Cambium Networks Corp (CMBM) 2021 Q1 法說會逐字稿

Good afternoon. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cambium Networks First Quarter 2021 Financial Results Conference call. (Operator Instructions) Thank you. Mr. Peter Schuman, Senior Director of Investor and Industry Analyst Relations. You may begin your conference.

Thank you, Abigail. Welcome, and thank you for joining us today for Cambium Networks First Quarter 2021 Financial Results Conference Call, and welcome to all those joining by the webcast. Atul Bhatnagar, our President and CEO; and Stephen Cumming, 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 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 first quarter 2021; and Stephen Cumming, Cambium Networks' CFO, will provide a recap of the financial results for the quarter and our financial outlook for the second quarter and calendar year 2021. Our prepared remarks will be followed by a Q&A session. I'd like to now turn the call over to Atul.

Thank you, Peter. The momentum continued to build for Cambium's business as our vision as a high-performance, yet affordable global wireless infrastructure leader for broadband communications accelerated during the first quarter of 2021. During the last week of January, Cambium Networks shipped our 9 millionth radio since becoming a stand-alone company. Interest in fixed wireless broadband solutions is becoming mainstream as performance matches that of fiber and the attractive cost of ownership for our solutions make Cambium a competitive and economically superior solution for wireless infrastructure projects around the world, propelled by increased government spending. Fixed wireless broadband is a critically important networking infrastructure to connect our local communities. If it can be a wireless solution, it will be a wireless solution because of ease of installation and operations.

We are at the start of a new era of end-to-end wireless speeds equivalent to that of fiber. Our multi-gigabit wireless fabric can deliver fiber's performance and reliability at a fraction of the cost. Our recently launched 60 gigahertz cnWave solution is shipping in volume with increasing demand and our forthcoming fixed 5G 28 gigahertz millimeter wave products with proof-of-concept arriving during the middle of 2021 and fall for volume shipments will further accelerate this trend as we reach new customers and enter new markets demanding higher broadband performance at the edge of the network.

For the first time in Cambium's history, we will be -- purposefully compete in urban markets in a meaningful way as existing networks upgrade infrastructure and new high-speed networks proliferate with more cost-effective technology provided by Cambium Networks. Cambium's significant new product introductions, combined with increased government funding around the world, will benefit our financial results for many years into the future.

Turning to the results of first quarter 2021. We achieved a record revenues of $88.5 million, above the high end of our outlook of between $81 million to $85 million. Non-GAAP diluted EPS of $0.41 also exceeded the high end of our outlook of between $0.30 and $0.34 per diluted share. We delivered these outstanding results as we have transformed Cambium into a more agile company as we continue to work remotely during the COVID pandemic.

Taking a look at revenues across our different product lines. Within our Point-to-Multi-Point, PMP, business, we had record revenues, increasing 7% sequentially and up 66% year-over-year as we continued to see strong momentum in network traffic, increased demand for our CBRS solutions and solid demand for new product introductions. We believe we are taking share from both larger and smaller competitors as we expand our portfolio of solutions, offering industry-leading spectral efficiency, scalability, quality, reliability and attractive economics for our customers. The Point-to-Point, PTP, business had better-than-anticipated results during Q1 '21, growing 4% quarter-over-quarter while improving 33% year-over-year on higher demand for backhaul. We had record results for our enterprise Wi-Fi business, which continued to recover from COVID, growing 11% sequentially and increasing 6% year-over-year during Q1 '21 due to the expanded growth of Wi-Fi 6 solutions and record revenues for our cloud-savvy cnMatrix enterprise switching products.

Looking at some notable customer wins and new product developments. In North America, we had multiple wins for our new 60 gigahertz cnWave Solutions. Alaska Communications, a service provider, is planning to offer up to 1 gig speeds to select residential locations in Anchorage and Fairbanks. Cambium's solution was selected to work in conjunction with the existing fiber networks, where new fiber construction is cost prohibitive, and Cambium's technology allows for delivery of service to neighborhoods more quickly. Also in Alaska, Cambium won a residential deployment at a military base using our 60 gigahertz cnWave technology. Within our PTP business, a large service provider delivering high-speed Internet and voice services to 6 states in Midwest and Southwest selected our PTP 850 as they seek to expand and fortify their network.

One of the larger RDOF winners, which is a new customer for Cambium is building out their commercial network with the use of Cambium's PMP 450m and our ePMP technology. The customer selected Cambium for our superior performance, reliability and the ability to scale with their business. Another significant win for Cambium was with an NFL City in the Southeast for a smart city project. The city selected Cambium's 60 gigahertz cnWave for Wi-Fi backhaul and our cnPilot e700 for outdoor community Wi-Fi access. Cambium was selected by customer for our cnMaestro wireless fabric management, reliability, scalability, superior performance and value. In enterprise, a large MSP based out of the Northeast selected Cambium cnMatrix switching products for deployment in an assisted living and health care facility.

