Airspan Networks Holdings Inc.

Accordingly, while the company is seeking waivers from compliance with the applicable covenants in connection with such breaches, the company is also pursuing alternative sources of capital so that it will be able to satisfy its prospective minimum liquidity obligations. As a result, the company has classified its debt as current on the balance sheet. Looking forward, we expect Q4 22 revenue of approximately $49 to $57 million. representing an increase of between 19% and 38% over the third quarter 22, with gross margin between 42% and 46%. These views may be impacted by, among other things, component availability, related expenses, and challenges from COVID-19 restrictions in Asia. With that, Eric, Glenn, and I will open it up to your questions. Operator, please prompt for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on a telephone keypad. A confirmation tone will indicate your time is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from the line of Ben Harwood from New Street Research. Please state your question.

Thanks for taking the questions. I just have a couple on your partnership. So first on your partnership with Rakuten and Symphony, are you seeing that accelerate and increase confidence in Open RAN among your telco customers? and have you won deals based upon being on the platform? And then secondly, how are your partnerships with hyperscalers and large enterprise networking partners progressing? Where are you seeing wins in these partnerships? Is it mainly with telcos or is it in 5G enterprise applications? What do you see that these partnerships provide you? What benefits? Thank you.

Yeah, good morning. Thanks for the question. First, the Rakuten relationship, we are in a very deep, as you know, relationship rolling out. The Open RAN technology in Japan, we've been very pleased with the network performance, very pleased with continued purchase commitments from Rakuten, and very pleased in the third quarter, particularly with the adoption of several new products. So in Japan, the relationship has been very healthy and buoyant for us. As we work across the globe with Symphony, we continue to look at opportunities. Together with them, I think the adoption rate will be something more significant in the coming period than what's happened to date so far. But it's a very, very encouraging demonstration of real-life Open RAN in Japan. The network performance criteria is being hit. We're getting very good operational models for the customer. and we're very committed to Open RAN. In general, we are seeing a lot of Open RAN demand throughout the globe, and we're continuing to strengthen our portfolio there, as introduced with some of the new products. So watch this space for other significant announcements. On the hyperscalers, the relationships have been strengthening throughout the year. We recently participated in one of the hyperscalers projects that focused on a very scalable set of networks, which involves provision by the hyperscaler as network as a service. We turned that live late in the third quarter. We also have, with other large partners in the ecosystem, for instance, folks who make cores, we have been very deeply engaged in market launch. So we have a a very nice position in the portfolios with some of our partners as they bring private 5G and 4G to networks around the world. Specifically, both folks who make infrastructure in the server area and infrastructure in the core area have been instrumental in this expansion. In addition, one of the hyperscalers has disordered again an additional tranche of buildings for us. internal build that they are doing, and that's contributed to revenue in 2Q, contributed in 3Q. We expect acceleration of that relationship. So hyperscalers are giving the market scale, whether it's where they acquire the equipment and run it on their balance sheet as network as a service, or it's a bundle pass-through, or it's us working through their systems integration partners in a very constructive way It's all contributing to the massive increase we're seeing in private networks.

That's great. Thanks, Eric.

Thank you. Our next question is from the line of Tim Savage from Northland Capital Markets. Please go ahead.

Hi. Good morning. Congrats on the bookings in particular. And that's really kind of part of the question I wanted to ask, which is you called out bookings from your major customer, assuming there are some other 4G, 5G carrier bookings on top of that. But just working from that base, it seems like if you look at private networks and fixed wireless access, You know, could that be as much as a third of your bookings in the quarter? And the real question, you know, the question beyond that is how is that translating to revenue currently as you look at this year? And if you want to aggregate those fine or break them out, that's fine as well. And then what sort of growth might you be looking at? I mean, you talked about bookings growth in fixed wireless access, you know, Are those sorts of numbers reasonable to think about for revenue growth next year in these emerging enterprise and fixed wireless markets? Thanks.

Yeah, Glenn, you want to take that?

