Cambium Networks Corp

Note 1. Description of Business and Summary of Significant Accounting Policies

Cambium Networks Corporation (“Cambium” or “Cambium Networks” or the “Company”), incorporated under the laws of the Cayman Islands, is a holding company whose principal operating entities are Cambium Networks, Ltd. (UK), Cambium Networks, Inc. (USA), and Cambium Networks Private Limited (India). On June 26, 2019, the Company completed an Initial Public Offering and the Company’s ordinary shares began trading on the Nasdaq Global Markets.

Cambium Networks Corporation and its wholly owned subsidiaries design, develop, and manufacture wireless broadband, fiber and Wi-Fi networking infrastructure solutions that are used by businesses, governments, and service providers in urban, suburban and rural environments. Cambium Networks' products simplify and automate the design, deployment, optimization, and management of broadband and Wi-Fi access networks through intelligent automation.

The Company operates on a calendar year ending December 31. As such, all references to 2021, 2022 and 2023 contained within these notes relate to the calendar year, unless otherwise indicated.

Basis of Presentation

The Company’s consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Cambium Networks Corporation and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

In 2022, management determined that certain costs previously included as general and administrative expenses related to other functions of the business. Prior period results have been revised to reflect the allocation of these costs to their respective functions. These costs primarily include facility costs such as leased space and shared IT costs. Revisions were made to increase research and development expense by $3.4 million and selling and marketing expense by $1.0 million and decrease general and administrative expense by $4.4 million for the year ended December 31, 2021. These revisions were concluded to be immaterial and had no impact on operating income.

Use of Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates these estimates, including those related to the provision for excess and obsolete inventory, the carrying amount of estimated inventory returns, the estimated amount expected to be refunded to customers in respect of inventory returns, fair value of equity awards granted to employees and the associated forfeiture rates, fair value of assets acquired, liabilities assumed, goodwill and identifiable intangible assets in business combinations, leases, provision for income taxes, recoverability of deferred tax assets. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Segments

Management has determined that it operates asone operating segment andone reporting unit as it only reports financial information on an aggregate and consolidated basis to its Chief Executive Officer, who is the Company’s chief operating decision maker ("CODM"). Decisions about resource allocation or operating performance assessments are not made below a total company level. Consequently, impairment testing of goodwill is performed at the consolidated level as one reporting unit.

Recognition of revenues

Revenues consist primarily of revenues from the sale of hardware products. Revenues also include amounts for software products, extended warranty on hardware products and software subscription services. Substantially all products are sold through distributors and other channel partners, such as resellers and systems integrators.

The Company recognizes revenue to reflect the transfer of control of promised products or services to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for products or services.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company identifies its distinct performance obligations under each contract. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. Hardware products with essential embedded software, software products, extended warranty on hardware products and software subscriptions have been identified as separate performance obligations.

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring products or services to a customer. Exchanges made as part of the Company’s stock rotation program meet the definition of a right of return. An adjustment to revenue is made to adjust the transaction price to exclude the consideration related to products expected to be returned. The Company records an asset at the carrying amount of the estimated stock returns and a liability for the estimated amount expected to be refunded to the customer. The transaction price also excludes other forms of consideration provided to the customer, such as volume-based rebates and cooperative marketing allowances.

The Company recognizes revenue when, or as, it satisfies a performance obligation by transferring control of a promised product or service to a customer. Revenue from hardware products with embedded software is recognized when control is transferred to the customer, which is typically at the time of shipment. Software revenue is from perpetual license software and is recognized at the point in time the customer is able to use or benefit from the software. Extended warranty is available for purchase on hardware products and is a performance obligation that is satisfied over time, beginning on the effective date of the warranty term and ending on the expiration of the warranty term. The Company recognizes revenue on extended warranties on a straight-line basis over the warranty period. Revenue from subscription services is recognized ratably over the term in which the services are provided and our performance obligation is satisfied.

Multiple performance obligations

The Company enters into revenue arrangements that may consist of multiple performance obligations, such as hardware and extended warranty. The Company allocates the transaction price to each performance obligation on a relative standalone selling price basis for each distinct product or service in the contract. The best evidence of standalone selling price is the observable price of a product or service when the Company sells that product or service separately in similar circumstances and to similar customers. If a standalone selling price is not directly observable, the Company estimates the transaction price allocated to each performance obligation using the expected costs plus a margin approach.

Receivables and concentration of credit risk

Trade accounts receivable are recorded at invoiced amounts, net of the allowance for credit losses. The Company considers the credit risk of all customers and regularly monitors credit risk exposure in its trade receivables. The Company’s standard credit terms with their customers are generally net 30 to 60 days. The Company hadone customer representing more than 10% of trade receivables at December 31, 2022 and 2023. The Company hadtwo customers representing more than 10% of revenues for the years ended December 31, 2021 and 2023 andone customer representing more than 10% of revenues for the year ended December 31, 2022.

The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based on historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables, and credit and liquidity indicators for individual customers.

Inventory

The Company’s inventories are primarily finished goods for resale and, to a lesser extent, raw materials, which have been either consigned to the Company’s third-party manufacturers or are held by the Company. Inventories are stated at the lower of cost or net realizable value. In determining the cost of raw materials, consumables and goods purchased for resale, the weighted average purchase price is used. For finished goods, cost is computed as production cost including capitalized inbound freight costs.

The valuation of inventory also requires the Company to estimate excess or obsolete inventory. The determination of excess or obsolete inventory is based on a comparison of the quantity and cost of inventory on hand versus the Company's forecast of customer demand and consideration of historical usage and management's judgment. The Company also considers the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products. Any adjustments to the valuation of inventory are included in cost of revenues.

The Company also records a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of its future demand forecasts consistent with the valuation of its excess and obsolete inventory. Any adjustments to recognize a loss on supplier commitments are included in cost of revenues.

Property and equipment

Per ASC 360, Property, Plant, and Equipment, property and equipment is stated at cost. The Company calculates depreciation expense using the straight-line method over the estimated useful lives of each asset based on its asset class. Leasehold improvements are amortized over the shorter of their useful lives or the lease term. See Note 3 – Property and equipment for the useful lives for each asset class.

Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in operating expense in the Consolidated Statements of Operations. For the years ended 2021, 2022 and 2023, the loss recognized was immaterial.

