cmbm-10q_20200630.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 June 30, 2020

☐	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 6, 2020 the registrant had 25,686,799 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	38
Item 6.	Exhibits	39
Signatures		40

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 prospectus 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;

•

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.

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,
	2019			2020
				(unaudited)
ASSETS
Current assets
Cash	$	19,346		$	37,444
Receivables, net of allowances		58,628			51,290
Inventories, net		41,670			30,091
Recoverable income taxes		—			201
Prepaid expenses		5,323			3,792
Other current assets		4,350			3,893
Total current assets		129,317			126,711
Noncurrent assets
Property and equipment, net		8,314			7,700
Software, net		3,395			3,145
Operating lease assets		6,872			5,991
Intangible assets, net		15,100			13,997
Goodwill		8,552			9,842
Deferred tax assets, net		929			841
Other noncurrent assets		—			415
TOTAL ASSETS	$	172,479		$	168,642
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	25,214		$	20,021
Accrued liabilities		15,034			16,556
Employee compensation		4,652			6,570
Current portion of long-term external debt, net		9,454			9,454
Deferred revenues		7,430			6,368
Other current liabilities		6,084			7,152
Total current liabilities		67,868			66,121
Noncurrent liabilities
Long-term external debt, net		54,158			49,431
Deferred revenues		4,852			3,934
Noncurrent operating lease liabilities		5,335			4,176
Deferred tax liabilities, net		337			—
Other noncurrent liabilities		—			1,184
Total liabilities		132,550			124,846
Shareholders' equity
Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2019 and June 30, 2020; 25,753,603 shares issued and 25,672,983 outstanding at December 31, 2019 and 25,774,139 shares issued and 25,684,371 outstanding at June 30, 2020		3			3
Additional paid in capital		104,773			106,524
Treasury shares, at cost, 80,620 shares at December 31, 2019 and 89,768 shares at June 30, 2020		(1,094	)		(1,048	)
Accumulated deficit		(63,374	)		(60,900	)
Accumulated other comprehensive loss		(379	)		(783	)
Total shareholders' equity		39,929			43,796
TOTAL LIABILITIES AND EQUITY	$	172,479		$	168,642

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 June 30,						Six Months Ended June 30,
	2019			2020			2019			2020
Revenues	$	69,151		$	62,254		$	137,263		$	122,683
Cost of revenues		34,839			31,782			71,161			61,579
Gross profit		34,312			30,472			66,102			61,104
Operating expenses
Research and development		15,189			9,299			25,671			21,113
Sales and marketing		14,227			8,035			24,445			18,339
General and administrative		13,063			6,625			18,193			13,071
Depreciation and amortization		1,227			1,700			2,508			3,395
Total operating expenses		43,706			25,659			70,817			55,918
Operating (loss) income		(9,394	)		4,813			(4,715	)		5,186
Interest expense, net		2,301			1,525			4,569			2,870
Other expense (income), net		56			(22	)		190			(238	)
(Loss) income before income taxes		(11,751	)		3,310			(9,474	)		2,554
Provision (benefit) for income taxes		8,623			(2	)		9,038			80
Net (loss) income	$	(20,374	)	$	3,312		$	(18,512	)	$	2,474

(Loss) earnings per share
Basic	$	(1.47	)	$	0.13		$	(1.35	)	$	0.10
Diluted	$	(1.47	)	$	0.13		$	(1.35	)	$	0.10
Weighted-average number of shares outstanding to compute net (loss) earnings per share
Basic		13,865,111			25,683,289			13,732,760			25,680,234
Diluted		13,865,111			25,789,830			13,732,760			25,764,966

Share-based compensation included in costs and expenses:
Cost of revenues	$	182		$	18		$	182		$	35
Research and development		4,863			422			4,863			790
Sales and marketing		3,607			243			3,607			475
General and administrative		7,426			257			7,426			451
Total share-based compensation	$	16,078		$	940		$	16,078		$	1,751

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

Cambium Networks Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2020			2019			2020
Net (loss) income	$	(20,374	)	$	3,312		$	(18,512	)	$	2,474
Other comprehensive loss
Foreign currency translation adjustment		28			(16	)		26			(404	)
Comprehensive (loss) income	$	(20,346	)	$	3,296		$	(18,486	)	$	2,070

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

Cambium Networks Corporation

Condensed Consolidated Statements of Shareholders’ (Deficit) Equity

(in thousands)

(unaudited)

	Three Months Ended June 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 March 31, 2019		77		$	—	$	772	$	24,651		$	—		$	(43,911	)	$	(223	)	$	(18,711	)
Net loss		—			—		—		—			—			(20,374	)		—			(20,374	)
Share-based compensation		—			—		16,078		—			—			—			—			16,078
Issuance of shares in Recapitalization and related reclassification		19,849			2		24,651		(24,651	)		—			—			—			2
Issuance of shares in initial public offering, net of issuance costs of $7,866		5,800			1		61,734		—			—			—			—			61,735
Treasury shares withheld for net settlement in Recapitalization		(94	)		—		308		—			(1,133	)		—			—			(825	)
Foreign currency translation		—			—		—		—			—			—			28			28
Balance at June 30, 2019		25,632		$	3	$	103,543	$	—		$	(1,133	)	$	(64,285	)	$	(195	)	$	37,933

	Six Months Ended June 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		—			—		—		—			—			(18,512	)		—			(18,512	)
Share-based compensation		—			—		16,078		—			—			—			—			16,078
Issuance of shares in Recapitalization and related reclassification		19,849			2		24,651		(24,651	)		—			—			—			2
Issuance of shares in initial public offering, net of issuance costs of $7,866		5,800			1		61,734		—			—			—			—			61,735
Treasury shares withheld for net settlement in Recapitalization		(94	)		—		308		—			(1,133	)		—			—			(825	)
Foreign currency translation		—			—		—		—			—			—			26			26
Balance at June 30, 2019		25,632		$	3	$	103,543	$	—		$	(1,133	)	$	(64,285	)	$	(195	)	$	37,933

	Three Months Ended June 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 March 31, 2020		25,680		$	3	$	105,584	$	—		$	(1,041	)	$	(64,212	)	$	(767	)	$	39,567
Net income		—			—		—		—			—			3,312			—			3,312
Share-based compensation		—			—		940		—			—			—			—			940
Issuance of vested shares		5			—		—		—			—			—			—			—
Treasury shares withheld for net settlement		(1	)		—		—		—			(7	)		—			—			(7	)
Foreign currency translation		—			—		—		—			—			—			(16	)		(16	)
Balance at June 30, 2020		25,684		$	3	$	106,524	$	—		$	(1,048	)	$	(60,900	)	$	(783	)	$	43,796

	Six Months Ended June 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		—			—		—		—			—			2,474			—			2,474
Share-based compensation		—			—		1,751		—			—			—			—			1,751
Issuance of vested shares		20			—		—		—			—			—			—			—
Treasury shares withheld for net settlement		(9	)		—		—		—			46			—			—			46
Foreign currency translation		—			—		—		—			—			—			(404	)		(404	)
Balance at June 30, 2020		25,684		$	3	$	106,524	$	—		$	(1,048	)	$	(60,900	)	$	(783	)	$	43,796

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

Cambium Networks Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2019			2020
Cash flows from operating activities:
Net (loss) income	$	(18,512	)	$	2,474
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		1,713			1,913
Amortization of software and intangible assets