Q2 2021 Cambium Networks Corp Earnings Call
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Good afternoon, My name is Mel and I will be a conference operator today at this time I would like to welcome everyone to the cambium networks second quarter 2021 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. The ask the question during the session you will get the Crestar 1 on the telephone keypad.
Limit yourself to 1 question and 1 follow up question. Thank you Mr. Peter Schuman senior director of Investor and industry analysts. The relation you may begin your conference.
Thank you Mel welcome and thank you for joining us today for Cambium networks second quarter 2021 financial results conference call and welcome to all of those joining by webcast of 12.
Our president and CEO of Stephen Cumming, our CFO are here for today's call the <unk>.
The 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 a 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.
As a reminder, today's remarks, including those made during Q&A will contain forward looking statements about the company's outlook and expect the 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 the statements to actual results or to make changes and cambium expectations or otherwise.
It is cambium networks policy not to read and reiterate our financial outlook. We encourage listeners to review the full list of risk factors included and the Safe Harbor statement in today's financial press release.
We will also reference both GAAP and non-GAAP financial measures and specifically note that all sequential and year over year comparisons reference non-GAAP numbers, except where otherwise noted a reconciliation of non-GAAP to GAAP is included in the appendix to today's financial results press release, which can be found on the investor page of our website and of today's press release and.
Announcing our results turning to the agenda cambium Networks' President and CEO of 2 of button augur well provide the key investment highlights for the second quarter 2021, and Stephen Cumming Cambium networks CFO will provide a recap of the financial results for the quarter and our financial outlook for the third quarter and calendar year 2021.
Our prepared remarks will be followed by a Q&A session I would now like to turn the call over to of tool.
Thank you Peter can be on the business remains strong.
As the expansion of broadband wireless communications networks continue.
And our vision of high performance via the Affordable Global infrastructure leader was well received during Q2 'twenty 1.
Cambium hit 2 significant milestones as the Standalone company during the second quarter 2021.
The first the achievement was shipping our 10 millionth radio.
The second accomplishment was breaking the $90 million revenue barrier in the quarter for the first time after only breaking the $80 million revenue value of that in Q4, 'twenty and reaching the $70 million threshold for the first time during Q3 'twenty.
Cambium momentum continued to build getting through Q2, 'twenty, 1 with our new multi gigabit product introductions ramping increased interest and fixed wireless broadband solutions as the performance matches that of fiber.
And the attractive cost of ownership of our solutions, making cambium of compelling choice for wireless infrastructure projects around the world for many new and emerging applications.
We see increased government spending on infrastructure products accelerating the strength over the next few years as broadband is the lifeline to connect local communities and distributed enterprises around the globe.
If it can be of wireless solution it will be a wireless solution.
Cause of the ease of installation and operations speed of service enablement, along with the affordability.
Cambium head of breakthrough quarter, 4 out of enterprise Wi Fi business with revenues for that business significantly exceeding our expectations. During the second quarter 2021, reaching record revenues of $18.3 million, increasing by 139% year over year and improving by 51%.
Yeah.
We experienced strength across many verticals, including education public Wi Fi.
And at the company and hospitality vertical.
Even more importantly, we benefitted from service providers increasingly adopting our complete multi gigabit wireless fabric solutions consisting of fixed wireless broadband.
Enterprise Wi Fi and wireless savvy switching.
Bind with our cloud based the and Maestro software solutions to manage the network.
Cambium as at the start of a new era of end to end wireless speeds equal entered debt of fiber.
And with a multi gigabit wireless fabric delivering fiber performance and the luxury at a fraction of the cost and enabling exciting new applications.
Customers that are adopting of 60 gigahertz <unk> solution to extend fiber networks with the reduced capital expense.
The learning time to revenue and improving the ROI.
In addition, fiber operators are using <unk> to seamlessly cross streets, and railroad crossings and travelers physical obstacles without the hassle of permits trenching and other limitations and countered with legacy Wired networks.
And on the time of our next earnings call.
Our forthcoming fixed millimeter wave <unk>, 2 and be it gigahertz <unk> will further expand our serviceable available market Tam as both new and existing customers of demand higher broadband performance at the edge.
Edge of the networks.
Network upgrades are multiyear even and we are at the intersection of the new needful of powerful emerging high speed networks, and the introduction of cambium and leading edge cost effective technology.
Together with significant government funding as the nation's wanted to bridge the digital divide and achieved digital equity we expect fixed wireless networks continue to provide meaningful growth for many years to come.
Cambium will be of significant beneficiary of these new infrastructure boots.
Turning to the results of second quarter 2021.
We achieved record revenues of $92.7 million above the high end of our outlook.
Record non-GAAP diluted EPS of <unk> 45.
Also exceeded the high end of our outlook of between 29, and <unk> 35 per diluted share.
We delivered these excellent results and a supply constrained environment, where many of our employees and partners continued working remotely during the Covid pandemic.
Looking at revenues across our different product line.
Our point to multi point BNP business had record revenues, increasing 3% sequentially and up 47% year over year as we continued to see strong momentum and network traffic increased demand for CVR of solutions and broadening interest and our new product introductions as we expand our portfolio of <unk>.
Dilutions offering industry, leading spectral efficiency scalability reliability and attractive economics for our customers.
As expected the point the point business was lower decreasing 20% sequentially. During Q2, 'twenty, 1 due to timing of shipments with federal products, while improving 12% year over year on higher demand for backhaul Q3, 'twenty, 1 tends to be a stronger quarter 4 of our federal business.
As previously mentioned, we had another record quarter for our enterprise Wi Fi business growing 51% sequentially and increasing 139% year over year. During Q2, 'twenty 1 due to strong growth of <unk> 6 solutions and record revenues and attach rates for our wireless <unk> and <unk>.
<unk> enterprise switching products.
This is also of the first time and cambium history. The Wi Fi revenue reached 20% of company revenues.
Looking at some notable customer wins and new product development.
In North America, and a prequalification even for the U S. Olympic trials Cambium BNP for 50, CBS solution, featuring our BNP for TB hygiene customer premise equipment was used to backhaul through trees for our new outdoor Wi Fi 6 product the guest flow.
And network covered the entire perimeter of the track and field area and performed flawlessly.
157 devices connected to the Wi Fi networks that could not get settled reception at the venue due to the mobile networks being down mid event.
We won a large new service provider and Vancouver, British Columbia, using BNP flow 50 M and BNP for <unk> for residential broadband access.
And the selected cambium put our superior total cost of ownership and quality.
And enterprise Wi Fi the hospitality market is recovering nicely.
And we had of win at a 5 star resort and Hawaii. The highlight galvani 4 hour ex suite to dash to Wi Fi 6 products.
