Cambium Networks Corporation

Good afternoon. My name is Daphne, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's fourth quarter and full year 2020 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, press star, followed by the number one, on your keypad. To withdraw your question, press the pound sign. Please limit yourself to one question and one follow-up question. Thank you, Mr. Peter Schumann, Senior Director of Investor and Industry Analyst Relations. You may begin your conference.

Thank you, Daphne. Welcome and thank you for joining us today for Cambium Network's fourth quarter and full year 2020 Financial Results Conference Call, and welcome to all those joining by webcast. Atul Bhatnagar, our president and CEO, and Stephen Cumming, our CFO, are here for today's call. The financial results, press release, and CFO commentary referenced on this call are accessible on the investor page of our website, and the press release has been submitted on Form 8K with the SEC. A copy of today's prepared remarks will also be available on our investor page at the conclusion of this call. As a reminder, today's remarks, including those made during Q&A, will contain forward-looking statements, about the company's outlook and expected performance. These statements are based on current expectations, forecasts, and assumptions. Risks and uncertainties could cause actual results to differ materially. Except as required by law, Cambium Networks does not undertake any obligation to update or revise any forward-looking statements for any reason after the date of this presentation, whether as a result of new information, future developments, to conform these statements to actual results or make changes in Cambium's expectations or otherwise. It is Cambium Network's policy not to reiterate our financial outlook. We will encourage listeners to review the full list of risk factors included in the safe harbor statement in today's financial results press release. We will also reference both GAAP and non-GAAP financial measures and specifically note that all sequential and year-over-year comparisons reference non-GAAP numbers except where otherwise noted. A reconciliation of non-GAAP measures to GAAP measures is included in the appendix of today's financial results press release, which can be found on the investor page of our website and in today's press release announcing our results. Turning to the agenda, Cambium Network's president and CEO, Atul Bhatnagar, will provide the key investment highlights for the quarter, and Stephen Cumming, Cambium Network's CFO, will provide a recap of the financial results for the fourth quarter and full year 2020, and he will provide our financial outlook for the first quarter and full year 2021. Our prepared remarks will be followed by a Q&A session. I'd now like to turn the call over to Atul.

Thank you, Peter. We have built Cambium into a next-generation global wireless infrastructure leader for broadband communications, and the results are clearly demonstrated in our financial performance during the fourth quarter and second half of 2020. Demand for wireless infrastructure projects around the world remain robust, driven by work, learn, and play from home, and accelerated by government funding of broadband solutions. Fixed wireless broadband is a critically important networking fabric to connect our local communities. We are benefiting greatly from the investments we have made over the past few years in fixed wireless infrastructure technologies in such areas as point-to-multipoint, PMP, including the Citizens Broadband Radio Service, CBRS, compatible products, and in new opportunities, such as gigabit wireless solutions with our 60 gigahertz millimeter wave products, our new enterprise Wi-Fi 6, and cloud-savvy wireless switching products. And we have now added a premium version of our software-as-a-service solution the cloud-first CN Maestro X, allowing network operators to dramatically improve quality of service from a single pane of glass in the cloud. We are at the start of a new era of end-to-end wireless speeds equivalent to that of fiber. Our multi-gigabit wireless fabric can deliver fiber's performance and reliability at a fraction of the cost. Our recently launched 60 GHz CN wave solution is shipping in volume, and the forthcoming 5G 28 GHz millimeter wave products arriving during 21 will further accelerate this trend as we reach new customers and enter new markets demanding higher broadband performance. For the first time in Cambium's history, we will purposefully compete in urban markets in a meaningful way, as existing networks upgrade infrastructure and new high-speed networks proliferate with more cost-effective technology provided by Cambium Networks. In early