1Q24 Earnings Weak on 6 GHz Delay; 2H24 Expectations for Growth and Return to Profitability
Cambium Networks (CMBM) reported earnings on May 9 that came in below our expectations (we were the lowest on the Street), mainly due to a delay in FTC approval of 6 GHz spectrum. This also hit gross margin, which came in at 22.7%. Company expectations are for a better 2Q24 and 2H24, but with continued challenges in inventory and the move to 6 GHz. The company did see a recovery in the enterprise market in 1Q24, but not enough to offset the weakness in 6 GHz. The stock dropped 13% in the aftermarket. The company expects 2H24 to be challenging, but with a significant recovery. This recovery is expected to be driven by: (1) FTC approval of 6 GHz (which just occurred); (2) a lessening of enterprise headwinds (which it saw in 1Q); and (3) a clear out of excess inventory both in-house and in the channel (which it expects to stabilize by end of 2Q). The company is guiding to flat revenue growth in 2024 at the mid-point. Cambium’s new CFO gave detailed guidance for both 2Q24 and FY24. For 2Q24, revenue is expected to be $43.0-48.0 million (we are modeling $44.6 million), non-GAAP gross margin of 40.0-42.0% (we are at 41.0%), and a loss of between $0.19 and $0.24 per diluted share (we are modeling a $0.21 loss per share). Full-year revenue guidance of $205.0-225.0 million is flat Y/Y at the mid-point. EPS guidance is between a net loss of $0.41 to a net loss of $0.64. We are modeling a $0.49 EPS loss on sales of $211.6 million. For FY25, we are modeling a return to growth in the upper teens, gross margin in the upper 40s, and positive EPS. Cambium’s comparables include wired and wireless networking companies of a similar size. The comps have a median P/S of 0.7x, while Cambium is trading at a 28% discount at 0.5x. As expectations are for losses in the next few quarters, P/E and forward P/E will not be appropriate valuation metrics. Cambium is a leading mid-market wireless solutions provider. Growth is being driven by 5G and new 6 GHz products, which the FTC just approved. The company believes its strengths are its RF algorithms and software. Read all our reports on Cambium on our website.
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