Q4 2020 Cambium Networks Corp Earnings Call
Good afternoon.
My name is Stephanie and I'll be your conference operator today at this time I would like to welcome everyone to the cambium networks fourth quarter and full year, 'twenty and 'twenty financial results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
To ask a question press star followed by the number one on your keypad.
To withdraw your question press the pound sign.
Please limit yourself to one one question and one follow up question. Thank you Mr. Peter Schuman senior director of Investor and industry and Analyst Relations. You May begin your conference. Thank you Daphne welcome and thank you for joining us today for cambium networks fourth quarter, and full year, 'twenty and 'twenty financial results.
<unk> call and welcome to all those joining by webcast tool bought and AGA, our president and CEO and Stephen Cumming. 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 8-K with the SEC.
A copy of today's prepared remarks will also be available on our investor page at the conclusion of this call.
A minder 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 make changes and cambium expectations or otherwise it is cambium and.
Networks policy not to reiterate our financial outlook, we will encourage listeners to review the full list of risk factors included and the Safe Harbor statement and today's financial results Press release, we will also reference both GAAP and non-GAAP financial measures and specific debt, specifically note that all sequential and year over year comparisons referenced non-GAAP.
Numbers, except where otherwise noted a reconciliation of non-GAAP measures to GAAP measures is included in the appendix of 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, Networks', President and CEO tool bought and augur well provide the key investment highlights for the quarter and Stephen Cumming Cambium networks CFO will provide a recap of the financial results for the fourth quarter and full year, 'twenty and 'twenty and he will provide our financial outlook for the first quarter and full year 2021.
Our prepared remarks will be followed by a Q&A session I would now like to turn the call over to a tool.
Thank you Peter.
We have built cambium and do a next generation global wireless infrastructure leader.
Broadband communications and the results are clearly demonstrated in our financial performance during the fourth quarter and second half of 'twenty and 'twenty.
Demand for wireless infrastructure projects around the world remain robust driven by work learn and play from home and accelerated by girl and funding our broadband solutions.
Fixed wireless broadband is a critically important and networking fabric to connect our local communities.
We are benefiting greatly from the investments we have made over the past few years and fixed wireless infrastructure technologies and such areas as point to multi point BMP, including the citizens broadband radio service, the brs comparable products and and new opportunities such as gigabit wireless solutions.
And without 60 gigahertz millimeter wave products.
Our new enterprise Wifi, six and cloud Savi wireless switching products.
And we have now added a premium version of our software as a service solution. The cloud first and see and maestro ex allowing network operators to dramatically improve quality of service from single pane of glass and the cloud.
We are at the start of a new era of and two and wireless speeds equal into debt of fiber.
Our multi gigabit wireless fabric and deliver fiber performance and reliability at a fraction of the cost.
Our recently launched 60 gigahertz <unk> solution is shipping in volume and the forthcoming five G 28 gigahertz millimeter wave products, arriving during 'twenty, one will further accelerate the strength as we reach new customers and enter new markets demanding higher broadband performance.
For the first time and cambium history, we will purposefully compete in urban markets and a meaningful way as existing net first upgrade infrastructure and new high speed networks proliferate with more cost effective technology provided by cambium networks.
And early December the Federal Communications Commission FCC announced the identity of the winners of the first phase of 24 billion rural digital opportunity from our golf or the next 10 years to bring high speed broadband service to millions of Unserved Americans.
The first phase of the auction ended at $9 $2 billion money that will go toward providing internet connections.
$5 2 million unserved homes and businesses around the country.
The winners included fixed wireless service providers as well as cable operators electric cooperatives incumbent telephone companies and satellite companies.
The winners have six years to deploy broadband to winning locations and will be paid by the FCC and equal monthly installments over the next 10 years, assuming the winners can meet the service level agreements.
You will see a mix and match of technologies and different partnerships involving cambium as a result of the RF program.
High quality and affordable resilient cambium solutions with lower PCL and stand to gain substantially from <unk> and initiate it.
Cambium expects to see deployments of our equipment for art off beginning late 2021, when all is said and done.
Cambium significant new product introductions combined with government funding around the world will provide a catalyst to our financial results for many years into the future.
Turning to the results of the fourth quarter 2020.
We achieved record revenues of $82 8 million above the high end of our outlook of between $74 million to $78 million.
Non-GAAP diluted EPS of <unk> 38, and all.
And so exceeded the high end of our outlook of between 24 and 28 cents per diluted share.
We finished the year with another record quarter of execution, but and dark cambium team as he worked remotely during the Covid pandemic.
We continued to have strong product momentum across our different product line.
Within the BNP business, we grew 24% sequentially and 62% year over year as we continued to see strong momentum and network traffic and.
Create demand for our CBR solutions, and the benefit of new product introductions.
Our U S customers continue to build out their networks using general authorized access licenses and we expect the successfully completed priority access licenses Pal to contribute in 2021.
We also believe we're taking share from both larger and smaller competitors as we continued to expand our portfolio of solutions offering industry, leading spectral efficiency.
Scalability and quality reliability and attractive economics for our customers.
Our PDP business had better than expected results during Q4 'twenty.
After delivering a strong third quarter performance declining 7% quarter over quarter and 8% year over year.
Our enterprise cloud based Wi Fi business continued to recover within certain verticals, namely health care and education growing 10% sequentially. During Q4 'twenty due to the continued growth of our new Wifi six solutions and record revenues for our cloud savvy C and metric enterprise.
Switching products.
For the full year, 'twenty and 'twenty revenues of 278 5 million increased 4% from 2019.
The 2020 growth was primarily driven by a point to Multipoint and enterprise Wifi solutions, which both grew double digit percentages over the previous year.
For the full year 2020, our BNP products grew 11% and enterprise Wi Fi grew 12%, while the point to point products decreased 16% compared to calendar year 2019.
Looking at some notable customer wins and new product development.
During Q4, 'twenty I'm pleased to report Cambium networks continued to have several high profile customer engagements.
And North America, we had a win with an industrial customer at Canadian rail operator for backhaul at rail yards with our new 60, gigahertz C and vape products cambium will be displacing a competitor five gigahertz products with 60 gig RC and wave.
