It has been about a month since the last earnings report for Cambium (CMBM). Shares have added about 13.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cambium due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cambium Q1 Earning Beat Estimates, Revenues Rise Y/Y
Cambium reported healthy first-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. The leading wireless solutions provider reported higher revenues year over year, driven by positive demand trends for enterprise and Point-To-Point products and improved supply situation.
On a GAAP basis, quarterly net income was $4.3 million or 15 cents per share against a loss of $1.6 million or a loss of 6 cents per share in the prior-year quarter. Net sales growth and strong cost discipline supported the bottom line during the quarter.
Non-GAAP net income came in at $6.8 million or 24 cents per share compared with $0.3 million or a penny per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.
During the quarter, Cambium generated revenues of $77.4 million, up 25% from $61.9 million reported in the prior-year quarter. The year-over-year improvement was propelled by growth in Enterprise and Point-To-Point (PTP) products. Lower net sales in Point-to-Multi-Point (PMP) revenues partially reversed this positive trend. The top line marginally beat the Zacks Consensus Estimate of $77 million.
By product category, quarterly revenues at PMP came in at $22.3 million compared with $30.9 million a year ago. The declining demand trends from service provider owing to transition from PMP 450 products to Cambium’s new gigabit technologies hurt net sales from this segment.
Revenues from PTP business rose to $18 million in the first quarter from $14.7 million in the prior-year quarter. The company’s PTP products witnessed a solid momentum in several deal wins in EMEA (Europe, Middle East and Africa) and CALA (Caribbean and Latin America). Robust growth in defense business also supported revenue growth from this segment.
During the first quarter, revenues at Enterprises surged to $35.6 million from $15.5 million in the year-ago quarter. Increasing demand for company’s wireless solutions and innovative software improvements to support service providers led to a net sales gain in this segment.
Region wise, revenues from North America rose to $47.6 million from $28.3 million in the year-ago quarter. Revenues from EMEA declined to $19.7 million from $20.3 million in the prior-year quarter. The company witnessed a top-line decline from the CALA region, as revenues fell from $5.1 million in the year-ago quarter to $3.7 million in the first quarter. Revenues from Asia-Pacific declined to $6.4 million from $8.1 million in the prior-year quarter.
Non-GAAP gross profit increased to $40.3 million from $29.6 million for respective margins of 52.1% and 47.8%. The upside can be attributed to higher volumes and improved mix of enterprise and PTP products. Non-GAAP operating income rose to $9.4 million from $1 million in the year-ago quarter. Non-GAAP adjusted EBITDA totaled $10.4 million compared with $1.9 million a year ago, for respective margins of 13.4% and 3.1%.
Cash Flow & Liquidity
During the quarter, Cambium utilized $6 million in the first quarter 2023 compared with $19.2 million cash utilization in the prior-year quarter. As of Mar 31, 2023 the company had a $38.7 million cash balance with $23.8 million long term debt.
For the second quarter of 2023, revenues are expected in the range of $72-$80 million, indicating growth of approximately 4-15% year over. Non-GAAP earnings are anticipated in the band of $4.2-$7.6 million or 15-27 cents per share. Non-GAAP operating income is projected between $5.9 million and $10.1 million, while adjusted EBITDA is likely to be in the range of $6.9-$11.1 million, with a corresponding margin between 9.6% and 13.9%.
For 2023, management estimates revenues in the range of $327-$337 million. Non-GAAP gross margin is approximated at 50.9%. Non-GAAP net income is expected in the band of $33.7-$36 million or $1.18-$1.26 earnings per share. The company is planning to maintain its cost-control initiatives and management is conservative about revenue growth rate owing to the persistence of uncertainty in the global economy.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -26.98% due to these changes.
Currently, Cambium has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cambium has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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