Q2 2020 Cambium Networks Corp Earnings Call
My name is Justin and I will be a conference operator today at this time I would like to welcome everyone to the Cambia networks second quarter 2020 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 answer session.
It's a question you'll need to press star one on your telephone please limit yourself to one question and one follow up. Thank you Mr., Peter Schuman Senior director of Investor and industry analysts Relations you may begin your conference.
Justin Welcome and thank you for joining us today for Cambium networks second quarter 2020 financial results conference call and welcome to all those joining by webcast a tool bought an older our president and CEO, even coming our CFO are here for today's call. The financial results press release, and CFO commentary referenced on this call or accessible.
The Investor page of our website in the press release has been submitted a form 8-K with the FCC.
Copy of today's prepared remarks, we'll also be available or investor page at the conclusion of this call as a reminder, today's remarks, including those major acuity 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 result.
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 the actual results or make changes in cambium expectations or otherwise.
It is cambium networks policy not to reiterate our financial outlook, we encourage listeners to review.
As a risk factors included in the Safe Harbor statements in today's financial results press release.
We will also reference both GAAP and non-GAAP financial measures and specifically note that both 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 press release, which can be found on the investor page of our website and in today's press release and now.
During our results.
Turning to the agenda cambium networks, President and CEO to a button augur well provide the key investment highlights for the quarter, It's Steven coming Kim network CFO will provide a recap of the financial results for the second quarter 2020, and he will provide our financial outlook for the third quarter 2020, our prepared remarks will be followed by acute.
In a recession.
I'd now like to turn the call over to a tool.
Thank you Peter.
We've always said wireless broadband connectivity lightly and essential infrastructure for people around the world.
And is a lifeline for most communities.
Fixed wireless broadband is a critically important networking fabric being executed by Fiveg standards to connect our local communities and the importance has speed, especially true in light of the current environment.
The increases in that book traffic continues to be driven by work from home E learning and the Seculert dreadful broadband communications and infrastructure projects remaining get top priority throughout the world.
His second quarter's results reflect an inflection point for cambium financial performance and Mark the start of significant new product introductions.
Which will continue over the next couple of quarters.
These new product introductions will be material to our financial results for many quarters into the future.
Cambium that Brooks has no entered the era of wireless internet speeds equal into data fiber.
Our multi gigabit wireless fabric, which can be controlled from a single pane of glass.
Can deliver performance ended loved or do you have five were at a fraction of the cost with our new life by six and the addition, so far upcoming 60 gigahertz millimeter wave solutions, followed by our five used when do you guys products.
Further expanding the serviceable addressable markets Sam for Cambium.
We are already engaged with multiple customers on 60 gigahertz C.N.V. and already won several RFP from larger customers in multiple geos.
Wireless can now be extended two places, especially at the edge of the network with fiber could not go cost effectively.
Certain greenfield environments, it will not be necessary to deploy life I wouldn't it books adult.
And with older Wired and that books exists capacity can be added with the wireless rather than replacing them with costly fiber or other wired technologies, which are hard to install.
Fiber is no longer the only answer too high speed that sits in many situations.
Finally can be on will be and drink urban markets. In addition to high density suburban markets and middle markets as almost 60 gigahertz CMBS solutions deployed wireless at the speed of fiber.
As we like to see at Cambium Netbooks wireless is the new fiber.
This is all managed like ambience cloud based software seeing Maestro I was single pane of glass in the club.
Turning to that as those so far second quarter Twentytwenty.
We achieved revenues of $62.2 million.
Above the high end of our meatballs outlook of between $51 million to $56 million.
And ahead of the July it isn't already revenues of approximately $61 million.
Non-GAAP diluted EPS of 16 cents also exceeded the high end a far mutuals outlook of five cents per diluted share.
We executed very well during the quarter with a strong performance by the entire cambium team as we continue to work remotely during the <unk> pandemic.
We would like to express our gratitude to our worldwide cambium employees for their resiliency and strong loyalty by our channel partners.
Looking at some notable customer wins and new product development.
During Q2 20, I'm pleased to report Cambium Netbooks continued to have several high profile customer engagements.
In North America, It lost service provider in North East, Texas for writing commercial and residential access has selected cambium notebooks for network upgrade using BMP for could be EM and PTP it wouldn't be.
'cause resulted in a supply agreement that will you called in some devices delivered or the next year.
This selected cambium put reliability.
Scalability and spectral efficiency.
A large managed service provider MSP in northeast surfacing campus healthcare Department of defense and federal customers silicate cambium put a nationwide lifeway deployment.
Thousands of access points will rollout or the next year.
This was a highly competitive win and can be was selected for our superior Multitenant cloud management, what switches and access points of delivering it lower total cost of ownership.
In the education vertical the local school district in South, Texas through the crew Novartis eight relief and economics good idea.
Also known as the kids that is using cambium wireless fabric in conjunction with US citizens broadband radio service CBR us without being people are 50 m.
Combined with our enterprise life I solutions to provide intended for remote learning as a result of the goal would lock down.
The school district is listening cluster, so far BMP for 50 M. on $6 throughout the district combined with approximately 1000 subscriber modules look good on local utility poles across underserved communities to provide internet access.
Cambium that Brooks is one off if not the only manufacturer that can for Widebodies do but these type of created an end to end performance solutions with the wireless fabric to connect unconnected.
