73.0 million for the third quarter 2020 increased $7.3 million year-over-year as a result of strong demand for Point-to-Multi-Point products, and increased Point-to-Point revenues from improved federal busines. Revenues for the third quarter 2020 increased by $10.7 million compared to $62.3 million for the second quarter 2020, due to a recovery in Point-to-Point revenues from increased federal purchases, higher Point-to-Multi-Point revenues due to service providers continuing to scale networks due to requests for increased capacity, and a strong recovery in enterprise Wi-Fi solutions driven by improved field deployments and the transition to Wi-Fi 6 solutions.

GAAP gross margin for the third quarter 2020 was 49.4%, compared to 48.4% for the third quarter 2019, and 48.9% for the second quarter 2020. GAAP operating income for the third quarter 2020 was $7.3 million, compared to $4.1 million for the third quarter 2019, and $4.8 million for the second quarter 2020. Record GAAP net income for the third quarter 2020 was $5.6 million, or net earnings of $0.21 per diluted share, compared to $2.0 million, or $0.08 per diluted share for the third quarter 2019, and $3.3 million, or net earnings of $0.13 per diluted share for the second quarter 2020.

Non-GAAP gross margin for the third quarter 2020 was 49.7%, compared to 48.7% for the third quarter 2019, and 49.2% for the second quarter 2020. Non-GAAP operating income for the third quarter 2020 was $10.6 million, compared to $5.8 million for the third quarter 2019, and $6.5 million for the second quarter 2020. Non-GAAP net income for the third quarter 2020 was a record $7.8 million, or $0.29 per diluted share, compared to $3.7 million, or $0.15 per diluted share for the third quarter 2019, and $4.3 million, or $0.16 per diluted share for the second quarter 2020. For the third quarter 2020, adjusted EBITDA was $11.4 million or 15.6% of revenues, compared to adjusted EBITDA of $6.8 million or 10.3% of revenues for the third quarter 2019, and $7.7 million or 12.3% of revenues for the second quarter 2020.

Cash provided by operating activities was $16.4 million for the third quarter 2020, compared to cash used in operating activities of $11.8 million for the third quarter 2019, and $26.2 million cash provided by operating activities for the second quarter 2020. Cash totaled $50.1 million as of September 30, 2020, $31.2 million higher than September 30, 2019, due primarily to higher earnings, strong working capital management from lower inventories, reduced accounts receivable, and lower interest payments due to a reduction in long-term debt. The increase in cash balance of $12.7 million from June 30, 2020 was primarily the result of an increase in net income and improved working capital management.

Third Quarter 2020 Highlights

 

Record revenues of $73.0 million, up 17% sequentially, an increase of 11% year-over-year.

 

Record GAAP net income of $5.6 million or $0.21 per diluted share, record non-GAAP net income of $7.8 million or $0.29 per diluted share.

 

Adjusted EBITDA of $11.4 million or 15.6% of revenues, compared to $6.8 million or 10.3% of revenues for the third quarter 2019, and $7.7 million or 12.3% of revenues for the second quarter 2020.

 

Net cash provided by operating activities $16.4 million.


 

Increased new channel partners by over 2,100 year-over-year, an increase of 33%.

 

Devices under cnMaestro® Cloud management increased 47% year-over-year.

 

Launched breakthrough 60 GHz cnWave fixed wireless broadband, offering multi-gigabit performance at a fraction of the cost of fiber.

 

Fourth Quarter 2020 Financial Outlook

Taking into account our current visibility, the financial outlook as of November 5, 2020 for the fourth quarter ending December 31, 2020 is expected to be as follows:

 

Revenues between $74.0-$78.0 million

 

GAAP gross margin between 48.9%-50.0%; and non-GAAP gross margin between 49.2%-50.2%

 

GAAP operating income between $7.3-$9.1 million; and non-GAAP operating income between $9.3-$11.0 million

 

Interest expense, net of approximately $1.4 million

 

GAAP net income between $5.0-$6.1 million or between $0.18 and $0.22 per diluted share; and non-GAAP net income between $6.5-$7.6 million or between $0.24 and $0.28 per diluted share

 

Adjusted EBITDA between $10.3-$11.9 million; and adjusted EBITDA margin between 13.9%-15.3%

 

GAAP taxes between 16.0%-19.0%; and a non-GAAP effective tax rate of approximately 17.0%-19.0%

 

Approximately 27.6 million weighted average diluted shares outstanding

 

Cash requirements are expected to be as follows:

 

Paydown of debt: $2.5 million

 

Cash flow interest expense: approximately $0.9 million

 

Capital expenditures: $1.3-$1.7 million

 

Cambium Networks financial outlook does not include the potential impact of any possible future financial transactions, pending legal matters, or other transactions.  Accordingly, Cambium Networks only includes such items in the company’s financial outlook to the extent they are reasonable; however, actual results may differ materially from the outlook.

