Cambium Networks Corp 10-Q for FY2020 Q1

Cambium Networks Corp (CMBMF)

10-Q 2020-05-13 For: 2020-03-31

Added on April 06, 2026

About this 10-Q

Cambium Networks Corp filed this 10-Q on May 13, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $60.43M; down 11.3% from $68.11M a year earlier
Net loss: $838K; compared with net income of $1.86M a year earlier

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Cayman Islands		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

		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	33
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	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

	December 31,			March 31,
	2019			2020
				(unaudited)
ASSETS
Current assets
Cash	$	19,346		$	24,493
Receivables, net of allowances		58,628			61,606
Inventories, net		41,670			32,499
Recoverable income taxes		—			46
Prepaid expenses		5,323			4,078
Other current assets		4,350			4,944
Total current assets		129,317			127,666
Noncurrent assets
Property and equipment, net		8,314			8,264
Software, net		3,395			3,185
Operating lease assets		6,872			6,443
Intangible assets, net		15,100			14,548
Goodwill		8,552			9,493
Deferred tax assets, net		929			815
Other noncurrent assets		—			417
TOTAL ASSETS	$	172,479		$	170,831
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	25,214		$	16,528
Accrued liabilities		15,034			15,017
Employee compensation		4,652			5,097
Current portion of long-term external debt, net		9,454			9,454
Deferred revenues		7,430			6,331
Other current liabilities		6,084			7,400
Total current liabilities		67,868			59,827
Noncurrent liabilities
Long-term external debt, net		54,158			61,795
Deferred revenues		4,852			4,337
Noncurrent operating lease liabilities		5,335			4,724
Deferred tax liabilities, net		337			61
Other noncurrent liabilities		—			520
Total liabilities		132,550			131,264
Shareholders' equity
Share capital; $0.0001 par value; 500,000,000 shares authorized at December 31, 2019 and March 31, 2020; 25,753,603 shares issued and 25,672,983 outstanding at December 31, 2019 and 25,768,757 shares issued and 25,680,205 outstanding at March 31, 2020		3			3
Additional paid in capital		104,773			105,584
Treasury shares, at cost, 80,620 shares at December 31, 2019 and 88,552 shares at March 31, 2020		(1,094	)		(1,041	)
Accumulated deficit		(63,374	)		(64,212	)
Accumulated other comprehensive loss		(379	)		(767	)
Total shareholders' equity		39,929			39,567
TOTAL LIABILITIES AND EQUITY	$	172,479		$	170,831

	Three Months Ended March 31,
	2019		2020
Revenues	$	68,112	$	60,429
Cost of revenues		36,322		29,797
Gross profit		31,790		30,632
Operating expenses
Research and development		10,482		11,814
Sales and marketing		10,218		10,304
General and administrative		5,130		6,446
Depreciation and amortization		1,281		1,695
Total operating expenses		27,111		30,259
Operating income		4,679		373
Interest expense, net		2,268		1,345
Other expense (income), net		134		(216	)
Income (loss) before income taxes		2,277		(756	)
Provision for income taxes		415		82
Net income (loss)	$	1,862	$	(838	)

Earnings (loss) per share
Basic and diluted	$	0.14	$	(0.03	)
Weighted-average number of shares outstanding to compute net income (loss) per share
Basic and diluted		13,600,411		25,677,179

Share-based compensation included in costs and expenses:
Cost of revenues	$	—	$	17
Research and development		—		368
Sales and marketing		—		232
General and administrative		—		194
Total share-based compensation	$	—	$	811

	Three Months Ended March 31, 2019
	Share Capital
	Shares			Amount		Additional paid in capital		Capital contribution		Treasury shares			Accumulated deficit			Accumulated other comprehensive loss			Total shareholders' (deficit)
Balance at December 31, 2018		77		$	—	$	772	$	24,651	$	—		$	(45,773	)	$	(221	)	$	(20,571	)
Net income		—			—		—		—		—			1,862			—			1,862
Foreign currency translation		—			—		—		—		—			—			(2	)		(2	)
Balance at March 31, 2019		77		$	—	$	772	$	24,651	$	—		$	(43,911	)	$	(223	)	$	(18,711	)


	Three Months Ended March 31, 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 loss		—			—		—		—		—			(838	)		—			(838	)
Share-based compensation		—			—		811		—		—			—			—			811
Issuance of vested shares		15			—		—		—		—			—			—			—
Treasury shares withheld for net settlement		(8	)		—		—		—		53			—			—			53
Foreign currency translation		—			—		—		—		—			—			(388	)		(388	)
Balance at March 31, 2020		25,680		$	3	$	105,584	$	—	$	(1,041	)	$	(64,212	)	$	(767	)	$	39,567

Goodwill	$	1,433
Customer relationships		7,670
Unpatented technology		540
Deferred revenue		(7,460	)
Other net assets acquired		2,817
Total purchase price	$	5,000

