Good afternoon. My name is Justin, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Networks Second Quarter 2020 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. [Operator Instructions] Mr. Peter Schuman, Senior Director of Investor & Industry Analyst Relations, you may begin your conference.

Thank you, Justin. Welcome and thank you for joining us today for Cambium Networks second quarter 2020 financial results conference call and welcome to all those joining by webcast. Atul Bhatnagar, our President and CEO, and Stephen Cumming, our CFO, are here for today's call. The financial results press release and CFO commentary referenced on this call are accessible on the Investor page of our website and the press release has been submitted on a Form 8-K with the SEC. A copy of today's prepared remarks will also be available on our Investor page at the conclusion of this call. As a reminder, today's remarks, including those made during Q&A, will contain forward-looking statements about the Company's outlook and 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 in Cambium's expectations or otherwise. It is Cambium Networks policy to not reiterate our financial outlook. We encourage listeners to review the full list of risk factors included in the safe harbor statement in today's financial results press release. We will also reference both GAAP and non-GAAP financial measures and specifically note that all sequential and year-over-year comparisons reference non-GAAP numbers except where otherwise noted. A reconciliation of non-GAAP measures to GAAP is included in the appendix to today's financial results press release which can be found on the Investor page of our website and in today's press release announcing our results. Turning to the agenda, Cambium Networks President & CEO, Atul Bhatnagar, will provide the key investment highlights for the quarter; and Stephen Cumming, Cambium Networks CFO, will provide a recap of the financial results for the second quarter 2020, and he will provide our financial outlook for the third quarter 2020. Our prepared remarks will be followed by a Q&A session. I'd now like to turn the call over to Atul.

Thank you, Peter. We have always said wireless broadband connectivity is vital and essential infrastructure for people around the world and is a lifeline for most communities. Fixed Wireless Broadband is a critically important networking fabric being accelerated by 5G standards to connect our local communities and the importance has proved especially true in light of the current environment. The increases in network traffic continues to be driven by work from home, e-learning, and the secular trend of broadband communications and infrastructure projects remaining a priority throughout the world. The second quarter's results reflect an inflection point for Cambium's financial performance and mark the start of significant new product introductions which will continue over the next several quarters. These new product introductions will be material to our financial results for many quarters into the future. Cambium Networks has now entered the era of wireless end-to-end speeds equivalent to that of fiber. Our multi-gigabit wireless fabric, which can be controlled from a single-pane-of-glass, can deliver performance and reliability of fiber at a fraction of the cost with our new Wi-Fi 6 and the additions of our upcoming 60 GHz millimeter wave solutions, followed by our 5G 28 GHz products, further expanding the serviceable available market SAM for Cambium. We are already engaged with multiple customers on 60 GHz cnWave and have already won several RFPs from larger customers in multiple geos. Wireless can now be extended to places especially at the edge of the network where fiber could not go cost effectively. In certain greenfield environments it will not be necessary to deploy fiber networks at all. And where older wired networks exist, capacity can be added with wireless rather than replacing them with costly fiber or other wired technologies which are hard to install. Fiber is no longer the only…

Thanks Atul. Our outlook at the start of the second quarter resulted from our concern over our partners' ability to install our solutions during the COVID pandemic. I'm pleased to say the second quarter results reflect the increased demand for Cambium's high-quality products, the resilience of our partner community, the strength of our bookings, and better than anticipated demand ahead of new product introductions during the second half of calendar 2020. Revenues of $62.3 million for Q2 '20 came in above the high-end of our initial outlook of $51-$56 million, and above our revised outlook of approximately $61 million released on July 8th. Revenues increased by 3% quarter-over-quarter and decreased by 10% year-over-year from $69.2 million. On a sequential basis for Q2 '20, revenues were higher by $1.9 million or an increase of approximately3%. The higher revenues were driven by PMP products, which grew 16% quarter-over-quarter, due to service providers scaling networks driven by requests for increased capacity and better than anticipated field deployments. Q2 '20 revenue growth was offset by lower demand for PTP products, with revenues lower by 4% sequentially due to the timing of U.S. Federal programs, which are expected to materialize during Q3 '20. As expected, our enterprise Wi-Fi solutions declined, although performing better than anticipated, decreasing by 33% quarter-over-quarter with weakness centered around the hospitality and retail verticals, as this business was challenged by the impact of global shutdowns and other restrictions to combat the COVID pandemic. Looking at revenues by geographies North America represented 52% of company revenues, compared 51% during Q1 '20. On a quarter-over-quarter basis North America grew 5%, primarily driven by PMP, with Wi-Fi softer due to the impact from COVID. EMEA, our second largest region, increased 9% quarter-over-quarter and represented 33% of revenues during Q2'20, and 31% of revenues during…

