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Good afternoon. My name is Delphine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cambium Networks First Quarter 2022 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. Thank you. Mr. Peter Schuman, Senior Director, Investor and Industry Analyst Relations, you may begin your conference.

Thank you, Delphine. Welcome and thank you for joining us today for Cambium Networks first quarter 2022 financial results conference call and welcome to all those joining by webcast. Atul Bhatnagar, our President and CEO; and Andrew Bronstein, 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 and CEO, Atul Bhatnagar, will provide the key investment highlights for the first quarter 2022 and Andrew Bronstein, Cambium Networks CFO, will provide a recap of the financial results for the first quarter 2022 and present our financial outlook for the second quarter and full year 2022. 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 faced supply chain challenges within our industry, which impacted our first quarter results because of two unexpected events. First, a Chinese Government COVID lockdown in Shenzhen impacted manufacturing during the middle of March. And second, during the last two weeks of the quarter, a lockdown in Shanghai closed our distribution and warehousing facility. Although, our contract manufacturers have a global footprint, certain products and components are manufactured in China and cannot rapidly be relocated to facilities in different geos. Despite this setback, we are confident that once the supply chain recovers, we expect improved financial performance. We anticipate some recovery in revenues during the second quarter 2022, given our strong backlog and increased pricing actions now fully in place. We exited the first quarter 2022 with backlog up 7% quarter-over-quarter and higher by 10% year-over-year. Cambium’s cost-effective multi-gigabit Wi-Fi and ePMP product lines were most affected by the lockdowns in China. Despite the lockdowns, we saw strong demand for our enterprise solutions and exited Q1 2022 with record backlog for Wi-Fi. During late Q1 2022 we began taking orders for our new Quality of Experience, QoE subscription service, which provides visibility and network traffic optimization in real-time to mitigate congestion and control network traffic. One customer, an Italian service provider, noticed immediate improvements including a clear reduction in support center calls and actual reports of improved broadband performance. We are at the forefront of the next wave of high-performance wireless broadband technology including our millimeter wave solutions. Our new 28 gigahertz 5G multi-gigabit fixed wireless products shipped for revenue in limited quantities during the first quarter. We presently have eight POCs for our 28 gigahertz cnWave going on in four continents with three additional customers planning POCs pending receipt of equipment shipped in March. As we previously mentioned during our last earnings call, we expect larger deal sizes with 28 gigahertz cnWave. Cambium’s attractive cost of ownership and cloud-managed wireless fabric solutions make our fixed wireless solutions a compelling choice for wireless infrastructure projects around the world. Turning to the results of the first quarter 2022. Revenues of $61.9 million came in below the outlook of $77.5 million to $81.5 million announced during the Q4 2021 earnings call. The supply constrained environment affected shipments of both fixed wireless and Wi-Fi products during Q1 2022. The Wi-Fi market and ePMP product lines were more affected by the Chinese Government lockdowns in Shenzhen and Shanghai, although demand remains very strong for our Wi-Fi, wireless savvy switching and ePMP products. Looking at revenues across our different product lines. Our Point-to-Multi-Point, PMP, business revenues decreased 16% sequentially and decreased 46% year-over-year, due to global supply and distribution constraints negatively impacting shipments of ePMP products and slower demand from North American service providers. We are seeing the component shortages continue to improve, although gradually, and expect the lockdowns in China to loosen during Q2 2022. The Point-to-Point, PTP, business decreased by 4% sequentially during Q1 2022, with component shortages limiting shipments of certain products, while year-over-year revenues decreased 16% due to lower shipments for backhaul products compared to a very strong prior year period. Our Enterprise Wi-Fi business had revenues of $15.5 million, with revenues decreasing 40% sequentially due to supply and distribution disruptions, although higher by 28% year-over-year during Q1 2022. Demand remains very healthy for our Enterprise Wi-Fi and wireless savvy switching solutions and we continue to win larger and more diverse customers in this end market across the world as customers adopt our next-generation leading-edge Wi-Fi 6 and 6E solutions. Looking at some notable customer wins and new product developments. In North America, in Scottsdale, Arizona, a leading broadband service provider, Desert iNet, is extending fiber networks with Cambium’s 60 gigahertz cnWave fixed wireless broadband solution, to deliver multi-gigabit access