Q3 2021 Cambium Networks Corp Earnings Call
Yeah.
Good afternoon, My name is Judith and I'll be your conference operator today.
At this time I would like to welcome everyone to the Cambium Networks' third 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 to ask a question. During the session you will need to press Star then the number one on your telephone keypad.
Please limit yourself to one question and one follow up question only thank you Mr. Peter Schuman Senior director Investor and industry Analyst Relations you may begin your conference.
Thank you Judith welcome and thank you for joining us for Cambium Networks' third quarter 2021 financial results conference call and welcome to all those joining by webcast.
Bob <unk>, 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 as a reminder, today's remarks, including those made during Q&A will contain forward looking statements about the company's outlook and expected performance. These statements are based on current expectations forecasts and assumptions risks and uncertainties could cause actual.
Results to differ materially.
Except as required by law Cambium networks does not take 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, where otherwise it is cambium policy.
Not to reiterate our financial outlook, we encourage listeners to review the full list of risk factors included in the Safe Harbor statement in today's financial results press release.
We will also reference both GAAP and non-GAAP financial measures and specifically note that all sequential and year over year comparisons reference non-GAAP numbers, except where otherwise noted a reconciliation of non-GAAP measures to GAAP is included in the appendix to today's financial results press release, which can be found on the investor page of our website and in today's press release.
Announcing our results.
Turning to the agenda cambium Networks' President and CEO of 12 button augur well provide the key investment highlights for the third quarter of 2021, and Stephen Cumming Cambium Networks' CFO will provide a recap of the financial results for the quarter and our financial outlook for the fourth quarter 2021, our prepared remarks will be followed by a Q&A session.
I'd now like to turn the call over to a tool.
Thank you Peter.
Overall demand and backlog remains strong due to the continued need for expansion of broadband wireless communications networks.
Cause supply chain challenges impacted cambium shipments during Q3 'twenty one.
The supply chain challenges facing our industry are unprecedented including shortages and rising cost for semiconductors mechanical components.
Increased expedite fees due to extended lead times and many supplier decommit.
As well as increased freight expenses.
By late August Cambium had become mix from some of our largest suppliers for key components, which caused us to redesign some of our higher volume products with alternative parts from new suppliers.
We remain cautious about supply over the next few quarters.
And are monitoring the situation and working with our key suppliers and manufacturing partners on a weekly basis until visibility and commit for calendar year 'twenty to improve.
As mentioned in our preliminary results, we now believe global supply and logistic constraints may last into calendar 'twenty two based on several factors affecting the entire industry, including chip foundries getting additional fab capacity in place.
We are not immune from future enforcing events, which could impact supply in future quarters.
Cambium is taking very specific steps to address the supply constraints, we are pushing for supplier.
For calendar year 2022.
We are providing couldn't be one month forecast.
Key suppliers and where necessary we are redesigning products with more widely available parts to meet customer demand.
Demand remained strong.
We entered the fourth quarter 2021, with backlog up 57% year over year.
Without the supply constraints cambium networks would have met or exceeded the high end of the previous third quarter 2021 revenue outlook range provided on August nine 2021.
Looking at our market position.
This October cambium celebrated our 10th anniversary as a Standalone company.
We have built an innovative sustainable and prosperous business over the past decade and remain excited about the next wave of high performance wireless broadband technology above to be unleashed in the upcoming months and years.
Cambium has a promising future and our best years remain in front of us.
Millimeter wave technology sticking holes without 60 gigahertz products and our new 28 gigahertz five G multi gigabit fixed wireless products expected to be released during the fourth quarter for proof of concept <unk> installations.
During Q3, 'twenty, one cambium sold over 115, 60 gigahertz starter kits in 30 different countries and we presently have youll see four hour 28 gigahertz <unk> going on in four different continents.
We have shipped tens of thousands of these new 60 gigahertz Vmware products cumulatively.
These products are changing the way fixed wireless is viewed by customers all the new <unk> and.
