Insiders ranked by realized 90-day signed return on their open-market trades at Cambium Networks Corp. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.15pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Real-time Form 4 intelligence. Smarter insider tracking.
Net-tone change vs last year's 10-K.
MD&A
+0.15pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
No section text extracted for this filing. The 10-K may use a non-standard template that the parser doesn't recognize - the original doc is still linked in the Stats tab.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
limitations+3
suspension+3
restructuring+1
challenges+1
divestiture+1
Positive rising
leading+1
MD&A (Item 7)
8,186 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and results of operations was prepared to provide the reader with a view and perspective of our business through the eyes of management and should be read in conjunction with the consolidated financial statements and related notes thereto of Cambium Networks Corporation (“Cambium”, “we”, “our”, or “us”) included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly those discussed under Part I, Item 1A. “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Cambium Networks is a global technology company that designs, develops, and manufactures fixed wireless and PON/XGSPON based broadband, Wi-Fi, and local area networking ("LAN") switching infrastructure, and security gateway solutions for a wide range of applications, including broadband access, wireless backhaul, Internet of Things (IoT), public safety communications, and Wi-Fi access. Our products enable service providers, enterprises, industrial organizations, and governments to deliver exceptional digital experiences and device connectivity, with compelling economics. Our ONE network platform simplifies the management of Cambium Networks' wired and wireless technologies. Our product lines fall into three broad, interrelated categories: Fixed Wireless and fiber Broadband ("FWB"), Enterprise networking, and Subscription and Services.
The FWB portfolio spans point-to-point ("PTP") and point-to-multi-point ("PMP") architectures over multiple standards, and frequency bands, including licensed, unlicensed, and lightly licensed spectrum, and fiber products. During 2024, both our ePMP 4600 and PMP 450v platforms received Federal Communications Commission ("FCC") approval to operate in the recently released 6 GHz band in conjunction with our approved Automated Frequency Coordination ("AFC") service.
The Enterprise portfolio includes a complete range of indoor and outdoor Wi-Fi access points, indoor and hardened copper and optical-based Ethernet switches, and security gateway and software-defined wide area network ("SD-WAN") devices. During 2024, we introduced our first Wi-Fi 7 access point, the X7-35X, which was supplemented by the X7-53X and X7-55X in September 2025. These three Wi-Fi 7 access points will be complemented with a broad range of indoor and outdoor Wi-Fi 7 solutions as the industry transition to Wi-Fi 7 occurs.
The Subscription and Services portfolio includes network planning and design, and cloud or on-premises network management and control solutions. The latter capability, delivered through subscription to cnMaestro X, forms the foundation of our ONE Network, a cloud-based network management architecture that allows users to remotely configure, monitor, and manage their wired and wireless networks. It provides a single, centralized view of all Cambium Network devices, and real-time performance and usage data, allowing users to control and optimize network configuration and settings. Advanced services offered in conjunction with this platform include application visibility and control, which is used to optimize end-user experiences; and "Assurance" which allows network administrators the ability to rapidly troubleshoot network issues using AI-powered root cause analysis with proactive resolution, ensuring service level agreements are met and preventing client impact. The Network Service Edge ("NSE"), an integrated security gateway and SD-WAN service for small and medium businesses, may also be associated with a subscription for network security services.
Trends impacting our business
Macroeconomic factors such as higher interest rates and inflationary pressures, which impact private sector capital investment, and concerns about a global economic slowdown and geopolitical conditions added to the softened demand for our products and services that we experienced over 2023 and 2024 coming out of the pandemic, and increased our cost of revenues and impacted, and may continue to impact, our gross margin. We continue to see a high level of competition in our industry due to slower demand and aggressive pricing. We also see increased competition and pricing pressure from new competitors such as Starlink significantly driving down global connectivity prices, with satellite bandwidth costs dropping roughly 77% over the last five years due to its rapid constellation deployment and lower manufacturer costs. We have also seen increased competition from mobile network operators who are using excess capacity in their mobile network to address fixed wireless broadband needs, and from original design manufacturers who are trying to increase their market share by selling directly to major telecommunications providers. We believe that these market pressures will continue to negatively impact revenues and gross margins for the foreseeable future. We may continue to face risks of
technology shifts that could result in inventory becoming obsolete before it is deployed, including as the industry continues its shift to Wi-Fi 7.
We are also impacted by the increases in the prices of memory chips from our semiconductor suppliers. Prices for memory chips have increased rapidly for newer generations of memory, which has had an impact on the supply of current memory, impacting components for both Wi-Fi 7 and Wi-Fi 6. We expect this to continue for the foreseeable future due to the scaling of AI data centers.
