Q2 2022 Cambium Networks Corp Earnings Call

August 4, 2022

Good afternoon, My name is Jason and I'll be your conference operator today at this time I would like to welcome everyone to Cambium Networks' second quarter 2022 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.

May Press Star then one on your Touchtone phone.

Draw from the question queue. Please press Star then two.

Please limit yourself to one question and one follow up question.

Thank you Mr. Peter Schuman, Vice President Investor and industry analysts relations you may begin your conference. Thank.

Thank you Jason welcome and thank you for joining us today for Cambium Networks' second quarter 2022 financial results conference call and welcome to all those joining by webcast tool button AGA, our president and CEO and Andrew <unk>. Our CFO are here for today's call.

Actual results press release, and CFO commentary referenced on the 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.

Statements are based on current expectations forecasts and assumptions risks and uncertainties could cause actual results to differ materially except as required by law cambium networks does not undertake any obligation to update or revise any forward looking statements for any reason after the date of this presentation, whether as a result of new information future developments.

To conform these statements to actual results or to make changes in <unk> expectations or otherwise. It is cambium networks' policy not to reiterate our financial outlook. We encourage listeners to review the full list of risk factors included in the Safe Harbor statement in today's financial results press release.

We will also reference both GAAP and non-GAAP financial measures and specifically note that all sequential and year over year comparisons reference non-GAAP numbers, except where otherwise noted a reconciliation of non-GAAP measures to GAAP measures is included in the appendix to today's financial results press release, which can be found on the investor page of our website and in today's press release announcing our results.

Yeah.

Turning to the agenda cambium, Networks' President and CEO tool button augur, well provide the key investment highlights for the second quarter 2022 and in Nebraska.

Cambium, CFO , who will provide a recap of the financial results for the second quarter 2022, and present, our financial outlook for the third quarter and full year 2022, our prepared remarks will be followed by a Q&A session I'd now like to turn the call over to Atul. Thank you Peter.

<unk> had recovery in our second quarter results with revenues of $69 $3 million.

Increasing 12% sequentially slightly ahead of our midpoint of between $65 million to $73 million announced during the Q1 'twenty two quarter club.

Profitability improved significantly.

EPS up 18%.

Our outlook of between one to 11.

As we regain some scale.

Had higher gross margin and spending was lower than anticipated due to our tight cost control.

Our technology roadmap and strategy continued to strengthen.

Cambium as at the start of a new growth S curve.

During evolutionary change performance starts from a slower initial phase.

It goes into an accelerated deployment phase.

Before stabilizing and maturing.

This is about a five year cycle for cambium.

And the last time, we entered this cycle was 2016.

We are now at the cusp of entering this accelerated phase of growth for high performance broadband network.

We anticipate continued recovery in revenues during the third quarter 2022.

Given our record backlog right.

Pricing actions announced late last year are now fully in place.

And we expect further improvements in the supply chain and distribution of components and finished products during the second half of 2022.

We exited the second quarter, 2022, with backlog up 5% quarter over quarter and higher by 29% year over year.

We saw strong demand for our enterprise solutions.

Which grew 55% sequentially and increased 31% year over year.

Including record by five six revenue.

We now expect our enterprise business to grow over 45% for calendar year 2022.

While the supply situation remains tight and challenging we exited Q2 'twenty two with another record quarter of backlog for enterprise products.

Can be an attractive total cost of ownership.

And cloud managed wireless fabric of solutions integrate multiple communication standards and emerging broadband technologies, which we're now calling cambium one network.

Our solutions are a compelling choice.

Wireless infrastructure projects around the world with.

With network management from a single pane of glass.

Turning to the results of the second quarter 2022.

Looking at revenues across our product lines, our point to Multipoint BNP business revenues decreased 9% sequentially and decreased 53% year over year due to the continued sluggish demand from service providers for legacy Pnp floor 50 products ahead of the ramp up of both 28 gigahertz <unk>.

Fixed technology.

And the introduction of 60 gigahertz products expected during Q4 'twenty two.

We are seeing the component shortages continue to improve although gradually which benefited the <unk> product line as a result of the reopening of China during Q2 2002.

The point to point PTP business increased 7% sequentially during Q2, 'twenty two while year over year increased 12% due to higher shipments for PDP products using unlicensed frequencies.

Our enterprise business had robust revenues of $24 million.

During Q2, 'twenty, two increasing 55% sequentially and higher by 31% year over year due to improved supply and distribution.

And strong demand for our Wi Fi six solutions.

Cambium has an opportunity to.

To be a significant leader in mid market enterprise networking.

By our extensive enterprise channels built over the last few years.

In EMEA Cambium was named an outperformer in the 'twenty to 'twenty two Giga <unk> radar report for Wi Fi six and six key solutions.

We are also beginning to see software becomes a more meaningful contributor to bookings and revenue.

Looking at some notable customer wins and new product development.

In North America, we are receiving very strong orders in enterprise Wi Fi.

White Sky Communications and managed service provider MSP, focusing on the multi dwelling unit MDU market placed a large order for enterprise Wi Fi, including CMI Pro X.

Our flagship subscription network management solutions.

Cambium was selected for our price performance and superior value proposition.

<unk> X is fine tune and optimize our MSP and MDU application.

And NFL cities in the South East placed an order for 60 gigahertz CN web connectivity and Wi Fi as part of its smart city deployment.

<unk> was selected for our portfolio breadth and ability to deliver backhaul and access with a single management platform.

In our federal defense business.

We have a large funnel of deal as the hostilities in eastern Europe are leading to multiple nations wanting to upgrade the military communications infrastructure with same equipment as the U S defense establishment using cambium PTP 700 technology for fixed wireless broadband communications.

This enables total equipment interoperability and rapid deployment in the field.

In the Europe , Middle East and Africa region EMEA, we continue to have healthy demand for our enterprise business and continue to win larger projects.

A recent strategic win in Germany included Cambium, partnering with NCR order men, a global market leader for mobile ordering providing high performance Wi Fi solutions for hospitality industry, including connectivity for point of sale systems as well as the handhelds for mobile order, taking and building.

More than 80000 restaurants around the world are equipped with an <unk> system.

With this new solution restaurants, and other venues can deliver fast and reliable service with Wi Fi from cambium.

This win included Cambium, <unk> Wi Fi six access points.

<unk> metrics Ethernet switches and CMI stroke cloud management solution.

Cambium wireless fabric makes it easy to plan.

Floyd and manage affordable gigabit speed for the home and enterprise.

In the UK enterprise market, we closed a few large MSP deals, especially as an MD use with a focus on providing services for student housing accommodations.

These deals covering multiple quarters and countries across Europe .

In the Asia Pacific APAC region, we received a sizable order in India from Airtel for small cell backhaul, using our <unk> product line, but unlicensed spectrum, covering LTE and less dense locations.

And in the Caribbean and Latin America Gala region, we had a significant win lending our first multimillion dollar agreement for 28 gigahertz <unk> fixed technology from a leading telecommunications and IP service provider operating in Puerto Rico, and U S Virgin Islands.

Can be selected for our ability to support gigabit speeds with low latency and consistently high performance.

Turning to new product introductions since our previous quarterly update.

The industry is eagerly awaiting the availability of six gigahertz spectrum for wireless channels and higher throughput.

Cambium will have an industry leading position when our next generation multi gigabit <unk> 4600 products is expected to be released before year end.

Proximately, a half dozen customers, including next linked Internet.

Our already field testing our product under special FCC licenses.

In May <unk> announced the results of six gigahertz spectrum testing utilizing an FCC experimental license and achieved actual throughput of over one gigabit per second download and 500 megabit per second upload to each subscriber module under full load utilizing 160 megahertz channel at <unk>.

Right.

Clearing the way for more gigabit fixed wireless deployments nationwide.

Upon full commercial deployment next year next link will be rolling out gigabit speed plan for their existing fixed wireless services network expansion, while the FCC's Rural digital opportunity fund our dock program.

Ultimately next linked expansion of gigabit fixed wireless will cover over 4 million households, and businesses.

The promise of six gigahertz, enabling gigabit speeds or wireless Israel and fixed wireless enabled cambium customers to rollout gigabit speeds faster than they can with fiber in an economical and timely manner.

Fixed wireless broadband takes months as compared to years or fiber to be deployed.

For our federal and National Security PDP business before year end, we plan to rollout a new smart antenna.

<unk> 700, tena will facilitate rapid alignment of our remote radio.

The primary site in a highly automated manner.

And within our software and subscription services business.

This fall Cambium will launch our network service edge NFC solutions.

NSC bundles, a rich set of network services.

SD Wan and security features optimizing SaaS applications performance and reliability at the network edge.

This complements our cloud managed Wi Fi and switching products to deliver cambium, one network solution.

Especially for mid market enterprises, which are looking for an easy to deploy and operate networks with our significant IP health.

Instead of building solutions from multiple vendors and spending excessive time dealing with complex install problems.

Service providers and enterprises can manage one efficient solution utilizing cambium expertise in Wi Fi fixed wireless broadband switching management and security solutions.

Our integrated solution provides better combined insights into the network performance to improve overall quality of experience and security.

While reducing complexity and lowering total cost of ownership.

This fall <unk> newest version of the 28 gigahertz millimeter wave solutions for five year fixed will become ever levels.

Network operators will be able to support scale deployment, featuring competitive differentiation with our floor by floor multi user mimo and software defined radio architecture that delivers 400 megabit per second speeds for business and residential subscribers in urban suburban and rural locations at scale.

We believe this newest version of <unk> will drive high volumes with large deal sizes.

Cambium presently has over 10 poc's in four continents for our <unk> equipment and during the second quarter, we landed our first multimillion dollar contract for this technology.

We remain excited.

The revenue potential for this upcoming BMP product.

Looking at our CMI stroke cloud software.

Our end to end cloud power connectivity solution to manage the network from a single pane of glass.

The CN MISO cloud software continued to experience strong user growth total devices under cloud management in Q2 'twenty. Two was over 837000, an increase of 6% from Q1, 'twenty, two and up 36% year over year.

While our premium <unk> offerings, we booked a major deal with a sizable service provider for fixed wireless broadband during the second quarter and R&R seeing healthy growth in annual recurring revenue.

For this product.