to residential subscribers with faster time to service than trenching fiber, at a very attractive cost of ownership. Cambium’s wireless fabric makes it easy to plan, deploy and manage affordable gigabit speeds to the home and enterprise. An assisted living facility in New Jersey selected Cambium’s Wi-Fi 6 access points, cnMatrix wireless savvy switches and cnMaestro X cloud management to enable further efficiencies from digital transformation initiatives, while minimizing total cost of ownership for the assisted living facility. Residents wanted the ability to connect with friends and family, and assisted living care operations managers needed reliable Wi-Fi at reasonable costs. In our Defense business, we landed the first portion of a five-year contract from the U.S. Federal Government for Cambium’s PTP 700 technology to upgrade global military base security with high-capacity fixed wireless broadband communications infrastructure. The first phase of this program is mid single-digit millions for Cambium with a potential to be tens of millions of dollars. In the Europe, Middle East and Africa region, EMEA, we continue to have healthy demand for our Enterprise business and continue to win more and larger projects, although revenues were down due to COVID supply constraints from China. Recent strategic wins since our last call include, in Northern Italy, we displaced a Tier 1 enterprise networking supplier to deploy over 1,000 Wi-Fi 6 access points, wireless savvy switching, and cnMaestro X cloud management across 20 schools in the region. We won because of our wireless fabric end-to-end solution and Cambium’s superior customer support. In South Africa, we had a fixed wireless win with Ikeja Wireless for our ePMP 3000 for residential broadband access across the country. We won as a result of strong performance versus the incumbent supplier. In the APAC region, we received orders from two different service providers on both sides of the Australian continent for our first generation 28 gigahertz cnWave. In Korea, we had a Wi-Fi 6E win with our newly released high-density four radio access point, the XE3-4, for Sang Ji University. And in the Caribbean and Latin America, CALA region, we had a win with a government Service Provider in Brazil, PRODEPA, in the State of Pará. They selected our PMP 450 to provide Internet access and communications to government buildings and schools. Cambium was selected for our superior performance and lower total cost of ownership for the customer. Turning to new product introductions since our previous quarterly update. Before our next earnings call, we expect to announce the next expansion of our Wi-Fi 6 portfolio, including models specifically designed for the hospitality market and value-conscious buyers with availability during the second half of calendar 2022. At the higher end of the market, Cambium’s new five-radio high-density Wi-Fi 6E access point announced in January will begin shipping this quarter. This solution targets high-density indoor applications such as auditoriums, meeting rooms, classrooms, libraries and public venues. Cambium has the industry’s first five-radio Wi-Fi 6E solution which is much more efficient and cost-effective for high-density use cases. Our expertise and history with high-density Wi-Fi enable us to deliver a highly differentiated Wi-Fi 6E solution at a lower total cost of ownership than the competition. Cambium continues to build a strong foundation for our software and subscription services business, which delivers customer stickiness, recurring revenue and accretive margin. Cambium has been trialing in North America a new Network-as-a-Service, NaaS, solution. We are offering a package of cnMaestro X and Cambium Care combined with our Wi-Fi hardware made available as a subscription service. The subscription packages are billed monthly and are available in three-year and five-year terms. Our initial POCs, are performing well and we are seeing strong interest in our commercial offering in Q2 2022. Looking at our cnMaestro Cloud software, our end-to-end cloud-powered connectivity solution to manage the network from a single pane of glass. The cnMaestro Cloud software continued to experience strong user growth. Total devices under cloud management in Q1 2022 were over 791,000, an increase of 6% from Q4 2021, and up 37% year-over-year. Turning to our channel. In Q1’22, we expanded our channel presence by adding 70 net new channel partners sequentially and approximately 1,670 net new channel partners year-over-year, which represents an increase of approximately 1% sequentially and 17% year-over-year. During the first quarter Cambium showcased our Wireless Fabric at the WISPAMERICA trade show in New Orleans. We received excellent customer feedback on our 60 gigahertz cnWave, 28 gigahertz cnWave, enterprise Wi-Fi 6 portfolio and wireless savvy switching. Our upcoming 6 gigahertz ePMP solution is also generating lots of excitement for gigabit connectivity particularly with North American service providers. Our technology and platforms, including the new software capabilities like QoE and cnHeat, were also well received by customers. I will now turn the call over to Andrew for a review of our Q1 2022 financial results and Q2 2022 outlook.