We spent 2025 moving production of select products from a third-party manufacturer in Mexico to a third-party manufacturer in Thailand. The move has been challenged by logistic and production issues due to the complexity of the impacted products as well as challenges present when utilizing a new manufacturer. While the majority of impacted products are in production, issues of scale, yield and supply chain continue to limit our ability to meet customer demand, and this may continue into 2026.
We continue to monitor the impact of macroeconomic factors, including a potential global recession, inflationary pressures, monetary policy shifts, trade wars and growing political tensions globally that continue to impact our industry and our business. We also believe that our customers continue to grapple with the impact of these macroeconomic factors on their businesses and future investment plans, leading to business uncertainty and a more constrained approach to forecasts and orders, and decreasing visibility into customer demand. Any prolonged economic disruptions, continued uncertainty over global trade wars, as well as further deterioration in the global economy or outbreaks of international hostilities, could have a negative impact on demand from our customers in future periods.
The impact of reverse globalization, including a more nationalistic trend globally leading to increasing government requirements for domestically produced products or limiting the sourcing of components and other products from China and elsewhere, has led us to limit our reliance on third-party manufacturers in China and move manufacturing to other locations, particularly Thailand, which has caused some disruptions in our supply operations, together with the impact of moving manufacture of some products to suppliers who have no recent experience building similar products. Nationalistic trends are occurring in various geographies, which may make it impractical for us to do business in some countries.
Credit Agreement Default
We continue to be out of compliance with financial and other covenants under our Amended Credit Agreement, and such defaults continued through 2025 and are expected to continue into 2026. In addition, we ceased payment of required quarterly principal and periodic interest on the term loan facility and of quarterly interest on the revolving credit facility as of June 2025. Such defaults afford the lender the right to declare the amounts outstanding immediately due and payable. We continue to have regular discussions with the lender and we have not been able to obtain a waiver of the defaults from the lender or otherwise refinance the indebtedness. If the lender were to accelerate the maturity and declare the full outstanding principal and interest immediately due and payable, we would not be able to repay the debt, and therefore, there is substantial uncertainty we would be able to continue as a going concern. Absent acceleration, our Amended Credit Agreement matures on November 17, 2026. Absent an infusion of capital from financing or divestiture, we will be unable to repay this indebtedness when it comes due. Refer to Note 6. Debt, to our consolidated financial statements of this Annual Report on Form 10-K for additional information.
We continue to take actions to improve our profitability, focus on operating efficiency and reducing discretionary spending, deferring capital expenditures and implementing cost reductions to align our cost structure with current and expected revenue levels. We are actively seeking additional capital through possible divestitures and/or capital raising transactions and working on accommodation with our lenders to provide us with the financial flexibility needed to meet our obligations as they come due over the next twelve months. Our ability to achieve these objectives depends in part on our expectations regarding macro-conditions in the markets in which we compete, customer acceptance and purchases of our products, buying decisions by our distributors, improvements in our manufacturing challenges with transition to new manufacturers, and other factors that are not all within our control.
Basis of presentation
Revenues
Our revenues are generated primarily from the sale of hardware products with essential embedded software. Our revenues also include amounts for software products, extended warranty on hardware products and subscription services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met and we measure revenue based on the consideration to which we expect to be entitled to based on customer contracts. We recognize subscription services revenue ratably over the term in which the services are provided and our performance obligation is satisfied. Revenues are adjusted for variable consideration amounts, including but not limited to estimated stock returns, customer incentives, and cooperative marketing allowances that we provide to distributors. We provide a standard warranty on our hardware products, with the term depending on the product, and record a liability for the estimated future costs associated with potential warranty claims. In addition, we also offer
extended warranties for purchase that represents a future performance obligation for us. The extended warranty is included in deferred revenues and is recognized on a straight-line basis over the term of the extended warranty.
Cost of revenues and gross profit
Our cost of revenues is comprised primarily of the costs of procuring finished goods from our third-party manufacturers, third-party logistics and warehousing provider costs, freight costs, and warranty costs. We outsource our manufacturing to third-party manufacturers located primarily in Thailand, Vietnam, Philippines, and Taiwan. Cost of revenues also includes costs associated with supply operations, including personnel and related allocated overhead costs, provision for excess and obsolete inventory, loss on supplier commitment expense, third-party license costs and third-party costs related to services we provide. Cost of revenues also includes amortization of capitalized software costs associated with products to be sold, and charges for excess and obsolescence and losses on supplier commitments.
