Cambium Networks Corporation

Good afternoon. My name is Sean, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's second quarter 2022 financial results conference call. Our 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 one one on your phone. Please limit yourself to one question and one follow-up question. Thank you. Mr. Peter Schuman, Vice President, Investor and Industry Analyst Relations, you may begin your conference.

Thank you, Sean. Welcome and thank you for joining us today for Cambium Network's third 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 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, 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 to 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 third quarter 2022. And Andrew Bronstein, Cambium Network's CFO, will provide a recap of the financial results for the third quarter 2022 and present our financial outlook for the fourth quarter 2022. 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.

Cambium continued growth in our third quarter with revenues of $81.2 million, increasing 17% sequentially, ahead of the high end of our outlook of between $72 to $76 million announced during the Q2-22 quarter call. Profitability improved significantly, with strong gross margins and EPS of 40 cents, ahead of the high end of our outlook of between 16 and 20 cents, We saw improved supply of components for enterprise products, including record revenues for Wi-Fi, switching, and SaaS solutions. Cambium had better product mix, and spending was lower than anticipated due to our tight cost controls. We anticipate improving demand for fixed wireless point-to-multipoint PMP solutions driven by new technologies and stronger demand for point-to-point PTP for defense applications. Our enterprise solutions also remains strong and we expect further improvements in the supply chain. We had an exceptional quarter for our enterprise solutions, with record demand growing 60% sequentially and increasing 257% year-over-year, including record Wi-Fi 6, Wi-Fi 6E, and switching revenues. Our switching business had strong backlog, which we were able to fulfill during Q3 22. We continue to gain market share and now expect our enterprise business to grow by more than 50% for calendar year 22. During Q3 22, we shipped our 13 millionth radio as a standalone company. Cambium's one network solution is a compelling choice for wireless infrastructure projects around the world, featuring our attractive total cost of ownership. cloud-managed wireless fabric of solutions integrating multiple communication standards and emerging broadband technologies with network management from a single pane of glass. Turning to the results of third quarter 2022, looking at revenues across our product lines, our PMP business revenue decreased 8% sequentially and decreased 48% year-over-year due to lower demand as service providers moved from our legacy PMP450 products ahead of the ramp of new gigabit technologies, including both 28 gigahertz CNWave 5G fixed technology and the introduction of 6 gigahertz products expected during Q4 22. The PTP business decreased by 2% sequentially during Q3 22, while year-over-year revenues improved 11% due to higher shipments for our federal defense business using Cambium's PTP 700 technology for fixed wireless broadband communications. We had our largest quarter of defense bookings in the company's history during Q3-22, although Hurricane Ian in Florida caused delays in shipments at the end of Q3-22. We expect higher defense shipments during Q4-22. Our enterprise business had record revenues of $38.3 million during Q3-22, increasing by $14.4 million or 60% sequentially. and higher by $27.6 million or 257% year-over-year due to record demand for our Wi-Fi 6 and 6C solutions, record switching revenues, and increased growth in SaaS solutions. We have established a strong reputation for our enterprise feature set and product quality and are being well received by the hospitality, education, healthcare, and other verticals. looking at some notable customer wins and new product developments. In North America, a large wireless service provider in Texas, Community Internet Providers, CIP, selected Cambium's PMP450 platform, CN Heat, and 60 GHz CN Wave for greenfield sites. Cambium was selected for its superior performance, an attractive total cost of ownership, planning capabilities including FCC-mandated broadband data collection, BDC, reporting, and scalability. The customer was previously with one of our largest competitors and has signed a long-term agreement to deploy Cambium products. In Kentucky, Midway University selected Cambium's enterprise Wi-Fi, switching, and 60 gigahertz CNWave fixed wireless backhaul to upgrade their network. Cambium was selected due to our portfolio breadth and superior performance in both indoor and outdoor applications. Cambium's 60 gigahertz CN wave was selected to deliver high-speed access to remote locations that would have otherwise required expensive fiber to reach. In the Europe, Middle East, and Africa region, EMEA, we continued to have healthy demand for our enterprise business and continued to win larger projects. We received a substantial commitment from a service provider in Northern Africa for our new 28 gigahertz CN-Wave 5G fixed platform. We won this deal as a result of Cambium's quality, reliability, scalability, and our technology roadmap. We are two large managed service provider MSP wins in France for initial deployments in the hospitality vertical. These wins included Cambium's Wi-Fi 6 access points and CN Maestro X cloud management solutions. Cambium's one network makes it easy to plan, deploy, and manage affordable gigabit speeds for the home and enterprise. In the Asia Pacific APAC region, we had a strong quarter in the hospitality vertical with a sizable enterprise win at a large chain of luxury hotels in India for over 16 locations. Cambium was selected through a leading hospitality