December, the Federal Communications Commission, FCC, announced the identity of the winners of the first phase of $20.4 billion Rural Digital Opportunity Fund, RDOF, over the next 10 years to bring high-speed broadband service to millions of unserved Americans. The first phase of the auction ended at $9.2 billion, money that will go toward providing Internet connections to over 5.2 million unserved homes and businesses around the country. The winners included fixed wireless service providers, as well as cable operators, electric cooperatives, incumbent telephone companies, and satellite companies. The winners have six years to deploy broadband to winning locations and will be paid by the FCC in equal monthly installments over the next 10 years, assuming the winners can meet the service-level agreements. You will see a mix and match of technologies and different partnerships involving Cambium as a result of the RDOF program. High-quality and affordable, resilient Cambium solutions will lower TCO and stand to gain substantially from RDOF initiative. Cambium expects to see deployments of our equipment for RDOF beginning late 2021 when all is said and done. Cambium's significant new product introductions combined with government funding around the world will provide a catalyst to our financial results for many years into the future. Turning to the results of the fourth quarter 2020. We achieved record revenues of $82.8 million above the high end of our outlook of between $74 to $78 million. Non-GAAP diluted EPS of $0.38 also exceeded the high end of our outlook of between $0.24 and $0.28 per diluted share. We finished the year with another record quarter of executions by our entire Cambium team, as we worked remotely during the COVID pandemic. We continued to have strong product momentum across our different product lines. Within the PMP business, we grew 24% sequentially and 62% year-over-year, as we continued to see strong momentum in network traffic, increased demand for our CBR solutions, and the benefit of new product introductions. Our U.S. customers continue to build out their networks using general authorized access licenses, and we expect the successfully completed Priority Access License PAL to contribute in 2021. We also believe we are taking share from both larger and smaller competitors as we continue to expand our portfolio of solutions offering industry-leading spectral efficiency, scalability, quality, reliability, and attractive economics for our customers. Our PTP business had better than expected results during Q420. After delivering a strong third quarter performance, declining 7% quarter over quarter and 8% year over year, our enterprise cloud-based Wi-Fi business continued to recover within certain verticals, namely healthcare and education, growing 10% sequentially during Q420, due to the continued growth of our new Wi-Fi 6 solutions and record revenues for our cloud-savvy CN Matrix enterprise switching products. For the full year 2020, revenues of $278.5 million increased 4% from 2019. The 2020 growth was primarily driven by our point-to-multipoint and enterprise Wi-Fi solutions. which both grew double-digit percentages over the previous year. For the full year 2020, our PMP products grew 11%, and enterprise Wi-Fi grew 12%, while the point-to-point products decreased 16% compared to calendar year 2019. Looking at some notable customer wins and new product developments. During Q420, I'm pleased to report Cambium networks continue to have several high-profile customer engagements. In North America, we had a win with an industrial customer, a Canadian rail operator for backhaul at rail yards with our new 60 GHz CN wave products. Cambium will be displacing a competitor's 5 GHz products with 60 GHz CN wave. We had a win at an American gas and electric utility company which is currently the second largest utility company in the U.S. in terms of customer base. Cambium displays a competitor with our PTP670 due to our superior performance and reliability. A broadband internet service and voice over IP phone systems provider in Little Rock, Arkansas, selected Cambium's PMP450 and PTP820 over solutions from two competitors. The win was a result of CARES Act funding to deliver broadband services to some of the most rural communities in Arkansas. This deployment includes hundreds of towers and will provide services of 25 megabits per second and greater. We had an exceptional quarter of customer wins with Native American tribal nations as a result of CARES Act funding and efforts by the FCC to provide 2.5 gigahertz licenses to qualifying tribal nation applicants. A tribal nation in Arizona selected Cambium for a broadband rollout, including our PMP450M and PMP450B products, our PTP820 product for