Cambium Networks Corporation (“Cambium Networks”) (NASDAQ: CMBM), a
leading provider of wireless broadband networking infrastructure
solutions, today announced financial results for the third quarter
ended September 30, 2019.
|
GAAP |
|
Non-GAAP (1) |
(in millions, except
percentages) |
Q3 2019 |
|
Q2 2019 |
|
Q3 2018 |
|
Q3 2019 |
|
Q2 2019 |
|
Q3 2018 |
Revenues |
$ |
65.7 |
|
|
$ |
69.2 |
|
|
$ |
59.0 |
|
|
$ |
65.7 |
|
|
$ |
69.2 |
|
|
$ |
59.0 |
|
Gross margin |
|
48.4 |
% |
|
|
49.6 |
% |
|
|
46.6 |
% |
|
|
48.7 |
% |
|
|
50.1 |
% |
|
|
46.8 |
% |
Operating margin |
|
6.3 |
% |
|
|
(13.6 |
)% |
|
|
(1.8 |
)% |
|
|
8.8 |
% |
|
|
10.3 |
% |
|
|
0.4 |
% |
Adjusted EBITDA margin |
|
|
|
|
|
|
|
10.3 |
% |
|
|
11.8 |
% |
|
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[1] Refer to Supplemental Financial Information accompanying
this press release for a reconciliation of GAAP to non-GAAP numbers
and for reconciliation of adjusted EBITDA for the third quarter of
2019.
“We are pleased that our profitability remained strong as a
result of improved operating efficiencies and tighter cost
controls,” said Atul Bhatnagar, president and CEO. “Our revenues
grew 11% year-over-year during the third quarter, our twenty-second
consecutive quarter of year-over-year growth, although slower than
anticipated, as a result of softer government spending for our
Point-to-Point products.”
Bhatnagar continued, “Cambium Networks continues to broaden our
technology portfolio and remains well positioned for growth as a
leader in fixed wireless broadband infrastructure and cloud powered
enterprise Wi-Fi solutions. We will continue to capitalize on the
strength of our technologies, while focusing on improving
profitability through cost reduction initiatives and disciplined
discretionary spending.”
Revenues of $65.7 million for the third quarter 2019 increased
$6.7 million year-over-year, as a result of growth in both
Point-to-Multi-Point and Wi-Fi businesses. Revenues for the third
quarter 2019 decreased $3.4 million compared to $69.2 million for
the second quarter 2019, driven by slower government spending
partially offset by growth in enterprise Wi-Fi solutions. GAAP
gross margin for the third quarter 2019 was 48.4%, compared to
46.6% for the third quarter 2018, and 49.6% for the second quarter
2019. GAAP operating income for the third quarter 2019 was $4.1
million, compared to operating loss of $1.1 million during the
third quarter 2018, and GAAP operating loss for the second quarter
2019 of $9.4 million, which included a $16.1 million charge for
share-based compensation expense. GAAP net income for the third
quarter 2019 was $2.0 million, or net income of $0.08 per diluted
share, compared to a net loss of $2.6 million, or a net loss of
$0.19 per diluted share for the third quarter 2018, and a net loss
of $20.4 million, or a net loss of $1.47 per diluted share for the
second quarter 2019.
Non-GAAP gross margin for the third quarter 2019 was 48.7%,
compared to 46.8% for the third quarter 2018, and 50.1% for the
second quarter 2019. Non-GAAP operating income for the third
quarter 2019 was $5.8 million, compared to $0.2 million for the
third quarter 2018, and $7.1 million for the second quarter 2019.
Non-GAAP net income for the third quarter 2019 was $3.7 million, or
$0.15 per diluted share, compared to non-GAAP net loss of $1.5
million, or a net loss of $0.11 per diluted share for the third
quarter 2018, and non-GAAP net income of $3.9 million, or $0.15 per
diluted share, for the second quarter 2019.
For the third quarter 2019, adjusted EBITDA was $6.8 million or
10.3% of revenues, compared to adjusted EBITDA of $1.5 million or
2.5% of revenues for the third quarter 2018, and $8.1 million, or
11.8% of revenues for the second quarter 2019.
Cash used in operating activities was $11.8 million for the
third quarter 2019, due primarily to the timing of payments related
to the Initial Public Offering (IPO), and compared to cash provided
by operating activities of $3.2 million for the third quarter 2018,
and $6.0 million for the second quarter 2019. Cash totaled $19.0
million as of September 30, 2019, $14.8 million higher than the
third quarter 2018, and a decrease of $52.3 million from the second
quarter 2019. The decrease in cash balance for the third quarter
2019 from the second quarter 2019 was primarily the result of a
$33.2 million paydown of long-term and revolving debt, payments of
approximately $6.0 million for offering expenses and D&O
insurance, a $5.6 million past management fee, a $5.0 million
increase in inventories, and a $2.0 million payment to acquire the
Xirrus Wi-Fi business.