Cambium was selected for a simple, reliable and secure cloud management platform as well as policy-based automation. Cambium's first mover status with the FCC's 3.5 gigahertz CBRS spectrum continued to have momentum for the sales of our PMP 450 products and our SaaS service in both the U.S. and its territories. Our full end-to-end solutions include high-performance radios, over-the-air CBRS upgrades and cloud-based software solutions. In April, we released software updates for support of priority access licenses, PAL, multi-grant support once they become online, providing another layer of differentiation from competing LTE solutions. Further enhancements to our CBRS platform will occur in June, including optimized alternative channel algorithms.

As of today's call, we now have over 90,000 devices managed by our CBRS SaaS service, an increase of over 19% since we reported last quarter. In the Europe, Middle East and Africa region, EMEA, the strategic wins from Q1 include: in Spain, we have a few larger wins to share, one of Spain's and Portugal's leading nationwide fiber and mobile network operators selected Cambium to launch their high-speed broadband services across the interior of Spain and Portugal, where deployment -- deploying fiber is cost prohibitive. They selected our PMP 450m and enterprise switches as well as cnMaestro X. This is a first sale to a nationwide carrier of cnMaestro X since the products release in Q4 '20.

Also in Spain, we are seeing a gradual recovery in the hospitality market and have closed a high-profile enterprise Wi-Fi win at a 5-star luxury resort, the Marbella Club Resort on the Mediterranean Coast. The resort selected Cambium's full suite of hospitality solutions to deliver high-speed wireless connectivity across the resort to cover guest rooms, outdoor recreation areas and high-density conference facilities using our cnPilot Wi-Fi. Wi-Fi aware cnMatrix switching technology, all managed by our cnMaestro software solution. In the U.K., we had another high-profile win for our 60 gigahertz cnWave solutions and Cambium's enterprise Wi-Fi solutions at WiFinity, the U.K.'s leading managed service provider of connectivity solutions for recreational holiday parks.

WiFinity will deploy Cambium's 60 gigahertz cnWave to provide high-speed connectivity for guests at multiple holiday parks in the U.K. In-country staycations are popular this year due to travel restrictions between countries. Cambium continues its leadership position, deploying public Wi-Fi solutions across the European Union as part of EU's WiFi4EU initiative, having already secured over 1,500 municipalities under the EU's WiFi4EU program. This very-successful, government-sponsored WiFi4EU program was extended by an additional six months, approximately 800 to 900 municipalities in Europe still have not yet used their vouchers. In the Middle East, Saudi Aramco, the world's largest petroleum company awarded Cambium its first project to backhaul oil wellheads and security data for its production operations.

In Africa, the Orange Group's Ivory Coast operating entity selected Cambium to upgrade its high-speed broadband network. The win displaced one of our closest competitors with the selection of our ePMP Force 200 technology due to ePMP's superior performance and Cambium's superior technical support. In the APAC region, we had a sizable enterprise Wi-Fi 6 win at the Melbourne convention and exhibition center, which is replacing end-of-life of a major Wi-Fi vendor with Cambium's XV3-8 access points to establish connectivity of their back-office operations. Cambium was already powering Wi-Fi in the front office areas, including the conference rooms and exhibition areas. Now the convention center is fully deploying Cambium in their front and back-office operations, altogether, 250 access points will be in operation.

In New Zealand, Stratnet, a large WISP with coverage across the country decided to transition from a close competitor to Cambium. We are now deploying the first project in the northern part of the country, funded by the New Zealand Government's Rural Broadband Initiative to provide high-speed Internet to the underserved areas. In the first phase, Stratnet is deploying Cambium equipment to connect over 550 residential customers. Cambium was selected for overall cost of ownership, performance and scalability.

In the Caribbean and Latin America, CALA, region, we had a record-breaking quarter with revenues at $10.5 million, the second consecutive quarter that the region has exceeded $10 million in revenue. We had another large deal in Colombia this quarter with a Tier 1 service provider. As 2 different system integrators selected Cambium, using both our ePMP technology for the fixed wireless backhaul portion of the project to connect remote locations and Cambium's enterprise Wi-Fi solutions, including cnMatrix switches. They were selected for access at those sites. The operator who has recently acquired significant new access spectrum is expanding its capacity and coverage nationwide to bridge the digital divide. We won this project based on our reputation plus the functionality of cnMaestro Cloud management software.

In Panama, Cable Onda, owned by Tigo-Millicom, purchased a significant number of 3 gigahertz PMP 450 CPEs to service its expanding customer base in that country. Finally, we won the first phase of a public safety project with the state of Veracruz in Mexico. The state government plans to deploy 50,000 surveillance cameras using our PTP 670 for transport and PMP 450i for access. Cambium was selected because of the performance of our PMP 450i and our reputation as a leading provider of solutions being used by numerous high-profile video surveillance systems in Mexico.