backhaul, as well as Wi-Fi, including our CN pilot and CN matrix switches. Two different tribal nations in New Mexico selected Cambium for broadband wins, including the use of our CN Ranger LTE solutions, PMP450M and PMP450B solutions, and our PTP820 products for backhaul. We had a new customer win with a managed service provider, MSP, focused on the multiple dwelling unit market. Cambium displays competitors in both fixed wireless and enterprise Wi-Fi. This win included both our new ePMP Force 425, enterprise Wi-Fi 6 access points, and the first sale of our recently released Cloud First CN Maestro X management software. We won over the customer with our outstanding cloud management, scalability, superior performance, and value. Cambium's first mover status for the FCC's 3.5 GHz CBR spectrum continues to pay dividends in both the acquisition of new customers and sales of our PMP450 products and our SaaS service in both U.S. and its territories. Our full end-to-end solutions includes high-performance radios, over-the-air CBRS upgrades, and cloud-based software solutions. As of today's call, we now have approximately 76,000 devices managed by our CBRS SaaS service, an increase of over 29% since we reported last quarter. In the Europe, Middle East, and Africa region, EMEA, strategic wins from Q4 include, in Germany, we beat out a larger competitor with a win in the Bitburg School District. This selected Cambium as a result of our ability to provide an entire wireless fabric network including our ePMP and enterprise Wi-Fi for both indoor and outdoor capabilities, as well as our wireless-aware CN metric switching technology. In the UK, we had a high-profile enterprise Wi-Fi win at the largest private girls' school in the country, St. Mary's School. The campus-wide deployment included our XV3-8 access points, and we beat out a sizable competitor. In Africa, we had a win in Botswana with MTN Group, one of Africa's largest operators, providing telecom services to 23 countries. The win was for enterprise Wi-Fi. Cambium was selected for flexible CN Maestro cloud management as MTN is an existing customer of Cambium's fixed wireless solutions. MTN's operating companies value the benefits of the complete Cambium wireless fabric solutions. We added a new national carrier in Africa with the addition of Telecom Kenya. We won both fixed wireless with our EPMP solutions and enterprise Wi-Fi with our E410 CN pilot line. We beat out the incumbent equipment provider in the multi-year effort as a result of attractive economics for the performance offered and strong customer support provided by Cambium. In the APAC region, We had a sizable enterprise Wi-Fi 6 win with a new customer, Korea Baptist Theological University. The customer is deploying 900 access points, including both our XSuite 2-2 and XSuite 3-8 products and our Cambium Care Pro support. Korea Baptist was looking for the latest Wi-Fi 6 solutions that deliver performance for classrooms, streaming video, for remote learning as classes were remote, due to COVID. Cambium won the deal from a larger competitor because of performance, ease of installation, value, and leading-edge Cambium Care Pro support. We had another enterprise Wi-Fi 6 win in Thailand with Pongswadi Technology College. Due to COVID-19, the college removed the campus computer center to prevent gathering in larger groups. Their new plan provided all students with laptops, for which they needed pervasive and reliable Wi-Fi across campus. They selected the Cambium wireless fabric, including our high-density APs, cloud-savvy CN matrix switching, all controlled by our cloud-managed CN Maestro software. In the Caribbean and Latin America Cala region, we had a record quarter, breaking the $10 million barrier for the first time in the company's history. We had a significant win in Colombia, with the Ministry of Telecom and Technology. The Ministry selected Cambium and our partners to provide indoor Wi-Fi and switching solutions for schools and government offices in 15,000 remote rural locations throughout the country. We also won the backhaul portion of the network to connect these remote locations. We won this third phase of the project based on our reputation plus the functionality of CN Maestro cloud management software. Aeronet, one of the top service providers in the Caribbean, offering broadband internet connectivity to the residential and enterprise markets, selected Cambium to implement Puerto Rico's first CBRS system. Aeronet plans to cover 90% of the island of Puerto Rico. Aeronet selects Cambium's PMP portfolio, including our PMP450M portfolio, with CN Medusa technology, along with our PMP450B high-gain subscriber modules. In Ecuador, the Ministry of Telecommunications created a program to provide