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Cambium Networks Corp (CMBM)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 was severely challenged: revenue fell to $40.2M (-7% q/q, -52% y/y) and margins turned sharply negative on Enterprise rebates and large inventory reserves; non-GAAP EPS was -$0.95 and adjusted EBITDA margin was -81.8% .
  • The company pre-announced a revenue shortfall to ~$40.0M on Jan 18 (vs prior Q4 guidance $45–$50M), and actuals later confirmed this; non-GAAP gross margin was far below guidance due to ~$18.9M inventory charges and the $11M revenue reduction from incentives. This represents a significant miss versus the prior outlook and preliminary update .
  • Strength in Point-to-Point (defense) and early 6 GHz PMP orders in North America were offsets, but Enterprise demand and EMEA PMP weakness dominated; management sees Enterprise channel inventories approaching pre-pandemic levels and non-GAAP breakeven at roughly $60M revenue .
  • 2024 setup: Q1 revenue guide $43–$48M, non-GAAP GM 41–44%, and FY 2024 revenue guide $215–$245M with ~44% non-GAAP GM; FCC approval of 6 GHz is a key potential catalyst for PMP growth in 2024 .
  • Liquidity: Q4 cash was $18.7M; management may draw on the $45M revolver in 1H 2024 to support operations—monitor cash flows and inventory normalization progress closely .

What Went Well and What Went Wrong

What Went Well

  • Defense-driven Point-to-Point revenues were strong: +38% q/q and +3% y/y in Q4, with ongoing growth expected in North America and abroad; this segment had the highest margin profile within the portfolio .
  • Early 6 GHz traction: customers in North America purchased 6 GHz PMP products under experimental licenses ahead of FCC approval; >100 POCs and a sizable order from Nextlink for ePMP 4600 were highlighted .
  • Cost discipline and operational focus: OpEx tightened sequentially, restructuring initiatives continued, and management quantified non-GAAP operating breakeven at ~$60M quarterly revenue, setting a tangible profitability threshold .

What Went Wrong

  • Enterprise collapsed on aggressive discounting and rebates: the $11M revenue reduction tied to channel incentives plus ~$18.9M inventory reserves drove Q4’s negative gross margin; Enterprise revenue was negative in Q4 due to stock rotations and incentives .
  • PMP weakness in EMEA and macro headwinds: PMP decreased 4% q/q and 24% y/y in Q4, primarily outside North America; EMEA weakness followed large 28 GHz shipments in Q3 and softer regional demand .
  • Guidance miss and estimate downside: Q4 revenue and margins were well below prior guidance (and preliminary update), necessitating deeper channel-clearing actions and depressing profitability .

Financial Results

Core P&L Trends (sequential view)

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$59.542 $43.046 $40.206
GAAP Diluted EPS ($)-$0.10 -$0.95 -$1.41
Non-GAAP Diluted EPS ($)$0.03 -$0.44 -$0.95
GAAP Gross Margin (%)49.1% 25.5% -21.7%
Non-GAAP Gross Margin (%)50.3% 27.7% -19.4%
Adjusted EBITDA Margin (%)4.7% -33.5% -81.8%

Year-over-Year View (Q4 vs prior year)

MetricQ4 2022Q4 2023
Revenue ($USD Millions)$84.507 $40.206
GAAP Diluted EPS ($)$0.35 -$1.41
Non-GAAP Diluted EPS ($)$0.36 -$0.95
GAAP Gross Margin (%)49.0% -21.7%
Non-GAAP Gross Margin (%)49.6% -19.4%
Adjusted EBITDA Margin (%)16.9% -81.8%

Product Segment Revenue

Product Category ($USD Millions)Q3 2023Q4 2023Q4 2022
Point-to-Multi-Point (PMP)$23.596 $22.575 $29.656
Point-to-Point (PTP)$15.809 $21.874 $21.276
Enterprise$2.499 -$5.478 $31.992
Other$1.142 $1.235 $1.583
Total$43.046 $40.206 $84.507

Note: Negative Enterprise revenue in Q4 reflects stock rotations and incentives used to clear excess channel inventory .

Regional Revenue

Region ($USD Millions)Q3 2023Q4 2023Q4 2022
North America$17.768 $27.056 $44.350
Europe, Middle East & Africa (EMEA)$14.274 $3.418 $20.007
Caribbean & Latin America (CALA)$5.726 $5.303 $9.244
Asia Pacific$5.278 $4.429 $10.906
Total$43.046 $40.206 $84.507

KPIs and Operating Highlights

KPIQ2 2023Q3 2023Q4 2023
Devices under cnMaestro Cloud (YoY change)+17% +17% +14%
Net new channel partners (YoY change)+13% (~1,600) +13% (~1,620) +12% (>1,500)
Radios shipped since spin-off (cumulative)>14M >17M >20M
Cash balance ($USD Millions)$31.978 $27.529 $18.710

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2023$45.0–$50.0 (11/2/23) ~$40.0 (1/18/24 prelim) Lowered
Non-GAAP Gross Margin (%)Q4 202338–45 (11/2/23) Below low end (prelim note) Lowered
Revenue ($USD Millions)Q1 2024—$43.0–$48.0 n/a
Non-GAAP Gross Margin (%)Q1 2024—41.0–44.0 n/a
Non-GAAP OpEx ($USD Millions)Q1 2024—$25.4–$26.4 n/a
Non-GAAP Net Loss ($USD Millions)Q1 2024—$6.1–$8.6; EPS -$0.22 to -$0.31 n/a
Adjusted EBITDA ($USD Millions; margin %)Q1 2024—-$4.1 to -$6.6; -8.6% to -15.4% n/a
Tax rateQ1 2024—GAAP ETR 12–15%; non-GAAP immaterial n/a
Revenue ($USD Millions)FY 2024$215–$245 (1/18/24 prelim) $215–$245 (2/15/24) Maintained
Non-GAAP Gross Margin (%)FY 2024—~44% n/a
Non-GAAP Net (Loss)/Income ($USD Millions; EPS)FY 2024—-$13.6 to +$2.3; -$0.48 to +$0.08 n/a
Adjusted EBITDA Margin (%)FY 2024—-2.7% to +4.1% n/a

