Cambium Networks Corporation

Good afternoon. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's fourth quarter and full year 2022 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 star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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, Amy. Welcome and thank you for joining us today for Cambium Network's fourth quarter and full year 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. Certain revisions were made within operating expenses in prior periods to conform to the classifications in the current period. These revisions had no impact to operating income. 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 to 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 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 2022. And Andrew Brownstein, Cambium Networks CFO, will provide a recap of the financial results for the fourth quarter and full year 2022 and present our financial outlook for the first quarter and full year 2023. 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 fourth quarter with revenues of $84.5 million, increasing 4% sequentially ahead of the high end of our outlook of between 80 to $84 million announced during the Q3 22 quarter call. Profitability remains strong with a gross margin of 49.6% near the high end of the outlook and EPS of 36 cents exceeding the high end of the outlook. We had a strong finish to the year in North America with growth in all major product categories and sequential growth for our point-to-multipoint PMP solutions. After record-breaking results during Q3 2022 that included an incremental $5 million in switching revenues, as expected, our enterprise business returned to a normalized run rate in Q4 2022. For the full year 2022, our enterprise business grew 64% to $109.8 million, exceeding the high end of our original forecast. This is after growth of 67% during full year 2021. For 2023, enterprise growth will be from a much higher base, with our initial forecast of growth for the enterprise business of 20% to 30% as we continue to innovate with new Wi-Fi, switching, and cloud-based software solutions. and we continue to gain market share globally. We have grown from approximately 1,500 cumulative Wi-Fi customers at the time of our IPO in mid-2019 to about 18,500 at Q422. We are now at the start of the next wave of high-performance fixed wireless broadband deployments for our PMP business with a ramp of new gigabit solutions including 28 GHz CN-Wave 5G fixed products, an acceleration in the growth of our 60 GHz CN-Wave products, and the introduction of disruptive 6 GHz PMP products during Q4 2022, which delivers industry-leading price performance. Final FCC approval for outdoor use of the 6 GHz spectrum is expected around mid-year 2023. The FCC has already started approving special temporary authority licensing, STA, for proof-of-concept networks. Turning to the results of the fourth quarter 2022. Looking at revenues across our product lines, our PMP business revenues increased 14% sequentially and decreased 20% year-over-year, as service providers are beginning to move from our legacy PMP450 products to the new gigabit technologies. We did see an acceleration of growth for our multi-gig 60 gigahertz CN wave solutions as service providers are gaining an understanding of how to deploy the technology at scale to take advantage of the benefits of multi-gigabit bandwidth, low latency, and efficiency with hybrid fiber and cable networks. The PTB business revenues increased a healthy 38% sequentially, while improving 39% year over year. during Q4-22 due to higher shipments for our federal defense business in North America, as well as growth in EMEA and CALA using Cambium's PTP 700 mission-critical technology for fixed wireless broadband communications. Cambium has been selected to supply our PTP defense products to over 10 key programs of record, POR, for the Department of Defense. We expect continued strong defense shipments during 2023. As expected, our enterprise business declined sequentially, decreasing by $6.3 million, or 17%, after record revenues of $38.3 million during Q3 2022, which included the previously mentioned catch-up shipments for switching, while higher by $6.2 million, or 24%, year-over-year. The year-over-year growth was driven by increased demand for our Wi-Fi 6 and 6E solutions, switching revenues, and growth in our SaaS solutions. For the full year 2022, revenues of $296.9 million decreased 12% from 2021. The 2022 decline was driven by our PMP products, which declined 44% from the prior year, partially offset by the growth of our enterprise business, which had a record year, increasing 64% for the full year 2022, breaking the $100 million threshold for the first time in Cambium's history, while our PTP business grew 10% compared to 2021 revenues due to the strength of our federal defense business. It is notable that our enterprise business represented 37% of the company revenues during calendar year 2022, compared to 20% of