Cambium Networks Corp (CMBM) 2022 Q4 法說會逐字稿

Good afternoon. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cambium Networks' Fourth Quarter and Full Year 2022 Financial Results Conference Call. (Operator Instructions) Thank you.

Mr. Peter Schuman, Vice President, Investor and Industry Analyst Relations, you may begin your conference.

Thank you, Amy. Welcome, and thank you for joining us today for Cambium Networks' fourth quarter and full year 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 Form 8-K with the SEC.

Certain revisions were made with -- within operating expenses in prior periods to conform to the classifications in the current period. These revisions had no impact to operating income. 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 not to 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 measures 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 fourth quarter and full year 2022; and Andrew Bronstein, Cambium Networks' CFO, will provide a recap of the financial results for the fourth quarter and full year 2022 and present our financial outlook for the first quarter and full year 2023. 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. Cambium continued growth in our fourth quarter with revenues of $84.5 million, increasing 4% sequentially, ahead of the high end of our outlook of between $80 million to $84 million announced during the Q3 '22 quarter call. Profitability remained strong with a gross margin of 49.6%, near the high end of the outlook and EPS of $0.36, exceeding the high end of the outlook. We had a strong finish to the year in North America, with growth in all major product categories and sequential growth for our Point-to-Multi-Point PMP Solutions.

After record-breaking results during Q3 '22, that included an incremental $5 million in switching revenues, as expected, our Enterprise business returned to a normalized run rate in Q4 '22. For the full year 2022, our Enterprise business grew 64% to $109.8 million, exceeding the high end of our original forecast. This is after growth of 67% during full year 2021. For 2023, enterprise growth will be from a much higher base, with our initial forecast of growth for the Enterprise business of 20% to 30% as we continue to innovate with new Wi-Fi, switching and cloud-based software solutions, and we continue to gain market share globally.

We have grown from approximately 1,500 cumulative Wi-Fi customers at the time of our IPO in mid-2019 to about 18,500 at Q4 '22. We are now at the start of the next wave of high-performance fixed wireless broadband deployments for our PMP business with the ramp of new gigabit solutions, including 28 gigahertz cnWave 5G Fixed products, an acceleration in the growth of our 60 gigahertz cnWave products, and the introduction of disruptive 6 gigahertz PMP products during Q4 '22, which delivers industry-leading price performance. Final FCC approval for outdoor use of the 6 gigahertz spectrum is expected around midyear 2023. However, the FCC has already started approving Special Temporary Authority Licensing, STA, for proof-of-concept networks.

Turning to the results of the fourth quarter 2022. Looking at revenues across our product lines, our PMP business revenues increased 14% sequentially and decreased 20% year-over-year as service providers are beginning to move from our legacy PMP 450 products to the new gigabit technologies. We did see an acceleration of growth for our multi-gig 60 gigahertz cnWave solutions as service providers are gaining an understanding of how to deploy the technology at scale to take advantage of the benefits of multi-gigabit bandwidth, low latency and efficiency with hybrid fiber and cable networks.

The PTP business revenues increased a healthy 38% sequentially, while improving 39% year-over-year during Q4 '22 due to higher shipments for our federal defense business in North America, as well as growth in EMEA and CALA using Cambium's PTP 700 mission-critical technology for fixed wireless broadband communications. Cambium has been selected to supply our PTP defense products to over 10 key programs of record, POR, for the Department of Defense. We expect continued strong defense shipments during 2023. As expected, our Enterprise business declined sequentially, decreasing by $6.3 million or 17% after record revenues of $38.3 million during Q3 '22, which included the previously mentioned catch-up shipments for switching, while higher by $6.2 million or 24% year-over-year.

The year-over-year growth was driven by increased demand for our Wi-Fi 6 and 6E solutions, switching revenues and growth in our SaaS solutions. For the full year 2022, revenues of $296.9 million decreased 12% from 2021. The 2022 decline was driven by our PMP products, which declined 44% from the prior year, partially offset by the growth of our Enterprise business, which had a record year, increasing 64% for the full year 2022, breaking the $100 million threshold for the first time in Cambium's history, while our PTP business grew 10% compared to 2021 revenues due to the strength of our federal defense business.

It is notable that our Enterprise business represented 37% of the company revenues during calendar year 2022 compared to 20% of revenues for 2021. In the long term, we anticipate our Enterprise and PMP businesses will each represent approximately 40% of our total revenues as we ride the new growth S-curves, while PTP will represent the remaining 20%. We do foresee the return to modest growth for the PMP business, driven by new product momentum in 6 gigahertz upon the FCC's approval as expected to drive revenue growth during the second half of the year, as well as the continued ramp of 28 and 60 gigahertz millimeter wave solutions, the new 5 and 6 gigahertz products for both the ePMP and PMP 450 product lines. Both 60 and 28 gigahertz cnWave solutions have recently brought in several multimillion-dollar deals.