Third Quarter 2019 Highlights
- Revenues of $65.7 million increased 11% year-over-year.
- GAAP gross margin of 48.4%, up 180 basis points from 46.6% for
the third quarter 2018, and down 120 basis points compared to 49.6%
for the second quarter 2019.
- Non-GAAP gross margin of 48.7%, up 190 basis points from 46.8%
for the third quarter 2018, and down 140 basis points
compared to 50.1% for the second quarter 2019.
- GAAP net income of $2.0 million or $0.08 per diluted share,
non-GAAP net income $3.7 million or $0.15 per diluted share.
- Adjusted EBITDA of $6.8 million or 10.3% of revenues, compared
to $1.5 million or 2.5% of revenues for the third quarter 2018, and
$8.1 million or 11.8% of revenues for the second quarter 2019.
- Increased new channel partners by over 1,450 year-over-year, an
increase of 29%.
- Announced new cloud managed cnPilot indoor and outdoor Wi-Fi
solutions (cnPilot e505, cnPilot e510 and cnPilot e425H).
- Announced Citizens Broadband Radio Service (CBRS) wireless
broadband connectivity solution on the PMP 450 product line.
Demonstrated CBRS capabilities with Initial Commercial Deployment
(ICD) with four network operators, utilizing both Federated
Wireless and Google for spectrum access system (SAS) services in
September 2019.
- Inaugural inclusion in both the 2019 Gartner Magic Quadrant for
the Wired and Wireless LAN Access Infrastructure and the 2019
Forrester New Wave report for wireless solutions.
- Awarded manufacturer of the year for 2019 as voted by the
members of the North America Wireless Internet Service Providers
Association (WISPA).
Fourth Quarter 2019 Financial OutlookTaking
into account the company’s current visibility, and incorporating
the acquisition of Xirrus (excluding any one-time charges affecting
the acquisition), the financial outlook as of November 7, 2019 for
the fourth quarter ending December 31, 2019 is expected to be as
follows:
- GAAP revenues between $63.0-$66.0 million
- GAAP gross margin between 48.0%-49.4%; and non-GAAP gross
margin between 48.2%-49.5%
- GAAP operating income between $1.2-$2.4 million; and non-GAAP
operating income between $2.4-$3.6 million
- GAAP (net loss)/net income between ($1.0)-$0.0 million or
between ($0.04) and $0.00 per diluted share; and non-GAAP net
income between $0.8-$1.7 million or between $0.03 and $0.07 per
diluted share
- Adjusted EBITDA between $3.4-$4.5 million; and adjusted EBITDA
margin between 5.3%-6.9%
- GAAP taxes between 19.0%-21.0%; and a non-GAAP effective tax
rate of approximately 17.0%-19.0%
- Approximately 25.6 million weighted average diluted shares
outstanding
Cash requirements are expected to be as
follows:
- Paydown of debt: $2.4 million
- Interest expense: approximately $1.4 million
- Capital expenditures: $1.0-$1.1 million
Cambium Networks financial outlook does not include the
potential impact of any possible future financial transactions,
pending legal matters, or other transactions. Accordingly,
Cambium Networks only includes such items in the company’s
financial outlook to the extent they are reasonably certain;
however, actual results may differ materially from the outlook.
Conference Call and Webcast
Cambium Networks will host a live webcast and conference call to
discuss its financial results at 4:30 p.m. ET today, November 7,
2019. To access the live conference call by phone, listeners should
dial +1-877-288-4394 in the U.S. or Canada and +1-470-495-9483 for
international callers. To join the live webcast and view additional
materials, listeners should access the investor page of Cambium
Networks website at https://investors.cambiumnetworks.com/.
Following the live webcast, a replay will be available on the
investor page of Cambium Networks website for a period of one year.
A replay of the conference call will be available for 48 hours soon
after the call by phone by dialing +1-855-859-2056 in the U.S. or
Canada and +1-404-537-3406 for international callers, using the
conference access code: 5478019.
In addition, on Tuesday November 12, 2019 at 3:40 p.m. ET,
Cambium Networks president and CEO, Atul Bhatnagar, will present at
the Needham Security, Networking and Communications Conference in
New York. To join the live webcast, listeners should access the
investor page of Cambium Networks
website https://investors.cambiumnetworks.com/.
Following the live webcast, a replay will be available in the event
archives at the same web address.
About Cambium Networks
Cambium Networks is a leading provider of wireless broadband
networking infrastructure solutions for network operators,
including medium-sized wireless Internet service providers,
enterprises and government agencies. Cambium’s scalable,
reliable and high-performance solutions create a purpose-built
wireless fabric which connects people, places and things across
distances ranging from two meters to more than 100 kilometers,
indoors and outdoors, using licensed and unlicensed spectrum, at
attractive economics. Headquartered outside Chicago and with
R&D centers in the U.S., U.K. and India, Cambium Networks sells
through a range of trusted global distributors.
