Cambium Networks Corporation

Good afternoon. My name is Judith, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's third quarter 2021 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 during the session, you will need to press start and the number one on your telephone keypad. Please limit yourself to one question and one follow-up question only. Thank you. Mr. Peter Schumann, Senior Director, Investor and Industry Analyst Relations, you may begin your conference.

Thank you, Judith. Welcome and thank you for joining us for Cambium Network's third quarter 2021 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. Risk and uncertainties could cause actual results to differ materially. Except as required by law, Cambium Networks does not take 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's policy not to reiterate our financial outlook. we 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 is included in the appendix to 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 third quarter of 2021, and Stephen Cumming, Cambium Network's CFO, will provide a recap of the financial results for the quarter and our financial outlook for the fourth quarter of 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. Oral demand and backlog remain strong, due to the continued need for expansion of broadband wireless communications networks, while supply chain challenges impacted Cambium's shipments during Q321. The supply chain challenges facing our industry are unprecedented, including shortages and rising costs for semiconductors, mechanical components, increased expedite fees due to extended lead times, and many supplier decommits, as well as increased freight expenses. By late August, Cambium had decommits from some of our larger suppliers for key components, which caused us to redesign some of our higher volume products with alternative parts from new suppliers. We remain cautious about supply for the next few quarters and are monitoring the situation and working with our key suppliers and manufacturing partners on a weekly basis until visibility and commits for calendar year 22 improve. As mentioned in our preliminary results, we now believe global supply and logistic constraints may last into calendar 22 based on several factors affecting the entire industry, including chip foundries getting additional fab capacity in place. We are not immune from future unforeseen events which could impact supply in future quarters. Cambium is taking very specific steps to address the supply constraints. We are pushing for supplier commits for calendar year 2022. We are providing 21-month forecasts to our key suppliers, and where necessary, we are redesigning products with more widely available parts to meet customer demand. Demand remains strong. We entered the fourth quarter 2021 with backlog up 57% year-over-year. Without the supply constraints, Cambium Networks would have met or exceeded the high end of the previous third quarter 2021 revenue outlook range provided on August 9th, 2021. Looking at our market position. This October, Cambium celebrated our 10th anniversary as a standalone company. We have built an innovative, sustainable, and prosperous business over the past decade and remain excited about the next wave of high-performance wireless broadband technology about to be unleashed in the upcoming months and years. Cambium has a promising future and our best years remain in front of us. Millimeter wave technology is taking hold with our 60 gigahertz products and our new 28 gigahertz 5G multi-gigabit fixed wireless products expected to be released during the fourth quarter for proof of concept POCs installations. During Q3 21, Cambium sold over 115 60 gigahertz starter kits in 30 different countries. And we presently have POCs for our 28 gigahertz CN wave going on in four different continents. We have shipped tens of thousands of these new 60 gigahertz CN wave products cumulatively. These products are changing the way fixed wireless is viewed by customers old and new and expands our serviceable available market bringing a standards-based multi-gigabit fixed wireless solution using licensed and unlicensed spectrum to network operators, serving residential, urban, and enterprise markets. Cambium's attractive cost of ownership makes our fixed wireless solutions a compelling choice for wireless infrastructure projects around the world. We continue to expect increased government spending on infrastructure products accelerating over the next few years as broadband is a lifeline to connect local communities and distributed enterprises around the globe. Turning to the results of the third quarter 2021, revenues of $75.9 million came in above the $75 million provided in the preliminary results announced on October 21st and fell below the outlook of $88 to $92 million, announced during the Q221 earnings call. Non-GAAP diluted EPS of 23 cents was below the outlook announced during the Q221 earnings call of between 30 and 34 cents per diluted share. The inability to ship products due to the greater than anticipated supply-constrained environment negatively impacted our financial results. Looking at revenues across four different product lines, Our point-to-multipoint PMP business revenues decreased 16% sequentially and increased 16% year-over-year as we continued to see strong momentum in network traffic, increased demand for CBRS solutions, and broadening interest in our new product introductions, although obtaining components was a more difficult challenge than anticipated at the start of the quarter. The point-to-point PTP business was lower by 1% sequentially during Q321, with component shortages affecting shipments, although we had higher shipments for federal products, while year-over-year decreased 23% due to delayed shipments for backhaul products. Our enterprise Wi-Fi business was the most impacted product line, decreasing 41% sequentially due to a paucity of semiconductor chips, although Wi-Fi increased 8% year-over-year, during Q321. Demand remains very healthy for our enterprise business, but it remains a challenging environment to ship products. Looking at some notable customer wins and new product developments. In North America, the cities of Aurora, Colorado, and San Jose, California, both the third largest cities in their respective states, have completed deployments of 60 gigahertz CN waves to provide gigabit speed backhaul for their city's aging wireless infrastructures. Aurora was given coronavirus aid relief and economic security CARES Act funding, which was allocated to improve IT infrastructure to benefit public safety, voice and data, LAN extension, video application, and credit card processing. Aurora replaced an aging 50 megabit per second microwave network with a 60 gigahertz CN wave gigabit capacity fixed wireless broadband network. The city of San Jose deployed outdoor public access Wi-Fi networks in strategic corridors throughout the downtown area. Cambium Network's 60 gigahertz CN wave distributed network infrastructure covers approximately 60 city blocks to transport the free Wi-Fi connectivity for residents, visitors, workers, and businesses throughout strategic downtown corridors to the internet point of presence. The downtown Wi-Fi project is the latest step in improving the city's digital infrastructure to support