And managed from a single pane of glass in the club.
On basketball's, we've spoken about the federal communications commissions newly released see gigahertz C., we gotta spectrum.
Cambium is for smaller with this technology.
Spectrum is the freshest to source for an operator and CBR. It provides advanced technology to share bandwidth effectively.
And can be them as a full end to end solution, including high performers radios and cloud based software solutions.
On our Q1 20 earnings call, we disclosed having over 19000 devices managed by our CB ought to sat service.
As of today's calls we now have approximately 44000 devices managed by our CBR assess service.
So you'd be autos is driving new sales so far P.M.B. for 50 products in North America.
Our success with the dynamic spectrum sharing model using CBR us in the United States has the potential to be replicated in additional geographies as the model continues to mature and demonstrate significant benefits what operators and users.
Can you imagine or dozens of new CRM customers in Q2, ranging from small proof of concept you'll see.
[music] regional Rollouts.
Got it must have lifted our before 50, mplus CBR due to its simplicity compared to L.D. competitors.
Hi performance features.
Massive m. you mimo.
And can be able to attractive go through cost of ownership.
In addition, BMP for could be endless purpose built for delivering reliable fixed wireless access and offer superior network management capabilities for fixed wireless service providers.
In the Europe Middle East in Africa region EMEA.
We are seeing ongoing increased demand from service providers as increased capacity to the net Brooks and add new subscribers and discovered environment.
We added a significant number of new service providers in eastern Europe during the second quarter.
Across the so before I go to market in EMEA Cambium sees study demand for its technology as new service provider switched to cambium broadband solutions, an existing service the widest expand and 45000 networks.
If you strategic wins in EMEA from Q2 include the bullish health administration silica cambium to deployed lifeway access solutions into doing than 32 hospitals across the country.
Lets them for we got our first wife I six when would the international school of Luxembourg, We provided hundreds of our new high in.
Hi, six devices and Zerust SMS cloud management to support 1700 students and teachers.
In Nigeria is service provider named city expanded its network with cambium, becoming the country's largest public life I offered using cambium Cnpad third wife, I solution backhaul or eat BNP fixed wireless broadband solution.
Additionally, we have one service provider projects in several other African nation.
And the battery Jim Bloem, one of the largest Philippines service provider selected cambium that drugs for reliable and quickly deployable backhaul using our BNP product.
Groups elected cambium, because I thought it reliability scalability to been strong and sustainable business model.
Quality of service and the ease of management with our cloud managed Cien Maestro software.
In American some more U.S. territory, covering South Pacific Islands Cambium, one is sizable contract to provide CBR as services using our B M before for the EM and 450 be products.
And Chris had been in Latin America, Carla if you don't want service provider in Brazil has selected the PT before from <unk> to provide fixed wireless broadband access to enterprise customers.
And I'd be more Amazon region of Columbia, Cambium is providing internet access to an isolated hospitals.
Sends a failed will be Shia the only public hospital in the region.
Hospitals will be using both cambium indoor and outdoor see in pilot lifelike solutions Lifepoint will enable the use of telemedicine at the hospital to add to assess and enhance the health of the inhabitants of the region.
Looking at new products launched since our previous quarterly update.
Cambium that Brooks relieves the first of all our new high performance Enterprise life by six solutions on June 24.
Cambium skin words zeros and see inspired by for six brought portfolio alongside news see an metrics wireless sabby switches cost effectively serves a wide range of business needs.
Our cloud for solutions offered a superior and use the performance and disruptive economics that enable a broad spectrum of enterprises to focus on their business outcomes rather than on managing their networks.
Mid and large size organization benefit from our software defined radio is.
And high density architecture to reduce the amount of equipment acquired and leverage automation.
The reception to date.
Our new life by six products has been excellent with initial shipments during the second quarter, a solid orders going into the third quarter as the product portfolio to them.
One of our customers not to what I T was quoted as saying there's no other window that can deliver this feature set at this price point and deliver white fivesix.
Another customer from North West, Missouri State University commented, we have seen impressive performance from the cambium by six solutions.
Our first products release included the high density high performance actually three dash eight like play at this point, which offers aided by a massive mimo technology offering four times, the duty and lower latency the prior technology and Leverages, our cloud managed approach which increases.
Ease of use an operation for system antennas and software upgrades.
And the performance category, we also announced in July Albert excuse to Dutch two product into back to solution.
In addition to before new cloud manage enterprise switching products in the C N metric yet to get families. The lease during the second quarter.
During the third quarter Twentytwenty, we would be the leasing for at least a little wireless savvy switches.
Entry level enterprise switched family.
You see in metric you won't get family is targeted to the value category for small and medium sized businesses.
Unlicensed spectrum.
Cambium Netbooks would release, our next generation fixed wireless broadband L.D. black from Cm Ranger for Threeq gigahertz spectrum. The product is expected to be widely available, but shipments commencing in the third quarter CN range. It integrated with our seeing maestro cloud platform.
This is in addition to be forced fixed LT, you products, which operated in two gigahertz spectrum.
C. N Ranger is an ideal solution for Internet service providers, providing cambium that from an opportunity for the larger footprint with the or two carriers and industrial customers.
In late Q3 cabinet for lunch one of our most important fixed wireless networking solutions in many years, you got a bit wireless solutions for the residential and enterprise access and backlog for wife or small cell markets.
