cmbm-10q_20200930.htm

 

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 September 30, 2020

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 November 1, 2020 the registrant had 25,708,837 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 (Loss)

3

 

Condensed Consolidated Statements of Shareholders’ (Deficit) 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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

37

PART II.

OTHER INFORMATION

38

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

39

Item 6.

Exhibits

40

Signatures

41

 


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. 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 unpredictability of our operating results;

 

our inability to predict and respond to emerging technological trends and network operators’ changing needs;

 

the impact of actual or threatened health epidemics and other outbreaks including the impact of the COVID-19 pandemic;

 

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 expectations regarding outstanding litigation;

 

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 difficulty of comparing or forecasting our financial results on a quarter-by-quarter basis due to 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.

 

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.

ii


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,

 

 

September 30,

 

 

 

2019

 

 

2020

 

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

19,346

 

 

$

50,120

 

Receivables, net of allowances

 

 

58,628

 

 

 

53,866

 

Inventories, net

 

 

41,670

 

 

 

29,054

 

Recoverable income taxes

 

 

 

 

 

361

 

Prepaid expenses

 

 

5,323

 

 

 

4,036

 

Other current assets

 

 

4,350

 

 

 

5,074

 

Total current assets

 

 

129,317

 

 

 

142,511

 

Noncurrent assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

8,314

 

 

 

7,627

 

Software, net

 

 

3,395

 

 

 

3,045

 

Operating lease assets

 

 

6,872

 

 

 

5,494

 

Intangible assets, net

 

 

15,100

 

 

 

13,446

 

Goodwill

 

 

8,552

 

 

 

9,842

 

Deferred tax assets, net

 

 

929

 

 

 

1,276

 

Other noncurrent assets

 

 

 

 

 

291

 

TOTAL ASSETS

 

$

172,479

 

 

$

183,532

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,214

 

 

$

25,107

 

Accrued liabilities

 

 

15,034

 

 

 

19,771

 

Employee compensation

 

 

4,652

 

 

 

9,169

 

Current portion of long-term external debt, net

 

 

9,454

 

 

 

9,454

 

Deferred revenues

 

 

7,430

 

 

 

6,731

 

Other current liabilities

 

 

6,084

 

 

 

6,218

 

Total current liabilities

 

 

67,868

 

 

 

76,450

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Long-term external debt, net

 

 

54,158

 

 

 

47,068

 

Deferred revenues

 

 

4,852

 

 

 

4,278

 

Noncurrent operating lease liabilities

 

 

5,335

 

 

 

3,689

 

Deferred tax liabilities, net

 

 

337

 

 

 

 

Other noncurrent liabilities

 

 

 

 

 

1,451

 

Total liabilities

 

 

132,550

 

 

 

132,936

 

Shareholders' equity

 

 

 

 

 

 

 

 

Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2019 and

   September 30, 2020; 25,753,603 shares issued and 25,672,983 outstanding at December 31, 2019 and 25,791,702 shares issued and 25,700,741 outstanding at September 30, 2020

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

104,773

 

 

 

107,641

 

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

  September 30, 2020

 

 

(1,094

)

 

 

(1,063

)

Accumulated deficit

 

 

(63,374

)

 

 

(55,305

)

Accumulated other comprehensive loss

 

 

(379

)

 

 

(680

)

Total shareholders' equity

 

 

39,929

 

 

 

50,596

 

TOTAL LIABILITIES AND EQUITY

 

$

172,479

 

 

$

183,532

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Revenues

 

$

65,703

 

 

$

72,971

 

 

$

202,966

 

 

$

195,654

 

Cost of revenues

 

 

33,871

 

 

 

36,902

 

 

 

105,032

 

 

 

98,481

 

Gross profit

 

 

31,832

 

 

 

36,069

 

 

 

97,934

 

 

 

97,173

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

9,895

 

 

 

10,213

 

 

 

35,566

 

 

 

31,326

 

Sales and marketing

 

 

10,363

 

 

 

8,293

 

 

 

34,808

 

 

 

26,632

 

General and administrative

 

 

5,996

 

 

 

8,604

 

 

 

24,189

 

 

 

21,675

 

Depreciation and amortization

 

 

1,449

 

 

 

1,643

 

 

 

3,957

 

 

 

5,038

 

Total operating expenses

 

 

27,703

 

 

 

28,753

 

 

 

98,520

 

 

 

84,671

 

Operating income (loss)

 

 

4,129

 

 

 

7,316

 

 

 

(586

)

 

 

12,502

 

Interest expense, net

 

 

2,105

 

 

 

1,259

 

 

 

6,674

 

 

 

4,129

 

Other expense, net

 

 

61

 

 

 

318

 

 

 

251

 

 

 

80

 

Income (loss) before income taxes

 

 

1,963

 

 

 

5,739

 

 

 

(7,511

)

 

 

8,293

 

Provision for income taxes

 

 

3

 

 

 

144

 

 

 

9,041

 

 

 

224

 

Net income (loss)

 

$

1,960

 

 

$

5,595

 

 

$

(16,552

)

 

$

8,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.22

 

 

$

(0.93

)

 

$

0.31

 

Diluted

 

$

0.08

 

 

$

0.21

 

 

$

(0.93

)

 

$

0.31

 