Software

Software may be purchased or developed internally for internal use. Costs related to internal use software are accounted for in accordance with ASC 350-40, Internal Use Software. Costs are expensed as incurred during the preliminary project stage of an internal use software project. Costs are capitalized once the project has been approved by management and is in the application development stage. Post implementation/operation costs, such as maintenance and training costs, are expensed as incurred. Any costs incurred to provide upgrades or enhancements are capitalized only if they provide additional functionality that did not previously exist.

Amortization of internal use software begins when the software is ready for internal use and is amortized over its estimated useful life. The amortization expense for internal use software is computed using the straight-line method over three toseven years.

Costs related to certain software, which is available for sale, are capitalized in accordance with ASC 985-20, Costs of Software to be Sold, Leased, or Marketed, when the resulting product reaches technological feasibility. The Company generally determines technological feasibility when it has a detailed program design that takes product function, feature and technical requirements to their most detailed, logical form and the product is ready for coding. The Company does not typically capitalize costs related to the development of first-generation product offerings as technological feasibility generally coincides with general availability of the software.

Amortization of software costs to be sold or marketed externally begins when the product is available for sale to customers and is amortized using the straight-line method over its estimated useful life ofthree years.

Goodwill and intangible assets

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired in a business combination. Goodwill is measured at cost and is not amortized. Intangible assets acquired, either individually or with a group of assets, are initially recognized and measured at fair value. The Company uses third-party specialists to assist management to determine fair values and estimated useful lives for intangible assets acquired in business combinations. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives of between 3 and 18 years. The Company has no intangible assets with indefinite lives.

In accordance with ASC 350, Goodwill and Other, the Company assesses goodwill for impairment at least annually and whenever events or circumstances that would more likely than not, reduce the fair value below its carrying value. The Company tested goodwill for impairment at December 31. The Company didnot recognize an impairment loss of goodwill for the years ended December 31, 2021, 2022 and 2023.

Annual impairment testing is completed at the reporting unit level. Management has concluded the Company operates asone reporting unit andone operating segment for annual impairment testing.

In completing its impairment evaluations, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. In performing this qualitative assessment, the Company assesses relevant events and changes in circumstances, including industry and market conditions, operating results, business plans, and entity-specific events that would affect the fair value or the carrying amount of a reporting unit. If it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company determines the fair value of the reporting unit and compares the fair value to its carrying value. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and no further steps are required. As of December 31, 2023, the Company's market capitalization exceeded its net assets by 106%.

Impairment of long-lived assets

The Company evaluates its long-lived assets, including property and equipment, software, right of use assets, and definite-lived intangible 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. An impairment loss 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, theasset is written down to its estimated fair value. The Company didnot recognize any material impairment losses of long-lived assets for the years ended December 31, 2021, 2022 and 2023.

Leases

The Company has both cancelable and noncancelable operating leases for office space, vehicles, and office equipment. The Company records leases in accordance with ASC 842, Leases, (“ASC 842”). The Company records a right-of-use asset and lease liability on its consolidated balance sheet for all leases that qualify. The operating lease liability represents the present value of the future minimum lease payments over the lease term using the Company’s incremental borrowing rate at the lease commencement date. The right-of-use asset reflects adjustments for the derecognition of deferred rent and prepaid rent. Leases with an initial term of 12 months or less are not recorded on the Company’s consolidated balance sheet, and are expensed on a straight-line basis over the lease term. The Company does not include any renewal periods in the lease term for its leases as sufficient economic factors do not exist that would compel it to continue to use the underlying asset beyond the initial non-cancelable term. The Company has elected to combine the lease and non-lease components into a single lease component for all of its leases. See Note 14 – Leases for further details.

Product warranties

The Company provides a standard warranty on its products, with the term depending on the product, and records a liability for the estimated future costs associated with potential warranty claims. Provisions for warranty claims are recorded at the time products are sold based on historical experience factors including product failure rates, material usage, and service delivery cost incurred in correcting product failures. These provisions are reviewed and adjusted by management periodically to reflect actual and anticipated experience. The warranty costs are reflected in the Company’s consolidated statements of operations within cost of revenues. In certain circumstances, the Company may have recourse from its contract manufacturers for replacement cost of defective products, which it also factors into its warranty liability assessment.

Income taxes

The Company accounts 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 its 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 basis 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 the income tax provision in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts the valuation allowances accordingly. In making such a determination, the Company considers 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.

In general, it is the practice and intention of the Company to reinvest the earnings of its subsidiaries in those foreign operations. As of December 31, 2021, 2022 and 2023, the Company had not made a provision for withholding taxes on the undistributed earnings of any foreign subsidiaries and are treating their earnings as being indefinitely reinvested. It is not practicable to estimate the amount of deferred tax liability to the undistributed earnings in these subsidiaries.

The Company may be subject to income tax audits in all of the jurisdictions in which it operates and, as a result, must also assess exposures to any potential issues arising from current or future audits of current and prior years’ tax returns. Accordingly, the Company must assess such potential exposures and, where necessary, provide for any expected loss. The Company would 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 to be realized upon settlement. To the extent that the Company establishes a liability, its income tax expense would be increased. If the Company ultimately determines that payment of these amounts is unnecessary, it would reverse the liability and recognize an income tax benefit during the period in which new information becomes available indicating that the liability is no longer necessary. The Company would record an additional income tax expense in the period in which new information becomes available indicating that the income tax liability is greater than its original estimate. The Company did not record such an adjustment for the years ended December 31, 2021, 2022 or 2023.

Share-based compensation

The Company accounts for share-based compensation in accordance with the guidance in ASC 718, Share-based Payments, by measuring and recognizing compensation expense for all share-based payments based on estimated grant date fair values for equity settled awards.

Awards are granted under the 2019 Share Incentive Plan. The 2019 Share Incentive Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted share awards, restricted share units, or other share-based awards and performance awards.

The Company also issues shares under its Employee Share Purchase Plan ("ESPP"). The first offering period or purchase period under the ESPP began on January 1, 2021. The Company offers two offering periods of six month each per year. Under the ESPP, the purchase price of the Company's shares is 85% of the lower of the fair market value of the shares on the first trading date of each offering period or on the purchase date.

