Cambium Networks Corporation (“Cambium Networks”) (NASDAQ: CMBM), a
leading provider of wireless networking infrastructure solutions,
today announced financial results for the first quarter 2020 ended
March 31, 2020.
|
GAAP |
|
Non-GAAP (1) |
(in millions, except
percentages) |
Q1 2020 |
|
Q4 2019 |
|
Q1 2019 |
|
Q1 2020 |
|
Q4 2019 |
|
Q1 2019 |
Revenues |
$ |
60.4 |
|
|
$ |
64.1 |
|
|
$ |
68.1 |
|
|
$ |
60.4 |
|
|
$ |
64.1 |
|
|
$ |
68.1 |
|
Gross margin |
|
50.7 |
% |
|
|
52.0 |
% |
|
|
46.7 |
% |
|
|
51.0 |
% |
|
|
52.4 |
% |
|
|
46.8 |
% |
Operating margin |
|
0.6 |
% |
|
|
2.9 |
% |
|
|
6.9 |
% |
|
|
5.0 |
% |
|
|
6.6 |
% |
|
|
7.4 |
% |
Adjusted EBITDA margin |
|
|
|
|
|
|
|
7.3 |
% |
|
|
8.2 |
% |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[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 first quarter
ended March 31, 2020.
“I am pleased revenues came in above the high-end of our outlook
during a period of extreme uncertainty in the world,” said Atul
Bhatnagar, president and CEO. “Our financial position remains
strong as we weather the current market turbulence. During this
period of social distancing, more people are working and learning
remotely using an increasing number of devices per household,
requiring an increased need for fixed wireless broadband
infrastructure.”
Bhatnagar continued, “Our technology leadership in fixed
wireless broadband infrastructure will be driven by a new upgrade
cycle to gigabit wireless solutions including our 60 GHz and 28 GHz
millimeter wave and cloud powered enterprise Wi-Fi 6
solutions.”
Revenues of $60.4 million for the first quarter 2020 decreased
$7.7 million year-over-year, as a result of lower demand for
Point-to-Multi-Point products due to a technology transition and
softer demand for defense related products which impacted
Point-to-Point revenues, offset by growth in enterprise Wi-Fi
solutions. Revenues for the first quarter 2020 decreased by $3.7
million compared to $64.1 million for the fourth quarter 2019,
driven by less Point-to-Point revenues from defense products,
offset by increased revenues for Point-to-Multi-Point products, and
flat demand for enterprise Wi-Fi solutions ahead of a product
transition to Wi-Fi 6. GAAP gross margin for the first quarter 2020
was 50.7%, compared to 46.7% for the first quarter 2019, and 52.0%
for the fourth quarter 2019. GAAP operating income for the first
quarter 2020 was $0.4 million, compared to $4.7 million during the
first quarter 2019, and $1.9 million for the fourth quarter 2019.
GAAP net loss for the first quarter 2020 was $0.8 million, or a net
loss of $0.03 per diluted share, compared to net income of $1.9
million, or $0.14 per diluted share for the first quarter 2019, and
net loss for the fourth quarter 2019 of $1.0 million, or a net loss
of $0.04 per diluted share.
Non-GAAP gross margin for the first quarter 2020 was 51.0%,
compared to 46.8% for the first quarter 2019, and 52.4% for the
fourth quarter 2019. Non-GAAP operating income for the first
quarter 2020 was $3.0 million, compared to $5.1 million for the
first quarter 2019, and $4.3 million for the fourth quarter 2019.
Non-GAAP net income for the first quarter 2020 was $1.4 million, or
$0.05 per diluted share, compared to $2.2 million, or $0.16 per
diluted share for the first quarter 2019, and $2.3 million, or
$0.09 per diluted share for the fourth quarter 2019. For the first
quarter 2020, adjusted EBITDA was $4.4 million or 7.3% of revenues,
compared to adjusted EBITDA of $6.0 million or 8.9% of revenues for
the first quarter 2019, and $5.3 million or 8.2% of revenues for
the fourth quarter 2019.