<unk> four <unk> Pro X, which includes both enterprise and fixed wireless solutions grew 66% sequentially during the quarter.

Turning to our channels.

In Q2, 'twenty, two we expanded our channel presence by adding over 520 net new channel partners sequentially and approximately 1600 net new channel partners year over year.

Which represents an increase of approximately 5% sequentially and 15% year over year.

This is expanding our reach into new mid market customers around the world.

During the second quarter Cambium shared our strategy and vision at cambium connections, our biannual online webinars for our end customers and the partner community throughout various geos.

Our upcoming six gigahertz <unk> solution is generating lots of excitement or gigabit connectivity.

Particularly with North American service providers, and we held separate events surrounding the opening of this important spectrum for future commercial use.

I will now turn the call over to Andrew for a review of our Q2 'twenty two financial results and Q3 'twenty two outlook.

Thanks Atul.

Cambium had revenues of $69 3 million for Q2 'twenty two.

Revenues increased by 12% quarter over quarter and decreased 25% year over year.

While revenue in global supply constraints are beginning to ease we still had impact to shipments of our products. During the first two months of the quarter as a result of the China Covid shutdown.

Although we continue to have significant pent up demand, especially in our enterprise products.

Our backlog in end demand remained strong with backlog, increasing by 5% quarter over quarter and 29% year over year.

On a sequential basis for Q2 'twenty two.

Revenues were higher by seven 4 million to.

The higher revenues were primarily the result.

Of increased enterprise and PTP solutions, while <unk> revenues were lower due to softer demand for legacy PMT $4 50, partly offset by improved supply benefiting <unk> shipments.

Moving to our gross margin our non-GAAP gross margin of 48, 9% was significantly better than anticipated, although decreasing by 110 basis points compared to Q2 'twenty one.

The year over year decline in our non-GAAP gross margin was the result of lower revenues increased component costs as well as higher freight and distribution costs due to expedited shipping.

On a positive note on a sequential basis, our non-GAAP gross margin improved by 110 basis points compared to Q1 'twenty two.

The higher quarter over quarter non-GAAP gross margin was the result of a higher mix of enterprise products tight tight.

Tight cost controls and the benefit from the previously announced price increases that we instituted approximately three quarters ago.

The higher gross margin is notable considering we had expedited shipping from the Shenzhen factory to distribution hubs in North America, and EMEA in order to balance freak congestion and fuel surcharges of Shanghai unlocked from Covid.

We believe we will continue to see sequential improvements to our gross margin. During 2000 22022 from both the benefits of the actions we have already taken and increased scale in our business as we progress through the full year.

In Q2, 'twenty two our non-GAAP gross profit dollars of $33 9 million decreased by $12 5 million compared to the prior year due to lower revenues and increased by $4 $3 million sequentially due to higher volumes and improved mix of enterprise products.

Our longer term goal remains an annual non-GAAP gross margin target of 51% to 52%.

non-GAAP operating expenses in Q2, 'twenty two decreased by approximately $1 3 million when compared to Q2 'twenty one.

And stood at $27 5 million or 39, 7% of revenues.

The decrease in operating expenses compared to the prior year period was related to the timing of R&D expenditures and lower variable compensation.

When compared to Q1, 'twenty two non-GAAP operating expenses decreased by approximately $1 million during the quarter.

Quarter over quarter sales and marketing increased slightly primarily because of higher travel.

While R&D decreased three leading to the timing of expenditures.

And overall lower variable compensation.

non-GAAP operating margin for Q2, 'twenty two was nine 1% down from 18, 9% during Q2, 'twenty, one and up significantly from one 6% in Q1 'twenty two.

non-GAAP net income for Q2, 'twenty, two was $5 million or <unk> 18 per diluted share.

Ahead of the previous outlook of between $1 11 per diluted share and compared to $12 9 million or <unk> 45 per diluted share for Q2 'twenty one.

And non-GAAP net income of $300000 or <unk> <unk> per diluted share for Q1 'twenty two.

The lower non-GAAP net income compared to the prior year period was primarily due to the lower revenues impacting our gross profit dollars, while higher net income compared to the prior quarter's results was primarily a result of higher revenues benefiting gross profit dollars improved mix and lower operating expenses.

Adjusted EBITDA for Q2, 'twenty, two was $7 8 million or 11, 3% of revenues compared to $18 4 million or 19, 9% of revenues for Q2, 'twenty, one and compared to $1 9 million or three 1% of revenues for Q1 'twenty two.

Our operating model remains solid.

We are beginning to regain some operating leverage in our business as cambium increased revenues and benefits from improved pricing.

We remain committed to driving our adjusted EBITDA to our target model of 18% to 19% of revenues.

Next moving to our cash flow cash.

Cash provided by operating activities was $10 million for Q2, 'twenty two and compares to $20 1 million of net cash provided by operating activities for Q2, 'twenty one and.

And cash used in operating activities of $19 2 million for Q1 'twenty two.

We expect to maintain positive operating cash flow for the remainder of the year.

Next turning to our balance sheet cash totaled $45 9 million as of June 32022, and.

An increase of $7 5 million from Q1 'twenty to the sequential.

<unk> increase in cash primarily reflects higher earnings and improved working capital.

Net inventories of $47 4 million in Q2, 'twenty two increased by approximately $19 million year over year.

At about $7 2 million from Q1 'twenty two.

Inventories were higher sequentially because of an increase in components and finished goods as we grow our business.

While the supply chain remains an ongoing challenge we are working to selectively increase our inventory position during 2022.

So in summary, the second quarter was better than we anticipated due to recovery in the COVID-19 situation in China, and an improving supply chain environment.

We are now benefiting from the price increases in 2021.

Our backlog remains strong and we are at the start of new product cycles.

We expect to continue to regain scale improve operational efficiency and make significant progress toward achieving our long term target operating model.

Moving to the third quarter and full year 2022 outlook <unk>.

<unk> Networks' financial outlook does not include the potential impact of any possible future financial transactions acquisitions pending legal matters or other transactions considering.

Considering our current visibility as of today.

Our Q3 dollars 22 financial outlook is as follows revenues of between $70 million to $76 million, representing approximately 4% to 10% sequential growth.

We remain supply constrained, especially in the enterprise product lines.

non-GAAP gross margin between 48, 5% to 49, 5% non.

non-GAAP operating expenses between 28, nine and 29 9 million.

And non-GAAP operating income between six one and $7 8 million.

Interest expense net of approximately $500000 and non-GAAP net income of between $4 5 million to $5 8 million, which represents 16% to <unk> 20 per diluted share.

Adjusted EBITDA between seven and $8 7 million and adjusted EBITDA margins of between nine 8% and 11, 5%.

We expected non-GAAP effective income tax rate of approximately 18% to 20%.

And approximately $28 2 million weighted average shares outstanding.

Our cash requirements are expected to be as follows we expect paydown of debt of $700000.

Positive.

We expect cash flow interest expense of approximately $502000 and we expect capex of two four to $2 6 million.

Turning to our full year 2022 financial outlook.

We expect revenues of between $280 and $300 million.

And we expect non-GAAP net income to be 13, 1% to $25 $1 million were $46 89 per diluted share.

And adjusted EBITDA margin of seven 8% to 12, 5%.

I will now turn the call back to a tool for some closing remarks.

Cambium growth strategy and drivers remained solid.

We are now benefiting from increasing chip supply, which will drive our growth during second half of this year.

Our investments in multi gigabit wireless products, such as enterprise Wifi six six E.

Wireless service switching products.

60, gigahertz <unk> wave.

28, gigahertz millimeter wave solutions, our fixed <unk>.

And the upcoming launch of six gigahertz fixed wireless solutions, arriving later in 2020 tool will drive future revenue growth.

Our federal business is at the start of significant growth and we are now benefiting from our software as a service solutions.

The integrated wireless fabric, which we are now calling cambium, one network brings together ease of deployment.

Scalability of networks and lower total cost of ownership as awarded deploy next generation high performance wireless broadband.

We remain focused on judiciously managing our costs.

You need to invest in innovative products to maintain our technology edge.

And expect increased scale.

And all of this will benefit our future operating results.

I would like to show my appreciation for our employees.

Partners and customers.

During these unprecedented times.

This concludes our prepared remarks, so with that I would like to turn the call over to Jason.

And begin the Q&A session.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

We're using a speakerphone please pick up your handset before pressing the keys to withdraw from a question. Please press Star then two.

In the interest of time, please limit yourself to one question and one follow up question at this time, we will pause momentarily to assemble our roster.

Our first question comes from Si.

Women Leopold from Raymond James Please go ahead.

Thanks for taking the question.

I wanted to start off.

Trying to get a better understanding of what you think.

Going to happen in your mix for the balance of the year you walked out.

Comment.

Second the Wi Fi business to be up by like 45% for the year, which nice uptick.

But you tend to have kind of lumpy quarters and in particular I'm looking at.

PMT PM key products.

Being down sequentially two quarters in a row trying to figure out where that stabilizes. So ultimately.

Some sense of what you're thinking about for mix in the next couple of quarters.

And then I've got a follow up sure yes. Thanks for the question. So so in terms of mix, we expect the enterprise business to continue to be strong.

And to continue as a percentage of our overall business to grow.

In terms of PMT.

We think that that will begin to stabilize late third quarter early fourth quarter.

We do think that there will be.

There will be.

Continued.

Downtick because of the product cycle that we're in in the fourth quarter keep in mind is when we're going to begin to see revenues from the new product introductions and that should drive positive.

Quarter over quarter results in the fourth quarter.

Maybe one more point Simon I want to add is we.

We have entered the S curve on enterprise, probably about two quarters back or sell and we are now entering the acceleration phase.

If the supply continues youll see that I think the S curve on the fixed wireless broadband we will start with the cusp of it will start probably Q4.

Because Q4 is when we will introduce 60 gigahertz products. It's in beta test right now and 28 gigahertz funnel is now also beginning to mature into deals as we announced we closed our first multimillion dollar deal. Yes. So I think you will see in the PDP business actually is also beginning to accelerate well because of defense.

And the PDP 700 is our bedrock for the defense business and we are introducing new products like smart antenna in Q4, but in general you will see I think the fixed wireless broadband, which is the bedrock of cambium with lot of differentiation.