Looking at new products since our previous quarterly update. During the middle of this year, we expect to have 2 significant new product introductions. First, our outdoor Wi-Fi 6 product, the XV2-2T will be released this summer. Outdoor Wi-Fi is an increasingly relevant market in a number of verticals, and Cambium has a particular strength in this market, given our strong heritage in outdoor resilient radios. Second, our highly anticipated 28 gigahertz cnWave 5G product will be available for POCs around the time of our next quarterly earnings call. Initially, customers in the EMEA region will be our primary focus for our fixed 5G products.

Our 28 gigahertz cnWave provides high capacity, scalable residential access, backhaul for outdoor Wi-Fi access points, 4G and 5G small cells and video surveillance networks at a lower total cost of ownership than fiber. Utilizing the licensed 28 gigahertz band, which will run from 24 to 29 gigahertz spectrum, Cambium has benefits of the 5G NR standard yet features the benefits of Cambium's fixed wireless products using our software-defined radio architecture, including ease of use and deployment, reliability and management of our single pane of glass. Interest in our 28 gigahertz cnWave products remains high, and customer activity remains strong ahead of availability.

Cambium received its first volume orders for its new 28 gigahertz cnWave product platform from a major service provider in EMEA. We will have more details regarding this product during our third quarter earnings conference call. Also in our PMP and PTP product lines, Cambium's 60 gigahertz cnWave for millimeter wavelength make it possible to provide a city with high-speed broadband access by utilizing existing street furniture such as street lamps, traffic lights and utility poles. As a result, it can be deployed faster and more cost efficiently than fiber broadband.

We have several high-profile POCs in Silicon Valley that have selected Cambium to deploy gigabit backhaul within their cities. We are seeing traditional fiber operators, such as Alaska Communications deploying hybrid networks using cnWave to extend fiber to customer premises, accelerating time to revenue at lower operating and capital costs. We are very bullish on 60 gigahertz cnWave solutions and have a time to market advantage over our nearest competitors.

We continue to experience strong growth in accounts utilizing cnMaestro Cloud software, our end-to-end cloud-powered connectivity solution to manage the entire network from a single pane of glass. Total devices under cloud management in Q1 '21 totaled approximately 577,900, an increase of 10% from Q4 '20 and up 40% year-over-year.

Turning to the channel. In Q1 '21, we expanded our channel presence by adding over 560 net new channel partners sequentially and over 2,280 net new channel partners year-over-year, which represents an increase of approximately 6% sequentially and 31% year-over-year. Our first-ever global virtual event called Cambium Connections was held on February 24 and 25th for our end customer and partner community. We had more than 2,700 people from over 130 countries registered, and the event was successful at attracting both new and existing customers as we shared our vision of where the industry is headed over the next few years. A replay of the event can be found on YouTube.

Finally, I'm proud to say Cambium Networks were recently voted by the members of the Wireless ISP Association, WISPA, as the Manufacturer of the Year. I would like to thank our customers and partners for this honor. I will now turn the call over to Stephen for a review of our Q1 '21 financial results and outlook.

Thanks, Atul. Cambium had record revenues of $88.5 million for Q1 '21, above the high end of our outlook of $81 million to $85 million. Revenues increased by 7% quarter-over-quarter and were up 46% year-over-year. On a sequential basis for Q1 '21, revenues were higher by $5.7 million. The higher revenues were driven by record shipments of our PMP products, which grew 7% sequentially due to service providers continuing to scale networks driven by requests for increased capacity, higher demand for CBRS compatible solutions, Cares Act and CAF2 funding and higher shipments of our new multi-gigabit products. Our Point-to-Point Revenues performed better than expected, growing 4% sequentially due to increased demand for backhaul. Enterprise Wi-Fi Solutions reached a new record and grew 11% quarter-over-quarter, driven by higher shipments of our new Wi-Fi 6 products and record shipments of our cloud-savvy switching products.

Looking at revenues by geography. North America, our largest region, represented 61% of company revenues compared to 55% during Q4 '20. North America had a record quarter with revenues growing 20% on a sequential basis, driven by PMP from service providers, a recovery in PTP and strong Wi-Fi, including record revenues of our switching products. EMEA, our second largest region, decreased 13% sequentially, primarily reflecting softer PMP and PTP revenues as a result of timing of shipments and represented 21% of revenues during Q1 '21 and 26% of revenues during Q4 '20. CALA had another record quarter growing 1% quarter-over-quarter, driven by a significant number of customer wins and a continued recovery in that region and represented 12% of sales during Q1 '21. APAC decreased 11% sequentially and represented 6% of revenues during Q1 '21 compared to 7% of revenues for Q4 '20.