Cautionary Note Regarding Forward-Looking
StatementsThis release contains certain forward-looking
statements within the meaning of the federal securities laws. All
statements other than statements of historical fact contained in
this document, 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, you can identify forward-looking statements 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 document 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 document and are
subject to a number of risks, uncertainties and assumptions
including those described in the “Risk factors” section of our
registration statement on Form S-1 filed with the Securities and
Exchange Commission. Because forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot
be predicted or quantified, you should not rely on these
forward-looking statements 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; 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, remediate our material
weakness, 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.
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.
CAMBIUM
NETWORKS CORPORATION |
CONSOLIDATED
STATEMENTS OF OPERATION |
(In
thousands, except share and per share amounts) |
(Unaudited) |
|
Three Months Ended |
|
September 30, 2019 |
|
June 30, 2019 |
|
September 30, 2018 |
|
|
|
|
|
|
Revenues |
$ |
65,703 |
|
|
$ |
69,151 |
|
|
$ |
58,981 |
|
Cost of revenues |
|
33,871 |
|
|
|
34,839 |
|
|
|
31,469 |
|
Gross
profit |
|
31,832 |
|
|
|
34,312 |
|
|
|
27,512 |
|
Gross margin |
|
48.4 |
% |
|
|
49.6 |
% |
|
|
46.6 |
% |
Operating
expenses |
|
|
|
|
|
Research and development |
|
9,895 |
|
|
|
15,189 |
|
|
|
9,810 |
|
Sales and marketing |
|
10,363 |
|
|
|
14,227 |
|
|
|
10,805 |
|
General and administrative |
|
5,996 |
|
|
|
13,063 |
|
|
|
5,520 |
|
Depreciation and amortization |
|
1,449 |
|
|
|
1,227 |
|
|
|
2,448 |
|
Total operating
expenses |
|
27,703 |
|
|
|
43,706 |
|
|
|
28,583 |
|
Operating income
(loss) |
|
4,129 |
|
|
|
(9,394 |
) |
|
|
(1,071 |
) |
Operating margin |
|
6.3 |
% |
|
|
(13.6 |
)% |
|
|
(1.8 |
)% |
Interest expense |
|
2,105 |
|
|
|
2,301 |
|
|
|
2,033 |
|
Other expense |
|
61 |
|
|
|
56 |
|
|
|
116 |
|
Income (loss) before
income taxes |
|
1,963 |
|
|
|
(11,751 |
) |
|
|
(3,220 |
) |
Provision (benefit) for income
taxes |
|
3 |
|
|
|
8,623 |
|
|
|
(665 |
) |
Net income
(loss) |
$ |
1,960 |
|
|
$ |
(20,374 |
) |
|
$ |
(2,555 |
) |
|
|
|
|
|
|
Earnings (loss) per
share |
|
|
|
|
|
Basic and diluted |
$ |
0.08 |
|
|
$ |
(1.47 |
) |
|
$ |
(0.19 |
) |
Weighted-average
number of shares outstanding to compute net earnings (loss) per
share |
|
|
|
|
|
Basic and diluted |
|
25,634,417 |
|
|
|
13,865,111 |
|
|
|
13,600,411 |
|
|
|
|
|
|
|
Share-based
compensation included in costs and expenses: |
|
|
|
|
|
Cost of revenues |
$ |
14 |
|
|
$ |
182 |
|
|
$ |
— |
|
Research and development |
|
199 |
|
|
|
4,863 |
|
|
|
— |
|
Sales and marketing |
|
374 |
|
|
|
3,607 |
|
|
|
— |
|
General and administrative |
|
241 |
|
|
|
7,426 |
|
|
|
— |
|
Total share-based compensation expense |
$ |
828 |
|
|
$ |
16,078 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAMBIUM
NETWORKS CORPORATION |
CONSOLIDATED
BALANCE SHEETS |
(In
thousands) |
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
ASSETS |
(Unaudited) |
|
|
Current assets |
|
|
|
Cash |
$ |
18,950 |
|
|
$ |
4,441 |
|
Accounts receivable, net of allowance |
|
59,824 |
|
|
|
60,389 |
|
Inventories, net |
|
41,933 |
|
|
|
30,710 |
|
Recoverable income taxes |
|
527 |
|
|
|
679 |
|
Prepaid expenses |
|
6,301 |
|
|
|
3,465 |
|
Other current assets |
|
4,516 |
|
|
|
5,889 |
|
Total current assets |
|
132,051 |
|
|
|
105,573 |
|
Noncurrent assets |