We had a win at and American gas and electric utility company, which is currently the second largest utility company in the U S and terms of customer base cambium displaced a competitor with our PTP six seven day due to our superior performance and reliability.
And broadband Internet service and voice over IP phone systems provider and little rock, Arkansas selected Cambium, BMP, $4, 50, and PTP 820 or solutions from two competitors.
The win was a result of cares act funding to deliver broadband services to some of the most rural communities in Orca and stuff.
This deployment include hundreds of dollars and will provide services of 25 megabits per second and greater.
We had an exceptional quarter of customer wins with native American tribal nations and the result of cares Act funding and net forced by the FCC to provide two five gigahertz licenses to qualifying tribal nation applicants.
Tribal nation, and Arizona selected cambium, but broadband rollout, including our BNP for 50 M and.
And BNP for 50 beef products, our PTP eight 'twenty product for backhaul as well as by Fi, including our C and pilot and see and metrics switches.
Two different travel nations and new Mexico selected cambium for broadband wins, including the use of our C and Ranger LTE solutions.
<unk> hundred 50 M and BNP for <unk> solutions, and our PTP 820 products for backhaul.
Yes.
We had a new customer win with a managed service provider MSP focused on the multiple dwelling unit market.
Cambium displace competitors and both fixed wireless and enterprise Wifi.
This win included both our new E&P force for 25.
Enterprise Wifi six access points and the first sale of a recently released cloud first in line.
Ex management software.
We won all the customer without outstanding cloud management.
Scale Liberty superior performance and value.
Cambium as first mover status for the FCC's three five gigahertz <unk> spectrum continues to pay dividends and both the acquisition of new customers and sales of our PMT 450 products and our SaaS service and both U S and its territories.
Our full end to end solutions includes high performance radios.
Or the <unk> upgrades and cloud based software solutions.
As of today's call. We now have approximately 76000 devices managed by our seed we ought to assess service and increase of over 29% since we reported last quarter.
In the Europe, Middle East and Africa region, EMEA strategic wins from Q4 include.
And Germany, we beat out a larger competitor.
With the wind and the Big Bird School District. This selected cambium as a result of our ability to provide an entire wireless fabric network, including our <unk> and enterprise Wifi for both indoor and outdoor capabilities as well as our wireless obviously and metrics switching technology.
And the U K, we had a high profile enterprise Wi Fi win and the largest private girl's school and the country St Mary's School the cash.
Campuswide deployment included our ex suite three dash eight access points and we beat out a sizable competitor.
In Africa, we had a win and Botswana with MTN group, one of the Africa's largest operators, providing telecom services to 23 countries.
The wind was for enterprise Wi Fi.
Ambulance selected for flexible C and my stroke cloud management, and MTN is and existing customer of cambium fixed wireless solutions Mtn's operating companies value the benefits of the complete cambium wireless fabric solutions.
We added a new national carrier and Africa with the addition of Telecom Kenya.
And we want both fixed wireless without <unk> solutions, and enterprise Wi Fi without <unk> and blood line.
We beat out the incumbent equipment provider in the multi year effort as a result of attractive economics for the performance software.
And strong customer support provided by cambium.
And the APAC region, we had a sizable enterprise Wi Fi six win with a new customer Korea Baptist Theological University with cash.
Tomorrow is deploying 900 access points, including both our ex suite to digital and ex suite three dash eight products and our cambium care for all support.
Gloria Baptist was looking for the latest Wi Fi six solutions that deliver performance from our classrooms, assuming video for remote learning as pluses or remote due to COVID-19.
Jim you want the deal from a larger competitor because the performance ease of installation value and leading edge cambium care flow support.
We had another enterprise Wifi, six one and Thailand with Banca <unk> Technology College due to COVID-19, the college and moved the campus computer center to prevent and gathering and larger groups. The new plan provided all students with laptops for which they need it for <unk> and reliable Wi Fi across campus.
<unk>.
The selected the cambium wireless fabric, including our high density Aps and cloud.
Cloud service fee and metrics switching all control by our cloud and I see and Maestro software and.
The Caribbean and Latin America, Cala region, we had a record quarter breaking the $10 billion barrier for the first time and the company's history.
And we had a significant win and Colombia with the Ministry of Telecom and technology, The Ministry selected Cambium, and our partners to provide indoor Wi Fi and switching solutions for schools and government offices and 15000 remote rural locations throughout the country.
We also won the backhaul portion of the network to connect these remote locations.
We won this third phase of the project based on our reputation.
The functionality Youll see and Maestro cloud management software and.
Zero net one of the top service providers in the Caribbean offering broadband internet connectivity to the residential and enterprise markets selected cambium to implement Puerto Rico's Force <unk> system.
And I don't net plans to cover 90% of the island of Puerto Rico.
It provides selected cambium BMP portfolio, including our BMP for 50 M C.
C and Medusa technology, along with our <unk> hundred 50, <unk> subscriber modules and that corridor. The Ministry of Telecommunications created a program to provide free internet access at 4005 hundred extremely remote locations throughout the country.
The Ministry selected CMT, who is a large service provider owned by the Ecuadorian government.
To deploy and manage their network CMT selected cambium networks enterprise portfolio outdoor access points <unk> five turn to provide these public hotspots.
Looking at new products since our previous quarterly update.
Within the BNP products, we are rounding out our product lines with the addition of two new solutions for the BNP for 50 line. The additions include the five gigahertz and BMP for 50, BP connect Rice and 450 Micropump connect price the 450 micropump connect price exit and new option.
And to provide hard to reach coverage and filling for the operator's network with an affordable solution.
Both new products allow for a customized antenna is specific customer operators needs.
Also.
And our BMP and PDP product line Cambium is highly anticipated 60 gigahertz <unk> four millimeter wavelength began shipping in volume and December. This is significant as network operators can now compete with fiber and cable operators and urban and suburban markets with comparable you go get gigabit.
Data rates and with compelling economics, which increases our serviceable available market Sam.
Cambium now has approximately 40 proof of concepts POC underway and several are turning to commercial operations, including White field communications and Malaysian telecommunications, operator, which has placed the worlds first significant commercial order.
White deal will be deploying our C and we have 60 gigahertz millimeter wave radio and Georgetown.
In the state of Penang, Malaysia.