Yeah, so I think that the booking strength is across really all three of the markets that we play in. We had really strong bookings in Q3 from the three largest mobile operator customers that we have. We had You know, I've mentioned strong bookings performance up 75% year to date on the fixed wireless access that comes directly from the introduction of the new six series products that we're just launching right now. And then, you know, really good bookings performance as well on the private network side with the one significant order on the smart cities engagement that we talked about. So pretty uniformly distributed. And then, you know, I think that to address This from a revenue perspective, we expect that we're sitting on over $100 million of shippable backlog right now. So we're set up pretty well for the next couple of quarters that will fall into revenue over the next two to three quarters. And then when you look at it from, if we tunnel into the fixed wireless access piece, for Yeah, the bookings performance this year will translate into revenue growth next year across fixed royalties access. That's a given.

Okay, thanks. And last question for me is on the operating expense side. You saw a nice reduction here in Q3 and I think mentioned some prospects for further declines in Q4, I'm wondering if you could maybe put some kind of magnitude on that in terms of what sort of baseline we should be thinking about from an OPEX run rate perspective.

Yeah, Tim, this is David. So, you know, the majority of the OPEX reductions have been executed and have been reflected into our Q3 numbers. Additional reductions, I would expect approximately a million dollars, you know, that sort of level down from, you from Q3 into Q4. And I think it's important while we've streamlined our organization, we've also focused on delivering these Q3 bookings and introduced new products in the third quarter whilst executing these cost reductions. So to your point, I think about a million dollars.

Okay, thanks very much. Thanks, Tim.

Thank you. Our next question is from the line of George Nauder from Jefferies. Please go ahead, state your question.

Hi, guys. This is Lloyd down for George. Thanks very much for taking the question. Just touching on the go-go opportunity, it sounds like you've completed the base station shipments, and then on the 5G line cars, is the expectation to begin shipping those in mid-2023, or is that shipping with volume in mid-2023, and then Are there any issues with the 4G line cards?

So let's break that down into two parts. So on the 5G air cards, we expected to begin shipping those in the middle of 2023, in the early Q3 timeframe, 2023, and then ramping through the second half of next year. And then with respect to the 4G air cards, no problem at all. We've been shipping the 4G air cards actually through the course of 2020. 2022 will continue to ship at a steady rate, actually, into Q4 and all the way through into the entire 2023 timeframe. So the 4G air cards continue to ship, and the 5G air cards will begin to ship in the middle of 2023. Okay. Thank you. That's helpful.

And then Are you seeing any slowdown with any customers or any macro weakness to call out from certain geographies or markets?

I would say the opposite. We had a good third quarter in terms of bookings across the board. The growth that we've been concerned about is in the enterprise space because obviously there's a major economic pullback. But as I spoke in my prepared remarks, we're actually seeing the opposite. There's a real focus on cost reduction and increased automation, things as diverse as airports needing to do a better job on baggage clearing. We see opportunities with large big box stores who are sadly suffering from product lossage and they need better monitoring within the store, and that's driving a need for connectivity. So we're not seeing a slowdown at all on any of our segments. I think the real growth here is as businesses converge in this new world that we're in now, how much more technology they need on the automation side. And then just to call out Europe, because that was another area of concern. We actually had a very significant uptick in bookings in Europe in the third quarter from the private network side. And we can expect that to continue here. through the rest of the year. So that was an area where obviously there's economic challenge across the board, but the commitment to enterprise automation seems as robust as ever.

Okay, great. In terms of timeline of those discussions with the creditors to seek waiver and kind of a finance or receive financing, is there sort of an end date of, you know, you look out to the end of this year and say, that's when we want something figured out, or how should we expect those conversations to evolve over time? And thanks, Seth, for that.

That was with our lenders? Sorry, yes, your lenders. I'm sorry, sorry, yes, of course, with our lenders. Yeah, we're in discussions now with them, and we're talking about a breach of covenants that... that we had at the end of the quarter and then subsequent to the quarter. So I expect those conversations to continue this through the coming weeks and until we get resolution.