San Jose's smart city vision and digital inclusion and broadband strategy. Within our industrial customer base, a North American railroad operator selected our PTP-820 for its range, throughput performance, small footprint, and superior reliability. We displaced a competitor and will be working with this customer for additional field deployment opportunities moving forward. The enterprise hospitality market continued to recover. We had a win at a resort in Hawaii, the Maui Villas Resort, for our new outdoor Wi-Fi 6 product for coverage across the resort. Cambium's outdoor Wi-Fi 6 performance is significantly better than our competitors, resulting in a massively lower cost of ownership. For example, the Maui Villas Resort required 50% fewer access points than our competitors. Less equipment means less labor, maintenance, power, and simpler management of the network. Cambium's first mover status for the FCC's 3.5 GHz CVRS spectrum continued to benefit our PMP450 products. and our CBRS SaaS service in both the US and its territories. As of today's call, we now have over 115,500 devices managed by our CBRS SaaS service, an increase of approximately 12% since we reported last quarter. In the Europe, Middle East, and Africa region, EMEA, recent strategic wins since our last call include we had a major enterprise win in the education vertical in Morocco against larger competitors to provide a national carrier 20,000 Wi-Fi 6 APs for deployment and CN Maestro X software at major public universities to connect 12 campuses comprised of 278 buildings. Cambium was selected for our superior technology and value proposition. In Northern Holland, the Duna Mayor Education Group A school district comprised 22 secondary schools with over 13,000 students selected Cambium's Wi-Fi 6 access points to upgrade their network and move from an on-premises implementation to the cloud. The education group selected Cambium for our better performance and lower total cost of ownership than the competition. Cambium Networks had a key managed service provider win in the U.K. with Yfinity, to deploy Cambium's CN matrix switching solution for a significant multi-dwelling unit opportunity in the UK government. This adds CN matrix switches to the portfolio of Cambium's wireless fabric products already selected by Yfinity, including PMP450M and 60 GHz CN Wave. In the APAC region, we had a great quarter with several significant wins. The Australian Turf Club, a premier owner and operator of thoroughbred racing events and hospitality venues across Sydney, selected our indoor and new outdoor Wi-Fi 6 products, switching an XMS cloud to support stadium seating, hospitality suites, and general use areas requiring high-density deployments. A large internet search engine provider in India selected Cambium's PTP-550 to extend connectivity. The initial deployment is 20 locations. This is the start of a recurring deployment expected to go to 400 locations over the coming year. In Malaysia, in the state of Selangor, Cambium won a new CCTV project with Smart Selangor, a state government program with a vision to make Selangor a smart state through the optimization of digital technologies. This project featured Cambium's PTB670, EPMP 3000, and EPMP Force 300 products. Cambium beat out a number of fixed wireless competitors to win this project. In the Caribbean and Latin America Cala region, Cambium continued the long chain of success in Peru with a sizable win at a new government-sponsored agency for program Proyecto Selva to provide indoor and outdoor enterprise solutions for 1,300 public institutions. We won this project due to Cambium's advanced technology ability to deliver, and total cost of ownership, and Cambium's outstanding customer support. We had a win with our 60 gigahertz CN Wave technology at a large internet service provider in Puerto Rico, which moved from a trial to the deployment phase for business customers. Turning to new product introductions since our previous quarterly update. Before our next earnings call, Our first Wi-Fi 6E product will bring even more performance benefits, including utilization of up to 1.2 gigahertz of new clean spectrum in the 6 gigahertz band. Cambium's expertise and history with multi-radio access point designs enables us to deliver differentiated Wi-Fi 6E products. Our three-radio 4x4 technology, the XC3-4, will offer up to 700 160 megahertz channels. Wi-Fi 6E enables improved performance, increased capacity, and lower latency that enables a new set of high-density use cases. We are also working on a new set of high-performance 6 gigahertz products for fixed wireless access, which are on the product roadmap for introduction during calendar 2022. We begin extensive field trials and proof-of-concept deployments for our 28 GHz CN Wave 5G and R fixed wireless product with revenues ramping during calendar 2022. 28 GHz CN Wave will further expand our serviceable available market SAM as both new and existing customers demand higher broadband performance at the edge of their networks. Our 28 GHz product is expected to be price-disruptive compared to the existing equipment providers and feature lower operating costs and complexity compared to existing mobile-centric solutions. The 5G fixed solution from Cambium is simple. No complex infrastructure. Fiber rollout can take months or years. Future generations of this product will feature wider channels, include an increased capacity from the use of our MU-MIMO technology, carrier aggregation, and channel bonding. The capital and operating expense of Cambium's 5G fixed solution is much less than that of a 5G mobile solution or even fiber, especially when the subscriber density becomes less than that of dense urban areas. An increasing number of countries are opening up the 28 gigahertz band in the MAR region, including Slovenia, Croatia, and Spain. Many service providers are interested in using millimeter wave for fixed wireless access in areas where it's not possible to use either fiber or traditional mobile technologies like 4G or 5G, which require a high density of customers to justify the business case. Turning to our CN Maestro cloud software, our end-to-end cloud-powered connectivity solution to manage the network from a single pane of glass. the CN Maestro cloud software continued to experience strong user growth. Total devices under cloud management in Q321 totaled over 718,300, an increase of 16% from Q221 and up 47% year-over-year. Looking at our channel, in Q321, we expanded our channel presence by adding 475 net new channel partners sequentially, and over 2,270 net new channel partners year over year, which represents an increase of approximately 5% sequentially and 27% year over year. This September, we had a very successful set of Cambium Connections online webinars for our end customers and partner community. We had over 4,200 registered attendees, which represented an increase of approximately 50% from our previous Cambium Connections events in February. We also returned to in-person events with a significant presence at the largest WISP trade show of the year, WISPA Palooza 2021, held in mid-October in Las Vegas, at which Cambium was recognized as the manufacturer of the year. I will now turn the call over to Stephen for a review of our Q321 financial results and Q421 outlook. Thanks, Atul.