Good afternoon. My name is Eric, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Networks third quarter 2023 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, simply press star one one again. Please limit yourself to one question and one follow-up question. Be advised that today's conference is being recorded. And now, Mr. Peter Schuman, Vice President of Investor Relations, Investor and Industry Analyst Relations, you may begin your conference.
Thank you, Eric. Welcome, and thank you for joining us today for Cambium Networks' third quarter 2023 financial results conference call, and welcome to all those joining by webcast. Morgan Kurk, 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 within operating expenses in prior periods to conform to the classifications in the current period. These revisions had no impact to operating results. 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 forecasted performance.
These statements are based on current conditions, 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 and our most recent SEC filings, including our most recent Form 10-K and Form 10-Qs. 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, Morgan Kurk will provide the key operational highlights for the third quarter of 2023, and Andrew Bronstein will provide a recap of the financial results for the third quarter of 2023, and will discuss certain elements of our financial outlook for the fourth quarter of 2023. Our prepared remarks will be followed by a Q&A session. I'd now like to turn the call over to Morgan.
Thank you, Peter. I'll begin by outlining some of the observations I've had and the initiatives I've started during my three-month tenure as CEO, and why, despite our challenges and economic headwinds, I'm excited about Cambium's future. After a comprehensive review of Cambium Networks' product portfolio, I'm impressed by the technology I have seen in both depth and breadth. Furthermore, I'm encouraged by the technical talent throughout the organization and believe that with additional direction, there is a wealth of opportunity to be exploited. I see possibilities in our future roadmaps by combining technologies from different areas of the business to solve networking problems more effectively. I have three immediate priorities. My first focus is in execution. This is in all aspects of the business and is about keeping our promises. A promise to deliver our innovations when we say, what we say.
A promise to deliver greater value than the rest of the market. A promise to use capital wisely, whether it is in cash or human capital. This say-do is the foundation of trust within the company and between us and our customers and suppliers, and is what I will use to help build a solid organization. Second, after an initial strategy session and discussion with customers, I've concluded we often try to do too much, spreading ourselves too thin. So I am implementing a focus and simplify strategy, where we are building core platforms that can be used to create multiple solutions. This strategy improves efficiency in engineering, reduces time to market, and lowers product cost and support cost. Focus is the key to success and requires the strength to decide what to do and what not to do.
My third priority is to improve our go-to-market in specific areas where we can grow. We will place additional emphasis on those sectors that can be differentiated through product or services. I look forward to growing Cambium's top-line revenues and returning the business back to higher levels of profitability. Recapping the underperformance of Q3 2023 revenues. We had three items contributing to the shortfall in revenues during Q3 2023. Our point-to-point, PTP, revenues decreased 37% sequentially and grew 3% year-over-year due to temporary U.S. federal budgetary issues, resulting in a gap of more than $8 million in defense orders as compared to our initial Q3 2023 outlook. We expect a significant portion of these delays to ship during Q4 2023.
Our point-to-multipoint, PMP, revenues decreased 12% sequentially and was lower by 10% year-over-year, as inventories and channel reduced while waiting for the FCC approval of 6 GHz spectrum expected during late Q4 2023. The approval is anticipated to drive sales of Cambium's new 6 GHz ePMP 4600 and PMP 450v product lines. On a positive note, our 28 GHz fixed products reported record revenues, increasing 144% sequentially during Q3 2023. Our enterprise revenues decreased 61% sequentially and decreased 93% year-over-year. Order for our enterprise business continues to experience headwinds, particularly in North America and EMEA, due to high channel inventory. Enterprise revenues were negatively impacted by stock rotations of approximately $9 million, of which approximately half were exchanged for enterprise products.
Sales of Cambium products out of the distribution channel, as reported by Cambium's distributors, were significantly higher for Q3 2023 than Cambium's reported revenues, and we saw a correspondingly large decrease in channel inventories for both enterprise and PMP products. While we're making good progress in clearing out inventories in the channel, this effort is not complete yet. We expect the channel inventories for Cambium's enterprise products to return to pre-COVID levels during the first half of 2024. Now looking at some customer wins that are key to our future success. In the city of Huntington Park, California, Cambium won the first phase of an American Rescue Plan Act, ARPA, funded city-wide initiative to provide internet to bridge the digital divide by equipping streetlights with Cambium's 60 GHz cnWave and outdoor Wi-Fi access points, highlighting Cambium's unique product set.
In the Europe, Middle East, and Africa region, we had a multi-year win with a managed service provider to provide enterprise Wi-Fi for AB InBev, the largest brewer in the world, providing internet access to thousands of taverns across sub-Saharan Africa as a testimony to Cambium's central cloud architecture. In the Middle East, the Gulf of Suez Petroleum Company, and in the Asia Pacific region, Oil and Natural Gas Corporation Limited, both selected Cambium's suite of PTP, PMP, and cnMaestro cloud management solutions to connect large, harsh environments, which exemplifies our product's reliability. In the Caribbean and Latin America region, we had important wins with the largest hotel chain in the world, with managed service provider, Single Digits .
The Fairfield Luquillo Beach hotel in Puerto Rico is implementing our Wi-Fi 6 and Wi-Fi and switching solutions, and Cambium was recently selected for the AC Hotel Santiago in the Dominican Republic, which demonstrates continued acceptance of our product in the hospitality market. Turning to upcoming product introductions since our previous quarterly update. In the PTP business for defense communication, Cambium introduced a new smart antenna, the PTP 700 beam steering unit, outdoor unit, which enables antenna alignment automatically rather than manually, and high-level interference mitigation to provide secure communications in hostile environments. This product solves one of the biggest challenges in deploying wireless networks, which is antenna alignment, and subsequently reduces the cost and weight of the radios. Cambium is also introducing a Wi-Fi 6 home mesh gateway solution.