Oh, 60, gigahertz seeing wave utilizes millimeter wave technology.
That's standards based commercial silicon, coupled with an advance mushing technological telegraph provided by Facebooks connectivity Division.
Oh 60 gigahertz CMBS solution enables service providers to reliably provide you go bid for second bandwidth to the home and business.
Equivalent to the speed of fiber and economically.
The technology and capability willing will be increasingly relevant for urban use.
This is for many years ago.
We've been together our networking solutions, we continue to experienced strong growth in accounts utilizing C. N Maestro cloud our end to end cloud power connectivity solution to managed and Darden network from a single pane of glass.
Doldrums devices under cloud management in Q2, two and three to 452000, an increase of approximately 10% from Q1 20 and up 52% your audience.
Turning to the channel.
In Q2, two and D., we expanded our shelf presence by adding over 500, new channel partner sequentially I know, what 2000, New channel partners year over year, which represents an increase of approximately 7% sequentially and 35% year over year.
The covert pandemic has shown that there's a digital divide doesn't exist in many parts of the United States <unk>.
The study shoe cambium Netflix is supporting them next drawn to connect America funding called rural digital opportunity fund or our dog.
Which is currently being evaluated by FCC for computing $20.4 billion in funding over the next 10 years to bring high speed broadband service to millions of Unserved Americans.
This represents almost 10 times the value of the present connect America fund fees to funding.
Under our debt off their afford to your self service with the highest level of service one gigabit download and 500 Megabits per second upload.
I'm pleased to report the FCC approved fixed wireless broadband as the highest here for the highest to Europe service.
This is a win win for both cambium and our service providers.
Also in the channel, we have instituted new programs and tools to help partners distributors and Msps grow revenue and transition enterprise customers to our new life by six technology.
Cambium, New channel investments include an upgraded partner portal.
Total cost of ownership DCIO profiler software tool for quickly come peering deployment options for cambium versus a number of sort of life like competitors.
Expanded free online training virtual online demonstration capabilities and expanded digital marketing funds.
These new programs and tools enable partners to sell deployed and managed cat premiums new life, a six products, including our two new life fight sticks at six point.
Six new multi gigabit wireless service switches and enhance cloud based software lifeway designer and Lifeway Inspector that simplifies wireless network design into place.
I'll now turn the call or to sequence, but if you up our Q2 20 financial results and outlook.
Thanks to.
Our outlook of the stocks at the second quarter resulted from our concern over our partners ability to install our solutions during the cozy pandemic.
I'm pleased to say the second quarter results reflect the increased amounts that can be in high quality products. The resilience of our partner community the strength of our bookings and better than anticipated demand ahead of new product introductions during the second half of kinda twentytwenty.
Revenues $62.3 million for Q2, 20 Canyon above the high end of our initial outlook, a $51 million to $56 million and above our revised outlook of approximately $61 million released on July eight.
Revenues increased by 3% COOLTRANS, a quota and decreased by 10% year over year from $69.2 million.
On a sequential basis. The Q2 20 revenues were higher by $1.9 million or an increase of approximately 3%.
The high revenues were driven by Pam pre products, which grew 16% quarter over quarter due to service providers scaling networks, driven by request for increased capacity and better than anticipated feel deployments.
Q2, 20 revenue growth was offset by lower demand PTP products with revenues look like 4% sequentially due to the timing of U.S. federal programs, which are expected to materialize during Q3 20.
As expected our enterprise Wifely solutions declined well, they performing better than anticipated decreasing by 33% quarter over quarter with weakness centered around the hospitality and retail verticals. As this business was challenged by the impact of global shutdowns and other restrictions to combat the Kobe pandemic.
Looking at revenues by geography, North America represented 52% of company revenues compared to 51% during Q1 20.
On a quarter over quarter basis, North America grew 5%, primarily driven by PMP with wife myself to due to the impact from Cobi.
EMEA second largest region increased 9% portrays a quota and represented 33% of revenues during Q2, 20, and 31% of revenues during Q1 20.
The quarter over quarter improvement in EMEA, primarily reflects increasing PMP revenues from both existing service prices, adding capacity and new service providers building out networks offset by weaker enterprise wide site revenues.
Callout represented 7% of revenues during Q2 20, decreasing by 11% for the quarter with Brazil, particularly impacted by the code they sent them it.
ATAC represented 8% revenues during Q2 20 declining by 13% from Q1 20 impacted by cobot related Lockdowns in the region.
Looking at our gross margin.
Non-GAAP gross margin of 49.2% decrease by 90 basis points compared to Q2 19.
The year over year decline in non-GAAP gross margin was the result of lower mix of high and much in defense and enterprise wide products increased inventory reserves and high shipping costs, partially offset by key initiatives put in place focused on cost reductions and supply chain efficiencies.
Non-GAAP gross margin in Q2, 20 was 100 and by 80 basis points lower than Q1, 20, the lower quarter over quarter non-GAAP gross margin was the result of low mix of high margin products increased inventory reserves, partially offset by key initiatives put in place focused on cost reductions and supply chain efficiencies.
In Q2, 20, a non-GAAP gross profit dollars decreased by $4 million to $30.6 million compared to the prior year decreased by $156000 sequentially.
We continue to make progress towards our longer term goal of achieving an annual non-GAAP gross margin target, 51% to 52%.