This is a key that prints deployment for cambium and this is where Facebook implemented the largest telegraph trials.
The city of Georgetown has legacy infrastructures and the prestigious UNESCO status and making a difficult to deploy fiber with 60 gigahertz and it is possible to provide the city with high speed broadband access by utilizing existing street furniture, such as Streetlamps traffic lights and youth.
Deposits.
As a result, it can be deployed faster and more cost effectively than fiber broadband.
Cambium networks is very excited about being able to provide fiber like broadband performance and reliability at a fraction of the cost of fiber we and.
Anticipate traditional fiber operators to deploy hybrid networks by using <unk> to extend the fiber plant to customer premises ex.
<unk> time to revenue at lower operating and capital costs.
Wireless is the new fiber.
Within our PDP product line during the fourth quarter 2020, Cambium added two new next generation point to point licensed microwave products for backhaul featuring lighter channel.
The first is the PTP 850 S debt can deliver up to gigabit per second plus throughput.
Throughput, reaching up to four K quadrature amplitude modulation qualm.
The second is the PTP 800, FTC, which can deliver up to four gigabit per second and four by four massive mimo.
The <unk> and <unk>.
<unk> and important additions to our backhaul portfolio.
Also and licensed spectrum during the Q4 cambium networks relieves at three <unk> LTE CPE with.
With the food system release, our next generation fixed wireless broadband LTE platform C and Ranger.
Three gigahertz spectrum.
Mensing during Q1 'twenty one.
<unk> and Ranger is an ideal solution for the Internet service providers and industrial customers.
We continued to experience strong growth and accounts utilizing <unk> stroke cloud software and our end to end cloud powered connectivity solution to manage the entire networks from a single pane of glass.
Total devices under cloud management, and Q4, 'twenty totaled 524000 and increase of 7% from Q3, 2000 and up 40% year over year.
After years of development and December Cambium launched our new C and maestro ex the premium version of C and Maestro and it has taken a lot of effort to add and majority of cambium and products to be supported by sea and maestro ex and to develop the sophisticated features that will come and subscription.
Payment.
And <unk> will now become the platform that will be the basis for many subscription software and service offerings and <unk>.
And Maestro X will continue to make cambium hardware products more differentiate it and over the long run will contribute to a higher gross margin for the company.
Turning to the channel and.
And Q4 'twenty.
Expanded our channel presence by adding over 640, new channel partners sequentially.
And over 2340, New channel partners year over year, which represents an increase of approximately seven 5% sequentially and 34% year over year.
Given the global pandemic, we will be holding our first global virtual event called Cambium connection on February 24th and 25, four hour and customers and partner community. We're excited to share our vision of where the industry is headed over the next few years.
I will now turn the call over to Steven for a review of our Q4 'twenty financial results and outlooks.
Thanks <unk>.
<unk> record fourth quarter results are the culmination of multiple years of investment and a strong R&D pipeline and new product momentum as demand strengthened for cambium high quality fixed wireless and enterprise Wi Fi products.
Partner community remains resilient.
And demand continues to increase for our new Wi Fi six products and we are seeing healthy shipments about 60 gigahertz products and.
And record shipments of our latest <unk> products during the fourth quarter.
Record revenues of $82 8 million for Q4 'twenty came in above the high end of our outlook of $74 million to $76 million.
Revenues increased by 13% quarter over quarter, and up 29% year over year from $64 1 million.
This was the first quarter in our company's history to break the $18 million revenue threshold, having just broke and the $17 million barrier for the first time during Q3 and 20.
On a sequential basis for Q4, 'twenty revenues were higher by $9 $8 million or an increase of approximately 13%.
The higher revenues were driven by a pnp products, which grew 24% sequentially due to service providers continuing to scale networks driven by request for increased capacity and higher demand for <unk> compatible solutions cares act and cost and funding and the start of volume shipments of.
And our new 60 gigahertz technologies.
As anticipated our point to point revenues declined by 7% sequentially.
And better than anticipated after a very strong seasonal third quarter in North America for federal products.
Enterprise Wi Fi solutions grew 10% quarter over quarter, driven by higher shipments of our new Wi Fi six products and record shipments of our cloud savvy switching products.
Looking at revenues by geography.
All regions grew on a quarter over quarter basis, North America, our largest region represented 55% of company revenues compared to 53% during Q3 'twenty.
North America had a record quarter with revenues growing 17% on a sequential basis driven by higher PMT EMEA.
EMEA.
Second largest region grew 6% sequentially and represented 26% of revenues during Q4, 'twenty and 28% of revenues during Q3 'twenty.
Quarter over quarter growth and EMEA, primarily reflects strong debt PTP revenues and continued recovery and enterprise Wi Fi revenues.
<unk> had another strong quarter of revenues breaking the $10 million barrier for the first time and the company's history and represented 12% of sales during Q4, 'twenty growing by 14% quarter over quarter due to a broad base revitalization and the region and a number of significant.
Customer wins.
APAC revenues grew 16% sequentially and represented 7% of revenues during Q4, 'twenty flat as a percentage of revenues from Q3 'twenty.
Looking at our gross margin non-GAAP gross margin of 51, 2% decreased by a 120 basis points compared to Q4 19 per.
The year over year decrease in non-GAAP gross margin was result of less mix of higher margin PTP, and Wi Fi products and higher inventory reserves.
On a sequential basis non-GAAP gross margin from Q4 2000.
51, 2% was 150 basis points higher than Q3 'twenty.
The higher quarter over quarter non-GAAP gross margin was a result of higher volumes rich and mix of higher margin enterprise Wi Fi.
Lower rebates and inventory reserves and improved supply chain efficiencies.
And Q4, 'twenty, our non-GAAP gross profit dollars increased by $8 8 million to $42 4 million compared to the prior year and improved by $6 $2 million sequentially.
I'm, particularly pleased with the improvements we've made with our gross margin initiatives and progress towards our longer term goal of achieving an annual non-GAAP gross margin target of 51% to 52%.
For the full year 2020, non-GAAP gross margin improved 80 basis points to 53% compared to 49, 5% for 2019.
Non-GAAP operating expenses research and development sales and marketing general administrative and depreciation and amortization in Q4 <unk> decreased by $171000 when compared to Q4 19 and stood at $29 1 million or 35, 2% of revenues the mid.