|
|
|
Property and equipment, net |
|
8,257 |
|
|
|
7,965 |
|
Software, net |
|
4,084 |
|
|
|
3,944 |
|
Operating lease assets |
|
6,957 |
|
|
|
— |
|
Intangible assets, net |
|
15,693 |
|
|
|
8,493 |
|
Goodwill |
|
8,963 |
|
|
|
8,060 |
|
Deferred tax assets, net |
|
496 |
|
|
|
8,022 |
|
TOTAL ASSETS |
$ |
176,501 |
|
|
$ |
142,057 |
|
LIABILITIES AND EQUITY
(DEFICIT) |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
20,894 |
|
|
$ |
23,710 |
|
Accrued liabilities |
|
20,425 |
|
|
|
18,263 |
|
Employee compensation |
|
4,961 |
|
|
|
4,377 |
|
Current portion of long-term external debt |
|
9,329 |
|
|
|
8,836 |
|
Payable to Sponsor |
|
— |
|
|
|
5,582 |
|
Deferred revenues |
|
7,557 |
|
|
|
2,770 |
|
Other current liabilities |
|
5,870 |
|
|
|
2,761 |
|
Total current liabilities |
|
69,036 |
|
|
|
66,299 |
|
Noncurrent liabilities |
|
|
|
Long-term external debt |
|
56,522 |
|
|
|
94,183 |
|
Deferred revenues |
|
5,184 |
|
|
|
1,541 |
|
Noncurrent operating lease liabilities |
|
5,544 |
|
|
|
— |
|
Other noncurrent liabilities |
|
— |
|
|
|
605 |
|
Total liabilities |
|
136,286 |
|
|
|
162,628 |
|
Shareholders' equity
(deficit) |
|
|
|
Share capital; $0.0001 par value; 500,000,000 shares authorized at
December 31, 2018 and September 30, 2019; 77,179 shares issued and
outstanding at December 31, 2018 and 25,725,542 issued and
25,634,417 outstanding at September 30, 2019 |
|
3 |
|
|
|
— |
|
Additional paid in capital |
|
103,992 |
|
|
|
772 |
|
Capital contribution |
|
— |
|
|
|
24,651 |
|
Treasury shares, at cost, 0 shares at December 31, 2018 and 91,125
shares at September 30, 2019 |
|
(1,094 |
) |
|
|
— |
|
Accumulated deficit |
|
(62,325 |
) |
|
|
(45,773 |
) |
Accumulated other comprehensive loss |
|
(361 |
) |
|
|
(221 |
) |
Total shareholders’ equity (deficit) |
|
40,215 |
|
|
|
(20,571 |
) |
TOTAL LIABILITIES AND EQUITY (DEFICIT) |
$ |
176,501 |
|
|
$ |
142,057 |
|
|
|
|
|
|
|
|
|
CAMBIUM
NETWORKS CORPORATION |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
Three Months Ended |
|
September 30, 2019 |
|
June 30, 2019 |
|
September 30, 2018 |
Cash flows from operating
activities: |
|
|
Net income (loss) |
$ |
1,960 |
|
|
$ |
(20,374 |
) |
|
$ |
(2,555 |
) |
Adjustments to reconcile net
income (loss) to net cash (used in ) provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
1,568 |
|
|
|
1,393 |
|
|
|
2,529 |
|
Amortization of debt issuance costs |
|
663 |
|
|
|
177 |
|
|
|
142 |
|
Share-based compensation |
|
828 |
|
|
|
16,078 |
|
|
|
- |
|
Deferred income taxes |
|
(9 |
) |
|
|
7,198 |
|
|
|
(1,106 |
) |
Other |
|
(31 |
) |
|
|
(429 |
) |
|
|
265 |
|
Change in assets and liabilities: |
|
|
|
|
|
Receivables |
|
2,423 |
|
|
|
1,717 |
|
|
|
(1,343 |
) |
Inventories |
|
(1,977 |
) |
|
|
(4,034 |
) |
|
|
(3,996 |
) |
Accounts payable |
|
(6,223 |
) |
|
|
2,736 |
|
|
|
4,776 |
|
Accrued employee compensation |
|
(1,394 |
) |
|
|
346 |
|
|
|
902 |
|
Other assets and liabilities |
|
(9,609 |
) |
|
|
1,146 |
|
|
|
3,546 |
|
Net cash (used in) provided by operating activities |
|
(11,801 |
) |
|
|
5,954 |
|
|
|
3,160 |
|
Cash flows from investing
activities: |
|
|
|
|
|
Purchase of property and equipment |
|
(828 |
) |
|
|
(579 |
) |
|
|
(1,343 |
) |
Purchase of software |
|
(157 |
) |
|
|
(332 |
) |
|
|
(467 |
) |
Cash paid for acquisition |
|
(2,000 |
) |
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
(2,985 |
) |
|
|
(911 |
) |
|
|
(1,810 |
) |
Cash flows from financing
activities: |
|
|
|
|
|
Proceeds from issuance of term loan |
|
— |
|
|
|
— |
|
|
|
— |
|
Proceeds from issuance of revolver debt |
|
— |
|
|
|
— |
|
|
|
— |
|
Repayment of term loan |
|
(23,087 |
) |
|
|
(2,375 |
) |
|