Gross profit has been and will continue to be affected by various factors, including changes in product mix. The margin profile of products within each of our core product categories can vary significantly depending on the operating performance, features and manufacturer of the product. Generally, our gross margins on backhaul and fixed wireless access point products are greater than those on our CPE products. Because the ratio of CPE to PTP and PMP access points typically increases as network operators build out the density of their networks, increases in follow-on sales to network operators as a percentage of our total sales generally have a downward effect on our overall gross margins. Finally, gross margin will also vary as a function of changes in pricing due to competitive pressure, our third-party manufacturing and other production costs, cost of shipping and logistics, provision for excess and obsolete inventory, loss on supplier commitments, and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.
Operating expenses
We classify our operating expense as research and development, sales and marketing, and general and administrative expense. Personnel costs are the primary component of each of these operating expense categories, which consist of costs such as salaries, sales commissions, benefits, and bonuses, as well as share-based compensation expense. Depreciation and amortization of long-lived assets is separately disclosed in the statements of operations. In 2024, we recorded impairment of goodwill, intangibles and long-lived assets and this is separately disclosed in the statements of operations.
Research and development
In addition to personnel costs, research and development expense consists of costs associated with the design and development of our products, product certification, travel, recruiting, shared facility and shared IT costs. We generally recognize research and development expense as incurred. For certain of our software projects under development, we capitalize the development cost during the period between determining technological feasibility of the product and commercial release. We amortize the capitalized development cost upon commercial release, generally over three years, and include the amortization costs in cost of revenues on our statements of operations. We typically do not capitalize costs related to the development of first-generation product offerings as technological feasibility generally coincides with general availability of the software.
Sales and marketing
In addition to personnel costs for sales, marketing, service and product line management personnel, sales and marketing expense consists of our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, national and local regulatory approval on our products, travel and entertainment, recruiting and shared facility and shared IT costs.
General and administrative
In addition to personnel costs, general and administrative expense consists of professional fees, such as legal, audit, accounting, information technology and consulting costs, insurance, shared facility and shared IT costs, and other supporting overhead costs.
Depreciation and amortization
Depreciation and amortization expense consist of depreciation related to fixed assets such as computer equipment, furniture and fixtures, and testing equipment, as well as amortization related to acquired and internal use software and definite lived intangibles.
Impairment
Impairment expense consists of amounts recorded to impair our goodwill, customer relationship intangible, software and long-lived assets.
Provision for income taxes
Our provision for income taxes consists primarily of income taxes in the jurisdictions in which we conduct business. Management assesses our deferred tax assets in each reporting period, and if it is determined that it is not more likely than not to be realized, we will record a valuation allowance in that period.
Results of operations
The following table presents the consolidated statements of operations, as well as the percentage relationship to total revenues for items included in our consolidated statements of operations for the year ended December 31, 2024 compared to the year ended December 31, 2025:
Year Ended December 31,
(in thousands)
Statements of Operations Data:
Product
Subscriptions and services
Total revenues
Cost of revenues:
Product
Subscriptions and services
Total cost of revenue
Gross profit:
Product
Subscriptions and services
Total gross profit
Operating expenses
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Impairment
Total operating expenses
Operating loss
Interest expense, net
Other expense, net
Loss before income taxes
(Benefit) provision for income taxes
Net loss
Year Ended December 31,
Percentage of Revenues:
Product
Subscriptions and services
Total revenues
Cost of revenues:
Product
Subscriptions and services
Total cost of revenue
Gross profit:
Product
Subscriptions and services
Total gross profit
Operating expenses
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Impairment
Total operating expenses
Operating loss
Interest expense, net
Other expense, net
Loss before income taxes
(Benefit) provision for income taxes
Net loss
Comparison of the year ended December 31, 2024 to the year ended December 31, 2025
Revenues
Year Ended December 31,
Change
(dollars in thousands)
Product
Subscriptions and services
Product revenues decreased $16.5 million, or 10.5%, from $157.8 million in 2024 to $141.3 million in 2025. The decrease was primarily due to our point-to-multi-point product category partially as a result of lower demand for ePMP, 28 GHz and 60 GHz products, but also due to limitations on our ability to meet customer demand as a result of issues of scale, yield and supply experienced following our transition from our Mexico manufacturer to a manufacturer in Thailand. Revenues also decreased in our point-to-point product category partially as a result of lower demand for PTP accessories and impacts from moving manufacturing of certain products noted above, partially offset by higher demand for defense products in Europe, Middle East, Africa. Revenues increased in our enterprise product category driven by increased demand for switching products and Wi-Fi 7.
Subscriptions and services revenues decreased $1.1 million, or 5.7%, from $19.5 million in 2024 to $18.4 million in 2025. The decrease was primarily due to lower services revenue partially offset by increased volume of software subscriptions on enterprise products.