	Year ended December 31,			Three months ended March 31,
	2019			2020
				(unaudited)
Beginning balance	$	503		$	580
Increase, charged to expense		333			125
Recoveries		(204	)		(15	)
Amounts written-off		(52	)		—
Ending balance	$	580		$	690

		December 31,			March 31,
	Useful Life	2019			2020
					(unaudited)
Equipment and tooling	3 to 5 years	$	22,150		$	22,614
Computer equipment	3 to 5 years		2,888			2,892
Furniture and fixtures	10 years		749			737
Leasehold improvements	2 to 3 years		—			282
Total cost			25,787			26,525
Less: Accumulated depreciation			(17,473	)		(18,261	)
Property and equipment, net		$	8,314		$	8,264

		December 31, 2019							March 31, 2020
	Useful Life	Gross carrying amount		Accumulated amortization			Net balance		Gross carrying amount		Accumulated amortization			Net balance
									(unaudited)
Acquired and Software for internal use	3 to 7 years	$	15,870	$	(13,471	)	$	2,399	$	15,884	$	(13,650	)	$	2,234
Software marketed for external sale	3 years		1,805		(809	)		996		1,911		(960	)		951
Total		$	17,675	$	(14,280	)	$	3,395	$	17,795	$	(14,610	)	$	3,185

Year ending December 31,	Acquired and internal use software		Software marketed for external use		Total
2020 (April - December)	$	550	$	462	$	1,012
2021		698		330		1,028
2022		449		140		589
2023		209		19		228
2024		115		—		115
Thereafter		213		—		213
Total amortization	$	2,234	$	951	$	3,185

Year ending December 31,	Amortization
2020 (April - December)	$	1,654
2021		2,118
2022		1,603
2023		1,498
2024		1,498
Thereafter		6,177
Total amortization	$	14,548

Year ending December 31,
2020 (April - December)	$	7,500
2021		10,000
2022		55,250
Total	$	72,750

		Quarter ending
Covenant	Criteria	June 30, 2020	September 30, 2020	December 31, 2020	March 31, 2020
Monthly minimum adjusted quick ratio	Min ratio	Non quarter-end months 1.00:1.00 Quarter-end months 1.15:1.00
Quarterly consolidated fixed charge coverage ratio	Min ratio	1.25:1.00	1.25:1.00	1.25:1.00	1.25:1.00
Quarterly consolidated fixed charge coverage ratio	Time period	Trailing twelve-month
Quarterly consolidated leverage ratio	Max ratio	2.75:1.00	2.50:1.00	2.50:1.00	2.25:1.00
Quarterly consolidated leverage ratio	Time period	Trailing twelve-month

	Number of shares
Available for grant at December 31, 2019		426,022
2019 Share Incentive Plan		1,283,649
RSUs granted		(470,000	)
Shares withheld in settlement of taxes		7,932
Forfeitures		155,000
Available for grant at March 31, 2020		1,402,603

	Three Months Ended March 31,
	2019			2020
Cash flows from operating activities:
Net income (loss)	$	1,862		$	(838	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		882			955
Amortization of software and intangible assets		478			890
Amortization of debt issuance costs		165			137
Share-based compensation		—			811
Deferred income taxes		310			(162	)
Other		866			522
Change in assets and liabilities:
Receivables		(3,487	)		(2,172	)
Inventories		(2,651	)		8,698
Accounts payable		1,830			(8,546	)
Accrued employee compensation		1,391			547
Accrued liabilities		1,542			(585	)
Accrued Sponsor interest and payables		43			—
Other assets and liabilities		24			(1,048	)
Net cash provided by (used in) operating activities		3,255			(791	)
Cash flows from investing activities:
Purchase of property and equipment		(1,128	)		(1,053	)
Purchase of software		(383	)		(157	)
Cash paid for acquisition		—			(334	)
Net cash used in investing activities		(1,511	)		(1,544	)
Cash flows from financing activities:
Proceeds from issuance of revolver debt		—			10,000
Repayment of term loan		(2,375	)		(2,500	)
Taxes paid related to net share settlement of equity awards		—			52
Net cash (used in) provided by financing activities		(2,375	)		7,552
Effect of exchange rate on cash		(9	)		(70	)
Net (decrease) increase in cash		(640	)		5,147
Cash, beginning of period		4,441			19,346
Cash, end of period	$	3,801		$	24,493
Supplemental disclosure of cash flow information:
Income taxes paid	$	201		$	149
Interest paid	$	1,950		$	1,117

	December 31,			March 31,
	2019			2020
				(unaudited)
Trade accounts receivable	$	58,774		$	62,000
Other receivables		434			296
Total receivables		59,208			62,296
Less: Allowance for credit losses		(580	)		(690	)
Receivables, net	$	58,628		$	61,606