<unk> of the year over year decrease and non-GAAP operating expenses was a result of lower discretionary spending and sales and marketing expenses due to less travel and trade show expenses as a result of Covid.
When compared to Q3, 'twenty non-GAAP operating expenses increased by approximately $3 5 million in the.
Quarter over quarter increase reflects higher R&D and sales and marketing expenses from a full quarter reinstated salaries and increased variable compensation, resulting from higher revenues due to the company's strong performance during Q4 'twenty.
For the full year 2020, non-GAAP operating expenses decreased by $3 1 million and.
And stood at $106 7 million.
<unk> $109 8 million for 2019.
The lower non-GAAP operating expenses during 2020 reflect the benefits of past restructuring activities as well as lower discretionary spending and sales and marketing.
Non-GAAP operating margin was 16% up from six 6% during Q4 and 19.
And increased from 14, 6% of revenues and Q3 'twenty four.
For the full year 2020, non-GAAP operating margin was 12% compared to eight 3% for 2019.
We had another excellent quarter of profitability with adjusted EBITDA for Q4, 'twenty at a record $13 $9 million or 16, 8% of revenues compared to $5 3 million or eight 2% of revenues for Q4, 19 and up from $11 4 million or 15 six.
A percentage of revenues for Q3 'twenty.
Full year 2020, adjusted EBITDA was $37 4 million or 13, 4% of revenues compared to $26 2 million or nine 8% of revenues for the full year 2019. This represents a 43% increase and adjusted EBIT and EBITDA from 2019.
We see continued leverage and our business and remain committed to driving our adjusted EBITDA to our target model of 18% to 19% of revenues over the next few years.
Moving to cash flow cash flow provided by operating activities was $15 1 million for the fourth quarter 2020, primarily the result of increased profitability improved collections as a result of better linearity of revenues and an increase in accounts payable.
This compared to $6 1 million of net cash flow provided by operating activities for the fourth quarter 2019, and $16 4 million.
Third quarter 2020.
For the full year 2020, operating cash flow was $56 9 million compared to $3 6 million during 2000 and during calendar year 2019.
Non-GAAP net income for Q4, 'twenty was a record $10 $7 million or <unk> 38 per diluted share compared to $2 3 million or <unk> <unk> per diluted share for Q4, 19, and non-GAAP net income of $7 $8 million or 29 cents per diluted share for Q3 'twenty.
The high and non-GAAP net income compared to the prior year period was due to higher revenues and gross profit dollars lower opex as a result of benefits from our past restructuring lower sales and marketing and R&D expenses and lower interest expense due to the reduction in long term debt.
The increase in non-GAAP net income compared to Q3, 'twenty was primarily attributable to higher revenues and gross profit dollars as we efficiently scale our business from.
Full year 2020, non-GAAP net income was $24 1 million or <unk> 86 cents per diluted share compared to $12 1 million or <unk> 47 per diluted share in 2019.
Turning to the balance sheet cash totaled $62 $5 million as of Q4, 'twenty and increase of $12 4 million from Q3, 'twenty and represented a positive net cash position for the company and the first time in its history.
The sequential increase in cash balance during Q4 <unk> was primary the result and improved earnings.
Cash collections, resulting from improved linearity of revenues and an increase in accounts payable.
Q4, 'twenty net receivables totaled $58 1 million a decrease of half a million dollars from Q4, 19, and an increase of $4 $2 million sequentially day.
Day sales outstanding for the fourth quarter stood at 56 days and all time record and a decrease of 22 days from the prior year and lower by two days sequentially as a result of strong collections and improved shipping linearity.
And Q4 of 20 days payables outstanding stood at 55 days, a decrease of five days from the fourth quarter of the prior year and lower by three days from the third quarter 2020.
Net inventories of $34 million and Q4, 'twenty decreased by $7 $7 million year over year and increased by $4 9 million.
From Q3 'twenty.
Inventory days stood at 71 days down 58 days compared to Q4, 19 and down by two days from the end of September.
Given the rapid growth and revenues, we expect a modest increase in inventories over the next few quarters.
And finally cambium was able to successfully increase.
And trading liquidity with a secondary offering of two 5 million shares sold from back to capital and.
The offering was non dilutive to our existing shareholders and we welcome those new shareholders that are now part of cambium as Jenny.
In summary, we continue to make excellent progress on achieving our long term target operating model by accelerating growth gaining scale and improving our operational efficiency.
All of this is demonstrating the tremendous operating leverage we have and our business.
Our balance sheet has strengthened with another excellent quarter of cash generation and we continue to see improving visibility into our business.
Moving to the first quarter and calendar year 2021 financial outlook. Please.
Please note that cambium networks financial outlook does not include the potential impact of any possible future financial transactions acquisitions pending legal matters or other transactions. Accordingly, cambium networks only includes such items and our financial outlook to the extent they are reasonable.
However, actual results may differ materially from the outlet.
Considering our current visibility as of February the 18th 2021.
Q1, 'twenty one financial outlook is expected to be the following revenues between $81 million to $85 million non-GAAP gross margin between $49, 5% to 55%.
Non-GAAP operating income between 11, 6% to $13 4 million.
Interest expense net of approximately $1 $4 million.
Non-GAAP net income between eight 4% to $9 7 million or between 30 to 34 cents per diluted share adjusted EBITDA between 12 six two.
$214 $5 million and adjusted EBITDA margin between 15, 6% to 17%.
Non-GAAP effective tax rate of approximately 17% to 19% and approximately $28 3 million weighted average diluted shares outstanding.
Turning to our cash requirements paydown of debt of $2 $5 million cash.
Cash flow interest expense of approximately.
$900000 and capital expenditures between three two and $3 $6 million.
For the full year 2021 financial outlook is expected to be as follows <unk>.
Revenues between $317 five to $331 4 million.
Increasing between 14% to 19%.
And adjusted EBITDA margin between 15% to 16%.
I'll now turn the call back to a tool for some closing remarks.
We started this journey over nine years ago with our separation from Motorola with a shared set of values.
And the goal to win by delivering high performance high quality, yet affordable products, providing end to end wireless fabric managed by our cloud based fee and Maestro software.