Significant installed base is ready to move to the new technologies and ready to ride the new S curve. So we feel pretty good as we head towards 23 that you will see and the way I always describe as cambium as two wheels up and motorcycle both fields.

<unk>, one will might operate a little more efficiently little more faster, but both of these are going to be pretty important for our future.

And specifically PTP in the third quarter, we're expecting a pretty good uptick because of the government business and I think youll see that come through in Q3.

Great and then my follow up I'd like to get both the near term as well as longer term.

Government stimulus programs art off feed how you see them contributing to the business and I'd like to take care of that both from sort of a current year view as well as the longer term. Thank you.

Let me take the question I'll give you a good rundown on both our Duff and beat let me first touch upon our RF.

<unk> overall was November $20 billion over the next 10 years or so.

Our $20 billion 9 billion was promised and then out of $9 billion $4 5 billion less committed mostly to fiber.

You will see wireless awards coming through either late this year or early next year.

Thats, our expectation that the wireless part of the funding.

Some of our customers are very much participating in that I think cambium will see first half 'twenty three is my best guess right now.

And when you look at the bead, which is the federal program, that's about $142 billion large fund.

We are going through a mapping phase by FCC is called broad data collection BDC project until all that mapping has done for the different communities and all of that there'll be no funding release. So my guess is the bead the federal side of things probably in 'twenty three or late 'twenty three early 'twenty four.

If I were to guests and that gives you a timing on both of them where do we see things.

Great. Thank you.

Thanks, Simon Thanks.

The next question comes from some chatter from J P. Morgan. Please go ahead.

Great. Thanks for taking my questions I guess.

First one.

I just wanted to see if you can comment on the linearity.

Revenues during the June quarter, I know a couple of months were impacted by the China, Covid situations and things got better.

Quarterly, but just trying to sort of.

See where the exit rate was in terms of shipment or revenue sort of.

In the last month of the quarter and how.

It was heading into sort of three time period and I have a follow up. Thank you sure. So so you are right in terms of in terms of linearity.

As a result of the Covid shutdown things were pretty slow to gradually open up, especially when you look at the.

The shipping situation and the free shipping out of China, and the backup that they had as a result of coming out of Covid.

And that didn't really begin to recover until late May early June .

But despite that we were still doing some some shipping or some some.

Shipping by by Air as I mentioned during my prepared remarks.

And as a result, we were still able to get product out to customers. During the first two months of the quarter, but certainly I would say that linearity in terms of this quarter versus prior quarters was even a little bit more heavily weighted to that last month of the quarter.

And we ended the quarter as Atul mentioned and I mentioned as well with a very very strong backlog.

Okay.

If I can just.

To clarify on that are you assuming any further supply disruptions in the third quarter.

I wouldn't say, we're assuming any supply disruptions, but supply.

Supply chain in general, it's still challenging, especially in <unk>.

Enterprise business, where despite the fact that we're growing.

By more than 45% year over year is our expectation.

We are still supply constrained so.

So we are still seeing pockets of areas within our supply chain that is still quite challenging.

The freight situation is getting better certainly.

But there is it's.

It was just lumpiness theres still lumpiness in and where theres issues, and where theres product availability and maybe one point I want to add is when we say this year, we will see 45% plus growth enterprise business, we have taken into account what we have.

We have taken into account the commitments, we have in all of that and its supply chain situation improves that tells you that we could do better.

And just.

Just.

Question for you, which is more of a broad one is obviously everyone's concerned about the macro <unk> and.

And you have the two legs that you talked about how youre thinking about resilience of the offline even tacos.

Sort of reasonable level of economic slowdown, particularly on the enterprise business.

Where are you seeing strong growth right now.

We know from our vantage point, we see that the need for bandwidth the need for connectivity, especially in enterprise. We are going over mid enterprises hospitality education managed service providers, who are really providing video affordable Wi Fi Smart city Wi Fi across the world that is unknown.

<unk> need that need cannot be slowed down.

And since we are willing upper mid market enterprises.

Don't anticipate a macro to really slowed that down massively.

At least on the enterprise side now on the fixed wireless broadband side anyone who's depending a lot of government money they could slow down but a lot of our customers are buying cambium in the fixed wireless broadband side because of economics.

Solutions are economical solutions are.

<unk> performance so far.

I am not concerned about that.

Yes, and keep in mind that we are gaining market share so.

That's a very important element, especially on the enterprise side like.

For example, an enterprise we are in a very early us and customers are liking the economics the ease of deployment.

In the mid market segment. So we have a significant opportunity to emerge as a leader in that segment.

Alright. Thank you thanks for taking my questions. Thank you.

The next question comes from Rod Hall from Goldman Sachs. Please go ahead.

Hey, guys. Thanks for taking my question. This is <unk> on for Rod.

Yes.

I'll start off with the performance in the quarter, clearly <unk> performing better than you had expected three months back and we see that kind of margins wholesale gross margins were better.

On the contrary Pnp performance at $28 million revenues in the quarter.

<unk> is a lawyer.

See in the last five years.

Clearly.

Demand is weak there.

And I see a commentary on the customer side of taking a pause ahead of the.

28 gig product excellent Tom.

But maybe could you expand a bit more.

Fair enough explain more lie.

I do feel confident.

Maybe talk morning, I'm, sorry visibility that you how I see the number of Poc's that you got.

But still more tangibly do have any backlogged in are generally gives you more confidence for that particular segment.

Follow ups.

Well a couple.

A couple of key points, we're explaining why we feel good.

In the E&P business. The last time, we entered best curve was with Medusa in 2016 timeframe or so.

And the customer expectations at that time was maybe $25 50 megabit per second type of throughput.

And we had if endesa performing product with economical and we saw a growth I think that S curve is or the newest curve is you need to deliver 100 to maybe in some markets to under 300 megabit per second.

That means bands and frequencies, which are wider.

Less noisy.

Where you can really deliver that kind of performance enhanced the 28 gigahertz <unk> fixed product, we can see that two years back we knew that <unk> will need the performance and we are feeling very good about the funnel and the deal. We are one of the deals. We just closed is a sizable deal and we have significant deals in the funnel and you will see.

See cambium announced through press releases over the next probably three quarters.

Fantastic deals and 28 gigahertz sizable.

And the size of these deals in our last 10 year history, we have not seen because these are tier one last year to customers globally. So that gives us confidence that we have the next generation product next generation S curve growth product.

Secondly, the six gigahertz band, which we will start to release the products for full volume Q4, we're already beta testing that we've done customers that gives the adviser channels.

Honest to good gigabit performance.

So overall, when we say new S curve of growth. This is now five years have done through the next five years and the last point I want to make is that the government money has not flown in at least four wireless part I think the first half 'twenty three you'll start to see the BMP money come in access for our <unk> site and I think late <unk>.

Three early 'twenty four you will see the bead money coming in.

And cambium Formula is very simple.

We focus on affordability, we don't go off to a very high performance very high end and very expensive networks. We go after the strong mid tier 80 percentile and those are the products. We have now so we feel good where we are where we're going and you see both parts of our business accelerating new S curve.

I would just add one thing to that too in terms of <unk> is that.

Channel inventory is down about 5% or so from what we can from what we can see.

Which which is which is our comment about demand and working through the channel backlog is.

Is beginning to get more favorable as well.

And one more point.

MTI and the bead part of the program they announced that.

<unk> three five gigahertz will be treated as licensed frequency.

This just came in last few weeks.

So that basically means that the government funding will allow the CPR is three gigahertz to be treated at par with fiber.

So you will see cambium. These are all changes happening as we speak.

So I think we feel good about where we are the kind of products. We are in the kind of innovations we have done which gets us ready for this exploration as the next growth curve comes in.

Got you very helpful. Thank you so much.

I've got a follow up.

Full year guidance.

The guidance range for revenues.

Thanks, Tom.

Is still pretty wide with only two quarters left.

And it could be because I would like to say.

You do have pipeline in the next in the near term but.

The transition to <unk>.

New products would probably cost.

<unk> in terms of an option in the near term.

Is that the reason why.

You are still maintaining a lighter guidance because of that uncertainty for Q4.

Yes, I would say that's part of it.

I think when you when you look at the whole macro environment.

<unk> of supply chain overall, and the tightness that I mentioned within the enterprise market.

The availability of those specific ships that we need for our products.

There is.

There is limited room from where we sit here right now for expansion now there may be some some some inventory that frees up in the secondary market Thats always possible.

But we're forecasting based on what we know today and we're forecasting based on what our commitments are to get those chips into into our numbers.

So our products that will result in sales and get into our numbers. So.

I think that while the range for the for the full year.

<unk> is basically where we were last quarter and.

And we're one quarter later I think its appropriate given given the overall macro environment.

Yes, that's fair and finally on backlog.

You talked about significant backlog.

Could you maybe quantify for us I assume most of it is probably in that enterprise Wifi business, but could you could you just quantify for us.

Yes, we're not going to we're not going to.

<unk> exactly but but it is higher than what we had said where we were last quarter as I mentioned by by about 5%, even though last quarter. If you remember we are in the midst of a China.

Complete shutdown, so so even even with China lifting coming out of Covid and reopening.

We are still higher than where we were last quarter and you're right a significant amount of that.

Is is in the enterprise.

Portion of the market, but the PTP segment is also quite strong government segment is quite strong and and Thats, where we see there being benefit.

This quarter this third quarter as well as the fourth quarter.

And keep in mind that when you look at.

When you look at the margins in the government business as well as Wi Fi and enterprise.

Those tend to be stronger margins in that that further gives us confidence over our margin projections as well.

Got it very helpful. Thanks.

Thanks, so much.

Thanks, a lot.

The next question comes from Scott Searle from Roth Capital. Please go ahead.

Good afternoon, Thanks for taking my questions and nice to see Wi Fi, it's bouncing back towards record levels.

Maybe if I could a tool digging in on the last question the guidance for the year of $2 $80 million to $300 million, given what youre guiding to for the third quarter implies at the higher end for the fourth quarter you could be looking at 90 plus million I guess, you've referred to this a couple of different ways in terms of strength Wi Fi point to point and federal government coming back but I'm.

Wonder if you could.

Go through what's your confidence level is starting to look like going into the fourth quarter that you've left that guidance out there because it certainly implies that there is some good demand I know you've got some new products, but how are you thinking about that and as part of that I'm not sure I heard a number in terms of the revenue that was left on the table due to supply constraints in the second quarter, yes.