|
(1,125 |
) |
Repayment of revolver debt |
|
(10,000 |
) |
|
|
— |
|
|
|
— |
|
Payment of debt issuance costs |
|
(128 |
) |
|
|
(208 |
) |
|
|
— |
|
Proceeds from initial public offering, net of underwriters
commission and fees and payment of deferred offering costs |
|
(3,428 |
) |
|
|
64,981 |
|
|
|
— |
|
Taxes paid related to net share settlement of equity awards |
|
(802 |
) |
|
|
— |
|
|
|
— |
|
Net cash (used in) provided by financing activities |
|
(37,445 |
) |
|
|
62,398 |
|
|
|
(1,125 |
) |
Effect of exchange rate on
cash |
|
(65 |
) |
|
|
4 |
|
|
|
(2 |
) |
Net (decrease) increase in
cash |
|
(52,296 |
) |
|
|
67,445 |
|
|
|
223 |
|
Cash, beginning of period |
|
71,246 |
|
|
|
3,801 |
|
|
|
3,932 |
|
Cash, end of period |
$ |
18,950 |
|
|
$ |
71,246 |
|
|
$ |
4,155 |
|
|
|
|
|
|
|
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
Income taxes paid |
$ |
1,076 |
|
|
$ |
155 |
|
|
$ |
293 |
|
Interest paid |
$ |
1,371 |
|
|
$ |
1,949 |
|
|
$ |
1,778 |
|
Significant non-cash
activities: |
|
|
|
|
|
Issuance of shares for unreturned capital and accumulated
yield |
$ |
— |
|
|
$ |
49,252 |
|
|
$ |
— |
|
Deferred offering costs included in accrued liabilities |
$ |
179 |
|
|
$ |
3,246 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAMBIUM NETWORKS CORPORATION |
SUPPLEMENTAL FINANCIAL INFORMATION |
(In thousands) |
(Unaudited) |
|
|
|
|
|
|
REVENUES BY PRODUCT
TYPE |
|
|
|
|
|
|
Three Months Ended |
|
September 30, 2019 |
|
June 30, 2019 |
|
September 30, 2018 |
Point-to-Multi-Point |
$ |
38,856 |
|
$ |
41,730 |
|
$ |
33,024 |
Point-to-Point |
|
15,976 |
|
|
17,830 |
|
|
20,566 |
Wi-Fi |
|
10,141 |
|
|
8,430 |
|
|
4,370 |
Other |
|
730 |
|
|
1,161 |
|
|
1,021 |
Total Revenues |
$ |
65,703 |
|
$ |
69,151 |
|
$ |
58,981 |
|
|
|
|
|
|
REVENUES BY
REGION |
|
|
|
|
|
|
Three Months Ended |
|
September 30, 2019 |
|
June 30, 2019 |
|
September 30, 2018 |
North America |
$ |
29,032 |
|
$ |
30,056 |
|
$ |
29,104 |
Europe, Middle East and Africa |
|
21,749 |
|
|
22,994 |
|
|
17,082 |
Caribbean and Latin America |
|
8,008 |
|
|
8,420 |
|
|
6,624 |
Asia Pacific |
|
6,914 |
|
|
7,681 |
|
|
6,171 |
Total Revenues |
$ |
65,703 |
|
$ |
69,151 |
|
$ |
58,981 |
|
|
|
|
|
|
|
|
|
Use of non-GAAP (Adjusted) Financial MeasuresIn
addition to providing financial measurements based on generally
accepted accounting principles in the United States (GAAP), we
provide additional financial metrics that are not prepared in
accordance with GAAP (non-GAAP), including Adjusted EBITDA,
non-GAAP gross margin, non-GAAP operating expenses, non-GAAP
operating income and non-GAAP operating margin, non-GAAP pre-tax
income, non-GAAP provision for income taxes, non-GAAP net income,
and non-GAAP fully weighted basic and diluted shares. Management
uses these non-GAAP financial measures, in addition to GAAP
financial measures, to understand and compare operating results
across accounting periods, for financial and operational decision
making, for planning and forecasting purposes, to measure executive
compensation and to evaluate our financial performance. We believe
that these non-GAAP financial measures help us to identify
underlying trends in our business that could otherwise be masked by
the effect of the expenses that we exclude in the calculations of
the non-GAAP financial measures.
Accordingly, we believe that these financial measures reflect
our ongoing business in a manner that allows for meaningful
comparisons and analysis of trends in the business and provides
useful information to investors and others in understanding and
evaluating our operating results, enhancing the overall
understanding of our past performance and future prospects.