We are very pleased with the second quarter results and improved outlook as we enter the third quarter. Cambium Networks will continue to manage our business for the goal of growth and profitability. Our balance sheet strengthened, and we have shown what type of cash generation is possible with good execution. At no point in our company's history has Cambium Networks been better positioned to win business based on the superior value derived from proven high-performance, high-quality, and affordable products providing end-to-end wireless connectivity managed by our cloud-based cnMaestro solution and matching end-to-end speeds of fiber. Fixed Wireless Broadband is a critically important networking fabric being accelerated by 5G standards to connect our local communities. The secular trends driven by the COVID environment have shown how vital and essential wireless broadband connectivity infrastructure is for people around the world. Working from home is no longer a luxury for many people, it is a necessity, and a lifeline for most communities. For those listeners new to Cambium Networks, the key secular drivers for our growth over the next several years, in addition to the need for our existing portfolio of solutions by Tier 2 and Tier 3 service providers and mid-size enterprises, are the anticipated release of new gigabit wireless products as the next several quarters unfold, such as enterprise Wi-Fi 6, 60 GHz and 28 GHz millimeter wave solutions for fixed 5G wireless, and the continued adoption of CBRS compatible solutions. We expect faster than market growth for our enterprise Wi-Fi solutions, based on Wi-Fi 6 adoption. Finally, we are starting to see growth of our cloud software-as-a-service business model generating recurring revenues. Cambium Networks is very well positioned as a Gigabit Wireless Leader for global markets and as an affordable, yet high-quality competitor, offering superb reliability and scalability. We have the right products at the right time, the right team in place to deliver outstanding results for both our customers and shareholders. This concludes our prepared remarks. So, with that, I'd like to turn the call over to Justin and begin the Q&A session.

Thank you. [Operator Instructions] And our first question comes from Paul Coster of JP Morgan. Your line is now open.

So, a couple of things, one is on the growth front, I think I heard you say steam that we're going to see sequential growth in the next two quarters into year end. And is that with the full benefit of the new product cycle kicking in? Or is that still sort of playing out into the first half of 2021? And once you're asked answering that question, how is it that you could suddenly see -- you could see this recovery and grow even though new products are pending normally that causes customers to slow down in advance of the new product cycle?

Paul, this is Atul. First of all, thank you for the question. The new product introductions have Wi-Fi-6 already started with Q2. Generally what I find is, it takes about three to maybe five months of lots of POCs then the expansion starts. So Wi-Fi-6 expansion will start in second half because those POCs which people start using and say end of Q2 in early Q3 will start to mature. The 60 gigahertz will introduce towards the end of Q3 and that will enter POCs in late Q3 and then continue in Q4. So I think 60 gigahertz will see some acceleration in q4, but most of it will be in '21. So all pretty much, the life cycle is well understood by us in terms of, you know, secondary half versus '21. '21, we'll see definitely a lot more acceleration for new products.

I just add to that Paul. We are -- as you heard from our prepared remarks, right. PMP business grew 16% sequentially. So that's stronger than we had anticipated. And where we're seeing a bit of a secular story here with the start of the upgrade cycle on these new products and requiring more gigabit speeds. And then you overlay that with the work from home dynamic, where we've seen a lot of our service providers now having to invest in new infrastructure, given the increased demand on the network as customers are upgrading their service or requesting services where they didn't need them before, as they change their lifestyles to some more rural locations. So our portfolio is well positioned, highly reliable and highly scalable and we're benefitting as a result of that.