Looking at some notable customer wins and new product developments. In North America, Salt Lake City placed an order for 60 gigahertz cnWave connectivity as part of a smart city deployment. Cambium was selected for our portfolio breadth and ability to deliver backhaul and access with a single management platform. A division of the third largest cable television provider in the United States, serving 3.5 million Internet subscribers, introduced a new business service for customers through our system integration partner, Future Tech.

The service utilizes Cambium's 60 gigahertz cnWave solution to fit between fiber and CBRS assets as part of the new private network offering for multi-gigabit connectivity. We had a large order for 60 gigahertz solutions from a Canadian operator in Alberta, MCSnet, for a 60 gigahertz network build-out. They were attracted to our 60 gigahertz products as it offers gigabit speeds at a much lower total cost of ownership than fiber. They have already deployed in 12 communities so far with a goal of 44 connected communities during 2023. This is an example of where we are seeing a resurgence in our 60 gigahertz business after an initial period of gestation.

In the Europe, Middle East and Africa region, EMEA, we continued to have healthy demand for our Enterprise business and are winning larger projects. Cambium had a customer win with a fiber network operator in South Africa, Isizwe, for our outdoor Wi-Fi with the goal of connecting households up to 100 megabit per second and a disruptive cost model for the consumer. Isizwe aims to increase its number of homes connected from 4,500 in December 2022 to 22,000 in 2023. In the Asia Pacific, APAC region, we landed our first Network-as-a-Service, NaaS win to enable rural connectivity in Sumatra, Indonesia.

This first NaaS order in the region is for 500 homes and includes our Wi-Fi and cnMaestro X cloud software. This is in addition to our ePMP 3000 for fixed wireless broadband access. Upon successful deployment of this first order, we expect a larger multiyear volume agreement. And in Caribbean and Latin America, CALA region, in Brazil, we partnered with Qualcomm in collaboration with the National Telecommunications Agency, Anatel and Telium to demonstrate the first use of the 6 gigahertz band in an outdoor area in Campo Belo neighborhood of Sao Paulo.

The connection featured Cambium's outdoor Wi-Fi 6 and 6E access points, 6 gigahertz ePMP 4600 for fixed wireless infrastructure, cnMatrix wireless savvy switches and cnMaestro X cloud management software. The demo became available for 2 months starting on December 3 for visitors in the surrounding area. The demo included the use of Automated Frequency Coordination, AFC, spectrum sharing platform to ensure that there was no interference with fixed Point-to-Point systems existing in that region and to demonstrate its overall speed, performance and reliability.

Turning to upcoming product introductions since our previous quarterly update. While the industry is excited about the future availability of new 6 gigahertz spectrum to enable the delivery of gigabit data rates to the edge of the network and awaits FCC approval, Cambium also continues to push the envelope with affordable new 5 gigahertz solutions with our ePMP 4500 featuring 8x8 MU-MIMO and over 3 gigabits of capacity with up to [80] megahertz channels and enables non-line of sight to select subscribers.

The ePMP 4500 is a powerful and transformative product, which we expect will penetrate the market due to its high performance and affordability compared to other alternatives in the market, especially to take market share from our competition in the service provider space ahead of the FCC's approval of 6 gigahertz spectrum.

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 Q4 '22 was over 898,000, an increase of 4% from Q3 '22 and up 21% year-over-year.

Turning to our channel. In Q4 '22, we expanded our channel presence by adding over 425 net new channel partners sequentially and over 1,300 net new channel partners year-over-year, which represents an increase of over 3% sequentially and 11% year-over-year. We continued to expand our reach into new customers around the world.

I will now turn the call over to Andrew for a review of our Q4 '22 and full year '22 financial results and Q1 '23 and full year '23 outlook.

Thanks, Atul. Cambium reported revenues of $84.5 million for Q4 '22. Revenues increased by 4% quarter-over-quarter and increased by 7% year-over-year. On a sequential basis for Q4 '22, revenues were higher by $3.3 million. The higher revenues were primarily the result of increased PTP revenues for defense products and an increase in PMP products as a result of our 60 gigahertz cnWave and ePMP products, while enterprise solutions decreased after a record Q3 '22, which included the $5 million catch-up in switching revenues due to supply chain shortages in previous quarters.

For the full year 2022, revenues of $296.9 million decreased by $39 million or 12% compared to the full year 2021. The decrease is a result of lower PMP revenues, which declined by $89.8 million or 44% compared to 2021 due to product transitions to the next-generation 6 and 28 gigahertz cnWave 5G Fixed solutions. We had record enterprise revenues of $109.8 million during 2022, which grew by $42.9 million or 64% compared to 2021. And our PTP revenues increased by $6.3 million to $67.1 million or an improvement of 10% compared to the full year 2021 due to strong demand for our defense products.

Moving on to our gross margin. Our non-GAAP gross margin of 49.6% was better than anticipated, increasing by 540 basis points compared to Q4 '21. The year-over-year increase in our non-GAAP gross margin was the result of higher volumes and a greater mix of higher-margin enterprise and PTP products and lower freight costs. On a sequential basis, non-GAAP gross margin was lower by 170 basis points compared to Q3 '22. The lower quarter-over-quarter non-GAAP gross margin in Q4 '22 was the result of a higher mix of lower-margin PMP products, and as expected, a decline in enterprise switching revenues, offset in part by higher PTP revenues and higher component inventory costs.