Moving to our gross margin. Non-GAAP gross margin of 50.1% decreased by 90 basis points compared to Q1 '20. The year-over-year decrease in non-GAAP gross margin was primarily the result of mix and higher freight and distribution costs due to component shortages in the market. On a sequential basis, non-GAAP gross margin in Q1 '21 of 50.1% was 110 basis points lower than Q4 '20. The lower quarter-over-quarter non-GAAP gross margin was a result of product mix and higher freight and distribution costs due to component shortages in the market. In Q1 '21, our non-GAAP gross profit dollars increased by $13.5 to $44.3 million compared to the prior year and improved by $1.9 million sequentially.

Non-GAAP operating expenses, research and development, sales and marketing, general and administrative, depreciation and amortization in Q1 '21 increased by $1.1 million when compared to Q1 '20 and stood at $28.8 million or 32.6% of revenues. The majority of the year-over-year increase in non-GAAP operating expenses was a result of higher G&A expense and R&D resulting from increased incentive compensation due to higher revenues. When compared to Q4 '20, non-GAAP operating expenses decreased by approximately $300,000. The quarter-over-quarter decrease reflects lower R&D from the timing of regulatory costs, higher R&D tax credits and lower sales and marketing expenses resulting from less spend for trade shows and other events.

Non-GAAP operating margin was a record 17.5%, up from 5% during Q1 '20 and increased from 16% of revenues in Q4 '20. We had another excellent quarter of profitability with adjusted EBITDA for Q1 '21 at a record $16.5 million or 18.6% of revenues compared to $4.4 million or 7.3% of revenues for Q1 '20, and up from $13.9 million or 16.8% of revenues for Q4 '20. We see continued leverage in our business and 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 $7.6 million for the first quarter of 2021. The quarter-over-quarter decrease in cash was primarily the result of payments for variable compensation and increase in accounts receivable as we had delays in receiving key components, thereby impacting the timing of shipments of final goods and delaying collections, a decrease in accounts payable and an increase in prepaid inventories as we secure strategic supplies resulting from higher revenues, offset by improved earnings.

This compares to $800,000 of net cash flow used by operating activities for the first quarter of 2020 and $15.1 million net cash flow provided by operating activities for the fourth quarter 2020. Non-GAAP net income for Q1 '21 was a record $11.7 million or $0.41 per diluted share compared to $1.4 million or $0.05 per diluted share for Q1 '20, and non-GAAP net income of $10.7 million or $0.38 per diluted share for Q4 '20. The higher non-GAAP net income compared to the prior year period was primarily due to higher revenues and gross profit dollars, demonstrating improved leverage in our operating model. The increase in non-GAAP net income compared to Q4 '20 was primarily attributable to higher revenues and gross profit dollars as we efficiently scale our business.

Turning to the balance sheet. Cash totaled $51.2 million as of Q1 '21, a decrease of $11.3 million from Q4 '20. The sequential decrease in cash was primarily the result of payments for variable compensation and increase in accounts receivable due to supply constraints affecting linearity of shipments, a decrease in accounts payable and an increase in prepaid inventories as we secure strategic supply to support the growth of the business, offset by improved earnings. Net inventories of $31.4 million in Q1 '21 decreased by $1.1 million year-over-year and decreased by $2.5 million from Q4 '20. Given the rapid growth in revenues and low entry levels, we expect a modest increase in inventories over the next few quarters.

In summary, we are within line of sight of achieving our long-term target operating model by accelerating growth, gaining scale and improving our operational efficiency. Our results demonstrate the tremendous operating leverage we have in our business. We continue to have improved visibility and predictability into our business. Given the global semiconductor shortages, we remain supply constrained, which we expect to impact our sequential growth during Q2 '21.

Moving to the second quarter 2021 financial outlook. Please note that Cambium Networks financial outlook does not include the potential impact of any possible future financial transactions, acquisitions, pending legal matters or other transactions. Accordingly, Cambium networks only includes such items in our financial outlook to the extent they are reasonable. However, actual results may differ materially from the outlook. Considering our current visibility as of May 6, 2021, our Q2 '21 financial outlook is expected to be as follows: revenues between $85 million to $90 million, non-GAAP gross margin between 49% to 50%, non-GAAP operating expenses between $30.2 to $31.2 million, non-GAAP operating income between $11.4 to $13.8 million, Interest expense net of approximately $1.1 million, non-GAAP net income between $8.6 to $10.3 million or between $0.29 to $0.35 per diluted share, adjusted EBITDA between $12.4 to $14.8 million and adjusted EBITDA margin between 14.6% to 16.4%, non-GAAP effective tax rate of approximately 17% to 19% and approximately 29.2 million weighted average diluted shares outstanding.

