4Q23 Revenue as Pre-Announced, but EPS Loss Worse; 2024 Outlook Is for 4.5% Growth
Cambium Networks (CMBM) reported earnings on February 15 after its negative pre-announcement on January 18. While the company hit the pre-announced revenue number at $40.2 million, the EPS loss of $0.95 was significantly below consensus of a loss of $0.39. Enterprise weakness and continued discounting to move inventory were the main causes for the profit weakness (non-GAAP gross margin came in at -19.4%, historically this has been in the 47-50% range). The company expects 1H24 to be challenging, but with a significant recovery in 2H24. This recovery is expected to be driven by: (1) FTC approval of 6 GHz; (2) a lessening of enterprise headwinds; and (3) a clear out of excess inventory both in-house and in the channel. The company is guiding to 4.5% revenue growth in 2024 at the midpoint. CMBM’s interim CFO gave detailed guidance for both 1Q24 and FY24. For 1Q24, the company is expecting revenue of $43.0-48.0 million (we are modeling $44.1 million), non-GAAP gross margin of 41.0-44.0% (we are at 41.0%), and an EPS loss of $0.22 and $0.31 (diluted) (we are modeling a loss of $0.26 per share). Full-year revenue guidance of $215.0-245.0 million represents a 4.5% increase Y/Y at the midpoint. EPS guidance is for between a net loss of $0.48 and net earnings of $0.08. We are modeling an EPS loss of $0.18 on sales of $216.3 million. For FY25, we are modeling a return to growth in the upper teens, gross margins in the upper 40s, and positive EPS. CMBM’s comparables include wired and wireless networking companies of a similar size. The comps have a median P/S of 0.7x, while CMBM is at 0.5x, a 29% discount. As expectations are for losses in the next few quarters, P/E and forward P/E are not appropriate valuation metrics. CMBM is a leading mid-market wireless solutions provider. Growth is being driven by 5G and new 6 GHz products, which the FTC is due to approve in 2H24. The company believes its strengths are its RF algorithms and software. Read all our reports on Cambium on our website. Link in our full report.Cambium Network provides wireless broadband networking solutions for network operators, including medium-sized wireless internet service providers, enterprises and government agencies. The company's wireless fabric includes intelligent radios, smart antennas, radio frequency, algorithms, wireless-aware switches and its cloud-based network management software. The company's products can be categorized into its PTP backhaul, PMP distribution, Wi-Fi access, cnMatrix switching, and cnReach IIoT solutions. The company also provides a number of other network management and monitoring tools, such as cnMaestro, XMS Cloud, LINKPlanner, cnHeat, and cnArcher, to further improve ease of use and network performance.
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