Excluding these non-GAAP measures eliminate the variability caused
by share-based compensation as a result of the variety of equity
awards used by other companies and the varying methodologies and
assumptions used, the variability caused by purchase accounting and
provide a more relevant measure of operating performance. Although
the calculation of non-GAAP financial measures may vary from
company to company, our detailed presentation may facilitate
analysis and comparison of our operating results by management and
investors with other peer companies, many of which use similar
non-GAAP financial measures to supplement their GAAP results in
their public disclosures. These non-GAAP financial measures are
discussed below.
Adjusted EBITDA is defined as net income as reported in our
consolidated statements of income excluding the impact of (i)
interest expense (income), net; (ii) income tax provision
(benefit); (iii) depreciation and amortization expense; (iv)
Sponsor fees associated with advisory services, and (v) share-based
compensation expense. EBITDA is widely used by securities analysts,
investors and other interested parties to evaluate the
profitability of companies. EBITDA eliminates potential differences
in performance caused by variations in capital structures
(affecting net finance costs), tax positions (such as the
availability of net operating losses against which to relieve
taxable profits), the cost and age of tangible assets (affecting
relative depreciation expense) and the extent to which intangible
assets are identifiable (affecting relative amortization expense).
We adjust EBITDA to also exclude Sponsor fees, in order to
eliminate the impact on reported performance caused by these fees,
which are related to our past ownership structure. We adjust EBITDA
for share-based compensation expense which is a non-cash expense
that varies in amount from period to period and is dependent on
market forces that are often beyond Cambium Networks control. As a
result, management excludes this item from Cambium Networks
internal operating forecasts and models.
Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP
operating income and non-GAAP operating margin, and non-GAAP net
income are used as a supplement to our unaudited consolidated
financial statements presented in accordance with GAAP. We
believe these non-GAAP measures are the most meaningful for period
to period comparisons because they exclude the impact of
share-based compensation expense, amortization of acquired
intangibles, and amortization of capitalized software costs as we
do not consider these costs and expenses to be indicative of our
ongoing operations.
- Share-based compensation expense and associated employment
taxes paid. Management may issue different types of awards,
including share options, restricted share awards and restricted
share units, as well as awards with performance or other market
characteristics, and excludes the associated expense in this
non-GAAP measure. Share-based compensation expense is a non-cash
expense that varies in amount from period to period and is
dependent on market forces that are often beyond Cambium Networks'
control while the associated employment taxes are cash-based
expenses that vary in amount from period-to-period and are
dependent on market forces as well as jurisdictional tax
regulations that are often beyond Cambium Networks' control.
In addition, in the three-month period ended June 30, 2019, Cambium
Networks incurred a one-time share-based compensation expense of
$16.1 million in connection with (i) the recognition of deferred
share-based compensation expense and (ii) the issuance of 2,172,000
share options, each upon the completion of our initial public
offering as well as employment taxes paid by Cambium Networks in
conjunction with the settlement of deferred share-based
compensation into ordinary shares.
- Amortization of acquired intangibles includes customer
relationships, unpatented technology, patents, software, and
trademarks.
- Amortization of capitalized software costs include capitalized
research and development activities amortized over their useful
life and included in cost of revenues.
- Debt amortization costs associated with the extinguishment of
long-term debt. Cambium Networks excludes these expenses from
non-GAAP income since they result from an event that is outside the
ordinary course of continuing operations.
- Acquisition and integration costs consist of legal and
professional fees relations to the acquisition of Xirrus. Cambium
Networks excludes these expenses since they result from an event
that is outside the ordinary course of continuing operations.
- One-time charges associated with the completion of an
acquisition including items such as contract termination costs,
severance and other acquisition-related restructuring costs; costs
incurred in connection with integration activities; and legal and
accounting costs. Cambium Networks excludes these expenses since
they result from an event that is outside the ordinary course of
continuing operations.
- Restructuring expenses primarily consist of severance costs for
employees which are not related to future operating expenses.
Cambium Networks excludes these expenses since they result from an
event that is outside the ordinary course of continuing operations.
Excluding these charges permits more accurate comparisons of
Cambium Networks' ongoing business results.
Our non-GAAP tax adjustments include the tax
impacts from share-based compensation expense including excess or
decremental tax benefits available to the company that are recorded
when incurred, one-time and ongoing impacts from the company's
valuation allowance recognized in the quarter ended June 30, 2019,
and one-time tax impacts from share-based compensation expense
incurred upon the completion of our initial public offering as
noted above. Cambium Networks excludes these amounts to more
closely approximate the company’s ongoing effective tax rate (ETR)
after adjusting for one-time or unique reoccurring items. The
associated non-GAAP effective tax rate is also applied to the gross
amount of non-GAAP adjustments for purposes of calculating non-GAAP
net income in total and on a per-share basis. This approach is
designed to enhance the ability of investors to understand the
company's tax expense on its current operations, provide improved
modeling accuracy, and substantially reduce fluctuations caused by
GAAP adjustments which may not reflect actual cash tax
expense.