Cash used in operating activities was $0.8 million for the first
quarter 2020, compared to cash provided by operating activities of
$3.3 million for the first quarter 2019, and $6.1 million cash
provided by operating activities for the fourth quarter 2019. Cash
totaled $24.5 million as of March 31, 2020, $20.7 million higher
than March 31, 2019, and an increase of $5.1 million from December
31, 2019. The increase in cash balance for the first quarter 2020
from the fourth quarter 2019 was primarily the result of a $10
million draw down on the revolving credit facility to preserve
liquidity in a period of macroeconomic uncertainty, a reduction in
inventories, offset by a decrease in accounts payable principally
due to the timing of inventory payments, an increase in accounts
receivable, restructuring payments, and a scheduled principal
paydown of debt.
First Quarter 2020 Highlights
- Revenues of $60.4 million, above the high-end of outlook.
- Enterprise Wi-Fi revenues increased 106% year-over-year.
- GAAP gross margin of 50.7%, up 400 basis points from 46.7% for
the first quarter 2019.
- Non-GAAP gross margin of 51.0%, up 420 basis points from 46.8%
for the first quarter 2019.
- GAAP net loss of $0.8 million or $0.03 per diluted share,
non-GAAP net income of $1.4 million or $0.05 per diluted
share.
- Adjusted EBITDA of $4.4 million or 7.3% of revenues, compared
to $6.0 million or 8.9% of revenues for the first quarter 2019, and
$5.3 million or 8.2% of revenues for the fourth quarter 2019.
- Increased new channel partners by over 1,550 year-over-year, an
increase of 26%.
- Added Arrow in North America and Nuvias Group in EMEA as
distribution partners for Xirrus enterprise Wi-Fi solutions.
- Devices under cnMaestro® Cloud management increased 61%
year-over-year.
- Over 7,800 devices are managed by Cambium Networks’ CBRS SaaS
Service.
Second Quarter 2020 Financial Outlook
Taking into account our current visibility, the financial
outlook as of May 12, 2020 for the second quarter ending June 30,
2020 is expected to be as follows:
- GAAP revenues between $51.0-$56.0 million
- GAAP gross margin between 48.2%-49.2%; and non-GAAP gross
margin between 48.5%-49.5%
- GAAP operating (loss) income between ($1.1)-$0.8 million; and
non-GAAP operating income between $1.1-$3.0 million
- GAAP net loss between $1.9-$0.5 million or between $0.07 and
$0.02 per diluted share; and non-GAAP net (loss) income between
($0.1)-$1.3 million or between ($0.00) and $0.05 per diluted
share
- Adjusted EBITDA between $2.1-$4.0 million; and adjusted EBITDA
margin between 4.2%-7.2%
- GAAP taxes between 19.0%-21.0%; and a non-GAAP effective tax
rate of approximately 17.0%-19.0%
- Approximately 25.7 million weighted average diluted shares
outstanding
Cash requirements are expected to be as
follows:
- Paydown of debt: $2.5 million
- Interest expense: approximately $1.1 million
- Capital expenditures: $0.7-$0.9 million
- Pre-tax restructuring charges: $0.2-$0.3 million
Full Year 2020 Financial Outlook
- The company has withdrawn its previously announced full year
2020 financial outlook due to the rapidly evolving uncertainty
surrounding the effects of the COVID-19 virus although we do expect
to generate positive cash flow during 2020.
Cambium Networks is taking additional steps in connection with
its previously announced corporate restructuring to continue to
better align our cost structure with current economic conditions
and position the company to achieve long-term targets and operating
growth.
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 reasonable; 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, May 12, 2020.
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, referencing conference ID number
9939885. 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 ID
number 9939885.
In addition, Cambium Networks president and CEO, Atul Bhatnagar,
will present on Wednesday, May 13, 2020 at 3:20 p.m. ET, at the
J.P. Morgan Technology, Media, and Communications Conference which
will be held virtually. 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 empowers millions of people with wireless
connectivity worldwide. Its wireless portfolio is used by
commercial and government network operators as well as broadband
service providers to connect people, places and things. With a
single network architecture spanning fixed wireless and Wi-Fi,
Cambium Networks enables operators to achieve maximum performance
with minimal spectrum. End-to-end cloud management transforms
networks into dynamic environments that evolve to meet changing
needs with minimal physical human intervention. Cambium Networks
empowers a growing ecosystem of partners who design and deliver
gigabit wireless solutions that just work.