Cambium was selected for coverage of rooms.
Indoor spaces, and the outdoor pool areas with our new ex <unk> zero.
We won the deal over a larger competitor as a result of our superior total cost of ownership, including our secure cloud management and see and Maestro ex platform <unk>.
And the ability to provide a range of different use cases.
Cambium first mover status for the FCC $3.5 gigahertz CVR of spectrum continued to benefit sales of RP and before 50 products and our CPR of SaaS service and both the U S and its territories.
And our Pnp for PM system, featuring <unk> and Medusa massive Mu Mimo technology enables service providers to rapidly enhance the networks using the CPR of frequency bands to provide high performance broadband service of business and residential subscribers.
And late July Cambium announced we have deployed over 100 and fixed wireless broadband devices utilizing cbre's frequency licenses.
As of today's call. We now have over 103000 devices managed by our CPR of SaaS service and increase of approximately 14% since we reported last quarter.
In addition to our industry, leading <unk> full 50 platform. We now offer the fixed LTE platform for CBR at.
The 3 gigahertz <unk> and Ranger for those customers that required standards based platforms, where.
We are differentiated among alternative LP choices because of sea and ranges of operational simplicity and lower total cost of ownership versus our competition.
The 3 gigahertz and range of platform joins the previously introduced 2.5 gigahertz C and range of solution.
In the Europe, Middle East and Africa region, EMEA and the strategic wins from Q2 include.
The phone 1 of Italy's top network operators selected cambium for the Smart City project and the vascular Qatar region to receive the full wireless fabric deployment.
Cambium was selected for the outdoor public access to 130 municipalities and the deployment included the use of our EP and <unk> 300 <unk>.
The and pilot and Wi Fi 6 access points and see and metrics enterprise switches.
We beat out the larger competitor and were selected for our superior performance and outdoor areas.
As part of the project, we recruited certified and on boarded and important new system integrator.
And Germany, we had numerous enterprise wins and the education market with deployments and the Frankfurt stock Lincoln Lindquist will cancel and totaling the school districts.
And Africa, our wireless fabric strategy is paying off with the sizable order from the large multinational operator with the win in Nigeria for RFP and <unk> hundred 50 M and.
Enterprise, Wifi, 6 and see and metrics switches and our C and maestro ex fabric management software.
The project is with the country's largest national carrier to deploy indoor and outdoor Wi Fi plus switching to the nation's largest countrywide bank.
With over 500 offices being connected by cambium wireless fabric.
In the APAC region, we had a large enterprises and in Korea.
With our new outdoor Wi Fi 6 products, the <unk> and the city of <unk>.
We won this business against 2 larger competitors as the result of MBS performance and value.
And Japan, we received a substantial order for outdoor Wi Fi from the large multinational hamburgers chain for the drive thru service.
And in India, We had and enterprise Wifi win and the until the tunnel. The <unk> tunnel is the worlds longest on the above 10000 feet and has the total length of our 6 miles the tunnel operator deployed cambium Wi Fi access points to create a mesh network. The mesh network connects all video cameras and IP phones.
Several OEM brands were tested and the difficult conditions and cambium Wi Fi was selected as the best due to its grid of range stability and robustness.
And the Caribbean and Latin America, Cala region, we had a record breaking quarter with revenues exceeding $12 million for the first time.
Including record enterprise revenue for the region.
We had a large enterprise win with the Ministry of Telecom and payroll.
Cambium partnered with the satellite communications provider to deliver vice and connectivity to over 1300 rural sites and the Amazonia region to provide connectivity for primary education and rural health care centers.
We won this project based on our reputation and the reliability of our enterprise Lifesize and switching products plus the functionality of our C and Maestro cloud management software.
Now that the pandemic is easing and the color region, the hospitality industry. The recovering we are.
We're seeing extraordinary acceptance of our enterprise solutions throughout the region.
Some of enterprise wins include the hotel Regatta and Cartagena, Colombia.
<unk> will cover in Queen deal, Columbia, and and the Mayan Riviera of Mexico tool on 2 different boutique resource and the year holds the spa and hip hotel and Spa.
In addition, <unk> the largest service provider and Suriname has deployed our <unk> hundred 50, I and the jungles of Diana to provide broadband solutions for the oil and gas industry.
Turning to new product introductions.
Our previous quarterly update.
During this fall we expect to have 2 significant new product introductions.
And our Wi Fi 6 E product will bring even more performance benefits, including the availability of up to 1.2 gigahertz of new clean spectrum and the 6 gigahertz band.
With up to 760 megahertz channel Wi Fi 6 E delivers improved performance increased capacity and lower latency debt enables a new set of high density the use cases.
Cambium expertise and history with multi radio AP designs enables us to deliver differentiated by 560 products.
We start betas in Q3, and 4 are highly anticipated growth.
Gigahertz, <unk> and our fixed wireless product for early adopters of the technology with <unk> This fall and shipments in Q4.
We have approximately 30 customers requesting gear for 28 gigahertz. The envy of trials and have received firm orders from 1 of our distributors to support of specific network operator.
Cambium <unk> provides high capacity scalable residential access backhaul for outdoor Wifi access points for <unk> small cells and video surveillance networks at the lower total cost of ownership than fiber.
Our highly reliable and rapidly deployable 28, gigahertz <unk> products feature of Multiuser Mimo.
Beam, forming and stays up to date for next generation performance enhancement with Cambium C and maestro ex cloud software.
Interest and auto and viewed gigahertz, the envy of products remains very high and customer activity remains strong the head up ever Liberty.
This product paved the way for fixed fiber and wireless leadership from cambium.
During this fall, we will commence extensive field trials and proof of concept of deployments and advance of expected commercial shipments and fourth quarter with product revenue ramping during calendar 2022.
We remain very positive on the global use of 60 gigahertz, <unk> and wave solutions and see many new use cases developing from a variety of customers around the globe.
Cambium 60, gigahertz, <unk>, 4 millimeter wavelength and make it possible to provide of city with high speed broadband access by utilizing the existing street furniture, such as Streetlamps traffic life and utility Poles as the result, it can be deployed faster and more cost effectively.
And wired networks.
As we have previously mentioned 60 gigahertz opens up new markets for cambium due to its performance and what's the ability.
We had a sizable win with our <unk> family of technology with bent on it and rapidly growing high speed service provider Investor and Australia, which is a favorite choice among gaming enthusiasts bent on it as.
He is using our 60 gigahertz C and wave 2 backhaul for homes and businesses.
Cambium is helping transform the 50 of part 2.
And to gigabit speeds throughout the city.