Non-GAAP fully weighted basic and diluted shares
are shown as outstanding during the entire period presented and
include dilutive shares, if their effect to earnings per share is
dilutive. We also use non-GAAP fully weighted basic and
diluted shares to provide more comparable per-share results across
periods.
These non-GAAP financial measures do not replace the
presentation of our GAAP financial results and should only be used
as a supplement to, not as a substitute for, our financial results
presented in accordance with GAAP. There are limitations in the use
of non-GAAP measures, because they do not include all the expenses
that must be included under GAAP and because they involve the
exercise of judgment concerning exclusions of items from the
comparable non-GAAP financial measure. In addition, other companies
may use other measures to evaluate their performance, or may
calculate non-GAAP measures differently, all of which could reduce
the usefulness of our non-GAAP financial measures as tools for
comparison. We present a “Reconciliation of GAAP Financial Measures
to Non-GAAP Financial Measures” in the tables below.
The following table reconciles net income (loss) to Adjusted
EBITDA, the most directly comparable financial measure, calculated
and presented in accordance with GAAP (in thousands):
CAMBIUM NETWORKS CORPORATION |
SUPPLEMENTAL SCHEDULE OF NON-GAAP ADJUSTED
EBITDA |
(In thousands) |
(Unaudited) |
|
Three Months Ended |
|
September 30, 2019 |
|
June 30, 2019 |
|
September 30, 2018 |
Net income (loss) |
$ |
1,960 |
|
|
$ |
(20,374 |
) |
|
$ |
(2,555 |
) |
Interest expense, net |
|
2,105 |
|
|
|
2,301 |
|
|
|
2,033 |
|
Provision (benefit) for income taxes |
|
3 |
|
|
|
8,623 |
|
|
|
(665 |
) |
Depreciation and amortization |
|
1,568 |
|
|
|
1,393 |
|
|
|
2,528 |
|
EBITDA |
|
5,636 |
|
|
|
(8,057 |
) |
|
|
1,341 |
|
Share-based compensation |
|
966 |
|
|
|
16,078 |
|
|
|
— |
|
Sponsor management fee |
|
— |
|
|
|
125 |
|
|
|
125 |
|
Xirrus one-time acquisition charges |
|
168 |
|
|
|
— |
|
|
|
— |
|
Adjusted EBITDA |
$ |
6,770 |
|
|
$ |
8,146 |
|
|
$ |
1,466 |
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
10.3 |
% |
|
|
11.8 |
% |
|
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles all other GAAP to non-GAAP
financial measures (in thousands):
CAMBIUM NETWORKS CORPORATION |
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP
FINANCIAL MEASURES |
(in thousands, except per share data) |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2019 |
June 30, 2019 |
|
September 30, 2018 |
GAAP gross profit |
|
$ |
31,832 |
|
|
$ |
34,312 |
|
|
$ |
27,512 |
|
Share-based compensation
expense |
|
|
14 |
|
|
|
182 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
|
119 |
|
|
|
166 |
|
|
|
80 |
|
Non-GAAP gross
profit |
|
$ |
31,965 |
|
|
$ |
34,660 |
|
|
$ |
27,592 |
|
Non-GAAP gross
margin |
|
|
48.7 |
% |
|
|
50.1 |
% |
|
|
46.8 |
% |
|
|
|
|
|
|
|
GAAP research and
development expense |
|
$ |
9,895 |
|
|
$ |
15,189 |
|
|
$ |
9,810 |
|
Share-based compensation
expense |
|
|
337 |
|
|
|
4,863 |
|
|
|
— |
|
Non-GAAP research and
development expense |
|
$ |
9,558 |
|
|
$ |
10,326 |
|
|
$ |
9,810 |
|
|
|
|
|
|
|
|
GAAP sales and
marketing expense |
|
$ |
10,363 |
|
|
$ |
14,227 |
|
|
$ |
10,805 |
|
Share-based compensation
expense |
|
|
374 |
|
|
|
3,607 |
|
|
|
— |
|
Non-GAAP sales and
marketing expense |
|
$ |
9,989 |
|
|
$ |
10,620 |
|
|
$ |
10,805 |
|
|
|
|
|
|
|
|
GAAP general and
administrative expense |
|
$ |
5,996 |
|
|
$ |
13,063 |
|
|
