Cambium Networks Corporation

Good afternoon. My name is Eric, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Network's third 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your questions, simply press star 11 again. Please limit yourself to one question and one follow-up question. Be advised that today's conference is being recorded. And now, Mr. Peter Schuman, Vice President of Investor Relations, Investor and Industry Analyst Relations, you may begin your conference.

Thank you, Eric. Welcome and thank you for joining us today for Cambium Network's third quarter 2023 financial results conference call and welcome to all those joining by webcast. Morgan Kirk, 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 results. 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 forecasted performance. These statements are based on current conditions, 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 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 and our most recent SEC filings, including our most recent Form 10-K and Form 10-Qs. 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, Morgan Kirk will provide the key operational highlights for the third quarter 2023, and Andrew Bronstein will provide a recap of the financial results for the third quarter 2023 and will discuss certain elements of our financial outlook for the fourth quarter 2023. Our prepared remarks will be followed by a Q&A session. I'd now like to turn the call over to Morgan.

Thank you, Peter. I'll begin by outlining some of the observations I've had and the initiatives I've started during my three-month tenure as CEO and why, despite our challenges and economic headwinds, I'm excited about Cambium's future. After a comprehensive review of Cambium Network's product portfolio, I'm impressed by the technology I've seen in both depth and breadth. Furthermore, I'm encouraged by the technical talent throughout the organization and believe that with additional direction, there is a wealth of opportunity to be exploited. I see possibilities in our future roadmaps by combining technologies from different areas of the business to solve networking problems more effectively. I have three immediate priorities. My first focus is in execution. This is in all aspects of the business and is about keeping our promises. A promise to deliver our innovations when we say what we say. A promise to deliver greater value than the rest of the market. A promise to use capital wisely, whether it is in cash or human capital. This say-do is the foundation of trust within the company and between us and our customers and suppliers, and is what I will use to help build a solid organization. second after an initial strategy session and discussion with customers i've concluded we often try to do too much spreading ourselves too thin so i am implementing a focus and simplify strategy where we are building core platforms that can be used to create multiple solutions this strategy improves efficiency and engineering reduces time to market and lowers product cost and support costs Focus is the key to success and requires the strength to decide what to do and what not to do. My third priority is to improve our go to market in specific areas where we can grow. We will place additional emphasis on those sectors that can be differentiated through product or services. I look forward to growing Cambium's top line revenues and returning the business back to higher levels of profitability. Recapping the underperformance of Q3 23 revenues. We had three items contributing to the shortfall in revenues during Q3 23. Our point to point PTP revenues decreased 37% sequentially and grew 3% year over year due to temporary US federal budgetary issues, resulting in a gap of more than $8 million in defense orders as compared to our initial Q3 23 outlook. we expect a significant portion of these delays to shift during Q4 23. Our point-to-multipoint PMP revenues decreased 12% sequentially and was lower by 10% year-over-year as inventories and channel reduced while waiting for the FCC approval of 6 GHz spectrum expected during late Q4 23. The approval is anticipated to drive sales of Cambium's new 6 GHz EPMP4600 and PMP450V product lines. On a positive note, our 28 gigahertz fixed products reported record revenues increasing 144% sequentially during Q3 23. Our enterprise revenues decreased 61% sequentially and decreased 93% year over year. Order for our enterprise business continues to experience headwinds, particularly in North America and EMEA, due to high channel inventory. Enterprise revenues were negatively impacted by stock rotations of approximately $9 million, of which approximately half were exchanged for enterprise products. Sales of Cambium products out of the distribution channel, as reported by Cambium's distributors, were significantly higher for Q3 23 than Cambium's reported revenues, and we saw a correspondingly large decrease in channel inventories for both enterprise and PMP products. While we're making good progress in clearing out inventories in the channel, this effort is not complete yet. We expect the channel inventories for Cambium's enterprise products to return to pre-COVID levels during the first half of 2024. Now looking at some customer wins that are key to our future success. In the city of Huntington Park, California, Cambium won the first phase of an American Rescue Plan Act funded city-wise initiative to provide internet to bridge the digital divide by equipping streetlights with Cambium's 60 gigahertz CN wave and outdoor Wi-Fi access points, highlighting Cambium's unique product set. In the Europe, Middle East, and Africa region, we had a multi-year win with a managed service provider to provide enterprise Wi-Fi for AB InBev, the largest brewer in the world, providing internet access to thousands of taverns across Sub-Saharan Africa, as a testimony to Cambium's central cloud architecture. In the Middle East, the Gulf of Suez Petroleum Company, and in the Asia Pacific region, Oil and Natural Gas Corporation Limited, both selected Cambium's suite of PTP, PMP, and CN Maestro cloud management solutions to connect large harsh environments, which exemplifies our product's reliability. And in the Caribbean and Latin America region, We had important wins with the largest hotel chain in the world with managed service providers single digits. The Fairfield Laquilo Beach in Puerto Rico is implementing our Wi-Fi 6 and switching solutions, and Cambium was recently selected for the AC Santiago in the Dominican Republic, which demonstrates continued acceptance of our product in the hospitality market. Turning to upcoming product introductions since our previous quarterly update. In the PTP business for defense communication, Cambium introduced a new smart antenna, the PTP 700 Beam Steering Outdoor Unit, which enables antenna alignment automatically rather than manually and high-level interference mitigation to provide secure communications in hostile environments. This product solves one of the biggest challenges in deploying wireless networks, which is antenna alignment, and subsequently, reduces the cost and weight of the radios. Cambium is also introducing a Wi-Fi 6 home mesh gateway solution. The Wi-Fi mesh gateway solution works seamlessly with our fiber and wireless backhaul products and features auto frequency coordination, content filtering, device bedtimes, a guest network, and a CAF2 compliance speed test. The hardware and customer apps can be customized and branded with the ability to do self-install and self-help. Looking at our CN Maestro cloud software, total devices under cloud management in Q3 23 surpassed 1 million for the first time in Cambium's history, increasing approximately 4% from Q2 23 and up over 17% year over year. On the human interest front, Cambium donated outdoor Wi-Fi equipment to the Information Technology Disaster Resource Center to help those displaced by fires on Maui. Within hours of installation, one hotel reported the number of connected clients increased by three times from about 50 to more than 150 connected devices. I will now turn the call over to Andrew for a review of our Q3 23 financial results and Q4 23 financial outlook.