In EMEA, we expect the government of France. The approved formal use of 60 gigahertz band during Q3 'twenty 1.
More broadly across the EMEA region, we see countries opening of access to 60 gigahertz.
Also in the EMEA region of large service provider and Nigeria, the provider of affordable broadband connectivity to Africa's underserved populations has selected our 60 gigahertz <unk> to backhaul Wi Fi and more urban areas.
Finally, and North America, we have secured of trial network utilizing 60 gigahertz <unk> from a nationwide cable operator for fiber extensions to enterprise customers.
We anticipate the first networks being deployed and southern California later this year.
Looking at new developments and our PTP microbial product line. During Q3, we will be releasing the new <unk> with 224 megahertz of Wideband channel supporting 11, 18% and 23 gigahertz frequencies.
The wideband version is backward compatible with the prior narrow band version of the product.
Wider channels provide a key benefit of additional capacity for customers.
Turning to our C and MISO of cloud software our end to end cloud powered connectivity solution to manage the network from a single pane of glass.
The C and MISO cloud software continued to experience strong user growth total devices and the cloud management and Q2 'twenty 1 towards the lower 616000.
And 600 and increase of 7% from Q1, 'twenty, 1 and up 46% year over year.
Looking at our channel.
In Q2, 'twenty, 1 we expanded our channel presence by adding over 590, net new channel partners sequentially and over 2340, net new channel partners year over year.
Which represents an increase of approximately 6% sequentially and 29% year over year.
Cambium added some new larger distribution partners during the second quarter, including in North America. We recently added scan source as a distributor and in the Middle East We added Ingram micro and the distribution partner for the wide variety of wireless connectivity solutions.
This fall we plan to return with our presence at the largest trade show of the year of <unk> 2021 held in mid October and Las Vegas.
The annual convention will provide up to date information on cambium latest hardware software and services.
We will also have our next set of cambium connections online webinars for our and customers and partner community throughout the various geos in September.
I will now turn the call over to Steven for a review of our Q2, 'twenty, 1 financial results and Q3 'twenty and outlook.
Thanks and tool.
Cambium had record revenues of 92.7 million for Q2, 'twenty, 1 above the high end of our outlook of $85 million to $19 million.
This is the first time and the company's history, we've broken the $19 million revenue area revenues.
Increased by 5% quarter over quarter and.
And we're up 49% year over year.
We achieved these outstanding results, despite the supply chain constraints affecting the entire industry.
On a sequential basis, the Q2 'twenty, 1 revenues were higher by $4.2 million.
The higher revenues were driven by record shipments of our <unk> products, which grew 3% sequentially due to service providers continuing to scale networks higher shipments of our new multi gigabit products and record revenues for our enterprise Wi Fi solutions, which grew 51% quarter over quarter.
Driven by higher shipments of our new Wifi, 6 products and record shipments of our cloud savvy switching products.
Looking at revenues by geography.
North America, our largest region represented 53% of the company's revenues compared to 61% during Q1 'twenty 1.
On a sequential basis as expected North America had a softer quarter with revenues declining 9% driven by lower PPP and PMT demand from service providers offset by stronger enterprise Wi Fi revenues.
EMEA, our second largest region increased 33% sequentially, primarily reflecting stronger pnp and robust enterprise Wi Fi revenues and represented 27% of revenues during Q2, 'twenty, 1 compared to 21% of revenues during Q1 'twenty 1.
<unk> had another record quarter, its fourth consecutive quarter of growth, increasing by 16% quarter over quarter, driven by a significant number of customer wins and continued recovery in that region and represented 13% of sales during Q2 'twenty 1.
APAC increased 23% sequentially and represented 7% of revenue during Q2, 'twenty, 1 compared to 6% of revenues for Q1 'twenty 1.
Moving to our gross margin non-GAAP gross margin of 50% increased by 80 basis points compared to Q2 'twenty the year over year increase on non-GAAP gross margin was primarily the result of higher volume and mix.
On a sequential basis and <unk>.
Non-GAAP gross margin in Q2, 'twenty, 1 of 50% was 10 basis points lower than Q1 'twenty 1.
The lower quarter over quarter non-GAAP gross margin was the result of higher freight and distribution costs due to component shortages and the market.
And Q2 'twenty 1 on non-GAAP gross profit dollars increased by $15.7 million <unk>.
Compared to the prior year of $46.3 million and improved by $2 million sequentially.
Non-GAAP operating expenses research and development sales and marketing general and administrative and depreciation and amortization in Q2, 'twenty, 1 increased by $4.7 million when compared to Q2, 'twenty and stood at $28.8 million of 31, 1 percentage of revenues.
The majority of the year over year increase in non-GAAP operating expenses was the result of higher R&D, resulting from increased spending on upcoming technologies and higher sales and marketing due to increased head count the support higher revenues.
When compared to Q1 and 21 non-GAAP operating expenses were flat during Q2, 'twenty 1 quarter over quarter on R&D went up due to increased head count and spend on the upcoming technologies, while sales and marketing general administrative expenses low level.
Record non-GAAP operating margin was 18, 9% up for the 10, 4% during Q2.2017, 5% of revenues in Q1 'twenty 1.
We had another good quarter of profitability with record adjusted EBITDA for Q2, 'twenty, 1 of $18.4 million or 19, 9% of revenues compared to 7.7 million or 12, 3% of revenue for Q2, 'twenty and compared to $16.5 million.
Or 18, 6% of revenues for Q1 'twenty 1.
We see continued leverage and our business and remain committed to driving our adjusted EBITDA to our target model of 18% to 19% of revenue.
While we are presently exceeding our target operating model and certain metrics. We view these metrics on a consistent annual basis, and we will reevaluate our targets when appropriate.
Moving to cash flow cash provided by operating activities was $20.1 million for the second quarter of 'twenty 1 the.
The quarter over quarter increase in cash was primarily the result of strong earnings and increase in accounts payable and the reduction in inventories offset by an increase in accounts receivable.
This compares to $26.2 million of net cash flow provided by operating activities for the second quarter of 2020 and cash used in operating activities of $7.6 million for the first quarter of 2021.
Non-GAAP net income for Q2, 'twenty, 1 was a record $12.9 million of 45 per diluted share compared to $4.3 million or <unk> 16 per diluted share for the Q2 dollars 20, and non-GAAP net income of $11.7 million.
Of 41 per diluted share for Q1 'twenty 1.
The high and non-GAAP net income compared to the both the prior year period and the prior quarter was primarily due to higher revenues and gross profit dollars demonstrating improved leverage and our operating model.
Turning to the balance sheet cash totaled $51.4 million as of Q2, 'twenty, 1 and increase of $200000 from Q1 'twenty 1.