 

Conference Call and Webcast

Cambium Networks will host a live webcast and conference call to discuss its financial results at 4:30 p.m. ET today, Nov. 5, 2020. To access the live conference call by phone, listeners should dial +1(877) 288-4394 in the U.S. or Canada and +1 (470) 495-9483 for international callers, referencing conference ID number


3814699. To join the live webcast and view additional materials, listeners should access the investor page of Cambium Networks website at https://investors.cambiumnetworks.com/. Following the live webcast, a replay will be available on the investor page of Cambium Networks website for a period of one year. A replay of the conference call will be available for 48 hours soon after the call by phone by dialing +1 (855) 859-2056 in the U.S. or Canada and +1 (404) 537-3406 for international callers, using the conference ID number 3814699.

In addition, Cambium Networks President and CEO, Atul Bhatnagar, will present and hold one-on-one meetings with investors on Tuesday Nov. 10, 2020 at the JMP Securities Small Cap Tech Forum; Wednesday, Nov. 11 at the ROTH Capital Virtual Technology event; on Tuesday, Nov. 17, 2020 at the Needham Virtual Networking, Security, and Communications Conference; at the Raymond James Virtual Technology Conference on Tuesday Dec. 8, 2020; and at the Oppenheimer 5G Summit on Tuesday Dec. 15, 2020. All conferences will be held virtually. To join the live webcasts for the conferences, listeners should access the investor page of Cambium Networks website https://investors.cambiumnetworks.com/.  Following the live webcast, a replay will be available in the event archives at the same web address.

 

About Cambium Networks

 

Cambium Networks empowers millions of people with wireless connectivity worldwide. Its wireless portfolio is used by commercial and government network operators as well as broadband service providers to connect people, places and things. With a single network architecture spanning fixed wireless and Wi-Fi, Cambium Networks enables operators to achieve maximum performance with minimal spectrum. End-to-end cloud management transforms networks into dynamic environments that evolve to meet changing needs with minimal physical human intervention. Cambium Networks empowers a growing ecosystem of partners who design and deliver gigabit wireless solutions that just work.

 

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 Securities and Exchange Commission on March 23, 2020, and most recent Form 10-Q filed on August 12, 2020. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements 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 unpredictability of our operating results; our expectations regarding outstanding litigation; our inability to predict and respond to emerging technological trends and network operators changing needs; risks presented by the global COVID-19 pandemic, which could significantly disrupt our manufacturing, sales and other operations and negatively impact our financial results; 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; the quality of our support and services offerings; our or our distributors’ and channel partners’ inability to attract new network operators or sell additional products to network operators that currently use our products; the seasonality of our business; our limited or sole source suppliers’ inability to produce third-party components to build our products; the technological complexity of our products, which may contain undetected hardware defects or software bugs; 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 manage our growth and expand our operations; unpredictability of sales and revenues due to lengthy sales cycles; 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; current or future unfavorable economic conditions, both domestically and in foreign markets; and our inability to obtain intellectual property protections for our products.

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.

 

 


CAMBIUM NETWORKS CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands, except share and per share amounts)

 

(Unaudited)

 

 

 

Three months ended

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

Revenues

 

$

72,971

 

 

$

62,254

 

 

$

65,703

 

Cost of revenues

 

 

36,902

 

 

 

31,782

 

 

 

33,871

 

Gross profit

 

 

36,069

 

 

 

30,472

 

 

 

31,832

 

Gross margin

 

 

49.4

%

 

 

48.9

%

 

 

48.4

%

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,213

 

 

 

9,299

 

 

 

9,895

 

Sales and marketing

 

 

8,293

 

 

 

8,035

 

 

 

10,363

 

General and administrative

 

 

8,604

 

 

 

6,625

 

 

 

5,996

 

Depreciation and amortization

 

 

1,643

 

 

 

1,700

 

 

 

1,449

 

Total operating expenses

 

 

28,753

 

 

 

25,659

 

 

 

27,703

 

Operating income

 

 

7,316

 

 

 

4,813

 

 

 

4,129

 

Operating margin

 

 

10.0

%

 

 

7.7

%

 

 

6.3

%

Interest expense, net

 

 

1,259

 

 

 

1,525

 

 

 

2,105

 

Other expense (income), net

 

 

