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Cambium Networks Corp (CMBM)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $42.3M (+5% q/q, -45% y/y), with GAAP gross margin of 20.5% and non-GAAP gross margin of 22.7%; results fell short of Q1 guidance as gross margin was impacted by ~$7M in inventory reserves and supplier commitments (ex-charges GM would have been ~39.2%) .
  • Enterprise recovered sharply (+231% q/q), EMEA revenue rose +146% q/q, and sell-out exceeded sell-in as channel inventories declined; management targets EBITDA-positive in 2H24 and has reduced breakeven to < $60M quarterly revenue .
  • Guidance reset: FY 2024 revenue cut to $205–$225M (from $215–$245M), non-GAAP GM lowered to ~40% (from ~44%), and non-GAAP net loss widened to $11.6–$18.0M (from $(13.6)–$2.3M), reflecting tougher enterprise pricing and mix .
  • Catalyst: Final FCC/ISEDC approvals for ePMP 4600 6 GHz announced May 21; management expects PMP ramp to build through 2024, while BEAD is likely more of a 2025 driver .

What Went Well and What Went Wrong

What Went Well

  • Enterprise revenue improved 231% sequentially as demand recovered and channel inventory declined; management launched first Wi‑Fi 7 product (X7‑35X) .
  • EMEA revenue increased 146% q/q on enterprise recovery; sell-out from distributors higher than reported revenue, supporting inventory normalization .
  • FCC approval for 6 GHz spectrum (late Q1, and full approvals mid-May) positions ePMP 4600/PMP 450 product lines for growth; devices under cnMaestro cloud management rose 15% y/y .

What Went Wrong

  • Q1 results came in slightly below the company’s outlook; PTP defense orders were delayed, and 6 GHz approval timing reduced PMP shipments .
  • Gross margins were depressed by ~$7M of excess & obsolete inventory and supplier commitments; non-GAAP GM was 22.7% vs guided 41–44% .
  • Profitability remained weak: GAAP net loss of $26.4M; non-GAAP net loss of $12.7M; adjusted EBITDA margin -36.7%; cash used in operations was $15.6M .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$43.0 $40.2 $42.3
GAAP Diluted EPS ($USD)$(0.95) $(1.41) $(0.95)
Non-GAAP Diluted EPS ($USD)$(0.44) $(0.95) $(0.46)
GAAP Gross Margin %25.5% (21.7)% 20.5%
Non-GAAP Gross Margin %27.7% (19.4)% 22.7%
GAAP Operating Margin %(51.3)% (97.8)% (49.6)%
Non-GAAP Operating Margin %(36.1)% (84.9)% (39.5)%
Adjusted EBITDA Margin %(33.5)% (81.8)% (36.7)%
Product Category Revenue ($USD Millions)Q3 2023Q4 2023Q1 2024
Point-to-Multi-Point (PMP)$23.596 $22.575 $19.421
Point-to-Point (PTP)$15.809 $21.874 $14.411
Enterprise$2.499 $(5.478) $7.163
Other$1.142 $1.235 $1.342
Region Revenue ($USD Millions)Q3 2023Q4 2023Q1 2024
North America$17.768 $27.056 $25.049
Europe/Middle East/Africa$14.274 $3.418 $8.410
Caribbean/Latin America$5.726 $5.303 $4.892
Asia Pacific$5.278 $4.429 $3.986
KPIQ3 2023Q4 2023Q1 2024
Devices under cnMaestro cloud management>1M; +4% q/q; +17% y/y +14% y/y +15% y/y; +4% q/q
Radios shipped (cumulative)17M+ 20M+ 23M+
Cash ($USD Millions)$27.5 $18.7 $38.7
Net Cash Used in Operating Activities ($USD Millions)$(0.2) $(6.2) $(15.6)

Q1 2024 versus Company guidance (issued Feb 15, 2024):

MetricQ1 2024 Guidance (Feb 15)Actual Q1 2024Delta
Revenue ($M)$43–$48 $42.3 Miss (below low end)
Non-GAAP Gross Margin %41–44% 22.7% Miss
Non-GAAP Diluted EPS ($)$(0.22)–$(0.31) $(0.46) Miss
Adjusted EBITDA ($M)$(4.1)–$(6.6) $(15.5) Miss