Non-GAAP operating expenses research and development sales and marketing General administration, depreciation and amortization in Q2 20 decreased by $3.4 million when compared to Q2, 19 and stood at $24.1 million or 38.8% of revenues.
When compared to Q1 20, non-GAAP operating expenses decreased by approximately $3.6 million. The majority of such as the year over year end sequential decrease in non-GAAP operating expenses was primarily driven by the benefit about cost restructuring activities low wages due to the temporary companywide salary.
<unk> reductions as well as lower discretionary spending and sales and marketing due to less travel and tradeshow expenses impacted by Cody.
Non-GAAP operating margin was 10.4%.
From 10.3% for Q2, 19 and increased from 5% of revenues in Q1 20.
Adjusted EBITDA for Q2, 20 stood at $7.7 million or 12.3% of revenues compared to $8.1 billion or 11.8% of revenues for Q2, 19 and up from $4.4 million or 7.3% of revenues for Q1 20.
We remain committed to driving our adjusted EBITDA expansion to our target model of 18% to 19% of revenues over the next few years.
Cash flow provided by operating activities was a record $26.2 million for the second quarter of 2020, primarily the result of improved profitability strong collections, resulting in significant decrease in accounts receivable of $11.6 million an increase.
Yes, and accounts payable of $3.6 million and a continued reduction in our inventories.
This compares to cash provided by operating activities, a $6 million for the second quarter of 2019, an $800000 cash used in operating activities in the first quarter of 2020.
The strong operating cash flow during the second quarter.
2020 reflects the cash generation potential about business.
Non-GAAP net income for Q2, 20 was $4.3 million or 16 cents per diluted share compared to $3.9 million or 15 cents put to the chair for Q2, 19, non-GAAP net income of $1.4 million or five cents per diluted share for Q1 22.
Hi, a non-GAAP net income compared to the prior year period was due to lower period expenses as a result of the benefits from our restructuring temporary cost saving measures lower sales and marketing expenses and lower interest expense due to reduction in long term debt.
The increase in non-GAAP net income compared to Q1 20 was primarily attributable to lower operating expenses due to a cost containment efforts temporary cost saving measures.
Lower sales and marketing expenses as a result of the impact of 'cause it.
Turning to the balance sheet cash totaled $37.4 million as of Q2 20, an increase of $13 million from Q1 20.
The sequential increase in cash balance during Q2 20 was primarily the result in improved earnings.
Non cash collections, resulting in a decrease of accounts receivable and increase in accounts payables decreased in inventories offset by a pay down $10 million on the revolver.
As a result of the stronger than expected performance, we made the decision to pay down the $10 million revolver. During Q2 20, excluding the pay down the role that cash would have increased by $23 million quarter over quarter.
Q2, 20, net receivables totaled $51.3 million, a decrease of $11.3 million from Q2, 19 and decreased by $10.3 million sequentially.
Day sales outstanding for the second quarter stood at 66 days, a decrease of 10 days from the prior year and a decrease of 20 days from the first quarter of 2020 as a result was improved linearity of the business and the timing of collections from several several customers, which it could during the first month of the quarter.
In Q2, 20 days payable outstanding stood at 57 days a decrease of two days from the second quarter of the prior year and four days from the first quarter 2020.
We made good progress, reducing our inventory dollars 10 days net inventories at $30.1 million in Q2, 20 decreased by $6.9 million year over year and were lower by $2.4 million from Q1 20.
We continue to reduce inventories towards our target model of 80 to 90 days inventory days stood at 90 days down two days compared to Q2, 19 and down by 22 days from them on the end of March.
In summary, we took early and decisive actions to align our cost structure in response to the koby pandemic.
We are focused on our objective achieving our long term target operating model by accelerating growth in improving our cost structure and operational efficiency.
As we entered Q3, we now have improved visibility into our business.
Well, we are not yet providing full year 2020 outlook due to the possibility of a second way because we do expect revenues to increase quarter over quarter for the remainder of the yet as we have the benefit of new product introductions during the second half of Twentytwenty.
As a result, the approved outlook and cash position, we have decided to eliminate the temporary cost measures in regard to employee salary reductions.
I'm grateful for employees perseverance and fortitude during the period of uncertainty.
Moving to the third quarter 2020 financial outlook.
Please note the cambium networks financial outlook does not include the potential impact of any possible future financial transactions haendel pending legal matters or other transactions. Accordingly Cambium network. Only include such items, you know financial outlook to the extent they are reasonable however, actual results differ.
Every from the outlook.
Considering our current visibility as of August 11, 2020.
Q3, 20 financial outlook is expected to be as follows.
GAAP revenues between $64 million to $67 million.
Non-GAAP gross margin between 49% to 50%.
Non-GAAP operating income between $5.3 million to $6.4 million.
Non-GAAP net income between $3.2 million to $3.8 million well between 12, and 14 cents per diluted share.
Adjusted EBITDA between 6.4, and $7.4 million, an adjusted EBITDA margin between 10 and 11.1%.
Non-GAAP effective tax rate of approximately 17% to 18%.
And approximately 26.6 million weighted average diluted shares outstanding.
Turning to our cash requirements.
Paydown of debt of $2.5 million interest expense of approximately <unk> point $9 million.
And capital expenditures of between 900000 to $1.1 million.
I'll now turn the call back to a tool for some closing remarks.
