Cambium Networks Corporation

Good afternoon. My name is Jules, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's first quarter 2023 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, Jules. Welcome and thank you for joining us today for Cambium Network's first quarter 2023 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 and 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. 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 and today's financial results press release and our most recent SEC filings, including our most recent Form 10-K. 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 operational highlights for the first quarter 2023, and Andrew Brownstein, Cambium Network's CFO, will provide a recap of financial results for the first quarter 2023 and present our financial outlook for the second 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. In the first quarter of 2023, revenues grew 25% year-over-year, fueled primarily by our enterprise business, our largest product line, which grew 130% year-over-year. Our gross margin, EBITDA, and profitability remains very strong and exceeded the top end of our guidance, which is a testament both to the competitive differentiation of our products and our team's laser focus on controlling costs. We have built a broad portfolio of differentiated products as well as an efficient operating cost structure, providing us with the profitability to take advantage of the market trends and invest in new products. Cambium's first quarter 2023 revenues of $77.4 million were slightly above the midpoint of our outlook of between $74 to $80 million announced during the Q4 22 financial results call. Margins and profitability remained strong, with a gross margin of 52.1% above the high end of the outlook and EPS of $0.24, also above the high end of the outlook. Our point-to-point PTP results were affected by the timing of a large defense deal discussed during last earnings call, which we now expect to shift in the second quarter. Within our point-to-multipoint PMP solutions, which includes upcoming releases of new innovative products, including advancements in our 28 gigahertz CNWave 5G fixed products, 60 gigahertz CNWave products, And with a final approval of our 6 gigahertz EPMP4600 product, we anticipate PMP revenues accelerating in the second half of 2023. Further, late in Q2, we expect to release our exciting new fiber product, Cambium Fiber, which is powered by our CN Maestro network software, enabling network convergence from a single pane of glass. I will discuss Cambium Fiber in more detail later in this call. Turning to the results of the first quarter 2023. Looking at revenues across our product lines, our enterprise revenues grew 11% sequentially and increased 130% year-over-year as growth was driven by increased supply and strong demand for our Wi-Fi 6 and 6E solutions. Our PTP revenues decreased by 15% sequentially while improving 22% year-over-year. We continue to expect strong defense shipments during 2023 as we are engaged in an increasing number of global defense programs of record, POR. As expected, our PMP business revenues decrease sequentially, lower by 25% quarter-over-quarter and 28% year-over-year as service providers are moving from our current generation of PMP450 products to the new gigabit technologies, including 6 gigahertz upon the FCC's approval, which is expected to drive PMP revenue growth during the second half of the year. We expect an increase in revenues from 28 gigahertz and 60 gigahertz millimeter wave solutions and new 5 and 6 gigahertz products for both the ePMP and the new PMP450V product lines during the second half of calendar 2023. looking at some notable customer wins and new product development. In North America, we had an additional win with NextLink for 6 GHz ePMP to meet RDoF requirements ahead of the formal FCC approval. A service provider in the Midwest selected PTP850 for a next-generation broadband deployment. We were selected for our superior capacity, ease of deployment, and product reliability. We continue to do well in the enterprise education vertical with a win at a mid-Atlantic medical school, which included Wi-Fi and switching. This will be an end-to-end Cambium solution, and we were selected for our simple management, ease of deployment, and superior economic value proposition. In the Europe, Middle East, and Africa region, EMEA, in Italy, we displaced a competitor with a Cambium One network win at ERG. a renewable energy company that provides wind and solar plants across Europe for connectivity with a range of Cambium products including our PTP, EPMP, Wi-Fi, and switching solutions. We won this deal due to our strong portfolio of outdoor solutions with compatibility across the entire network and the ability to manage the network with a single pane of glass. In England, We won a 60 gigahertz CNWave deal with Vonius Broadband, one of the largest rural broadband providers in the country, rolling