And we haven't deviated from that vision and today.
The market is coming to cambium.
And as fixed wireless is now becoming mainstream and as we enter urban markets for the first time and a significant way.
With wireless now matching the end to end speeds of fiber cambium networks is very well positioned to win based on our superior value and lower PCL.
Wireless is the new fiber.
We continue to strive to achieve our goal of long term top line growth and the mid teens and adjusted EBITDA and the upper teens as a percentage of revenues cambium has multiple revenue drivers to reach this goal, including our new gigabit wireless products such as enterprise.
Wi Fi 660 gigahertz.
And in the Middle of this year 28, gigahertz millimeter wave solutions for five <unk> fixed wireless.
We also expect the continued adoption of <unk> compatible solutions and we can now add software as a service to the list of growth drivers for 2021 with the inclusion of our C and my ex solution.
Our profitability should benefit from increased scale and our business, while we judiciously manage our costs. Although we will continue to fuel new investments in R&D to maintain our technology edge.
Our balance sheet and net cash positive for the first time and company the history and continues to improve.
We had another solid quarter of cash generation and we remain excellent stewards of capital.
Looking at the upcoming year.
'twenty 'twenty showed how the wireless communications community to rapidly stepped up to meet demand and response to the pandemic.
We predict.
'twenty one we'll see many of those changes become permanent and sets the stage for future growth opportunities.
Beyond calendar 2021, Cambium networks remains excited to support the next round of connect America funding the rural digital opportunity fund to bring high speed broadband service to millions of Unserved Americans.
And Nextgen EU funding programs for high capacity networks in Europe.
Cambium solutions stand to benefit significantly from the general netbook infrastructure upgrades and.
And VR Duff initiated beginning and a substantial we're doing 2022 and last thing for six or more years.
Our ability to scale, our business, including our 24 by seven global support and our focus on customer delight through cutting edge innovations remain our winning formula.
Finally, I would like to thank our employees partners and customers for the hard work and cooperation and outstanding results. During these unprecedented times.
This concludes our prepared remarks, so with that I would like to turn the call over to Daphne.
And begin the Q&A session.
Thank you and Tom.
At this time as a reminder to ask a question.
Followed by one on your telephone.
Joanne Your question press the pound key.
Please limit yourself to one question and one follow up question.
And your first question comes from the line of Paul Coster with JP Morgan.
Yes. Thank you for taking my question a couple of quick ones. So first stop.
The move into urban markets is it.
And with existing customers and the existing channel or is it guidance be a new customer base and the new channel and if it's.
And the case can you just describe to us.
The sort of sequence of events there.
Thanks, Paul I think it's going to be a mix many of our customers.
Our drawing concentric circle.
Around their markets. They have won the developing commodity side and now they're to expand business day.
And are going towards maybe five kilometers 10 kilometers more.
And some of that could be enterprise connectivity and some of that could be home connectivity. So I think we do have existing customers who are now diversifying but also many new customers who might be and video surveillance for example, and they need a broadband at a particular point new applications or someone who really needs.
Very strong multi gigabit.
Urban point to point connectivity EBIT meshing architecture.
So those are mix of the tool and.
Very exciting new applications opening up I think I made this remark and one of the calls if.
If you asked me what all markets will succeed you got get into I don't think we can predict it I think it'll be very pleasant surprises and new markets new applications, because they're very enabling technology.
So this is <unk> how.
How would you describe the current and so the adoption process is sort of land and expand or are people doing full football to complete installations without testing and scaling well be going straight to full deployment.
No I think it'll be a land and expand because wireless always you have to the proof is always and the pudding. You know everybody can claim whatever number they were and our claim but ultimately you have to deliver the resilience performance and delivery and the noisy conditions and different that must be really conditions. So.
And I think and we land and expand and to fly a cambium always focuses on and.
We will always see that and the first four to six months of POC and pretty much all of our solutions and then the expansion starts and that expansion and last for multiple years.
And when you bring out the five to 28.
So it's product and will that be sold into the same market same customers and if so how are the two products positioned.
I think they are very complementary because 60 gigahertz. The one kilometer two kilometers type of distances and maybe with mesh and you're going to be little more whereas 28 gigahertz will be reported five to seven kilometers without mesh. So I think you will see them as very complementary.
As customers.
Expand the network with multi gigabit and al.
And always say that Lan Wan convergence is happening.
We used to always separate the van is floor land as fast or increasingly when you achieve and multi gigabit and those type of distances you start to bring a lot of computing to the edge, which is kind of what youre seeing.
My last question and that's all thanks for taking my questions.
And so well and yeah. It feels like half the customers, who are still struggling or not available to them and I'm thinking in particular, hospitality and airports and education facilities campuses campus environments, where they.
It's still sub optimal in terms of occupation levels and activity levels and.
Sort of the pandemic continues to weigh on the activity. So surely they haven't even tested out the need for new capacity with Wi Fi six and some of these new.
Capabilities, yes.
Is that a true statement and.
And so things just get better and better as the world opens up hero.
Is it and you're already seeing that business.
I think Paul a very insightful gum and I definitely think there is good upside as the world gets better and better because our new products are just getting off the gate.
It is a POC then we know the lifecycle and the <unk>.
Direct life cycles, and new deployment is anywhere good solid four years five years cambium is products, which are on the dollars per five years six years.
No I think I think your observation is right that as the world gets better I think our opportunity gets stronger.
Thanks, Paul.
Thank you.
Thanks, a lot thanks Bill.
As a reminder, please limit yourself to one question and one follow up question.
Next is Scott Searle with Roth capital.
Hey, good afternoon, and thanks for taking my questions.
In terms of the fourth quarter results a lot of demand certainly on the point to Multipoint front and within North America. I was wondering if you could quantify or provide a little bit more detail in terms of some of the new products and their contribution in the quarter, whether it's 60 gig and and also if you could clarify I think you said 40 proof of concepts that are going on right now we're trying.
And for six years and wanted to confirm that that was 60 gig and other product line, but we're we're 60 gig where risky brs and the fourth quarter results and then second question shifting day outlook or to your guidance for the first quarter and 2021 and.