Yeah, let me just add the relationship with Fortress is very good. We're deeply involved here on a solution on the covenants. And this is focused mainly on contractual covenants at the debt level as opposed to liquidity. or issues like that. So there's a path through this. We're very, very optimistic, and we're obviously working with it full speed here to get something resolved and out in the public eye.

Thank you. Our next question is from the line of Franco Granda with DA Davidson. Please go ahead.

Good morning, everyone. I hope you guys are all doing okay. Congrats on the quarter. It seems like the momentum is coming back and the only challenge is the supply chain, as per usual. You guys have done a good job in the quarter trimming your OPEC line, you know, for the second half of the year. And you just talked about the supply chain challenges extending through, you know, around the middle of next year. Can you quantify what percentage of these savings are more permanent versus what you expect will return once you have a little more flexibility in the model?

Yeah, all of them. Changes we announced are permanent. These were workforce strategic alignment and optimization of where we're doing things, so we don't anticipate an uptick in OPEX. We tend to run this business with what we call cash OPEX, so that strips out the issues of warrant accounting and so forth, stock compensation, and we're pretty confident pretty encouraged by where we got to so far while keeping up the business momentum. And as David said, we expect that to continue to move downward. So we don't see an uptick in OPEX specific to an increase in sales that we're getting through the improved supply chain as well as a much better order book here.

I appreciate that, Tyler. And then you talked about, I guess in one of the earlier questions, you mentioned that the bookings from this year should turn into revenues next year. Is that the case across the entire portfolio or was that just in reference to private networks?

No, no, that's across. We wouldn't be announcing bookings that had a lead time or an execution window more than 12 months. So it's across everything here. We don't book frame contracts and announce them. Realization of this revenue is in the pipe now. To give you an example, we'll have a new product and someone will buy $8 million of it. We get the order in August and it's a six-month lead time to get some of the components on that product. That's just as Glenn has explained the reality of the market we're in now. So that's the reason there's a lag and, you know, we're not converting $100 million of shippable backlog into $100 million of revenue this quarter. But, you know, the programs are all substantial and there's a momentum with the clients, you know, product absorption and taking the products. And so we feel pretty confident in that getting everything realized in the next year.

Okay. That's great. And then lastly, David, as you look at your guidance, what are your perhaps quantitative assumptions when it comes to supply chain constraints at the moment? How much do you think is being left on the table at the moment, just on the timing perspective, while you can navigate through these?

I think that in our guidance, 49 to 57, if we didn't have supply chain constraints, certainly And also, I mean, two things. One is supply chain constraints, and the other is the long lead time of components. If components were back to the two, three years ago timelines of 13 to 16 weeks, we would be able to ship more of that 100 million in Q4. But the reality is that it isn't. And so the 49 to 57 sort of dimensions where we think that um the the supply chain impacts will will um be worked and have that variance for us so you know our 40 49 57 guidance is uh it it delivers where we feel the supply chain will deliver to us all right great i appreciate all your comments thank you thank you thank you

Ladies and gentlemen, if you would like to ask a question, please press star 1 on the telephone keypad. There are no further questions at this time. I would like to turn the floor back over to the management for closing comments.

Okay, thank you. Our business outlook remains encouraging, and we are excited by the buoyant product demand. We are confidently moving closer to breakeven in 4Q, and we have a product portfolio that is gaining wide acceptance across a wide range of major technology partners, end users, and markets. 5G continues unabated, even with the economic headwinds facing the world economy. Governments remain committed to alternative domestic supply paths for critical network infrastructure and are willing to invest to ensure network equipment supply chain diversity. Lastly, our operational model improves as extraordinary supply chain and logistics challenges ease, and we have been able to reduce operating costs through efficiency measures. One last note. We will be participating in broker conferences and one-on-one meetings in the coming months, including upcoming conferences with New Street Research and Oppenheimer & Company. We look forward to engaging with investors at these events. Thank you again for your interest and support. This concludes our call.

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