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 2019
Form 10-K filed with the Securities and Exchange Commission on
March 23, 2020. 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; risks presented by the global COVID-19 pandemic, which could
significantly disrupt our manufacturing, sales and other
operations and negatively impact our financial results; 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; and negatively impact our financial results; 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.
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 |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATION |
(In
thousands, except share and per share amounts) |
(Unaudited) |
|
Three months ended |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
|
|
|
|
|
|
Revenues |
$ |
60,429 |
|
|
$ |
64,062 |
|
|
$ |
68,112 |
|
Cost of revenues |
|
29,797 |
|
|
|
30,767 |
|
|
|
36,322 |
|
Gross
profit |
|
30,632 |
|
|
|
33,295 |
|
|
|
31,790 |
|
Gross margin |
|
50.7 |
% |
|
|
52.0 |
% |
|
|
46.7 |
% |
Operating
expenses |
|
|
|
|
|
Research and development |
|
11,814 |
|
|
|
12,126 |
|
|
|
10,482 |
|
Sales and marketing |
|
10,304 |
|
|
|
11,445 |
|
|
|
10,218 |
|
General and administrative |
|
6,446 |
|
|
|
5,936 |
|
|
|
5,130 |
|
Depreciation and amortization |
|
1,695 |
|
|
|
1,901 |
|
|
|
1,281 |
|
Total operating
expenses |
|
30,259 |
|
|
|
31,408 |
|
|
|
27,111 |
|
Operating
income |
|
373 |
|
|
|
1,887 |
|
|
|
4,679 |
|
Operating margin |
|
0.6 |
% |
|
|
2.9 |
% |
|
|
6.9 |
% |
Interest expense, net |
|
1,345 |
|
|
|
1,402 |
|
|
|
2,268 |
|
Other (income) expense,
net |
|
(216 |
) |
|
|
295 |
|
|
|
134 |
|
(Loss) income before
income taxes |
|
(756 |
) |
|
|
190 |
|
|
|
2,277 |
|
Provision for income
taxes |
|
82 |
|
|
|
1,239 |
|
|
|
415 |
|
Net (loss)
income |
$ |
(838 |
) |
|
$ |
(1,049 |
) |
|
$ |
1,862 |
|
|
|
|
|
|
|
(Loss) income per
share |
|
|
|
|
|
Basic and diluted |
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.14 |
|
Weighted-average
number of shares outstanding to compute net (loss) income per
share |
|
|
|
|
|
Basic and diluted |
|
25,677,179 |
|
|
|
25,635,050 |
|
|
|
13,600,411 |
|
|
|
|
|
|
|
Share-based
compensation included in costs and expenses: |
|
|
|
|
|
Cost of revenues |
$ |
17 |
|
|
$ |
15 |
|
|
$ |
— |
|
Research and development |
|
368 |
|
|
|
301 |
|
|
|
— |
|
Sales and marketing |
|
232 |
|
|
|
204 |
|
|
|
— |
|
General and administrative |
|
194 |
|
|
|
270 |
|
|
|
— |
|
Total share-based compensation expense |
$ |
811 |
|
|
$ |
790 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAMBIUM
NETWORKS CORPORATION |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(In
thousands) |
|
|
March 31, 2020 |
|
December 31, 2019 |
ASSETS |
(Unaudited) |
|
|
Current assets |
|
|
|
Cash |
$ |
24,493 |
|
|
$ |
19,346 |
|
Accounts receivable, net of allowance |
|
61,606 |
|
|
|
58,628 |
|
Inventories, net |
|
32,499 |
|
|
|
41,670 |
|
Recoverable income taxes |
|
46 |
|
|
|
— |
|
Prepaid expenses |
|
4,078 |
|
|
|
5,323 |
|
Other current assets |
|
4,944 |
|
|
|
4,350 |
|
Total current assets |
|
127,666 |
|
|
|
129,317 |
|
