Cambium Networks Corporation

Good afternoon. My name is Carmen, 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 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 that time, you will need to press star 1 on your telephone to get in the queue. Please limit yourself to one question and one follow-up question. Thank you. Mr. Peter Shulman, Senior Director, Investor, and Industry Analyst Relations, you may begin your conference.

Thank you, Carmen. Welcome and thank you for joining us today for Cambium Network's fourth quarter and full year 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 the 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 outlook and expected performance of the company. 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 Networks' 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 measures 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 fourth quarter and full year 2021. And Stephen Cumming, Cambium Network's CFO, will provide a recap of the financial results for the fourth quarter and full year 2021 and present our financial outlook for the first quarter and full year 2020. 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. Demand and backlog remained strong due to the continued need for expansion of broadband wireless communications networks and a strong rebound in enterprise Wi-Fi shipments. We experienced an incremental improvement with supply chain challenges and are winning more sizable enterprise deals while taking market share during Q4 2021. For calendar year 2021, our enterprise business grew 67%, well ahead of our original forecast of 40% to 60% growth announced during our Q420 financial results conference call last February. We achieved our overall results without the full benefit of the price increases and surcharges, which continue to layer into our financial results over the next few quarters. We are still facing supply chain challenges within our industry, although things seem to have broadened and are expected to improve incrementally over the next few quarters as we have adjusted to the new normal, which includes expedite fees, extended lead times, as well as increased freight expenses. Demand remains strong. We exited the fourth quarter 2021 with backlog of 7% quarter over quarter and 16% year over year. We are at the forefront of the next wave of high performance wireless broadband technology with our millimeter wave solutions. Our new 28 gigahertz 5G multi-gigabit fixed wireless products are expected to be released during the first quarter. We presently have eight POCs for our 28 gigahertz CN wave going on in four continents. Our 60 gigahertz CN wave products are changing the way fixed wireless is viewed by customers and expands our serviceable available market bringing a standard-based multi-gigabit fixed wireless solution using licensed and unlicensed spectrum to network operators serving residential, urban, and enterprise markets. Cambium's enterprise solutions bring sophisticated, cost-effective multi-gigabit Wi-Fi, wireless-savvy switching, premium software solutions, and subscription services to our customers, and the results have been outstanding during 2021. We had a breakthrough quarter for the Wi-Fi business with record revenues of $25.8 million, which grew 140% sequentially and 136% year-over-year during Q4 2021. To put this in perspective, Wi-Fi represented a third of company revenues during the fourth quarter 2021. A previous record was 20% of revenues during the second quarter 2021. We are winning as a result of Cambium's attractive cost of ownership, which makes our fixed wireless solutions a compelling choice for wireless infrastructure projects around the world. With increased government spending on infrastructure projects accelerating over the next few years, and our commitment to deliver cost-effective and scalable multi-gigabit solutions to local communities and distributed enterprises around the globe, Cambium will be a winner over the next several years with its cloud-managed wireless fabric solution extending from few meters to over 100 kilometers, all done wirelessly. Turning to the results of the fourth quarter of 2021, revenues of $78.7 million came in above the outlook of $73.5 million to $77.5 million announced during the Q3 21 earnings call. The supply-constrained environment mainly affected shipments of fixed wireless products and limited further upside to our fourth quarter results. The enterprise market had a strong rebound in Q421 as supply constraints began to ease. We were able to opportunistically purchase chips on the secondary market at higher prices. Non-GAAP fully diluted EPS of 16 cents was within the outlook announced during the Q321 earnings call of between $0.11 and $0.17 per diluted share. Looking at revenues across our different product lines, our point-to-multipoint PMP business revenues decreased 26% sequentially and 31% year-over-year due to global supply constraints negatively impacting shipment of products. We continue to see strong momentum in network traffic, increased demand for CBRS solutions, and broadening interest in our new product introductions. We expect the component shortages to continue to improve, although gradually, during the first half of calendar year 2022. The point-to-point PTP business improved by 10% sequentially during Q4-21, with component shortages limiting shipments of certain products. Although we had higher shipments for federal products, while year-over-year revenues decreased 9% due to lower shipments for backhaul products, compared to a very strong prior year period. Our enterprise Wi-Fi business had a breakthrough quarter with record revenues of $25.8 million. Our previous record for Wi-Fi was $18.3 million during Q2 21. We were fortunate to have improved supply conditions and pent-up demand, with Wi-Fi increasing 140% sequentially and higher by 136% year-over-year, during Q421, although supply constraints remain. This is an indication of the strong potential of the Wi-Fi business for Cambium Networks. Demand remains very healthy for our enterprise Wi-Fi and wireless-savvy switching solutions, and we continue to win larger and more diverse customers in this end market all over the world as customers adopt our next-generation leading-edge Wi-Fi 6 and 6E solutions. For the full year 2021, revenues of $335.9 million increased 21% from 2020. The 2021 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 2021, our PMP products grew 19%, and enterprise Wi-Fi grew 67%, while the point-to-point products increased 1% compared to calendar year 2020. Looking at some notable customer wins and new product developments. In North America, we had several competitive wins aided by government funding. A service provider in Texas ripped and replaced a competitor's gear with Cambium's PMP450M technology. a second service provider with a new focus on fixed wireless in rural western New York State replaced Huawei equipment with Cambium's PMP450 with the aid of government funding. Within our industrial customer base, a North American railroad operator selected our PTP820 for its range, throughput performance, small footprint, and superior reliability. Also in the transportation space, Buckeye Mountain, a leading system integrator of communication solutions to the railroad and intermodal industries, has integrated Cambium Network's fixed wireless