SEC Filing | Cambium Networks

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

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, 2022


☐	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, 2022, the registrant had 27,035,371 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	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

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 on Russia, Belarus and certain regions of Ukraine;

•

the impact of geopolitical actions, including growing tensions between the U.S. and China;

•

the impact of 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 inability to forecast demand with our suppliers and the risk of excess inventory;

•

our ability to maintain appropriate inventory levels and purchase commitments;

•

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.

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,
	2021			2022
				(unaudited)
ASSETS
Current assets
Cash	$	59,291		$	44,859
Receivables, net of allowances of $683 and $634		69,773			84,352
Inventories, net		33,777			50,641
Recoverable income taxes		860			299
Prepaid expenses		12,170			8,088
Other current assets		4,718			5,816
Total current assets		180,589			194,055
Noncurrent assets
Property and equipment, net		10,490			11,054
Software, net		5,867			7,772
Operating lease assets		5,899			4,548
Intangible assets, net		10,777			9,548
Goodwill		9,842			9,842
Deferred tax assets, net		7,604			9,593
Other noncurrent assets		1,200			1,035
TOTAL ASSETS	$	232,268		$	247,447
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	28,241		$	28,167
Accrued liabilities		21,948			27,312
Employee compensation		16,601			6,475
Current portion of long-term external debt, net		2,489			3,155
Deferred revenues		6,880			8,226
Other current liabilities		5,981			6,853
Total current liabilities		82,140			80,188
Noncurrent liabilities
Long-term external debt, net		26,965			25,090
Deferred revenues		5,363			8,201
Noncurrent operating lease liabilities		4,112			2,558
Other noncurrent liabilities		1,551			1,589
Total liabilities		120,131			117,626
Shareholders' equity
Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2021 and September 30, 2022; 26,892,082 shares issued and 26,735,175 outstanding at December 31, 2021 and 27,216,120 shares issued and 27,016,104 outstanding at September 30, 2022		3			3
Additional paid in capital		124,117			133,158
Treasury shares, at cost, 156,907 shares at December 31, 2021 and 200,016 shares at September 30, 2022		(3,906	)		(4,723	)
Accumulated (deficit) earnings		(7,378	)		2,811
Accumulated other comprehensive loss		(699	)		(1,428	)
Total shareholders' equity		112,137			129,821
TOTAL LIABILITIES AND EQUITY	$	232,268		$	247,447

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

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,
	2021		2022			2021			2022
Revenues	$	75,920	$	81,200		$	257,144		$	212,392
Cost of revenues		39,900		40,034			130,862			108,621
Gross profit		36,020		41,166			126,282			103,771
Operating expenses
Research and development		12,082		11,747			36,302			34,425
Sales and marketing		9,938		10,767			29,696			31,494
General and administrative		6,640		7,186			22,065			22,936
Depreciation and amortization		1,548		1,506			4,707			4,486
Total operating expenses		30,208		31,206			92,770			93,341
Operating income		5,812		9,960			33,512			10,430
Interest expense, net		752		514			3,208			1,418
Other expense (income), net		88		165			209			(129	)
Income before income taxes		4,972		9,281			30,095			9,141
Provision (benefit) for income taxes		355		(154	)		(5,899	)		(1,048	)
Net income	$	4,617	$	9,435		$	35,994		$	10,189

Earnings per share
Basic	$	0.17	$	0.35		$	1.37		$	0.38
Diluted	$	0.16	$	0.34		$	1.25		$	0.36
Weighted-average number of shares outstanding to compute net earnings per share
Basic		26,540,843		26,977,155			26,342,113			26,855,395
Diluted		28,639,177		27,979,575			28,705,677			27,939,728

Share-based compensation included in costs and expenses:
Cost of revenues	$	39	$	56		$	108		$	163
Research and development		834		1,241			2,193			3,274
Sales and marketing		540		696			1,374			1,901
General and administrative		663		855			1,909			2,447
Total share-based compensation	$	2,076	$	2,848		$	5,584		$	7,785

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

Cambium Networks Corporation

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2022			2021			2022
Net income	$	4,617		$	9,435		$	35,994		$	10,189
Other comprehensive loss
Foreign currency translation adjustment		(38	)		(283	)		(122	)		(729	)
Comprehensive income	$	4,579		$	9,152		$	35,872		$	9,460

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

Cambium Networks Corporation

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands)

(unaudited)


	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	$	117,521	$	(3,276	)	$	(13,422	)	$	(648	)	$	100,178
Net income		—			—		—		—			4,617			—			4,617
Share-based compensation		—			—		1,886		—			—			—			1,886
Issuance of vested shares		34			—		—		—			—			—			—
Treasury shares withheld for net settlement		(11	)		—		—		(387	)		—			—			(387	)
Share options exercised		113			—		1,196		—			—			—			1,196
Foreign currency translation		—			—		—		—			—			(38	)		(38	)
Balance at September 30, 2021		26,639		$	3	$	120,603	$	(3,663	)	$	(8,805	)	$	(686	)	$	107,452

	Nine 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 December 31, 2020		26,035		$	3	$	109,837	$	(1,090	)	$	(44,799	)	$	(564	)	$	63,387
Net income		—			—		—		—			35,994			—			35,994
Share-based compensation		—			—		5,061		—			—			—			5,061
Issuance of ordinary shares under ESPP		39			—		1,164		—			—			—			1,164
Issuance of vested shares		195			—		—		—			—			—			—
Treasury shares withheld for net settlement		(55	)		—		—		(2,573	)		—			—			(2,573	)
Share options exercised		425			—