And expand our serviceable available market, bringing a standards based multi gigabit fixed wireless solutions.
Using licensed and unlicensed spectrum to network operators.
Serving residential.
Robin and enterprise markets.
Can be an attractive cost of ownership mix, our fixed wireless solutions, a compelling choice for wireless infrastructure projects around the world.
We continue to expect increased government spending on infrastructure products accelerating over the next few years.
Broadband is a lifeline to connect local communities.
Distributed enterprises around the globe.
Turning to the results of the third quarter 2021.
Revenues of $75 9 million came in above the $75 million provided in the preliminary results announced on October 21st and fell below the outlook of $88 million to $92 million announced during the Q2 'twenty one earnings call.
Non-GAAP diluted EPS of <unk> 23 cents.
But below the outlook announced during the Q2 'twenty one earnings call of between 30, and 34 cents per diluted share.
The inability to ship products due to the greater than anticipated supply constrained environment negatively impacted our financial results.
Looking at revenues across four different product lines.
Our point to Multipoint BNP business revenues decreased 16% sequentially and increased 16% year over year as we continued to see strong momentum in network traffic increased demand for <unk> solutions and.
And broadening interest in our new product introductions, although obtaining complements was a more difficult challenge than anticipated at the start of the quarter.
The point to point PTP business was lower by 1% sequentially. During Q3, 'twenty, one with component shortages affecting shipments, although we had higher shipments for federal products, while year over year decreased 23% due to delayed shipments for backhaul products.
Our enterprise lifestyle business was the most impacted product line decreasing 41% sequentially due to a paucity of semiconductor chips, although lifestyle increased 8% year over year during Q3 'twenty one.
Demand remains very healthy for our enterprise business, but it remains a challenging environment to ship products.
Looking at some notable customer wins and new product development.
In North America, the cities of Aurora, Colorado, and San Jose, California, both the third largest cities and their respective states have completed deployment of 60 gigahertz <unk> to provide gigabit speed backhaul for the cities aging wireless infrastructures.
Aurora was given coronavirus aid relief and economic Security Cares Act funding, which was allocated to improve our it infrastructure to benefit public safety voice and data line extension video application and credit card processing.
Aurora replace an aging 50 megabit.
But second microwave and expert with.
With a 60 gigahertz dnb.
He got bit capacity fixed wireless broadband network.
The city of San Jose deployed outdoor public access Wifi networks, and strategic core doors throughout the downtown area.
Cambium networks 60, gigahertz <unk> distributor network infrastructure covers approximately 60 city blocks to transport the free Wifi connectivity for residents.
Visitors workers and businesses through our strategic downtown corridor to the Internet point of presence.
The downtown lifestyle project is the latest step in improving the city's digital infrastructure to support this smart city vision and digital inclusion and broadband strategy.
Within our industrial customer base in North American Railroad, operator selected PTP 820, onex range throughput performance.
Small footprint and superior reliability.
We displaced a competitor and we will be working with this customer for additional field deployment opportunities moving forward.
The enterprise hospitality market continues to recover.
We had a win at a resort in Hawaii, the Mahvi with last resort.
Our new outdoor Wifi six product for coverage across the resort can.
<unk> outdoor Wifi six performance is significantly better than our competitors, resulting in a massively lower cost of ownership.
For example, the Maui resort quite 50% fewer access points than our competitors less equipment means less labor maintenance power and simpler management of the network.
Camden's first mover status for the FCC's feedlot, five gigahertz Cvs spectrum continues to benefit out BNP for 50 products.
And our CPR to assess service in both the U S and its territories.
As of today's call.
We now have over 115500 devices managed by our CBR assess service an increase of approximately 12% since we reported last quarter.
In the Europe, Middle East and Africa region, EMEA recent strategic wins since our last call include.
We had a major enterprise wins in the adjuvant.
<unk> vertical in Morocco against larger competitors to provide the national carrier 20000, Wi Fi six Aps per deployment.