Contingencies

In accordance with ASC 450, Contingencies, the Company periodically evaluates all pending or threatened contingencies and any commitments, if any, that are reasonably likely to have a material adverse effect on its results of operations, financial position or cash flows. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Foreign currency translation

The Company records any gain and loss associated with foreign currencies in accordance with ASC 830, Foreign Currency Matters. The reporting currency of the Company is the U.S. dollar and the functional currency for each operating subsidiary is the local currency of the operating subsidiary other than for Cambium Networks, Ltd. (UK) for which the functional currency is the U.S. dollar. Local currency denominated monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenues, cost of revenues and expenses are translated at the average exchange rate in effect during the applicable period. The Company recognizes foreign exchange gains and losses in other expense on its consolidated statements of operations and accumulated other comprehensive income (loss) on its consolidated balance sheets.

Research and development costs

Research and development expenses consists primarily of salary and benefit expenses for employees and contractors engaged in research, design and development activities, and costs for prototypes, travel costs and shared facility and IT costs. The Company also incurs research and development costs associated with the development of software for both internal use and to be marketed externally. Research and development costs, other than those associated with the development of software that meet the criteria for capitalization, are expensed as incurred.

Recently issued accounting standards not yet adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required in an entity's income tax rate reconciliation table and requires disclosure of income taxes paid in both U.S. and foreign jurisdictions. The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendment requires disclosures of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit of loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. The new guidance also requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Upon adoption, this guidance should be applied retrospectively to all prior periods presented. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

In October 2023, the FASB issued ASU 2023-06 Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission's ("SEC") Disclosure Update and Simplification Initiative. The amendments in this update require modification of certain disclosure and presentation requirements for a variety of ASU topics in response to the SEC's Release No. 33-10532. The effective date for each amended topic in the ASC is the date on which the SEC's removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendment will be removed from the Codification and not become effective. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.

Note 2. Balance sheet components

Receivables, net

The Company’s accounts receivable arise from sales on credit to customers. The Company establishes an estimate for credit losses to present the net amount of accounts receivable expected to be collected. The estimate is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivables. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity indicators for individual customers.

The components of receivable, net are as follows (in thousands):

The estimate for credit losses activity was as follows (in thousands):

The amounts written-off include receivables that were deemed uncollectible and were previously reserved for.

Inventories, net

Inventories, net consisted of the following (in thousands):

The following table reflects the activity in the Company’s inventory excess and obsolete provision (in thousands):

The increase in inventory is primarily due to lower demand for our PMP products and a reduction in enterprise product orders due to higher channel inventory. Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on historical usage, known trends, inventory age and market conditions and judgment about the consumption and our ability to sell the inventory. The increase in the excess and obsolescence provision from December 31, 2022 to December 31, 2023 was mostly driven by excess inventory related to our enterprise products driven by lower anticipated demand and our PMP products driven by a combination of lower anticipated demand as well as the impact of the anticipated introduction of new 6 GHz PMP products.

Accrued liabilities

Accrued liabilities consisted of the following (in thousands):

Accrued loss on supplier commitments reflects accrued loss on purchase obligations for inventory expected to be reserved.

The increase in the accrued customer rebates is the result of additional rebates offered in the fourth quarter of 2023 to the Company's distributors on enterprise products.

Accrued warranty

Provision for warranty claims is primarily related to our hardware products and recorded at the time products are sold. The change to accrued warranty was as follows (in thousands):

At December 31, 2022, $1.2 million is included in Other current liabilities and $0.5 million is included in Other noncurrent liabilities on the Company’s consolidated balance sheet. At December 31, 2023, $1.2 million is included in Other current liabilities and$0.3 million is included in Other noncurrent liabilities on the Company’s consolidated balance sheet.

Note 3. Property and equipment

Property and equipment, net consisted of the following (in thousands):

Total depreciation expense was $3.4 million, $3.9 million and $4.3 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Note 4. Software

Software consisted of the following (in thousands):

Amortization of acquired and internal use software is computed using the straight-line method over an estimated useful life of generally three toseven years. Amortization expense recognized on acquired and internal use software is reflected in depreciation and amortization in the consolidated statements of operations. Amortization expense was $0.7 million, $0.4 million and $0.4 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Amortization expense recognized on software to be sold or marketed externally was $0.8 million, $1.6 million and $2.8 million for the years ended December 31, 2021, 2022 and 2023, respectively, and is included in cost of revenues on the consolidated statements of operations.

Based on capitalized software assets at December 31, 2023, estimated amortization expense in future fiscal years is as follows (in thousands):

Note 5. Goodwill and Intangible Assets

When the Company acquired the trade assets of Motorola Solutions, Inc.’s wireless point-to-point and point-to-multi-point businesses, the transaction generated goodwill and certain intangible assets. The goodwill associated with this transaction was recorded by Cambium Networks Corporation and allocated to Cambium Networks, Ltd. and Cambium Networks, Inc. using a revenue and asset allocation method. Although goodwill has been allocated totwo operating subsidiaries, the Company operates asone operating segment andone reporting unit and therefore, goodwill is reported, and impairment testing performed, at the Cambium Networks Corporation consolidated level.

The carrying amount of goodwill for the years ended December 31, 2022 and 2023 was $9.8 million. The wasno change in the carrying amount of goodwill for the years ended December 31, 2022 and 2023.

The Company tests goodwill and intangible assets for impairment annually on December 31 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or asset group below its carrying amount and tests intangible assets if an indicator suggests that the carrying amount may not be recoverable. Accordingly, for 2022 and 2023, the Company completed a qualitative triggering events assessment which considers significant events and circumstances such as a reporting unit’s historical and current results, assumptions regarding future performance, operating income or cash flows, strategic initiatives and overall economic factors, including significant negative industry or economic trends and macro-economic developments, and sustained declines in the Company's share price or market capitalization, considered in both absolute terms and relative to peers, to determine whether any of these may indicate that it is more likely than not that the fair value of the reporting unit or intangible asset is less than their carrying value. If indicators of impairment are identified, a quantitative impairment test is performed.