Thanks, Atul, and hello, everyone. Cambium had revenues of $61.9 million for Q1 2022. Revenues decreased by 21% quarter-over-quarter and by 30% year-over-year. The global supply constraints combined with the Chinese lockdowns impacted shipments of our products, which continue to have significant pent-up demand. Our backlog and end demand remained strong, with backlog increasing by 7% quarter-over-quarter and 10% year-over-year. On a sequential basis for Q1 2022, revenues were lower by $16.8 million. The weaker revenues were primarily the result of lower enterprise Wi-Fi solutions and Point-to-Multi-Point revenues, due to global supply constraints negatively impacting the manufacture and shipments of products. Moving to our gross margin. Non-GAAP gross margin of 47.8% decreased by 230 basis points compared to Q1 2021. The year-over-year decline in non-GAAP gross margin was the result of lower revenues and increased component costs, as well as higher freight and distribution costs caused by expedited shipping. On a positive note, on a sequential basis, non-GAAP gross margin improved by 360 basis points compared to Q4 2021. The higher quarter-over-quarter non-GAAP gross margin was the result of previously announced price increases and mix as we shipped a higher proportion of Wi-Fi and switching relative to fixed wireless products. We believe we will continue to see sequential improvements to gross margin during 2022 from both the benefits of the actions we have already taken and increased scale in our business as we progress through the full year. The full impact of the price increases will be realized during the second half of 2022. In Q1 2022 our non-GAAP gross profit dollars of $29.6 million decreased by $14.7 million compared to the prior year and were lower by $5.3 million sequentially, both due to lower volumes. Our longer-term goal remains an annual non-GAAP gross margin target of 51% to 52%. Non-GAAP operating expenses comprised of research and development, sales and marketing, general and administrative, and depreciation and amortization in Q1 2022 decreased by approximately $200 thousand, when compared to Q1 2021, and stood at $28.6 million or 46.2% of revenues. Given the lower revenues, non-GAAP operating expenses were relatively flat compared to the prior year period. When compared to Q4 2021, non-GAAP operating expenses decreased by approximately $500,000 during Q1 2022. Quarter-over-quarter sales and marketing decreased primarily because of lower variable compensation for salespeople due to the lower revenues, while R&D and G&A had modest increases due to higher wages and professional services. Non-GAAP operating margin for Q1 2022 was 1.6%, down from 17.5% during Q1 2021, and 7.3% of revenues in Q4 2021. Non-GAAP net income for Q1 2022 was $300,000 or $0.01 per diluted share, compared to $11.7 million or $0.41 per diluted share for Q1 2021, and non-GAAP net income of $4.4 million or $0.16 per diluted share for Q4 2021. The lower non-GAAP net income compared to both the prior year period and prior quarter’s results was primarily due to the lower revenues impacting gross profit dollars. Adjusted EBITDA for Q1 2022 was $1.9 million or 3.1% of revenues, compared to $16.5 million or 18.6% of revenues for Q1 2021, and compared to $6.7 million or 8.6% of revenues for Q4 2021. With the current supply constraints combined with the China lockdowns impacting shipments, we temporarily lost some operating leverage in our business, although we remain committed to driving our adjusted EBITDA to our target model of 18% to 19% of revenues. Moving to cash flow. Cash used in operating activities was $19.2 million for Q1 2022. The cash used in operating activities included a $12.1 million decrease in accounts payable from -- principally due to the timing of inventory payments, and annual variable compensation of approximately $10.2 million for incentive compensation earned during calendar 2021 and distributed in Q1 2022. Q1 2022 cash used in operations compares to $7.6 million of net cash used in operating activities for the first quarter 2021 and $5.6 million net cash provided by operating activities for Q4 2021. Turning to the balance sheet. Our cash totaled $38.4 million as of Q1 2022, a decrease of $20.9 million from Q4 2021. As previously mentioned, the sequential decrease in cash primarily reflects a $12.1 million decrease in accounts payable principally due to the timing of inventory payments, and a payment for annual variable compensation of $10.2 million. Net inventories of $40.2 million in Q1 2022 increased by approximately $8.8 million year-over-year, while increasing by $6.4 million from Q4 2021. Inventories were higher sequentially because of an increase in finished goods due to the inability to ship products from the Shanghai warehouse and distribution center during the last two weeks of Q1 2022. While the supply chain remains an ongoing challenge, we are working to selectively increase our inventory position during 2022. As of right now the manufacturing facilities in Shenzhen are open and operating. Factories are now open for 95% of our products. Components are in decent supply and we expect improvement during the balance of the year. We are moving some products from our manufacturing and distribution centers in China to our other distribution centers in North America and Europe until Shanghai is fully operational. In terms of logistics, we are shipping by air freight as much as we have to compensate for the Shanghai COVID lockdown. Once Shanghai is fully operational, we expect it could take an additional one week to two weeks to completely normalize distribution activities. In summary, the first quarter did not play out as expected given COVID lockdowns in China on top of an already challenging supply chain environment. We strive to become more predictable. Our price increases are now layering in with the benefit that we expect to happen in full by the second half 2022. Our backlog remained strong and we are at the start of new product cycles. Once the supply issues are resolved, we expect to re-gain scale, improve operational efficiency, and make significant progress toward achieving our long-term target operating model. Now moving to the second quarter and full year 2022 financial outlook. Considering our current visibility as of today, our Q2 2022 financial outlook is expected to be as follows. We expect revenues to be between $65 million to $73 million, non-GAAP gross margin between 47.5% to 48.5%, non-GAAP operating expenses between $29.7 million to $30.7 million and non-GAAP operating income between $1.2 million to $4.7 million, interest expense net of approximately $700,000 and non-GAAP net income between $400,000 to $3.2 million, yielding net income per share of $0.01 per fully diluted share to $0.11 per fully diluted share. Adjusted EBITDA we expect to be between $2.2 million to $5.8 million and adjusted EBITDA margin between 3.4% to 7.9%. And we expect the non-GAAP effective tax rate of approximately 18.0% to 20.0% and 28.7 million weighted average diluted shares outstanding. Our cash requirements are expected to be as follows. We expect the pay down of debt, $1.3 million, cash flow interest expense of approximately $300,000, we expect CapEx to be between $1.4 million and $1.6 million. Next turning to the full year 2022 financial outlook. We expect revenues to be between $280 million to $300 million, decreasing approximately 10.7% to 16.6%. We expect non-GAAP net income to be $8.1 million to $20.1 million or $0.28 per diluted share to $0.70 per diluted share, and adjusted EBITDA margin of 6.0% to 10.8%. I will now turn the call back to Atul for some closing remarks.