<unk> X software at major public universities to connect closed campuses.
Comprised of 278 buildings.
<unk> was selected for our superior technology and value proposition.
In Northern Holland that do not mirror Education Group a school district comprised 22 secondary schools with over 13000 students selected cambium Wi Fi six access points to upgrade the network and move from an on premises implementations to the cloud.
The education group selected cambium, four or better performance and lower total cost of ownership than the competition.
Cambium networks had key managed service provider win in the UK with liquidity to deploy <unk> metrics switching solution.
For a significant multi dwelling unit opportunity in the U K government. This as CN metrics switches to the portfolio of cambium wireless fabric products already selected by life entity, including BNP for 50 and.
And 60 gigahertz <unk>.
In the APAC region, we had a great quarter with several significant wins.
Australia trough club, a premier owner and operator of total bred racing events and hospital hospitality venues across Sydney selected our indoor and new outdoor Wi Fi six products switching and <unk> cloud to support stadium seating hospitality suites and general use areas requiring high density.
Deployments.
A large internet search engine providers in India selected cambium speed to be $5 50 to extend connectivity.
The initial deployment is 20 locations. This is a start of a recurring deployment.
Just to go to 400 locations over the coming year.
In Malaysia in the state of selling Gore Cambium learning, New CCTV project with Smart <unk>, a state government program with a vision to make southern Goris smart state through the optimization of digital technologies.
This project featured can be on speed to be 670, <unk> III and.
And <unk> 300 products.
Cambium beat out a number of fixed wireless competitors to win this project.
In the Caribbean and Latin America, Cala region Cambium continued the long chain of success in Peru with a sizable win at a new government sponsored agency for program for <unk> Silva to provide indoor and outdoor enterprise solutions for 1300 public institutions.
We won this project due to cambium advanced technology ability to deliver and total cost of ownership and cambium outstanding customer support.
We had a win with our 60 gigahertz <unk> technology at the large Internet service provider in Puerto Rico.
Which moved from a trial to deployment phase for business customers.
Turning to new product introductions since our previous quarterly update.
Before our next earnings call.
Our first Wi Fi six E product will bring even more performance benefits.
<unk> utilization of up to one two gigahertz of new clean spectrum in the six gigahertz band.
Cambium expertise and history with multi radio at this point designs enables us to deliver differentiated Wi Fi six products.
Our three the ideal floor by floor technology. The <unk> four will offer up to 760 megahertz channels.
<unk> enables improved performance increased capacity and lower latency that enables a new set of high density use cases.
We are also working on a new set of high performance six gigahertz products or fixed wireless access.
On the product roadmap for introduction during calendar 2022.
We begin extensive field trials and.
And proof of concept deployments for our 28 gigahertz, <unk> <unk> and our fixed wireless product.
Revenues ramping during calendar 2022.
<unk> seen we will further expand our serviceable available market, Sam as both new and existing customers demand higher broadband performance at the edge of their networks.
Our <unk> product is expected to be price disruptive compared to the existing equipment providers and feature lower operating cost and complexity compared to existing mobile centric solutions.
The five <unk> fixed solution from cambium is simple.
No complex infrastructure.
Fiber rollout can take months or years future generations of this product will feature wider channels.
Included increased capacity from the use of our <unk> Mimo technology carrier aggregation and channel bonding.
The capital and operating expense of Cambium <unk> solution is much less than that of its <unk> mobile solution audio and fiber, especially when the subscriber density becomes less than that of dense urban areas.
An increasing number of countries are opening up the 28 gigahertz band in the EMEA region, including Slovenia.
Russia and Spain.
Many service providers that are interested in using millimeter wave fixed wireless access in areas, where it's not possible to use either fiber our traditional mobile technology like <unk> or <unk>.
We saw quite a high density of customers to justify the business case.
Turning to our CMI stroke cloud software.
Our end to end cloud powered connectivity solution to manage the network from a single pane of glass.