In Q4 '22, our non-GAAP gross profit dollars of $41.9 million increased by $7.1 million compared to the prior year due to higher volumes and improved mix of PTP and enterprise products and lower shipping costs, and increased by $276,000 sequentially, mostly as a result of higher revenues, offset in part by the higher component costs due to inflation. For the full year 2022, non-GAAP gross margin improved by 130 basis points to 49.5% compared to 48.2% for 2021 due to an improved mix of our higher-margin enterprise and PTP product lines.

Our longer-term goal remains a consistent non-GAAP gross margin target of 51% to 52% on an annual basis. Non-GAAP operating expenses, including amortization in Q4 '22 decreased by $348,000 when compared to Q4 '21 and stood at $28.7 million or 34% of revenues. The decrease in operating expenses compared to the prior year period was primarily due to lower variable compensation and tight controls around head count, offset by higher sales and marketing costs related to travel and trade shows and higher wages, while R&D remained flat. When compared to Q3 '22, non-GAAP operating expenses increased by approximately $850,000.

Quarter-over-quarter sales and marketing expenses increased primarily because of higher wages and sales accelerators related to our Enterprise business and increased trade show and travel expenditures, while R&D increased as a result of higher staffing costs related to development work on new products and G&A decreased due to tight cost controls. For the full year 2022, non-GAAP operating expenses decreased by $1.6 million and stood at $112.7 million compared to $114.3 million for 2021. The lower non-GAAP operating expenses during 2022 reflect less variable compensation, offset by higher wages due to inflation. We will continue to maintain our strong cost controls.

Non-GAAP operating margin for Q4 '22 was 15.6%, up from 7.3% during Q4 '21 and down from 17% of revenues in Q3 '22. For the full year 2022, our non-GAAP operating margin was 11.6% compared to 14.1% in 2021, primarily reflecting lower revenues and less scale, resulting in fewer gross profit dollars despite an improved mix of revenues. Non-GAAP net income for Q4 '22 was $10.3 million or $0.36 per diluted share, above our previous outlook of between $0.23 to $0.27 per diluted share and compared to $4.4 million or $0.16 per diluted share for Q4 '21, and non-GAAP net income of $11.3 million or $0.40 per diluted share during Q3 '22.

The higher non-GAAP net income compared to the prior year period was primarily due to higher gross profit dollars, while lower net income compared to the prior quarter's results was primarily a result of higher sales and marketing costs. For the full year 2022, non-GAAP net income was $26.9 million or $0.94 per diluted share compared to $35.6 million or $1.26 per diluted share in 2021.

Adjusted EBITDA for Q4 '22 was $14.3 million or 16.9% of revenues compared to $6.7 million or 8.6% of revenues for Q4 '21 and compared to $14.7 million or 18.2% of revenues for Q3 '22. The full year 2022 adjusted EBITDA was $38.8 million or 13.1% of revenues compared to $51.2 million or 15.3% of revenues for the full year 2021. Our operating model remains solid. We remain committed to consistently driving our adjusted EBITDA to our long-term target of 18% to 19% of revenues.

Now moving on to cash flow. Cash provided by operating activities was $4 million for Q4 '22 and compares to $5.6 million for Q4 '21 and $2.2 million for Q3 '22. Our cash flow was negatively impacted as we increased inventories and materials to support new products and to take advantage of supply chain opportunities for the anticipated growth of our business, and we increased accounts receivable as a result of higher revenues.

Now turning to the balance sheet. Our cash totaled $48.2 million as of December 31, '22, an increase of $3.3 million from Q3 '22. The sequential increase in cash primarily reflects collections on higher revenues and changes in working capital. Our net inventories of $57.1 million in Q4 '22 increased by approximately $23.3 million year-over-year, while increasing $6.4 million from Q3 '22. Inventories were higher sequentially because of an increase in inventories as we continue to grow our business and take advantage of supply chain opportunities. The increased level of inventories reflects the anticipated higher demand for federal products, enterprise solutions and the ramp of new PMP products during the second half of calendar year '23.

In summary, the fourth quarter played out better than anticipated. As predicted, our PMP business grew sequentially. Our gross margin remains strong. We continue to see improvement in our supply chain environment. Our backlog remains solid, and we are at the start of new product cycles. During 2023, we expect to gain scale, improve operational efficiency and make significant progress towards achieving our long-term target operating model. As expected, while the supply chain continues to improve, there are still areas of component shortages in certain products and longer lead times as compared to pre-COVID levels.