Turning to our cash requirements. Paydown of debt, $2.5 million scheduled debt and an additional $19.6 million reduction in term loan principle as required by the excess cash flow provision in the term credit agreement. Cash flow interest expense approximately $900,000 and capital expenditures of between $2.50 to $2.9 million. Looking at the full year 2021 financial outlook. Revenues between $345 million to $359 million, increasing between 24% to 29%. And adjusted EBITDA margin between 15% to 17%. I'll now turn the call back to Atul for some closing remarks.

We continue to strive to achieve our goal of long-term top line growth in the mid-teens and adjusted EBITDA in the upper teens as a percentage of revenues, which we are presently delivering. Cambium has multiple revenue drivers to reach these goals, including our new gigabit wireless products such as enterprise Wi-Fi 6, 60 gigahertz and in the middle of this year, 28 gigahertz millimeter wave solutions for Fixed 5G wireless. We continue to -- we expect to continued adoption of CBRS compatible solutions as we can now add software as a service to the list of growth drivers of 2021, with the inclusion of our cnMaestro X solution. Our profitability should benefit from increased scale in our business while we judiciously manage our costs, although we will continue to fuel new investments in R&D to maintain our technology edge.

Finally, I would like to show my appreciation for our employees, partners and customers for another outstanding quarter of results during these unprecedented times. This concludes our prepared remarks. So with that, I would like to turn the call over to Abigail and begin the Q&A session.

(Operator Instructions) Our first question comes from the line of Rod Hall with Goldman Sachs.

So my first question was going to be regarding visibility. You raised the full year guidance here. And wondering if, particularly your carrier customers are showing you a little bit more visibility because of the supply shortage. Are people ordering early? What's going on with orders here and visibility from your point of view? And then I do have a follow-up to that.

Yes, Rob, this is Stephen. I think overall visibility in our business has continued to improve really since we became a public company. And I think it's twofold. One is, we've actually invested a lot of time, effort and systems in improving that visibility. We have channel management tools and such forth that we can really gauge what the ultimate sell-through is and POS activity overall for our customers. I do think to your comment though, additionally, given the tighter supply constraints, we are seeing a tendency for our customers to place orders sooner and the -- and our distributors seeing visibility sooner from their customers.

So I think that is improving things. We've been entering the quarter. We actually like to enter the quarter or exit sort of the first month of that given quarter with an excess of 60% of billings and backlog in place, we are way ahead of that. And since really Q1 of last year, we've seen that continue to improve. We're certainly north of 75% in Q4, and we're better than that in Q1, and we're tracking ahead of that in Q2. So visibility is getting better. And I would additionally say that visibility into future quarters is improving as well as those customers are putting longer-term orders on us. So overall, a much better picture for our view.

Maybe, Rod, if I can just add one more point. The new products we have introduced, I think, are finding new applications, new customers so the funnels are also getting stronger. So definitely, as we go into the next few quarters, you will hear more about it, just, I think, more demand.

Okay. And then I wanted to follow-up on Wi-Fi. We -- the numbers you guys printed were a little bit below what we expected. I was curious if that's -- if they were below what you expected. And then sort of as part of this question, you guys have talked about 40% to 60% growth this year in Wi-Fi. Are you still thinking that as the hospitality industry comes back online? And so I'm just curious kind of what the -- what you're thinking on Wi-Fi and whether this was below what you had expected for the quarter?

Yes. So let me give a quick rundown and then if Stephen wants to add. We absolutely think 40% to 60% is right on, fantastic demand on enterprise products, good acceleration. We were supply constrained in Q1. So we feel very good where we are with the product lines, the Wi-Fi 6 adoption, some of the new markets, which we are getting traction in. Hospitality definitely strengthening, coming back. So we are actually pretty hopeful and confident about that market.

Yes. So I think -- just to add to that, I think it was actually pretty -- Wi-Fi was pretty much in line with our expectations from what we guided last quarter. I think, as Atul mentioned, really, it becomes more of a supply issue than a demand situation. We are seeing hospitality. And we mentioned this last quarter. We're seeing the hospitality market come back online, in particular, in Europe. And we're also seeing opportunities in Wi-Fi for new markets like logistics and medical.

They're providing sort of rich feeding grounds for us. And as we start to see some of these government subsidies going into other regions of the world, we're finding, particularly in Europe, WiFi4EU program really driving new demand for our Wi-Fi product. So we feel good about the numbers. We actually hit a record for Q1. We expect sequential increase for Q2 and feel good about the 40% to 60% growth trajectory.

Okay. You're not worried about supplies being a risk to the Wi-Fi growth later in the year. Do you think that will be fine?

No, we factored that into our calculations and guidance. So we think 40% to 60% holds.

Rod, maybe one more data point is outdoor Wi-Fi is accelerating because one of the effects of COVID is government, countries, they want connectivity everywhere. And many situations, public Wi-Fi, outdoor situations are accelerating and that's where we have a very superior differentiation. So we feel pretty good where we are.