Guidance Changes

MetricPeriodPrevious Guidance (Feb 15, 2024)Current Guidance (May 9, 2024)Change
Revenue ($M)FY 2024$215–$245 $205–$225 Lowered
Non-GAAP Gross Margin %FY 2024~44% ~40% Lowered
Non-GAAP Net (Loss)/Income ($M)FY 2024$(13.6) to $2.3 $(11.6) to $(18.0) Lowered (to loss)
Adjusted EBITDA Margin %FY 2024(2.7)% to 4.1% (2.2)% to (6.8)% Lowered
Revenue ($M)Q2 2024N/A$43–$48 New
Non-GAAP Gross Margin %Q2 2024N/A40–42% New
Non-GAAP OpEx ($M)Q2 2024N/A$24.6–$25.6 New
Non-GAAP Operating Loss ($M)Q2 2024N/A$(5.4)–$(7.4) New
Interest Expense, net ($M)Q2 2024N/A~$1.8 New
Non-GAAP Diluted EPS ($)Q2 2024N/A$(0.19)–$(0.24) New
Adjusted EBITDA ($M)Q2 2024N/A$(4.2)–$(6.2) New
Non-GAAP TaxQ2 2024N/A~25% benefit New
Diluted Shares (M)Q2 2024N/A~28.0 New
Paydown of Debt ($M)Q2 2024N/A$0.7 New
Cash Interest ($M)Q2 2024N/A~$1.7 New
Capex ($M)Q2 2024N/A$1.5–$2.5 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’23 and Q4’23)Current Period (Q1’24)Trend
6 GHz spectrum approvals and PMP rampAwaiting FCC approval; >100 POCs; expectation of step-up post-approval FCC approved late in Q1; initial shipments slower than anticipated; ramp expected through year Turning positive; gradual ramp
Channel inventory normalizationEnterprise and PMP inventories elevated but declining; aggressive discounting/rotations in Q4 Sell-out > sell-in; inventories approaching healthy levels, equilibrium by end of Q2 Improving
Defense/PTP orders timingQ3 impacted by US budget delays; strong Q4 defense shipments Q1 shortfall due to delayed defense orders in NA/Europe; expect sequential increases in 2024 Recovery expected
Gross margin outlookNon-GAAP GM compressed by inventory reserves, rebates; long-term target ~50% Q1 non-GAAP GM 22.7%; ~$7M reserve impact; ex-charges ~39.2%; target ~40% near-term, >45% long-term Rebound targeted; still pressured
Enterprise competition/discountingIndustry-wide discounting; inventory digestion; sequential recovery expected in 2024 Enterprise +231% q/q; continued competitive pricing; Wi‑Fi 7 launch Recovery with pricing pressure
Cash/liquidity and revolverConsidering drawing < half of $45M revolver entering 2024 Drew $40M revolver; cash $38.7M; focused on conserving cash Liquidity bolstered
BEAD/government programsFiber-first focus; timing unclear; limited near-term uplift BEAD requires licensed spectrum; uplift more likely 2025; 6 GHz applicable to other funding 2025 event
Product platforming/consolidationDrive to unified platforms, focus R&D; cost reductions Continued platforming initiatives; aligning go-to-market Ongoing execution
cnMaestro adoptionDevices surpassed 1M; +17% y/y Devices +15% y/y; +4% q/q Continued growth

Management Commentary

  • CEO Morgan Kurk: “I’m pleased we delivered sequential growth during the first quarter as the Enterprise business has started to recover and we reduced channel inventories. We are at the start of a new product cycle for our Point-to-Multi-Point business with the FCC’s approval of 6 GHz spectrum.” .
  • CFO Jacob Sayer: “Q1 results included additional inventory charges and additional supplier commitments, which impacted gross margins by approximately $7 million… Without these charges, gross margins would have been approximately 39.2%...” .
  • CEO Morgan Kurk: “We continue to work with our channel and end customers to manage inventory and improve efficiency… We believe… equilibrium to occur by the end of Q2.” .

Q&A Highlights

  • Gross margin drivers: ~$7M excess & obsolete/supplier commitment charges; ex-charges GM ~39.2%; defense mix also impacted margin .
  • Second-half uplift: Visibility driven by end of distributor inventory contraction by end of Q2, enabling sell-in to normalize .
  • 6 GHz ramp: Approval arrived late; learning curve with AFC means ramp spreads across Q2–Q4 rather than a single-quarter catch-up .
  • BEAD: Licensed spectrum requirement implies limited 2024 impact; more likely a 2025 driver; 6 GHz applicable to other US funding .
  • Long-term margin target: Near-term ~40%; long-term goal north of 45% with higher-margin defense/enterprise mix .
  • Bad debt: ~$0.6M included in non-GAAP G&A .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 EPS and revenue was unavailable due to API limits at request time; comparisons are made versus company guidance. S&P Global consensus data could not be retrieved at this time.
  • Q1 2024 missed the company’s Q1 guidance on revenue ($42.3M vs $43–$48M), non-GAAP GM (22.7% vs 41–44%), and non-GAAP diluted EPS ($(0.46) vs $(0.22)–$(0.31)), with adjusted EBITDA at $(15.5)M vs $(4.1)–$(6.6)M .

Key Takeaways for Investors

  • Near-term setup hinges on Q2 delivery of 40–42% non-GAAP gross margin as inventory charges abate and enterprise mix improves; a clean margin print could catalyze relief .
  • Watch 6 GHz commercialization: final approvals (May 21) support a PMP ramp; evidence of sustained sell-through and AFC operational stability should drive confidence .
  • Channel inventory normalization by end of Q2 is a critical narrative pivot; confirmation via sell-in/sell-out parity is key .
  • Defense/PTP order timing remains lumpy; sequential improvement is expected, but timing risk persists across NA/Europe .
  • Liquidity: revolver draw lifted cash to $38.7M; monitor cash burn vs. EBITDA trajectory and inventory reduction target (~$40M) .
  • Medium-term margin ambition (>45%) depends on defense and enterprise mix plus platform consolidation; watch Wi‑Fi 7 adoption and pricing discipline .
  • FY24 guidance reset lowers expectations; execution against Q2 guide and 2H EBITDA-positive target will be the stock’s key drivers through the year .