10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period from

Commission File Number: 001-38952

 

CAMBIUM NETWORKS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Cayman Islands

 

Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

c/o Cambium Networks, Inc.

 

 

3800 Golf Road, Suite 360

Rolling Meadows, Illinois 60008

 

(345) 943-3100

(Address of principal executive offices, including zip code)

 

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Ordinary shares, $0.0001 par value

 

CMBM

 

Nasdaq Global Market

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

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

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

As of August 1, 2022, the registrant had 26,964,218 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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

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

38

Item 6.

Exhibits

39

Signatures

40

 

 

i


 

Note regarding forward-looking statements

 

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

 

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

 

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

ii


 

 

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

 

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

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Cambium Networks Corporation

Condensed Consolidated Balance Sheets

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

 

 

 

December 31,

 

 

June 30,

 

 

 

2021

 

 

2022

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$

59,291

 

 

$

45,929

 

Receivables, net of allowances of $683 and $731

 

 

69,773

 

 

 

79,538

 

Inventories, net

 

 

33,777

 

 

 

47,442

 

Recoverable income taxes

 

 

860

 

 

 

280

 

Prepaid expenses

 

 

12,170

 

 

 

3,980

 

Other current assets

 

 

4,718

 

 

 

5,251

 

Total current assets

 

 

180,589

 

 

 

182,420

 

Noncurrent assets

 

 

 

 

 

 

Property and equipment, net

 

 

10,490

 

 

 

10,929

 

Software, net

 

 

5,867

 

 

 

6,847

 

Operating lease assets

 

 

5,899

 

 

 

4,938

 

Intangible assets, net

 

 

10,777

 

 

 

9,938

 

Goodwill

 

 

9,842

 

 

 

9,842

 

Deferred tax assets, net

 

 

7,604

 

 

 

8,897

 

Other noncurrent assets

 

 

1,200

 

 

 

1,089

 

TOTAL ASSETS

 

$

232,268

 

 

$

234,900

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

28,241

 

 

$

28,096

 

Accrued liabilities

 

 

21,948

 

 

 

29,129

 

Employee compensation

 

 

16,601

 

 

 

5,580

 

Current portion of long-term external debt, net

 

 

2,489

 

 

 

3,152

 

Deferred revenues

 

 

6,880

 

 

 

7,269

 

Other current liabilities

 

 

5,981

 

 

 

6,388

 

Total current liabilities

 

 

82,140

 

 

 

79,614

 

Noncurrent liabilities

 

 

 

 

 

 

Long-term external debt, net

 

 

26,965

 

 

 

25,715

 

Deferred revenues

 

 

5,363

 

 

 

6,796

 

Noncurrent operating lease liabilities

 

 

4,112

 

 

 

3,051

 

Other noncurrent liabilities

 

 

1,551

 

 

 

1,572

 

Total liabilities

 

 

120,131

 

 

 

116,748

 

Shareholders' equity

 

 

 

 

 

 

Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2021 and
  June 30, 2022;
26,892,082 shares issued and 26,735,175 outstanding at December 31, 2021
   and
27,152,434 shares issued and 26,964,218 outstanding at June 30, 2022

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

124,117

 

 

 

130,430

 

Treasury shares, at cost, 156,907 shares at December 31, 2021 and 188,216 shares at
 June 30, 2022

 

 

(3,906

)

 

 

(4,512

)

Accumulated deficit

 

 

(7,378

)

 

 

(6,624

)

Accumulated other comprehensive loss

 

 

(699

)

 

 

(1,145

)

Total shareholders' equity

 

 

112,137

 

 

 

118,152

 

TOTAL LIABILITIES AND EQUITY

 

$

232,268

 

 

$

234,900

 

 

 

 

 

 

 

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

Revenues

 

$

92,709

 

 

$

69,296

 

 

$

181,224

 

 

$

131,192

 

Cost of revenues

 

 

46,617

 

 

 

35,857

 

 

 

90,962

 

 

 

68,587

 

Gross profit

 

 

46,092

 

 

 

33,439

 

 

 

90,262

 

 

 

62,605

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

12,617

 

 

 

10,576

 

 

 

24,220

 

 

 

22,678

 

Sales and marketing

 

 

9,718

 

 

 

10,579

 

 

 

19,758

 

 

 

20,727

 

General and administrative

 

 

7,896

 

 

 

8,085

 

 

 

15,425

 

 

 

15,750

 

Depreciation and amortization

 

 

1,564

 

 

 

1,534

 

 

 

3,159

 

 

 

2,980

 