Moving to the first quarter and full year 2023 financial outlook. Cambium Networks' financial outlook does not include the potential impact of any possible future financial transactions, acquisitions, pending legal matters or other transactions. Considering our current visibility as of today, our Q1 '23 financial outlook is expected to be as follows: revenues between USD74 million and USD80 million, representing growth of approximately 20% to 29% year-over-year and a decrease of between 5% and 12% sequentially due in part to seasonality in our PMP business and slowing world economies, while our defense business and PTP remains strong, non-GAAP gross margin of between 49.2% and 50.8%, non-GAAP operating expenses between $30.6 million to $31.6 million, and non-GAAP operating income of between USD5.8 million and USD9 million, interest expense net of approximately $600,000 and non-GAAP net income of between USD4.1 million and USD6.8 million or net income per diluted share of between $0.14 and $0.23, adjusted EBITDA between $6.8 million to $10 million and adjusted EBITDA margins between 9.2% and 12.5%, a non-GAAP effective income tax rate of approximately 17% to 21% and approximately 28.9 million weighted average diluted shares outstanding.

Cash requirements are expected as follows: pay down of debt of $700,000, cash interest of approximately $400,000 and CapEx of between USD3 million and USD4 million. Full year 2023 financial outlook is expected to be as follows: we expect revenues of between USD327 million and USD345 million, representing approximately 10% to 16% revenue growth, non-GAAP gross margin of approximately 50%, non-GAAP net income of between USD33.9 million and USD36.4 million or net income per diluted share of between $1.17 to $1.25, adjusted EBITDA margins of between 14.5% to 15%. And for the year, we expect CapEx to be approximately $14 million to $18 million, mainly driven by an expansion in our R&D labs and equipment, along with software costs in connection with new products.

I will now turn the call back to Atul for some closing remarks.

We delivered a solid quarter of results with increased revenues, excellent profitability and a strong balance sheet, significant new product introductions and a return to growth for our PMP business driven by 60 gigahertz cnWave, 28 gigahertz cnWave 5G Fixed, and the launch of affordable 6 gigahertz fixed wireless PMP solutions. Our Enterprise business remains strong, led by Wi-Fi 6 and 6E wireless savvy switching products and an increased offering of our software-as-a-service solutions, an excellent onboarding of new large managed service providers.

We expect the Enterprise business to grow between 20% and 30% during calendar year '23. The Cambium ONE Network integrated wireless fabric has become a reality, providing customers ease of deployment, scalability of networks and lower total cost of ownership as the world deploys next-generation high-performance wireless broadband networks. During 2022, we diversified and made our business more resilient. We remain focused on judiciously managing our costs, improving our operations, continuing to invest in innovative products to maintain our technology edge and expect increased scale will benefit our future operating results.

As we look to 2023, our 6 gigahertz, 28 gigahertz cnWave 5G Fixed technology, millimeter wave products and upcoming fiber products will expand our markets and continue to propel Cambium in the fixed wireless broadband market. Our defense business is expected to continue growing as national security has become a global issue. And our reach into managed service providers and multi-dwelling units will broaden and strengthen our Enterprise business and position us for continued strong growth. We'll expand our software and services offerings and add even more features, security and functionality into our flagship cnMaestro platform.

Our focus will be on solutions that our customers want, keeping a keen eye on how our products mesh with customer applications and network automation. Cambium has now graduated from building just radios to delivering an exceptional customer experience through our extensive broadband solutions that brings delight and confidence. Given the humanitarian crisis unfolding in Turkey last week, Cambium is contributing wireless broadband solutions in the country for connectivity to loved ones to support the citizens and relief workers in the hardest hit areas. I would like to show my appreciation for our employees, partners and customers for their resilience as we return to growth during the second half of calendar 2022.

This concludes our prepared remarks. So with that, I would like to turn the call over to Amy and begin the Q&A session.

(Operator Instructions) And our first question comes from Simon Leopold with Raymond James.

First, I just wanted to knock out a quick clarification. In the prepared remarks, Atul, I think you talked about the mix being roughly 40% PMP, 40% Wi-Fi or Enterprise and 20% P2P, but I wasn't sure what time frame you were thinking about those targets, whether that was your 2023 view or something longer term? And then I've got a follow-up.

Yes. Thanks, Simon. That's a long-term model. Generally, long-term model for us is 2-year to 3-year time frame. And especially PMP is a very key foundation of Cambium with the resurgence of new products, innovations we are doing with gigabit connectivity, millimeter wave 5G. So that just tells you the confidence we have that in a long-term model, you will see PMP and Enterprise probably equal and PTP about 20%.

And then a little bit more of, I guess, a trending question is around -- I have the impression there's some controversy around the BEAD or government Broadband Equity Access Deployment program funding that, if I'm understanding it correctly, they look at areas where WISPs are providing service and consider them unserved or underserved. And I guess the thought process is that there'd be some risk that the government funds would pay to build out competition to your WISPs customers. And I guess I'm just trying to get a better understanding, I think the WISPs Association is lobbying the NTIA. If you could maybe tell us a little bit about what's going on and where we are in terms of solving this problem?

Sure. So Simon, let me address on both RDOF as well as BEAD. The RDOF, which is the Rural Development Opportunity Fund, actually just approved 2 of our customers for a total of about $700 million. And they plan to deploy 6 gigahertz for that gigabit connectivity. So in the RDOF world, the 6 gigahertz, CBRS, all that stuff is giving mission-critical connectivity. In the BEAD world, as we said -- this is the federal infrastructure initiative, as we said, it will be probably early '24 when the dissemination will happen. And I think the results of our -- all the interactions we are having with different folks, it is very clear that wireless will provide a very affordable mission-critical infrastructure, the way it has provided in CAF 1 and CAF 2, the Connect America Fund 1 and Connect America Fund 2.

