Good afternoon. I'm Samik Chatterjee. I cover the hardware companies at JP Morgan. For the next session, we are hosting Cambium Networks, and I have the pleasure of hosting Atul Bhatnagar, who's the President and CEO of the company. Atul, thanks for taking time to attend the conference. I guess we're starting off with a few questions that's more to really sort of get a temperature check on a couple of different things. The first question is more around the macro, and really as you look through the remainder of the year, where do you see the biggest macro risk to your business? You know, as we look at rest of the year, Samik, I think, the first macro risk which has reduced significantly is the supply chain, which was key macro risk for us in the last, I think, 15 months or so. Supply chain has become a lot more normal, and I think by the end of Q2, at least for us, we pretty much reached pre-COVID supply chain status. For us, I think the macro risk really is in some ways, we're a global company, is the political situation, the wars and all that, you know, across the world, because that does slow things down. Economics-wise, Cambium thrives when there is a change. We believe that in the broadband world, there's a lot of technological change coming for the right architectures, right networks. For us, that's the opportunity, but for the companies who are not innovative, that could be a macro risk. For us, I think, the technological changes are very positive. It's just that the world can keep working with each other, supply chain holds together well. Those are more macro risks for us than anything else. Okay. I mean, maybe just off top, going off topic here a bit, but I think most of the companies I've hosted today, obviously, there's the sort of debt ceiling and those concerns around. Given that you're looking forward to some of the drivers for your business being the RDOF spend- Sure. The BEAD spend, any thoughts around how that visibility gets impacted? Yeah. If you do have that macro risk materialize? Yeah. I think, Samik, that was a good segue. The government spending in broadband in next, say four years, five years, between RDOF and BEAD initiative is about $50 billion-$60 billion. There is enough wind there for all key connectivity companies who can provide the right architecture to give the broadband to developing communities. The U.S. is leading that, but I think that that'll be true for many countries in the world. I think overall, even though macro means different thing to different people. That's why you won't get same answer from everybody, and every industry is different, every company is different. I think for the broadband companies in wireless or wired who are progressive in bringing new architectures, there will be a lot of opportunity. Wherever you're providing 100 Mb service, those users are clamoring for 200 or 300 Mb per second. The demand, because another question people ask, demand. I think demand for innovative products and for the right kind of services will be there. If you don't have that ability or those architectures, those companies will see less demand. We see this as a very transitionary time in at least our industry. Okay. Okay, fair. The other big theme, obviously, and, I mean, I think just maybe more insights about what your discussions with customers are like, but on the AI front, right? Like, how do you really think about AI playing into connectivity overall for the industry, and then how do you think about that playing into your product portfolio? Excellent question. This is a question I've been asking my team as well as colleagues in the industry who are in fintech or who are in other areas. I think the conclusion I've come to is for at least our industry, some of these ChatGPT type of advancements can help in predictive support. Predicting what kind of issues networks are gonna have and anticipating, before customer runs into the issue, you, based on the data collection and the models you have, you predict that this will happen or capacity planning. I think network support, network diagnostics, and capacity planning are probably the area where this will help. Then as the technologies become more advanced in the antenna designs and you're gathering a lot of data in RF, you can start to do the planning and design part of the network. I would say support is probably the key area where this could be applied for us a lot more quickly. Delving into the product areas a bit more, or sort of call it product and customer verticals, you mentioned broadband spending being a sort of connectivity being a big driver. If you were to sort of think about drivers for the business outside of that, how would you sort of quantify what are the big areas or the big drivers for why, for the top line for you over the next sort of three to five years? Three to five years, I think the government spending could be one key driver. We talked about that. I think the second driver is the need for bandwidth will keep increasing as we are digitizing life and the world. The number of sensors, just see what's going on in smart cities, homes, the number of just digital devices we are adding. I think the second key driver has to be that more real-time responsiveness, less latency, more media-rich connectivity for in