Cambium’s growth drivers remain intact. As we said on last quarter’s earnings call, we reiterate increasing chip supply during the second half of this year and our growth strategy remains solid. We expect to see above market returns from our investments in multi-gigabit wireless products such as enterprise Wi-Fi 6 and 6E, wireless savvy switching products, 60 gigahertz cnWave, our new 28 gigahertz millimeter wave solutions for Fixed 5G, the new 6 gigahertz fixed wireless solutions arriving later in 2022, a reinvigorated federal business, as well as our software-as-a-service solutions. The integrated wireless fabric from Cambium brings together ease of deployment, scalability of networks and lower total cost of ownership as the world deploys next-generation high-performance wireless broadband. We remain focused on judiciously managing our costs, continuing to invest in innovative products to maintain our technology edge and expect increased scale should benefit our future operating results. I’d like to show my appreciation for our employees, partners and customers during these unprecedented times. This concludes our prepared remarks. So, with that, I would like to turn the call over to Delphine for begin the Q&A session.

Thank you. I want to say that’s our CEO and President, Mr. Atul Bhatnagar. Our first question is with Simon Leopold of Raymond James.

Thanks for taking the question. I guess I was a little bit surprised that the gross margin was actually better than I expected, several 100 basis points, better and sequential improvement. And so I’m just trying to make sure I get a grounding in terms of how to think about modeling and so I’m looking for maybe a little bit color in terms of, if you could rank order. You’re segments in terms of kind of the gross margin contributions and the supply chain impact, just to help us understand what the trends are in gross margin. And then I’ve got a follow up.

Yeah. Hi. This is Andrew. So when you look at the gross margin versus last quarter, as you mentioned, it was up, which was great news and there’s really two major factors that are causing that increase. One is the product mix. So as Atul mentioned, our Wi-Fi products, despite the issues that we had with the China lockdowns, were still up year-over-year and also very healthy, just given that situation on a quarter-to-quarter basis. And in terms of the percentage mix versus the other products, the Wi-Fi was a higher portion of that mix. And then the second reason is the price increases that we had that we’ve mentioned before, where we had price increases last year that’s working its way through the system and we expect that to be fully benefit -- see the full benefit of that in the second half of the year, but it started to impact our numbers in the first quarter favorably.

Thank you for that. And I wanted to follow-up on the, particularly the 28 gigahertz product, you did mention a larger award in Italy. And I’m guessing and presuming that this product is playing into that award. But, ultimately, what I’m trying to get a sense of is how to think about the size of that product contribution as it ramps over time and the materiality or opportunity for 28 gigahertz platforms? Thank you.

Thanks, Simon. This is Atul. I will take that one. So let me give you a little more color around 28, because I’m very excited about the potential of 28 for probably next four years to five years with what we are releasing right now. The way 28 gigahertz solutions are different. They are addressing larger service providers in Europe, South America, North America and Asia in that sequence, in that priority order. It’s a licensed frequency. So the service providers are going after many square miles of area and fortifying the territory with that licensed broadband solution. So the -- what we see is, if you had ex amount of total dollars spent by a service provider for the sub-5 gigahertz solution, traditional solution for a medium-sized service provider. 28 gigahertz solution is probably 2 times to 3 times be deal size. And I think in next 12 months you’re going to see us announced many larger Tier 2 and Tier 1 service providers with substantial business and it is changing our own dynamics. And in return Cambium is scaling the support structure, because when you engage these type of service providers, you really have to have 24x7 across the globe support teams and that’s what we’ll be offering. So pretty excited and just to give you an idea, I think, we did mention in the earnings call script, about 10 POCs. Eight of them, I think, gone and two or three coming through, these are all pretty sizable customers. So, very positive, very exciting. And this opens the runway to Cambium Networks towards 5G fixed. These are different -- when we say next-generation architecture, 28 is a very key plank of the next-generation architecture.