And then, the other thing both Stephen and Atul, the other will still your productivity seems to improve. Your forecasting seems to have improved, you've issued guidance and beaten twice in a row now must change there. What is it this happened that made your forecasting better? And what is it that's happening that's improving visibility in the end market at the moment?

I think -- Paul, this is Stephen again. There's a few things happening now and we have spoken about them in the past, but I think we sort of continue to refine them and improve them. But the Company's been doing a lot of work in terms of improving its visibility and predictability of the business and ultimately trying to improve the deeming linearity of our business. And we've spoken about some of these things in the cost such as the incentive plans, we implemented a channel management tool. So, we look at end demand dynamics with the end customers and getting our distributors to report POS and inventory. I would say on top of that was happening probably in the last few facilities. Some of our customers are a little immediate to supply, so they're tending to get ahead of this earlier and book earlier and provide us with more visibility. So we started to see that happens in Q2, and it's continuing into Q3. So that gives us the confidence to guide where we go.

And I think there's no question, COVID has made Fixed Wireless Broadband long more relevant. And in some cases, it has accelerated the technological transition by one year. And in some cases, even by me more than that, look at the video, for example. The adoption of video, it would have taken probably two years, three years for video to go to this range of usage. So I think COVID has accelerated the transition.

And our next question comes from Simon Leopold from Raymond James. Your line is now open.

So first thing, I want to ask about was. I think, Stephen, you've mentioned ending the temporary salary reductions. Just wanted to get a better sense of what we should look at as really the baseline for operating expenses? I'm thinking it's around 28 million in the September quarter, but just want to make sure I understand what this means?

So, we did end the temporary cost reductions, and we are salary reductions, and we're very thankful for our employees for going through that pain. I think from a baseline perspective, guidelines based on the guidance I've given, you're probably looking at the midpoint of our guidance of around 266 with regards to OpEx. And that in incorporates, I would say the majority of those temporary salary reductions coming in. Some of them didn't get reinstated until right in the beginning of the quarter. So as you as you look, to sort of Q4 expanding may come up a little bit more. I don't think we're going to get back quite frankly, to that $28 million level. Remember, we've gone through a fairly substantial restructuring initiative that we announced in Q4 and Q1. And that's likely taking effect in our numbers now. So I think, it's launching a second directly. 26 is the number 53 and maybe up a little bit more from that for Q4.

And I wanted to maybe double click on how to think about the Wi-Fi business in the trajectory. So, your explanation for this quarters Wi-Fi segment makes a ton of sense given the current environment, I guess, I'm struggling to try to really think about and visualize what a recovery looks like, for that line of business. How should we think about -- you did mention growing faster in the market that really is not a very high bar. So I guess I'm looking for some better insight as to what your expectations are for where that business goes longer term?

Simon, let me take the question. So Wi-Fi, where we see shrinkage in Q2 is hospitality and retail. And no question, those segments have been hit. But where we are seeing now more positive economic activity is education. Education Institutions are fortifying online tools technologies everywhere and that includes indoor and outdoor, so that that's one segment we are beginning to see good activity in our regions like EMEA or North America. Number one. Secondly, the government, local government, state governments, they are all looking at many outdoor wireless public areas. So I think those projects are also accelerating. Healthcare Cambium, I think before COVID, we were not in as much healthcare but as you will use from the commentary for this quarter and last quarter, many hospitals, midsized hospitals are adopting Cambium Solutions worldwide. So, I would say those are the probably segments where we will see good activity in second half. And then as COVID, hopefully, is handled by the end of the year, I think you will see even the other segments where we were squeezed in '21 they accelerate. So overall, I feel the Wi-Fi will grow reasonably well. Especially, as we comment. Stephen, you want to add something?

Yes. Just to quantify that more and, I don't need to add I mean to put on with opponents, but just to give you some numbers around it. So you heard from our prepared remarks that Wi-Fi was down 33% for us in Q2, and obviously retail hospitality led the charge there and I won't go over the market that we talked about in terms of being a bit stronger that Atul just mentioned. But I think just to give you some idea of Wi-Fi for us in Q3, we're going to see that sequentially move up about the lower, mid, lower to mid 20s, in sequential growth as we go into Q3. And that, obviously driven by some of those verticals that Atul just refer to.