The sequential increase and cash primarily reflects strong net income and includes a $19.6 million reduction in term loan principal as required by the excess cash flow of provision in the term credit agreement.
And 10 are intended to $5 million scheduled principal pay down of debt occurred on July 3rd due to a delay processing by the bank and will be reflected on our third quarter financial results.
Net inventories of $28.4 million in Q2, 'twenty, 1 decreased by $1.7 million year over year and were lower by $3 million from Q1, 'twenty 1 while the supply chain remains an ongoing challenge we are working to increase our inventory position over the next few quarters to support the growth and our <unk>.
<unk>.
In summary, we continue to see sequential growth and record profitability and solid cash flows from operations with good execution and what was the very supply constrained quarter, the visibility and predictability and our business remains strong as we enter new product cycles, and we expect increased government <unk>.
Ending for our broadband business as we exit calendar 2021, we.
We are gaining scale, improving our operational efficiency and making excellent progress on achieving our long term target model.
Moving to the third quarter 2021 financial outlook. Please note the cambium networks financial outlook does not include the potential impact of any possible future financial transactions acquisition pending legal matters or other transactions occur.
Accordingly, Cambium networks only includes such items in our financial outlook to the extent they are reasonable however, actual results may differ materially for the outlook.
Considering our current visibility as of August the 19th 2021, Q3, 'twenty 1 financial outlook is expected to be as follows revenues between $88 million to $92 million.
Non-GAAP gross margin between 48, 5% to 49.5.
<unk> non-GAAP operating expenses between 39 to $31.9 million and.
Non-GAAP operating income between 11, 8% to $13.6 million.
Interest expense net of approximately $1 million.
Non-GAAP net income between 8.6% to $9.8 million of between 30% to 34 cents per diluted share.
Adjusted EBITDA of between 12, 7% to $14.6 million.
And adjusted EBITDA margin between 14, 4% to 15, 8%.
Non-GAAP effective tax rate of approximately 20% to 22% and approximately 29 million weighted average diluted shares outstanding.
Turning to our cash requirements paydown of debt to $5 million schedule of debt and an additional $2.5 million due to the timing from the second quarter of 2021 payment.
Cash flow interest expense of approximately $1 million and.
Capital expenditures between 2 to $2.5 million.
Looking at the full year 2021 financial outlook.
Revenues between 357 million to $365 million incur.
Increasing between 28% to 31%.
Non-GAAP effective tax rate of approximately 20% to 22% and adjusted EBITDA margins between 16% to 18%.
I'll now turn the call back to a tool for some closing remarks.
We continued to deliver impressive growth as we overcame global supply chain challenges and made excellent progress on our goal of long term top line growth and the mid teens and and adjusted EBITDA and the upper teens as the percentage of revenue.
We have multiple growth drivers for 2021, and beyond and including our gigabit wireless products, such as enterprise Wi Fi 6.
60, gigahertz and our upcoming 28 gigahertz millimeter wave solutions for fixed.
Wireless as well as our software the service fee and Maestro ex solution.
Cambium continues to work diligently with different governments enterprises and agencies to help bridge the digital divide using our advanced wireless fabric solutions.
We expect increased scale should benefit our operating results and we remain focused on judiciously managing our costs.
While continuing to invest and future innovative products to maintain our technology edge.
Finally, I would like to show my appreciation for our employees.
Gartner <unk> and customers for another great quarter of results and these unprecedented times.
This concludes our prepared remarks.
So with that I would like to turn the call over to Mel and begin the Q&A session.
Thank you ladies and gentlemen, if you have the question at this time please press the.
And then the number 1 key on your Touchtone telephone. If your question has been answered any of you wish to remove yourself from the tier Please press the pound key.
Please limit yourself to 1 question and 1 follow up question. Thank you. Your first question comes from the line of Rod Hall of Goldman Sachs. Your line is now open you may ask your question.
Hi, guys. Thanks for taking the question. My first question was regarding supplies and the supply constraints I know you said you'd been impacted by freight costs, but I'm just curious.
If we look at the guidance is there of revenue that you're assuming will be impacted by shortage of supplies are difficult to getting supplies and can you quantify the margin impact at all for US and then I've got a follow up thanks sure Rod This is Russell.
Our guidance includes what we have seen the supply chain constraints. So we've taken all of the into account.
And as we give you the guidance for Q3.
Just a couple of comments.
We saw supply chain constraints as early as last November.
And we started working very proactively with the senior execs of all of our the supply chain partners, who are working very closely with them and I think youll see improvement and chips situation in Q4, and then continuing into 2022, I think Q3, probably will remain tight but all of the conversation.
We have had with our partners looks like Q4 on and they are all working very proactively.
Getting capacity and making sure the new things ease a little bit on our side. What we have done proactively is we are definitely adding additional buffer of inventory.
And are increasing our yields on our manufacturing floors, we're adding test capacity and as much automation as we can so this is also a time line.
We are making sure our processes of running very smoothly.
Okay, Dave and Rod just just to add to that of guide for Q3 is about the at the midpoint of 3% down.
Sequentially and.
And to answer your first part of question I would say that primarily driven from the supply constraints that we and the and the rest of the industry is seeing.
I would say in general, we're seeing sort of prolonged industry wide supply shortages.
And from the semiconductor cited the cloud pallet supply side as well so that's impacting us. So it's certainly more of a supply issue than a demand issue we actually.
And to the quarter with a very healthy backlog position of about 75% and that's continued to grow as we've gone through the first months of the quarter and we basically got pretty much almost 100% of our guide and place at this point in time, so with destiny supply constrained with regards to the gross margin the <unk>.
Point of my guide was coming in at 49% as you've noticed.
That is now reflecting some of those higher input costs from higher component pricing.
But we are raising prices and communicated that to our customers and so there'll be an offset of that whether we anticipate once we worked through the backlog materializing in in Q4.
Okay. Okay. That's really helpful guys I appreciate that David just on the gross profit you would you do you guys have I haven't looked at your inventory better I guess youre unwinding more expensive inventory into Cogs later, so that'll theres still going be a little bit of a drag on gross margins as that occurs and then as Atul said, maybe when the chip.
Situation gets better toward the end of the year beginning of next that starts to.
Mitigate itself is that is that the right way to think about gross margin and think about it yet.
And then just a clarification on the products the millimeter wave product you guys called out could you kind.
Kind of juxtapose that with the millimeter wave stuff that we hear from carriers I assume this is more of a proprietary millimeter wave.
Interface, but.
Does it have a role to play and fixed wireless access.
And maybe just kind of put that into some sort of adjust the position with the.