Noncurrent assets |
|
|
|
Property and equipment, net |
|
8,264 |
|
|
|
8,314 |
|
Software, net |
|
3,185 |
|
|
|
3,395 |
|
Operating lease assets |
|
6,443 |
|
|
|
6,872 |
|
Intangible assets, net |
|
14,548 |
|
|
|
15,100 |
|
Goodwill |
|
9,493 |
|
|
|
8,552 |
|
Deferred tax assets, net |
|
815 |
|
|
|
929 |
|
Other noncurrent assets |
|
417 |
|
|
|
— |
|
TOTAL ASSETS |
$ |
170,831 |
|
|
$ |
172,479 |
|
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
16,528 |
|
|
$ |
25,214 |
|
Accrued liabilities |
|
15,017 |
|
|
|
15,034 |
|
Employee compensation |
|
5,097 |
|
|
|
4,652 |
|
Current portion of long-term external debt, net |
|
9,454 |
|
|
|
9,454 |
|
Deferred revenues |
|
6,331 |
|
|
|
7,430 |
|
Other current liabilities |
|
7,400 |
|
|
|
6,084 |
|
Total current liabilities |
|
59,827 |
|
|
|
67,868 |
|
Noncurrent liabilities |
|
|
|
Long-term external debt, net |
|
61,795 |
|
|
|
54,158 |
|
Deferred revenues |
|
4,337 |
|
|
|
4,852 |
|
Noncurrent operating lease liabilities |
|
4,724 |
|
|
|
5,335 |
|
Deferred tax liabilities, net |
|
61 |
|
|
|
337 |
|
Other noncurrent liabilities |
|
520 |
|
|
|
— |
|
Total liabilities |
|
131,264 |
|
|
|
132,550 |
|
Shareholders'
equity |
|
|
|
Share capital; $0.0001 par value; 500,000,000 shares authorized at
December 31, 2019 and March 31, 2020; 25,753,603 issued and
25,672,983 outstanding at December 31, 2019; 25,768,757 shares
issued and 25,680,205 outstanding at March 31, 2020 |
|
3 |
|
|
|
3 |
|
Additional paid in capital |
|
105,584 |
|
|
|
104,773 |
|
Treasury shares, at cost, 80,620 shares at December 31, 2019 and
88,552 shares at March 31, 2020 |
|
(1,041 |
) |
|
|
(1,094 |
) |
Accumulated deficit |
|
(64,212 |
) |
|
|
(63,374 |
) |
Accumulated other comprehensive loss |
|
(767 |
) |
|
|
(379 |
) |
Total shareholders’ equity |
|
39,567 |
|
|
|
39,929 |
|
TOTAL LIABILITIES AND EQUITY |
$ |
170,831 |
|
|
$ |
172,479 |
|
|
|
|
|
CAMBIUM
NETWORKS CORPORATION |
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
Cash flows from operating
activities: |
|
|
|
|
Net (loss) income |
$ |
(838 |
) |
|
$ |
(1,049 |
) |
|
$ |
1,862 |
|
Adjustments to reconcile net
(loss) income to net cash (used in) provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
1,845 |
|
|
|
2,046 |
|
|
|
1,360 |
|
Amortization of debt issuance costs |
|
137 |
|
|
|
136 |
|
|
|
165 |
|
Share-based compensation |
|
811 |
|
|
|
790 |
|
|
|
— |
|
Deferred income taxes |
|
(162 |
) |
|
|
(97 |
) |
|
|
310 |
|
Other |
|
522 |
|
|
|
(95 |
) |
|
|
866 |
|
Change in assets and liabilities: |
|
|
|
|
|
Receivables |
|
(2,172 |
) |
|
|
(31 |
) |
|
|
(3,487 |
) |
Inventories |
|
8,698 |
|
|
|
1,028 |
|
|
|
(2,651 |
) |
Accounts payable |
|
(8,546 |
) |
|
|
3,753 |
|
|
|
1,830 |
|
Accrued employee compensation |
|
547 |
|
|
|
(329 |
) |
|
|
1,391 |
|
Other assets and liabilities |
|
(1,633 |
) |
|
|
(7 |
) |
|
|
1,609 |
|
Net cash (used in) provided by operating activities |
|
(791 |
) |
|
|
6,145 |
|
|
|
3,255 |
|
Cash flows from investing
activities: |
|
|
|
|
|
Purchase of property and equipment |
|
(1,053 |
) |
|
|
(467 |
) |
|
|
(1,128 |
) |
Purchase of software |
|