out high bandwidth internet to enhance the lives of rural communities. In the Asia Pacific APAC region, we landed a sizeable network as a service NAS deal for urban connectivity in Perth, Australia with Pantanet. This NAS order is for our 28 gigahertz CNWave 5G fixed to connect homes in the region and includes our CN Maestro X cloud software. The 5G service will increase internet service offering and capacity, increasing its ability to service and add more users at a higher data rate. The multi-year deal amounts in total to approximately $4 million. Cambium will also provide wireless connectivity for the 2023 Southeast Asian Games in May. This win is significant as Cambium displaced two Chinese competitors. And in the Caribbean and Latin America Cala region, Pemex, Mexico's large state-owned oil and gas company, selected Cambium's PTP products to upgrade their field operations communications and voice and data to field regional offices using our newest generation of unlicensed technology to increase bandwidth capacity. Turning to upcoming product introductions and developments, since our previous quarterly update. In the enterprise market, Cambium announced our high-performance outdoor Wi-Fi 6 and 6C tri-band solution, the Trade Agreement Act Compliance, TAA, and is now available for both national governments, including civil, law enforcement, national security agencies, and defense markets. This will be the first time Cambium can sell Wi-Fi solutions to a sizable U.S. government and defense market. Our enterprise business continues to expand with both new products and the ability to reach new customers and markets. Within our fixed wireless portfolio, Cambium announced that broadband service providers currently operating our PMP450 fixed wireless infrastructure can boost throughput speeds to their customers without replacing equipment. The latest innovative software improvements make it easy for service providers to offer over 100 Mbps services per subscriber using existing equipment to increase capacity and reduce network latency during peak periods. Also, new antenna options can increase range by 30% or more to offer 100 Mbps services to customers who were previously out of reach. With these recent improvements, service providers can maximize their investment in existing access points and subscriber modules by boosting performance with a software upgrade. During the past earning calls, we have spoken at length about Cambium's new 6 GHz solution, the EPMP4600, enabling the delivery of gigabit data rates to the edge of the network. The FCC is now engaged with test houses on the automated frequency coordination AFC process, with the expected FCC approval later this summer. The next transformational product to be released late this summer will be our next generation of the PMP450 platform. Cambium's workhorse solution used by thousands of networks globally. With a new PMP450V, Cambium PMP450V operates between 5.15 to 7.125 gigahertz in a single platform and features 4x4 MU MIMO and 1.5 gigabits of capacity. The product is backward and forward compatible, and as a software-defined radio, future-proof with the next generation of PMP450 line of products, offering a step function in performance. This summer, we will have a significant new product launch with our first-ever fiber product named Cambium Fiber, offering network convergence from a single pane of glass management Cambium Fiber offers the most advanced passive optical network PON technology for a complete end-to-end solution. The solutions for service provider offer a combo SGS PON 8 port OLT and 16 port OLT with ONTs for both indoor and outdoor use. The solutions are managed via CN Maestro X, our converged single pane of glass addressing both wireless and fiber management. The solutions also enable service providers and enterprises to go from fiber to wireless to Wi-Fi routers, all within a single pane of glass. Interest in the product is extremely high with our initial target market of our current installed fixed wireless broadband customer base, enabling network convergence and ease of procurement from our channels. Looking at our CN Maestro cloud software. Total devices under cloud management in Q123 was over 928,000, an increase of over 3% from Q422 and up 17% year-over-year. Turning to our channel. In Q123, we expanded our channel presence by adding approximately 500 net new channel partners sequentially and over 1,700 net new channel partners year-over-year. which represents an increase of approximately 4% sequentially and over 15% year-over-year. In March, we held a well-attended executive managed service provider MSP event at our San Jose, California office to facilitate future revenue growth during 2023. We continue to expand our reach into new customers around the world, particularly for our enterprise business. I will now turn the call over to Andrew for a review of our Q123 financial results and outlook for Q223 and full year 2023.