The qualitative assessments performed for 2022 and 2023 included an assessment of excess inventories, supply chain constraints, and macroeconomic considerations. Based on the operating results for 2022 and 2023 and these other considerations, the Company believes that it is more likely than not that the enterprise value for itsone reporting unit and the fair value of intangibles is still greater than their carrying values. As of December 31, 2023, the Company's market capitalization exceeded its net assets by 106%. The Company reconciled the aggregate estimated fair value of the Company's one reporting unit to the Company's market capitalization, including consideration of a control premium representing the estimated amount a market participant would pay to obtain a controlling interest in the Company. Based on our analysis, we concluded that a step 1 impairment test was not required. Accordingly, there wasno goodwill impairment to record for either period. In addition, there wereno triggering events or changes in circumstances during 2022 and 2023 that would have required an interim impairment assessment other than at the annual test date. The Company continues to monitor market capitalization and assess potential goodwill impairment triggering events, including continued impact of slower demand, higher channel inventory and sustained decrease in its share price. If triggering events occur, the Company will perform a goodwill impairment assessment that may indicate impairment in a future period.

The useful life, gross carrying value, accumulated amortization, and net balance for each major class of definite-lived intangible assets at each balance sheet date were as follows (in thousands):

Intangible assets are amortized over their expected useful life and none are expected to have a significant residual value at the end of their useful life. Intangible assets amortization expense was $2.1 million, $1.6 million and $1.5 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Based on capitalized intangible assets as of December 31, 2023, estimated amortization expense amounts in future fiscal years are as follows (in thousands):

Note 6. Debt

As of December 31, 2023, the Company had $25.4 million outstanding under its amended term loan facility with Bank of America and $0.0 million in borrowings under its revolving credit facility. The Company has available $45.0 million under its revolving credit facility with Bank of America.

As of December 31, 2022, the Company had $28.0 million outstanding under its term loan facility with Bank of America and $0.0 million in borrowings under its revolving credit facility with Bank of America.

The following table reflects the current and noncurrent portions of the external debt facilities at December 31, 2022 and December 31, 2023 (in thousands):

Secured credit agreements

On December 29, 2023 (the “Amendment Effective Date”), the Company entered into the Second Amendment to Credit Agreement (the “Second Amendment”), which amends the credit agreement, dated as of November 17, 2021 (the “BofA Credit Agreement”, the BofA Credit Agreement as amended prior to the date hereof, the “Existing Credit Agreement,” and the Existing Credit Agreement, as amended by the Second Amendment, the “Amended Credit Agreement”) by and among, inter alios, Cambium Networks, Ltd. as the borrower (the “Borrower”), the Company as a guarantor, Cambium (US), L.L.C., as a guarantor, certain other subsidiaries of the Company party thereto as guarantors (with the Borrower and each guarantor being, individually, a “Loan Party” and collectively, the “Loan Parties”), Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”), a Lender, Swingline Lender and an L/C Issuer and the other Lenders party thereto from time to time. Capitalized terms used but not otherwise defined herein shall have the meanings as assigned to such terms in the Second Amendment and Amended Credit Agreement as previously filed as Exhibit 10.47.

The Second Amendment amends the Existing Credit Agreement by, among other things, establishing a covenant relief period, which began on December 31, 2023 and ends on November 30, 2024 (“Covenant Relief Period”) during which time the Company is (a) required to maintain certain Liquidity as provided in the Amended Credit Agreement, (b) required to maintain certain levels of Consolidated EBITDA as provided in the Amended Credit Agreement, (c) required to provide certain additional financial reporting to the Administrative Agent and (d) not required to meet (or, during such period, test) its Consolidated Leverage Ratio or Consolidated Fixed Charge Coverage Ratio. Additionally, the Second Amendment provides 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 was the case in the Existing Credit Agreement, the Amended Credit Agreement provides that the Borrower has the option to borrow Revolving Loans under the Revolving Facility in the form of either Base Rate Loans or Term SOFR Loans. The outstanding principal amounts of Term SOFR Loans borrowed under the Revolving Facility bear interest at the same rates as described above.

At December 31, 2023, the applicable margin was 3.25% and the effective interest rate on the Term SOFR Loan was 9.2%.

The maturity date of the Term Facility and the Revolving Facility remains unchanged, with both terminating and all amounts outstanding thereunder, becoming due and payable in full, on November 17, 2026 (the “Maturity Date”). The Term Facility is still subject to repayment of outstanding principal in equal quarterly amounts of $656,250, which began with the quarter ended March 31, 2022.

Obligations under the Second Amendment are guaranteed by the Loan Parties and secured by Collateral, in each case, as set forth in the Existing Credit Agreement. Under the Second Amendment, within sixty (60) days of the December 29, 2023 (or such longer period agreed to by the Administrative Agent), the Borrower shall execute additional collateral agreements governed by the laws of England and Wales required to provide the Administrative Agent a lien on all assets owned by the Borrower (subject to security principles that will be agreed, but which shall provide for a customary qualifying floating charge over its assets, with certain customary exceptions). The Second Amendment also provides that by December 31, 2024 and June 30, 2025, as applicable, the Borrower and its Subsidiaries shall transition certain of their primary principal disbursement services, payroll services and primary operating customer deposit services to Bank of America, N.A.

The Second Amendment modified certain of the Events of Default under the Existing Credit Agreement as a result of certain additional reporting covenants that are included in the Second Amendment. However, other than such additions, no additional changes were effectuated to the Events of Default, which remain the same under the Amended Credit Agreement vis-a-vis the Existing Credit Agreement.

As of December 31, 2023, the Company was compliant with all affirmative and negative covenants under the Existing Credit Agreement and the Amended Credit Agreement.

Maturities on the external debt outstanding at December 31, 2023 under the BofA Agreement are as follows (in thousands):

Interest expense, net

Net Interest expense, including bank charges and amortization of debt issuance costs on the external debt, was $4.3 million, $2.0 million and $2.5 million for the years ended December 31, 2021, 2022 and 2023, respectively. Interest expense for the year ended December 31, 2021 included $0.7 million of additional amortization of deferred issuance costs related to the Silicon Valley Bank credit agreement.

Note 7. Employee benefit plans

The Company’s employee benefit plans currently consist of a defined contribution plan in the United States and a separate defined contribution plan in the UK. The Company does not offer any other postretirement benefit plans, such as retiree medical and dental benefits or deferred compensation agreements to its employees or officers.

