Cambium Networks Corporation

Good afternoon. My name is Delphine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's first quarter 2022 financial results conference call. All lines have been placed to mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, you will need to press star 1 on your telephone keypad. And please limit yourself to one question and one follow-up question. Thank you. Mr. Peter Schumann, Senior Director, Investor and Industry Analyst Relations, you may begin your conference.

Thank you, Delphin. Welcome and thank you for joining us today for Cambium Network's first quarter 2022 financial results conference call. And welcome to all those joining by webcast. Atul Bhatnagar, our President and CEO, and Andrew Bronstein, 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 a 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 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 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 and 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 first quarter of 2022, and Andrew Bronstein, Cambium Network's CFO, will provide a recap of the financial results for the first quarter of 2022 and present our financial outlook for the second quarter and full year of 2022. Our preparer remarks will be followed by a Q&A session. I'd now like to turn the call over to Atul.

Thank you, Peter. We face supply chain challenges within our industry, which impacted our first quarter results because of two unexpected events. First, a Chinese government COVID lockdown in Shenzhen impacted manufacturing during the middle of March. And second, during the last two weeks of the quarter, a lockdown in Shanghai closed our distribution and warehousing facilities. Although our contract manufacturers have a global footprint, certain products and components are manufactured in China and cannot rapidly be relocated to facilities in different geos. Despite this setback, we are confident that once the supply chain recovers, we expect improved financial performance. We anticipate some recovery in revenues during the second quarter 2022, given our strong backlog and increased pricing actions now fully in place. We exited the first quarter, 2022, with backlog up 7% quarter over quarter and higher by 10% year over year. Cambium's cost-effective multi-gigabit Wi-Fi and EPMP product lines were most affected by the lockdowns in China. Despite the lockdowns, we saw strong demand for our enterprise solutions and exited Q122 with record backlog for Wi-Fi During late Q1-22, we began taking orders for our new Quality of Experience subscription service, which provides visibility and network traffic optimization in real time to mitigate congestion and control network traffic. One customer, an Italian service provider, noticed immediate improvements, including a clear reduction in support center calls and actual reports of improved broadband performance. We are at the forefront of the next wave of high-performance wireless broadband technology, including our millimeter wave solutions. Our new 28 gigahertz 5G multi-gigabit fixed wireless products shipped for revenue in limited quantities during the first quarter. We presently have eight POCs for our 28 gigahertz CN wave going on in four continents, with three additional customers planning POCs pending receipt of equipment shipped in March. As we previously mentioned during our last earnings call, we expect larger deal sizes with 28 gigahertz CN wave. Cambium's attractive cost of ownership and cloud-managed wireless fabric solutions make our fixed wireless solutions a compelling choice for wireless infrastructure projects around the world. Turning to the results of first quarter 2022. Revenues of $61.9 million came in below the outlook of $77.5 million to $81.5 million announced during Q4-21 earnings call. The supply-constrained environment affected shipments of both fixed wireless and Wi-Fi products during Q1-22. The Wi-Fi market and EPMP product lines were most affected by Chinese government lockdowns in Shenzhen and Shanghai. although demand remains very strong for our Wi-Fi, wireless heavy switching, and ePMP products. Looking at revenues across our different product lines, our point-to-multipoint PMP business revenues decreased 16% sequentially and decreased 46% year-over-year due to global supply and distribution constraints negatively impacting shipments of ePMP products and slower demand from North American service providers. we are seeing the component shortages continue to improve, although gradually, and expect the lockdowns in China to loosen during Q2-22. The point-to-point PTP business decreased 4% sequentially during Q1-22, with component shortages limiting shipments of certain products, while year-over-year revenues decreased 16% due to lower shipments for backhaul products compared to a very strong prior year period. Our enterprise Wi-Fi business had revenues of $15.5 million, with revenues decreasing 40% sequentially due to supply and distribution disruptions, although higher by 28% year-over-year during Q122. Demand remains very healthy for our enterprise Wi-Fi and wireless heavy switching solutions, and we continue to win larger and more diverse customers in this end market across the world as customers adopt our next-generation leading-edge Wi-Fi 6, and 6E solutions. Looking at some notable