So Scott number one.

Supply chain is improving.

And we are anticipating the Q4, it'll give us even more leeway than Q3.

More optimism in terms of supply chain chip, possibly believe and we are working very closely with our suppliers on a weekly basis. So we know what theyre committing but it's still work in progress when people ask me when do you expect some normalcy I'll always say 23 mid 20 threes some semblance of normal.

Because of the markets, we're in and you might see some ever liberating some chips, but the markets were in their hot market with <unk> or Wi Fi six all of these products and when you look at calendar 'twenty two.

The areas, where especially as we go into Q4, we get a lot of good feeling good good confidence is the new products.

The six gigahertz comes in Q4, and as I said, a lot of excitement around that with now with community as well as some of the verticals where they are waiting for this gigabit connectivity. So we feel good new products 28, gigahertz is accelerating very well and as I said size of the deals are superior Europe .

Asia, leading the charge.

We feel good we have not seen this this size deals in our history.

BTB defense.

The world has actually because of the <unk>.

Ukrainian <unk>.

Mainly defense establishments are now converging.

Because they want fast interoperability that is driving our PTP 700 business. So there are many things converging and supply chain improving that gives us a good feel for Q4.

But net net the reason we still have the wider ranges.

Supply chain continues to be still an improving thing in work in progress. Okay. Very helpful. I appreciate the color and if I could as a follow up on the six gigahertz front huge opportunity there both domestically and growing internationally given the amount of spectrum given that you leverage existing Wi Fi six infrastructure. So I'm wondering.

Couple of things, if you could kind of take us through the milestone product will be available in the fourth quarter. How quickly does that ramp what is the level of interest and how quickly do we see this become a meaningful portion of the revenue stream I don't know if you have any early thoughts on that front in terms of how youre thinking about 2023, okay.

Good question Scott.

The way, we approach our point to Multipoint, especially the <unk> line.

As we very much focus on affordability.

And the fact that Wi Fi six has gone to six E that gives us a very affordable cost effective chipset to use when we do a lot of innovation in software and antennas. So it gives us a truly gigabit solution with fantastic affordability and.

And many service still and this is a global markets. Many service providers will have no government dollars.

In many countries. So we are making sure that government are no dormant cambium solutions remains very affordable and very performance.

Kind of point number one point number two these solutions will complement fiber.

Many of our customers are going to be fiber customers because when it comes to terrain and the last mile last two mines.

Our food challenges service providers have significant ARPA average revenue per user challenges in many geographies. So they want this type of solution for 60 gigahertz.

We are in Q4, but to use the experimental license, which our customers will acquire this is call SBA special temporary authority SD licenses. So under SD licenses, you will see Q4 Q1 Q2.

Large soft poc's across North America.

And many countries are now watching what we do in North America and copy that.

And FCC evaluating right now they are testing the AFC for my anticipation is that the ASC approvals and all of that will be done in first half 'twenty three somewhere there and the SBA license that will be used in Q4 to start the proof of concepts going.

And this is basically a coordinated spectrum strategy.

And very innovative so we feel good we will be one of the first companies to produce volume quality product and my anticipation is as usual.

Two to three quarters will be lots of POC and then the ramp starts probably second half of 'twenty three.

Okay perfect. Thanks, so much I appreciate the color and looking forward to the ramp.

<unk>.

The next question comes from Eric <unk> from JMP Securities. Please go ahead.

Yeah. Thanks, Thanks for taking the question.

Great job on the enterprise.

We haven't heard too much in terms of the macro economy.

It is slowing on your with customers or your end customers. What are you seeing in light of.

Kind of an uncertain economy right now.

On the risk side.

There is no question that they all wanted to participate in this new government funded projects.

Whether it's our dog, where does need money, but they also know that this could take time as I said are thus far wireless is plus five.

23.

The dollars have gone to fiber right now so far for <unk>.

$5 billion, but theres a lot more money still to be allocated so that's our anticipation.

And also the very small with.

Definitely our capex constrained so there could be acquisitions, there there could be more consolidation happening there, but this is another story everywhere when you go to different countries.

There's different dynamics.

So my sense is that as government dollars come in Youll see this adopt this next generation technologies.

<unk> for example, and then other countries 28 gigahertz is basically the key exploration that is happening in many.

The press release, you will see by one of our customers called <unk> in Australia in the city of Port and they are using 60 gigahertz to really deploy gigabit connectivity in Australia.

So I think the new S curve is starting and Thats why I said 2016, we entered last time I think 2022 late Q4, and then it's a five year cycle, probably good solid one year in the early phases of esker solid mid two years, an acceleration and then it.

Interest maturity, so thats, what we see a newest co starting probably late this year.

Yeah.

Okay.

And then.

The number of the telcos Verizon T mobile in particular have been really embracing fixed wireless access.

That changing the competitive dynamics for you.

Actually that's a good thing remember fixed wireless broadband used to be after thought.

It was not mainstream.

I think what <unk> has done five G and 28 gigahertz is legitimised fixed wireless broadband.

I'm very glad that Verizon and AT&T that the work are pushing it because their solutions might be very large scale solutions are urban solutions.

Our solutions are suburban rural and many cases and economical.

So overall.

Ernesto fixed wireless broadband increases that.

<unk> benefits can be because we don't have those kind of marketing dollars.

What they have.

I think net net you will you will see another dynamic another dynamic is that many areas. These large service providers may win a deal.

They may get they may have a license or the government funded project they might win but they will subcontract or they will bring other service providers, which are smaller and for them. That's a good enough business and.

And Thats, how these larger companies will participate in these second tier service providers will engage cambium.

So no matter, how you will see when the water trickles down cambium will be a beneficiary in anything in fixed wireless broadband with affordability and quality is acquired.

Yes.

Very good thank you.

The next question comes from George Notter from Jefferies. Please go ahead.

Hey, Thanks for taking our question. This is Blake on for George you mentioned that price increases beyond to work into the model, but you still have not.

And felt the full impact from those correct and is there any specific segment, where <unk> been able to pass along more price increases through.

So the price increases that we enacted last year are in our numbers.

Pretty much fully in the numbers for Q3 at this point.

If you remember we didn't impact.

We didn't impact our backlog and we worked through that backlog at this point.

So when you look at the Q3, you look at the Q2 results.

And then and then what we're expecting in Q3.

Those include the price increases.

There still may be some that are going to trickle in but it's really immaterial. So so I think that's what you're seeing there we certainly.

We have experienced price increases on the cost side that that is also.

Offset.

The price increases that we've had.

And increases in components and chips.

In freight costs and all the things that we've spoken about.

So.

So net net.

That's the impact of the price increases from last year and overall, what's really driving the increase in our gross margins as more mix.

The mix being more heavily weighted towards of our enterprise products, which carry a higher gross profit margin by nature and by by market.

And that's really what's driving the increase much more so than price increases that were offset by cost increases.

Got it that's helpful. And then I think you mentioned channel inventory was down 5% was that sequentially or year on year and when do you expect channel inventory to kind of stabilize around these current levels or.

Slower.

Yes.

Sequentially and that was that was specifically in the PMT.

Product line.

And I think they'll probably continue to work down a bit.

They are waiting for the new product introduction.

And and waiting for.

For that to happen and I think that'll happen.

In terms of stabilization in late Q3 early Q4.

Awesome. Thank you very much thanks Lee.

The next question comes from Tim <unk> from Northland Capital markets. Please go ahead.

Hi, good afternoon on little late so.

Forgive me, if I repeat something here, but.

I just want to focus on Pnp.

From a couple of different perspectives one.

And I'm not sure what sort of guidance you gave about what's driving sequential growth next quarter, but.

Should we be looking at Q2 as the trough for PMT revenues I guess is the first question.

No. So we expect that it will be it's proved a decline in <unk> in Q3.

And then we expect that it will begin to stabilize late Q3 early Q4.

And then Youll see an uptick in Q4.

Okay great.

Q3 is the trough.

Or at least I guess, we hope.

In terms of the 28 gigahertz deals that were mentioned alright. Thank you mentioned those in the context of Q4, but they seem like they should be drivers for calendar 'twenty three.

And you had mentioned.

Deal sizes are.

Pretty big relative to what you've seen in the past I don't know if thats a pnp specific comment you booked some pretty big deals on the PTP side on the federal side, including recently.

I think you'd characterize those.

Maybe tens of millions type thing.

Should we be thinking about these 28 gigahertz deals in a similar order of magnitude.

Let me give Tim quick rundown on that so 28 gigahertz as I said deal sizes are larger and the reason for that is that these are the largest service providers, who have the money to buy licenses for 28 gigahertz, we have larger scale networks. So right off the gate they wanted to monetize faster and we have 10 POC.

He is going in four continents.

So we have closed one of them one contract is done and we are working now to close other deals my sense is the needle start to move probably 'twenty three.

This is still the early phase of the 28 gigahertz acceleration, but we will announce as we close these deals from time to time, you will see through press releases.

So I am pretty pleased when we look at the size of the deals and as I said earlier these are pretty sizable deals.

And the differentiation we are building in our product floor by floor.

<unk> 400 megabit per second throughput at scale, we are building some very good differentiation for the service providers and we're also taking the service provider sourced <unk>.

<unk> network.

And we can see these products two years back and now they are they are coming out. So in terms of acceleration I would say more 'twenty three but in terms of contracts closing we might announce as we close.

And the fact that we are beginning to close contracts.

That gives me confidence we have the right product and this is really startup in U S curve.

Well just one more on that.

I'm going to take a shot at quantifying the aggregate opportunity of those 10.

Poc's should they go to full deployment.

I won't I won't give a specific number but but you are not far off in terms of these deals are generally Tim for a five year long range deals. They are rarely one year contract five year contract for your contract almost all of them are long range and those contracts will be youre not too far off when you sit and $7 million.

Alright, it sounds good.

Last question on six gigahertz and.

And I guess my question is does more need to happen.

From operator regulator licensing standpoint.

Or from a cambium specific product standpoint to.

To enable that ramp excellent question Tim.

Good question very insightful question from project point of view, we feel very good as I said, we have approximately I would say close to 10 beta customers as we speak. So this is not something we are.

Going to do we are doing that right now.

And in Q4, we will have a ability to ship volume.