And our next question comes from the line of George Notter with Jefferies.

Congratulations on nice results here. I guess I wanted to sort of go back to the question on supply constraints. Can you give us a sense for how much revenue you weren't able to ship in Q1 because of supply constraints? And then also, obviously, component pricing is going up. Any thoughts on how that might have had an impact on your margins?

Yes. So this is Stephen, again. I would say -- it's really tough to quantify that. I think we still came past the upper end of our guidance. I think the supply constraints for us are going to be more of a Q2 impact with it possibly drilling into Q3. And so you saw from our guide, sequentially, we've guided 1% down. And we said last quarter, we felt Q2 would be more likely to be the tighter quarter for us. As a company, we've done a lot of things to get ahead of this. We actually started looking at the supply chain way back last year and building buffer stock. So I think we're in a better situation than most. But I think really, Q2 is going to be the tougher quarter to us, and that's built into our guide.

Yes. Maybe one more point to add. We have excellent relationships with our strategic suppliers. And the reason for that is that the kind of solutions Cambium works on is state-of-the-art, cutting-edge, 60 gigahertz, 28 gigahertz, the Wi-Fi 6 indoor/outdoor. They value our inputs as the system architects of our company work very closely with them. So as Stephen mentioned, we proactively worked with them as early as last year, November because we knew the paucity of chips was coming. So I think we have -- compared to competition and other companies, I think we're well positioned. And everything we are guiding, we are taking those things into account.

Yes. And this is Stephen, again. With regards to your other question on gross margins, certainly, again, with our guide, we guided gross margins 49% to 50%. So we are seeing the impact as a result of the higher component costs reflected in our guidance. And obviously, a little bit higher cost from the overall freight and surcharges associated with the supply constraints as well. You've seen, as a company, we've done a lot around the gross margins and over the last year, you've seen them improve quite materially. I would expect, once we work through these supply constraints, you should expect to see our gross margins come back into the 50s. And obviously, we still have expectations of driving towards our longer-term gross margin model of that 51% to 52%.

Got it. If I could just ask one more follow-up. This is a bit of a change in subject here, but I wanted to ask about cnMaestro X. You guys, I think, introduced that in the quarter. There's a big trial going on with your customers. I'm just curious what the initial feedback looks like and what kind of acceptance you're getting on that.

And I think as we mentioned in the commentary as well, very good reception. Good -- we have over 0.5 million users using Maestro as a platform. And now with the value-added services, data storage, duration of data storage, some of the security features, deployment features. I think it's still early, but so far, so good, very positive feedback. It's helping customers deploy networks in a far more easier manner.

And then for many of these government broadband initiatives, you're seeing -- we are winning quite a few deals. One of the reasons is they find the ease of management, ease of deployment through cnMaestro as a key differentiator. And cnMaestro acts as just additional features for which we are now monetizing. So -- and every quarter, we'll give you guys a good rundown how that entire monetization part is going.

And our next question is from Scott Searle with ROTH Capital.

Atul, you referenced RDOF in your opening comments. There are a lot of different government and regulatory initiatives out there for various subsidy programs to bridge the digital divide. I was wondering if you could address what revenues were attributable to that in the first quarter? And how big the pipeline of opportunity is there, right? If you look at RDOF, and you start adding up some of the potential numbers from the broadband infrastructure bill, if that -- if and when that ever passes, some big numbers there. So I wonder if you could frame that for us a little bit in terms of where we are today. Maybe what that could mean over the next 18 months?

Sure, I think as we said probably last quarter, RDOF for Cambium in a meaningful manner, I think we'll still probably end of '21, early '22 is when you'll see a lot of momentum behind that. I think what you're seeing in RDOF right now is early projects and the Cambium is winning quite a few of them, but they're still early infrastructure, backhaul, those type of things. The real RDOF formula for Cambium starts on access parts, the Point-to-Multi-Point, Wi-Fi, those type of products get going. And as we said earlier, I think you will see a significant spend of RDOF will be probably first six years.

And that means if you were to kind of time it, I would say, in the late this year, early '22 is when things will start in a significant manner. And until then, you'll hear projects here and there. But the real momentum, the wheel will, I think, start moving, my guess is late this year or early next year. And we are very well positioned with the early RDOF winners, approximately half of them are already using some Cambium product or the other. So that's probably just a little bit of color on that.

Great. Very helpful. And as a follow-up, 60 gigahertz seems like it's gaining some momentum for you. I think you specifically referenced starting to move into urban markets, which, in my mind, says larger bids, larger opportunities. I'm wondering if you could give us an update in terms of how big you think that is this year. And now with the 28 gig product coming behind it, different technology, different solution, but I'm wondering if you could size the 28 gig opportunity versus the 60 gig opportunity, comparable, smaller, bigger?