Revenues by product category
Year Ended December 31,
Change
(dollars in thousands)
Point-to-Multi-Point
Point-to-Point
Enterprise
Other
Total revenues by product category
Point-to-Multi-Point
PMP revenues decreased $13.8 million, or 18.8%, from 2024 to 2025. PMP revenues decreased in all regions except the Caribbean and Latin America regions, driven by decreased demand from our service providers for our 28 GHz and ePMP products and the limitations on our ability to meet customer demand following our transition from our Mexico manufacturer to a manufacturer in Thailand.
Point-to-Point
PTP revenues decreased $5.1 million, or 10.6%, from 2024 to 2025. PTP revenues decreased across all regions, with the larges decrease in North America. The decrease is mostly driven by lower demand for PTP accessories and the limitations on our ability to meet customer demand following our transition from our Mexico manufacturer to a manufacturer in Thailand.
Enterprise
Enterprise revenues increased $2.9 million, or 5.7%, from 2024 to 2025, with the largest increase in North America. The increase is mostly driven by higher demand for switching products and Wi-Fi 7 products, partially offset by lower demand for Wi-Fi 5 products.
Other
Other revenues decreased $1.6 million, or 30.6%, from 2024 to 2025, with the larges decreases in North America and Europe, Middle East, Africa, due to lower services revenue.
Revenues by geography
Year Ended December 31,
Change
(dollars in thousands)
North America
Europe, Middle East, Africa
Caribbean and Latin America
Asia Pacific
Total revenues by geography
Revenues decreased in 2025 compared to 2024, with the largest decrease in North America. All regions were impacted by the move of the manufacturing of certain products from Mexico to Thailand. In addition to the impact of the move, the decrease in PMP and PTP revenues in North America was related to lower demand across all products within these categories, partially offset by increased enterprise product revenues driven by higher demand for switching and Wi-Fi 7 products. Revenues in Europe, Middle East, Africa decreased year-over-year, mostly from decreased PMP and enterprise product revenues, mostly offset by increased PTP product category revenues driven by increased demand for defense products. Revenues in Caribbean and Latin America decreased year-over-year, mostly from decreased PMP and PTP revenues due to lower demand spread across all products within these categories. The decrease in revenues in Asia Pacific was driven by decreased revenues in PMP and PTP, mostly offset by increased revenues in enterprise products with higher demand for Wi-Fi 6 and switching products.
Cost of revenues and gross margin
Year Ended December 31,
Change
(dollars in thousands)
Product
Gross margin
620 bps
Subscriptions and services
Gross margin
(780) bps
Cost of revenues for products decreased $19.8 million, or 18.7%, from $106.1 million for 2024 to $86.3 million for 2025. The decrease in cost of revenues was primarily due to $13.2 million lower loss on supplier commitment expense, $4.3 million lower excess and obsolescence, along with decreased revenues resulting in lower direct materials costs and lower freight and duty costs. These costs are partially offset by nonrecurring expenses related to the move of manufacturing from Mexico to Thailand and restructuring activities.
Cost of revenues for subscriptions and services increased $1.0 million, or 11.7%, from $8.2 million for 2024 to $9.2 million for 2025. The increase in cost of revenues was primarily due to increased direct services costs.
Gross margin for products increased from 32.7% in 2024 to 38.9% in 2025. The increase mostly reflects the impact of the above mentioned decreases in excess and obsolescence reserve and loss on supplier commitments offset by lower revenues from higher margin products.
Gross margin for subscriptions and services decreased from 57.9% in 2024 to 50.1% in 2025. The decrease mostly reflects the impact from decreased services revenue.
Operating expenses
Year Ended December 31,
Change
(dollars in thousands)
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Impairment
Total operating expenses
Research and development
Research and development expense decreased $6.4 million, or 16.4%, from $39.3 million in 2024 to $32.9 million in 2025. Research and development expense decreased mainly due to $3.6 million lower employee-related expense, mostly due to decreased headcount from the reductions completed in 2025, $1.2 million lower share-based compensation expense due to no new awards in 2025 along with suspension of ESPP, $0.9 million lower outside contractor spend and $0.3 million lower engineering material spend due to fewer projects, $0.5 million lower homologation and regulatory spend due to the timing and number of projects, $0.5 million lower lease expense and $0.5 million higher capitalized software costs, offset by $0.8 million lower research and development tax credit due to lower headcount and fewer project qualifying for the credit and $0.2 million higher travel-related expenses.