It will be like production units in production software.

And as I said FCC special temporary authority SBA license is what we used to get the PUC is going.

Thank the more.

What is what is needed more.

Probably over the next six months is four four.

FCC to finish the evaluation and testing of the <unk>.

AFC algorithm.

Six gigahertz as a coordinated spectrum and FCC has done a good experience from <unk> to be honest is a tremendous success story for three five gigahertz band. So I think what Youll see is that estimate FCC testing is done sometime in <unk>.

<unk> end of Q1 early Q2 somewhere there.

This will all be allowed and operators want to see it operational because then they can start to make money for those high performance networks. So I think little more needs to be done by the service providers and the FCC working together.

We enable.

Multi gigabit networks, which are very affordable and cambium is really <unk> will be ready with the AFC algorithm can be and will be ready with cloud management Campbell related with products. So from our side, we already in Q4, and we will be doing everything possible in our power to be educating us to see and pushing that.

Launching and they did a great job with CBRE and three in <unk>. So we're very confident.

And <unk> not as sophisticated as CVR as algorithms work. So they did a great job with <unk> and <unk> I think they can do this in first half so we feel pretty good.

Okay. Thanks very much.

Thanks, Tim.

This concludes our question and answer session I would like to turn the conference back over to Peter Schuman for any closing remarks.

Thank you Jason during Q3, 'twenty, two cambium networks will be presenting and meeting with investors in August 10th at the Oppenheimer Internet Communications Conference held virtually on August 31 at the Jefferies 2022, semiconductor hardware and communications infrastructure summit in Chicago Cambium will host a tour of our rolling Meadows.

Headquarter facilities on September <unk>, with Barrington Research and on September 14th or 15th the company will hold one on ones and present at the Goldman Sachs Technology Conference in San Francisco in the meantime, you're always welcome to contact our Investor Relations Department at $8 seven to six four to 188 with any questions that can rise.

Thank you for joining us and this concludes today's earnings call.

Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].

Okay.

[music].

Good afternoon, My name is Jason and I'll be your conference operator today at this time I would like to welcome everyone to the Cambium Networks' second quarter 2022 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 you May Press Star then one on your Touchtone phone to withdraw from the question queue. Please press Star then two please limit yourself to one question and one follow up question.

Mr. Peter Schuman, Vice President Investor and industry analysts relations you may begin your conference.

Our CFO are here for today's call.

Our financial results press release, and CFO commentary referenced on the 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.

It's about the company's outlook and expected performance. These statements are based on current expectations forecasts and assumptions risks and uncertainties could cause actual results to differ materially except as required by law cambium networks does not undertake any obligation to update or revise any forward looking statements for any reason after the date of this presentation.

Whether as a result of new information future developments to conform these statements to actual results or to make changes and cambium <unk> expectations or otherwise.

Is cambium networks' policy not to reiterate our financial outlook, we encourage listeners to review the full list of risk factors included in the Safe Harbor statement in today's financial results press release.

We will also reference both GAAP and non-GAAP financial measures and specifically note that all sequential and year over year comparisons referenced non-GAAP numbers, except where otherwise noted a reconciliation of non-GAAP measures to GAAP measures is included in the appendix 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 re.

<unk>.

Turning to the agenda cambium Networks' President and CEO to have bought lager will provide the key investment highlights for the second quarter, 2022, and <unk>, well <unk> CFO , who will provide a recap of the financial results for the second quarter 2022, and present, our financial outlook for the third quarter and full year 2022 are prepared.

<unk> remarks will be followed by a Q&A session I would now like to turn the call over to a tool. Thank you Peter.

Cambium had recovery in our second quarter results with revenues of $69 3 million, increasing 12% sequentially slightly ahead of our midpoint of between $65 million to $73 million announced during the Q1 'twenty two quarter globally.

Profitability improved significantly with EPS up 18%.

Our outlook of between one to 11.

As we regain some scale.

<unk> had higher gross margin.

Spending was lower than anticipated due to our tight cost control.

Our technology roadmap and strategy continued to strengthen.

Cambium as at the start of a new growth S curve.

During evolutionary change performance starts from a slow initial phase.

It goes into an accelerated deployment phase.

Before stabilizing and maturing.

This is about a five year cycle for cambium.

And the last time, we entered this cycle was 2016.

We are now at the cusp of entering the accelerated phase of growth for high performance broadband network.

We anticipate continued recovery in revenues during the third quarter 2022.

Given our record backlog.

Pricing actions announced late last year are now fully in place and.

And we expect further improvements in the supply chain and distribution of components and finished products during the second half of 2022.

We exited the second quarter, 2022, with backlog up 5% quarter over quarter and higher by 29% year over year.

We saw strong demand for our enterprise solutions.

Which grew 55% sequentially and increased 31% year over year.

Including record by $5 six revenues.

We now expect our enterprise business to grow over 45% for calendar year 2022.

While the supply situation remains tight and challenging we exited Q2 'twenty two with another record quarter of backlog for enterprise products.

Cambium attractive total cost of ownership and.

In cloud managed wireless fabric of solutions integrating multiple communication standards and emerging broadband technologies, which we are now calling cambium one network.

Our solutions are a compelling choice for <unk>.

Wireless infrastructure projects around the World with network management from a single pane of glass.

Turning to the results of the second quarter 2022.

Of the ramp up of both 28 gigahertz <unk> fixed technology and the introduction of 60 gigahertz products expected during Q4 'twenty two.

We are seeing the component shortages continue to improve although gradually which benefited the <unk> product line as a result of the reopening of China during Q2 2002.

The point to point PTP business increased 7% sequentially during Q2, 'twenty two while year over year increase.

Ill person due to higher shipments of <unk> products using unlicensed frequencies.

Our enterprise business had robust revenues of $24 million.

During Q2, 'twenty, two increasing 55% sequentially and higher by 31% year over year due to improved supply and distribution and.

And strong demand for our Wi Fi six solutions.

Cambium has an opportunity to be a significant leader in mid market enterprise networking.

Third by our extensive enterprise channel built over the last few years.

In EMEA Cambium was named an outperformer in the 'twenty to 'twenty two Giga <unk> radar report for Wifi, six and <unk> solutions.

We are also beginning to see software become a more meaningful contributor to bookings and revenue.

Looking at some notable customer wins and new product development.

In North America, we are receiving very strong orders in enterprise Wi Fi.

Light Sky Communications and managed service provider MSP, focusing on the multi dwelling unit MDU market placed a large order for enterprise Wi Fi, including CN Maestro X.

Our flagship subscription network management solutions.

Can be selected for our price performance and superior value proposition.

<unk> X is fine tune and optimize our MSP and MDU applications.

And NFL city in the southeast placed an order for 60 gigahertz CN web connectivity and Wi Fi as part of its smart city deployment.

Can be on a selected for our portfolio breadth and ability to deliver backhaul and access with a single management platform.

In our federal defense business.

We have a large funnel of deal as the hostilities in eastern Europe are leading to multiple nations wanting to upgrade the military communications infrastructure with same equipment as the U S defense establishment using cambium PPP 700 technology for fixed wireless broadband communications.

This enables total equipment interoperability and a rapid deployment in the field.

In the Europe , Middle East and Africa region EMEA, we continue to have healthy demand for our enterprise business and continue to win larger projects.

A recent strategic win in Germany included Cambium partnering with NCR order meant a global market leader for mobile ordering providing high performance lifestyle solutions for hospitality industry, including connectivity for point of sale systems as well as the handhelds for mobile order, taking and billing.

More than 80000 restaurants around the world are equipped with an order meant system.

With this new solution restaurants, and other venues can deliver fast and reliable service with Wi Fi from cambium.

This win included Cambium Wi Fi six access point.

CN metrics Ethernet switches and CMI stroke cloud management solution.

<unk> wireless fabric makes it easy to plan.

Alloy and manage affordable gigabit speeds for the home and enterprise.

In the UK enterprise market, we closed a few large MSP deals, especially as an MD use with a focus on providing services for student housing accommodations.

These deals covering multiple quarters and countries across Europe .

And in the Caribbean and Latin America Cala region, we had a significant win lending our first multimillion dollar agreement for 28 gigahertz <unk> fixed technology from a leading telecommunications and IP service provider operating in Puerto Rico, and U S Virgin Islands.

<unk> was selected for our ability to support gigabit speeds with low latency and consistently high performance.

Turning to new product introductions since our previous quarterly update.

The industry is eagerly awaiting the availability of six gigahertz spectrum for wireless channels and higher throughput.

<unk> will have an industry leading position when our next generation multi gigabit <unk> 4600 products is expected to be released before year end.

Approximately a half dozen customers, including next linked Internet.

Our already field testing our product under special FCC licenses.

In May <unk> announced the results of six gigahertz spectrum testing utilizing an FCC experimental license and achieved actual throughput of over one gigabit per second download and 500 Megabits per second upload to each subscriber module under full load utilizing it earned 60 megahertz channel at <unk>.

<unk>.

Clearing the way for more gigabyte fixed wireless deployments nationwide.

Upon full commercial deployment next year next link will be rolling out gigabit speed plan for their existing fixed wireless service network expansion, while the FCC's Rural digital opportunity fund our Daas program.

Ultimately next links expansion of gigabit fixed wireless will cover over 4 million households, and businesses.

Fixed wireless broadband takes months as compared to years or fiber to be deployed.

For our federal and National Security PDP business before year end, we plan to rollout a new smart antenna.

<unk> 700, tena will facilitate rapid alignment of our remote radio.

With the primary site in a highly automated manner.

And within our software and subscription services business.

This fall Cambium will launch our network service edge NFC solution <unk>.

NSC bundles, a rich set of network services.

DRAM and security features optimizing SaaS applications performance and reliability at the network edge.

This complements our cloud managed Wi Fi and switching products to deliver cambium, one network solution.

Especially for mid market enterprises, which are looking for an easy to deploy and operate networks without significant IP health.

Instead of building solutions from multiple vendors and spending excessive time dealing with complex installed problems service.

Service providers and enterprises can manage one efficient solution utilizing cambium expertise in Wi Fi fixed wireless broadband switching management and security solutions.

Our integrated solution provides better combined and insights into the network performance to improve overall quality of experience and security.

By reducing complexity and lowering toward robust of ownership.