So this year, for 60 gigahertz, at least for, I would say, Q2 and Q3, lots of POCS. I think we are probably over north of 40 POCs already. And I think I would still say Q2 and Q3 but fantastic reception so far in terms of quality, performance, MU-MIMO architecture Cambium has on 60 gigahertz, customers are pretty pleased. So my sense is, Scott, that acceleration of 60 for Cambium in terms of size of the deals and all that generally happens, T plus 6, 6 months after you do the POC. So you can say towards the end of the year, early next year for 60 gigahertz would be a good acceleration time. 28 gigahertz, we will start to POC -- we have actually done with one customer, very early quick testing and very good results. But real POCs will start probably in July-ish time frame. And then we will volume ship in probably late Q3. And then I would say Q4 and Q1 probably would be again, POCs. And then maybe timing-wise, I would say, mid '22 is when you start to see 28 accelerate.

Now let me differentiate that too a little bit for you. Both are phenomenal multi-gigabit products. Both have taken us 2-year plus to design and build. There's a lot of R&D and a lot of differentiation built into these products. One, 60 gigahertz will give you, say, 1 kilometer to 2, depending on the terrain and weather and all that, and then 28 gigahertz will start to give you probably 4 to 7 kilometers depending again on terrain and weather. So now you can see on the edge, we truly have multi gigabit. 28 gigabit is a fixed 5G path.

So globally, it will be pretty well received as a standard. And our anticipation is that EMEA will lead. And we already have a sizable set of deals because there is a significant pent-up demand for that product. 60 gigahertz will also be a global product and -- probably less in the infrastructure, whereas 28 gigahertz can really -- since it covers the distance, it will go more infrastructure product. But they are hand in the glove, both go hand-in-hand when you're deploying multi-gigabit network. And with the last 300, 400 meters, you've got Wi-Fi 6. So we feel our wireless fabric has truly -- is coming very close to scaling. And all those products will be significant winners, different regions. 60 gigahertz, you will see North America lead the world in a major manner. So I think you'll see a little bit of differentiation across territories.

And our next question is from Simon Leopold with Raymond James.

First, just a quick one. You were asked earlier about the supply chain constraint effect on March. I guess I'm more interested in understanding what you've assumed for the revenue headwind in your June guidance and the gross margin headwind, it sounds like you could sell more if you could get all the components you needed. Just trying to understand how to quantify that headwind.

Yes. I think the way we've tried to -- there's always an assumption that you get the perfect mix, Simon, and that's obviously the case. But I think between the lower and upper end, we've tried to build in the -- on the lower end, the lack of availability on our components and at the higher end, assuming a better case scenario in component availability. I mean, certainly, there are situations where lead times get pushed out and deliveries get missed. And so I guess we've probably been a little bit more aggressive as to sort of derisking those upper and lower ends. But again, it's tough to give you a number on how much more we could do if supply was not an issue, but we've tried to factor that into our upper and lower end on our guidance.

So just to make sure I understand you, if somebody makes the assumption that you do the high end of sales, we should assume the high end of gross margin and vice versa, low end of sales would mean the low end of gross margin?

Absolutely. Yes. If that's what you referring to, absolutely, yes, yes.

Great, great. No, I appreciate that. Now the longer-term question, I wanted to see if you could talk about is really the changing dynamics of competition, specifically, I'm thinking about operators like T-Mobile and Charter talking more about efforts to sell services into rural markets, which historically was the turf of your primary customer base, the WISP. I certainly heard your commentary about moving into urban, so it's not as if you're not making a counterattack. But I want to get your sense of how you see the competitive landscape of operators like T-Mobile and Charter, push technology that isn't necessarily yours into the footprint where you've historically sold?

Yes. Simon, excellent question, by the way. And I will give a good color on this. I think Cambium is finding that we are moving up the value chain. That's a key statement I'm making, probably for the first time. I think the kind of capability we have added into our portfolio over the last, say, 12 months, is opening lots of doors for Cambium globally in not just Tier 2, but Tier 1 as well. And I think what's happening is people are noticing the innovation of 60 gigahertz, the quality, they're noticing the 28 gigahertz product coming. So I think different regions, we have good traction with the kind of names you are throwing.

So I will not give you specific names, but you are not that far off from anticipating next year, 2 years where Cambium could go. It's all because of their innovation, well, I think we're doing and yet maintaining the quality through a lot of software-defined radios and software features. So I think as we evolve the company, you will start to hear over next, say, 5, 6 quarters, some names, which will not be too far from some of your guesses.

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

One, I was just curious, what are the lead times on some of the longer lead time components that you're looking at? And then my question more on that is, how much are you competing with fiber today? Is that becoming the primary competitor? Or how much do you see fiber as the alternative to fixed wireless broadband today?

