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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 September 30, 2021

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 8, 2021, the registrant had 26,645,954 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

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits

38

Signatures

39

 


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 unpredictability of our operating results;

 

the impact of component shortages;

 

the impact of logistics, freight and shipping availability shortages and costs increases;

 

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 limited or sole source suppliers’ inability to produce third-party components to build our products;

 

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

 

our ability to respond to increased competition from current competitors as well as emerging  companies and established companies that may enter our markets;

 

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 impact of actual or threatened health epidemics and other outbreaks;

 

our ability to achieve similar growth rates of our earlier years in future periods;

 

the quality of our support and services offerings;

 

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;

 

the variation or decline in our gross margin from period-to-period;

 

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;

 

our inability to effectively forecast demand or manage our inventory;

 

credit risk of our channel partners, which could adversely affect their ability to purchase or pay for our products;

 

our ability to effectively deploy and train our direct sales force;

 

our ability to manage and enhance our brand;

 

unpredictability of sales and revenues due to lengthy sales cycles;

 

any delay in sales or decrease in demand for our products by government agencies;

 

risks associated with international sales and operations;

ii


 

 

the uncertainty of any economic, financial, trade and legal implications of the withdrawal of the United Kingdom from the European Union;

 

the loss of key personnel or an inability to attract, retain and motivate qualified personnel;

 

the availability of unlicensed RF spectrum and the possibility that such spectrum becomes unavailable through overuse or licensing;

 

the impact of any acquisition of, or investments in, other businesses;

 

the impact of new regulations or standards, or changes in existing regulations or standards, in the U.S. or internationally, related to our products;

 

our reliance on the availability of third-party licenses;

 

our inability to obtain intellectual property protections for our products;

 

our inability to maintain an effective system of internal controls, produce timely and accurate financial statements or comply with applicable regulations;

 

current or future unfavorable economic conditions, both domestically and in foreign markets; and

 

our ability to manage our growth and expand our operations.

 

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,

 

 

September 30,

 

 

 

2020

 

 

2021

 

 

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

62,472

 

 

$

58,596

 

Receivables, net of allowances of $919 and $723

 

 

58,114

 

 

 

70,584

 

Inventories, net

 

 

33,962

 

 

 

28,789

 

Recoverable income taxes

 

 

1,420

 

 

 

1,262

 

Prepaid expenses

 

 

4,143

 

 

 

5,239

 

Other current assets

 

 

5,024

 

 

 

4,408

 

Total current assets

 

 

165,135

 

 

 

168,878

 

Noncurrent assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

7,535

 

 

 

10,296

 

Software, net

 

 

3,438

 

 

 

5,000

 

Operating lease assets

 

 

5,083

 

 

 

5,227

 

Intangible assets, net

 

 

12,895

 

 

 

11,240

 

Goodwill

 

 

9,842

 

 

 

9,842

 

Deferred tax assets, net

 

 

1,537

 

 

 

7,961

 

Other noncurrent assets

 

 

288

 

 

 

568

 

TOTAL ASSETS

 

$

205,753

 

 

$

219,012

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,859

 

 

$

24,882

 

Accrued liabilities

 

 

20,160

 

 

 

18,827

 

Employee compensation

 

 

14,911

 

 

 

13,465

 

Current portion of long-term external debt, net

 

 

29,201

 

 

 

 

Deferred revenues

 

 

6,471

 

 

 

7,257

 

Other current liabilities

 

 

6,009

 

 

 

5,586

 

Total current liabilities

 

 

107,611

 

 

 

70,017

 

Noncurrent liabilities

 

 

 

 

 

 

 

 

Long-term external debt, net

 

 

24,957

 

 

 

30,249

 

Deferred revenues

 

 

4,448

 

 

 

5,308

 

Noncurrent operating lease liabilities

 

 

3,332

 

 

 

3,999

 

Deferred tax liabilities, net

 

 

9

 

 

 

9

 

Other noncurrent liabilities

 

 

2,009

 

 

 

1,978

 