So we are pretty confident that economics and the results of RDOF success will prevail in all the government installations. And also many of the fiber customers of Cambium are actually using it very successfully in tough terrains and some localities where fiber cannot be deployed. So for many practical reasons, I think you will see BEAD also adopted, but RDOF is taking the initiative probably a little earlier.

And our next question comes from Samik Chatterjee with JPMorgan.

This is Angela Jin on for Samik Chatterjee. I just wanted to ask one question on the customer verticals. So in the service provider vertical, are you seeing any sort of pause in spend from sort of mid-tier providers? And then on the enterprise side, well, Cambium doesn't really serve that many traditional enterprise players. Are you seeing the macro impacting hospitality, education, health care verticals and their budgets heading into 2023? And then I have one follow-up.

Sure. Thanks, Angela. Let me address the service provider first. So in the service provider, they are moving to next-gen architecture. Actually, Cambium has used the pandemic time frame to completely create the new architectures for gigabit. That's what we did the last 2 years. So what we're finding is that if someone is selling last generation architecture with slow speeds, you're absolutely right, they are not going to adopt that. But if you have gigabit connectivity, you have 60 gigahertz, 5G standards, we are seeing significant activity in our funnel and the number of customers, number of POCs in even '22 increased quite a bit.

So the key message, you have to have the next-generation architecture, and that's the platform of the future for Cambium. And we are seeing good growth there. In enterprise, we focus on hospitality, education, and our channel is to manage service providers, and they value ease of deployment, they value economics. And those are the 2 key differentiation Cambium has. And that's why we are posting 60% plus year-over-year type of growth. So we are not seeing any slowdown there. But even there, Angela, you have to have very high performance, 6 -- Wi-Fi 6 and 6E products, again, next-gen architecture. And that has been our key message. New growth S-curves are what's driving the growth right now.

You got a follow-up?

Yes. So I guess moving to my follow-up. So given the ramp in 5G investments and build-outs that are going on in India, could you maybe just walk through what is your exposure to India and your thoughts on potential growth in that region?

So Angela, India's 5G, we are very engaged. I think it will take still a year to 1.5 years for the dust to settle down because their frequency is, I think, 26 gigahertz or so. And we have a -- we have very good understanding of what will it take. In general, 5G Fixed addressable market between '21 to '26 is going to go from $890 million to $1.6 billion. It's a 100% increase in those 5 years, 6 years. So we think that 28 gigahertz will be a key market, including India, but gestation might take good solid year to 18 months, but very engaged in that market.

And our next question comes from Scott Searle with ROTH.

Atul, a lot of new products starting to go out the door. I'm not sure if I heard a number, but I was wondering if you could give us some idea of the magnitude of the contribution of 28 and 6 gig? I know it's early days in the just completed fourth quarter and 60 gig as well, I know it's starting to ramp up. I'm wondering how -- what sort of bundled opportunities you're seeing with the other newer products? And then I had a follow-up.

Sure. Thanks, Scott. Let me go one by one. So 60 gigahertz, we have -- now, as we mentioned, we have a couple of million dollars in every new technology. I look for 3 tiers, when do you cross $100,000 in revenue, when do you cross $0.5 million and when do you cross $1 million. So we are now beginning to see many customers in 60 gigahertz crossing million. What that basically means is they are deploying north of 1,000 subscribers. And as Cambium history shows, every new platform we bring, first, we cross the 1,000 barrier, then we cross 10,000 subscriber barriers, then we cross 100,000 subscriber barriers, and it's a 4-year cycle.

So the key message on 60 gigahertz, I think we are now scaling. Our customers are scaling. The gestation for many of the POCs we talked about last 3 quarters, 4 quarters has happened. And this cycle will continue. And where we see acceleration is wireless Internet service providers with municipalities, which are using it for public Wi-Fi, video surveillance, and enterprises, particularly logistics, outdoor Wi-Fi campus connectivity. These are the segments where 60 gigahertz is expanding. So feel pretty good about that as we exited Q4, we felt now our customers are beginning to scale. So that's 60 gigahertz.

28 gigahertz will not have as many customers, but the deal sizes of 28 gigahertz will be probably, in many cases, 5x to 10x because it's a license frequency, and it is very much adopted by Tier 1s and Tier 2s. So what you'll see between 28 and 60 gigahertz is 60 gigahertz will be lots of deals, lots of customers, thousands of them, whereas 28 gigahertz will be probably hundreds, but the deal sizes on 28 gigahertz will be much larger. We have about 20 POCs, 20, 20 POCs worldwide, and 8 are in production right now. And that tells you how fast Cambium is moving.

And just if you look at 2021, we only had 2 or 3. So in last 12 months, our POCs have increased, production customers have increased. And as I mentioned many times in the last few quarters, deal sizes is much, much larger, and their duration is also 3 years to 4 years, not just 1 year or 2 years.