And our next question comes from Rod Hall from Goldman Sachs. Your line is now open.

Hi, this is RK on behalf of Rod. Thank you for taking my question. Could you give some color on the visibility you have by geography? And also talk about in fact from COVID, did you see approve forward in demand? And to what extent did you see the negative impacts?

Okay. Let me give you, this broad question. I'll give you just a high level answer. I think the visibility by the geo. We have excellent visibility in North America and very good visibility in EMEA as well, where the visibility and the impact of COVID -- impact of COVID is on everyone. But I think where the impact of COVID is probably a little more severe is, I would say Asia and from the specific countries in CALA, like Brazil. And there, I would also say that, though people kind of say, COVID impact, some of those countries have economic impact going on even before. It is a COVID has exceeded the situation a little bit, made it a little more serious. So I would say visibility wise, good visibility in North America, good visibility in EMEA and some countries in CALA, let's a little more opaque like Brazil and then Asia definitely places like India impacted with COVID far more seriously. So hopefully that gives you a color.

Yes, that's very helpful. Any commentary here on the pull forward in demand?

Yes. Pull forward in demand. Some is coming fix, while as you can see as people are scaling the network, but not really in the sense that some of those networks are also ready for transition to a higher speed. So maybe from a specific area that might be full forward, but I would say it's something that extraordinary. I think we will see the killer, steady state growth in the fixed wireless broadband as we kind of visualize next several quarters.

Yes, I mean I just add to that. I think we're seeing you know, just and I said this earlier, we're seeing a little bit higher booking activity as distributors want to get the orders on the books sooner to ensure supply but I don't really think we're seeing much in the way of full forward.

That's very helpful. And Stephen, could you could you give us some more color on the guidance by segments? Maybe talk about Wi-Fi but could you talk about other things too?

Yes, I can, bear with me. I'm going to break out. Yes, so overall, our midpoint of our guidance is roughly up about 5% sequentially. And as we said, in general, we're seeing some good bookings performance from regions stronger than others. So we were cautiously optimistic and still a lot of uncertainty with regard to COVID on some of the impacts in some regions like APAC. But from a from a product perspective, we expect TMT to grow low single digit sequentially. Remember that coming off a very strong Q2, which grew 16% sequentially in the service providers really driving that growth. PPP will be no double digit sequentially in Q3 as we see some of those federal and defense programs start to come back and obviously a lot more opportunity. We spoken about this in the past as we look to 2021 there but we're starting to see some shoots of recovery there. And then Wi-Fi I've already covered I think that's going to low to mid 20s sequentially increase. Europe coming back online, the vertical tool mentioned and a nice portfolio of new products from our Wi-Fi6 launch will help that refresh cycle.

Great. That's very helpful. And thus final question if I may. You're all ramping a number of new products like Wi-Fi-6 in 60 millimeter Wave in H2 and into next year. Could you give us some color on how material this could to be mentioned?

Let me -- I think these products as I said, it takes POCs, the good three to five months of good POCs. We focus a lot on quality. These are wireless products, which are very environment driven as well. So we learn a lot in those POCs. And then they accelerate. So all the products are describing their life is actually not one or two years, the life is three years, four years, five years. And the full lifecycle of acceleration stabilization, then they can decrease. So these are long restarts. I think one point I want to make is that solution we are seeing is not that suddenly we have done something right. We have been working on these things for two years, 18 months, these technologies these investments is just that I think in some cases it may be accelerated, but these are very secular technology, secular drivers. And just we focused on doing the right things. And we now think that as people, I always say that on the call, when people come back from any major transition like COVID, or any other major transition. We always buy next generation architecture. They don't buy legacy stuff. We knew that. So we were always planning for this technology transition. And we're pleased to see that these new products are at the right time at the right place.

And our next question comes from Scott Searle from ROTH Capital. Your line is now open.

Guys. Nice job, particularly considering that the new products have yet to really take it in a meaningful fashion. Atul just to go back to some of your earlier comments as it related to some of the funding whether see FCC or otherwise in the United States for me to start off in 5G rural opportunity phones and CAF II. With now wireless being viewed as a comparable to wireline technology. What is the incremental portion of that $30 billion over the next 10 years across those programs? What is that open to you guys now? I guess maybe another way of asking what is not open to you now, because in the past, wireless tended to get a relatively small portion of that overall pie, if you will? And then I had a follow up as it relates to the work on 60 gig.