This fall <unk> newest version of the 28 gigahertz millimeter wave solutions for five year fix will become ever level.

We believe this newest version of <unk> will drive high volumes with large deal sizes.

Cambium presently has over 10 poc's in four continents for our <unk> equipment and during the second quarter, we landed our first multimillion dollar contract for this technology.

We remain excited about the revenue potential for this upcoming BMP product.

Looking at our CMI stroke cloud software.

Our end to end cloud power connectivity solution to manage the network from a single pane of glass.

The CN MISO cloud software continued to experience strong user growth total devices under cloud management in Q2, 'twenty two was over 837000 an.

An increase of 6% from Q1, 'twenty, two and up 36% year over year.

While our premium <unk> offerings, we booked a major deal with a sizable service provider for fixed wireless broadband during the second quarter.

And are now seeing healthy growth in annual recurring revenue.

While this product.

AAR Foreseeing Maestro X, which includes both enterprise and fixed wireless solutions grew 66% sequentially during the quarter.

Turning to our channels.

In Q2, 'twenty, two we expanded our channel presence by adding over 520 net new channel partners sequentially and approximately 1600 net new channel partners year over year, which represents an increase of approximately 5% sequentially and 15% year.

This is expanding our reach into new mid market customers around the world.

During the second quarter Cambium shared our strategy and vision at cambium connections, our biannual online webinars, but end customers and the partner community throughout various geos.

Our upcoming six gigahertz <unk> solution is generating lots of excitement for gigabit connectivity, particularly with North American service providers and we held separate events surrounding the opening of this important spectrum for future commercial use.

I will now turn the call over to Andrew but a review of our Q2 'twenty two financial results and Q3 'twenty two outlook.

Thanks Atul.

Cambium had revenues of $69 3 million for Q2 'twenty to.

Revenues increased by 12% quarter over quarter and decreased 25% year over year.

While revenue in global supply constraints are beginning to ease we still had impact to shipments of our products. During the first two months of the quarter as a result of the China Covid shutdown.

Although we continue to have significant pent up demand, especially in our enterprise products.

Our backlog in end demand remains strong with backlog, increasing by 5% quarter over quarter and 29% year over year.

On a sequential basis for Q2 'twenty two.

Revenues were higher by seven $4 million.

The higher revenues were primarily the result.

Of increased enterprise and PTP solutions, while <unk> revenues were lower due to softer demand for legacy PMT $4 50, partly offset by improved supply benefiting <unk> shipments.

Moving to our gross margin our non-GAAP gross margin of 48, 9% was significantly better than anticipated, although decreasing by 110 basis points compared to Q2 'twenty one.

The year over year decline in our non-GAAP gross margin was the result of lower revenues increased component costs as well as higher freight and distribution costs due to expedited shipping.

On a positive note on a sequential basis, our non-GAAP gross margin improved by 110 basis points compared to Q1 'twenty two.

The higher quarter over quarter non-GAAP gross margin was the result of a higher mix of enterprise products tight tight.

Tight cost controls and the benefit from the previously announced price increases that we instituted approximately three quarters ago.

The higher gross margin is notable considering we had expedited shipping from the Shenzhen factory to distribution hubs in North America, and EMEA in order to balance Street congestion and fuel surcharges of Shanghai unlocked from Covid.

Our longer term goal remains an annual non-GAAP gross margin target of 51% to 52%.

non-GAAP operating expenses in Q2, 'twenty to decrease by approximately $1 $3 million when compared to Q2, 'twenty one and.

And stood at $27 5 million or 39, 7% of revenues there.

The decrease in operating expenses compared to the prior year period was related to the timing of R&D expenditures and lower variable compensation.

When compared to Q1, 'twenty two non-GAAP operating expenses decreased by approximately $1 million during the quarter.

Quarter over quarter sales and marketing increased slightly primarily because of higher travel.

While R&D decreased three leading to the timing of expenditures.

And overall lower variable compensation.

non-GAAP operating margin for Q2, 'twenty two was nine 1% down from 18, 9% during Q2, 'twenty, one and up significantly from one 6% in Q1 'twenty two.

non-GAAP net income for Q2, 'twenty, two was $5 million or <unk> 18 per diluted share.

The previous outlook of between one and <unk> 11 per diluted share and compared to $12 9 million or <unk> 45 per diluted share for Q2 'twenty one.

And non-GAAP net income of $300000 or <unk> <unk> per diluted share for Q1 'twenty two.

Our operating model remains solid.

We are beginning to regain some operating leverage in our business as cambium increased revenues and benefits from improved pricing.

We remain committed to driving our adjusted EBITDA to our target model of 18% to 19% of revenues.

Next moving to our cash flow cash.

Cash provided by operating activities was $10 million for Q2, 'twenty two and compares to $20 1 million of net cash provided by operating activities for Q2, 'twenty one and.

And cash used in operating activities of $19 2 million for Q1 'twenty two.

We expect to maintain positive operating cash flow for the remainder of the year.

Next turning to our balance sheet cash totaled $45 9 million as of June 32022, and.

An increase of $7 5 million from Q1 'twenty to the sequential.

<unk> increase in cash primarily reflects higher earnings and improved working capital.

Net inventories of 47 4 million in Q2, 'twenty two increased by approximately $19 million year over year.

And about $7 2 million from Q1 'twenty two.

Inventories were higher sequentially because of an increase in components and finished goods as we grow our business.

While the supply chain remains an ongoing challenge we are working to selectively increase our inventory position during 2022.

So in summary, the second quarter was better than we anticipated due to recovery in the COVID-19 situation in China, and an improving supply chain environment.

We are now benefiting from the price increases in 2021.

Our backlog remains strong and we are at the start of new product cycles.

We expect to continue to regain scale improve operational efficiency and make significant progress toward achieving our long term target operating model.

Moving to the third quarter and full year 2022 outlook <unk>.

Ambient networks' financial outlook does not include the potential impact of any possible future financial transactions acquisitions pending legal matters or other transactions considering.

Considering our current visibility as of today, our Q3 'twenty two financial outlook is as follows revenues of between $70 million to $76 million, representing approximately 4% to 10% sequential growth.

We remain supply constrained, especially in the enterprise product lines.

non-GAAP gross margin between 48, 5% to 49, 5% non.

non-GAAP operating expenses between 28, 9% in 2000 $99 million.

And non-GAAP operating income between six one and $7 8 million.

Interest expense net of approximately $500000 and non-GAAP net income of between $4 5 million to $5 8 million, which represents 16% to 20 <unk> per diluted share.

Adjusted EBITDA between seven and $8 7 million and adjusted EBITDA margins of between nine 8% and 11, 5%.

We expect a non-GAAP effective income tax rate of approximately 18% to 20%.

And approximately $28 2 million weighted average shares outstanding.

Our cash requirements are expected to be as follows we expect paydown of debt of $700000.

Positive.

We expect cash flow interest expense of approximately $500000 and we expect capex of two four to $2 6 million.

Turning to our full year 2022 financial outlook.

We expect revenues of between $280 and $300 million.

And we expect non-GAAP net income to be 13, 1% to $25 1 million or <unk> 46 to 89 per diluted share.

And adjusted EBITA margin of seven 8% to 12, 5%.

I will now turn the call back to a tool for some closing remarks.

Cambium growth strategy and drivers remain solid.

We are now benefiting from increasing chip supply.

Which will drive our growth during second half of this year.

Our investments in multi gigabit wireless products, such as enterprise Wifi six six E <unk>.

Wireless savvy switching products.

60, gigahertz <unk> web.

28 gig millimeter wave solutions, our fixed <unk>.

And the upcoming launch of six gigahertz fixed wireless solutions, arriving later in 2020 tool will drive future revenue growth.

Our federal business is at the start of significant growth and we are now benefiting from our software as a service solutions.

The integrated wireless fabric, which we are now calling cambium, one network brings together ease of deployment scale.

Scalability of networks and lower total cost of ownership as awarded employs next generation high performance wireless broadband.

We remain focused on judiciously managing our costs.

Continuing to invest in innovative products to maintain our technology edge.

And expect increased scale.

And all of this will benefit our future operating results.

I would like to show my appreciation for our employees.

Partners and customers.

During these unprecedented times.

This concludes our prepared remarks, so with that I would like to turn the call over to Jason.

And begin the Q&A session.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

We are using a speakerphone please pick up your handset before pressing the keys.

To withdraw from a questions queue. Please press Star then two.

In the interest of time, please limit yourself to one question and one follow up question at this time, we will pause momentarily to assemble our roster.

Our first question comes from.

Leopold from Raymond James Please go ahead.

Thanks for taking my question.

I wanted to start off.

Trying to get a better understanding of what you think.

Going to happen in your mix for the balance of the year you walked us.

Comment.

Second the Wi Fi business to be up by like 45% for the year, which nice uptick.

But you tend to have kind of lumpy quarters and in particular I'm looking at the TMT PM key products.

Being down sequentially two quarters in a row trying to figure out where that stabilizes. So ultimately I'm looking for some sense of what you're thinking about for mix in the next couple of quarters.

And then I've got a follow up sure yes. Thanks for the question.

So in terms of mix, we expect the enterprise business to continue to be strong.

And to continue as a percentage of our overall business to grow.

We do think that there will be.

Downtick because of the product cycle that we're in in the fourth quarter keep in mind is when we're going to begin to see revenues from the new product introductions and that should drive positive.

Quarter over quarter results in the fourth quarter.

Maybe one more point Simon I wanted to add is we.

We have entered the S curve on enterprise, probably about two quarters back ourselves and we are now entering the acceleration phase.

If the supply continues youll see that I think the S curve on the fixed wireless broadband.

Because Q4 is when we will introduce six gigahertz products. It's in beta test right now and 28 gigahertz funnel is now also beginning to mature in two deals as we announced we closed our first multimillion dollar deal. Yes. So I think you will see and.

The PDP business actually is also beginning to accelerate well because of defense.

Sometimes one will might operate a little more efficiently little more faster, but both we and they are going to be pretty important for our future.

And specifically PTP in the third quarter, we're expecting a pretty good uptick because of the government business and I think youll see that come through in Q3.

Great and then my follow up I'd like to get both the near term as well as longer term.

On government stimulus programs art off feed how you see them contributing to the business and I'd like to take care of that both from sort of a current year view as well as the longer term. Thank you.