and outdoor Wi-Fi technology into their rapid deploy family of connectivity solutions. As ports and rail yards deal with unprecedented supply chain issues, communications reliability is vitally important. We also see 60 GHz CNWave, as an emerging application at rail yards and railways for communications across rail tracks to avoid trenching fiber to cross railroad tracks. We had one of our first Wi-Fi 6E wins with a university in Texas. Not only did they select over 1,000 Cambium access points to cover the indoor and outdoor areas of the classrooms and dorms, but they selected our ultra-high density radios for their auditorium and public areas. They also chose our 60 gigahertz CN wave to backhaul the Wi-Fi for their stadium areas. Cambium's first mover status for the FCC's 3.5 gigahertz CBR 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 129,000 devices managed by our CBRS SaaS service, an increase of over 12% since we reported last quarter, and an increase of approximately 93% year over year. In the Europe, Middle East, and Africa region, EMEA, recent strategic wins since our last call include, in France, one of the largest restaurant chains in the country, servicing 600 various quick service restaurants, selected Cambium's Wi-Fi 6, and switching. The deal is a sizable one, and we beat out several larger competitors. Our Wi-Fi performance superiority is propelling us forward in competitive wins. We have several wins in the enterprise hospitality vertical in Germany and Italy. These resorts in the northern hemisphere are upgrading their Wi-Fi for their guest rooms and convention areas during the off-peak season. Cambium's quality, affordability, support, and relationships with partners are some of the reasons why we are winning over these customers. In the APAC region, we had record revenues. Wi-Fi bookings were also very robust. We received a major enterprise order for over 7,000 access points from WorldLink Nepal for outdoor Wi-Fi. We had our first win with a large telco managed service provider, MSP in Japan, for our Wi-Fi business. The project involved connectivity for schools and hospitals and featured our Wi-Fi 6 product. This opens the door for future opportunities as the Japanese market is dominated by larger telecom MSPs, and we won this project over a larger competitor. And in Malaysia, one of the largest oil and gas companies in the region selected Cambium's intelligent positioners with our PTP-450i for connectivity between oil rigs and oil tankers. In Caribbean and Latin America Cala region, Cambium had a solid quarter with record bookings. We had a strong enterprise quarter with an education win in Brazil for 1,600 schools in the state of Sao Paulo. Cambium's outdoor access points were selected versus several larger competitors due to our superior performance and total cost of ownership for the customer. Brazil represents a large opportunity to expand our enterprise business and we are making tremendous progress in the country. We had a win with our 60 gigahertz and Wi-Fi combo for a major port in the Cala region to provide coverage across a facility in days. The maritime port facility found that mobile cellular service did not perform adequately in an environment where metal containers were moved and stacked on a continual basis. After deploying Cambium fixed wireless and Wi-Fi technology, the port experienced consistent connectivity and higher data throughput. Our partner is expanding their deployment to cover four additional ports and equip two container ships. Turning to new product introductions since our previous quarterly update. We officially launched our first Wi-Fi 6E products, the XC series, which triples the available spectrum for Wi-Fi usage including utilization up to 1.2 GHz of new clean spectrum in the 6 GHz band. The Wi-Fi 6E solution is a compatible solution with existing Wi-Fi 6 networks and enables customers to upgrade to 6 GHz when they are ready without a price premium. We continued with extensive field trials and proof-of-concept deployments for our new 28 GHz CN-Wave 5G NR network fixed wireless product with a formal launch during Q1 2022 and revenues beginning to ramp during calendar 2022. Interest and demand from service providers is very high for this long sought after product which uses millimeter wave for fixed wireless access in areas where it's not possible to use either fiber or traditional mobile technology like 4G or 5G. Our 28 gigahertz CN Wave solution will include a mandatory software attach with CN Maestro X, our cloud-based network management platform to support service delivery, and Cambium Care for software maintenance and upgrades. One of our key goals for 2022 is to build a strong foundation for our software and subscription service business, which delivers customer stickiness, recurring revenue, and a creative margin. We are building a sustainable subscription business through three principle initiatives. First, CN Maestro Essentials provides important core services valued by all of our enterprise and fixed wireless customers. And CN Maestro X provides enhanced services, functionality, and ecosystem integration for a fee basis. We continue to invest in CN Maestro X for enterprise and fixed wireless broadband network administration through organic development and ecosystem integration, including mandatory rates on certain products. Second, through the development and introduction of new products that are subscription-first by design. During Q1 2022, we expect to launch our new quality of experience QoE service. QoE provides visibility and network traffic optimization in real time to mitigate congestion and control network traffic. This feature will be increasingly important to high bandwidth multi-gigabit networks across wired and wireless platforms. Network operators subscribing to Cambium's QoE can optimize the average revenue per user ARPU and improve customer satisfaction. QoE allows network administrators to confidently offer higher service level agreements, SLAs, at targeted higher ARPU subscribers. Additional products are anticipated in the second half of 2022 to accelerate annual recurring revenue. Third, we are aligning, training, and incentivizing our internal go-to-market teams. And more importantly, our more than 10,000 global partners. to effectively position and sell our subscription services. Having conducted business in approximately 170 countries in 2021, it is critical that we harness the knowledge, skill, and presence of our channel partners to advance our subscription services business. Looking at 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 growth. The total devices under cloud management in Q4-21 were over 744,300, an increase of 4% from Q3-21 and up 42% year-over-year. The expansion and growth of our subscription services will be a multi-year journey for Cambium, In the coming quarters, we will provide investors metrics to measure our progress. Looking at the channel, in Q421, we expanded our channel presence by adding over 530 net new channel partners sequentially and over 2,160 net new channel partners year over year, which represents an increase of approximately 5% sequentially and 24% year over year. I will now turn the call over to Stephen for a review of our Q421 financial results and Q122 and full year 22 outlook. Thanks at all. Cambium had revenues of $78.7 million for Q421.