The cellular stuff that's out there thanks.
The 60 gigahertz.
Millimeter wave.
And the higher frequencies.
They are industry standard at a total of about 11.
And so its all standard we worked with Qualcomm Facebook.
All of US work together, so thats pretty standard the 28 gigahertz band goes from I think 23 to 29.
So we use of call of <unk> been there we are focusing on the fixed wireless broadband and as <unk> and our standards evolve the chips will evolve the will add the right Apis sort of architecture hardware architecture and design to evolve towards the <unk> NR from day 1.
And so it will also be standard and we will not do mobility. We are totally focused on fixed 5 G. So when you compare so called millimeter wave solutions from the large service providers, they will be focusing a lot more on mobility and some of them might new fixed part as well, but we are designing our.
And like a hand in the glove for simplicity ease of deployment ease of management from day, 1 the way we did pnp $4.50.
Thanks, Rob.
Great. Thanks, guys.
Thank you.
Thank you and the next question comes from the line of Kelly of Roth Capital. Your line is now open you May ask your question Hey, good afternoon, and thanks for taking my questions I appreciate all the color on the call guys.
Maybe for starters just to dig in on the supply constraint issue again I am not sure. If you quantified it for the second quarter in terms of the revenue opportunity that was curtailed by component availability and also the gross margin impact and the second quarter I was wondering as part of the as well you can kind of talk a little bit about linearity that you saw on the second quarter and so far into the third.
<unk>.
Yes, Scott This is day and we didn't really.
And really tough to quantify I think the the way you can look at the it is when you think of.
Guide last quarter of 85 to 90, we actually ended up achieving about 3% that adds and the high end of our range and and if you can remember that I was commenting last quarter that we basically had pretty much and thought we had all of.
And our guide already covered in our backlog when we gave on our last earnings call announcements. So I would say the kudos to our supply chain, they executed almost flawlessly and allowed us to achieve 3% better than the high end.
And of a range.
Im sure there was a little bit of the.
The product that we left on the table that we could have shipped but we'll pick that up in Q3, I think it's tough to quantify.
Got you. Thanks, and then as a follow up I wanted to dig in on the government funding opportunity when you're talking about things like <unk> and potentially the $65 billion that could come as part of the $1 trillion infrastructure package.
You've talked about really that's certainly kick in towards the end of the sheer I was wondering if you could talk about.
How the 65 billion of that comes in and with some way shape or form how you would expect to see it and how big government funding driven.
Driven sales could be as we look into 2022 and beyond and I know, it's still early days, it's a lot of dollars floating around out there and you have had some customers.
And that have 1 the R&R funding. So I'm wondering if you could just kind of address how you see that as we go into 2022.
Sure Scott.
And as we said I think on many calls.
The art off with the long range program.
The impact on cambium, Youll see starting probably 2022 and going all the weighted $22.7 so the $20 billion I would say, maybe 70% of 80% of of that money would be spent and plus 6.7 years.
So we are pretty much on that timeline.
Out of top 11, the winners and our Doc 6 of them already have fixed wireless broadband and the key architecture.
The very important point.
Fixed wireless broadband will give bang for the Buck.
Ultimately economics when some of these things and if you look at GAAP to the last round of government funding around connect America Fund.
Our adventure and say, maybe 50% of $60 some of that money for connectivity did go to fixed wireless broadband again because of economics. So we anticipate that we will pick a good chunk and our.
Our approximate number was and on average for the 6 years of about $60 million a year. So the.
And we're pretty much on that and we are very engaged with the 3 or 4 key winners and showcasing our solutions and the other solutions, which are coming from cambium like 60 gigahertz in the future enhancements Wi Fi 6 E. All of those solutions will feed into that so this is our top of the.
President Biden initiative, there are lots of local governments initiative. Those are all additional so I think this entire drive for pervasive connectivity and approximately 30 million households, and the United States either of unconnected, albeit grossly under connected so there's a lot of focus on debt.
Biddable networking and we are very well placed to supply some of that.
Great. Thank you thanks, Scott Thanks Bill.
Thank you. The next question comes from the line of Simon Leopold of Raymond James. Your line is now open you may ask the question.
Thanks for taking the question.
The first I wanted to maybe talk a little bit about the product trends and the near term and the prepared remarks, you mentioned that you expected federal seasonality to help in September and the.
The point to point business to rebound a bit and overall youre guiding to a sequential decline so.
Is there some aspect of the business that.
And that may be a little bit weaker and I'm wondering, particularly Wi Fi will face a difficult sequential comparison after a blowout quarter, maybe just unpack a little bit of whether there's outliers among the other segment and then I've got a follow up sure Simon first of all of we are very supply chain.
And constrain environment demand is strong across the board and if you look at enterprise business. We are seeing very good adoption of our Wi Fi 6 we are seeing many segments coming back like education, and hospitality outdoor Wi Fi very strong adoption of <unk> and metrics are wireless.
Switching products. So I think when you look of service providers. They are expanding the networks scaling the network, giving more speeds and feeds of that business is strong.
On the regions all regions are actually seeing and the good adoption good demand.
And so when it comes of products and demand we feel pretty good.
The point to point business because of dependency on federal is always lumpy and Q3 is the strongest fed.
Federal quarter, So we anticipate PDP should recover and.
And in Q3, so overall good momentum with new products, good momentum with our strategy of multi gigabit fabric and I think as supply chain gets little improved in Q4 and in 2022, we'll start matching developed.
The demand we are seeing any other things of Stifel you want to mention yes, and I think.
The PTP, we're expecting to see a slight sequential growth even in light of some of these supply constraints that of tool mentioned I think a PTP business in general as we've spoken about that before and it services. Some of the federal business that are generally larger deals.
And the.
And sometimes.
It takes longer to get across the finish line when we look at that PTP business and particularly as we go out to 2022, we feel good about how that momentum is building and that business and the growth there to support some of these federal programs look pretty robust.
Into 2022, but.
As the tool mentioned this is more about of supply dynamic than it is around demand.
Thank you for that and just as the follow up.
Understanding the supply issues I wanted to see if you could talk a little bit about.
And the geographies, where you do your manufacturing so specifically and my recollection is you've got exposure to Mexico, and the U S not as much to Asia, but but I just wanted to double check the locations of your manufacturing, whether we've got issues in terms of lockdowns and possibly even whether there is the competitive advantage.
From your geographies, where you manufacture thank you.
Salmon and very good question.
Actually have a pretty diversified supply chain and.
And pretty much by design so Mexico.
Flextronics is 1 of our very key partners for our products with long range partnership there very pleased with how the partnership goes and then a lot of our odm's manufacturer in China.