Earnings Call Themes & Trends

TopicQ2 2023 (Prior-2)Q3 2023 (Prior-1)Q4 2023 (Current)Trend
Enterprise channel inventory & stock rotationsSevere slowdown; individualized distributor strategy and $14M cost reduction; target normalized run-rate $20–$30M by 1H’24; sales-out mid/high teens Persisting inventory; ~$9M stock rotations; normalization still 1H CY24 $11M incentives reduce revenue; ~$3M stock rotations; sequential recovery expected 2024 Improving; inventories declining
6 GHz PMP (FCC approval timing)Expected 2H’23; 25+ POCs; first mover advantage Late Q4’23 expectation; >100 POCs Now H1 CY24 expected; early orders under experimental licenses Timing slipped; still key catalyst
PTP defenseRecord Q2; strong funnel Budget delays defer >$8M; recovery expected Q4 Strong shipments; +38% q/q, +3% y/y Strong, lumpy
PMP demand & product mixSequential growth; setup for 6 GHz EMEA driven by 28 GHz; mix headwind NA strength on 6 GHz orders; EMEA weakness Modest growth expected
Supply chain & lead timesNormalizing; component availability impacts competitors Preparing for ramp; cautious cash planning Lead times dropped; shipping times/costs down Normalizing
Cost controls & restructuring$14M annualized saves; ~10% workforce reduction Additional $1.5–$2.5M restructuring Continued discipline; breakeven at ~$60M revenue Tightening
Liquidity & revolverExpect H2’23 operating cash generation Likely draw <½ of $45M revolver entering 2024 Cash $18.7M; may draw in 1H’24 Watch liquidity

Management Commentary

  • “Our revenue shortfall was due in part to an $11 million reduction to revenues mostly as the result of incentives and discounts provided to distributors related to our Enterprise business during the fourth quarter 2023.” — Morgan Kurk, CEO .
  • “We believe we are well positioned to deliver future growth and are taking the necessary steps to rationalize business operations and improve operating efficiencies to benefit our operating results during calendar 2024.” — Morgan Kurk .
  • “We are excited about the number of opportunities in a growing and profitable defense business… and our ongoing product development initiatives as we consolidate to a small number of platforms over the next few years.” — John Becerril, Interim CFO .
  • “Our non-GAAP breakeven operating profitability is now approximately $60 million in revenue.” — John Becerril .
  • “Once the spectrum is approved by the FCC, we expect rapid deployment by many of our over 100 customers who are trialing the [6 GHz] product.” — Morgan Kurk .
  • On Nextlink’s order: “the ePMP 6 GHz platform is an unmatched blend of performance and cost, allowing Nextlink to cost-effectively offer gigabit broadband.” — Nextlink CEO (as quoted by management) .

Q&A Highlights

  • Enterprise normalization and sales-out: Management reiterated sequential improvement through 2024; sales-out remains in the $15–$20M quarterly range while sell-in was depressed by incentives and rotations .
  • 6 GHz revenue impact: Management declined to guide specifically; expects readiness to ship upon FCC approval and prefers to stick to the consolidated FY 2024 guidance range .
  • Cost posture if 6 GHz approval slips: CFO emphasized “strong cost position” and readiness to take further action if needed .
  • Segment trajectory: PTP expected flat-to-modest growth after a record 2023; PMP mid-to-upper teens growth expected; Enterprise down y/y but sequential recovery through 2024 .
  • Supply chain readiness: Lead times have normalized; shipping times/costs down; company prepared to ramp with ODM/OEM partners .
  • Liquidity: Management may draw on the $45M revolver in 1H 2024 due to low cash inflows from prior low-revenue quarters and restructuring costs .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2–Q4 2023 EPS and Revenue was unavailable due to data access limits at the time of request. Values would be retrieved from S&P Global when available.*
  • Relative to company guidance, Q4 revenue and margins were materially below the prior November outlook and consistent with the January preliminary reduction; the non-GAAP gross margin fell well below the guided range due to inventory reserves and incentives .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q4’s significant miss stemmed from deliberate channel-clearing in Enterprise (negative revenue impact) and large inventory reserves, compressing margins; expect these actions to reduce future overhang but near-term profitability remains constrained .
  • Defense PTP remains a bright spot and margin anchor; watch for continued program cadence and potential budget timing risks that can create lumpiness (but supportive trend) .
  • The FCC’s 6 GHz approval is a major 2024 catalyst for PMP; strong POC base and early orders suggest potential acceleration upon approval; monitor timing (now expected H1 CY24) and North America ramp .
  • Liquidity watch: Q4 cash was $18.7M and management may tap the revolver in 1H 2024; inventory reduction toward ~$40M and improving sell-through are key to stabilizing cash flows .
  • Non-GAAP breakeven at ~$60M revenue provides a clear operating bar; Q1 guidance ($43–$48M) implies continued losses, with the path to breakeven hinging on Enterprise normalization and PMP ramp .
  • Regional mix matters: NA improved on defense and 6 GHz build-ahead; EMEA softness weighed on PMP; track geographic diversification as 6 GHz and 28 GHz deployments progress .
  • Near-term trading: sensitivity to FCC news flow and evidence of Enterprise channel normalization; medium-term thesis: platform consolidation, margin repair to ~40%+ non-GAAP GM, and growth from 6 GHz/PMP coupled with stable defense PTP .