every home and every enterprise. I think the second driver. Third is that the wireless particularly has made a lot of advancements in Packing more bits per hertz per second. That's where the MU-MIMO architectures and the millimeter waves and the 6 GHz expansion, which is happening, you know, in the 5 GHz band. All those things point to a direction that wireless more and more is going to take on main task on the edge, the last, you know, 5 mi, 6 mi, and marry very well with the wired infrastructure, which will provide the core and the connectivity all the way to the last 3, 5 mi. We see that those are the key drivers for wireless. It's not just mobility, which, you know, wireless does provide mobility. It's also the connectivity of the edge, and more convenience and faster to deploy. These are main drivers for us. Another key driver I would say is that Cambium is expanding into more government and defense side as well with our products. Our products are commercial products, but they're so good quality, and they're so Affordability is also so good, that we are finding that many of our products are finding applications into defense. Those are probably next three to five years are the key drivers. No, helpful. What we've seen on, in relation to your growth drivers more recently, though, I think service provider demand has been a bit lower due to product cycle transition there, but enterprise has been the real sort of strong growth driver for a few quarters. The question that we often get is: how do you sort of think about headroom for growth on the enterprise side continuing? What are the opportunities you're tapping into? Do you really see that land and expand with your customers continuing? Okay. Actually, I'll touch upon the service provider, and then I'll come to enterprise. Service provider comments you hear are also from a lot of companies, they're very large service providers, and they are definitely driven by the CapEx model and in general, the spending and all that. We serve very mid-size across the globe. They are more resilient, and their needs are. They are also many times smaller. In terms of the demand from service provider side, we believe for Cambium, as we go from 5 GHz to 6 GHz, as the world deploys more 5G fixed, we will see a faster and more resilient turnaround than if we were focused on very large service providers. It's a little different dynamic than what you hear. On the enterprise side, our main message is when Cambium provides enterprise products, in the last five, six years, we have come from zero to over $125 million a year based on that simplicity, affordability, and a single pane of glass management, whether it's Wi-Fi or switching or fixed wireless broadband products. For us, the drivers are keeping that. Secondly, it's a big TAM. It's a $10 billion TAM, and if you look at the SAM for us, even that is $7 billion or $8 billion now. We have a full lineup of products. So we're starting from a small number and have a lot of room to grow next four, five years. As we are marrying more fixed wireless broadband and Wi-Fi and switching from a single pane of glass, the opportunity, we are just scratching the surface. Overall, when you look at the applications where we are succeeding, hospitality is one, multi-dwelling units is another one, you know, condominiums, retirement homes, apartment complexes. We see there's plenty of opportunity for us to grow just based on the value proposition we have. There's a Wi-Fi 7 transition coming by end of say 2024 or so. Every four to five years, Wi-Fi transitions, so that opens another... We rode Wi-Fi 6, that's how we grew. We don't see a sunset or slowing down. There might be little bit of, you know, high growth or low growth, but by and large, it'll be a growth vector for Cambium for a while. Okay. Okay. The PTP product has been holding up much better in relation to demand related to PMP. Can you just run through what's the variance of the demand drivers that you've seen? Sure. between PTP and PMP? PMP, as I said, earlier, PMP is driven end users want 100 Mb - 200 Mb or 300 Mb. Technological transitions from five to six, and some of the customers were waiting for that, and that's why Q3 FCC approval, we think it'll come in August or September. That'll open up the gates now towards that 6 GHz transition. On the PMP front, internationally, it's 5G. Many countries are adopting fixed wireless broadband, 28 GHz. I think those are the kind of key drivers. On point-to-point, the key drivers for Cambium is there is more insecurity in the world. All the, whether it's armies, air force or navies of the world, they all realize communications is very key. What Cambium provides in point-to-point is very reliable, very performant and very affordable point-to-point communications. That is what's driving some of our point-to-point growth. Also, I think as the government dollars go on the point to multipoint side, they will also bring some of the point-to-point growth. Cambium, for Cambium is that part of the business is not as big as the defense and government point-to-point business is. Overall, when you look at steady state, say two, three years from now, one way to think about this is, I think 40% of Cambium will be enterprise, 40% of Cambium will be point to multipoint, and