And Shanghai and some of the designs happens and Taiwan and some of them on our diversifying into southeast Asia placed.
Places like Thailand for example.
Overall, we feel pretty good about the diversified supply chain.
And so far of that has not been the issue.
They have been delivering what we are asking and remember we are growing the CR, 28% to 31% and this unprecedented the climate.
So that does to you of how well our supply chain team has been executing and in this in this environment. So.
Pretty pleased and I think youre right. The diversified channel supply chain, we have is a key strength of cambium.
Great. Thank you for taking the questions sure. Thanks, Tom Thanks Simon.
Thank you. The next question comes from the line of George Schnell of Jefferies. Your line is now open you may ask the question.
Hi, guys. Thanks, very much obviously, a high percentage of the business goes through distribution channels I guess I was just curious about.
Your perspectives on channel inventory of these days I think if I recall correctly, you guys drive them around 6 weeks of inventory and.
And the channel is I guess, given all of the supply constraints that are out there I would imagine the that number kind of bounces around but any update on on channel inventories of would be great.
Yeah Julien Steven.
Channel inventory actually which is a good thing was up a little bit for us.
And we're actually been tracking around the.
7 weeks and its probably a little bit higher than that as we entered Q3, which is to say the good thing and.
And probably more and more tied to.
The linearity of our shipments into the channel rather than any softening in the end demand.
And given the supply constraints, we were that much more back end loaded with our shipments and instead of the distributors received more product and the latter part of the quarter and then.
Took a little bit more time for them to sell it through and the.
And the early part of this quarter. So yes, we are tracking a little bit higher, but we think thats. The good thing at this point.
Got it okay.
And then separately I wanted to ask about CN Maestro ex obviously.
New initiative for you guys I think its interesting and that you can start to monetize.
The software business a bit more aggressively, but where are you with seeing the maestro ex in terms of customer traction and adoption.
So George this is still I would say early stage.
<unk> seen the maestro ex.
The traction we are winning deals we are going into customers and selling the differentiated features as we said are really key goal is that our software revenue, whether the CMI throw ex or is it.
CBR SaaS service or the or the <unk> type of tools, we have we plan to focus on our 10% of our revenue say in next 2 to 3 years comes from software. That's the path. We're on and we're pretty pleased to see with the customer, especially with Wi Fi 6 and some of the new products.
60, gigahertz, and 28 gigahertz coming they will all youll see and maestro ex.
So overall I think.
Work in progress.
And we will update you on every quarter, but so far it's more early customers smaller numbers, but continuously increasing quarter over quarter.
Great. Thank you very much. Thank you. Thank you. Thank you.
Thank you. The next question comes from the line of Amit <unk> of J.
At the Morgan. Your line is now open you may ask the question.
Hi, good afternoon, and thanks for taking my question.
Also I just wanted to go back to be on your question from broader on 28 gigahertz product and <unk>.
If you can size up how are you thinking about that opportunity, particularly if you can.
Help me through how Youre thinking about the run rate of that business, where the opportunity could be and a couple of years from now.
And of a falloff of Switzerland.
Sure. So I think 28 gigahertz for cambium is a stepping stone into fixed 5 G word.
And what we are seeing is.
Good demand.
Coming from EMEA region.
And because.
A lot of service providers and the EMEA region. They have 28 gigahertz frequency of available and they are adopting standard. There. So we are seeing early demand for the product is really coming from EMEA.
After that I would say, we'll probably see kalla, our Asia again because of the Liberty of spectrum.
North America will be probably little later.
Because of the frequencies and mostly owned by the big guys.
And for that reason.
So when we look at 28 gigahertz and this kind of completes our multi gigabit fabric story. If you look at the first 300 meters of so you have Wi Fi..6 then you will have 1 to 2 kilometer and with the machine you can go even more with 60 gigahertz, which provides yoga and multi gigabit and then 28 gigahertz comes.
<unk>.
Which gives you 4 to 7 kilometer extension from there. So you can start to see the last 10 kilometers wirelessly multi gigabit.
The full pervasive connectivity desks.
And that's the opportunity we see and.
In terms of every network is always land and expand the strategy for us. It takes a good 6 months to do <unk> then after that it takes probably good 1 year to 18 months for the first set of cities aware of the deployed the check the quality and then it expands from there for the next 2 years. So it's a good.
Good you can see 3 to 4.5 year lifecycle.
And so nothing will happen and 91 quarter, but when you look at how the multi gigabit fabric has deployed over 3 or 4 years with service providers is the substantial business. So this is our 450 PMT business, bringing in multi gigabit connectivity and those type of distances.
Got it.
And for the follow up I know you had a strong quarter and Wifi and you highlighted the improvement and.
Some of the customer verticals the.
Can you give me a sense of what the current breakdown. It looks like you guys are still quite fragmented market.
The board goods and Youre kind of how the competition looks like so can you give me a sense of what the current.
Exposure looks like the Mcqueen.
The primary verticals there.
Sure.
I won't go into the specific numbers, but I can let me give you the little bit of color for us. The reason, we are winning and Wifi is the simplicity and automation and lot of our customers are really asking for simpler networks to deploy more automation and ease of cloud management and superior economics.
I think these of the key things, we have focused on and on enterprise solution and with the <unk> acquisition Cambium picked up a very strong multimedia the architecture expertise. So on Wi Fi 6 products have multitude of the architecture software defined radio 1 of the software defined radio do for customers. So they can bring life.
5.5 and Wi Fi 6 client transparently, we can network. We can segment of the networks properly the makes it the easy for them to deploy those are the reasons. We are winning but lately. We are also finding that our products with C and metrics, which is the wireless service switching products. They also more secure.
Have built good security architecture, and our Wi Fi product.
The switching products and all managed from CN Maestro for those reasons and we're seeing the we are able to take market share from competition and for those reasons the.
The segments like Education education has lot of video that needs more capacity more performance, we are very well placed there because of the Wifi 6 the.
The segments like hospitality it has to be easy to deploy.
We are finding good traction there and then cambium designs vs superior the outdoor radios very very superior and Thats. Our 4 day. So when it comes to outdoor Wi Fi Smart city. The citywide type of deployment, we are very superior with our solution. So I think these are the reasons why we are winning.
We are gaining share and we see good momentum in enterprise and anything seasonally yes, no I was just going to say I would just say Additionally, and 1 of the reasons, we start sort of a very strong Q2 as we saw the TC some in the verticals come back online and we spoke about this last quarter and we saw shoots of it the hospitality.
The and retail, which the sizable and markets for us of.
It really started to come back on line, particularly in.
In EMEA so.
