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

☐	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

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.

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.

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.

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.

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	)	$	50,596

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)

	Nine Months ended September 30,
	2019		2020
Cash flows from operating activities:
Net (loss) income	$	(16,552