318

 

 

 

(22

)

 

 

61

 

Income before income taxes

 

 

5,739

 

 

 

3,310

 

 

 

1,963

 

Provision (benefit) for income taxes

 

 

144

 

 

 

(2

)

 

 

3

 

Net income

 

$

5,595

 

 

$

3,312

 

 

$

1,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.13

 

 

$

0.08

 

Diluted

 

$

0.21

 

 

$

0.13

 

 

$

0.08

 

Weighted-average number of shares outstanding to

compute earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,691,357

 

 

 

25,683,289

 

 

 

25,634,417

 

Diluted

 

 

26,346,730

 

 

 

25,789,830

 

 

 

25,634,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation included in costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

$

16

 

 

$

18

 

 

$

14

 

Research and development

 

 

396

 

 

 

422

 

 

 

199

 

Sales and marketing

 

 

251

 

 

 

243

 

 

 

374

 

General and administrative

 

 

291

 

 

 

257

 

 

 

241

 

Total share-based compensation expense

 

$

954

 

 

$

940

 

 

$

828

 

 

 

 

 

 

 

 

 


CAMBIUM NETWORKS CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands)

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

ASSETS

 

(Unaudited)

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

50,120

 

 

$

19,346

 

Accounts receivable, net of allowance

 

 

53,866

 

 

 

58,628

 

Inventories, net

 

 

29,054

 

 

 

41,670

 

Recoverable income taxes

 

 

361

 

 

 

 

Prepaid expenses

 

 

4,036

 

 

 

5,323

 

Other current assets

 

 

5,074

 

 

 

4,350

 

Total current assets

 

 

142,511

 

 

 

129,317

 

Noncurrent assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

7,627

 

 

 

8,314

 

Software, net

 

 

3,045

 

 

 

3,395

 

Operating lease assets

 

 

5,494

 

 

 

6,872

 

Intangible assets, net

 

 

13,446

 

 

 

15,100

 

Goodwill

 

 

9,842

 

 

 

8,552

 

Deferred tax assets, net

 

 

1,276

 

 

 

929

 

Other noncurrent assets

 

 

291

 

 

 

 

TOTAL ASSETS

 

$

183,532

 

 

$

172,479

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,107

 

 

$

25,214

 

Accrued liabilities

 

 

19,771

 

 

 

15,034

 

Employee compensation

 

 

9,169

 

 

 

4,652

 

Current portion of long-term external debt, net

 

 

9,454

 

 

 

9,454

 

Deferred revenues

 

 

6,731

 

 

 

7,430

 

Other current liabilities

 

 

6,218

 

 

 

6,084

 

Total current liabilities

 

 

76,450

 

 

 

67,868

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Long-term external debt, net

 

 

47,068

 

 

 

54,158

 

Deferred revenues

 

 

4,278

 

 

 

4,852

 

Noncurrent operating lease liabilities

 

 

3,689

 

 

 

5,335

 

Deferred tax liabilities, net

 

 

 

 

 

337

 

Other noncurrent liabilities

 

 

1,451

 

 

 

 

Total liabilities

 

 

132,936

 

 

 

132,550

 

Shareholders' equity

 

 

 

 

 

 

 

 

Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2019 and September 30, 2020; 25,753,603 issued and 25,672,983 outstanding at December 31, 2019; 25,791,702 shares issued and 25,700,741 outstanding at September 30, 2020

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

107,641

 

 

 

104,773

 

Treasury shares, at cost, 80,620 shares at December 31, 2019 and 90,961 shares at September 30, 2020

 

 

(1,063

)

 

 

(1,094

)

Accumulated deficit

 

 

(55,305

)

 

 

(63,374

)

Accumulated other comprehensive loss

 

 

(680

)

 

 

(379

)

Total shareholders’ equity

 

 

50,596

 

 

 

39,929

 

TOTAL LIABILITIES AND EQUITY

 

$

183,532

 

 

$

172,479

 

 

 


CAMBIUM NETWORKS CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,595

 

 

$

3,312

 

 

$

1,960

 

Adjustments to reconcile net income to net cash provided by

(used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,807

 

 

 

1,853

 

 

 

1,568

 

Amortization of debt issuance costs

 

 

136

 

 

 

136

 

 

 

663

 

Share-based compensation

 

 

954

 

 

 

940

 

 

 

828

 

Deferred income taxes

 

 

(434

)

 

 

(88

)

 

 

(9

)

Provision for inventory excess and obsolescence

 

 

881

 

 

 

695

 

 

 

(92

)

Other

 

 

433

 

 

 

(27

)