MSP partner for better oral Wi-Fi performance total cost of ownership, easy management with CN Maestro, and strong support. And in Caribbean and Latin America Cala region, we had a smart city win for the city of Rio de Janeiro for our enterprise business, including both our Wi-Fi 6 access points and CN Maestro X software to provide 5,100 Wi-Fi hotspots across the city. Turning to new product introductions, since our previous quarterly update. The industry is eagerly awaiting the availability of new six gigahertz spectrum to enable the delivery of gigabit data rates to the edge of the network. Cambium will have an industry leading position when our next generation multi-gigabit EPMP4600 product is released before year end. Approximately 10 customers are doing proof of concept of our technology. and we have already received our first significant order. One customer utilizing an experimental license achieved actual throughput of 1.8 gigabit per second at 1.5 miles with 1.2 gigabit per second download and 640 megabit per second upload to each subscriber module. Cambium's 6 gigahertz EPMP4600 leverages the significant technology advantages of 802.11ax standards technology and provide higher performance than our competition at a significantly more affordable cost. Use of six gigahertz for six wireless point-to-multipoint operation is available in the U.S. today on a limited and controlled basis. However, broad access will require use of automated frequency coordination, AFC. AFC, similar to Citizens Band Radio Services, CBRS, is Spectrum Access Service, or SAS. In that, it facilitates sharing of spectrum with incumbent users. We expect the FCC to approve use of AFC in early 2023. And as with CBR and SAS, we intend to provide a complete solution, including hardware and AFC services under CN Maestro. In the enterprise market, we are launching new outdoor access points in Q4, including a Wi-Fi 6 product for high-volume outdoor markets such as public Wi-Fi, hospitality, education, municipality, transportation, and logistics applications, and a connectorized Wi-Fi 6 and 6E software-defined radio targeted for outdoor use for higher education, stadiums, and campuses. In 60 gigahertz, we recently introduced the new CNWave V2000, which fills out our 60 GHz CNWave portfolio for the service provider market. The new product features longer range than our V1000 product and fills the mid-range customer needs. This technology is targeted for the CCTV, wireless internet service provider WISP, warehouse and logistics, and smart city markets. The product offers point-to-point connectivity with up to 3.6 gigabit per second and a range of up to one kilometer also within our 60 gigahertz cn wave product lineup we are introducing a one gigabit and two gigabit bridge in the box solutions which provide a pair of cn wave radios pre-configured for out-of-box operation for connectivity for up to one kilometer away the deployment friendly solution can be used for high bandwidth internet connectivity, including remote cameras or CCTV video feeds, for activities such as concerts, athletic events, farmer's markets, or to connect cabins, lodges, machine shops, barns, or garages. Within Cambium's 28 GHz CN-Wave 5G fixed, our 4x4 multi-user MIMO and software-defined radio architecture delivering 400 Mbps speeds was released in late Q3 and is now available. Our next version of 28 gigahertz CNWave 5G fix featuring even higher performance, including 8x8 multi-user MIMO and speeds of 2 gigabit per second will become available within a few quarters with a software update. Network operators are now able to support scale deployments for business and residential subscribers in urban, suburban, and rural locations at scale. After our Q3 22 quarter end, Cambium landed one of the largest PMP contracts in our company's history, a multi-million dollar per year, multi-year deal for 28 gigahertz CN Wave 5G fixed from a customer in the Cala region. We are very excited that customers have validated our technology, and we are now moving into the commercial phase of deployment with larger size deals. 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 Q3 22 was over 866,000, an increase of over 3% from Q2 22, and up approximately 21% year over year. For our premium CN Maestro X offering, we booked a major deal with a large service provider in Asia for 20,000 seats for fixed wireless broadband during the third quarter and are continuing to see healthy growth in revenue for this product. Revenue for CN Maestro X, which includes both enterprise and fixed wireless solutions, grew 227% sequentially during the third quarter. Turning to the channel, in Q3 22, we expanded our channel presence by adding over 285 net new channel partners sequentially and over 1,400 net new channel partners year over year, which represents an increase of over 2% sequentially and 13% year over year. We continue to expand our reach into new mid-market customers around the world. Also in the channel, in early October, Cambium participated at a well-attended WISPA Palooza trade show, which is focused on service providers and channel partners within the industry and featured several new product introductions from Cambium, including six gigahertz, 60 gigahertz, 28 gigahertz, home gateways and routers. Cambium's CN Heat RF mapping tool received the 2022 WISPA Association Service of the Year Award. CNHeat makes it easy for all fixed wireless broadband service providers to plan their fixed wireless access networks, assess the effective coverage of their networks, market their services to served addresses, and meet the FCC-mandated broadband data collection reporting requirements. Software is becoming an increasingly important part of Cambium's growth story. and is now showing up in more meaningful way in our financial results. I will now turn the call over to Andrew for a review of our Q3 22 financial results and Q4 22 outlook. Thanks Atul. Cambium reported revenues of $81.2 million for Q3 22.