Total liabilities

 

 

142,366

 

 

 

111,560

 

Shareholders' equity

 

 

 

 

 

 

 

 

Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2020 and

September 30, 2021; 26,126,672 shares issued and 26,034,526 outstanding at December 31, 2020 and 26,786,201 shares issued and 26,639,483 outstanding at September 30, 2021

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

109,837

 

 

 

120,603

 

Treasury shares, at cost, 92,146 shares at December 31, 2020 and 146,718 shares at

September 30, 2021

 

 

(1,090

)

 

 

(3,663

)

Accumulated deficit

 

 

(44,799

)

 

 

(8,805

)

Accumulated other comprehensive loss

 

 

(564

)

 

 

(686

)

Total shareholders' equity

 

 

63,387

 

 

 

107,452

 

TOTAL LIABILITIES AND EQUITY

 

$

205,753

 

 

$

219,012

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

Revenues

 

$

72,971

 

 

$

75,920

 

 

$

195,654

 

 

$

257,144

 

Cost of revenues

 

 

36,902

 

 

 

39,900

 

 

 

98,481

 

 

 

130,862

 

Gross profit

 

 

36,069

 

 

 

36,020

 

 

 

97,173

 

 

 

126,282

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,213

 

 

 

12,082

 

 

 

31,326

 

 

 

36,302

 

Sales and marketing

 

 

8,293

 

 

 

9,938

 

 

 

26,632

 

 

 

29,696

 

General and administrative

 

 

8,604

 

 

 

6,640

 

 

 

21,675

 

 

 

22,065

 

Depreciation and amortization

 

 

1,643

 

 

 

1,548

 

 

 

5,038

 

 

 

4,707

 

Total operating expenses

 

 

28,753

 

 

 

30,208

 

 

 

84,671

 

 

 

92,770

 

Operating income

 

 

7,316

 

 

 

5,812

 

 

 

12,502

 

 

 

33,512

 

Interest expense, net

 

 

1,259

 

 

 

752

 

 

 

4,129

 

 

 

3,208

 

Other expense, net

 

 

318

 

 

 

88

 

 

 

80

 

 

 

209

 

Income before income taxes

 

 

5,739

 

 

 

4,972

 

 

 

8,293

 

 

 

30,095

 

Provision (benefit) for income taxes

 

 

144

 

 

 

355

 

 

 

224

 

 

 

(5,899

)

Net income

 

$

5,595

 

 

$

4,617

 

 

$

8,069

 

 

$

35,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.17

 

 

$

0.31

 

 

$

1.37

 

Diluted

 

$

0.21

 

 

$

0.16

 

 

$

0.31

 

 

$

1.25

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,691,357

 

 

 

26,540,843

 

 

 

25,683,969

 

 

 

26,342,113

 

Diluted

 

 

26,346,673

 

 

 

28,639,177

 

 

 

25,867,164

 

 

 

28,705,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation included in costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

$

16

 

 

$

39

 

 

$

51

 

 

$

108

 

Research and development

 

 

396

 

 

 

834

 

 

 

1,186

 

 

 

2,193

 

Sales and marketing

 

 

251

 

 

 

540

 

 

 

726

 

 

 

1,374

 

General and administrative

 

 

291

 

 

 

663

 

 

 

742

 

 

 

1,909

 

Total share-based compensation

 

$

954

 

 

$

2,076

 

 

$

2,705

 

 

$

5,584

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

Net income

 

$

5,595

 

 

$

4,617

 

 

$

8,069

 

 

$

35,994

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

103

 

 

 

(38

)

 

 

(301

)

 

 

(122

)

Comprehensive income

 

$

5,698

 

 

$

4,579

 

 

$

7,768

 

 

$

35,872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 September 30, 2020

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

paid in

capital

 

 

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 loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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 loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

 

$

50,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2021

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

paid in

capital

 

 

Treasury

shares

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

loss

 

 

Total

shareholders'

equity

 

Balance at June 30, 2021

 

 

26,503

 

 

$

3