(157 |
) |
|
|
(72 |
) |
|
|
(383 |
) |
Cash paid for acquisition |
|
(334 |
) |
|
|
(2,666 |
) |
|
|
— |
|
Net cash used in investing activities |
|
(1,544 |
) |
|
|
(3,205 |
) |
|
|
(1,511 |
) |
Cash flows from financing
activities: |
|
|
|
|
|
Proceeds from issuance of revolver debt |
|
10,000 |
|
|
|
— |
|
|
|
— |
|
Repayment of term loan |
|
(2,500 |
) |
|
|
(2,375 |
) |
|
|
(2,375 |
) |
Payment of deferred offering costs |
|
— |
|
|
|
(181 |
) |
|
|
— |
|
Taxes paid related to net share settlement of equity awards |
|
52 |
|
|
|
— |
|
|
|
— |
|
Net cash provided by (used in) financing activities |
|
7,552 |
|
|
|
(2,556 |
) |
|
|
(2,375 |
) |
Effect of exchange rate on
cash |
|
(70 |
) |
|
|
12 |
|
|
|
(9 |
) |
Net increase (decrease) in
cash |
|
5,147 |
|
|
|
396 |
|
|
|
(640 |
) |
Cash, beginning of period |
|
19,346 |
|
|
|
18,950 |
|
|
|
4,441 |
|
Cash, end of period |
$ |
24,493 |
|
|
$ |
19,346 |
|
|
$ |
3,801 |
|
|
|
|
|
|
|
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
Income taxes paid |
$ |
149 |
|
|
$ |
270 |
|
|
$ |
201 |
|
Interest paid |
$ |
1,117 |
|
|
$ |
1,185 |
|
|
$ |
1,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAMBIUM NETWORKS CORPORATION |
SUPPLEMENTAL FINANCIAL INFORMATION |
(In thousands) |
(Unaudited) |
|
|
|
|
|
|
REVENUES BY PRODUCT
TYPE |
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
Point-to-Multi-Point |
$ |
34,867 |
|
$ |
33,244 |
|
$ |
42,327 |
Point-to-Point |
|
13,110 |
|
|
18,178 |
|
|
19,634 |
Wi-Fi |
|
11,481 |
|
|
11,521 |
|
|
5,586 |
Other |
|
971 |
|
|
1,119 |
|
|
565 |
Total Revenues |
$ |
60,429 |
|
$ |
64,062 |
|
$ |
68,112 |
|
|
|
|
|
|
REVENUES BY
REGION |
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
North America |
$ |
31,035 |
|
$ |
29,113 |
|
$ |
34,364 |
Europe, Middle East and Africa |
|
18,744 |
|
|
19,217 |
|
|
21,970 |
Caribbean and Latin America |
|
5,230 |
|
|
8,240 |
|
|
7,099 |
Asia Pacific |
|
5,420 |
|
|
7,492 |
|
|
4,679 |
Total Revenues |
$ |
60,429 |
|
$ |
64,062 |
|
$ |
68,112 |
|
|
|
|
|
|
|
|
|
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 management fees associated with advisory services, (v)
share-based compensation expense, (vi) one-time acquisition costs,
and (vii) restructuring expenses. 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 management 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. We also adjust
EBITDA to exclude one-time acquisition costs and restructuring
expenses as these relate to events outside of the ordinary course
of continuing operations and to provide a more accurate comparison
of our ongoing business results.
Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP
operating income and non-GAAP operating margin, non-GAAP effective
tax rate and non-GAAP net income are used as a supplement to our
unaudited condensed 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 are excluded. 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.
Amortization of acquired intangibles includes customer
relationships, unpatented technology, patents, software, and
trademarks, and are excluded since these are not indicative of
continuing operations.