 

 

61

 

Change in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

 

 

(1,536

)

 

 

11,639

 

 

 

2,423

 

Inventories

 

 

156

 

 

 

1,713

 

 

 

(1,977

)

Accounts payable

 

 

5,156

 

 

 

3,565

 

 

 

(6,223

)

Accrued employee compensation

 

 

2,915

 

 

 

1,851

 

 

 

(1,394

)

Other assets and liabilities

 

 

322

 

 

 

636

 

 

 

(9,609

)

Net cash provided by (used in) operating activities

 

 

16,385

 

 

 

26,225

 

 

 

(11,801

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(890

)

 

 

(489

)

 

 

(828

)

Purchase of software

 

 

(485

)

 

 

(279

)

 

 

(157

)

Cash paid for acquisition

 

 

 

 

 

 

 

 

(2,000

)

Net cash used in investing activities

 

 

(1,375

)

 

 

(768

)

 

 

(2,985

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of term loan

 

 

(2,500

)

 

 

(2,500

)

 

 

(23,087

)

Repayment of revolver debt

 

 

 

 

 

(10,000

)

 

 

(10,000

)

Payment of debt issuance costs

 

 

 

 

 

 

 

 

(128

)

Payment of deferred offering costs

 

 

 

 

 

 

 

 

(3,428

)

Taxes paid related to net share settlement of equity awards

 

 

(15

)

 

 

(6

)

 

 

(802

)

Proceeds from share option exercises

 

 

163

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

(2,352

)

 

 

(12,506

)

 

 

(37,445

)

Effect of exchange rate on cash

 

 

18

 

 

 

 

 

 

(65

)

Net increase (decrease) in cash

 

 

12,676

 

 

 

12,951

 

 

 

(52,296

)

Cash, beginning of period

 

 

37,444

 

 

 

24,493

 

 

 

71,246

 

Cash, end of period

 

$

50,120

 

 

$

37,444

 

 

$

18,950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes paid

 

$

1,205

 

 

$

272

 

 

$

1,076

 

Interest paid

 

$

925

 

 

$

1,096

 

 

$

1,371

 

Significant non-cash activities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred offering costs included in accrued liabilities

 

$

 

 

$

 

 

$

179

 

 


CAMBIUM NETWORKS CORPORATION

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

(In thousands)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES BY PRODUCT TYPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

Point-to-Multi-Point

 

$

43,342

 

 

$

40,564

 

 

$

38,856

 

Point-to-Point

 

 

17,967

 

 

 

12,602

 

 

 

15,976

 

Wi-Fi

 

 

9,949

 

 

 

7,640

 

 

 

10,141

 

Other

 

 

1,713

 

 

 

1,448

 

 

 

730

 

Total Revenues

 

$

72,971

 

 

$

62,254

 

 

$

65,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES BY REGION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

North America

 

$

38,656

 

 

$

32,454

 

 

$

29,032

 

Europe, Middle East and Africa

 

 

20,250

 

 

 

20,424

 

 

 

21,749

 

Caribbean and Latin America

 

 

9,138

 

 

 

4,653

 

 

 

8,008

 

Asia Pacific

 

 

4,927

 

 

 

4,723

 

 

 

6,914

 

Total Revenues

 

$

72,971

 

 

$

62,254

 

 

$

65,703

 

 

Use of non-GAAP (Adjusted) Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), we provide additional financial metrics that are not prepared in accordance with GAAP (non-GAAP), including Adjusted EBITDA, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP operating margin, non-GAAP pre-tax income, non-GAAP provision for income taxes, non-GAAP net income, and non-GAAP fully weighted basic and diluted shares. Management uses these non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation and to evaluate our financial performance. We believe that these non-GAAP financial measures help us to identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of the non-GAAP financial measures.

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.  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) Nonrecurring legal expenses, (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 nonrecurring legal expenses since this is one-time in nature and does not reflect our ongoing operations. 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 Cambium Networks control. As a result, management excludes this item from Cambium Networks internal operating forecasts and models. We also adjust EBITDA to exclude one-time acquisition costs and restructuring expenses as these relate to events outside of the ordinary course of continuing operations and to provide a more accurate comparison of our ongoing business results.

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 Cambium Networks control while the associated employment taxes are cash-based expenses that vary in amount from period-to-period and are dependent on market forces as well as jurisdictional tax regulations that are often beyond Cambium Networks control.      

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 Xirrus. Cambium Networks excludes these expenses since they result from an event that is outside the ordinary course of continuing operations.

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. Cambium Networks excludes these expenses since they result from an event that is outside the ordinary course of continuing operations.