Simon Let me take the question I'll give you a good rundown on both our Duff and beat let me first touch upon our Dove RF.

<unk> overall was doing about $20 billion over the next 10 years or so.

Was promised and then out of $9 billion $4 5 billion less committed mostly to fiber.

You will see wireless awards coming through either late this year or early next year.

Thats, our expectation that the wireless part of the funding.

Some of our customers are very much participating in that I think cambium will see first half 'twenty three is my best guess right now.

And when you look at the beat which is a federal program, that's about $142 billion large fund.

We are going through a mapping phase by FCC is called broad data collection BDC project until all that mapping has done for the different communities and all that there'll be no funding release. So my guess is the bead the federal side of things, probably and couldnt be three or late 'twenty three early 'twenty four.

Great. Thank you.

Great. Thanks for taking my questions I guess.

First one.

I just wanted to see if you can comment on the linearity of revenues during the June quarter I know.

We'll have months were impacted by the China Covid situation.

Things got better as you exited the quarter, but just trying to sort of.

See where the exit rate was in terms of shipment or revenue.

In the last month of the quarter and how it was heading into sort of three <unk> time period and I have a follow up. Thank you sure. So so you're right in terms of in terms of linearity.

As a result of the Covid shutdown things were pretty slow to gradually open up, especially when you look at the.

The shipping situation and the free shipping out of China, and the backup that they had as a result of coming out of Covid.

And that didn't really begin to recover until late May early June .

Sure.

But despite that we were still doing some some shipping or some some.

Shipping by by Air as I mentioned during my prepared remarks.

And we ended the quarter as Atul mentioned and I mentioned as well with a very very strong backlog.

Okay.

If I can just.

Clarify on that are you assuming any further supply disruptions in the third quarter.

Okay.

I wouldn't say, we're assuming any supply disruptions, but supply.

Apply chain in general is still challenging, especially in our enterprise.

Prize business, where despite the fact that we're growing by more than 45% year over year is our expectation.

We're still supply constrained. So so so we are still seeing pockets of areas within our supply chain that is still quite challenging.

<unk> situation is getting better certainly.

But there is it's.

Theres, just lumpiness theres still lumpiness in.

Where theres issues, and where theres product availability.

Maybe one point I want to add is when we say this year, we will see 45% plus growth enterprise business. We have taken into account what we have we have taken into account the commitments. We have in all of that and its supply chain situation improves that tells you that we could do better.

And just.

Just.

Question for you, which is more of a broad or as obviously everyone's concerned about the macro and you have to like sort of that you talked about how youre thinking about resilience of the offline.

<unk> been tacos.

Sort of reasonable level of economic slowdown, particularly on the enterprise business side, whether you're seeing strong growth right now.

We know from our vantage point we.

See the need for bandwidth the need for connectivity, especially in enterprise, we are going over mid enterprises hospitality education managed service providers, who are really providing very affordable Wi Fi Smart city Wi Fi across the world.

That is unabated need that need cannot be slowed down.

And since we are willing upper mid market enterprises, we.

We don't anticipate a macro to really slowed that down massively.

At least on the enterprise side now on the fixed wireless broadband side anyone who is depending a lot of government money they could slow down but a lot of our customers are buying cambium in the fixed wireless broadband side because of economics.

<unk> solutions are economical solutions are.

The performance so far.

I am not concerned about that.

Yes, and keep in mind that we are gaining market share. So I think thats, a very important element, especially on the enterprise side.

For example, an enterprise we are in a very early cost and customers are liking the economics the ease of deployment.

The mid market segment, so we have a significant opportunity to emerge as a leader in that segment.

Alright. Thank you thanks for taking my questions. Thank you.

The next question comes from Rod Hall from Goldman Sachs. Please go ahead.

Hey, guys. Thanks for taking my question. This is <unk> on for Rod.

I guess, that's all I wanted to start off with the comments on the quarter clearly by high performing better than you had expected three months back and we see that kind of margins also gross margins look better on the contrary Pnp performance $28 million revenues in the quarter.

He is a lawyer.

I could see in the last five years.

Clearly.

Demand is weak there.

So your commentary like customer setup, taking a pause ahead of the two.

<unk> thousand eight gig product et cetera.

Could you expand a bit more in.

Kind of explain more lie.

I do feel confident.

Maybe talk morning, I'm, sorry visibility that you how I see the number of Poc's that you got.

But still more tangibly do have any backlog that generally gives you more confidence for that particular segment.

Follow ups.

So a couple.

A couple of key points, we're explaining why we feel good.

In the E&P business. The last time, we enter best curve was with Medusa in 2016 timeframe or so.

And the customer expectations at that time was maybe $25 50 megabit per second type of throughput.

And we had fantastic performing product that economical and we saw a growth I think that S curve is or the newest curve is you need to deliver 100 to maybe in some markets to under 300 megabit per second.

That means band frequencies, which are wider.

Less noisy.

Where you can really deliver that kind of performance enhanced the 28 gigahertz <unk> fixed product, we can see that two years back we knew that <unk> will need the performance and we are feeling very good about the funnel and the deal. We have one other abuse. We disclosed is a sizable deal and we have significant deals in the funnel and you will see.

Cambium announced through press releases over the next probably three quarters.

Fantastic deals and 28 gigahertz sizable and the size of these deals in our last 10 year history, we have not seen because these are tier one large tier two customers globally. So that gives us confidence that we have the next generation product next generation S curve growth product seconds.

The six gigahertz band, which we will start to release the products for flu volume Q4, we're already beta testing that with 10 customers that gives them wider channels honest to good gigabit performance.

So overall, when we say new S curve of growth. This is now five years have done through the next five years and the last point I'll make is that the government money has not flown in at least four wireless part.

The first half 'twenty three you'll start to see the BMP money come in access for our <unk> site and I think late <unk> early 'twenty four you will see the bead money coming in and.

Cambium Formula is very simple.

We focus on affordability, we don't go after very high performance very high end and very expensive networks. We go after the strong mid tier 80 percentile and those are the products. We have now so we feel good where we are where we're going and you'll see both parts of our business accelerating new S curve.

I would just add one thing to that too in terms of <unk> is that the channel inventory is down about 5% or so from what we can from what we can see.

Which is which is our comment about demand and working through the channel backlog is.

Is beginning to get more favorable as well.

And one more point.

NTIA and the bead part of the program they announced that.

<unk> three five gigahertz will be treated as licensed frequency.

This just came in last few weeks.

So that basically means that the government funding will allow the CPR is three gigahertz to be treated at par with fiber.

So you will see cambium. These are all changes happening as we speak.

So I think we feel good about where we are the kind of products. We are in the kind of innovations we have done which gets us ready for this exploration as the next growth curve Gunderson.

Got you very helpful. Thank you so much.

I've got a follow up.

Full year guidance.

If I look at the guidance range for revenues margins et cetera.

It is still pretty wide with only two quarters left.

And it could be because I don't like to say now.

You do have pipeline in the next in the near term but.

The transition to <unk>.

<unk> products would probably cause some sort of.

<unk> in terms of us wanted option in the near term.

Is that the reason why you are still maintaining a lighter guidance because of that uncertainty for Q4.

Yes, I would say that that's part of it.

I think when you when you look at the whole macro environment of supply chain overall, and the tightness that I mentioned within the enterprise market.

The availability of those specific chips that we need for our products.

Fears.

There is limited room from where we sit here right now for expansion now there may be some some some inventory there freeze up in the secondary market that's always possible.

But we're forecasting based on what we know today and we're forecasting based on what our commitments are to get those chips into into our numbers.

And so our products that will result in sales and get into our numbers. So.

I think that while the range for the for the full year.

<unk> is basically where we were last quarter.

And we're one quarter later I think its appropriate given given the overall macro environment.

Yes, that's fair.

Donnelley on backlog.

You talked about significant backlog, but could you maybe quantify it I assume most of it is probably in that enterprise Wifi business, but could you could you just quantify for us.

Yes, we're not going to we're not going to quantify it exactly but it is higher than what we had said where we were last quarter as I mentioned by by about 5%, even though last quarter. If you remember we were in the midst of a China.

Complete shutdown.

So even even with China lifting.

Coming out of Covid and reopening.

Still higher than where we were last quarter and you're right a significant amount of that.

<unk> is in the enterprise.

Portion of the market, but the PTP segment is also quite strong government segment is quite strong and and Thats, where we see there being benefit.

This quarter this third quarter as well as the fourth quarter.

And keep in mind that when you look at.

When you look at the margins in the government business as well as Wi Fi and enterprise.

Those tend to be stronger margins in that that further gives us confidence over our margin projections as well.

Got it very helpful. Thanks.

Thanks, so much.

Thanks, a lot.

The next question comes from Scott Searle from Roth Capital. Please go ahead hey.

Good afternoon, Thanks for taking my questions and nice to see Wi Fi is bouncing back towards record levels.

Maybe if I could a tool digging in on the last question the guidance for the year of $2 $80 million to $300 million, given what youre guiding to for the third quarter implies at the higher end for the fourth quarter you could be looking at 90 plus million I guess you referred to this a couple of different ways in terms of strength Wi Fi point to point and federal government coming back but I'm.

Wonder if you could.

So Scott number one supply chain is improving.

And we are anticipating the Q4, it'll give us even more leeway than Q3.

More optimism in terms of supply chain chip, possibly believe and we're working very closely with our suppliers on a weekly basis. So we know what theyre committing but it's still work in progress when people ask me when do you expect some normalcy I'll always say 23 mid 'twenty three some semblance of normal.

Because the markets, we're in and you might see some ever liberating some chips, but the markets. We are in their hot market with <unk> or Wi Fi six all of these products and when you look at calendar 'twenty two.

The areas, where especially as we go into Q4, we get a lot of good feeling good good confidence is the new products.

Six gigahertz comes in Q4, and as I said, a lot of excitement around that with now this community as well as some of the verticals where they are waiting for this gigabit connectivity. So we feel good new products 28, gigahertz is accelerating very well and as I said the size of the deals are superior Europe .

Asia, leading the charge.

We feel good we have not seen this this size deals in our history.

BTB defense.

The world has actually because of the.

Ukrainian War.

Many defense establishments are now converging.