Weighted-average number of shares outstanding to compute

   net earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,634,417

 

 

 

25,691,357

 

 

 

17,743,703

 

 

 

25,683,969

 

Diluted

 

 

25,634,417

 

 

 

26,346,673

 

 

 

17,743,703

 

 

 

25,867,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation included in costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

$

14

 

 

$

16

 

 

$

196

 

 

$

51

 

Research and development

 

 

199

 

 

 

396

 

 

 

5,062

 

 

 

1,186

 

Sales and marketing

 

 

374

 

 

 

251

 

 

 

3,981

 

 

 

726

 

General and administrative

 

 

241

 

 

 

291

 

 

 

7,667

 

 

 

742

 

Total share-based compensation

 

$

828

 

 

$

954

 

 

$

16,906

 

 

$

2,705

 

 

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

2


Cambium Networks Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Net income (loss)

 

$

1,960

 

 

$

5,595

 

 

$

(16,552

)

 

$

8,069

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(166

)

 

 

103

 

 

 

(140

)

 

 

(301

)

Comprehensive income (loss)

 

$

1,794

 

 

$

5,698

 

 

$

(16,692

)

 

$

7,768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

3


Cambium Networks Corporation

Condensed Consolidated Statements of Shareholders’ (Deficit) Equity

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30, 2019

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

paid in

capital

 

 

Capital

contribution

 

 

Treasury

shares

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders'

equity

 

Balance at June 30, 2019

 

 

25,632

 

 

$

3

 

 

$

103,543

 

 

$

 

 

$

(1,133

)

 

$

(64,285

)

 

$

(195

)

 

$

37,933

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,960

 

 

 

 

 

 

1,960

 

Share-based compensation

 

 

 

 

 

 

 

 

828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

828

 

Additional issuance costs in initial public offering

 

 

 

 

 

 

 

 

(361

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(361

)

Treasury shares withheld for net

   settlement in Recapitalization

 

 

2

 

 

 

 

 

 

(18

)

 

 

 

 

 

39

 

 

 

 

 

 

 

 

 

21

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(166

)

 

 

(166

)

Balance at September 30, 2019

 

 

25,634

 

 

$

3

 

 

$

103,992

 

 

$

 

 

$

(1,094

)

 

$

(62,325

)

 

$

(361

)

 

$

40,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

paid in

capital

 

 

Capital

contribution

 

 

Treasury

shares

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders'

(deficit)

equity

 

Balance at December 31, 2018

 

 

77

 

 

$

 

 

$

772

 

 

$

24,651

 

 

$

 

 

$

(45,773

)

 

$

(221

)

 

$

(20,571

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,552

)

 

 

 

 

 

(16,552

)

Share-based compensation

 

 

 

 

 

 

 

 

16,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,906

 

Issuance of shares in Recapitalization

   and related reclassification

 

 

19,848

 

 

 

2

 

 

 

24,651

 

 

 

(24,651

)

 

 

 

 

 

 

 

 

 

 

 

2

 

Issuance of shares in initial public

   offering, net of issuance costs

   of $7,866

 

 

5,800

 

 

 

1

 

 

 

61,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,374

 

Treasury shares withheld for net

   settlement in Recapitalization

 

 

(91

)

 

 

 

 

 

290

 

 

 

 

 

 

(1,094

)

 

 

 

 

 

 

 

 

(804

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140

)

 

 

(140

)

Balance at September 30, 2019

 

 

25,634

 

 

$

3

 

 

$

103,992

 

 

$

 

 

$

(1,094

)

 

$

(62,325

)

 

$

(361

)

 

$

40,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

paid in

capital

 

 

Capital

contribution

 

 

Treasury

shares

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders'

equity

 

Balance at June 30, 2020

 

 

25,684

 

 

$

3

 

 

$

106,524

 

 

$

 

 

$

(1,048

)

 

$

(60,900

)

 

$

(783

)

 

$

43,796

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,595

 

 

 

 

 

 

5,595

 

Share-based compensation

 

 

 

 

 

 

 

 

954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

954

 

Issuance of vested shares

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares withheld for net

   settlement

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

(15

)

Share options exercised

 

 

14

 

 

 

 

 

 

163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

163

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103

 

 

 

103

 

Balance at September 30, 2020

 

 

25,701

 

 

$

3

 

 

$

107,641

 

 

$

 

 

$

(1,063

)

 

$

(55,305

)

 

$

(680

)

 

$

50,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2020

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

paid in

capital

 

 

Capital

contribution

 

 

Treasury

shares

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders'

equity

 

Balance at December 31, 2019

 

 

25,673

 

 

$

3

 

 

$

104,773

 

 

$

 

 

$

(1,094

)

 

$

(63,374

)

 

$

(379

)

 

$

39,929

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,069

 

 

 

 

 

 

8,069

 

Share-based compensation

 

 

 

 

 

 

 

 

2,705

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,705

 

Issuance of vested shares

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares withheld for net

   settlement

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

 

 

 

 

 

 

31

 

Share options exercised

 

 

14

 

 

 

 

 

 

163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

163

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(301

)

 

 

(301

)

Balance at September 30, 2020

 

 

25,701

 

 

$

3

 

 

$

107,641

 

 

$

 

 

$

(1,063

)

 

$

(55,305

)

 

$

(680

)