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Cambium Networks Corp (CMBM)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue was $45.9M (+9% q/q; -22.9% y/y), with non-GAAP gross margin at 33.5% amid another ~$7M inventory reserve and supplier commitment charge; excluding E&O, management said adjusted gross margin would have been ~44.4% .
  • Enterprise revenue rose 58% q/q and PMP grew ~1%, while PTP declined ~5% on timing; sales-out exceeded sales-in and channel inventories continued to decline, with an estimated ~$10M sell-through vs. sell-in delta in Q2 .
  • GAAP net loss improved to $(9.1)M (EPS $(0.33)); non-GAAP net loss $(7.1)M (EPS $(0.25)); adjusted EBITDA loss narrowed to $(6.7)M (−14.5% margin), and cash from operations turned positive at $2.4M with cash of $42.6M .
  • Guidance cut materially: FY24 revenue now $180–$190M and non-GAAP GM ~37% (prior $205–$225M and ~40%); Q3 guide calls for $43–$48M revenue and non-GAAP GM 41.5%–43.5% with an E&O placeholder just under $2M. Bold catalysts: inventory normalization, Enterprise momentum, and 6 GHz ramp timing clarity vs. lowered FY guide .

What Went Well and What Went Wrong

What Went Well

  • Enterprise sequential recovery: Enterprise revenue +58% q/q, with demand improving across geographies and channel destocking progress (“Enterprise business continued to strengthen”) .
  • Cash inflection and EBITDA improvement: Operating cash flow +$2.4M (first positive in six quarters) and adjusted EBITDA loss improved 57% sequentially to $(6.7)M (−14.5%) .
  • Strategic 6 GHz certifications/product momentum: ePMP 4600 fully approved by FCC/ISEDC; PMP 450v also achieved full FCC/ISED certification; CEO cites platforming and operational excellence efforts gaining traction. “We have significantly improved our operational performance...streamlining our supply chain and reducing channel inventories” .

What Went Wrong

  • Another large E&O hit: Non-GAAP gross margin of 33.5% included ~$7M E&O and supplier commitment charges; management noted E&O was ~$5M higher than expected for Q2 .
  • Regional softness in North America: NA revenue fell 18% q/q (to $20.6M), with ongoing PMP caution as service providers work through 6 GHz deployment nuances .
  • Defense delays and PTP decline: PTP fell ~5% q/q on completion of a large prior installation and defense project delays; FY guide cut reflects slower defense and paced 6 GHz ramps .

Financial Results

Consolidated P&L and Margins vs. Prior Periods and Prior Year

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$59.5 $42.3 $45.9
GAAP Gross Margin (%)49.1% 20.5% 31.4%
Non-GAAP Gross Margin (%)50.3% 22.7% 33.5%
GAAP Operating Loss ($M)$(2.7) $(21.0) $(12.1)
GAAP Net Income (Loss) ($M)$(2.6) $(26.4) $(9.1)
GAAP Diluted EPS ($)$(0.10) $(0.95) $(0.33)
Non-GAAP Net Income (Loss) ($M)$0.9 $(12.7) $(7.1)
Non-GAAP Diluted EPS ($)$0.03 $(0.46) $(0.25)
Adjusted EBITDA Margin (%)4.7% −36.7% −14.5%

Narrative drivers:

  • Q2 q/q margin improvement driven by lower material costs, fewer rebates, and higher-margin Enterprise mix; E&O and supplier reserves depressed margins by ~$7M .
  • PTP decline and defense delays weighed on mix; Enterprise and PMP offset with sequential growth .

Segment Revenue Breakdown

ProductQ2 2023 ($M)Q1 2024 ($M)Q2 2024 ($M)
Point-to-Multi-Point (PMP)$26.734 $19.421 $19.647
Point-to-Point (PTP)$25.074 $14.411 $13.656
Enterprise$6.420 $7.163 $11.310
Other$1.314 $1.342 $1.333
Total$59.542 $42.337 $45.946

Regional Revenue Breakdown

RegionQ2 2023 ($M)Q1 2024 ($M)Q2 2024 ($M)
North America$39.526 $25.049 $20.647
EMEA$6.769 $8.410 $15.003
Caribbean & Latin America$6.015 $4.892 $5.306
Asia Pacific$7.232 $3.986 $4.990
Total$59.542 $42.337 $45.946

KPIs and Balance Sheet Highlights

KPIQ2 2023Q1 2024Q2 2024
Operating Cash Flow ($M)$(4.5) $(15.6) $2.4
Cash Balance ($M)$31.978 $38.711 $42.574
Net Inventories ($M)$66.878 (FY end) $55.593 $49.969
Adjusted EBITDA ($M)$2.773 $(15.538) $(6.650)
Interest Expense, net ($M)$0.579 $0.881 $1.304
Weighted Avg Diluted Shares (GAAP)27.433M 27.850M 27.903M

Q2 2024 Actual vs Q2 2024 Company Guidance (given May 9)

MetricQ2 Guidance (May 9)Q2 Actual
Revenue ($M)$43–$48 $45.9
Non-GAAP Gross Margin (%)40–42 33.5 (incl. ~$7M E&O)
Non-GAAP Net Loss ($M)$5.4–$6.9 $7.1
Adjusted EBITDA ($M)$(4.2)–$(6.2) $(6.7)