The thing what has changed is I think the world has realized that wireless is a fabric which is easier to deploy, it's greener, you're not digging trenches, and it has reached the reliability and performance equal to fiber. And I think that's what has changed. So my sense is that every country irrespective of income limits and different groups pushing for different technologies ultimately go for efficiency, ultimately go for whatever makes good business sense. So I think you will see the penetration of wireless more and more and I'm so glad that FCC approved fixed wireless broadband, as a technology even for the high tier, which is gigabit throughput and speed. So we feel good and then the CAF II funding. We are winning good deal there. So I think in RDOF, I don't think there is any part of RDOF, where we won't be able to compete. Of course, different companies will win different parts, but we feel pretty good how we are positioned for that $20 billion spend in North America across next 10 years. So proximately 2 billion, 3 billion a year, you'll start to see for next few years. And if COVID has shown one thing that is the broadband internet is really a lifeline. Now, it's not just work from home, it's not WFH, it's EFH, as well as education from home and both are important. So, we feel good about good participation in RDOF and opening a good segment for Cambium.

And if I could just to follow up on the 60 gig front are very exciting market opportunity sounds like the product will be commercially launched by the end of this quarter. But it sounds like that pipeline is already growing. You've got some something RFP wings and some other activity in the pipeline. I'm wondering, if you could quantify that a little bit. Maybe take us through what the sales cycle and the size of some of those opportunities are, I would imagine for 60 gig given that these are there's urban networks. The opportunity in the dollars that you win for RFP is probably larger than what you've seen in the past. I'm wondering if you could provide some color around that. And then how quickly that will ramp and if it's taking you into some Tier 1 opportunities now as well an area where you've historically haven't competed. And I don't know if you'd be willing to put out a number in 2021, what would constitute success in the 60 gig product line?

The way I look at this is, as I said, last five years, as we introduced new advanced breakthrough technologies, so the very clear life cycle. It takes good four to five, six months of POCs, because customers want to deploy, they want to test it out, they want to keep the buyers. So what we will see I think is that in Q3, and maybe some Q4 we last of POCs. These POCs are seeds in the ground, and then they start to accelerate customers and how to deployed, and if there's any, issues in some software installations or RF characteristics, they learn all that. So my sense is you will see some explanation for Wi-Fi 6 and probably 60 gigahertz and give up a lot of good strong exhibitions probably will come in '21. And as I said earlier, these technologies are deployed over two, three year periods. They're not just one or two quarters. And we have very good experience with our Medusa, which was Massive MUMIMO breakthrough technology or our Wi-Fi product lines. So my sense is that I think this will be, this is not a massive hockey stick suddenly and then it's going to be a nice ramp, which will go in '21, '22 and maybe '23 just start to decline, just forget a cycle you see. Let me address one more question you asked. In terms of -- these are very efficient technologies. So if not that suddenly the network will become very large with them, I think what you will see is they will coexist with the previous products. They will find new applications where we are not there. For example, when it comes to urban connectivity, Cambium really doesn't do much urban connectivity, but I think the 60 gigahertz could potentially open urban backhauling application for us, so small cell backhauling. So I think we will see lots more applications of this in Tier 2, Tier 3 service providers, large service providers might experiment, but generally, I would say Tier 2, Tier 3, the faster adopters of advanced technologies. That's kind of what I see in event '21.

And our next question comes from Erik Suppiger from JMP Securities. Your line is now open.

Can you talk a little bit about the CBRS opportunity one kind of how you think that sizes are up compared to your traditional technologies or maybe the 60 gig? And then two, how do you think the competitive landscape will evolve in that sector?