U.S. plan

U.S. regular, full-time employees are eligible to participate in the Cambium Networks, Inc. 401(k) Plan, which is a qualified defined contribution plan under section 401(k) of the Internal Revenue Service Code. Under the Cambium Networks, Inc. 401(k) Plan, the Company contributes a dollar-for-dollar match of the first 4% an employee contributes to the plan. Employees are eligible to participate on the first day of the month following their date of hire and begin receiving company contributions three-months after they become eligible to participate in the plan. Company matching contributions are made each pay period, but the funds do not vest until the employee’s second anniversary of employment with the Company. Employees are always fully vested in their own contributions. All contributions, including the Company match, are made in cash and invested in accordance with the participants’ investment elections. Contributions made by the Company under the Cambium Networks, Inc. 401(k) Plan were $1.2 million, $1.4 million and$1.4 million for the years ended December 31, 2021, 2022 and 2023, respectively.

UK plan

Regular, full-time UK employees are eligible to participate in the Cambium Networks Ltd. Stakeholder Pension Scheme, which is a qualified defined contribution plan. Employees are eligible to participate on the first of the month following receipt of their enrollment form, and eligible employees are automatically enrolled in the plan at a default employee contribution rate of 3% and a company contribution rate of 5% of the employee’s basic salary. The Company contribution rate increases by 1% for each additional 1% that the employee contributes up to a maximum of 7%. Company matching contributions vest immediately and employees are always vested in their own contributions. All contributions, including the Company match, are made in cash and deposited in the participant’s account each pay period. The total contributed by the Company under this plan was $0.4 million, $0.4 million and$0.4 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Note 8. Other expense (income), net

Other expense (income), netwas expense of $0.2 million, income of $(0.1) million and expense of $0.3 million for the years ended December 31, 2021, 2022 and 2023, respectively, and represents foreign exchange losses.

Note 9. Shareholders' equity

Ordinary Shares

As of December 31, 2022 and December 31, 2023, the Company's articles of association authorized the Company to issue up to 500,000,000 ordinary shares. Each holder of the Company's ordinary shares is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors.

As of December 31, 2023, no dividends have been declared or paid.

2019 Share incentive plan

In June 2019, the Company’s Board of Directors adopted, and its shareholders approved, the 2019 Share Incentive Plan (“2019 Plan”). The 2019 Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted share awards (“RSAs”), restricted share units (“RSUs”), other share-based awards and performance awards. The share reserve under the 2019 Plan will be automatically increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and will continue until, and including, the fiscal year ending December 31, 2029. The number of shares added annually will be equal to the lowest of 1,320,000 shares,5%of the number of the Company’s shares outstanding on the first day of such fiscal year, or an amount determined by the Board of Directors. On March 1, 2023 the Company registered 1,320,000 additional shares that may be issued under the 2019 Plan.

The Company’s employees, officers, directors, consultants, and advisors are eligible to receive awards under the 2019 Plan. Incentive share options, however, may only be granted to its employees.

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the year ended December 31, 2023:

As of December 31, 2023, the Company estimates the pre-tax unrecognized compensation expense of$20.4 million related to all unvested share-based awards, including share options and restricted share units will be recognized through the fourth quarter of 2027. The Company expects to satisfy the exercise of share options and future distributions of shares for restricted share units and restricted share awards by issuing new ordinary shares which have been reserved under the 2019 Plan.

The Company uses the Black-Scholes option pricing model to estimate the fair value of share options. The Company utilized a forfeiture rate of 8.2% during the year ended December 31, 2023 for estimating the forfeitures of share options and restricted share units granted.

Share options

Share options typically have a contractual term often years from grant date. The following is a summary of option activity for the Company’s share incentive plans for year ended December 31, 2023:

1 Options granted includes the time-based share options and the performance-based share options for which a grant date has been established, as described below.

The intrinsic value for share options outstanding and exercisable is defined as the difference between the market value of the Company’s ordinary shares as of the end of the period and the grant price. At December 31, 2021, 2022 and 2023, the aggregate intrinsic value of options exercisable under the Company’s share incentive plans was $18.5 million, $17.7 million and $0.0 million, respectively, as determined as of the date of grant. The Company had 454,354,242,423 and 59,800 options exercised during the years ended December 31, 2021, 2022 and 2023, respectively. The cash received from the share options exercised in 2021, 2022 and 2023 was $4.8 million, $2.2 million and $0.5 million, respectively.

At December 31, 2023, there was $12.9 million in unrecognized pre-tax share-based compensation expense, net of estimated forfeitures, related to unvested time-based share option awards. The unrecognized share-based compensation expense is expected to be recognized over aweighted-average period of 2.9 years.

The Company estimates the fair value of share options using the Black-Scholes option pricing model. The fair value of share options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of share options is estimated using the following weighted-average assumptions:

Restricted shares

The following is a summary of restricted shares activity for the Company’s share incentive plans for the year ended December 31, 2023:

1 RSUs granted includes the time-based RSUs and the performance-based RSUs for which a grant date has been established, as described below.

During 2022 and 2023,418,896 and 225,338 RSUs were granted under the 2019 Plan, respectively. The Company withheld 52,554 and 50,775 shares to pay the employees’ portion of the minimum payroll withholding taxes on the RSUs and RSAs that vested in 2022 and 2023, respectively.

At December 31, 2023, there was $7.5 million in unrecognized pre-tax compensation expense, net of estimated forfeitures, related to unvested time-based share awards. The unrecognized compensation expense is expected to be recognized over a weighted average period of 2.19 years.

Performance-based share awards

In May 2023, performance-based share awards were awarded to select executive officers of the Company. The awards contain a performance-based vesting criteria and included 60,000 share options and 135,000 restricted share units. The performance-based awards have two separate annual performance periods, with 50% of the performance-based awards vesting over each of the annual performance periods ending on December 31, 2023 ("First Performance Period") and December 31, 2024 ("Second Performance Period") if the performance goal is met. If the performance goal for that performance period is not met, the performance-based awards do not vest and are forfeited. The performance goal is based on the Company's adjusted earnings per share, as publicly reported by the Company, for each performance period. The method used to measure the fair value of the performance-based awards is consistent with the methods used to measure the fair value of time-based share options and RSUs, as described above.