Amortization of capitalized software costs include capitalized
research and development activities amortized over their useful
life and included in cost of revenues and are excluded since these
are not indicative of continuing operations.
Acquisition and integration costs consist of legal and
professional fees relating 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.
Cambium Networks excludes these amounts to more closely approximate
the company’s ongoing effective tax rate 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 (loss) income 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 |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
Net (loss) income |
$ |
(838 |
) |
|
$ |
(1,049 |
) |
|
$ |
1,862 |
|
Interest expense, net |
|
1,345 |
|
|
|
1,402 |
|
|
|
2,268 |
|
Provision for income taxes |
|
82 |
|
|
|
1,239 |
|
|
|
415 |
|
Depreciation and amortization |
|
1,845 |
|
|
|
2,046 |
|
|
|
1,360 |
|
EBITDA |
|
2,434 |
|
|
|
3,638 |
|
|
|
5,905 |
|
Share-based compensation |
|
811 |
|
|
|
915 |
|
|
|
— |
|
Sponsor management fee |
|
— |
|
|
|
— |
|
|
|
125 |
|
Xirrus one-time acquisition charges |
|
— |
|
|
|
74 |
|
|
|
— |
|
Restructuring expense |
|
1,152 |
|
|
|
644 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
4,397 |
|
|
$ |
5,271 |
|
|
$ |
6,030 |
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
7.3 |
% |
|
|
8.2 |
% |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
GAAP gross profit |
$ |
30,632 |
|
|
$ |
33,295 |
|
|
$ |
31,790 |
|
Share-based compensation
expense |
|
17 |
|
|
|
15 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
150 |
|
|
|
145 |
|
|
|
79 |
|
Restructuring expense |
|
— |
|
|
|
117 |
|
|
|
— |
|
Non-GAAP gross
profit |
$ |
30,799 |
|
|
$ |
33,572 |
|
|
$ |
31,869 |
|
Non-GAAP gross
margin |
|
51.0 |
% |
|
|
52.4 |
% |
|
|
46.8 |
% |
|
|
|
|
|
|
GAAP research and
development expense |
$ |
11,814 |
|
|
$ |
12,126 |
|
|
$ |
10,482 |
|
Share-based compensation
expense |
|
368 |
|
|
|
426 |
|
|
|
— |
|
Restructuring expense |
|
639 |
|
|
|
131 |
|
|
|
— |
|
Non-GAAP research and
development expense |
$ |
10,807 |
|
|
$ |
11,569 |
|
|
$ |
10,482 |
|
|
|
|
|
|
|
GAAP sales and
marketing expense |
$ |
10,304 |
|
|
$ |
11,445 |
|
|
$ |
10,218 |
|
Share-based compensation
expense |
|
232 |
|
|
|
204 |
|
|
|
— |
|
Restructuring expense |
|
513 |
|
|
|
362 |
|
|
|
— |
|
Non-GAAP sales and
marketing expense |
$ |
9,559 |
|
|
$ |
10,879 |
|
|
$ |
10,218 |
|
|
|
|
|
|
|
GAAP general and
administrative expense |
$ |
6,446 |
|
|
$ |
5,936 |
|
|
$ |
5,130 |
|
Share-based compensation
expense |
|
194 |
|
|
|
270 |
|
|
|
— |
|
Xirrus one-time acquisition
charges |
|
— |
|
|
|
74 |
|
|
|
— |
|
Restructuring expense |
|
— |
|
|
|
34 |
|
|
|
— |
|
Non-GAAP general and
administrative expense |
$ |
6,252 |
|
|
$ |
5,558 |
|
|
$ |
5,130 |
|
|
|
|
|
|
|
GAAP depreciation and
amortization |
$ |
1,695 |
|
|
$ |
1,901 |
|
|
$ |
1,281 |
|
Amortization of acquired
intangibles |