And what's the current visibility that you've got to the March quarter, and then as we're looking into 2021, what kind of implies that things soften a little bit so was that an era of conservatism on your part and what is the expectation for the new product contribution in 2021, and a lot of big products, a lot of momentum, but and.
And kind of wondering if you could put some some quantified a little bit more around the edge. Thanks, Scott Yeah, well, how many how many questions of that.
I'm trying to ABCD.
Alright, I think until we can say the first day.
Scott, Thank you for asking and so.
So first of all.
And 44 zero proof of concepts or 60 gigahertz is the right number I think we are seeing good expansion and POC and as I said and Paul I think good four months five months or so are always a POC and then expansion stocks so normal normal lifecycle.
So NPI Wi Fi six is expanding.
Moving into some someplace and moving into deployment, but still lots of Poc's 60, gigahertz, Boc's and and expansion will start I think 2021, you will see good expansion of 60 gigahertz.
Overall as we look at.
And fourth quarter results as well as Q1, the Cbr's continues to accelerate.
Pleasantly I think CBS is also finding new applications enterprises and looking at it.
Industrial automation guys are looking at it so in general debt precious spectrum of three and three five gigahertz is finding new applications. So and are good for us.
In terms from Q1.
Visibility I think people and going to give you a lot more color there and and in terms of the numbers, we always like to make sure that while we all have good momentum good wind and the sale we remain.
We remain kind of a realistic about things as well so I'll, let people and give you some rundown and yes, Scott so visibility for us I would say over the last few quarters has continued to get better and better it's actually something as a young public company and we spent a lot of time on it.
In terms of trying to prove that out in terms of our forecasting and the tools that we have access to to try and get better information from our on net work our channel and our distributors.
And so I would say in terms of the backlog position when we've been entering the quarters. Historically, we like to have a solid backlog and by the end of the first month have about 60% of the revenues booked.
Q3 was stronger than that Q4 was even stronger I would say as we enter Q1, which is tends to be sort of flattish seasonal quarter for us.
The backlog coverage is even stronger than it was in Q4, so that gives us confidence about the Q1 guide.
I think in terms of your other question with regards to.
2021, and it's sort of an element of conservatism and that number.
Forecast and the full year as I said in prepared remarks to be somewhere between 14 and 19% growth.
And overall you had from a tool we see strong momentum and the business does in rural fixed wireless broadband coupled with sheets of improvement from EBIT hospitality and enterprise. So things are looking good from that perspective, coupled with a lot of the new products that we introduced at the tail end of that of 2020 I think.
Uh huh.
And we are being a little bit cautious given some of the supply constraints that we see out there, particularly in the semiconductor space and.
And so our guidance incorporates that for 2021.
And you would get all of them. Thank you.
Perfect. Thanks.
Your next question comes from the line of George Notter with Jefferies.
Hi, guys. Thanks, very much congratulations on the good results and.
Hi.
If I wanted to nitpick on you guys, a little bit I guess I'm wondering if you could have shipped more and the quarter.
It's a very healthy environment out there and I was wondering if there was an opportunity to ship more of that maybe you couldnt because of supply chain or.
Distribution issues or manufacturing issues here and anything you could tell us would be great and.
And because we've been chatting with customers. It sounds like there have been some shortages out there of specific products for for cambium. So I was just wondering how you guys see that situation.
And there is.
And George there's no doubt that there is some tightness in chips and from supplies and.
Nothing to be orderly concern at least for our business as we forecast, but there is there is definitely tightness.
And I think as we look at the numbers as you forecast per year, we have already taken all that into accounts.
And in terms of the shipments and all of that I think every quarter and order how hard you work.
From different logistic reasons, sometimes you are not able to ship everything.
Theres never perfection, and those things, but overall I think most of our key customers got their products and then some key products, where there were shortages, we are catching up fast and.
Q1 overall.
I would say, yes, there is some conservatism built in but we're also realistic that not everything works out and every situation so that purchase and but we are pretty.
Positive about where we are very we have excellent relationships with our suppliers and actually in our case, we anticipated that the demand will be increasing based on last six to eight months of cambium demand to be proactively started working with our suppliers as early as and the number early December so we feel good where we are.
Got it that's great and just as a quick follow up any commentary on.
The distribution channel is right now in terms of inventory levels are they pre.
Like are they normal.
Or would you characterize it.
Yes, I mean, we.
Obviously, we got a lot of good channel data now with our channel management tools. So we track that.
Sell through the pole Pls.
Very very closely and we get pretty much all of our distributors to recall on their inventory.
And in some cases, a weekly basis, but certainly on a monthly basis. So I would say it's been reasonably consistent certainly pls has been very healthy. So we know the and demand is strong.
But I would say from an inventory perspective, and the channel, it's consistent and it's roughly around that sort of six or seven weeks.
Okay, great. Thank you.
Thanks, Josh.
Your next question comes from the line of Simon Leopold with Raymond James.
Hi, guys. This is Victor Chu in for Simon.
Regarding the RF opportunity I think you said on the call hundreds of million dollars over the span and initiatives. So can you just.
Just help us to understand what you're expecting around the timing and trajectory of the contributions from this afternoon. Okay. So our hope as we said, it's a nice share Dave I think it will kick off for us.
And then and a good way and maybe ended the year early next year that kind of timeframe and then it'll go for next six years.
Solid EPS and I think we have said and fast overall totally cumulative incremental business for Camden will be about 350 million or something like that those if and when we compute and know how.
And how that money will be spend the large $24 billion it'll be spread across many initiatives and I think for cambium debt type of a number of incremental or next six seven years, we feel pretty good about.
Okay. Okay. That's helpful and I just wanted to double click on progress with Wi Fi business day.
Year over year decline seem to be stabilizing somewhat but can you help us understand what you're observing from the demand environment and you seem to be pretty optimistic that the growth.
Recoveries here.
So I think Wi Fi.
We definitely see recovery and.
And.
Did that I think the bottom part is or and this year, we are projecting about 50% year over year growth five zero.
And remember in 2019 will delay 81 or 82% deal over a year. So we are back towards the kind of delek shouldn't be learned before.
And let me share with you why we are confident.
Cambium focuses on solutions cambium doesn't focus on technology and that's why when we go to customers, we say Mister customer we have wireless fabric, we are different frequencies.
