Cambium Networks Corporation has reported a disappointing performance in the fourth quarter of 2023, with both revenue and net income falling short of expectations. The leading wireless solutions provider faced challenges, including diminished sales in the Enterprise business and macroeconomic headwinds, leading to significant declines in both the top and bottom lines. Consequently, the company reported a net loss of $39.1 million or a loss of $1.41 per share, a stark contrast to the net income of $10 million or 35 cents per share in the prior-year period. These results reflect a significant revenue decline and a non-GAAP net loss of $26.4 million or a loss of 95 cents per share, further exacerbating the company’s financial woes.
Net Income Plummets
On a GAAP basis, the company reported a net loss of $39.1 million or a loss of $1.41 per share against a net income of $10 million or 35 cents per share a year ago. The downturn was primarily attributable to a significant revenue decline. Non-GAAP net loss was $26.4 million or a loss of 95 cents per share against a net income of $10.3 million or 38 cents per share in the year-ago quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 34 cents.
Revenues Struggle
Quarterly net sales more than halved to $40.2 million from $84.5 million in the year-ago quarter. Revenue growth was affected by a low order volume in the Enterprise business as distributors largely focused on lowering their channel inventories. Aggressive discounts and soft economic growth also led to the revenue shortfall. The net sales decline in the Point-to-Multi-Point (PMP) business further hurt the top line.
By product category, revenues from PMP were $22.6 million compared with $29.7 million a year ago. Inventory adjustments and the timing of the FCC’s approval of 6 GHz spectrum affected demand from service providers. The top line fell short of our revenue estimate of $24.6 million. PTP business revenues marginally rose to $21.9 million from $21.3 million in the year-ago quarter. U.S. federal budgetary allocations for defense sales helped the segment sales. Net sales beat the revenue estimate of $19.6 million. However, revenues from the Enterprises business witnessed a sharp decline to negative $5.5 million from $32 million in the year-ago quarter.
Other Woes
Non-GAAP gross loss was $7.8 million for a corresponding margin of negative 19.4% compared with respective figures of $41.9 million and 49.6% in the year-ago quarter. Lower volumes of high-margin Enterprise products, low freight capitalization, and elevated inventory levels adversely impacted the gross margin. Non-GAAP operating loss was $34.1 million against an operating income of $13.2 million in the prior-year quarter. In the December quarter, Cambium utilized $6.2 million against an operating cash flow of $4 million in the prior-year quarter. As of Dec 31, 2023, the company had $19.7 million cash with $21.9 million long-term debt compared with respective tallies of $48.2 million and $24.5 million a year ago.
Optimistic Future
Looking forward, Cambium aims to optimize its cost structure and identify and invest in key growth areas, which management believes will yield long-term benefits. The company expects the normalization of channel inventory for the Enterprise business to take a considerable amount of time and foresees potential growth in the PMP business with the FCC’s approval of its 6 GHz solutions. Additionally, solid revenues from defense are anticipated as demand in the PTP business remains robust.
Given the challenging period, the company anticipates a non-GAAP net loss of $6.1-$8.6 million or a loss of 22-31 cents per share for the first quarter of 2024, with revenues estimated to be in the range of $43-$48 million. For the full year, revenues are estimated to amount to $215-$245 million, with the company expecting non-GAAP earnings to range from a net loss of $13.6 million or a loss of 48 cents per share to net income of $2.3 million or 8 cents per share.
Zacks Rank & Key Picks
On a less positive note, Cambium currently holds a Zacks Rank #5 (Strong Sell). Conversely, other entities such as InterDigital, Inc. (IDCC), Ubiquiti Inc. (UI), and AudioCodes Ltd. (AUDC) offer investors promising opportunities with their respective Zacks Rank #2 (Buy) status.
InterDigital stands as a pioneer in advanced mobile technologies, while Ubiquiti Inc. boasts a comprehensive portfolio of networking products and solutions. On the other hand, AudioCodes Ltd. offers advanced communications software, products, and productivity solutions for the digital workplace.