Because they want fast interoperability that is driving our <unk> 700 business. So there are many things converging and supply chain improving that gives us a good feel for Q4.

But net net the reason we still have the wider ranges.

A couple of things if you could kind of take us through the milestone product will be available in the fourth quarter. How quickly does that ramp what is the level of interest and how quickly do we see this become a meaningful portion of the revenue stream I don't know if you have any early thoughts on that front in terms of how youre thinking about 2023.

Okay. Good question Scott.

The way, we approach our point to Multipoint, especially the <unk> line.

As we very much focus on affordability.

And the fact that the Wi Fi six has gone to six E that gives us a very affordable cost effective chipset to use when we do a lot of innovation in software and antennas. So it gives us a truly gigabit solutions with fantastic affordability.

And many service and this is a global markets. Many service providers will have no government dollars.

In many countries. So we are making sure that government or no government cambium solutions remains very affordable and very performance.

Point number one point number two these solutions will complement fiber.

Many of our customers are going to be fiber customers because when it comes to terrain and the last mile last two mines.

They have also challenges service providers have significant ARPA average revenue per user challenges in many geographies. So they want this type of solution for 60 gigahertz.

We are in Q4, we're going to use the experimental license, which our customers will acquire this is Carl SBA special temporary authority SD licenses. So under SDA licenses, you will see Q4 Q1 Q2.

Lots of Poc's across North America.

And many countries are now watching what we do in North America and copy that.

And FCC is evaluating right now they are testing the ASC. So my anticipation is that the AFC approvals and all of that will be done in first half 'twenty three somewhere there and the SBA license that will be used in Q4 to start the proof of concepts going.

And this is basically a coordinated spectrum strategy.

And very innovative so we feel good we will be one of the first.

<unk> to produce volume quality product and my anticipation is as usual.

Two to three quarters will be lots of POC and then the ramp starts probably second half of 'twenty three.

Okay perfect. Thanks, so much I appreciate the color and looking forward to the ramp thank you.

The next question comes from Erik <unk> from JMP Securities. Please go ahead.

Yeah. Thanks, Thanks for taking the question.

Great job on the enterprise.

We haven't heard too much in terms of the macro economy.

Any slowing on your wisp customers or your end customers. What are you seeing in light of.

Uncertain economy right now.

On the risk side.

There is no question that they all wanted to participate in this new government funded projects.

It's our dogs, where does need money, but they also know that this could take time as I said are thus far wireless is plus five.

'twenty three because the dollars have gone to fiber right now so far $4 5 billion, but there is a lot more money still to be allocated so.

That's our anticipation.

And also the very small.

Definitely our capex constrained.

Could be acquisitions, there there could be more consolidation happening there, but this is not the story everywhere. When you go to different countries, there's different dynamics to.

So my sense is that as government dollars come in Youll see this adopt this next generation technologies.

Six gigahertz for example, and then other countries 28 gigahertz is basically the key exploration that is happening in many in fact that the press release, you will see by.

By one of our customers called bent on it in Australia in the city of Port and they are using 60 gigahertz to really deploy gigabit connectivity.

In Australia.

So I think the new S curve is starting and Thats. What I said 2016, we entered last time I think 2022 late Q4, and then it's a five year cycle public good solid one year in the early phases of esker solid mid two years, an acceleration and then its.

Interest maturity, so thats, what we see in news go starting probably late this year.

Sure.

Okay.

And then.

The number of the telcos Verizon T mobile in particular are really embracing our fixed wireless access.

How is that changing the competitive dynamics for you.

Actually that's a good thing remember fixed wireless broadband used to be after thought.

It does not mean screen.

I think what <unk> has done <unk> 28, gigahertz is legitimised fixed wireless broadband.

I'm very glad that Verizon and AT&T that we're pushing it because their solutions might be very large scale solutions are urban solutions.

Our solutions are suburban rural and many cases and economical.

So overall.

International fixed wireless broadband increases that.

That benefits cambium, because we don't have those kind of marketing dollars.

What they have so I think net net you would you will see another dynamic another dynamic is that many areas with large service providers may win a deal or they may get they may have a license or the government funded project they might win but they will subcontract or they will bring other service providers, which are smaller and for them. That's a good enough business.

<unk> and.

And Thats, how these larger companies and participate in these second tier service providers will engage cambium.

So no matter, how you see the water trickles down cambium will be a beneficiary in anything in fixed wireless broadband where affordability and quality is acquired.

Yes.

Very good thank you.

The next question comes from George Notter from Jefferies. Please go ahead.

Hey, Thanks for taking our question. This is Blake on for George you mentioned that price increases beyond to work into the model, but you still have not.

And felt the full impact from those correct is there any specific segment, where you're you have been able to pass along more price increases through.

So the price increases that we enacted last year are in our numbers.

Pretty much fully in the numbers for Q3 at this point.

If you remember we didn't impact.

We didn't impact our backlog and we worked through that backlog at this point.

So when you look at the Q3, you look at the Q2 results.

And then and then what we're expecting in Q3.

Those include the price increases.

There still may be some that are going to trickle in but it's really immaterial. So so I think thats, what youre seeing there.

We certainly have experienced price increases on the cost side.

That is also.

Offset.

The price increases that we've had.

And increases in components and chips.

In freight costs and all the things that we've spoken about so.

So net net that's that's that's the impact of the price increases from last year and overall, what's really driving the increase in our gross margins as more mix.

The mix being more heavily weighted towards of our enterprise products, which carry a higher gross profit margin by nature and by by market.

And that's really what's driving the increase much more so than price increases that were offset by cost increases.

Slower or.

Yes.

Sequentially and that was that was specifically in the Pnp.

Product line.

And and I think they'll probably continue to work down a bit.

They are waiting for the new product introduction.

And and waiting for.

For that to happen and I think that will happen.

In terms of stabilization in late Q3 early Q4.

Awesome. Thank you very much yeah. Thanks Lee.

The next question comes from Tim <unk> from Northland Capital markets. Please go ahead.

Hi, good afternoon.

On a little late so.

Give me if I repeat something here, but.

I just want to focus on Pnp.

From a couple of different perspectives one.

I'm not sure what sort of guidance you gave about what's driving sequential growth next quarter, but.

Should we be looking at Q2 as the trough for PMT revenues I guess is the first question.

No.

So we expect that it will be a further decline in pnp in Q3.

Yes.

And then we expect that it will begin to stabilize late Q3 early Q4.

And then Youll see an uptick in Q4.

Okay great.

Q3 is the trough.

Or at least I guess, we hope.

In terms of the 28 gigahertz deals that were mentioned alright. Thank you mentioned this in the context of Q4, but they seem like they should be drivers for calendar 'twenty three.

And and you had mentioned.

Deal sizes are.

Big relative to what you've seen in the past I don't know if thats, a PMT specific comment and you've booked some pretty big deals on the PTP side on the federal side, including recently.

I think you'd characterize those and maybe tens of millions type thing.

Should we be thinking about these 28 gigahertz deals in a similar order of magnitude.

Let me give.

Give tim quick rundown on that so.

He had gigahertz as I said deal sizes are larger and the reason for that is that these are the largest service providers, who have the money to buy licenses for 28 gigahertz, we have larger scale networks.

Right off the gate they wanted to monetize faster and we have 10 poc's going in four continents. So.

So we have closed one of them one contract is done and we are working now to close other deals my sense is the needle start to move probably 'twenty three.

This is still the early phase of the 28 gigahertz acceleration, but we will announce as we close these deals from time to time, you will see through press releases.

So I am pretty pleased when we look at the size of the deals and as I said earlier these are pretty sizable deal.

And the differentiation we are building in our product floor by floor.

<unk> 400 megabit per second throughput at scale, we are building some very good differentiation for the service providers and they are also taking the service provider source five G.

<unk> network.

And the fact that we are beginning to close contracts.

That gives me confidence we have the right product and this is really start up in U S curve.

Just one more on that.

I wanted to take a shot at quantifying the aggregate opportunity of those 10.

Poc's should they go to full deployment.

I won't I won't give a specific number but you're not far off in terms of these deals are generally Tim for a five year long range deals. They are rarely linear contracts. These are five year contracts audio contract almost all of them are long range and those contracts will be youre not too far off when you sit and $7 million.

Alright, it sounds good.

Last question on six gigahertz and.

And I guess my question is does more need to happen.

From operator regulator licensing standpoint.

Or from a cambium specific product standpoint to.

To enable that ramp excellent question Tim.

Hey, good insightful question from a product point of view, we feel very good as I said, we have approximately I would say close to 10 beta customers as we speak. So this is not something we are.

Going to do we are doing that right now.

And in Q4, we will have a ability to ship volume.

It will be like production units in production software.

And as I said FCC special temporary authority SBA license is what we used to get the PUC is going.

Thank the more.

What is what is needed more.

Probably over the next six months is four four.

FCC to finish the evaluation and testing of the <unk>.

AFC algorithm.

Six gigahertz coordinated spectrum and FCC is not a good experience from Cvs Cvs is a tremendous success story for three five gigahertz band. So I think what youre going to see is that estimate FCC testing is done sometime in <unk>.

Guessing end of Q1 early Q2 somewhere there.

This will all be allowed and operators want to see it operational because then they can start to make money for the high performance networks. So I think little more needs to be done by the service providers and the FCC working together.

Enable.

Multi gigabit networks, which are very affordable and cambium is really cambium will be ready with AFC algorithm cambium liquidity with cloud management Campbell related with products. So from our side. We are ready in Q4, and we will be doing everything possible in our power to be educating FCC and pushing that.

Launching and they did a great job with CBRE and <unk>. So we're very confident.

And AFC is not as sophisticated as CVR as algorithms work. So they did a great job with CVR SM three <unk> I think they can do this in first half so we feel pretty good.

Okay. Thanks very much.

Thanks, Tim.

This concludes our question and answer session I would like to turn the conference back over to Peter Schuman for any closing remarks.

Headquarter facilities on September <unk>, with Barrington Research and on September 14th or 15th the company will hold one on ones and present at the Goldman Sachs Technology Conference in San Francisco in the meantime, you're always welcome to contact our Investor Relations Department at eight 7% to six four to 188 with any questions that can rise.

Thank you for joining us and this concludes today's earnings call.

Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q2 2022 Cambium Networks Corp Earnings Call

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