For performance-based awards that vest during the First Performance Period, the Company's Compensation Committee retains the ability to modify the applicable adjusted earnings per share metric. Due to this discretion, the Company has determined that the grantee does not have a mutual understanding of the key terms and conditions of the performance-based awards in the First Performance Period, and a grant date will not exist until the Compensation Committee approves the adjusted earnings per share metric for the First Performance Period. As of December 31, 2023, based on the total potential shares that could be earned, there were 62,500 RSUs outstanding for which there is no accounting grant date. Accordingly, no grant date fair value was established and the weighted average grant date fair values calculated above excludes these performance-based share options and performance-based RSUs. The Company remeasures the fair value of the awards at each reporting date until a grant date is achieved, as the service inception date precedes the grant date. As of December 31, 2023, there was $0.4 million in unrecognized pre-tax compensation expense, net of estimated forfeitures, related to unvested performance-based share awards for the First Performance Period, which would be recognized through the first quarter of 2024 upon achievement of the performance goal. As the performance goal has not been met for 2023, these performance shares have been forfeited as of January 29, 2024.

Unlike the performance-based awards in the First Performance Period, the Compensation Committee does not have the discretion to modify the applicable adjusted earnings per share metric for performance-based awards that vest during the Second Performance Period. As such, a mutual understanding of the key terms and conditions, and thus a grant date, exists on the date that the performance-based awards are issued by the Company. As of December 31, 2023, based on the total potential shares that could be earned, there were 62,500 RSUs granted. A grant date fair value was established, and the weighted average grant date fair values calculated in the above tables include these performance-based share options and performance-based RSUs. The Company has not recognized any compensation expense on these performance-based awards since the requisite service period does not begin until January 1, 2024. As of December 31, 2023, there was $0.9 million in unrecognized pre-tax compensation expense, net of estimated forfeitures, related to these unvested performance-based share awards for the Second Performance Period, which will be recognized over the requisite service period starting January 1, 2024 through the first quarter of 2025 if it is probable that the adjusted earnings per share metric will be achieved.

Employee share purchase plan

In June 2019, the Company’s Board of Directors adopted, and its shareholders approved, the Employee Share Purchase Plan (“ESPP”). The ESPP was effective on June 25, 2019 and the offering period or purchase period under the ESPP began on January 1, 2021. A total of 1,334,427 shares are available under the ESPP, which includes 550,000 shares originally available,256,730 additional shares registered on March 24, 2020,260,345 additional shares registered on March 1, 2021,267,352 additional shares registered on February 25, 2022 and 273,133 additional shares registered in March 1, 2023. The number of shares that will be available for sale under the ESPP will be increased annually on the first day of each fiscal year beginning in 2020, and will be equal to the lowest of:275,000 shares;1% of the outstanding shares as of the last day of the immediately preceding fiscal year, or such other amount as the administrator may determine. The purchase price of the shares will be 85% of the lower of the fair market value of our shares on the first trading day of each offering period or on the purchase date.

For the year ended December 31, 2021, the Company recognized $0.7 million of share-based compensation expense related to the ESPP. There were 39,061 and 42,401 shares issued under the ESPP during the six-month offering periods that ended on June 30, 2021 and December 31, 2021, respectively. For the year ended December 31, 2022, the Company recognized $0.9 million of share-based compensation expense related to the ESPP. There were 87,229 and 64,867 shares issued under the ESPP during the six-month offering periods that ended on June 30, 2022 and December 31, 2022, respectively. For the year ended December 31, 2023, the Company recognized $0.9 million of share-based compensation expense related to the ESPP. There were 88,290 and 113,218 shares issued under the ESPP during the six-month offering periods that ended on June 30, 2023 and December 31, 2023, respectively.

Note 10. Earnings (loss) per share

Basic net earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted net earnings (loss) per share is computed by giving effect to all potentially dilutive ordinary share equivalents outstanding for the period. For purposes of this calculation, share options, RSUs, and ESPP awards are considered to be ordinary share equivalents but are excluded from the calculation of diluted earnings (loss) per share when including them would have an anti-dilutive effect. Performance-based share awards are only included in the calculation of diluted earnings (loss) per share if the performance metric would have been achieved as of December 31, 2023 if that had been the end of the contingency period. The following table sets forth the computation of basic and diluted net earnings (loss) per share (in thousands, except for share and per share data):

In the computation of diluted earnings per share for the year ended December 31, 2021, no ordinary share equivalents were excluded. In the computation of diluted earnings per share for the year ended December 31, 2022,1,361,666 ordinary share equivalents were excluded because their inclusion would have been antidilutive. In the computation of diluted loss per share for the year ended December 31, 2023, no ordinary share equivalents were excluded because their inclusion would have been antidilutive.

Note 11. Income taxes

For the years ended December 31, 2021, 2022 and 2023, income (loss) before income taxes includes the following components (in thousands):

For the years ended December 31, 2021, 2022 and 2023, the (benefit) provision for income taxes consists of the following (in thousands):

In applying the statutory tax rate in the effective income tax rate reconciliation, the Company used the statutory U.S. federal income tax rate of 21% rather than the Cayman Islands zero percent rate. The table below reconciles the Company's tax (benefit) provision for income taxes based on the statutory U.S. federal income tax rate to its effective tax rate for the years ended December 31, 2021, 2022 and 2023 (in thousands):

Foreign rate differential represents the non-U.S. jurisdictions. The country having the greatest impact on the tax rate adjustment line shown in the above table as “foreign rate differential” for the years ended December 31, 2021, 2022 and 2023 is the UK where the statutory income tax rate was 19.0% for 2021 and 2022, and was 23.5% for 2023.

The Company accounts for income taxes in accordance with ASC Topic 740. Deferred income tax assets and liabilities are determined based upon temporary differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The deferred tax assets and liabilities result from differences in the timing of the recognition of certain income and expense items for tax and financial reporting purposes.

The sources of these differences for the years ended December 31, 2022 and 2023 are as follows (in thousands):

The net deferred tax asset of $3.7 million is expected to be realized over the next three years from 2024 through 2026.

For the years ended December 31, 2022 and 2023, the following table reflects the activity in the Company’s valuation allowance on deferred tax assets (in thousands):

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. The Company considers projected future taxable income, reversing taxable temporary differences, carryback opportunities, and tax-planning strategies in making this assessment.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets before they otherwise expire. Cumulative losses are objective evidence that limit the ability to consider other subjective evidence such as the Company’s projections for future growth. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as the Company’s projections for growth.

As of December 31, 2022 the Company’s deferred tax assets were primarily the result of UK and U.S. net operating losses (“NOLs”), tax credit carryforwards from the UK and U.S., share-based compensation, and the UK corporate interest restriction. As of December 31, 2023, the Company's deferred tax assets were primarily the result of capitalized research costs, UK net operating losses, tax credit carryforwards from the UK and U.S., share-based compensation, and UK corporate interest restriction.