We're very pleased with the second quarter results and improved outlook as we entered the third quarter.
Cambium Netbooks will continue to manage our business for the goal of growth and profitability.
Our balance sheet strength, and we have shown what type of cash attrition as possible with good execution.
At no point in our company's history has cambium netbooks being better position to win business based on the superior value derived from proven high performance high quality and affordable products, providing end to end wireless connectivity managed by our cloud based C N maestro solution and matching end to end feeds off.
Fiber.
Fixed wireless broadband is critically important networking fabric being accelerated by Fiveg standards to connect our local communities.
The seculert trends driven by the covered environment.
Have shown how white to an essential wireless broadband connectivity infrastructure is for people around the world.
Working from home is no longer it luxury for many people it is a necessity.
And a lifeline for most communities.
For those listeners new to cambium that Brooks.
The key secular drivers for our growth over the next several years.
In addition to the need for our existing portfolio solutions, but do you have to into your two service providers and midsize enterprises RV and distributed release of new gigabit wireless products as the next several quarters unfolding.
Such as enterprise life by six.
60, gigahertz and when do you go hard and millimeter wave solutions for fixed Fiveg wireless.
And the continued adoption of CBR, that's compared to one solution.
We expect faster than market growth for our enterprise wife, I solutions based on by five six adoption.
Finally.
We are starting to see growth of our cloud software as a service business models generating record revenues.
Cambium that Brooks is very well positioned as a gigabit wireless leader for global markets.
And as an affordable you get high quality competitor offering so for reliability and scalability.
We have the right products at the right time.
The right team in place to deliver outstanding results for both our customers and shareholders.
This concludes our prepared remarks, so with that I would like to turn the call over to Justin.
And begun the QNX session. Thank you.
As a reminder, please limit yourself to one question and one follow up question now to ask the question you'll need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the kuni roster and once again that is star one asked a question and our first question comes from Paul coaster from JP Morgan.
Your line is now open.
Yeah. Thank you for taking my questions a nice prints so a.
Couple of things one is on the growth from nothing I heard you say, Steve <unk>, we're going to see sequential growth.
The next two quarters since year end, then is that with the full benefit over the new product cycle pitching in or is that still.
So we're playing out into the first half Oh 2021, and most <unk> I'm sorry. My question you know how is it that you could suddenly see where you can see this recovery and growth.
Even though a new products were pending normally that causes customers to slow down in advance of the new product cycle.
Paul first this is ideal for suppose thank you for the question.
The new product introductions of life I think already started with Q2.
Generally what I find is a it takes about three to maybe five months of Loxo fuel sees then the expansion star some white Fivesix expansion will start in second half.
Because those people season, which people started using.
End of Q2 early Q3 will start to mature.
The 60 gigahertz, we'll introduce towards the end of Q3 and that will enter view sees in late Q3, and then continue in Q4. So I think six to guard, we'll see some escalation in Q4, but most of it would be I think when do you want.
So overall, we are pretty much the lifecycle is well understood by us.
In terms of you know second half versus 20 to 21, we'll see definitely luqman acceleration for new products.
Yes.
Just to add to that pool.
You heard from our prepared remarks, right Pnp business.
Grew 16% sequentially. So it was stronger than than we had anticipated and where we're seeing a bit of a secular story here with the start of the upgrade cycle on these new products and requiring more gigabit speeds and then you overlay that with the work from home dynamic.
Where are we seeing a lot of service providers now having to invest in in a new infrastructure given increased demand on on the network as customers upgrading that service or requesting the this is where they didn't need them before as they change their lifestyles.
Some some more rural locations. So our portfolio is well positioned highly reliable and highly scalable and with benefiting as a result of that.
The other thing well thought through Stephen I'm not totally you know you will see we're still produces the your food seems to have improved your poor costing seems to have improved receivership gotten some bitten twice in a row now.
We must change what is it that's happened that's my Youre forecasting, but ER and what is it that's happening, but improving visibility say mid market at the moment.
Yeah, I think that pull this is David again, there's a few things happening now and we have spoken about them in the past, but I think we sort of.
Can you to refine them and improve them.
But the company's being doing a lot of.
Working in terms of it losing its visibility and predictability of the business.
Ultimately trying to improve the the linearity of a business and we've spoken about some of these things in the past such as DST incentive plans, we implemented a a channel management tools. So we really look good and dinner and demand dynamics with a with the end customers and getting onto.
Attributed to report Pos and inventory and I would say on top of that that what happens in a in probably the last few quarters is you know some of our customers are a little bit skittish, there's got to supply so that tending to get ahead of this earlier and and booked earlier and provide us with widmore.
Visibility. So we started to see that happened in Q2 and its continuing to into Q3, and so that gives us a you know the covenants to Ah to guide where we guide.
<unk> <unk> and I think there's no question.
<unk> has made fixed wireless broadband lot more relevant.
And in some cases, it doesn't accelerated the technological transition by one year and in some cases, even by be more than I look at the video for example, the adoption of video it would have taken probably two years three years for video to go to this range of.
The usage, so I think the school would has accelerated the transition.
Got it thank you very much.
Excellent. Thanks.
And thank you and our next question comes from Simon Leopold from Raymond James Your line is now open.
Appreciate it. Thank you. So first thing I want to ask about was I think Stephen you <unk>, you mentioned ending the the temporary salary reductions.