Restructuring expenses primarily consist of severance costs for employees which are not related to future operating expenses. Cambium Networks excludes these expenses since they result from an event that is outside the ordinary course of continuing operations. Excluding these charges permits more accurate comparisons of Cambium Networks ongoing business results.

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 June 30, 2019, and one-time tax impacts from share-based compensation expense incurred upon the completion of our initial public offering. Cambium Networks excludes these amounts to more closely approximate the company’s ongoing effective tax rate after adjusting for one-time or unique reoccurring items. The associated non-GAAP effective tax rate is also applied to the gross amount of non-GAAP adjustments for purposes of calculating non-GAAP net income in total and on a per-share basis. This approach is designed to enhance the ability of investors to understand the company's tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP adjustments which may not reflect actual cash tax expense.  

 

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 income (loss) to Adjusted EBITDA, the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):

 

CAMBIUM NETWORKS CORPORATION

 

SUPPLEMENTAL SCHEDULE OF NON-GAAP ADJUSTED EBITDA

 

(In thousands)

 

(Unaudited)

 

 

 

Three months ended

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

Net income

 

$

5,595

 

 

$

3,312

 

 

$

1,960

 

Interest expense, net

 

 

1,259

 

 

 

1,525

 

 

 

2,105

 

Provision (benefit) for income taxes

 

 

144

 

 

 

(2

)

 

 

3

 

Depreciation and amortization

 

 

1,807

 

 

 

1,853

 

 

 

1,568

 

EBITDA

 

 

8,805

 

 

 

6,688

 

 

 

5,636

 

Share-based compensation

 

 

954

 

 

 

940

 

 

 

966

 

Nonrecurring legal expenses

 

 

1,625

 

 

 

 

 

 

 

Xirrus one-time acquisition charges

 

 

 

 

 

30

 

 

 

168

 

Restructuring expense

 

 

19

 

 

 

9

 

 

 

 

Adjusted EBITDA

 

$

11,403

 

 

$

7,667

 

 

$

6,770

 

Adjusted EBITDA Margin

 

 

15.6

%

 

 

12.3

%

 

 

10.3

%

 

The following table reconciles all other GAAP to non-GAAP financial measures (in thousands):

 


CAMBIUM NETWORKS CORPORATION

 

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

 

(In thousands, except per share data)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

GAAP gross profit

 

$

36,069

 

 

$

30,472

 

 

$

31,832

 

Share-based compensation expense

 

 

16

 

 

 

18

 

 

 

14

 

Amortization of capitalized software costs

 

 

163

 

 

 

153

 

 

 

119

 

Restructuring expense

 

 

 

 

 

 

 

 

 

Non-GAAP gross profit

 

$

36,248

 

 

$

30,643

 

 

$

31,965

 

Non-GAAP gross margin

 

 

49.7

%

 

 

49.2

%

 

 

48.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

 

$

10,213

 

 

$

9,299

 

 

$

9,895

 

Share-based compensation expense

 

 

396

 

 

 

422

 

 

 

337

 

Restructuring expense

 

 

19

 

 

 

(5

)

 

 

 

Non-GAAP research and development expense

 

$

9,798

 

 

$

8,882

 

 

$

9,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

 

$

8,293

 

 

$

8,035

 

 

$

10,363

 

Share-based compensation expense

 

 

251

 

 

 

243

 

 

 

374

 

Restructuring expense

 

 

 

 

 

(9

)

 

 

 

Non-GAAP sales and marketing expense

 

$

8,042

 

 

$

7,801

 

 

$

9,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

 

$

8,604

 

 

$

6,625

 

 

$

5,996

 

Share-based compensation expense

 

 

291

 

 

 

257

 

 

 

241

 

Nonrecurring legal expenses

 

 

1,625

 

 

 

 

 

 

 

Xirrus one-time acquisition charges

 

 

 

 

 

30

 

 

 

168

 

Restructuring expense

 

 

 

 

 

23

 

 

 

 

Non-GAAP general and administrative expense

 

$

6,688

 

 

$

6,315

 

 

$

5,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP depreciation and amortization

 

$

1,643

 

 

$

1,700

 

 

$

1,449

 

Amortization of acquired intangibles

 

 

551

 

 

 

551

 

 

 

424

 

Non-GAAP depreciation and amortization

 

$

1,092

 

 

$

1,149

 

 

$

1,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

7,316

 

 

$

4,813

 

 

$

4,129

 

Share-based compensation expense

 

 

954

 

 

 

940

 

 

 

966

 

Nonrecurring legal expenses