And that would help fueling some of that growth 1 more point I want to make the I Didnt mentioned earlier I think we are finding a very interesting dynamic.
Wifi, 6 and 60 gigahertz of going like hand and glove.
And to be Frank we did not notice winning and about how these 2 things will play, but what we're finding and many opportunities to be going with 60 gigahertz and then we bring and Wi Fi 6 and and many opportunities. We go with Wi Fi 6 and the fake how can a backhaul Wi Fi 6.
And I'm desperate and bring 60 gigawatt. So we're finding that the center concept of wireless fabric easy to deploy for this pervasive coverage.
And that those 2 products of very good connection and then as we expand to 28 gigahertz for the 4 to 7 kilometers that really become a drive price.
For us to bring to the market.
Got it.
Very helpful. Thank you and kind of.
Thanks.
Thank you and the next question comes from the line of Eric to PJM JMP Securities. Your line is now open you may ask the question.
Yes, thanks for taking the question.
Line of strength on the Wifi side.
Any comments or color you can give us about.
The split between service provider and the enterprise.
When I look at.
On the Wi Fi.
We are finding good traction on the enterprise side as we went through the segment of the Mark because they are upgrading but we're also finding that with.
Service provider side, especially the ones, who are serving enterprises auto of serving and the advanced customers are also adopting the.
Wi Fi I won't have the we generally don't do that flip.
And both sides of pulling the product.
Both sides are pretty mainstream for us and as I said, Eric as I said earlier the and.
Additional team finding of service providers of pooling 60, gigahertz first and then pulling Wi Fi 6 and enterprises. They are pulling Wi Fi 6 first and then pulling 60 desktop only kind of little change of dynamics and.
And on other comment I'll make is debt.
The 60 gigahertz has the potential long term.
We have very good companion on Wi Fi.
For the specialty for back hauling and both of our unlicensed both on economically very affordable So I think.
The future was 60 is definitely just starting and we feel pretty good.
And then can you talk about.
Competitive dynamics with fiber how much your business is competing.
Against fiber.
Eric the way I look at things is there are communities. There are customers, who are totally fiber and it's easy to explain the urban setting.
It's the high density and it's perfectly makes sense.
And there are situations, which are more rural or more.
And then the wholesale.
And on acquired their wireless is the very cost effective way and then there are situations, where the 5 of our guys actually are coming to us.
Wired guys are coming to the wasn't thing I just wanted to draw of concentric circle and this community and I think wireless is a cost effective way we have the operational systems management system can be used cambium actually we are finding lots of good traction with the wide day.
So we are at this point pretty agnostic because we have the tools. We have the architecture, we have ease of deployment and you will see us go and pure wife of wireless situations and Youll see is low and hybrid situations, where you have fiber or wired networks.
And we are winning and both.
Okay.
Very good thank you.
Thanks, Eric.
Thank you next question, we have the line of <unk> of Northland Capital. Your line is now open you may ask a question.
Hi, Good afternoon. Thanks for squeezing me in there first question is to follow up on the 28 gigahertz and.
You've given I think of metric around 30 customer requests for trials and I think on the release talked about.
I assume those starting this quarter to the extent youre, moving and debater and.
And my question is really try and relate that.
On to what you've been talking about on the 60 day gigahertz side I think last quarter, you talked about north of.
40 proof of concepts I wonder if theres any update.
On on that number or to the extent of it sounds like some of those proof of concepts of moved into some further advanced stage of deployment.
And.
And where do you think.
There is initial 30 for 28, where do you think in terms of customer interest.
Let me go into 64, so on 60 gigahertz, we have pretty good global pool right now.
Across the board since its the unlicensed band.
It is a little easier for service providers to deploy many countries are approving it as we said, France, probably will approve and Q3.
At this point the 60 is definitely.
Moving forward and good adoption in terms of <unk>.
Youll see the definitely far north of I think the probably 50 now and.
And many of the Puc's.
From last quarter have moved into deployment, we have installations now and.
In California for example, with North of 885 access points and thousands of users using the multi gigabit service.
Similarly, we mentioned penta net in Australia, which is going to be using 60 gigahertz. So I think at this point I would say.
Many of our moving towards deployment.
And.
Many of them are starting news new.
<unk>, our new betas.
So overall pretty feel pretty good about where we are with <unk>.
And you will see keep accelerating I think and our in our <unk> history, 60 will end up becoming a very fast growing product.
As we look at last 8 years of our product design and deployment of <unk>.
<unk> is the licensed bank.
So 'twenty it would be driven by service providers, who have debt license and as I've said earlier.
28 long term will be tier 2 tier 1 service providers across the globe because they have the license event. So we will see we are seeing good pull from EMEA and we're seeing some pull now from kalla and the.
I think North America, probably will be at the end as I said earlier and only large service providers have to and did you guys.
Overall, when you look at long term both of these products they will cater to a little different things 60 will cater to like Wi Fi on license across the board of deepened white.
28 will cater to the tier 2 tier 1 service providers.
Across the globe, who have the licensed brand and both will be part of that last 10 kilometers providing multi gigabit. So I think thats kind of the color I'll give you and every quarter. We will give you guys. The good rundown in terms of the traction number of Poc's.
All of that.
Great. Thanks for that and just to follow up.
And how would you characterize 60 gigahertz revenue contribution and your second half guide.
Starting to approach materiality of dollars are still pretty minimal.
Yes.
I would say, Tim it's starting to be meaningful revenue and we don't give it out specifically into the numbers, but it is certainly starting to be meaningful.
Revenue for us and the second half we saw as we had mentioned on previous earnings calls a lot of the.
PSC activity.
Certainly the impact.
The North America, and and now you're starting to see that traction really start to materialize and volume volume shipments and and that definitely will be meaningful and that's in the second half of the.
Of this year.
And I think.
Think about 1 way to think about this is if you look at Wi Fi in say 2002.
And 2003.
But starting.
Everyone knew it has the potential but we didn't quite know how big I think 60 gigahertz of debt stage.
And I really believe that.
The <unk> and Wi Fi will be of very good combination. So a lot of potential on new applications and I think at the last call I mentioned I don't think of you and we can predict where a little go it'll go and lot of the new applications and we are seeing some of that already.
Okay. Thanks very much.
Thanks, Tim.
Thank you we have the next question comes from the line of Chris Brian. The Research. Your line is now open you may ask the question.
Hi, the told students puts me on the call.
Hey, Craig and Chris.
Hi, yes.
Most of my questions have been answered by the do you have a few remaining kind of put them under 2 buckets..1 is C on maestro.
Mentioned, the devices under management, which continue to grow.
Can you talk about the growth here and the context.