The <unk> cloud software continued to experience strong user growth total devices under cloud management in Q2, 'twenty one totaled over 718300, an increase of 16% from Q2, 'twenty, one and up 47% year over year.
Looking at our channel in Q2, 'twenty, one we expanded our channel presence by adding 475, net new channel partners sequentially and.
Our 2270 net new channel partners year over year, which represents an increase of approximately 5% sequentially and 27% year over year.
This September we had a very successful setup cambium connections online webinars for our end customers and partner community.
We had over 4200 registered attendees, which represented an increase of approximately 50% from our previous cambium connections event in February.
We also return to in person events with a significant presence at the largest trade show of the year, we suffer lose at 2021.
In mid October in Las Vegas at which cambium was recognized as the manufacturer of the year.
I will now turn the call over to Steven for a review of our Q3 'twenty, one financial results and Q4 'twenty one outlook.
Thanks.
Cambium had revenues of $75 9 million for Q3 dollars 21, compared to the original outlook of $88 million to $92 million.
Provided at the time of our second quarter earnings call on August Tonight, and ahead of our preliminary outlook of approximately $75 million announced on October 21.
As we mentioned in our preliminary results press release the change in outlook, primarily reflects increased global supply constraints.
<unk> the shipment of products, while our backlog and demand remains strong with backlog, increasing by 8% quarter over quarter and 57% year over year.
Revenues decreased by 18% quarter over quarter and were up 4% year over year.
On a sequential basis Q3, 'twenty, one revenues were lower by $16 8 million.
The lower revenues were primarily the result of fewer shipments of our Pnp and enterprise Wi Fi solutions, which remain supply constrained.
PTP products declined 1% sequentially to tobacco products remaining supply constrained, although we did have increased shipments of federal products due to seasonality.
Moving to our gross margin non-GAAP gross margin of 47, 8% decreased by a 190 basis points compared to Q3 'twenty the year over year decrease in non-GAAP gross margin was a result of increased component costs as well as higher freight and distribution costs caused by expedited shipping.
On a sequential basis non-GAAP gross margin in Q3, 'twenty one of 47, 8% was 220 basis points lower than Q2 'twenty one.
The lower quarter over quarter non-GAAP gross margin was the result of high component costs and increased freight and distribution costs less mix of higher margin Wi Fi products and lower revenues.
Previously announced pricing increases should begin to help offset some gross margin degradation. During the latter part of Q4 'twenty one.
We are also implementing surcharges to offset the effects of the supply chain disruption.
We're doing everything in our power to support customers and deliver next generation products, but recognize we are temporarily impacted by escalating costs.
We believe the impact to gross margin is transitory as we navigate the global supply challenges.
In Q3, 'twenty, one non-GAAP gross profit dollars or $36 3 million.
Were approximately flat compared to the prior year and decreased by $10 million sequentially.
Non-GAAP operating expenses research and development sales and marketing general administrative depreciation and amortization in Q3 dollars 21 increased by $2 million when compared to Q3, 'twenty and stood at $27 6 million.
Or 36, 4% of revenues.
The majority of the year over year increase in non-GAAP operating expenses was a result of higher R&D, resulting from increased spending on upcoming technologies and higher sales and marketing due to increased head count and to support more marketing activities.
When compared to Q2, 'twenty, one non-GAAP operating expenses decreased by $1 2 million during Q3 dollars 21.
Quarter over quarter, R&D spend decreased due to slower hiring while G&A spend was lower due to variable compensation and improved operating efficiencies.
Non-GAAP operating margin was 11, 4% down from 14, 6% during Q3 2018, 9% of revenues in Q2 'twenty one.
Adjusted EBITDA for Q3 dollars 21 was $9 6 million or 12, 6% of revenues compared to 11 4 million or 15, 6% of revenues for Q3, 'twenty compared to $18 4 million or 19, 9% of revenues for Q2 'twenty one.
With lower revenues due to the spike constraints we.