about 20% will be point to point. There'll be variations, you know, between the quarters, but by and large, that's the split I think we'll have in a steady state. Okay. Okay. just to clarify that. you said 40% is enterprise, 40% is Point-to-Multipoint. Point-to-Multipoint. Okay. 20% point. Point. Correct. Okay. In terms of the just the product cycle now, PMP, you're sort of obviously expecting a product cycle to start ramping up, but what drives the confidence that that happens in the second half of this year relative to getting a bit more pushback? Excellent question. We have multiple vectors for growth in PMP in second half, we are anticipating in the second half of this year we will have year-over-year growth in PMP and sequential growth. We'll have both. Where's this confidence? First of all, the FCC is already allowing the experimental networks with 6 GHz. We have 20 POCs going right now in North America. These are the guys who will start to move into production probably either Q4 or Q1, Q4 this year or Q1 next year, sometime in that timeframe. We think in second half, 6 GHz will give us some growth. We are adding a fiber line- this quarter that goes into the PMP bucket as well. That gives us growth. 28 GHz trials, every quarter we are finding the POCs, at least one of them or two of them are moving into production. The 5 GHz, 5G, 28 GHz, fiber plus 6 GHz, there are enough rockets we have which will fire in the second half. You know, it's possible. A few things can delay here and there, but we're not depending on one thing. Just to sort of talk through that cadence, it sounds a lot more like in terms of us expecting a ramp up, it's more of a full queue as we sort of build up to that, all these things coming together, it's more of a sequential move up. Yeah, I think it'll be sequential. You will start to see some of that even in Q3. Okay. Q4 is probably more culmination of that. 2024, full throttle. These products will be in full production in terms of the networks. Typically, the life cycle is people use it to try, you know, four months, five months, then they move into the phase one deployment, and then it's phase two. This cycle is easily could be two-year cycle, right? Then it goes into more steady state, maybe third year, and then declines, and then the next technologies by then start to overtake. Maybe just to flesh that out a bit more, what's your sort of lead time right now on these new products to your customers if customers are going to deploy them starting sort of. Sure. Some sort of a ramp in 3Q, when would you have order visibility from those customers? First of all, lead times have become better. One of the reasons we have been building inventory on the new products, 6 GHz and fiber, for example, is precisely for that reason. Some customers are progressive, and they are already deploying right now on the towers to be ready. They have money to invest, they have wherewithal to do it. Most of the customers, I think, they will try for two months or three months, and they are some of them on POCs. I think it'll be phase one deployment will be for the next four quarters for them. They accelerate in the following four quarters. Typically, a service provider will keep deploying for about two years, and then they start to kinda steady state there and then decline. My sense is that it'll be 2024 and 2025. The second half of this year will be, while we'll see growth, a lot of growth will come in very meaningful numbers for those technologies like 6 GHz, for that matter, even 28 GHz, as these products move into the mainstream, it's probably 2024. Okay. The 6 GHz approval for that spectrum use from the FCC, I think you mentioned August or September of this year? Yeah. being the timeline. Firstly, how should we think about potential delays in that approval? If that were to come through, relative to maybe any previous decisions on that sort of similar spectrum usage, just given what we've gone through on a supply constraint basis, do we expect sort of customers to not really then sort of wait for the approval, but as you said, like some would start to deploy already because- Sure. The supply constraint being very different or supply landscape being very different, they're probably gonna take a more cautious approach. Is that the right way of thinking? The way we are thinking is, lead times have become better. There's no question compared to COVID timeframe, people will not pre-order as much because they know that they can get a product. We are making sure that we have the availability with us, in Q3 and Q4 on 6 GHz. Mm. Number one. Secondly, overall, most of the customers, if they can get a leg up by putting access points on the towers and then bring subscriber modules later, they will do it. Again, the bigger ones we see are doing that. I think most of them will probably buy more in the quarter, you know, than putting 9-month of backlogs and things like. Those times have changed. Okay. right? Compared to where we were in COVID. I think we are, we are ready, and we are prepared, and we are making sure the chips procurement and all that is done in such a way that as it ramps up... We are also going to these customers and asking, you know, "What will be your appetite so we can do forecasting and planning?" Overall, I