And maybe just to put a some quantification around that opportunity. If we think about 2023, when we’re past supply chain constraints, hopefully, could you see these products being on the order of 20%, say, of PMP or is that just too ambitious goal?

No. I think we are not too far off.

Great.

Because, again, the deal sizes we are looking, that is to be very frank, for me, the pleasant surprise is, as I gave you indication, if we did ex amount of revenue for traditional products, I think, we might be looking at 2x to 3x, because the service providers are going after larger area and they have larger subscriber base to cater to.

Thanks for answering that. Appreciate it.

Thanks, Simon.

Thank you. Our next question is with Rod Hall from Goldman Sachs.

Hi. Thanks for taking my question. This is Bala on for Rod. Looking at full year guidance, I’m just wondering what is being baked in into the full year guidance with respect to your operations in Shenzhen and also in Shanghai. It looks like Shenzhen is more or less fully operational now. But maybe just double click on what you’re expecting, how do you see the ramp as you go through the year? Then I got follow up.

Yeah. Thanks for the question. This is Andrew. So, in terms of looking at the $280 million to $300 million that we mentioned for the -- outlook for the year, we were being prudent in terms of looking at what’s happened in China and what the current status and the current situation is. So we do believe that revenues will continue to increase as we go throughout the year and we think that the second quarter revenues will be higher than the first quarter as well. But we don’t -- we still just given the manufacturing distribution facilities that we have in China, we want to be very careful in terms of looking at the outlook going forward and the impact of COVID, which obviously is very hard to predict. So we’re trying to really have a very balanced view and to be prudent in terms of what we believe the full year to be. As you saw in the numbers are -- and we discussed our strong backlog as well, the total backlog that we have today is as high as it’s been in the recent past or even higher than it’s been in the recent past. And especially as we look at the Wi-Fi product line, that continues to be very, very favorable and that’s what gives us that confidence that we’ll get into that range, despite the situation over in China and the supply chain constraints.

Right. And if you look at the second half of the year, the new guidance compared to the previous guidance indicates maybe about 15% to 20% cut in revenue guidance for the second half of the year. And I assume this, as you said, Andrew, prudently assumes that, like, lockdowns or related supply issues that you’re seeing would extend well beyond Q2 and then possibly into through the year. Is that the right thinking there?

Well, I think, the first half of the year is really what’s taking the largest hit. So when you think about Q1 and Q2, those two quarters are quite a bit below what we had originally anticipated for the year. We do believe that Q3 and Q4 will continue to ramp up. We are getting better visibility now in terms of supply chain and chips, which is very good news and that’s consistent with what we have predicted back when we -- when I wasn’t here yet, when the company spoke back in February. So that in fact is coming true. But the setback that we had given the China lockdowns is what’s really hurt in the first half or first quarter and we expect the second quarter of the year. Are we certainly do hope that Shanghai does reopen soon. There’s some glimmer of hope that we received as recently as today, that could happen in the next couple of weeks, if not sooner. But as I said, we want to be prudent in terms of how we’re thinking about it and have a balanced approach. So I do think by the second half of the year, especially in the fourth quarter, we will still -- we will see things beginning to return to somewhat of a normal situation and we will continue to have acceleration in certain areas of the business such as Wi-Fi, as we mentioned.

Yeah. Bala, if I can just add one comment. I think we have taken very proactive steps for the second half of this -- of 2022, working very closely with our chip partners, supply chain partners. And I think, as we said in last quarter’s earnings call, we expect second half to be increasingly better, whether it’s chip availability, whether its supply chain partners. That’s kind of what we see right now. And we are baking that in and I think my sense is that, cautiously very optimistic as we go into second half.

Yeah. And one other thing I would add to that is that, even as we sit here today, we’re not waiting for Shanghai to reopen. We have a plan that we’ve started to enact. As I mentioned, during my opening comments of shipping products out of the Shanghai region or directly out of the manufacturing areas in Shenzhen and elsewhere to other distribution facilities in Europe and in North America. And that may cause some additional shipping costs that we will incur as a result of that. But even despite that, we think that with the favorable mix, with Wi-Fi becoming a bigger part of the business, that that will help offset those incremental costs and hitting the margin.

Great. Thank you.

Sure.

Thank you. Our next question is with Samik Chatterjee of JPMorgan.