We temporarily lost some operating leverage in our business, although we remain committed to driving our adjusted EBITDA to our target model of 18% to 19% of revenues.
Moving to cash flow cash provided by operating activities was $11 8 million for the third quarter of 2021 quarter over quarter increase in cash was primarily the result of the positive impact from net income and improved working capital management, we had a good quarter of working capital management with $10 $1 million reduction in accounts.
<unk> offset by an increase in accounts payables and only a slight increase in inventories.
This compares to $16 4 million of net cash flow provided by operating activities for the third quarter of 2020 and $21 million.
For the second quarter of 2021.
Non-GAAP net income for Q3, 'twenty, one was $6 7 million or 23 per diluted share compared to $7 8 million or 29 cents per diluted share for Q3 dollars 20, and non-GAAP net income was $12 9 million or <unk> 45 per diluted share for Q2 'twenty one the low.
Non-GAAP net income compared to both the prior year and the prior quarters results was primarily due to the lower revenues impacting gross margin dollars and high cost until the supply chain normalizes.
We're able to reduce operating expenses during the quarter and plan to manage our operating expenses accordingly until the supply constraints improve.
Turning to the balance sheet cash totaled $58 6 million as Q3 dollars 21, an increase of $7 2 million from Q2 'twenty one.
The sequential increase in cash primarily reflects positive net income and strong working capital management and includes a $2 $5 million reduction in debt.
Net inventories of $28 8 million in Q3 dollars 21 decreased by $300000 year over year and were higher by $400000 from Q2 'twenty one.
While the supply chain remains an ongoing challenge we are working to increase our inventory position over the next few quarters to help support the growth of our business.
121, Q4, 21 financial outlook is expected to be his followers revenues between 73 $5 million to $77.5 million.
Non-GAAP gross margin between 45, 5% to 47%.
Non-GAAP operating expenses between 28 $5 million to $29.5 million, a non-GAAP operating income between 4.9 to $6 $9 million interest expense net of approximately $900000 a non-GAAP net income between $3.3 million to.
Four $8 million.
On net income between 11 to 17 cents per diluted share.
Adjusted EBITDA between five 8% to seven $8 million and adjusted EBITDA margin between seven 9% to 10.1%.
A non-GAAP effective tax rate of approximately 19% to 21% and approximately 28 8 million weighted average diluted shares outstanding.
Cash requirements are expected to be as follows.
Dash flow interest expense approximately $400000 in capital expenditures of between $2 million to $2.3 million.
Cause you're December guide are you baking in a similar supply headwind 15 to 20 million or is the expectation that headwind increases as we go into <unk>. Thank you.
Yeah.
Steven.
When we came into Q3.
We had a very strong backlog position.
And even that for months and I think we mentioned that are lost.
Quarter's earnings call that we had pretty much 100% of the guide.
Covered.
Just give you a perspective of what we went through.
From a supply perspective.
We felt we had comprehended.
And the risk many of the supply challenges.
When we gave that guidance and reading what we've seen also in in previous quarters, because it's not like Q3 or a previous quarters, we haven't seen any level of decommit, but what was different for us in Q3, as we started sort of a head to the lack of August I would say, we saw an elevated level.
Of Decommit from our suppliers.
And that really.
Really continued.
Through the rest of the quarter I think one of the overlay to this so that was probably the majority of the reason for the Miss but we also were able historically to tap into.
Secondary market options, which were.
Which were a nice little Eva for our team previous quarters, and so we saw that side of things start to dry up also in Q3 and areas around that we actually saw some really dramatic price increases auction like behavior.
Where we couldn't always participate.
So that left us with.
Some some meaningful constraints.
I think in general the constraints went across high end semiconductor chips as well as the lower end and it didn't really matter whether you had 50 cents missing is still meant you couldn't ship the product I think from a from a <unk>.
Overall Delta perspective, I think it was somewhere between $12 million to $16 million per month to your original question.