Total operating expenses

 

 

31,795

 

 

 

30,774

 

 

 

62,562

 

 

 

62,135

 

Operating income

 

 

14,297

 

 

 

2,665

 

 

 

27,700

 

 

 

470

 

Interest expense, net

 

 

1,316

 

 

 

407

 

 

 

2,456

 

 

 

904

 

Other expense (income), net

 

 

79

 

 

 

(371

)

 

 

121

 

 

 

(294

)

Income (loss) before income taxes

 

 

12,902

 

 

 

2,629

 

 

 

25,123

 

 

 

(140

)

Provision (benefit) for income taxes

 

 

1,385

 

 

 

307

 

 

 

(6,254

)

 

 

(894

)

Net income

 

$

11,517

 

 

$

2,322

 

 

$

31,377

 

 

$

754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

$

0.09

 

 

$

1.20

 

 

$

0.03

 

Diluted

 

$

0.40

 

 

$

0.08

 

 

$

1.09

 

 

$

0.03

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

26,365,207

 

 

 

26,836,853

 

 

 

26,241,101

 

 

 

26,793,505

 

Diluted

 

 

28,909,348

 

 

 

27,588,772

 

 

 

28,730,225

 

 

 

27,917,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation included in costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

$

50

 

 

$

50

 

 

$

69

 

 

$

107

 

Research and development

 

 

842

 

 

 

1,011

 

 

 

1,359

 

 

 

2,033

 

Sales and marketing

 

 

539

 

 

 

578

 

 

 

834

 

 

 

1,205

 

General and administrative

 

 

667

 

 

 

878

 

 

 

1,246

 

 

 

1,592

 

Total share-based compensation

 

$

2,098

 

 

$

2,517

 

 

$

3,508

 

 

$

4,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

Net income

 

$

11,517

 

 

$

2,322

 

 

$

31,377

 

 

$

754

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(19

)

 

 

(380

)

 

 

(84

)

 

 

(446

)

Comprehensive income

 

$

11,498

 

 

$

1,942

 

 

$

31,293

 

 

$

308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2021

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
paid in
capital

 

 

Treasury
shares

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total
shareholders'
equity

 

Balance at March 31, 2021

 

 

26,299

 

 

$

3

 

 

$

113,067

 

 

$

(3,101

)

 

$

(24,939

)

 

$

(629

)

 

$

84,401

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,517

 

 

 

 

 

 

11,517

 

Share-based compensation

 

 

 

 

 

 

 

 

1,916

 

 

 

 

 

 

 

 

 

 

 

 

1,916

 

Issuance of ordinary shares under ESPP

 

 

39

 

 

 

 

 

 

1,164

 

 

 

 

 

 

 

 

 

 

 

 

1,164

 

Issuance of vested shares

 

 

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares withheld for net settlement

 

 

(3

)

 

 

 

 

 

 

 

 

(175

)

 

 

 

 

 

 

 

 

(175

)

Share options exercised

 

 

128

 

 

 

 

 

 

1,374

 

 

 

 

 

 

 

 

 

 

 

 

1,374

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

(19

)

Balance at June 30, 2021

 

 

26,503

 

 

$

3

 

 

$

117,521

 

 

$

(3,276

)

 

$

(13,422

)

 

$

(648

)

 

$

100,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

Share Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
paid in
capital

 

 

Treasury
shares

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total
shareholders'
equity

 

Balance at December 31, 2020

 

 

26,035

 

 

$

3

 

 

$

109,837

 

 

$

(1,090

)

 

$

(44,799

)

 

$

(564

)

 

$

63,387

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,377

 

 

 

 

 

 

31,377

 

Share-based compensation

 

 

 

 

 

 

 

 

3,175

 

 

 

 

 

 

 

 

 

 

 

 

3,175

 

Issuance of ordinary shares under ESPP

 

 

39

 

 

 

 

 

 

1,164

 

 

 

 

 

 

 

 

 

 

 

 

1,164

 

Issuance of vested shares

 

 

161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares withheld for net settlement

 

 

(44

)

 

 

 

 

 

 

 

 

(2,186

)

 

 

 

 

 

 

 

 

(2,186

)

Share options exercised

 

 

312

 

 

 

 

 

 

3,345

 

 

 

 

 

 

 

 

 

 

 

 

3,345

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(84

)

 

 

(84

)

Balance at June 30, 2021

 

 

26,503

 

 

$

3

 

 

$

117,521

 

 

$

(3,276

)

 

$

(13,422

)

 

$

(648

)

 

$

100,178