Sales and marketing
Sales and marketing expense decreased $5.5 million, or 15.1%, from $36.7 million in 2024 to $31.2 million in 2025. The decrease in sales and marketing expense was primarily due to $3.1 million lower employee-related expense, mostly due to decreased headcount from the reductions completed in 2025, $1.7 million lower variable compensation expense, $0.9 million lower share-based compensation expense due no new awards in 2025 along with lower headcount and suspension of ESPP, $0.3 million lower travel-related spend, partially offset by $0.5 million higher restructuring costs related to the 2025 restructurings.
General and administrative
General and administrative expense increased $0.4 million, or 1.6%, from $26.0 million in 2024 to $26.4 million in 2025. The increase in general and administrative expense was primarily due to $2.1 increase in outside contractor spend due to employee attrition and additional staff added for restatement, $2.2 million higher legal fees and $1.3 million higher audit fees due to audit overrun and restatement, partially offset by $1.5 million lower staff-related expenses due to employee attrition and $0.4 million lower nonrecurring costs related to the Chief Executive Officer transition that did not repeat in 2025, $1.3 million lower share-based compensation expense due to lower headcount, no new awards in 2025 and suspension of ESPP, $0.9 million lower bad debt expense, $0.4 million
lower other fees and expenses, $0.3 million lower insurance costs, $0.3 million lower nonrecurring expenses related to the headquarters office move in 2024 and restructuring in 2024 and $0.1 million lower travel-related expenses.
Depreciation and amortization
Depreciation and amortization expense decreased $4.3 million, or 74.7%, from $5.8 million in 2024 to $1.5 million in 2025. The decrease in depreciation and amortization was mostly driven by a reduction of depreciation and amortization as a result of the impairment on property and equipment and customer relationships intangible recorded during the third quarter of 2024.
Impairment
We incurred a $25.5 million impairment charge in 2024, and $0.2 million charge in 2025, associated with the impairment of our property and equipment, goodwill, customer relationships intangible, internal use software, and software marketed for external sale. Refer to the Note 3. Property and equipment, Note 4. Software and Note 5. Goodwill and intangible assets in our consolidated financial statements included in this Annual Report on Form 10-K for details regarding the impairments recorded.
Interest expense, net
Year Ended December 31,
Change
(dollars in thousands)
Interest expense, net
Interest expense increased $3.2 million, or 54.4%, from $5.8 million in 2024 to $9.0 million in 2025. The increase was primarily due to interest expense incurred as a result of drawing $45.0 million against the revolving credit facility, mostly in the first quarter of 2024 and an increase in the interest rate on the term loan due to the covenant default in the third quarter of 2024 along with lower interest income on lower cash balances. This increase was partially offset by $0.6 million of fees expensed in 2024 related to an aborted amendment to our secured credit agreement.
Other expense, net
Year Ended December 31,
Change
(dollars in thousands)
Other expense, net
Other expense, net remained mostly flat from 2024 to 2025. The change is primarily associated with foreign currency fluctuations.
Provision for income taxes
Year Ended December 31,
Change
(dollars in thousands)
(Benefit) provision for income taxes
Effective income tax rate
The Company recorded income tax benefit of $1.9 million and a provision for income taxes of $1.5 million for the years ended December 31, 2024 and 2025, with an income tax rate of 2.4% and (4.2)%, respectively. For the year ended December 31, 2024, the Company's effective tax rate of 2.4% differed from the U.S. statutory rate of 21.0% primarily due to a pretax loss, the net increase in the valuation allowance of $12.3 million, a foreign tax rate differential of $(2.5) million, $2.7 million return to provision adjustment primarily due to a tax method change in the U.S. 2023 tax return related to the tax capitalization of our research and development expenditures, $1.5 million for establishment of a deferred tax liability for withholding tax on non-permanent investment in subsidiaries, a $1.2 million tax expense related to share-based compensation, and a benefit on research and development credits of $(0.3) million. For the year ended December 31, 2025, the Company's effective tax rate of (4.2)% differed from the U.S. statutory rate of 21.0% primarily due to a pretax loss, the net increase in the valuation allowance of $9.5 million, a foreign tax rate differential of ($1.5) million, a $0.9 million tax expense related to share-based compensation, and a benefit on research and development credits of $0.5 million. See Note 12. Income taxes in the Notes to the consolidated financial statements for more information related to income taxes.
Liquidity and Capital Resources
As of December 31, 2025, we had a cash balance of $11.3 million, a decrease of $23.6 million from December 31, 2024. We drew $45.0 million on our revolving credit facility in the first half of 2024 for working capital needs mainly to: (i) fund normal
operating expenses; (ii) meet interest and principal requirements of our outstanding indebtedness; and (iii) fund capital expenditures. Following this draw down, we have no remaining available liquidity under our revolving credit facility. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending to support development efforts, the timing of new product introductions, market acceptance of our products and overall economic conditions. We continue to focus on cost management, operating efficiency and efficient discretionary spending. We expect to regularly assess our liquidity needs and market conditions and may seek alternative sources of financing if and when our board of directors determines that doing so is in our best interest. As noted below, our Amended Credit Agreement with Bank of America matures on November 17, 2026. Absent an infusion of capital from financing or divestiture, we will be unable to repay this indebtedness when it becomes due.