In terms of headwinds acute fall.
Sense is.
We are seeing things I would say stabilize.
I can't say that we are seeing things necessarily improve.
Overall.
Pliers.
Of course, and nor are price increases I'm just curious how sticky you think those will be do you think you'll maintain those increased prices for.
You know all of 22 do you expect to roll them back I mean, what's your strategy around pricing here.
Yeah.
Mm cast your mind back to what you three and can we actually mentioned that we were.
How that price increase that would go.
Into effect the and.
Q3.
And so off plan as we see at the moment is to try to.
We cover as much as we can around with higher input costs.
But we recognize.
That the.
The <unk>.
Impact won't necessarily be immediate.
I think our customers recognize the challenges and they're not terribly surprised about the pricing action given the fact that it seems many of our competitors are doing something similar I think we are proactive in getting ahead of it.
We mentioned this as a stay on a lost earnings call.
The new pricing went into effect at the end of Q3, so that will start to work its way through the system towards the end of this quarter and once we burn off the.
The existing backlog and really have more meaningful impact as we go into 2022.
I would say the other item that we're executing on at the moment and you heard about it in the prepared remarks as we're implementing surcharges.
Handle that inflationary environment and help offset the effects of the supply chain cough.
These will go into effect this quarter.
And again I think you should expect to see the larger impact of that instead of the first half of 2022 and attempt to recover these costs.
I would say the initial pricing increase.
That we implemented.
We didn't see much in the way of.
Of.
Cancellations.
I think if anything we saw as you can expect a little bit of acceleration on booking activity as a customer's tried to get ahead of this but.
I would say in general things are pretty sticky for us.
We're watching this like a whole, but our sense is it's pretty sticky.
Pretty sticky okay. Okay. That's great. Thanks, very much for the color.
Our next question comes from the line of Simon Leopold of Raymond James Your line is now open.
Thanks for taking the question you talked about doing some redesigns associated with the chip constraints, which makes sense.
But trying to get an understanding of.
How to think about that impact assume it shows up in your R&D and would kind of be Oh.
One time or short term incremental expense.
Is it is it large enough that's worth calling out and how should we think about that going forward.
Thank you for the question. The redesign is four actually in some ways one of the milk Bard's interestingly the sophisticated chips, whether Wi Fi six or six piggy guards are going to use the big chips by and large we knew the surprise and we will deal with that if the smaller chips, which are not.
That sophisticated that supply also dried up so they're the redesigns are mostly done there short term they were pretty quick quick speed and we took care of that and some of the products are actually well will produce even in Q4 when majority will come in Q1, so it's not a big <unk>.
Expense impact is just a significant inconvenience, which.
We had to go through to just make sure we don't depend on a part which is in paucity.
Thanks, and then a tool in your prepared remarks.
Left me with an impression that you feel like the supply chain constraints ease around the turn of the year and this is I'm admitting my interpretation.
But it is in contrast to the tone of many of the other conference calls we've joined recently where.
Im interpreting most companies, saying, it's going to be very difficult through at least the first half of 'twenty, two and we don't recover through much of the year.
The entire year looks challenging and I just wanted to see if there is.
A good reason to think that your experience may be different than other networking companies in terms of supply chain constraints.
Another of Geoffrey's. Your line is now open.
Hi, guys. Thanks, very much I guess I wanted to ask you about the channel inventory levels.
You know, obviously lots of moving parts here with the supply chain constrained certainly there's there's the demand side of things also but where where do you think inventory levels bound up at quarter end in terms of weeks or relative to last quarter.
Yeah.
It was a treat for us and and we've spoken about this a lot in the past we've got some pretty good tool.
Not anything that on a monthly and a weekly basis.
Inventories came up a little bit.
Which actually we think is a good thing in this environment I think that's by design to certainly from a distributor side of things but.
But that was partly because they may not be able to get the complete set of products to allow them to shift things out the door as well. So we monitored very carefully we look at the POF fell through.