Just wanted to get a better sense of what we should look at as really the baseline for for operating expenses I'm thinking it's around 28 million in the September quarter, but just wanted to make sure I understand what this means.
Yeah. So.
We did we did and the temporary or cost reductions and we have a salary reductions and were very thankful for our employees going through that pain I think from a baseline perspective guidelines.
Guidelines based on the guidance I've, given you you're probably looking at the midpoint of our guidance of around 26, six with regard to Opex and that.
In incorporates I would say the majority of those temporary salary reductions coming in on some of them didn't get reinstated until right at the beginning the quarters. So as you as you look to sort of Q4, extending may come up a little bit more I don't think we can it get back like frankly to that 28 million.
In dollar level remained remember we've gone through fairly substantial restructuring initiative that we announced in a in Q4 Q1 and and that's largely taken effect you know numbers now. So I think you just want to your question directly 2026 six is the number for Q3, and maybe up a little bit more from that so for Q4.
Great no. Thank you that that's very helpful and I wanted to maybe double click on on how to think about the why phy business and the trajectory. So your explanation for this quarter's wildfire segment makes a ton of sense given the current environment.
I I guess I'm struggling to try to really think about and visualize what what a recovery looks like for that line of business. How should we think about you did mention growing faster in the market that really is not a very high bar. So I guess I'm looking for some better insight as to what your expectations are for where.
That business goes longer term. Thank you for the seven let me take the question.
So why flying a where we see shrinkage in Q2 is hospitality and retail.
And no question those segments had been hit.
But where we are seeing no more positive economic activity is education.
Education institutions are fortifying.
Online you know tools technology the everywhere.
That includes indoor and outdoor so that's one segment, we are beginning to see good activity in our in our regions like me on North America.
Number one secondly, the government local governments did government, they're all looking at many outdoor wireless public areas I think those projects are also accelerating health care.
I think before covered we were not doing as much health care, but as you even from the commentary well this quarter and last quarter. Many hospitals midsize hospitals are adopting cambium solutions worldwide.
So I would say those are the probably segments, where we will see good activity in us in second half and then as Ur Cobot hopefully is handled by the end of year. I think you will see he will then be other segments, where we were squeeze in 21, they accelerate so overall.
All I feel the white five will.
Gross reasonably well.
Especially as we come up so you can you want to add some Ah, yes, just to quantify that more and you know I don't need to adding tool was spot on with your comments, but just give you. Some some numbers around it. So you had for my prepared remarks that wife, I was was down 33% for us in Q2, and obviously a retail hospitality.
He led the charge there and I won't go but the market that we talk about in terms of of being a bit stronger either tool just mentioned, but I think just to give you. Some idea of white fight for us in Q3, we're going to see that sequentially move off without low what made lower to mid twentys in sequential growth as we.
We go into Q3, and not see driven by some of those verticals tools just referred to.
Great I appreciate that detail. Thank you.
Great. Thanks Simon.
Thank you.
And our next question comes from Rod Hall from Goldman Sachs. Your line is now open.
Hi, This is archaeology off a flawed. Thank you for taking my question could you give some color on the visibility you have by geography and.
And also talk about any patch from call. It did you see approved for what in demand and to what extent did you see the negative impacts.
Okay.
Let me give you the broad question I'll give you a just a high level answer I think the visibility.
By the Geo, we have excellent visibility North America.
And very good visibility in that area as well.
Where the visibility and impact of coal would impractical bid isn't everyone, but I think where the impact of covered is probably little more CV or is that what's the Asia and some specific countries in cala like Brazil.
And there.
I would also say that it though people kind of a sequel would impact some of those countries have economic impact going on even before it does have covered has a access celebrated the situation the little bit made it a little more serious I would say visibly device good visibility in North America, good visibility in EMEA and.
Some countries in Carla less the little more opaque like Brazil, or and then issue definitely places like India are impacted with go that far more seriously. So hopefully that gives you a color.
Yes, that's really helpful that any commentary on two forward in demand.
Yes, the pull forward in demand.
So maybe some in fixed wireless broadband you can see as people are scaling the network, but not really understands that some of those metrics will also ready for transition to a higher speed.
So maybe from a specific areas there might be pulled forward, but I wouldn't say, it's something the extraordinary I think we will see seculert steady state growth and the fixed wireless broadband as we kind of visualize next several quarters. Yeah. I mean, I think that's it I think we're seeing you know just and I said this earlier we see.
Got a little bit higher booking activity as you know distributors want to get the orders on the book soon to ensure supply, but I don't really think we're seeing much in a way of.
That's very helpful and Steve could you could you give us some more color on the guidance by segment you talked about why type, but could you talk whatever she wants to.
Ah, Yes, I can bear with me I've got a breakout.
Can you just.
Yes, so overall, our midpoint of our guidance a is roughly up about 5% sequentially and as we said in general we're seeing some good bookings performance or some regions stronger than others. So with we're cautiously optimistic and still a lot of uncertainty.
With regard to to cultivate on on some of the impact in some regions like a pack, but from a from a a product perspective, we expect P. M. P to grow low single digits sequentially, I remember that coming off a very strong.
Q2, which grew 16% sequentially in the service providers.
Really driving that growth PTP will be low double digits sequentially in Q3, as we see some of those federal and defense programs start to come back and obviously a lot more opportunity we spoken about this in the past as we look to 2021, there but with.