	December 31,			March 31,
	2019			2020
				(unaudited)
Finished goods	$	42,402		$	31,659
Raw materials		4,227			4,886
Gross inventory		46,629			36,545
Less: Excess and obsolete provision		(4,959	)		(4,046	)
Inventories, net	$	41,670		$	32,499

	Options			Weighted average exercise price		Weighted Average remaining contractual term (years)		Aggregate intrinsic value
Outstanding at December 31, 2019		2,920,500		$	10.40		9.6	$	1,932,000
Options forfeited		(155,000	)	$	10.72		—	$	—
Outstanding at March 31, 2020		2,765,500		$	10.38		9.4	$	—
Options exercisable at March 31, 2020		165,000		$	12.00		9.2	$	—
Options vested and expected to vest at March 31, 2020		2,578,105		$	10.42		9.4	$	—

	Three Months Ended March 31,
	2020
Expected dividend yield		—
Risk-free interest rate		1.80	%
Weighted-average expected volatility		40.8	%
Expected term (in years)		6.1
Weighted average grant-date fair value per share of options granted	$	4.34

	Units			Weighted average grant date fair value
RSU and RSA balance at December 31, 2019		257,119		$	12.00
RSUs and RSAs granted		470,000		$	4.50
RSUs and RSAs vested		(8,704	)	$	12.00
RSUs and RSAs forfeited		(5,078	)	$	12.00
RSU and RSA balance at March 31, 2020		713,337		$	7.06
RSUs and RSAs expected to vest at March 31, 2020		713,337		$	7.06

	Number of shares			Value (in thousands)
Balance at December 31, 2019		25,672,983		$	3
Shares withheld for net settlement of shares issued		(7,932	)		—
Issuance of vested shares		15,154			—
Balance at March 31, 2020		25,680,205		$	3
As of March 31, 2020, no dividends have been declared or paid.

	December 31, 2019		March 31, 2020
			(unaudited)
Trade accounts receivable, net of allowance for credit losses	$	58,254	$	61,370
Deferred revenue - current		7,430		6,331
Deferred revenue - noncurrent		4,852		4,337
Refund liability	$	2,223	$	3,052

	Three Months Ended March 31, 2019		Three Months Ended March 31, 2020
	(unaudited)		(unaudited)
Operating lease cost	$	586	$	644
Short-term lease cost		59		27
Variable lease costs		61		109
Total lease expense	$	706	$	780

	Balance Sheet Caption	December 31, 2019			March 31, 2020
Operating leases:
Operating lease assets	Operating lease assets	$	6,872		$	6,443
Current lease liabilities	Other current liabilities	$	2,125		$	2,208
Noncurrent lease liabilities	Noncurrent operating lease liabilities	$	5,335		$	4,724
Weighted average remaining lease term (years):
Operating leases			3.98			3.75
Weighted average discount rate:
Operating leases			8.50	%		8.50	%

	Operating leases
2020 (excludes the three months ended March 31, 2020)	$	2,038
2021		2,471
2022		1,349
2023		1,292
2024		537
Thereafter		448
Total lease payments		8,135
Less: interest		1,203
Present value of lease liabilities	$	6,932

Restructuring liability at December 31, 2019	$	138
Restructuring charges		1,152
Cost paid		(1,150	)
Restructuring liability at March 31, 2020	$	140

	Three months ended March 31,
(in thousands)	2019		2020
Statements of Operations Data:
Revenues	$	68,112	$	60,429
Cost of revenues		36,322		29,797
Gross profit		31,790		30,632
Operating expenses
Research and development		10,482		11,814
Sales and marketing		10,218		10,304
General and administrative		5,130		6,446
Depreciation and amortization		1,281		1,695
Total operating expenses		27,111		30,259
Operating income		4,679		373
Interest expense		2,268		1,345
Other expense (income)		134		(216	)
Income (loss) before income taxes		2,277		(756	)
Provision for income taxes		415		82
Net income (loss)	$	1,862	$	(838	)

	Three months ended March 31,				Change
(dollars in thousands)	2019		2020		$			%
Revenues	$	68,112	$	60,429	$	(7,683	)		(11.3	)%

	Payments due by period
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Operating lease obligations	$	2,781	$	3,881	$	1,859	$	468	$	8,989
Term credit facility⁽¹⁾		10,000		55,250		—		—		65,250
Term credit facility interest ⁽¹⁾		3,960		5,977		—		—		9,937
Revolving credit facility		—		10,000		—		—		10,000
Revolving credit facility interest ⁽²⁾		450		600		—		—		1,050
Purchase obligations		32,724		—		—		—		32,724
Total	$	49,915	$	75,708	$	1,859	$	468	$	127,950

Exhibit Number		Description
31.1*		Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	Cambium Networks Corporation

Date: May 13, 2020	By:	/s/ Atul Bhatnagar
		Atul Bhatnagar
		President and Chief Executive Officer

Date: May 13, 2020	By:	/s/ Stephen Cumming
		Stephen Cumming
		Chief Financial Officer