Both indoor and outdoor via Wi Fi or LTE, we are fixed wireless broadband and other solutions I think the benefit of that is that we are able to go into new segments.
We may not have been present for example, healthcare I think we are beginning to sell more Wi Fi solutions and health care globally, and we are beginning to go beyond like warehouses. For example, some of the warehouses have outdoor needs.
There'll be a very differentiated so we're seeing that we are seeing retirement communities and retirement homes. So what cambium is finding is new segments. So as all segments come back like hospitality and education and accelerates our game I think we will have some good upside.
Okay.
And just to add to that and little bit is healthcare as a tool mentioned.
Education is another area, but we are actually starting to see a little bit of a pulse now and hospitality I mean, it's a bit early day to say it is going to continue but certainly and EMEA, we're starting to see some activity there as things start to two to ease a little bit after the COVID-19 pandemic so factored.
<unk>.
And our growth expectations, which we think is somewhere between 40 and 60% for lifetime at point of 50% growth for 2021.
We are anticipating a little bit of a improvement in hospitality as we go through the year.
Okay, Okay, and if we're <unk>.
And the candy, it's not going head to head against the incumbents like Cisco and HP.
Are you thinking about the size of the addressable market.
And Youre thinking that yes, some and there is plenty of market and the mid market and.
And again I wouldn't point to anybody but no I don't think we need to go after the giants of our industry. There is plenty of value we provide for the mid market and we see pretty strong growth I think we need to just keep walking before we run and.
And there is plenty of business for us that we had.
Great. Thank you. Thanks, Thanks Aman.
Your next question comes from the line of Rod Hall with Goldman Sachs.
Hi, Thanks for taking my question, the Ebola and bird.
Rod.
Hello.
Congrats on the goodwill side of me circle back to the full year guidance.
And so it's clearly weighted strong.
Just wondering how much visibility do you have for the full year.
And how does the pace can be I know you've got tons of smaller customers.
They didn't put them on and have a tradition, but just wondering and I think broadly how.
How much are you factoring and from the <unk>.
And especially the.
And another 28, one debt that's coming.
And maybe I'll follow up thanks.
Yes, so and visibility for us and certainly within the immediate quarter is always very good.
Given the strength of the business and the booking activity.
And working with a lot of our channel partners and distributors to book as early as possible. So we are seeing.
And more activity now go into Q2 as well so that gives us a good snapshot of how the sort of first half of the year is looking.
So and that's improving I think we can certainly with the product and we released during 2020 that being Wifi six and <unk> 60 gigahertz, we've seen a lot of <unk>.
Momentum as we exited 2020, which gives us very strong comfort at.
And that 21 is going to be a strong year for adoption of these new products I think the other point to note in terms of.
Visibility and predictability of the business and we comment on this the law, but much of our business is repeat business.
And in fact, when we look at customers they come back once they order cambium products, they come back and order time and time again, so about 70% of our product.
Our revenues or is it that <unk> repeat.
Reoccurring purchases from our customer base and that allows us to give us some confidence in terms of predicting that ongoing run rate business, and then overlay and the adoption of new products.
And maybe volume in addition to what <unk> mentioned and I think you've touched upon six gigahertz and continued with regards I don't think you will see much of six gigahertz additional product that venue.
The 60.
And the biodiesel six gigahertz or 60.
And that's kind of a 60.
Okay. So 60, you will see strong 'twenty one performance because the Puc's activity started in November December last year continued and continues in Q1 28 gigahertz I think it will be lumpy youll season, probably second half and then 'twenty tool as well and 28 will kick in.
So lifecycle wise very consistent all new products and a 4% to six months of POC and then you start the first deployment then starts the acceleration, but the following and a two three years. So I think you'll see the same and 28.
Okay.
I got a follow up on the competitive landscape.
Ladies and tactical about Hollywood.
Wifi six products.
And better than competition, but in general broadly could you talk about the competition that you expect to see especially in urban markets et cetera, and the other product segment.
Okay. So on Wifi six.
One of the benefits Cambium had is as we did the <unk> acquisition, we picked up a lot of strong multi day, new architecture cloud management expertise because they used to focus on high performance Wi Fi and I think that year was a very good design center and we recently released a solid group reported.
And it's a public domain information, where you can see the superiority of cambium Wifi six performance compared to competition.
And those things I described to you. So I think overall ease of deployment.
Their performance.
And making sure we keep our cost structure types. So we can give better affordability to the end customers that has been a winning formula and that's why we are projecting about this year approximately 50% growth over last year. So I think that formula has worked for us before and we feel pretty good where we are and Viper.
And the design wins and the customer wins and the customer testimonials are giving us the confidence.
Okay.
Great. Thank you.
And thank you.
Your next question comes from the line of Erik <unk> with JMP Securities.
Yes, Thanks for taking my question and congrats on a very good quarter first off can you discuss whether theres been a shift in terms of the contribution from your your service provider business I think historically and that's been.
And the range of 45% of your business is that contribution changed in light of.
You know the whole COVID-19.
Acceleration.
And then secondly on <unk> I think it was up 29%.
Can you talk a little bit in terms of.
How you think that might.
And it changes as the installed base.
The traditional products that were already in your installed base and those been refreshed at this point and now it's new product new units that would be shipping out.
Should we think about the cbr's.
Okay customer base.
Thanks, Eric so.
First is the service provider business actually strengthened.
And as the broadband and became the lifeline and worldwide different communities I think the net proceeds to be scaled.
So in general I would say what we see is that the list definitely demanded more product, but more than that the tier two and.
You'll see service providers worldwide and got more engaged with cambium and actually in many countries even tier ones. Good engaged with cambium. So I think.
Service provider business is actually anything strengthening.
That's one point.
And secondly is that a larger.
Is it a larger contribution can you can you just tell us it's going to be Eric.
Eric This is going to be north of 50%.
So yes, Youll 45 is a bit line I would say, it's north of 50 and.
And probably has a slightly larger contribution nowadays.
And I think what's changing there is that the progressive service providers are now looking for.
Emerging multi gigabit technologies.
Whether it's 60 gigahertz by this emerging 28 gigahertz, so I think that bodes well for us because we invested in these areas two years back everything I'm, describing some of these investments we make two years back we knew this coming.