Starting to see some some she's a recovery there and then wildfire I've already covered I think that's gonna be low to mid Twentys sequential increase Europe's coming back online the verticals a tool mentioned and a nice portfolio of new products from my wife, I six launch will help that refresh cycle.
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Great. That's very helpful. What's fun question, if I mean, you all lumping them I'm talking politics, like why six millimeter wave.
She went into next year could you give us some color on how material he's going to eventually.
[noise], Oh, well, let me I think these products as I said.
It takes a few sees the good three to five months a good for you'll see we focus a lot on quality.
These are wireless products, which are you know video and what I'm going to do one as well. So we learned a lot in those policies and then they accelerate so all the products were describing their life is actually not one or two years that like three years four years five years and a there's a full lifecycle of acceleration stabilization them they cannot be.
<unk>. So we do though long range products I think one point automakers that solution. We are seeing is not the suddenly we have done something right.
We have been working on these things for two years 18 months. These technologies. These investments and just that I think in some cases it may be accelerated but these are very sick filler technology secular drivers.
And just you know we focus on doing the right things and we now paying that as people I always say that on the calls when people come back from any major transition like call it or any other major transition builders by next generation architecture. They don't buy legacy stuff we knew that.
So we would always planning for this technology transition and we're pleased to see the these new products are.
At the right time at the right plus.
Great Hi, Josh Thanks.
Thank you.
Thank you.
Next question comes from Scott Sealy from Roth Capital. Your line is now open and good afternoon. Thanks for taking my questions.
Guys nice job, particularly considering that the new products have yet to really kicking in in a meaningful fashion here too just to go back to some of your earlier comments as it related to some of the funding whether CFTC or otherwise in the United States related to our dolphin Fogey rural opportunity funds and Caf two.
Now wireless being viewed as a comparable to wireline technology, what is the incremental portion of that $30 billion over the next 10 years across those programs. What does that open to you guys now where I guess, maybe another way of asking what does not open to you now because in the past wireless tended to get a relatively small portion of that.
Overall I'm pie, if you will and then I had a a follow up as it relates to the outlook on 60 gig.
Got a very insightful question.
The thing what does changes I think the world as realize that wireless is if fabric, which is easier to deploy it's greener, you're not begin trenches and it has reached the reliability and performance equal to fiber.
And I think that's what has changed so my sense is that every country irrespective of the incumbents and the you know dyffryn groups pushing for different technological ultimately go for efficiency. Ultimately go for no whatever makes the good business sense. So I think you will see the penetration of water.
Lets more and more and I'm, so glad that FCC approved a fixed wireless broadband as a technology even for the height to your which is gigabit throughput and speeds.
So we feel good and then the Caf two funding.
We are winning good deals there so I think in our dog I don't think there's any part of our dog a weird we wouldn't be able to compete.
Of course, you know different companies move in different parts, but we feel pretty good how we're positioned for that $20 billion spend in North America across next 10 years. So approximately no two 3 billion a year, you'll start to see for next few years and and a if covered as shown one thing that is the broad.
Ben Internet is really a lifeline no. It's not just work from home, it's not double your fetch if he has such as well education from home.
On both had important so we feel good about good participation in our dog and and opening a good good segment for cambium.
Great very very helpful and if I could just to follow up on the 60 gig front are very exciting market opportunity. It sounds like the product will will be commercially launched by the end of this quarter, but it sounds like that pipeline is already growing you've got some sounds like or p. wins and some other activity in the pipeline I'm wondering if you could.
Quantify that a little bit maybe take us through what the sales cycle and the size of some of those opportunities are I would imagine for 60 gig given that these are there's a urban networks.
The opportunity in the dollars that you win per RFP is probably larger than what you've seen the pass Im wonder if you could provide some color around that and then how quickly that will ramp and if that's taking you went to some tier one opportunities now as well and area, where you historically havent competed and I don't know if you'd be willing to put out a number in 2021 what would.
Constitute success in the 60 gig product line. Thanks, Okay.
The way I look at this is as I said in the last five years as we introduce new advance breakthrough technologies, there's a very clear lifecycle you dig good four to five six months of fuel season.
Because customers when the deployed they want to test it out they want to kick the tires. So what we will see I think is that in Q3 and maybe some Q4 that philosophy will seize these people see the season the ground.
And then they start to accelerate customer smarter deployed and if there's any no issues in some software installations, our RF characteristics. The learn all that so my sense is you will see some acceleration or provide five six and probably 60 gigahertz and corporate Laura good strong solution, probably will come into it.
The one and and as I said earlier. These technologies are deployed to work to three year period, you know, they're not just one or two quarters and we have very good experience with our Medusa, which was massive mimo breakthrough technology or our you know a wife by product line.
So my sense is that I think.
This will be this is not a massive hockey stick suddenly and then it's going to be a nice ramp which will go in 21 22, or maybe 23 to start to decline that's the kind of cycle, you'll see let me address one more question yes.
In terms of these are very efficient technologically so it's not that suddenly the network will become very large with them I think what you will see they will coexist with the previous products. They will they will find new applications, where we are not there for example, we when it goes.
Urban connectivity cambium really doesn't do much urban connectivity, but I think the 60 gigahertz could potentially open urban backhauling.
Application for us.