Hi. Thanks for taking my questions. I have a couple, and for the first one, I actually wanted to follow up on Bala’s question there, ask you in terms of what do you think the exact revenue run rate for 4Q looks like, because I’m trying to compare it to June 2021 quarter, where you did about $93 million of revenue. From everything sort of you’ve talked about today, it doesn’t look like you’re seeing demand is a problem. It’s more either logistics or supply. So I’m wondering with sort of the supply situation that’s now recovering with pent-up demand, like, what’s holding back the 4Q exact revenue run rate to be higher than the sort of June number that you had, particularly your guidance for the full year. To me, it implies you’re sort of thinking more mid-80s versus the $90 plus million run rate that exhibited in the past. And I have a follow up as well. Thank you.

Yeah. And I think that’s about right. We do expect around the mid-80s in terms of the fourth quarter, as you mentioned. And again, we’re being prudent in terms of how we’re looking at, where we think we’re going to be for the balance of the year and that even at the mid-80s is an acceleration from where -- certainly where we are today and where we expect to be in Q3, which is in the, likely, mid-70s range or so. So there’s still a sizable increase in Q4. But we didn’t really want to get overly aggressive in terms of that outlook of Q4 given the situation with China and how they’re treating COVID and the lockdowns for any sorts of cases of COVID that come up in the country and what’s happening in China with their vaccine, et cetera. So we want to be prudent and estimate when we look out over the next few quarters, the best that we can. So that’s where we ended up.

Okay.

And also, Samik, Atul here.

Yeah.

While things are improving, the normalcy will I think only come in 2023. So the needs of the Cambium emerging product line, high growth product line, I think, it will be improving, but what we really need to go like a rocket, I think, that’s 2023. So that’s what you see built in here, based on our experience, realistically where it go. And we -- as I said, we have taken a lot of proactive steps. We have given 21 month forecast to our chip suppliers. We have redesigned certain products as necessary. We are making sure test capacity and our manufacturing lines are ready for higher volumes. So these are also the times when companies need to do proper planning for expansion and that’s what we are focusing on right now.

Got it. Got it. For my follow up, Atul, I mean, I don’t have the exact absolute number in terms of backlog that you guys are reporting, but just directionally looking at the quarter-over-quarter growth numbers here, you said a 7% quarter-over-quarter increase in backlog, it’s very similar to what you had in 4Q as well and given that you had the issues around shipping in 1Q, I would have expected a bigger increase in the backlog unless I’m thinking about it wrong. So maybe just directionally set me right there in terms of why doesn’t backlog have a bigger sort of number on it, despite being able -- not able to ship a lot in 1Q?

Yeah. So as the backlog actually has continued to increase throughout this quarter that we’re in. And as I mentioned, we have the highest backlog today than we’ve had in the near recent past here. So when you look at where our strength is in the business, right now, in the Wi-Fi product, especially, and the margins associated with that, we think that that is going to continue to grow and we’ve seen good acceleration of that this quarter. But in terms of looking at the outlook both for Q2, as well as Q3 and Q4, that all takes into consideration where we ended up at the end of the first quarter and what the mix was and what the total backlog was at that time. As Atul mentioned, we have products that we’re put -- we’re introducing into the marketplace that we believe will be very beneficial to our revenue outlook, especially towards the last half of this year and going into next year. And that’s where, I think, given, as long as we see normalcy returning to the supply chain, we’ll see continued acceleration of both backlog, as well as revenues that you’ll see showing up in the financials.

So, Samik, Atul here. Two or three points I want to make. Number one, I think as we go into the second half, the supply chain situation is getting better. And we said that last quarter as well and I’m reiterating that. Secondly, the Enterprise segment of cambium is fully transitioning to Wi-Fi 6. Remember, these are S curves of growth. We are on a S new growth curve with our Enterprise full portfolio, fully mature, full roadmap, very well received. Next point is, wire -- fixed wireless broadband is also going through a technology transition and this is an important point. And we anticipated that was 60 gigahertz and 28 gigahertz, both of those product lines are in early gestation. So as we come through Q3, Q4 and the Q1 next year, you will see us talk a lot more about the wins, the deal sizes, because we see that new S curve for gigabit networks and wireless coming and really augmenting fiber, and the transition of fixed wireless broadband is probably about six months behind Wi-Fi. Wi-Fi transition happened faster. But it’s also simpler. And right comes behind the fixed wireless broadband transition and I’m very excited. Cambium will beta test 6 gigahertz band for multi-gigabit connectivity or PMP line and shipped volume in Q4. This is new, very advanced technology. And this will assure the new S curve of fixed wireless broadband.

Thank you. Thank both.

Thanks, Samik.

Thank you. Our next question is with Mr. George Notter of Jeffries. Please go ahead.

Hi, guys. Thanks very much. I guess in the past, you guys have given us some commentary on channel inventory levels. I guess I was just curious if you have some comments about where channel inventories stood at the end of Q1?