|
551 |
|
|
|
593 |
|
|
|
293 |
|
Non-GAAP depreciation
and amortization |
$ |
1,144 |
|
|
$ |
1,308 |
|
|
$ |
988 |
|
|
|
|
|
|
|
GAAP operating
income |
$ |
373 |
|
|
$ |
1,887 |
|
|
$ |
4,679 |
|
Share-based compensation
expense |
|
811 |
|
|
|
915 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
150 |
|
|
|
145 |
|
|
|
79 |
|
Amortization of acquired
intangibles |
|
551 |
|
|
|
593 |
|
|
|
293 |
|
Xirrus one-time acquisition
charges |
|
— |
|
|
|
74 |
|
|
|
— |
|
Restructuring expense |
|
1,152 |
|
|
|
644 |
|
|
|
— |
|
Non-GAAP operating
income |
$ |
3,037 |
|
|
$ |
4,258 |
|
|
$ |
5,051 |
|
|
|
|
|
|
|
GAAP pre-tax income
(loss) |
$ |
(756 |
) |
|
$ |
190 |
|
|
$ |
2,277 |
|
Share-based compensation
expense |
|
811 |
|
|
|
915 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
150 |
|
|
|
145 |
|
|
|
79 |
|
Amortization of acquired
intangibles |
|
551 |
|
|
|
593 |
|
|
|
293 |
|
Xirrus one-time acquisition
charges |
|
— |
|
|
|
74 |
|
|
|
— |
|
Restructuring expense |
|
1,152 |
|
|
|
644 |
|
|
|
— |
|
Non-GAAP pre-tax
income |
$ |
1,908 |
|
|
$ |
2,561 |
|
|
$ |
2,649 |
|
|
|
|
|
|
|
GAAP provision
(benefit) for income taxes |
$ |
82 |
|
|
$ |
1,239 |
|
|
$ |
415 |
|
Valuation allowance
impacts |
|
— |
|
|
|
1,361 |
|
|
|
— |
|
Tax impacts of share
vesting |
|
3 |
|
|
|
277 |
|
|
|
— |
|
Tax effect of share-based
compensation expense, amortization of acquired intangibles, Xirrus
one-time acquisition, restructuring expense using non-GAAP ETR |
|
(533 |
) |
|
|
(688 |
) |
|
|
(67 |
) |
All other discrete items |
|
61 |
|
|
|
— |
|
|
|
6 |
|
Non-GAAP provision for
income taxes |
$ |
551 |
|
|
$ |
289 |
|
|
$ |
476 |
|
Non-GAAP
ETR |
|
28.9 |
% |
|
|
11.3 |
% |
|
|
18.0 |
% |
|
|
|
|
|
|
GAAP net (loss)
income |
$ |
(838 |
) |
|
$ |
(1,049 |
) |
|
$ |
1,862 |
|
Share-based compensation
expense |
|
811 |
|
|
|
915 |
|
|
|
— |
|
Amortization of capitalized
software costs |
|
150 |
|
|
|
145 |
|
|
|
79 |
|
Amortization of acquired
intangibles |
|
551 |
|
|
|
593 |
|
|
|
293 |
|
Xirrus one-time acquisition
charges |
|
— |
|
|
|
74 |
|
|
|
— |
|
Restructuring expense |
|
1,152 |
|
|
|
644 |
|
|
|
— |
|
Non-GAAP adjustments to
tax |
|
64 |
|
|
|
1,638 |
|
|
|
6 |
|
Tax effect of share-based
compensation expense, amortization of acquired intangibles, Xirrus
one-time acquisition charges, restructuring expense using non-GAAP
ETR |
|
(533 |
) |
|
|
(688 |
) |
|
|
(67 |
) |
Non-GAAP net
income |
$ |
1,357 |
|
|
$ |
2,272 |
|
|
$ |
2,173 |
|
|
|
|
|
1.0 |
% |
|
|
Non-GAAP fully
weighted basic and diluted shares |
|
25,680 |
|
|
|
25,673 |
|
|
|
13,600 |
|
|
|
|
|
|
|
Non-GAAP net income
per Non-GAAP fully weighted basic and diluted shares |
$ |
0.05 |
|
|
$ |
0.09 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Inquiries:Peter Schuman,
IRCSr. Director Investor & Industry Analyst RelationsCambium
Networks +1 (847) 264-2188peter.schuman@cambiumnetworks.com
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