Debt
On November 17, 2021, we established a new credit facility (the "Credit Agreement") with Bank of America N.A., as Administrative Agent, a Lender, Swingline Lender and an L/C Issuer and the other Lenders party thereto from time to time ("Bank of America"). The Credit Agreement allows for total borrowings of $75.0 million, which includes a $30.0 million term credit facility and a revolving credit facility of $45.0 million. On November 17, 2021, we borrowed the entire $30.0 million term loan.
On December 29, 2023, we entered into the Second Amendment to our Credit Agreement (the "Second Amendment"), which amended the Credit Agreement (the Credit Agreement as amended prior to the date of the Second Amendment, the "Existing Credit Agreement", and the Existing Credit Agreement, as amended by the Second Amendment, the "Amended Credit Agreement"). The Second Amendment amended the Existing Credit Agreement by, among other things, establishing a covenant relief period which began on December 31, 2023 and ended on November 30, 2024 ("Covenant Relief Period") during which time we were required to (a) maintain certain Liquidity as provided in the Amended Credit Agreement, (b) maintain certain levels of Consolidated EBITDA as provided in the Amended Credit Agreement, and (c) provide certain additional financial reporting. In addition, we were no longer required to meet (or, during such period, test) our Consolidated Leverage Ratio or Consolidated Fixed Charge Coverage Ratio. The Second Amendment also provided that, during the Covenant Relief Period, (x) the Applicable Rate of interest being incurred on any outstanding Loans is increased to 3.25% per annum for Term SOFR Loans and 2.25% per annum for Base Rate Loans, (y) the commitment fee for undrawn commitments is increased to 0.35% and (z) the ability of the Loan Parties to make certain Investments, Dispositions and Restricted Payments, in each case, is limited as more fully set forth in the Amended Credit Agreement.
As of December 31, 2025, we had $21.5 million outstanding principal debt under our term loan facility and $45.0 million outstanding on our revolving credit facility. There is no availability remaining on the revolving credit facility. The effective interest rate on the term credit facility at December 31, 2025 was 9.45% and the weighted-average interest rate on our revolving credit facility was 9.23%. These rates do not include an additional 2% default rate penalty that was added on both the term credit facility and revolving credit facilities as a result of the events of default that first occurred during the third quarter of 2024. We are required to make quarterly principal payments of $0.7 million under the term credit facility and quarterly interest payments under both the term loan facility and the revolving credit facility. For the year ended December 31, 2024, all quarterly principal and interest payments were made in accordance with the terms of the Amended Credit Agreement. Beginning with the quarter ended June 30, 2025, we ceased making principal and interest payments on the term loan and interest payments on the revolving credit facility.
We were not in compliance with our quarterly fixed charge coverage ratio or consolidated leverage ratio covenants as of December 31, 2024 and December 31, 2025. In addition, since we ceased paying principal and interest on the term loan and interest on the revolving credit facility, this results in a payment default, which is also continuing in 2026. Such defaults afford Bank of America the right to declare the amounts outstanding under our Amended Credit Agreement immediately due and payable. To provide us with the financing flexibility needed to meet our obligations as they come due over the next twelve months, we are actively seeking additional capital through possible divestitures and/or capital raising transactions and working with Bank of America to address our covenant non-compliance. If Bank of America were to accelerate the maturity of our indebtedness under the Amended Credit Agreement, there is substantial uncertainty we would be able to secure capital resources to repay the amounts due. Absent acceleration of payment, our term loan facility and revolving credit facility matures on November 17, 2026, at which time the outstanding principal and interest will be due. For a detailed discussion of our current credit facilities, refer to Note 6. Debt in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. For updated disclosure on the Credit Agreement, refer to "Credit Agreement Defaults", above.