George, good to hear from you. Let me take that question. So, in fixed wireless broadband, there’s definitely a simulation going on of accelerated buying in the second half 2020 and then 2021 and we see that. But the point-of-sale is pretty, we monitor that pretty closely. So I think in some product, there might be inventories because customers are kind of digesting assimilating and also customers are beginning to think about what is the next-generation fixed wireless broadband architecture. I think those are the two key drivers we see in terms of the inventory. When it comes to the Enterprise products, they can whatever we can give them, they’re grabbing right now. I think our next few quarters we will know steady-state wise where things land. But in general, there is still, I would say, overall, a good balance of where the inventory -- inventories are, what the demand is, and in certain products, they are kind of still being assimilated in the field. Anything, Andrew, you want to add?

No. I think you’ve covered it well.

Okay.

Got it. So I guess I’m inferring then there’s some products where channel inventories came out higher at the end of the quarter. I presume we’re talking about fixed wireless access products, Point-to-Multi-Point products.

Yeah…

And maybe other products which are lower, so Wi-Fi.

Yeah. It’s possible. And I think, George, in our industry, what ends up happening is, as customers are conceiving the next set of frequencies. Remember, if you are a service provider, and you’re conceiving of 60 gigahertz, you might have some frequencies which are sub-6 and as you’re shifting to 60 or you’re shifting the 28. And all of that gets taken care of in over two quarters, three quarters. But, net-net, at this point, we are still -- for all of our product lines, we are still building our inventory, like, for example, ePMP product lines, we are very constrained in inventory right now. If we add more chips right now we’ll be cranking more products. So a little bit of a balancing act goes on. But, net-net, customers are able to handle that over a quarter or two period.

Got you. And then I also want to ask about pricing. So it sounds like you took pricing increases in Q4. Just curious, can you remind us how much those pricing increases were and then, how much of that might have been assimilated into the model in Q1?

Yeah. So approximately, and Andrew, can please add based on, anything I missed. Approximately, I would say, 10% to 15% price increase cumulatively across product lines, based on in some of the increases of prices we face from our suppliers. And overall, we did have inventory and existing inventory, existing contracts. I would say, Q2 is probably the first quarter where you’ll see pretty wholesome impact. And then in second half clean, because we would have eaten into those inventories and contracts and all that will be all new pricing.

Yeah. Okay. Great. Thanks. Thank you very much.

Thanks, George. Thank you.

Our next question is with Scott Searle from ROTH Capital.

Hey. Good afternoon. Thanks for taking my questions. Yeah. Atul, I apologize for going back to the supply chain again. But it looks like you’ve been doing things in terms of best job that you can, struggling where everyone else has from a supply chain perspective redesigning products. But I was wondering if you could talk a little bit about more manufacturing, diversity of that manufacturing from a geographic standpoint and how you can be more resilient to not have any single points of failure going forward, two quarters of the last three quarters we’ve had some problems on that front caused by China? What can you do to design around that? So you’re a little more flexible, if there’s a third wave.

Yeah. Scott, good to hear from you and an excellent question. There are two areas we are very -- working very proactively. One is linearity. In fact, I’m going to -- you didn’t ask that, but I’m going to address that. We are working very proactively on linearity, because in, we also realized that I think when you are more back end loaded, you also get hit harder with these type of events. And Andrew, one of the reasons we brought Andrew into the company is Andrew brings excellent background with some of the manufacturing companies he worked for and linearity and those stuff. So that’s one project we have started. Secondly, with respect to China, and dependency on China, about I would say, maybe half of our manufacturing or so happens in Guadalajara with Flex. So we are already -- we have a very strong relationship with them and many of our fixed wireless broadband products are done there. In addition, we are very proactively diversifying from our audience in Taiwan into Southeast Asia. Proactively areas like Penang. So you will see Cambium continue to diversify opportunistically and strategically. Having said that, there are a lot of components, power supplies, mechanicals, they come out of China. And so it’s not just manufacturing, we have to look at it pretty wholesomely in a 360 degree way and we are going through all that, a lot of attention being fed, because we totally realize that the more diversified, but in a meaningful manner we are, the better it is. So both projects getting a lot of good attention inside and over next few quarters as we make those decisions, as we diversify, just to give you an idea, our new products we are designing, we are increasingly moving them towards Southeast Asia.

Okay. Very helpful. And if I could then follow up on the gross margin front, sounds like the price increases, you see more of an impact in the second quarter, you’ve benefited from the Wi-Fi mix in the first quarter. But if I kind of work through some of the numbers in the annual guidance, it either implies that OpEx is ramping up a lot more or gross margins are kind of plateauing, if not sort of rolling over. So I’m wondering, is there something else going on in the second half of the year, as you think about the gross margin profile? Does it stagnate? Does it not continue to increase or is it just level of conservatism in terms of how you’re guiding.