think, FCC is getting more and more ready because we track that pretty closely. They are working with test houses right now because test houses have to certify the products, and we are working with test houses. That's the step they've already taken. The fact they're letting experimental networks with limited number of clients go now, they're, you know, they want people to experiment with it. That means they moved to the second phase. We think the August, September is realistic. Nobody can guarantee, but I think that's pretty realistic where things are. One follow-up. You mentioned your lead times have shrunk, and that's obviously, I mean, what we're seeing with other system companies as well. At the same time, most of the system companies I've talked to over the last two days here have mentioned that not necessarily that the component lead time or the semiconductor lead time has come down by that same amount. It's a function of them pre-ordering a lot and now getting the supply. When you're still sort of planning a year ahead, you're just more inclined to order ahead of time when it comes to the underlying components you're using. Just wondering if that's, sort of the same dynamic you're seeing, or are you getting more relief on the cost side because you don't have to pay the premiums, you no longer have to be ordering sort of a year ahead and carry that inventory? What are you seeing on that? Sure on your components? I think First of all, cost-wise, price-wise, whatever needed to happen has happened. They're not coming down either, right? Secondly, with respect to chips, we are seeing more availability. But very popular chips like Wi-Fi 6, they have not yet come down because those are growth industries. People are still buying Wi-Fi 6. We don't need to place as much of order as much in advance. I think that has changed. Earlier, we were putting 20, 21 months, 24 months type of forecasting. I think now if we can do 12 months pretty good, that's good enough. In some ways, it's getting better. On very hot chips, we still have to be careful. I would say in general, it's pre-COVID. It's reaching by end of Q2, as I said. I think, at least for us, it'll be pre-COVID. It's possible that there might be some analog chip or some 5G chip, something very unique, which still is in long lead. I'm saying 80, 90 percentile, it's coming to pre-COVID. Okay. Yeah. Yeah. You've referred to, and I've generally sort of seen this on the earnings call as well, you obviously refer to the 6 GHz product, the 28 GHz, the 60 GHz. Obviously, these are all sort of high frequency, high bandwidth of device connectivity products. How do the use cases differ between each of them? What's sort of the different target or market or customer for each of them? Excellent question. 60 GHz is 1 km-2 km, the way to think about this. Distance is pretty important and very high bandwidth, and it is meshed architecture. It is used in a lot of CCTV-type applications, which are in high-density urban environments where you're backhauling a lot of traffic, high-fidelity videos. We are finding good applications in the CCTV side. Also for small cell backhaul. Many applications where, again, dense environment, you need to backhaul small cells. Some smart city projects. There are. We have a customer in Canada. They're using 60 GHz for about deploying to 5,000 subscribers, very high-speed broadband. It's mountainous, so terrain, fiber doesn't work. In that terrain, for them, it's working, and it's creating a very good example of a high-speed broadband network. By and large, I would say CCTV, smart cities. Comes, say 5, 6 GHz. 6 GHz will be mainstream broad because 5 GHz is used by Wireless Internet Service Providers across the world. They're very used to it. They know the characteristics of RF propagation. They know how that band operates. For them, it's a concentric circle. Very quick concentric circle to go to that. They have the expertise. They have the technological know-how to operate. 6 GHz is gonna be mainstream for WISP. How many, how much- They're called 10 km. Yeah. So it's 6 km can do pretty good distance. 28 is 5 km-7 km, and very high bandwidth, wider channels because, you know. Distance-wise, it's not probably as much as what 6 GHz can do, and it's also international. It's more EMEA, CALA, and Asia, where it's a licensed frequency, where they have the license. Mm. I think each one has a different application, different terrain, and different region. Like 28 GHz in the U.S. will probably the last for us in that band because you have three big operators here who have all the frequency. Whereas internationally, many countries are more democratized with respect to frequency allocation. Those are the dynamics. Okay. No, that's very helpful. Just shifting the focus back to government sub-spending and subsidies, just lay out the timing for us. When are you expecting sort of those material tailwinds to come through? What's the timing to think of? You know, our timing has been pretty consistent. We have not changed much. We said in the second half of 2023, which is this year, we will start to see some wireless RDOF dollars. We are seeing that. In fact, you know, one of our customers, I think, got about $400 million in RDOF funding. I think wireless is beginning