We're not we're not concerned about it but if anything it came a little bit which is a good thing.
Okay, and then one other one if I could.
Yeah on your inventory levels I saw the sequential improvement in September, but if I go back a few quarters I mean, you guys were.
Kind of working down inventories, which is I guess counter to what many other companies are doing in this environment is there.
I guess I'm trying to understand sort of the narrative around how you've been running inventory levels and what should we expect going forward.
Yeah, I mean, our inventory levels clearly an outlet desired level that we won.
Given the rate of growth of the company I think coming into the supply constraint challenges, we actually had it.
A very healthy level of inventory the allowed us to.
Whether any of the first half of the year very nicely.
We're at a point now where I inventories of about 60 date date.
Then a desired level I think in this environment is tough to put additional inventory on the shelves and build any sort of buffet.
Ultimately, we want to target back to that sort of 80 to 90 days.
Intend to do that over the coming quarters pending the.
Kennedy's by at this rate.
Okay. Okay. Thank you very much.
We have a question from Scottsdale off rock Tactical your line is that open.
Oh good afternoon, thanks for taking my questions.
And enterprise.
So we feel pretty good about both enterprise business as well as a point to multipoint business, but I want to make one more point.
<unk> will lead cambium networks, and the establishment of 28 gigahertz.
28 gigahertz adoption is extremely strong.
For our fixed wireless products in EMEA and I think as we go into proof of concept and as we said in the prepared remarks, all four continents. We have POC is going very innovative.
Disruptive pricing <unk> mimo product for <unk>. So you will see EMEA continued to accelerate and point to multipoint business as well as.
Enterprise business and defense Arena for Cambium in our prepared remarks touched upon that we feel very good about 'twenty two when it comes to defense. Our funnels are the funnels have diversified with multiple countries. Our funnels are also taking into account.
Our plan of record programs, which have recurring revenue. So MDI in general not just the enterprise and BNP, but also the defense side of <unk> will also be accelerating so hopefully that gives you a little color on EMEA.
Very helpful and if I could then a tool to follow up on one of your comments the new product portfolio, specifically thinking about 28 gig and 60 gigahertz could you give us an idea in terms of the magnitude and the size of some of these deployments and then coupling that into the supply discussion are there specific constraints or issues related to any of those products.
They're going to impact the ability for that to ramp up and maybe as well.
<unk> and three five gig products as they start to ramp up in art off opportunities or any of the newer things that are coming down. The line are there concerns from a supply standpoint, given that youre new to the game in those areas. Thanks, Scott excellent question, let me touch upon and see if I can answer.
60 gigahertz relatively speaking in terms of supply in Q3 was better position.
Because we are a leader we are fast emerging as number one player and 60 gigahertz and I think Youll see market research reports I would say, we're probably next quarter to two quarters coming out and Youll see cambium extremely well positioned we are or taking 60 gigahertz companies, who are there for four or five years and in one year.
We have shipped tens of thousands of products, we have 400, new customers with 60 gigahertz and at the beginning of the year, we probably have eight or 10 as we ship.
We had just shipped that product Q4, 'twenty, so very well positioned 60 gigahertz is growing approximately 44% CAGR in the but we did 2020 to 2024 and this is a market research report we tend to we can get you access to it.
650 group and <unk> and the 28 gigahertz market will grow 100% between 'twenty to 'twenty. Four. This was also 650 group market research. So we feel very good about the demand there the cambium innovation now when it comes to supply.
Both products will have some level of supply challenges because.
Whatever impacts remember what I said sophisticated chips, we are dealing with but also the run of the mill chipset impacting so it's not necessarily the 28 gigahertz chips, but sometimes it's just Ethernet Fi chips or other very basic chips. So I think that could definitely slow down some of the supply, but overall demand wise we feel.
Very very strong I hope that kind of answers your question.
Okay, great. Thank you.
Thanks Scott.
Our next question comes from the line of Erik <unk> with JMP Securities. Your line is now open.