Cash Flows
The following table sets forth summarized cash flow data for the periods indicated (in thousands):
Year Ended December 31,
Cash used in operating activities
Cash used in investing activities
Cash provided by (used in) financing activities
Cash flows from operating activities
Net cash used in operating activities for 2024 of $15.0 million consisted primarily of net loss of $74.5 million, adjustments for non-cash charges for depreciation and amortization of $10.0 million, share-based compensation expense of $9.8 million, a $9.0 million impairment charge related to goodwill, a $8.8 million impairment charge related to property and equipment, a $6.6 million impairment charge related to definite-lived intangibles, $1.1 million impairment charge related to both internal use and externally sold software and $0.1 million impairment charge for right-of-use operating lease assets along with a $6.0 million increase in provision for inventory excess and obsolescence, $1.5 million increase on the recognition of a deferred tax liability, $0.9 million increase in the provision for estimated credit losses and $0.1 million of other non-cash charges, along with changes in operating assets and liabilities that resulted in net cash inflows of $5.7 million. The changes in operating assets and liabilities consisted primarily of a $20.1 million reduction in inventories and a $8.3 million reduction in accounts receivable mostly due to lower revenues, partially offset by $10.6 million decrease in other accrued assets and liabilities, mostly due to decreased sales returns and increased noncurrent prepayments made to component suppliers to secure inventory in future years, along with $7.2 million increase in prepaid expenses, $1.4 million decrease in accounts payable, $1.3 million decrease in accrued liabilities, $1.2 million increase in income taxes receivable and $1.0 million reduction in accrued employee compensation.
Net cash used in operating activities for 2025 of $15.7 million consisted primarily of net loss of $38.5 million, adjustments for non-cash charges for depreciation and amortization of $5.1 million, share-based compensation expense of $6.4 million and increase in provision for inventory excess and obsolescence of $1.6 million, $0.3 million increase in deferred income taxes and $0.2 million impairment of capitalized software, along with changes in operating assets and liabilities that resulted in net cash inflows of $9.3 million. The changes in operating assets and liabilities consisted primarily of a $12.8 million decrease in inventory, $9.5 million increase in accrued liabilities, $4.1 million decrease in prepaid expenses and $1.4 million increase in accounts payable, mostly due to timing of purchases and payment, partially offset by $6.0 million increase in receivables, $0.1 million decrease in employee compensation and $12.1 million decrease in other assets and liabilities, mostly due to the increase in noncurrent supplier prepayments and decrease of noncurrent accrued loss on supplier commitments.
Cash flows from investing activities
Our investing activities for both periods presented consisted of capital expenditures for property, equipment, internal use software and capitalized labor costs for software to be marketed for sale in support of the growth of our business. Capital spending for 2025 was $6.0 million less than 2024.
Cash flows from financing activities
Net cash provided by financing activities of $43.2 million for 2024 was primarily due to $45.0 million drawn down on the revolving credit facility and proceeds received of $0.9 million from the issuance of ordinary shares under our Employee Share Purchase Plan partially offset by $2.6 million repayment of principal due under the term loan facility with Bank of America.
Net cash used in financing activities of $1.4 million for 2025 was primarily due to principal payments of $1.3 million on our term loan and $0.1 million of taxes paid on net share settlement of equity awards.
Critical accounting estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expense and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1. Description of Business and Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Recognition of revenues
Our revenues are generated primarily from the sale of hardware products, with essential embedded software. Our revenues also include amounts for software products, extended warranty on hardware products and subscription services. Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met. We recognize revenues on extended warranty on a straight-line basis over the term of the extended warranty. We recognize subscription services revenue ratably over the term in which the services are provided and our performance
obligation is satisfied. We determine the appropriate revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or arrangement.
Our distributors are allowed certain price adjustments in the form of stock rotation rights and customer incentives. In determining the transaction price, we consider stock rotation rights and customer incentives to be forms of variable consideration. The Company estimates variable consideration for rebates using the expected value method. The estimate incorporates all reasonably available information, including historical rebate experience, current channel inventory levels, macroeconomic indicators and observable changes in customer demand. Variable consideration estimates are continuously assessed such that it is probable that a significant reversal of revenue will not occur. Our distributors are also allowed certain price adjustments in the form of stock rotation rights. Stock rotation rights grant the distributor the ability to return certain specified amounts of inventory. Stock rotations are an additional form of variable consideration. The Company estimates variable consideration for stock rotations using the value of inventory being held by its distributors ("channel inventory"), historical returns experience and a qualitative adjustment to consider fluctuations in ending channel inventory balance and actual returns being processed in both historical and subsequent periods. Management believes that the accounting estimates related to these price adjustments are "critical accounting estimates" because significant judgment is required to estimate the related accruals, such as estimating future customer preferences that could impact the rebates offered to distributors or the stock being returned.
Accruals for these programs are recorded as revenue adjustments that reduce gross billings in the period the related sale is recognized. If significant changes in the assumptions used to develop the estimates occur, such as the expected rebate per unit or expected number of units to be rebated, it could impact the Company's results of operations and financial condition.