to get it because 6 GHz is giving, first of all, that gigabit connectivity, so it's competing reasonably well with fiber. That's one reason. I think the second is that in general, there is more acceptance in the government that wireless is a very viable way to go. Whether it's, whether it's Biden initiative or it's which is BEAD initiative, infrastructure initiative, or it's RDOF, you will see more wireless acceptance. Again, for terrain, for cost effectiveness, and for time to market, for time to deployment. Our sense is that second half, we will see more wireless money coming in from the RDOF side. BEAD initiative is probably 2024, Q1, Q2 timeframe. The reason for that is that money will not be allocated until the Broadband Data Collection part is done, where they're measuring economics of the equation, how much bandwidth can come in this terrain? What's the economics of that particular community? Government doesn't want to spend money just in communities which already have broadband. There's a lot of analysis has to be done in the BDC. Based on that, the money will go to the states, and there will be rules about performance, rules about, you know, management or reliability, those kind of things. Once that is done, dissemination of the money will be left to the state. Each state will have variety and variation. I think it'll be very unlikely there's cookie cutter across the board. Some states might be more wireless-friendly, some states might be more fiber-friendly. I think you'll see that variation in the BEAD initiative. That's an interesting point because I was going to ask you, when from the outside, investors are looking at Cambium, should they just aggregate the RDOF spending coming through and the BEAD spending and sort of say, "This is the total pool," or do you see RDOF playing out a bit differently than BEAD in terms of how much comes to wireless versus wire or fiber? I think it is a little different. RDOF is about connectivity, and that, the name says Rural Digital Opportunity Fund. BEAD is more, I think, state-driven, and each state might have little different flavors. Some states might say, "We need this money for, say, school connectivity." Some states might say, "We have a lot of inner city neighborhoods where we wanna bring broadband." I think there will be variations. That's why. Whereas RDOF is very much focused on rural connectivity because it's a progression of the CAF I, Connect America Fund Phase I and Connect America of CAF II. It's a progression of that. There, the linearity is well understood. BEAD is a new thing. I think each state might have a flavor of where they want to apply the money and what are different initiatives. It'll be all about connectivity, but where to apply that connectivity. Is it smart city projects? Is it educational institutions getting connectivity money? It is really the poorer neighborhoods getting broadband for eliminating digital divide. I think more variation on BEAD side, whereas I think RDOF is probably a little more uniform. Okay, helpful. Moving on to the product side, the fiber product that you sort of indicated on the call. I think you said the primary sort of target for now is the customers that you have, existing customers on the wireless side. Yes. I mean, first, like, how are you thinking about it? Which customers does it appeal most to? Sure. Secondly, how are you thinking about the opportunity to expand it beyond those customers? Excellent question. We have some experience with Wi-Fi, right? The way we did Wi-Fi, same question was asked us, "Hey, what would you guys do in Wi-Fi?" five years back, six years back, we were zero. Today we are, we'll cross this year with $125 million in Wi-Fi and connectivity. I think the first is always to go after low-hanging fruits. For us, even in Wi-Fi, we did the same thing, but then we expanded to hospitality, then we expanded to education, then we expanded to some smart city projects. Add MDU, multi-dwelling units. I think you'll see us do the same thing on fiber. We'll start with the low-hanging fruits, because many of our motivation for Wi-Fi came to us from our customers, because they say, "You are already providing a fixed wireless broadband. Why don't you come in and provide me Wi-Fi?" Many of the WISPs say the same thing to us. They say, "You guys do a great job with fixed wireless broadband, good quality, good relationship, good economics. Why won't you..." Many of the WISPs are offering both wireless and fiber. Mm-hmm. We are not focusing so much on the fiber box, we're focusing on manageability, simplicity. We are focusing on mid-tier customers, not very large fiber customers, mid-tier customers. I think the feedback we have gotten so far, because we have, what, five, seven betas going already as we release the product this quarter. They like the simplicity. They like the fact that our Wi-Fi, fiber, switching, all diagnostics we can see from single pane of glass. Typically, when a customer calls and says, "My network is down" or, "My fiber is down," it's not fiber down. Somebody moved the Wi-Fi. Somebody moved maybe a large furniture in the home and Wi-Fi... For them, it's the network is down. I think all that diagnostics integration we will do, and that'll become the... Our value add is gonna be a lot