Yes. Thanks for taking my question I wanted to just get a little more context around the <unk>.
What is your your.
Perspective in terms of how broadly these are affecting other switching that other networking vendors.
We're seeing some report.
Little different timing of impact based on who they are depending on and one more point I want to make is that fixed wireless broadband users love analog to digital Laura those chips and they were reasonably well placed but in Q3. They also had the paucity of chips. So.
So if you look at the results we were able to weather. The first few borders because we had inventory and also we had good supply of those chips. So I think we're all my my key messages that I think some of the comments we.
We believe the depth we have dealt with now we are working proactively and we have good communication reasonably good visibility I would like more visibility, but rather visibility will come on to our these weekly senior level meetings.
Do you feel like your size and volume is an advantage or disadvantage in terms of your ability to to work with your dominant vendors.
Our the size wise, there may be other companies, who may be far bigger than that but I think the reason their values and I make that point and many meetings is cambium uses the products and the most sophisticated way whether 60 Giga ours, we have as I said one of the best 60 Giga products. They values for the feedback we have RF labs.
And testing, which is very intense very in depth. They like the fact that they're able to find things and.
To monetize <unk> with those key vertical application Thats a secondary key initiative we have.
The third thing we're doing is we're making it mandatory.
As we go into 'twenty, two but as we come up with new products, whether it's 60 gigahertz features August 28, gigahertz software, the <unk> X and our cambium care support will be mandatory so we're doing a lot of very specific things to drive the software revenue in the right direction and our.
Stated goal has been 10% of cambium revenue in two years will come from software. So these are the kinds of things we're working on and every quarter. We'll give you more visibility into what we are doing to drive that revenue in the right direction.
Thank you that's.
<unk>. Thank.
Thank you.
Our next question comes from the line of Jon Lopez of vertical your line is now open.
Alright, thanks, so much I apologize because I hopped on late here. So if you covered some of this stuff we can skip it and catch it later, but.
I think my first question is around the cadence of what happened in Q3.
Got it understood and then.
I apologize.
Probably covered this so you can give me the quick version or not at all but.
I guess, the one product group I Wonder about most is the Wi Fi product group.
And there you had a really really big jump in calendar Q2, which is now basically reversed in calendar Q3.
I'm, assuming the supply chain issues were obviously, a big part of that but I guess my question is of your entire product stack.
It kind of seems like the most transactional.
I think there are other alternatives to you.
In those markets and I'm wondering how much of that demand do you think is perishable and how much of whatever elevated bookings are resulting from this excuse me do you think is reliable for that products that looking out into calendar 'twenty two.
Yeah, let me take that so when you look at our enterprise business.
Three key segments, which drive our growth one is hospitality.
It is coming back and they are really integrating some of the very key hospitality applications with our software. So I think there is stickiness there as you work with different channel partners. The second is education. There also we have education applications integrated with our <unk> product line.
And that's why you'll see when you look at our wins, you'll see good mid size universities education institutions as a key win.
And the third key area, which is emerging I think is a good segment for us is multi dwelling units.
And so when we look at all of these architectures, which are beginning to move towards Wifi six there's a level of stickiness I would not say that.
If we don't supply of course people can go somewhere else, but so far we see good demand good adoption.
Overall, and our outdoor Wi Fi is coming in volume shipments in early Q1, as we go into the outdoor setup, which is a very strong partner with 60 gigahertz 60, gigahertz and Wi Fi six is a hand in glove lot of a lot of installations.
We are watching and we are winning we have that combination. So what I would say theres not bulletproof net debt as significant stickiness to the segments. We are serving I would just add to that John.
Just to quantify a few things.
During Q3, we saw record bookings in our enterprise business, we ended Q4 with.
A record backlog in enterprise.
I think from a stickiness, we've been winning bigger and bigger deal and that makes it that much more relevant to our customers.
Today's quarterly earnings call. Thank you for your participation you may now log off.
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