And let me touch very briefly on 6 gigahertz. We shipped, Q4, our 6 gigahertz products, and that will support 10 to 20 POCs, many of the POCs are turning into now production, though FCC has not yet approved the final -- they've not given the final green signal, but many customers believe that the cost of deployment on towers is very expensive. So they are deploying 6 gigahertz and some of them are also using the 5 gigahertz version, which is ePMP 4500, as we mentioned.

So all these areas are growing. That's why we are saying 2023 for PMP will be expansion, more second half because many of these by the time they enter production and scale and all that, you will see that result. And when we fast forward 2 years, 3 years, we believe PMP, 40%, enterprise, 40%, PTP, 20% is probably the right steady state distribution.

Got you. Very helpful. And if I could for a follow-up, on the 6 gigahertz front, we're waiting for certification and approval from the [FCC] for the ASC before I guess we start to go into more commercial production. So with that in mind, I'm wondering how you're thinking about the ramp-up into the second half of this year and what's going to constitute success kind of exiting 2023? And as we think about 2024, how big of an opportunity is that the 6 gigahertz product line? What would be success?

And if I could just briefly kind of dissect between the U.S. and international markets. There's been a lot of focus near term on the U.S. opportunity, but this is certainly a global market in terms of what's going on with 6 gigahertz and regulatory approval and the allocation of frequencies. So I'm wondering how you're seeing that shape up on that front and how we should be thinking about that over the next couple of years?

Excellent question, Scott. So first of all, 6 gigahertz, United States is leading. I think every other country is observing. Brazil is one of the first ones to come on the band bag. And in our prepared remarks, we did say in Sao Paulo, we work with Brazilian authorities like Anatel and we showed that capability. I think you'll see many progressive countries adopt 6 gigahertz. And there's a reason for that. 5 gigahertz is a very well-established frequency, but it's getting noisy.

So when government gives you about 1,200 megahertz of very clean spectrum, that's a big deal, like in 2 decades, there's nothing like this have ever happened. So it's a big deal. So our belief is that U.S. will lead and many 5 gigahertz WISPs, particularly are waiting for to expand and the cost advantage and the performance advantage from 5 gigahertz to 6 gigahertz continues. Remember, when you go to the 60 gigahertz, 28 gigahertz, there's a technological change.

And that's why the gestation is needed. That's why the experience is needed before you scale. But when it comes to 6 gigahertz, it's an adjacency. They know how to do it. So I think the 6 gigahertz volume is starting the second half '23 is still early. It will ratchet up in '24 and '25, and this has been our experience. When we introduced Medusa in 2016 with our 5 gigahertz architecture and 3 gigahertz architecture, it ran for next 4 years, 5 years, and that's I always emphasize that.

So I think '23 still for 6 gigahertz in second half is a start, but it has a long legs after that. And we are feeling very excited because our customers are getting excited because they can see the price performance is of a different magnitude. That's why I always call it S-curve. It's a new S-curve.

And our next question comes from Erik Suppiger with JMP Securities.

Yes. And just following up a little bit more on some of the product segments. One, how much of your shipments on the enterprise side are Wi-Fi 6 or Wi-Fi 6E at this point? And then secondly, any comments in terms of timing around your fiber products when you think those will start hitting the market? And if they would be a meaningful contributor in '23?

Yes. Thanks, Erik. First of all, Wi-Fi 6 transition in Cambium portfolios happened very successfully. I would say majority of our shipments as of today are Wi-Fi 6 and 6E. So that gives you a pretty good indication majority. And this was the bet we made almost 18 months to 2 years back and has played very well. In terms of fiber timing, we are in beta. We will ship volume Q2 time frame. And our customers are pulling us actually, because one of the things Cambium is known for is ease of deployment, single pane of glass for management, and they are saying since the government dollars are going to be coming on that side as well, Cambium, why don't you provide us a nice solution. So our plan is where wireless stops, fiber can take over, where fiber stops, wireless can take over, single pane of glass to manage and focus on ease of deployment.

Just real quick on the Wi-Fi 6, are you shipping much Wi-Fi 6E at this point?

Some, yes, some. But I think Wi-Fi 6E, it has just so much horsepower in the outdoor arena and indoor arena that I think as of now, some, but I would say most of it is Wi-Fi 6. But that will change in probably '23 second half and '24.

And our next question comes from Paul Essi with William K. Woodruff.

Yes. A lot of my questions have been answered, but I've got a couple of quick ones. In the software area, what percent of the software revenues are now within a SaaS model? And what is the average? Is it a 1-year, 2-year, 3-year contract that you signed with them?

So our -- yes, thanks for the question. So as a percentage of our total revenue, if you look at SaaS type revenue that's recurring in nature, both software and support services together is about 5% to 6% of our total revenue. And most of those deals, they do vary 1-year, 2-year, 3-year, even some 5-year, but I would say, on average, they're 3-year deals.

Okay. Okay. Because I know that your deferred revenues are starting to build, and I just wanted to...

Exactly. That's why. Yes.