So it's a small cell backhauling. So I think we we will see lot more applications of this inferior to to get to service providers large service providers might experiment, but generally I would say tier two tier threes, a faster adopters off advanced technologies, that's kind of what I see you wouldn't 21.
Great. Thank you.
Thanks, Scott Thanks.
And thank you and our next question comes from Eric Supermajor from JMP Securities. Your line is now open.
Yeah.
So on a good quarter.
Can you talk a little bit about the.
Drs opportunity, one or kind of how you think that size up compared to your traditional technologies and or maybe the 60 gig.
And to how do you think the competitive landscape really balls in that sector.
Thanks, Eric.
So see parents CBS I really believe with a breakthrough very nowhere to be of spectrum sharing and the spectrum management as we said the spectrum is the most precious resource for an operator.
CBR. This is also using cloud very effectively.
And are very nobody licensing model, so I I really believe that CBR us is a.
Kind of window into the future.
And many governments and in fact, we are involved with certain governments in advising them. If they ask for advice or how this can be done for the country. I think the world is watching the progressive approach off FCC with respect to CBRN.
And we are glad I'm.
You know how we have adopted that seem to be honest will influence. Many standards I believe in next two three years.
Because spectrum management sharing spectrum as a common problem every country in every technology wants to salt. So in that sense, you will see broad applicability.
With respect to what competition is do you know we believe in standards.
Cambium are increasingly if you watch our portfolio a we believe in standards and I think a and then innovating within the framework of standards, that's our strategy or keeping the quality high and you're designing affordable products. It has been our formula.
So you see that approach and then you know weight with the hour M. you Mimo technology is our antenna intelligent antenna technology is our cloud management software RF algorithm, we have plenty of room to innovate even within the framework of standards and that's what you'll see us doing 60 gigahertz and other things so those.
Got my comments I think these are breakthrough technologies and when we it wouldn't be adopted Cpis. We didn't know how things will go but the fact that we are now you know to 24000 devices are using and another benefit I think cambium is reaping is we are learning software as a service business model learning live.
Little bit, though it's a seamless small numbers, but I think the learning how that part of the business portal can evolve for our company you know down the line.
Very good thank you.
Thanks.
Thank you.
And our next question comes from George I want it from Oppenheimer.
Your line is now open.
Thank you for taking my question I told just following up on your comments on C.N. Maestro. It seems like you continue to see good uptake from a device standpoint, I can you give us a sense of what the type of software enhancements that you're doing because she and I sprout and then what can you add over the next let's say year.
As far as expanding.
The reach of software, Okay, that's who joined the when you look at sea and Maestro.
Its taken us lot of effort to implement maestro for different devices.
And it has taken us because different devices, a different models leathers microwave or whether it's a fixed wireless broadband or whether its life I or switching there are very different sweetest, Anna and clearly what do you have the team really has created the single pane of glass.
And beat this the season Maestro the kind of functionality, we would like to add you know all nixie, you're getting a half maybe more security.
We will like to provide more security I think security is gonna be a very key differentiator in this industry, especially as number of devices increased industrial Io D. gets going so I think you'll see us probably asked some of that we have lot of security there but.
Add that and maybe try to monetize some of that I'd be the second part is the scaling up the network.
ER is gonna be another order and I always say that in our talks that whatever number you and I predict today in terms of a number of devices digital sensors and digitization on the industrial site will be will be easily off by an order of magnitude it because it's very difficult to predict how wrong.
Separately that digitization that happened so I think for maestro.
Having the ski Liberty to the next degree and that's another part we probably would like to see if we can monetize there's a lot of room for us too.
Grow and frankly speaking the number of devices. We have added in seeing maestro in some cases, you know we wish we could have added more security earlier, because they're limited resources and every company, but overall when I look at this I would say securities probably one of the key areas and ski Liberty's, probably the next kind of the area.
Where we would like to keep expanding for future.
Okay and just.
Looking at your channel partner expansion I think you added over 500 again this quarter in 2000 over the last year.
What type of leverage are you gaining from from the expansion or what areas are you getting access to that you previously or weren't able to reach.
I would say more mid mid enterprises.
Because for US the go to market is.
Fulfillment is through channel and and especially as good expanding our enterprise footprint to the Midmarket channel will play acute all and many a times those channels saw the msps or the wars.
Very application specific wars.
So that's kind of we are focuses on fixed wireless broadband we are very good channels established over time, so lot of on increases really happening I would say in the mid tier market, yeah, and I'd just add to that we fill out mid channel inside sales organization to really help facilitate this and create a very broad base business. So we quite.
Encouraged by the results were seeing so far and obviously the the onboarding of those new partners is a good metric.
Thank you.
Thanks, John.
Thank you.
And I would now like to turn the call back to Peter Senior Director of Investor Relations for closing remarks. Thank you Justin during Q3, 20, cambium networks will be meeting with investors virtually at the Oppenheimer Technology and Internet Communications Conference Tomorrow August 12, Tuesday September 1st 2020 at the Jefferies 22.
20, virtual semiconductor IP hardware communications infrastructure summit tool will also be presenting and meeting investors virtually at the Deutsche Bank Technology Conference on Monday September 14th in the meantime, you're always welcome to contact our Investor Relations Department at 47264 to one.
Eight with any questions that arise. Thank you for joining us and this concludes today's call.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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