Cambium Networks(US:CMBM)2022-05-05 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Cambium Networks' unaudited condensed consolidated financial statements for Q1 2022, including balance sheets, statements of operations, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Total assets decreased to $214.3 million from $232.3 million at year-end 2021, primarily due to reduced cash, while total liabilities also decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Mar 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $59,291 | $38,397 | | Receivables, net | $69,773 | $64,506 | | Inventories, net | $33,777 | $40,210 | | Total Assets | $232,268 | $214,343 | | Liabilities & Equity | | | | Accounts payable | $28,241 | $16,543 | | Total current liabilities | $82,140 | $64,809 | | Total liabilities | $120,131 | $101,935 | | Total shareholders' equity | $112,137 | $112,408 | Condensed Consolidated Statements of Operations Q1 2022 revenue declined to $61.9 million from $88.5 million year-over-year, resulting in a net loss of $1.6 million and diluted EPS of ($0.06) Q1 2022 vs. Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Revenues | $88,515 | $61,896 | | Gross Profit | $44,170 | $29,166 | | Operating Income (Loss) | $13,403 | $(2,195) | | Net Income (Loss) | $19,860 | $(1,568) | | Diluted EPS | $0.70 | $(0.06) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $19.2 million in Q1 2022, leading to a $20.9 million decrease in cash to $38.4 million Q1 2022 vs. Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,562) | $(19,225) | | Net cash used in investing activities | $(1,612) | $(1,782) | | Net cash (used in) provided by financing activities | $(2,092) | $104 | | Net decrease in cash | $(11,290) | $(20,894) | | Cash, end of period | $51,182 | $38,397 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, balance sheet components, debt, and revenue recognition, highlighting declines in Point-to-Multi-Point and North American sales - The company operates as a single operating segment and reporting unit, with its Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)92 Revenues by Product Category (in thousands) | Product Category | Q1 2021 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Point-to-Multi-Point | $57,799 | $30,926 | -46.5% | | Point-to-Point | $17,476 | $14,714 | -15.8% | | Wi-Fi | $12,123 | $15,508 | +27.9% | | Other | $1,117 | $748 | -33.0% | | Total Revenues | $88,515 | $61,896 | -30.1% | Revenues by Geography (in thousands) | Geography | Q1 2021 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | North America | $54,195 | $28,321 | -47.7% | | Europe, Middle East and Africa | $18,690 | $20,332 | +8.8% | | Caribbean and Latin America | $10,515 | $5,084 | -51.7% | | Asia Pacific | $5,115 | $8,159 | +59.5% | | Total Revenues | $88,515 | $61,896 | -30.1% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 30.1% revenue decrease to $61.9 million due to supply chain issues, COVID-19, and component shortages, addressing liquidity Trends impacting our business Business faces headwinds from global component shortages, increased logistics costs, China COVID-19 shutdowns, and cessation of sales in Russia - The company is constrained by global component shortages, especially semiconductor chipsets, leading to increased lead times and costs, expected to persist throughout 2022126 - COVID-19 shutdowns in Shenzhen and Shanghai, China, have negatively impacted manufacturing and distribution facilities, causing delays and increased costs130 - Due to the invasion of Ukraine and subsequent sanctions, the company has ceased sales of its products, services, and technology in Russia, Belarus, and certain regions of Ukraine, adversely impacting revenues133 Results of operations Q1 2022 revenue decreased 30.1% to $61.9 million, driven by Point-to-Multi-Point and North American sales declines, leading to an operating loss Revenue Comparison (Q1 2021 vs. Q1 2022, in thousands) | Metric | Q1 2021 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $88,515 | $61,896 | $(26,619) | -30.1% | | Gross Profit | $44,170 | $29,166 | $(15,004) | -34.0% | | Gross Margin | 49.9% | 47.1% | - | -280 bps | - The decrease in gross margin was driven by higher production costs from component shortages and increased logistics costs, including the use of alternative shipping modes due to government shutdowns in China158 - Operating expenses increased slightly, with higher payroll and share-based compensation costs mostly offset by lower variable compensation due to weaker financial performance160161162 Liquidity and Capital Resources Company held $38.4 million in cash as of March 31, 2022, with management confident in liquidity despite $19.2 million net cash used in operations - The company's cash balance was $38.4 million as of March 31, 2022168 - Net cash used in operating activities for Q1 2022 was $19.2 million, a significant increase from $7.6 million in Q1 2021, primarily due to the net loss and unfavorable working capital changes169172 - As of March 31, 2022, the company had $30.0 million of debt outstanding on its term loan and $45.0 million available under its revolving credit facility176 Quantitative and Qualitative Disclosures About Market Risk Company faces market risks from foreign currency and interest rate changes, with a 100-bps rate increase potentially adding $0.3 million to interest expense - The company is exposed to foreign currency exchange rate risk as it conducts business globally with the U.S. dollar being the primary currency for revenue contracts182 - The company has $30.0 million of variable-rate debt outstanding; a hypothetical 100-basis point increase in interest rates would increase annual interest expense by approximately $0.3 million184 - The company's BofA Credit Agreement matures in 2026, after the planned cessation of LIBOR in June 2023, and the company is actively assessing the transition to a benchmark replacement rate186 Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level189 - No changes were identified during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting190 PART II. OTHER INFORMATION Legal Proceedings No pending or threatened legal proceedings are expected to have a material adverse effect on financial condition or results of operations - Management believes it has established adequate accruals for any expected liabilities from pending legal matters and does not expect any current proceedings to have a material adverse effect on the company194 Risk Factors Updates key risks, with heightened concerns regarding the Ukraine invasion, COVID-19 pandemic, and ongoing supply chain disruptions - The invasion of Ukraine by Russia and resulting sanctions have forced the company to stop selling products to Russia, Belarus, and certain regions of Ukraine, which will adversely impact revenues197199 - The business continues to be adversely impacted by COVID-19, particularly due to government-mandated shutdowns in regions of China that affect both third-party manufacturing and logistics/warehousing operations201202204 - The company is experiencing and expects to continue experiencing shortages and increased costs for third-party components, especially semiconductors, which disrupts manufacturing and the ability to fulfill sales orders209211 Unregistered Sales of Equity Securities and Use of Proceeds This item is reported as not applicable for the period - Not applicable217 Defaults Upon Senior Securities The company reports no defaults upon senior securities - None217 Mine Safety Disclosures This item is reported as not applicable - Not applicable217 Other Information The company reports no other information for the period - None217 Exhibits Lists exhibits filed with the Form 10-Q, including employment agreements and Sarbanes-Oxley Act certifications - The report includes exhibits such as an offer letter for Andrew Bronstein, a separation agreement for Stephen Cumming, and CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906219