During 2023, the Company added state research and development tax credit benefits in the state of California, which are only available to offset actual tax liabilities. The state research and development tax credits are in excess of the amount reasonably expectedto be utilized over the next five years. Accordingly, the Company established an additional $0.3 million of valuation allowance during 2023, for a total of $1.6 million valuation allowance on the related deferred tax asset at December 31, 2023. During 2022, the Company's valuation allowance on the research and development tax credits for the state of California increased $0.8 million and was $1.3 million at December 31, 2022.

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore, the need for a valuation allowance on a quarterly basis. Regarding the valuation allowance remaining on the research and development tax credits for the state of California, the Company may release all or a portion of its valuation allowance, if results and other subjective evidence continue to reflect pre tax income such that the deferred tax assets become more likely than not to be realizable.

During 2023, the Company added a valuation allowance of $23.6 million as a result of the recognition of a valuation allowance on UK deferred tax assets in 2023. The valuation allowance of $5.3 million was established based on the UK deferred tax assets held at December 31, 2022. An increase in the valuation allowance of an additional $18.3 million was recorded in 2023 due to a loss at the Company's UK entity.

Due to the intercompany relationships between Cambium's entities, at December 31, 2023, the Company also recognized a valuation allowance of $10.5 million on the Company's U.S. entity, and $1.0 million on the Company's other foreign entities, due to a loss at the Company's UK entity.

The Company has gross income tax NOL carryforwards related to its U.S. and international operations. For the year ended December 31, 2022, the NOL carryforward was approximately $17.0 million, of which $15.3 million has an indefinite life and $1.7 million will expire in 2041. For the year ended December 31, 2023, the NOL carryforward was approximately $87.5 million, of which $85.9 million has an indefinite life and $1.6 million will expire in 2041.

The Company has tax credit carryforwards related to research and development. For the year ended December 31, 2022, the carryforward was approximately $2.0 million, all of which had an indefinite life. For the year ended December 31, 2023, the carryforward was approximately $2.9 million, all of which has an indefinite life.

The Company has gross corporate interest restriction (“CIR”) disallowance carryforwards related to its UK operations. For the year ended December 31, 2022, the CIR carryforward was approximately $3.9 million, all of which had an indefinite life. For the year ended December 31, 2023, the CIR carryforward was approximately $3.1 million, all which has an indefinite life. The Company has recorded a reduction to the deferred tax asset of $0.8 million related to an adjustment to the utilization of a portion of the CIR in the 2021 UK tax return.

The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and many foreign jurisdictions. The U.S., UK, and India are the main taxing jurisdictions in which the Company operates. Open tax years subject to audit vary depending on the tax jurisdiction. In the U.S., the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2020. In the UK, the tax returns that are open are for the tax years 2020, 2021, 2022 and 2023. In India, the tax returns that are open are for India assessment years 2019 through 2023.

The Company believes its tax positions comply with applicable tax law and intends to vigorously defend its position. However, differing positions on certain issues could be upheld by tax authorities, which could adversely affect the Company’s financial condition and results of operations. The Company doesnot have any unrecognized tax positions as of December 31, 2022 and 2023.

The Company recorded income tax (benefit) provision for income taxes of ($5.5) million, ($2.2) million, and $13.8 million for the years ended December 31, 2021, 2022 and 2023, with an effective tax rate of (17.3)%, (12.1)% and (21.6)%, respectively. For the year ended December 31, 2021, the Company's effective tax rate was (17.3)%. The effective tax rate differed from the U.S. statutory rate of 21.0% primarily due to a benefit on the release of a valuation allowance against its deferred tax assets of $7.9 million and a $3.4 million benefit arising on employee restricted share vesting and option exercises. For the year ended December 31, 2022, the Company's effective tax rate was (12.1)%. The effective tax rate differed from the U.S. statutory rate of 21.0% primarily due to research and development tax credits of $2.8 million, a benefit on Foreign Derived Intangible Income of $2.3 million, and a tax benefit of $0.9 million on revaluation of the UK deferred tax assets at a higher tax rate. For the year ended December 31, 2023, the Company's effective tax rate was (21.6)%. The effective tax rate differed from the U.S. statutory rate of 21.0% primarily due to a pretax loss, the establishment of a valuation allowance of $16.8 million, and an additional increase in the valuation allowance of $18.6 million, a tax benefit on Foreign Derived Intangible Income of $2.9 million, and a benefit on research and development credits of $2.4 million.

Note 12. Commitments and contingencies

In accordance with ASC 460, Guarantees, the Company recognizes the fair value for guarantee and indemnification arrangements it issues or modifies, if these arrangements are within the scope of the interpretation. In addition, the Company must continue to monitor the conditions that are subject to the guarantees and indemnifications in order to identify if a loss has incurred. If the Company determines it is probable that a loss has occurred, then any such estimated loss would be recognized under those guarantees and indemnifications and would be recognized in the Company’s consolidated statements of operations and corresponding consolidated balance sheets during that period.

Indemnification

The Company generally indemnifies its distributors, value added reseller and network operators against claims brought by a third party to the extent any such claim alleges that the Company’s product infringes a patent, copyright or trademark or violates any other proprietary rights of that third party. Although the Company generally tries to limit the maximum amount of potential future liability under its indemnification obligations, in certain agreements this liability may be unlimited. The maximum potential amount of future payments the Company may be required to make under these indemnification agreements is not estimable.

The Company indemnifies its directors and officers and select key employees, including key employees serving as directors or officers of the Company’s subsidiaries, for certain events or occurrences, subject to certain limits, while the director or officer is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the director’s or officer’s term of service. The Company may terminate the indemnification agreements with its directors, officers or key employees upon the termination of their services as directors or officers of the Company or its subsidiaries, or the termination of activities for which indemnification has been provided, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure. The Company believes the fair value of these indemnification agreements is minimal.