Okay. Okay. And second question, real briefly, have you seen any labor issues? Some of the other companies have expressed a concern that a year or 2 out, there might be some difficulty getting this product out and meeting some of the specs that the government is putting into the grants they're providing?

Paul, I didn't understand waiver issue. Could you be more specific?

Well, labor issues with rolling out the installations because [that might be your] bottleneck.

Yes. No, we have not heard that. No, no, we have not heard that. We had those issues, I would say in 2020 first half, and then 2020, second half, a little bit, 2021, people figured out how to work, [2022], no, I would not say we have heard labor issues on -- at least for our products.

And our next question comes from Tim Savageaux with Northland Capital Markets.

A nice quarter. So I wanted to contrast a lot of these positives that you've been discussing in terms of PMP, 6 gigahertz, new products, 28 gig, I would imagine the fiber product would go in that bucket, some funding for customers from the government. So there's a lot of positives there. You appear to be guiding to very, very modest growth in PMP in '23, like low single digits maybe. And I know there's kind of some recovery maybe from a seasonal decline in Q1. But I guess, how do we contrast, are we seeing kind of a falloff, quicker than expected falloff of legacy products on the one hand, that's kind of short term?

And then longer term, to get to your target even if you assume Wi-Fi is slowing, I mean, in the next few years, past '23, your growth rates kind of need to be and PMP sort of need to be where your enterprise growth rate is now, 25%, 30%, something like that. Is that something you have confidence in or a line of sight to?

Yes. Tim, thank you for the question, and an excellent question. Let me give you more insight into this. As I said earlier, I look for million-dollar deals because then I know the technologies are scaling. I think that's happening on 60 gigahertz. And even as we speak, some of the networks we are conceiving even with 60 gigahertz, the numbers are now beginning to be 5,000 to 10,000 subscribers. So that gives us the confidence that these new platforms are now scaling.

Customers are deploying, and they are gaining the confidence that they can truly provide fiber-like speed wirelessly. That's 60 gigahertz. 28 gigahertz is a -- 28 gigahertz is driven by 5G standards. And I mentioned earlier, 2026, the TAM of that market for fixed wireless is about $1.6 billion. And we have just started the 5G route. I think what you will -- the contrast you will see between 60 and 28 gigahertz, 28 gigahertz, we are now, as I said, we have 20 POCs, 8 in production and customers are beginning to scale. The difference will be the deal size on 28 gigahertz will be far larger.

As I said earlier, over a 3-year, 4-year period, 5x to 10x the revenue total deal size because this is a license frequency. Somebody has paid money, they really want to deploy it. But for fixed wireless broadband, life cycle is about 4 years to 5 years from the start to finish. So I think what we are describing is probably the first [20th percentile, 25th percentile] in '23 and probably half of '24. And then we -- these networks will -- and this is what we have experienced in the last 10 years. So we are sharing with you based on how we are seeing these technologies gestate. They have a long -- really long life in that sense.

So I think that gives us the confidence that as the gestation happens over next 3 years, that 40/40/20, PMP, enterprise and PTP is very, very realistic because we know the market sizes, we know where our strengths are, we know where our sales teams and channels are. We have excellent channels, especially for PMP markets. So -- and this is what we did last 2 years post COVID, just focused on these next-generation platforms. And now we are beginning to get that confidence they're scaling. That's the key word. They're scaling and they're being deployed.

Fiber, while we are excited, fiber will go through the same thing. Our enterprise quarters used to be $2 million, $3 million, $4 million for first few years. It took us time to kind of learn, scale, deploy and now we are cranking north of $25 million a quarter. So that's what we do. We work with customers closely with them, learn and then scale.

And to just give you a little bit more color as well that you're right that there will be some level of seasonality in the first quarter with PMP and the revenues in PMP in the first half of the year when you look at it on a year-over-year basis will decline. But in the second half of the year, and this is how we define, getting back to how we define success is that we'll be exiting the year with double-digit year-over-year and sequential quarter increases as a result of the new products coming into market in PMP. And that will continue, we believe, to accelerate into 2024.

And our next question comes from George Notter with Jefferies.

I -- in the past, you guys have talked a little bit about what channel inventory looks like, whether it was kind of above or below average or average. Could you just give us any comments on where you think that is right now?

Yes. So I -- so when you break it down, I think that the channel inventory on the enterprise side is a little bit higher than what it's been running at over the course of the past 12 months or so. Some of that is because of improvements in supply chain and lead times getting a little bit shorter as well and the ability to deliver product into the distributors. So I think that's what we're seeing on enterprise, slightly higher. On the PMP side in terms of the -- our inventory out of distributors, it's actually going the other direction. And that's a sign of the distributors getting ready for some of our new products as well. So I think it's somewhat balanced out in that fashion.

Got it. And then I guess I was also just going to ask about supply chain. I think you kind of answered it there. I mean are you still seeing any big hold-ups on supply chain, golden screw type issues or do you think products are flowing pretty freely now from a manufacturing perspective?