Inventory valuation
The valuation of inventory requires us to estimate excess or obsolete inventory. The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to our forecast of remaining lifetime demand, consideration of historical sales or usage and requires significant management judgment. We also consider the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which would have a negative impact on our gross margin. The actual amount of inventory written off in future periods will likely differ from the inventory excess and obsolete provisions reflected in our consolidated balance sheets due to difference between estimated and actual future demand, which could have a material effect on our net inventory as reported in our consolidated financial statements. Any adjustments to the valuation of inventory are included in cost of revenues.
Income taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement carrying amount and the tax bases of assets and liabilities using enacted income tax rates in effect for the year in which the differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax asset in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
We may be subject to income tax audits in all the jurisdictions in which we operate and, as a result, we must also assess exposures to any potential issues arising from current or future audits of current and prior years’ tax returns. Accordingly, we must assess such potential exposures and, where necessary, provide a reserve to cover any expected loss. We recognize the benefit of a tax position if it is more likely than not to be sustained. Recognized tax positions are measured at the largest amount more likely than not of being realized upon settlement. To the extent that we establish a reserve, our income tax expense would be increased. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize an income tax benefit during the period in which new information becomes available indicating the liability is no longer necessary. We record an additional income tax expense in the period in which new information becomes available indicating the tax liability is greater than our original estimate.
Long lived assets recoverability and impairment assessment
We evaluate our long-lived assets for impairment by completing a quarterly qualitative assessment and whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. We consider historical trends and current results, assumptions regarding future performance, operating income or cash flows, strategic initiatives and overall economic
factors, including significant negative market or industry trends and macroeconomic developments, considered in both absolute terms and relative to peers.
Considerable management judgment is necessary to estimate expected future cash flows, including evaluating the impact of operational and economic factors on our future cash flows, all of which are subject to uncertainty. The assumptions and estimates used involve significant elements of subjective judgment and analysis by management. Certain future events and circumstances, including deterioration of market conditions, a decline in actual and expected demand, among others, could result in changes to these assumptions and risks. An impairmentloss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to the assets or asset group. If impairment is indicated, the asset is written down to its estimated fair value.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
Interest rate risk
We are exposed to interest rate risk from fluctuations in the interest rate used to calculate interest expense on the outstanding principal on our term loan facility and all outstanding borrowing under our revolving credit facility, which as of December 31, 2025 was $21.5 million and $45.0 million, respectively.
As a result of our non-compliance with our covenants, our term loan facility and revolving credit facility were converted to Base Rate loans, with interest accruing on the outstanding principal amount of the term loan facility and outstanding borrowing on the revolving credit facility on a quarterly basis equal to the Prime rate per annum, plus a 2.25% applicable margin. In addition, we are being charged a 2% interest penalty while an event of default exists. At December 31, 2025, the effective interest rate on the term loan was 9.45% and the weighted-average interest rate on the revolving credit facility was 9.23%. A hypothetical 100-basis point increase in interest rates, and assuming a consistent applicable margin would result in an additional $0.2 million in interest expense related to our term loan facility and $0.5 million of interest expense related to our revolving credit facility per year. Until we are successful at removing the event of default, the 2% interest penalty will result in an additional $0.6 million in interest expense related to our term loan facility and $0.9 million of interest expense related to our revolving credit facility per year.
Foreign currency exchange rate risk
We conduct business in all parts of the world and are thereby exposed to market risks related to fluctuations in foreign currency exchange rates. The U.S. dollar is the single largest currency in which our revenue contracts are denominated. Any decline in the value of local foreign currencies against the U.S. dollar results in our products and services being more expensive to a potential foreign customer. In those instances where our goods and services have already been sold, receivables may be more difficult to collect. Additionally, in jurisdictions where the revenue contracts are denominated in U.S. dollars and operating expenses are incurred in the local currency, any decline in the value of the U.S. dollar will have an unfavorable impact to operating margins. We have not entered into any foreign currency hedging transactions. We do not purchase or hold any derivative financial instruments for speculation or arbitrage.
We do not hold any cash in any investment accounts and all cash is deposited with financial institutions that management believes are of high credit quality. Our cash consists primarily of U.S. dollar denominated demand accounts.
Credit risk
We consider the credit risk of all customers and regularly monitor credit risk exposures in our trade receivables. Our standard credit terms with our customers are generally net 30 to 60 days. We had one customer representing more than 10% of trade receivables at December 31, 2024 and 2025. In addition, we had two customers representing more than 10% of revenues for the years ended December 31, 2024 and 2025.
Item 8. Financial Statement s and Supplementary Data.
The information required by this item is incorporated by reference to the consolidated financial statements and accompanying notes set forth on pages F-1 through F-35 of this Annual Report on Form 10-K.