Explanation: Gross margin and earnings were below guidance due to higher-than-expected E&O (~$7M actual vs assumption), partially offset by stronger Enterprise mix .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q3 2024N/A (Q3 guide first on Aug 8)$43–$48 New
Non-GAAP Gross Margin (%)Q3 2024N/A41.5–43.5 New
Non-GAAP Net Loss ($M)Q3 2024N/A$3.8–$5.4 (EPS $(0.14)–$(0.19)) New
Adjusted EBITDA ($M)Q3 2024N/A$(2.4)–$(4.4); margin −4.9% to −10.2% New
Revenue ($M)FY 2024$205–$225 (May 9) $180–$190 (Aug 8) Lowered
Non-GAAP Gross Margin (%)FY 2024~40% (May 9) ~37% (Aug 8) Lowered
Non-GAAP Net (Loss) ($M)FY 2024$(11.6)–$(18.0) (EPS $(0.41)–$(0.64)) $(24.6)–$(29.4) (EPS $(0.87)–$(1.04)) Lowered
Adjusted EBITDA Margin (%)FY 2024−2.2% to −6.8% (May 9) −12.0% to −16.2% (Aug 8) Lowered
Capex ($M)Q3 2024$1.5–$2.5 (prior quarter commentary) $2.0–$3.0 Raised modestly
E&O Assumption ($M)Q3 2024N/A“Just under $2M” placeholder New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23 and Q1’24)Current Period (Q2’24)Trend
Channel inventory destockingEnterprise discounts and stock rotations drove Q4 margins down; sell-through in Enterprise ~$15–$20M per quarter; normalization expected by H1’24 Sell-through > sell-in; ~$10M delta in Q2; normalization by year-end; breakeven lowered to ~$55M revenue/run-rate Improving but taking longer than initially expected
6 GHz ramp (ePMP/PMP)FCC approval expected to drive PMP; early orders; ramp slower than expected initially due to AFC learning curve ePMP 4600 fully approved; PMP 450v certified; North America PMP ramp cautious as providers learn deployment nuances Building gradually; broader ramp into 2025/2026
Defense/PTPStrong in Q4’23; expected flat-to-modest growth in 2024 Q2 PTP −5% q/q; delays in defense projects domestically/internationally Softer near term vs. prior view
Gross margin and E&OQ1’24 non-GAAP GM 22.7% with ~$7M E&O; long-term normalized GM target >45% Q2 non-GAAP GM 33.5% with ~$7M E&O; ex-E&O ~44.4%; Q3 assuming ~<$2M E&O Sequential improvement; normalization expected as E&O fades
BEAD/Connectivity fundingBEAD requires licensed spectrum (3.5 GHz); 6 GHz applicable to ARPA-like programs; BEAD impact more likely 2025 Reinforced timeline and licensed-spectrum constraint for BEAD; optimism for late ’25/’26 PMP Medium-term tailwind
Platforming/Go-to-marketFocus on operational excellence, platform consolidation, improving channel engagement Continued platforming; launch of concierge Elite program for partners Structural improvements underway

Management Commentary

  • “Excluding the unexpected E&O charges, adjusted gross margins would have been 44.4%” .
  • “Sales of Cambium's products out of distribution channel...were again higher...and we saw corresponding declines in channel inventories” .
  • “For the third quarter, embedded in the guidance is just under a $2 million assumption for E&O” .
  • “We have significantly improved our operational performance...streamlining our supply chain and reducing channel inventories” .
  • “Our non-GAAP breakeven operating profitability is now approximately a $55 million quarterly revenue run rate” .

Q&A Highlights

  • E&O treatment: Q3 guidance assumes just under $2M of E&O; Q2 had ~$7M, ~$5M higher than expected .
  • Sell-through vs. sell-in: Enterprise destocking continues; estimated ~$10M sell-through delta in Q2 .
  • PMP/6 GHz trajectory: Broader impact expected late 2025/2026; current pace constrained by AFC process and deployment learnings .
  • Q4 trajectory: Midpoint of FY guide implies ~$51M Q4 revenue; sequential improvement driven by Enterprise and some PMP growth .
  • BEAD: Requires licensed spectrum (3.5 GHz), making 6 GHz not directly applicable; funding more a 2025 event .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q2 2024 (Revenue, EPS, EBITDA), but access returned “Daily Request Limit ... Exceeded.” Consensus comparisons are therefore unavailable in this recap. Where needed, rely on company guidance and actuals stated above [GetEstimates error].

Key Takeaways for Investors

  • Enterprise recovery is tangible (58% q/q) and channel normalization continues; expect sequential improvement as sell-in and sell-out converge by year-end, supporting margins and cash conversion .
  • Margin path depends on fading E&O; ex-E&O, Q2 adjusted GM 44.4% suggests underlying profitability potential as mix improves and reserves normalize; monitor Q3 E&O vs. “$2M” assumption .
  • 6 GHz certifications (ePMP 4600, PMP 450v) expand addressable market, but ramp appears paced; meaningful PMP uplift more likely 2025/2026, with BEAD limited to licensed spectrum (CBRS) .
  • Defense/PTP softness and lowered FY24 guide indicate near-term caution; watch Q4 inflection (~$51M implied) and Enterprise momentum to validate turnaround .
  • Liquidity improved (cash $42.6M; CFFO +$2.4M); breakeven lowered to ~$55M revenue/run-rate—execution on cost controls and inventory reduction is a key de-risking driver .
  • Trading lens: Near-term set-ups likely hinge on EMEA strength, Enterprise wins, and clarity on E&O trajectory; medium-term thesis rests on platforming, 6 GHz breadth, and defense recovery .