Okay. Erik, thanks for the question. Lead times, many of the products, especially on the Wi-Fi frontier, the lead time for the chips could be as much as 52 weeks. And my sense is that you will see the lead times probably start shrinking as we go into Q4 because I think every chip company is also working proactively to bring it down. But as of now, many of the chips could have as much as north of 50 weeks lead time.

But Erik, just to add to that, as we said earlier, we got way ahead of this. So we were building buffer stocks and putting in orders back in -- even as early as Q3 last year. So we're obviously not perfect. There's always some risk and uncertainties around this, but we're probably well positioned or better positioned than most. But certainly, we're dealing with some long lead time.

Yes. Yes. So last November time frame, we saw this coming so we had beefed up our forecast, working very closely, proactively with our partners. So I think, as I said, you will see us much better positioned because we did not wait until February or March. We had given much higher forecast for our -- and we were growing as a company, so it was a little easier to look ahead as well. But I would say, yes, lead times are high. And -- but I do anticipate them coming down probably late Q3, early Q4.

Now your second question, fiber. We are actually finding significant wins. Alaska Communications, we just talked of one of them. So as I've said always that you will see mix and match of appropriate solutions in RDOF, and any other government initiative, we are very focused on economics. I think ultimately, the solutions which win, they win because of economics, performance going hand-in-hand.

And fiber guys actually are finding Cambium to be a great partner. And there are high-density areas where they already have fiber, but it makes sense for them to extend fiber. But there are many areas where they need to extend, which are tough terrain, they come to Cambium; or they are dispersed low-density neighborhoods, they come to Cambium. So I think we are finding this to be not really a competitive but a symbiotic relationship. And this is why when you look at even the RDOF winners, some of the RDOF winners we're working with, they do fiber as well. So Cambium is very well positioned to be actually a significant enabler of broadband to both wireless and wireline. Now that current wins and current deals are showing us that.

(Operator Instructions) Our next question is from Jon Lopez with Vertical Group.

I had 2. The first one, if I look at the annual guidance and we take your commentary around Wi-Fi, those aspirations being intact, it kind of implies that Point-to-Multi-Point and Point-to-Point, I don't know, maybe flatten out or even kind of trend down a little bit in the second half relative to the first. Am I thinking about that right? Or are there other factors I'm not taking into account?

Well, I mean -- Jon, this is Stephen. I think when you're looking at year-over-year comparisons, right, we -- you saw that in Q1, Point-to-Multi-Point had year-over-year growth of something like 60-odd percent, and it's still pretty strong for Q2. So when you look at the second half in relation to those year-over-year comps, from a percentage perspective, it is going to be lower. I think overall, we're expecting Point-To-Multi-Point to be north of sort of 35% growth. Point-to-Point, it's more of a mature market. So obviously, and a little bit lumpier given the exposure that we have to some of the defense contracts. So that's going to be flattish, I think that's the right assumption there. And obviously, we've already given your Wi-Fi numbers between 40% and 60%. So I hope that puts some color around it.

No, that helps a lot. Yes, that helps. My second question, I wanted to come back to the topic of competition. And I think you guys mentioned at the outset and Point-To-Multi-Point, some comfort that you're picking share up against, I think you said larger and smaller competitors. You have one large competitor that they've had a couple of sort of relatively high-profile missteps. One of them not that long ago with the security issue. I guess I'm wondering, do you see sort of tangible evidence that you're, in fact, picking share up relative to that competitor? Or is this more like anecdotal looking at sort of your business relative to the peer set?

No. I think, John, this is more anecdotal. I think we are picking share. More on a broad basis, not just a large competition, but I think we have a lot of regional competition as well in Europe or CALA or Asia. I think at this point, I would say, more broadly because of the type of new products we have, they are highly differentiated. They all are managed from a single pane of glass. So I think to me, at this point, it's not just one company, I think this is more a broad frontier. We are picking up share. We're picking new customers. We're getting in new territories, new applications. That's what's driving.

Okay. I'm sorry, just to clarify that. I guess what I was asking is, you're looking at your business and sort of saying, your growth looks kind of better than the peer set more so than you're saying we've identified, say, competitive displacements here or there. Is that the right way to think about your commentary?

No, I think you're right. I'm saying we are more broad-based, anecdotal, just the tide is rising for us.

As there are no further questions. I will now turn the call back over to Mr. Peter Schuman, Senior Director, Investor and Industry Analyst Relations for closing remarks.

Thank you, Abigail. During Q2 '21, Cambium Networks will be presenting and meeting virtually with investors on May 18, at the Needham Virtual Technology Media Conference; May 26, at the JPMorgan Global Technology Media and Communications Conference; May 27, at the Barrington Research Virtual Spring Investment Conference; and May 28, with Raymond James Virtual Bus Tour. 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.