Purchase commitments with contract manufacturers and suppliers

We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us, such as forecasted demand. The Company may be liable to purchase excess product or aged material from our suppliers following reasonable mitigation efforts. The Company establishes a loss on purchase commitment liability for all product it does not expect it will sell. Such loss on purchase commitment liability is included in Accrued liabilities on the Company's consolidated balance sheets. The Company recorded losses on purchase commitments of $0.0 million, $0.5 million and $12.8 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Warranties

The Company offers a standard warranty on its products, with the term depending on the product, and records a liability for the estimated future costs associated with potential warranty claims. The Company’s responsibility under its standard warranty is the repair or replacement of in-warranty defective product, or to credit the purchase price of the defective product, at its discretion, without charge to the customer. The Company’s estimate of future warranty costs is largely based on historical experience factors including product failure rates, material usage, and service delivery cost incurred in correcting product failures. The standard warranty is included in either Other current liabilities or Other noncurrent liabilities on the Company’s consolidated balance sheets, depending on the time period covered by the warranty. The Company also offers an extended warranty for purchase that represents a future performance obligation for the Company. The extended warranty is included in deferred revenues (both current and noncurrent) on the consolidated balance sheets and recognized on a straight-line basis over the term of the extended warranty. The warranty costs are reflected in the Company’s consolidated statements of operations within cost of revenues.

Third parties may from time to time assert legal claims against the Company. The Company records accruals for loss contingencies to the extent that it concludes it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. The Company evaluates, on a regular basis, developments in legal proceedings and other matters that could cause a change in amounts recorded. Due to the inherent uncertainty involving legal matters, the ultimate resolution could differ from amounts recorded. There is no pending or threatened legal proceedings to which the Company is a party to, and in the Company’s opinion, is likely to have a material adverse effect on its financial condition or results of operations.

Note 13. Revenue from contracts with customers

Disaggregation of revenues

Revenues by product category were as follows (in thousands, except percentages):

The Company’s products are predominately distributed through a third-party logistics provider in the United States, Netherlands and Viet Nam. The Company has determined the geographical distribution of product revenues based upon the ship-to destinations.

Revenue by geography were as follows (in thousands, except percentages):

The following country had revenues greater than 10% of total revenues:

•

United States - $165.3 million for 2021,$132.9 million for 2022 and $132.0 million for 2023

Customers with an accounts receivable balance of 10% or greater of total accounts receivable and customers with net revenues of 10% or greater of total revenues are presented below for the periods indicated:

Contract Balances

The following table summarizes contract balances as of December 31, 2022 and December 31, 2023:

Trade accounts receivable include amounts currently due from customers. Amounts are in accordance with contractual terms and are recorded at face amount less an allowance for credit losses.

Deferred revenue consists of amounts due or received from customers in advance of the Company satisfying performance obligations under contractual arrangements. Deferred revenue is classified as current or noncurrent based on the timing of when revenue will be recognized. The changes in deferred revenue were due to normal timing differences between the Company’s performance and the customers’ payment.

The refund liability is the estimated amount expected to be refunded to customers in relation to product exchanges made as part of the Company’s stock rotation program and returns that have been authorized, but not yet received by the Company. The increase in the refund liability is mostly driven by the higher expected stock rotations of enterprise products as the channel aligns its inventory position with market demand and is included within Other current liabilities in the consolidated balance sheets.

Remaining performance obligations

Remaining performance obligations represent the revenue that is expected to be recognized in future periods related to performance obligations included in a contract that are unsatisfied, or partially satisfied, as of the end of a period. As of December 31, 2022 and 2023, deferred revenue (both current and noncurrent) of $17.5 million and $19.2 million, respectively, represents the Company’s remaining performance obligations, of which $8.9 million and $8.8 million, respectively, is expected to be recognized withinone year, with the remainder to be recognized thereafter.

Revenue recognized during the year ended December 31, 2023 which was previously included in deferred revenues as of December 31, 2022 was $8.7 million. Revenue recognized during the year ended December 31, 2022 which was previously included in deferred revenues as of December 31, 2021 was $6.8 million. Revenue recognized during the year ended December 31, 2021 which was previously included in deferred revenues as of December 31, 2020 was $6.3 million.

Cost to obtain a contract

Sales commissions are incremental costs of obtaining a contract. The Company haselected to recognize these expenses as incurred due to the amortization period of these costs being one year or less.

Note 14. Leases

The Company has operating leases for offices, vehicles, and office equipment. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets, and are expensed on a straight-line basis over the lease term.

Right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s lease payments are typically fixed or contain fixed escalators. The Company’s leases typically include certain lock-in periods and renewal options to extend the lease, but does not consider options to extend the lease it is not reasonably certain to exercise. The Company elected the practical expedient to not separate the lease and non-lease components of its leases and currently has no leases with options to purchase the leased property.

The components of lease expense were as follows (in thousands):

Supplemental balance sheet information related to leases were as follows (in thousands, except lease term and discount rate):

Supplemental cash flow information related to leases were as follows (in thousands):

The Company’s current lease terms range fromone tothirteen years and may include optionsto extend the lease byone tofour years.

Remaining maturities on lease liabilities at December 31, 2023 is as follows (in thousands):

The Company's new corporate headquarters office lease in Illinois includes a $3.2 million leasehold improvement allowance from the landlord that will be applied against certain of its build-out expenses and is expected to be received during 2024.

Note 15. Related party transactions

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal.

For the years ended December 31, 2021, 2022 and 2023, Vector Capital Management, LP charged $0.0 million, $0.1 million and $0.6 million for professional services fees and reimbursement of expenses. Amounts due to Vector Capital Management, LP at December 31, 2022 and 2023 were $0.1 million and $0.0 million, respectively, and were included in Accounts Payable in the Company's consolidated balance sheets.

Note 16. Restructuring

In 2023, the Company announced and initiated two corporate cost reductions to better align Cambium's cost structure with current economic conditions and position the Company to achieve near-term and long-term targets to maintain profitability, improve cash flow and maintain a strong balance sheet. The Company expects to incur approximately $2.5 - $3.5 million of costs associated with both restructurings, mostly related to one-time termination benefits and is expected to be substantially complete and costs incurred by the end of the second quarter of 2024, and expects all costs to be incurred by the end of 2024.

For the year ended December 31, 2023, the Company incurred total restructuring charges of approximately $2.2 million from both restructuring actions and is included in cost of revenues and all operating expense lines in the Company's consolidated statements of operations. As of December 31, 2023, the Company paid approximately $1.8 million of this amount, leaving a restructuring liability of $0.4 million which is included in Accrued liabilities in the Company's consolidated balance sheets. The remaining $0.4 million is expected to be paid by the end of the first quarter of 2024.

The following table reflects the restructuring liability activity for the year ended December 31, 2023 (in thousands):