So, George, first of all, our all manufacturing subcontractors and the sites are open and operating. As I said, supply chain is improving, but I don't think it's -- it is not yet normalcy. I think it will be probably mid-'23 when it will reach kind of for us, at least mid-'23 pre-COVID normalcy. There are still shortages on certain parts, but by and large, things have improved. And I think even after Chinese New Year, which is always something we watch carefully. This year, no hiccups, no hiccups, factories are fully open, logistics and freight are continually improving. So, so far, so good.

And we have a follow-up question from Scott Searle with ROTH Capital Partners.

Just a quick follow-up on the 6 gig front. I know you're looking at rolling a dual-mode 6 gigahertz solution product. I thought it was in the second quarter around CBRS, right? So it helps you circumvent some issues as it relates to reliability and BEAD funding. Just wanted to check on the progress of that and make sure that that's still tracking for the second quarter and kind of what the interest level is that you're seeing at least early on in dialogues with the wireless ISPs and other carriers on that front?

Yes. So Scott, the combo product of 5 and 6 gigahertz will very much be driven by the chips availability. In the beginning, the 5 and 6 gigahertz are 2 different products and CBRS. CBRS 1 is a 3 gigahertz separate frequency, completely different product. So I think this year, you will see us very much gain the experience and then focus on the combo side based on our experience with the customers and also based on availability of chips and all that. So I don't think the combo part will come right away because I think most of our customers right now are either deploying 5 gigahertz or 6 gigahertz. And CBRS is a completely different product.

And our next question comes from Timothy Horan with Oppenheimer.

So you have kind of 5, 6, I guess, almost 7 new major products kind of coming out here now. Can you talk a little bit about last time you had this many new services or sorry, new products coming out and what the impact was? And I mean, should we be kind of expecting a material step-up in growth in '24, '25 based on all the commentary that you have here?

Thanks, Tim. Yes. So while there are new products, if you look at when did we introduce them. A lot of it is about gestation. 60 gigahertz actually was introduced by us almost 18 months back. It's just that the gestation is now reaching a point where customers understand how to deploy it, they are scaling. 28 gigahertz, we introduced about a year back or so, something like that. And that is also beginning to now enter a point where they're going to scale. So I think when we say new products, while these are new platforms, some of them were introduced a year or 1.5 years back.

The completely new stuff, which is coming now is the 6 gigahertz, which we just introduced in Q4 last year about 3 months back or so. So these are different waves. I think the way to think about this is, as customers are scaling their networks, they will not deploy all of them at the same time. They will deploy it depending on the region, the rain, they'll deploy different frequency, and these will overlap over time. And that's what gives us resiliency because now we have different frequencies for different countries and regions. We have different performances and different cost structures, like 28 gigahertz is a license frequency.

Only Tier 1s and Tier 2s can afford that. So we are now working with them versus 6 gigahertz is, a lot of WISPs will use 6 gigahertz is an extension of 5 gigahertz. And 60 gigahertz is going both in enterprise, as I explained as well as municipalities and WISPs. So what you're seeing from Cambium is a broad wireless fabric serving some very key segments, and each one of them takes a little different time to gestate.

I understand, but I mean they're all kind of hitting the S-curve of the adoption cycle in the next 6 months to 8 months -- in the next 6 months to 12 months, I mean, they're all hitting almost at the same time, and the same thing with the Wi-Fi products. It feels like -- I know they've all been [introduce] at different times, but for a whole bunch of reasons, it does feel like we should really see a real acceleration in '24 and '25. And I'm not trying to put words in your mouth, but it does seem like they're all really hitting for '24?

Yes. Tim, I agree with you. I think starting in the second half, you will see some of the acceleration as we mentioned in the 6 gigahertz for example. But '24, '25, we will benefit from all these investments we have done in the last almost 18 months. That's an accurate statement.

[Plus] our product cycles for the older products as well that just in terms of its life cycle will go the other direction as well. So just keep that in mind.

And do you have any -- I know it's early to give guidance, but I mean all things being equal, it should be up from this year's growth rate. Is that pretty fair?

We really haven't gone through that level of guidance for our analysis for '24 yet. But we do -- we are -- like we said, we are excited about the new S-curves, especially when you look out over the next 12 months and you look at the 6 gigahertz product and the level of volume that, that could mean in starting in the S-curve in the PMP side of the business.

And then do we have any sense of the TAM of the 6 gigahertz product?

Yes. I think the way -- Tim, you want to think about this is 6 gigahertz is an extension of 5 gigahertz. And the 5 gigahertz Point-to-Multi-Point was about $1 billion TAM. The way you want to think about this is that $1 billion will churn and extend into the 6 gigahertz. That's the probably the easiest way to think about it.

I'm showing no further questions at this time. I would now like to turn the conference back to Peter Schuman, Vice President, Investor and Industry Analyst Relations for closing remarks.

Thank you, Amy. During Q1 '23, Cambium Networks will be presenting and meeting with investors on March 7 at the JMP Securities Technology Conference and on March 14 at the ROTH Annual Conference. In the meantime, you're 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.

Ladies and gentlemen, that concludes today's quarterly earnings call. Thank you for your participation. You may now log off.