$ |
5,520 |
|
Share-based compensation
expense |
|
|
241 |
|
|
|
7,426 |
|
|
|
— |
|
Xirrus one-time acquisition
charges |
|
|
168 |
|
|
|
— |
|
|
|
— |
|
Non-GAAP general and
administrative expense |
|
$ |
5,587 |
|
|
$ |
5,637 |
|
|
$ |
5,520 |
|
|
|
|
|
|
|
|
GAAP depreciation and
amortization |
|
$ |
1,449 |
|
|
$ |
1,227 |
|
|
$ |
2,448 |
|
Amortization of acquired
intangibles |
|
|
424 |
|
|
|
293 |
|
|
|
1,201 |
|
Non-GAAP depreciation
and amortization |
|
$ |
1,025 |
|
|
$ |
934 |
|
|
$ |
1,247 |
|
|
|
|
|
|
|
|
GAAP operating income
(loss) |
|
$ |
4,129 |
|
|
$ |
(9,394 |
) |
|
$ |
(1,071 |
) |
Share-based compensation
expense |
|
|
966 |
|
|
|
16,078 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
|
119 |
|
|
|
166 |
|
|
|
80 |
|
Amortization of acquired
intangibles |
|
|
424 |
|
|
|
293 |
|
|
|
1,201 |
|
Xirrus one-time acquisition
charges |
|
|
168 |
|
|
|
— |
|
|
|
— |
|
Non-GAAP operating
income |
|
$ |
5,806 |
|
|
$ |
7,143 |
|
|
$ |
210 |
|
|
|
|
|
|
|
|
GAAP pre-tax income
(loss) |
|
$ |
1,963 |
|
|
$ |
(11,751 |
) |
|
$ |
(3,220 |
) |
Share-based compensation
expense |
|
|
966 |
|
|
|
16,078 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
|
119 |
|
|
|
166 |
|
|
|
80 |
|
Amortization of acquired
intangibles |
|
|
424 |
|
|
|
293 |
|
|
|
1,201 |
|
Xirrus one-time acquisition
charges |
|
|
168 |
|
|
|
— |
|
|
|
— |
|
Write-down of debt issuance
costs upon prepayment of debt |
|
|
527 |
|
|
|
— |
|
|
|
— |
|
Non-GAAP pre-tax
income (loss) |
|
$ |
4,167 |
|
|
$ |
4,786 |
|
|
$ |
(1,939 |
) |
|
|
|
|
|
|
|
GAAP provision for
income taxes |
|
$ |
3 |
|
|
$ |
8,623 |
|
|
$ |
(665 |
) |
Valuation allowance
impacts |
|
|
— |
|
|
|
8,238 |
|
|
|
— |
|
Tax impacts of share
vesting |
|
|
— |
|
|
|
2,530 |
|
|
|
— |
|
Tax effect of share-based
compensation expense, amortization of acquired intangibles, Xirrus
one-time acquisition charges and write-down of debt issuance costs,
using non-GAAP ETR |
|
|
(511 |
) |
|
|
(3,010 |
) |
|
|
(299 |
) |
All other discrete items |
|
|
85 |
|
|
|
(6 |
) |
|
|
87 |
|
Non-GAAP provision
(benefit) for income taxes |
|
$ |
429 |
|
|
$ |
871 |
|
|
$ |
(453 |
) |
Non-GAAP
ETR |
|
|
10.3 |
% |
|
|
18.2 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
|
GAAP net income
(loss) |
|
$ |
1,960 |
|
|
$ |
(20,374 |
) |
|
$ |
(2,555 |
) |
Share-based compensation
expense |
|
|
966 |
|
|
|
16,078 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
|
119 |
|
|
|
166 |
|
|
|
80 |
|
Amortization of acquired
intangibles |
|
|
424 |
|
|
|
293 |
|
|
|
1,201 |
|
Xirrus one-time acquisition
charges |
|
|
168 |
|
|
|
— |
|
|
|
— |
|
Write-down of debt issuance
costs upon prepayment of debt |
|
|
527 |
|
|
|
— |
|
|
|
— |
|
Non-GAAP adjustments to
tax |
|
|
85 |
|
|
|
10,761 |
|
|
|
87 |
|
Tax effect of share-based
compensation expense, amortization of acquired intangibles, Xirrus
one-time acquisition charges and write-down of debt issuance costs,
using non-GAAP ETR |
|
|
(511 |
) |
|
|
(3,010 |
) |
|
|
(299 |
) |
Non-GAAP net income
(loss) |
|
$ |
3,738 |
|
|
$ |
3,915 |
|
|
$ |
(1,486 |
) |
|
|
|
|
|
|
|
Non-GAAP fully
weighted basic and diluted shares |
|
|
25,634 |
|
|
|
25,632 |
|
|
|
13,600 |
|
|
|
|
|
|
|
|
Non-GAAP net income
(loss) per Non-GAAP fully weighted basic and diluted
shares |
|
$ |
0.15 |
|
|
$ |
0.15 |
|
|
$ |
(0.11 |
) |
Investor Inquiries:Peter Schuman,
IRCSr. Director Investor RelationsCambium Networks+1 (847)
264-2188peter.schuman@cambiumnetworks.com
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