So we’re, again, being prudent on taking a look at where we are with OpEx, as well as gross margin as we go throughout the year. But the way that we’re looking at it is that, that OpEx will increase a bit as we move ahead throughout the year because of inflationary pressures. And increase salaries, for example, and costs relating to some of the R&D materials that we need in terms of the next-gen products that we are focused -- very much focused on. And in terms of the gross margin, we still believe very strongly in our overall operating model goal to work up towards that 51% to 52% goal over time. But we don’t necessarily see that happening in the very short-term, because of all of the issues around the tightening of the supply chain, as well as pricing of components and chips. So I think once things begin to stabilize further and there’s more supply of chips in the marketplace, that should happen towards the end of this year and certainly next year, I think, that you’ll see the gross margin increase further.

Okay.

So hopefully that answers your question.

No. Very helpful. By the way, congratulations, welcome aboard. If I -- Andrew, if I could follow up on that front, is that 51%, 52% a realistic goal for 2023?

I think we could hit that goal, especially in the last half of 2023, driven by our new products, along with normalization of the supply chain.

Yeah. Maybe, Scott, one more point I want to add is, we have a very strong federal defense funnel right now. Never has been this strong and the geopolitical events actually are driving that even stronger. So I think you can expect that in the second half of this year and in 2023, the federal defense will also play a key part and generally that gives us a good uplift for the gross margin.

Okay.

But I will say that as we look to diversify as well out of China, that there will be a cost of doing that and that’s why we’re being really prudent in how we’re looking at gross margins going forward.

Yeah.

So I’d be looking at that towards the end of next year.

Okay. And lastly, I’d like to throw out three quick questions on the product front. Atul, you’re talking about the excitement related to 5G at 28 gig to 60 gigahertz products, you’ve got multiple POCs for the 28 gig. Could you help us understand you talked about them being larger opportunities? Could you put a number of framework around it either what you would expect revenue to be exiting this year or maybe what the revenue opportunity for them is in 2023. Also, on the ePMP front, I know that there’s some new products coming that offer some higher, possibly multi-gigabit speeds, I think, around more the 5G architecture. I was wondering if you could talk about that?

Sure.

And lastly, I just want to confirm the availability of the Wi-Fi 60 outdoor solutions, when we’ll see them getting certification and then roll into market? Thanks.

Okay. Thanks, Scott. One of the power or strength of Cambium is that we have a wireless fabric and I’m going to go a little deeper into that just to position that. Each region has a different frequency plan. Each region has a different dynamic. So, for example, in Europe and CALA, South America, they have 28 gigahertz license frequency with so many different -- so many different service providers. So we are seeing acceleration in 28 there very well received, and as I said, deal sizes are larger and thee deal sizes are in a multi-million dollars each type of a deal. So I won’t go deeper than that, but this -- it’s going to start to give you a flavor. Then when it comes to North America, the 6 gigahertz band is the excitement. I -- this is clean frequency. This is 1.2 gigahertz, 1.3 gigahertz of band which is being released for the first time in two decades. So you’re going to see the significant solutions for multi-gigabit based on that frequency band and Cambium will be one of the first in the world to offer beta in Q3 and volume shipments. This is what I call new S curve in fixed wireless broadband we’re going to write. Our strategy is based on two key words, affordability and quality. That’s how we build this company. Always maintain affordability, but yet have fantastic quality. You will see us offer that in a fixed wireless broadband in North America. So, overall, the fabric integrated different frequencies and different architectures, manages from single pane of glass and then tell the customers that, Mr. Customer, the last edge, half kilometer or so you have indoor outdoor Wi-Fi, which is Wi-Fi 6. And that’s why many of these calls I say the combination of technologies like 60 gigahertz and Wi-Fi 6 is the hand and glove and we are seeing that in municipalities. We are seeing that in educational institutions. We are seeing them in so many different situations where they use fixed wireless broadband, now they’re using Wi-Fi, in some they went with Wi-Fi and now they are saying, can you do cnMatrix with 60 gigahertz. So interplay of this multi-gigabit technology is very powerful and you’ll see that I think definitely in second half, as well as in 2023.

Great. Thanks so much.

Thanks, Scott.

Thank you. There are no more questions on the queue. And with that, I would like to turn the call over to Mr. Peter Schuman for the closing statement.

Thank you, Delphine. During Q2 2022, Cambium Networks will be presenting and meeting with investors on May 19th at the Barrington Research Virtual Spring Conference and on Wednesday May 25th at the JPMorgan Global TMT Conference in Boston, Mass. In the meantime, you are always welcome to contact our Investor Relations Department at 847-264-2188 with any questions that arise. Thank you for joining us and this concludes today’s call.