So CBRS, I really believe it's a breakthrough, very negative way of spectrum sharing and spectrum management. As we said, the spectrum is the most precious resource for an operator. CBRS is also using cloud very effectively, and very innovative licensing model. So I really believe that CBRS is a kind of window into the future. And many governments and in fact, we are involved with certain governments in advising them if they ask for advice, how this can be done for their country. I think the world is watching the progressive approach of FCC with respect to CBRS. And we're glad how we have adopted that. CBRS will influence many standards, I believe in next two, three years. Because spectrum management sharing spectrum is a common problem every country in every technology wants to solve. So in that sense, you see broad applicability. With this to what competition we do. We believe in standards. Cambium, Increasingly, if you watch our portfolio, we believe in standards. And I think, and then innovating within the framework of standards that are strategy, keeping the quality high, and yet, designing affordable products has been our formula. So you see that approach, and then innovate with our mu MIMO technologies are intended intelligent internet technologies, our cloud management software, RF algorithms, we have plenty of room to innovate -- even within the framework of standards. And that's what you'll see us do in 60 gigahertz and other things. So those are my comments. I think these are breakthrough technologies. And when we adopted CBR, we didn't know how things will go. But the fact that we are now24,000 devices are using. And I'm going to benefit I think cambium is reaping is we are learning software as a service business models. But learning a little bit though it's a similar small numbers, but I think we're learning how that part of the business model can evolve for our company down the line.

Thank you. And our next question comes from George Iwanyc from Oppenheimer. Your line is now open.

Thank you for taking my question. Atul, just following up on your comments on cnMaestro, it seems like we continue to see good uptake from a device standpoint. Can you give us a sense of the type of software enhancements that you're doing to cnMaestro, and then what can you add over the next let's say a year as far as expanding the reach of software.

Okay. So George, when you look at cnMaestro, it has taken us a lot of effort to implement Maestro for different devices, and it has taken us -- because different devices have different modules as microwave or whether it's fixed wireless broadband or whether it's Wi-Fior switching. They are very different in creativity of the team really has created a single pane of glass. And with the CN Maestro, the kind of functionality we would like to add or next a year, year and a half, maybe more security. We will like to provide more security. I think security is going to be a very key differentiator in this industry, especially as number of devices increase industrial IoT gets going. So I think you will see us probably add some of that we have a lot of security there. But add that and maybe try to monetize some of that. I think the second part is the scaling of the network is going to be another order. And I always say that in our talks that whatever number you and I predict today, in terms of number of devices, digital sensors and digitization on the industrial side will be easily off by an order of magnitude. Because it's very difficult to predict how rapidly that digitization happens. So I think for Maestro having the scalability to the next degree. And that's another part you probably would like to see if we can monetize. So, a lot of room for us to grow and frankly speaking the number of devices we have added in CN Maestro, in some cases. We wish we could have added more security earlier because there are limited resources in every company. But overall, when I look at this, I would say security, probably one of the key areas, and scalability is probably the next area where we would like to keep expanding for future.

Just looking at your channel partner expansion, I think you've added over 500, again, this quarter in 2,000 over the last year. What type of leverage are you gaining from the expansion? What areas are you getting access to that you previously weren't able to reach?

I would say more mid enterprises because for us, the go-to-market is fulfilment is to channel and especially as you're expanding our enterprise footprint to the mid market channel will play a key role and many times those channels are MSPs or the wars very application specific wars. So that's going to be our focuses. On Fixed Wireless Broadband, we have very good channels established overtime. So a lot of our increase is really happening, I would say in the mid-tier market.

And just add to that we fill out, mid channel inside sales organizations really help facilitate this and create a very broad based business. So, we're quite encouraged by the results we've seen so far. And obviously, the on-boarding of those new partners is a good metric.

And I would now like to turn the call back to Peter, Senior Director of Investor Relations for closing remarks.

Thank you, Justin. During Q3 '20, Cambium Networks will be meeting with investors virtually at the Oppenheimer Technology and Internet Communications Conference tomorrow, August 12the; And on Tuesday, September 1, 2020, at the Jefferies' 2020 Virtual Semiconductor IP Hardware Communications Infrastructure Summit. So ,we'll also be presenting and meeting investors virtually at the Deutsche Bank Technology Conference on Monday, September 14th. In the meantime, you're always welcome to contact our Investor Relations Department at 847-264-2188 with any questions or that arrived. Thank you for joining us and this concludes today's call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.