And of your guidance for the year net.
As we look longer term you mentioned kind of the.
Potential contribution as a percent of revenue.
Perhaps you could talk about the impact further adoption of the software would have.
On your target model and related.
As it relates to gross profit.
And then my follow up is in regards of the backlog you mentioned the tremendous execution under the supply chain environment.
Can you talk about.
What contributed to it as far as might have been a lack of execution by some of your peers.
Okay. Let me, let me take the first 1 and.
And I am sure Stefan will have comment on the backlog side.
On the fee and Mistral, our strategy always was to make sure we integrate our products the fabric products for ease of deployment of simplicity automation and that was step 1 and I think we have achieved debt.
Our next part of our strategies to provide highly differentiated features like security like upgrading and.
Bring applications, which really help people run their processes debt.
Networks, and a far easier manner and for which they are willing to pay and CMI ex too.
It is moving in that direction and as we said earlier and our goal is and next 2 to 3 years I think from the software side of <unk>, but along with that we have.
The CVR SaaS service and even Wi Fi 6 he will bring some of the SaaS services. Some of the tools we have pulled together.
For frequency management.
Let's see and hear those type of things all of them combined our goal is that about 10% revenue say 2 to 3 years now come from debt portfolio.
And overall, we're heading in that direction I think it will start small, but every quarter. We are seeing the increase and thats. The key part we are on to now we're measuring ourselves we are making sure that we capture the value of charged for it all of the journey is going on in terms of the competition, how they have done and with the backlog.
And I won't really make any comments, but I'll tell you as we started working on some of the supply chain things very proactively last November because we could see what was coming and as a result, we are able to.
Even in this tough climate delivered I think pretty good results.
Yeah, and Additionally, Christian.
All of it to that and I think of twofold, 1 is our customers.
Fearful of not getting the product and supply. So there is a tendency in the line with regards to backlog to place orders earlier, which certainly allows us to plan soon and so that being the benefit that and on.
And I commented on this a few times the previous earnings calls.
We as the company had done a lot and preparation to be going public around channel management, and really getting our distributors on board with reporting the pls scenarios of the tree and that's allowed us to really look at their end demand and sort of incentivize them to place orders on us and and improving general overall visit.
<unk>, it's certainly of the tool mentioned, we'd seen this to be of potential issue in terms of supply constrained earlier on last year, and we took proactive action with lots of builds and working with our suppliers.
On a strategic perspective to support the growth of the business. So I think we're better positioned the most but it's certainly challenging times for everybody.
I think maybe 1 other thing Chris I'll add is we have very good relationships with the senior execs and many of these companies we are working on a weekly basis.
Sure the understand our needs and also asking for the guidance of realistically win which chip when will it improve all of that so there's a lot of constant dialogue going on for last many many months.
Okay.
All of them.
Thanks Steven.
Thanks, Chris.
Next question and I have the line of John Laclede of vertical.
The group. Your line is now open you may ask your question.
Alright, Thanks, a lot guys I'm, sorry, I'll make it quick and how were going along the.
I just had 2 quick I guess clarification as the first 1 I just want to come back to the bookings and the backlog side.
If I'm remembering right I think the last 2 quarters, you guys have been pretty comfortably over 100% booked as at the end of the first month.
I heard you say, it's closer to 100% now which is elevated versus normal times, but just down a bit versus the recent history. What are the puts and takes and that metric now versus these last couple of quarters.
Yeah and.
<unk> and I.
And we were a little bit of over 100% last quarter.
We are around 100% this quarter and that after the first month of the quarter.
Of note, while we are at now and that's after the first month of the quarter I would say when we entered the quarter similar to Q2, we had about 75% of.
The backlog in place so that gives you a sense that the booking activity is pretty strong.
I don't think you should read anything into it whether it's.
Slightly over a 100% or at 100% in general we see we see booking activity across.
Broadly across them pretty much most of our product lines as being strong so I'm not sure of that much in the way of puts and takes around it in general the demand is there and it's all about supply.
I see okay that helps thanks, and then the second quick 1 just on Wi Fi side, just to come back to that again. It was a very sizable jump I know you guys have talked about it a couple of different ways and I guess, the 1 thing I want to make sure of is is there anything from a channel perspective, like either new channel partners or perhaps the existing partners that are adding those products to the line cards that influenced that increase and.
The only thing on let's make sure. We're all thinking through is there any volatility and the next quarter or 2 that we should be thinking about either digestion or.
The new partner stocked. It then that then has to sell.
The sell through up to a certain run rate like any of those dynamics you would call out to us as we think about that line item for the next few quarters.
Yes, I don't think Theres any this is Steve and I don't think of any 1 time events that happened in Q2 that created.
Created maybe and abnormal quarter and certainly as I commented earlier, we seeing some of the larger.
Come back online. So we saw some nice activity and in hospitality and retail you heard from our prepared remarks that we did franchise.
2 more distributors.
But.
That tends to be a very slow gradual process, where they get familiarized with cambium and the products and the training you don't see of onetime cost of them.
Ordering a boatload of products on the shelves. So obviously, we expect that to happen over time, but it's more of a gradual process. Once we franchise of the distribution. Okay, maybe 1 more comment and I'll just add this.
Many customers who are zero customers for <unk>.
Many years back when we acquired them about 2 years 2 years back I think 2 years, we built a lot of credibility with these customers and some of them of large educational customers of retail customers and now we have shown on the products. We have shipped Wi Fi 6 they are now buying products again, so we are seeing momentum there again because.
Of the roadmap and the products and then I'll also say that.
As customers are transitioning from Wifi 5 to Wi Fi 6 we are open to new architectures that now when we evaluate our software defined radio multimedia the architecture of the performance. We have we are taking share we are beating many many competitors competitors with the superior products.
And I think this is organic what what youre seeing right now and.
And these new channel partners that they have not yet engaged in terms of buying so that could be additional later.
Understood. Okay. Thanks for the thoughts guys. Thank you.
Okay. Thank you and there are no question at this time I would like to turn the call over back to Mr. Shipman Senior director of Investor and industry analysts the relation.
Thank you Mel during Q3, 'twenty, 1 cambium networks.
Renting of meeting virtually with investors on August 11th at the Oppenheimer Technology Internet Conference September 1 at the Jefferies.
Conductor it hardware and communications infrastructure Summit and September 9th at the Deutsche Bank Technology Conference in the meantime, you're always welcome to contact our Investor Relations Department at 847 to 6.4 to $1.88 with any questions that arise. Thank you for joining us and this concludes today's call.
Thank you ladies and gentlemen that concludes today's quarterly earnings call. Thank you for your participation you may now line.
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