free internet access at 4,500 extremely remote locations throughout the country. The ministry selected CNT, who is a large service provider owned by the Ecuadorian government, to deploy and manage the network. CNT selected Cambium Networks Enterprise Portfolio Outdoor Access Points, E510, to provide these public hotspots. Looking at new products since our previous quarterly update. Within the PMP products, we are rounding out our product lines with the addition of two new solutions for the PMP450 line. The additions include the 5 GHz PMP450B connectorized and 450 micropop connectorized. The 450 MicroPOP Connect Rise adds a new option to provide hard-to-reach coverage and fill-in for the operator's network with an affordable solution. Both new products allow for a customized antenna specific for a customer operator's needs. Also, in our PMP and PTP product lines, Cambium's highly anticipated 60 GHz CN wave for millimeter wavelength began shipping in volume in December. This is significant as network operators can now compete with fiber and cable operators in urban and suburban markets with comparable gigabit data rates and with compelling economics, which increases our serviceable available market SAM. Cambium now has approximately 40 proof-of-concept POCs underway, and several are turning to commercial operations, including YTL communications. a Malaysian telecommunications operator, which has placed the world's first significant commercial order. YTL will be deploying our CN-Wave 60 GHz millimeter wave radio in Georgetown in the state of Penang, Malaysia. This is a key reference deployment for Cambium, as this is where Facebook implemented their largest tera-graph trial. The city of Georgetown has legacy infrastructures and a prestigious UNESCO status, making it difficult to deploy fiber. With 60 gigahertz, it is possible to provide the city with high-speed broadband access by utilizing existing street furniture, such as street lamps, traffic lights, and utility poles. As a result, it can be deployed faster and more cost-effectively than fiber broadband. Cambium Networks is very excited about being able to provide fiber-like broadband performance and reliability at a fraction of the cost of fiber. We anticipate traditional fiber operators to deploy hybrid networks by using CN Wave to extend the fiber plant to customer premises, accelerating time to revenue at lower operating and capital costs. Wireless is the new fiber. Within our PTP product line, during the fourth quarter 2020, Cambium added two new next-generation point-to-point licensed microwave products for backhaul featuring wider channels. The first is the PTP850S that can deliver up to 2 gigabit per second plus throughput featuring up to 4K quadrature amplitude modulation QAM. The second is the PTP850C, which can deliver up to 4 gigabit per second and 4x4 massive MIMO. The PTP850S and 850C are important additions to our backhaul portfolio. Also, in licensed spectrum, during the Q4, Cambium Networks released a 3G LTE CPE with a full system release, our next-generation fixed wireless broadband LTE platform, CN Ranger, for 3 GHz spectrum, commencing during Q1 2021. CN Ranger is an ideal solution for Internet service providers and industrial customers. We continue to experience strong growth in accounts utilizing CN Maestro cloud software, our end-to-end cloud-powered connectivity solution to manage the entire network from a single pane of glass. Total devices under cloud management in Q420 totaled over 524,000, an increase of 7%, from Q320 and up 40% year over year. After years of development in December, Cambium launched our new CN Maestro X, the premium version of CN Maestro. It has taken a lot of effort to add a majority of Cambium's products to be supported by CN Maestro X and to develop the sophisticated features that will command subscription payment. CN Maestro will now become the platform that will be the basis for many subscription software and service offerings. CN Maestro X will continue to make Cambium hardware products more differentiated and over the long run will contribute to a higher gross margin for the company. Turning to the channel, in Q420, we expanded our channel presence by adding over 640 new channel partners sequentially and over 2,340 new channel partners year over year, which represents an increase of approximately 7.5% sequentially and 34% year over year. Given the global pandemic, we will be holding our first global virtual event called Cambium Connections on February 24th and 25th for our end customers and partner community. We are excited to share our vision of where the industry is headed over the next few years. I will now turn the call over to Stephen for a review of our Q420 financial results and outlooks.