customer wins and new product developments. In North America, in Scottsdale, Arizona, a leading broadband service provider, Desert iNet, is extending fiber networks with Cambium's 60 GHz CN-Wave fixed wireless broadband solution to deliver multi-gigabit access to residential subscribers with faster time-to-service than trenching fibers. at a very attractive cost of ownership. Cambium's wireless fabric makes it easy to plan, deploy, and manage affordable gigabit speeds to the home and enterprise. An assisted living facility in New Jersey selected Cambium's Wi-Fi 6 access points, CNmetrix wireless heavy switches, and CNMaestro X cloud management to enable further efficiencies from digital transformation initiatives while minimizing total cost of ownership for the assisted living facility. Residents wanted the ability to connect with friends and family, and assisted living care operations managers needed reliable Wi-Fi at reasonable cost. In our defense business, we landed the first portion of a five-year contract from the U.S. federal government for Cambium's PTP-700 technology to upgrade global military-based security with high capacity fixed wireless broadband communications infrastructure. The first phase of this program is mid single digit millions for Cambium with a potential to be tens of millions of dollars. In the Europe, Middle East and Africa region, EMEA, we continue to have healthy demand for our enterprise business and continue to win more and larger projects, although revenues were down due to COVID supply constraints from China. Recent strategic wins since our last call include, in Northern Italy, we displaced a Tier 1 enterprise networking supplier to deploy over 1,000 Wi-Fi 6 access points, wireless heavy switching, and CN Maestro X cloud management across 20 schools in the region. We won because of our wireless fabric, end-to-end solution, and Cambium's superior customer support. In South Africa, we had a fixed wireless win with iQija Wireless for our EPMP3000 for residential broadband access across the country. We won as a result of strong performance versus the incumbent supplier. In APAC region, we received orders from two different service providers on both sides of the Australian continent for our first generation 28 gigahertz CN wave. In Korea, we had a Wi-Fi 6E win with our newly released high density four radio access points, the XC3-4 for Sangi University. And in Caribbean and Latin America, Cala region, we had a win with a government service provider in Brazil, ProDepa, in the state of Paria. They selected our PMP450 to provide internet access and communications to government buildings and schools. Cambium was selected for our superior performance and lower total cost of ownership for the customer. turning to the new product introductions since our previous quarterly update. Before our next earnings call, we expect to announce the next expansion of our Wi-Fi 6 portfolio, including models specifically designed for the hospitality market and value-conscious buyers with availability during the second half of calendar 2022. At the higher end of the market, Cambium's new 5-radio high-density Wi-Fi 6E access point announced in January, will begin shipping this quarter. This solution targets high density indoor applications such as auditoriums, meeting rooms, classrooms, libraries, and public venues. Cambium has the industry's first five radio Wi-Fi 60 solution, which is much more efficient and cost effective for high density use cases. Our expertise and history with high-density Wi-Fi enable us to deliver a highly differentiated Wi-Fi 6E solution at a lower total cost of ownership than the competition. Cambium continues to build a strong foundation for our software and subscription services business, which delivers customer stickiness, recurring revenue, and a creative margin. Cambium has begun trialing in North America a new network-as-a-service NAS solution. We are offering a package of CN Maestro X and Cambium Care combined with our Wi-Fi hardware made available as a subscription service. The subscription packages are billed monthly and are available in three- and five-year terms. Our initial POCs are performing well, and we are seeing strong interest in our commercial offering in Q222. 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 user growth. Total devices under cloud management in Q122 were over 791,000, an increase of 6% from Q421 and up 37% year-over-year. Turning to the channel, in Q122, We expanded our channel presence by adding 70 net new channel partners sequentially and approximately 1,670 net new channel partners year-over-year, which represents an increase of approximately 1% sequentially and 17% year-over-year. During the first quarter, Cambium showcased our wireless fabric at the WISPAP America Trade Show in New Orleans. We received excellent customer feedback on our 60 GHz CNWave, 28 gigahertz CN Wave, enterprise Wi-Fi 6 portfolio, and wireless savvy switching. Our upcoming 6 gigahertz ePMP solution is also generating lots of excitement for gigabit connectivity, particularly with North American service providers. Our technology and platforms, including the new software capabilities like QoE and CN Heat, were also well received by customers. I will now turn the call over to Andrew for a review of our Q1-22 financial results and Q2-22 outlook.