revenues for 2021. In the long term, we anticipate our enterprise and PMP businesses will each represent approximately 40% of our total revenues as we ride the new growth S curves, while PTP will represent the remaining 20%. We do foresee the return to modest growth for the PMP business, driven by new product momentum in 6 GHz upon the FCC's approval, as expected to drive revenue growth during the second half of the year, as well as the continued ramp of 28 GHz and 60 GHz millimeter wave solutions, the new 5 GHz and 6 GHz products for both the ePMP and PMP450 product lines. Both 60 GHz and 28 GHz CN wave solutions have recently brought in several multi-million dollar deals, looking at some notable customer wins and new product developments. In North America, Salt Lake City placed an order for 60 gigahertz CN Wave connectivity as part of a smart city deployment. Cambium was selected for our portfolio breadth and ability to deliver backhaul and access with a single management platform. A division of the third largest cable television provider in the United States, serving 3.5 million internet subscribers, introduced a new business service for customers through our system integration partner, FutureTech. The service utilizes Cambium's 60 gigahertz CN-Wave solution to fit between fiber and CBRS assets as part of the new private network offering for multi-gigabit connectivity. We had a large order for 60 gigahertz solutions from a Canadian operator in Alberta, MCSNet, for a 60 gigahertz network build-out. They were attracted to our 60 gigahertz products as it offers gigabit speeds at a much lower total cost of ownership than fiber. They have already deployed in 12 communities so far with a goal of 44 connected communities during 2023. This is an example of where we are seeing a resurgence in our 60 gigahertz business after an initial period of gestation. In the Europe, Middle East, and Africa region, EMEA, we continue to have healthy demand for our enterprise business and are winning larger projects. Cambium had a customer win with a fiber network operator in South Africa, Isisway, for our outdoor Wi-Fi with the goal of connecting households up to 100 megabit per second and a disruptive cost model for the consumer. It this way aims to increase its number of homes connected from 4,500 in December 2022 to 22,000 in 2023. In the Asia Pacific APAC region, we landed our first network as a service NAS win to enable rural connectivity in Sumatra, Indonesia. This first NAS order in the region is for 500 homes and includes our Wi-Fi and CN Maestro X cloud software. This is in addition to our EPMP3000 for fixed wireless broadband access. Upon successful deployment of this first order, we expect a larger multi-year volume agreement. And in Caribbean and Latin America, Cala region, in Brazil, we partnered with Qualcomm in collaboration with the National Telecommunications Agency, Anatel, and Telium to demonstrate the first use of the six gigahertz band in an outdoor area in Campo Velo neighborhood of Sao Paulo. The connection featured Cambium's outdoor Wi-Fi 6 and 6C access points, 6 gigahertz EPM P4600 for fixed wireless infrastructure, CN Matrix wireless savvy switches, and CN Maestro X cloud management software. The demo became available for two months starting on December 3rd for visitors in the surrounding area. The demo included the use of automated frequency coordination, AFC, spectrum sharing platform to ensure that there was no interference with fixed point-to-point systems existing in that region, and to demonstrate its overall speed, performance, and reliability. Turning to upcoming product introductions since our previous quarterly update. While the industry is excited about the future availability of new six gigahertz spectrum to enable the delivery of gigabit data rates to the edge of the network and awaits FCC approval. Cambium also continues to push the envelope with affordable new 5 gigahertz solutions with our EPMP4500 featuring 8x8 MU-MIMO and over 3 gigabits of capacity with up to 80 megahertz channels and enables non-line of sight to select subscribers. The EPMP4500 is a powerful and transformative product which we expect will penetrate the market due to its high performance and affordability compared to other alternatives in the market, especially to take market share from our competition in the service provider space ahead of the FCC's approval of 6 GHz spectrum. 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 Q4 22 was over 898,000, an increase of 4% from Q3 22 and up 21% year over year. Turning to our channel. In Q4 22, we expanded our channel presence by adding over 425 net new channel partners sequentially, and over 1,300 net new channel partners year-over-year, which represents an increase of over 3% sequentially and 11% year-over-year. We continue to expand our reach into new customers around the world. I will now turn the call over to Andrew for a review of our Q4 22 and full year 22 financial results and Q1 23 and full year 23 outlook.