more bird's eye view of the network, simplicity of deployment, single pane of glass of management. Okay. Got it. Just in terms of then the competitive landscape here, you're going to run up into your traditional sort of, equipment vendors that provide CPE equipment, is how I'm sort of visualizing it. Maybe elaborate a bit on what these new competitors you'll run up against. Again, is the differentiation then going to be that you're taking a more bundled approach at selling it to your existing customers and, or is there a different differentiation that you're thinking of? No, I think in our case, we always focus on solution. I think individual products, anybody can have a superior individual product at any given time, right? That's how industry works. I think when we go to a customer, we say, "Mr. Customer, we can give you a fixed wireless broadband for backhaul and Wi-Fi and switching, and they are all managed from a single pane of glass. We train you once, and you can manage all products." Same argument applies as we offer fiber with Wi-Fi and switching. Same argument, that simplicity of deployment. I think for us, it's not about competing with one box. We won, we built Wi-Fi business exactly the same way. The switching we provide is very Wi-Fi savvy. It has a security policies coming from the cloud. It has more power control for the Wi-Fi 6 needs more power. It has that. I think in our case, we try our solution to be more hand in a glove for the segments we serve. Let me give example. Hospitality. In hospitality, when we give Wi-Fi, we give in our management APIs for smart locks. The hotels like that. They can deploy 1,000 smart locks with some of our management ability. In each market, we are also making sure we understand their applications and then offer the right solution, and over time, monetize some of that software as well. That's why you see our gross margins as a company is going up. While a lot of companies are having gross margin issues, Cambium gross margins are going up. We feel pretty good that we will operate the company, you know, in a, in that higher gross margin period because of some of the software subscriptions kicking in and the solution going together. That gives us ability to price it right, the right way as a bundle. Okay. That does lead to the question, though, as you have the wireless portfolio, now you're branching out into the wired, and you have different obviously frequencies and use cases. When you think about the R&D pipeline and sort of the investments then that need to support that- Sure. business, particularly as you're scaling up sort of these new products, how do you think about R&D intensity and being able to sort of drive scale in every use case or every vertical you're going in? Yeah. The way we have done our R&D is typically we spend about 14% or so, we have kept it pretty consistent. As revenue grows, I think that percentage will come down some because revenue is growing, we don't need to scale all 14% every year. We have been pretty consistent. The one way we have done our R&D strategy is we have a sizable presence in India. We have a very effective R&D in the company. We built from scratch, these are own employees. The entire thing was built in last 10 years, fantastic center of excellence for us. We're keeping our cost structure affordable through moves like that. Secondly, we use ODMs very effectively. These are Taiwanese ODMs. Where the hardware is available, where commercial chips crank a pretty good hardware, our innovation goes in software. A lot of our innovation goes in management, RF algorithms, and how these products interoperate. I think, we're not planning either proprietary chips and some massive ASICs and things like that. We only use, you know, merchant silicon off-the-shelf and a lot of innovation software. That keeps our R&D structure in line, yet with innovation of that simplicity, affordability, and single pane of glass management. Okay. Okay. Maybe let's end with that thought on software. Just maybe outline where you are with your software sort of revenues right now. When you think about enterprise being the largest customer vertical for you over time, that automatically means there's a much bigger sort of opportunity to monetize software and maybe monetize it more in terms of subscription. Maybe lay out that plan as you think. Sure. sort of over the next five years Yeah. how are you looking to sort of grow that pipe? Software for us is growing. It's also one of those things that doesn't grow overnight. You know, you have to run a business, you have to have a value proposition. We have been focusing a lot in value-added management, like smart locks, I gave you example. I think each vertical we are going, we're finding what are those unique things we can do in management and then monetize that. Software for us is probably 5%-6% of the revenue, and growing steadily and helping the gross margin. Over time, I think you will see more of that monetization as we bring unique features and unique things for each vertical segment in enterprise, and meaningfully done. Overall going in the right direction. Okay. I'll wrap it up there. Thank you for coming to the conference. Thank you for the session. Thanks, Samik. I appreciate having me here. Yeah. Thank you.