And we are at the right place of the lifetime in terms of the CBR S C.
We are finding new applications I think many enterprises are looking for now more bandwidth. They are looking at Seabee, our industrial side is not looking too. So I think Steve we are it's not just our existing customers existing customers was.
Natural easy part for us and it still continues to grow but I think what we're finding is that it's opening new applications and new customers for us so so far.
And I don't think you will see now 'twenty two 'twenty three 'twenty four the kind of growth we saw probably last 12 months or so at some point those paper up but so far it remains pretty robust.
Very good and then last question can.
Can you talk about the competitive dynamics with the 60 gigahertz product I think ubiquity is shipping a product like that is there is there much of a competitive market out there.
So far our focus has been standard.
Our focus has been dark 11, a wide standard.
And proprietary.
Based on commercial chipsets, and very easy to deploy <unk> cloud management as our other fixed wireless broadband and Wifi consistent single pane of glass and.
And very good performance. So so far I would say we are probably leading.
And the fact that we have 40 POC is going worldwide. We are one of the largest deployment.
And right now.
And we feel pretty good in terms of.
Our differentiation.
Great. Thank you very much thanks.
Thanks, Eric.
Your next question comes from the line of John Roy with Water Tower research.
Great. Thank you very much.
Question, and I wanted to dig and at a little bit into the cloud management take rate.
And maybe you could give us a little bit and idea of the color on that and maybe.
Our SaaS revenue is there any particular.
Gross weight and we can think about or targets you want to try and hit for that going forward.
So John.
It's still going to be our leader for our software subscription revenue and still and we always said that 'twenty one 'twenty one the journey and started and every quarter, we will give a good color on where we are.
I think in general our strategy was to make sure we have a strong foundation with.
Most of our devices and its BMP of PDP or lifestyle switching or LTE or 60 gigahertz and I think that's a good effort went just to make sure. We can take care of different network models, and integrate that and see and lifestyle.
Now that we have done that our attention shifted to differentiating.
Features which we can charge for so I think this year, it's still it will be.
Modest numbers I don't think it'll be huge numbers, but.
We are beginning to kind of put the systems in place to generate software revenue and.
And.
And this has been a journey because it's very easy to say will claim software revenue it'll be you know and we will bring that but it has to be highly differentiating and.
And so I think I feel good where we are and we will give you more color, but I don't think this will be suddenly the hockey stick I don't think it'll be a hockey stick I think it will start growing very well and.
And the features and we are adding will give us more and more able to charge for it.
Great. Thank you very much.
Thanks, John.
And we'll take one more caller.
The last question comes from the line of Pam <unk> with Northland capital.
Thanks, Good afternoon and all.
I'll try and make a quick comment.
Kind of back on the topic of.
Of the guidance.
And what might be behind that for the year that is.
Even at the high end of the range and especially given your comments about visibility into Q2. It seems like you are projecting a lower second half than first half and.
That's with probably a decent and arent off ramp and maybe later in the year and new products continuing to ramp Wi Fi growth.
Spoken too so.
Are you modeling some degree of capacity pull forwards here and the first half we have seen that.
With some of your fiber based peers focused on the rural market.
You mentioned the.
Supply constraints, but.
Nothing on their capacity pull forward front door.
And we've just really being conservative here and I have a phone.
This is Steve and I wouldn't say this is a capacity and pull forward.
Certainly.
And we're putting up a strong Q1 number.
Off of a strong Q4 that we just reported right. So the year on EBITDA growth rates.
Yeah on our midpoint of our guide is going to be north of 30% set for Q1, and I think you can assume that probably won't be that same sort of growth rates in the second half.
We are being a little bit more conservative.
And given <unk>.
Some of the supply constraints that we see but as I say, that's factored into our guidance and we're not going to provide a quarterly breakout and we hope its supply eases that we could we can do better than that and <unk>.
<unk> P M P.
Given the.
Strength of rural fixed wireless broadband is it is going to be a very nice growth driver for us coupled with the release of our 60 gigahertz products. So we anticipate that piece of the business to grow somewhere between 14, and 16% and as a tool mentioned earlier Wifi business to grow somewhere between.
40, and 60% so some pretty strong growth rates and those businesses that we are being a little bit cautious given the supply environment.
Fair enough and it sounds like PTP could be another area of caution and that was actually my follow up question.
Which is a little bit of a multi parter, but but not not very much which is to say you have seen you mentioned gaining share and PMT and youre doing quite well there we've seen a couple of meaningful competitive wins by one of your competitors with a couple of the big art off winners.
And recently.
L T D and and excellent.
And and that might suggest maybe there is some competitive dynamics shifting and PTP that might be a bit of a headwind.
And the kind of multipart aspect is is that activity amongst those.
Providers, both of whom were big art off winners.
And they might be accelerating their access deployments.
And I would imagine you're pretty well positioned given this these backhaul awards and that's it from me.
Tim I would I would say.
The PCP business Force cambium.
And is very much the one not just from the visits.
Backhaul, but also defend.
A lot of defense users cambium PTP, so sometimes youll see very very strong quarters, sometimes maybe a little softer quarter from PDP that is not driven from service provider part for us is actually pretty strong.
We feel very good about.
Our PDP business worldwide.
In general access is far bigger business than PTP business for cambium, So I think.
Overall as we look at first half second half I think GDP will grow BT people will do what it has done in 2020.
But we.
And we don't see massive had been one way or the other and that business, but definitely it modulates lot more for cambium from the defense and government site.
Okay. Thanks, very much and thank you.
And I would now like to turn the call back over to Mr. Peter Schuman for closing remarks.
Thank you Daphne during Q1, 'twenty, one cambium networks will be presenting and meeting virtually with investors on February 24th with J P. Morgan February 2005th with water Tower research at the J P. JMP Securities Technology Conference on March 2nd and and Raymond James Institutional Investor Conference on March.
March 3rd and the Roth Capital Partners Conference on March 16th and the meantime, Youre always welcome to contact our Investor Relations Department at 847 to six four to $1 88 with any additional questions that arise. Thank you for joining us and this concludes today's call.
Ladies and gentlemen.
Today's quarterly earnings call. Thank you for your participation and you may now log off.
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