Why Is Cambium (CMBM) Down 21.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Cambium (CMBM). Shares have lost about 21.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cambium due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cambium Lags Q2 Earning Estimates on Lower Revenues
Cambium reported lackluster second-quarter 2023 results, with the bottom and the top line missing the respective Zacks Consensus Estimate. The leading wireless solutions provider reported lower revenues year over year due to a slowdown in revenues of Enterprise products.
Net Income
On a GAAP basis, quarterly net loss was $2.6 million or a loss of 10 cents per share against a net income of $2.3 million or 8 cents per share in the prior-year quarter. Net sales contraction and higher operating expenses dented the bottom line during the quarter.
Non-GAAP net income came in at $0.9 million or 3 cents per share compared with $5 million or 18 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of 21 cents by a considerable margin.
Revenues
During the quarter, Cambium generated revenues of $59.5 million, down from $69.3 million in the prior-year quarter. The year-over-year decline was attributable to significantly lower sales of Enterprise products owing to aggressive pricing by competitors and soft global economic conditions leading to order cancellations and delays in end-customer projects. Lower net sales in Point-to-Multi-Point (PMP) revenues added to the woes, while higher Point-To-Point (PTP) product sales partially reversed this positive trend. The top line missed the consensus estimate of $76 million.
By product category, quarterly revenues at PMP came in at $26.7 million compared with $28.3 million a year ago. The declining demand trends from service providers owing to the transition from PMP 450 products to Cambium’s new gigabit technologies hurt net sales from this segment. Revenues from the PTP business rose to $25.1 million from $15.7 million in the prior-year quarter, driven by robust growth in the defense business. Revenues at the Enterprises business declined to $6.4 million from $24 million in the year-ago quarter.
Region-wise, revenues from North America rose to $39.5 million from $31.1 million in the year-ago quarter. Revenues from EMEA (Europe, Middle East and Africa) declined to $6.8 million from $21.3 million in the prior-year quarter. The company witnessed a top-line decline from the CALA (Caribbean and Latin America) region, as revenues fell from $8 million in the year-ago quarter to $6 million. Revenues from Asia-Pacific declined to $7.2 million from $8.9 million in the prior-year quarter.
Other Details
Non-GAAP gross profit decreased to $29.9 million from $33.9 million for respective margins of 50.3% and 48.9%. The decline was largely due to lower Enterprise revenues. Non-GAAP operating income was down to $1.6 million from $6.3 million in the year-ago quarter. Non-GAAP adjusted EBITDA totaled $2.8 million compared with $7.8 million a year ago, for respective margins of 4.7% and 11.3%.
Cash Flow & Liquidity
During the quarter, Cambium utilized $4.5 million against an operating cash flow of $10 million in the prior-year quarter. As of Jun 30, 2023, the company had a $32 million cash balance with $23.2 million long-term debt.
Outlook
For the third quarter of 2023, revenues are expected in the range of $62-$70 million, while non-GAAP earnings are anticipated in the band of $3.7-$6.9 million or 13-25 cents per share. Non-GAAP operating income is projected between $5.2 million and $9.2 million, while adjusted EBITDA is likely to be in the range of $6.3-$10.3 million, with a corresponding margin between 10.2% and 14.8%.
For 2023, management has lowered its revenue estimates to the range of $265-$275 million from $327-$337 million. Non-GAAP gross margin is expected to be between 50.2% and 51.6%. Non-GAAP net income is expected in the band of $16.7-$21.9 million or 59-78 cents per share, down from $33.7-$36 million or $1.18-$1.26 per share expected earlier. The company plans 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 -56.63% due to these changes.
VGM Scores
At this time, Cambium has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.
Performance of an Industry Player
Cambium belongs to the Zacks Wireless National industry. Another stock from the same industry, AT&T (T), has gained 2.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
AT&T reported revenues of $29.92 billion in the last reported quarter, representing a year-over-year change of +0.9%. EPS of $0.63 for the same period compares with $0.65 a year ago.
AT&T is expected to post earnings of $0.62 per share for the current quarter, representing a year-over-year change of -8.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.
AT&T has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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