The Wi-Fi mesh gateway solution works seamlessly with our fiber and wireless backhaul products and features auto frequency coordination, content filtering, device bedtimes, a guest network, and a CAF II compliance speed test. The hardware and customer apps can be customized and branded with the ability to do self-install and self-help. Looking at our cnMaestro cloud, cloud software, total devices under cloud management in Q3 2023 surpassed 1 million for the first time in Cambium's history, increasing approximately 4% from Q2 2023, and up over 17% year-over-year. On the human interest front, Cambium donated outdoor Wi-Fi equipment to the Information Technology Disaster Resource Center to help those displaced by fires on Maui. Within hours of installation, one hotel reported the number of connected clients increased by 3 times, from about 50 to more than 150 connected devices.
I will now turn the call over to Andrew for a review of our Q3 2023 financial results and Q4 2023 financial outlook.
Thanks, Morgan. While Cambium is presently impacted by lower revenue levels, we are seeing the benefits of our cost reduction plan designed to align our cost structure to our revenues and to improve cash flow. In 2024, we expect to realize annualized cash savings of $24 million, comprised of OpEx savings of approximately $17 million, additional CapEx savings of approximately $5 million, as well as COGS savings of $2 million. These savings include actions taken both in August of 2023, as well as cost reductions planned during Q4 of 2023. Once revenues return to more normalized levels, we expect to see higher profitability flow through to our bottom line. As a reminder, our 2023 results do not include the full costs for our variable compensation plans due to the underperformance of our operating results.
Therefore, for 2024, these variable compensation programs are expected to add approximately $10 million when compared to 2023. Now turning to the quarter. Cambium reported revenues of $43 million for Q3 2023. Revenues decreased by 28% quarter-over-quarter and decreased by 47% year-over-year. On a sequential basis for Q3 2023, revenues were lower by $16.5 million. The lower revenues were the result of the previously mentioned U.S. federal budgetary delays impacting our PTP defense revenues, continued lower order volume from our enterprise business due to high channel inventories, stock rotations, and slowing economies, and slower PMP orders ahead of the approval of 6 GHz spectrum. We have seen PMP and enterprise channel inventories decline during Q3 2023.
Revenues of $43 million decreased by $38.2 million year-over-year, primarily due to lower enterprise revenues as a result of the high channel inventories, stock rotations, and slowing economies. PMP revenues decreased due to the anticipation of the 6 GHz FCC approval, partially offset by higher demand from service providers for 28 GHz fixed 5G. PTP revenues rose slightly year-over-year as a result of increased demand for our defense products. We expect stronger PTP revenues for Q4 2023 due to our expanding defense business. By region, North America, CALA, and APAC weakened sequentially, while EMEA recovered, growing 111% quarter-over-quarter, driven by demand from a large 28 GHz customer. Now moving to our gross margin. Our non-GAAP gross margin of 27.7% compares to 51.3% in Q3 2022.
This year-over-year decrease in our non-GAAP gross margin was primarily due to higher inventory reserves of approximately $5 million, lower freight capitalization, as well as weaker product mix as a result of lower enterprise revenues. On a sequential basis, Q3 2023 non-GAAP gross margin was 27.7% compared to 50.3%. The lower quarter-over-quarter non-GAAP gross margin was primarily the result of higher inventory reserves of approximately $5 million, lower freight capitalization, and lower defense and enterprise revenues. In Q3 2023, our non-GAAP gross profit dollars of $11.9 million decreased by $29.7 million compared to the prior year and decreased by $18 million sequentially due to lower revenues.
Non-GAAP total operating expenses, including amortization in Q3 2023, decreased by approximately $400,000 when compared to Q3 2022 and stood at $27.4 million, or 63.7% of revenues. The decrease in operating expenses compared to the prior year period was primarily the result of lower sales commissions as a result of lower revenues and lower marketing spend, partially offset by increased wages due to inflationary salary increases effective January 1, 2023. When compared to Q2 2023, non-GAAP operating expenses decreased by approximately $900,000 during Q3 2023. The quarter-over-quarter decrease in OpEx is due to lower headcount and lower sales commissions due to lower revenues, partially offset by higher G&A costs due to professional services.
Non-GAAP net loss for Q3 2023 was $12.1 million, or a loss of $0.44 per diluted share, below our outlook for the quarter and compared to non-GAAP net income of $11.3 million, or earnings of $0.40 per diluted share for Q3 2022, and non-GAAP net income of $900,000, or $0.03 per diluted share in Q2 2023. The lower non-GAAP net income compared to the prior year was primarily due to lower enterprise revenues and a lower gross margin, while the lower net income compared to the prior quarter's results was primarily the result of lower PTP and enterprise revenues and a lower gross margin, partially offset by lower operating expenses due to a reduction in headcount and lower sales commissions.
Adjusted EBITDA for Q3 2023 was a loss of $14.4 million, or -33.5% of revenues, compared to $14.7 million, or 18.2% of revenues for Q3 2022, and $2.8 million, or 4.7% of revenues for Q2 2023. Now moving to cash flow. Cash used in operating activities was $200,000 for Q3 2023 and compares to cash provided by operating activities of $2.2 million for Q3 2022, and cash used in operating activities of $4.5 million for Q2 2023. During Q3 2023, we did a great job converting receivables into cash. Inventories were reduced modestly, mainly due to inventory reserves. While we expect that our inventory balances will decline as we return to pre-COVID levels, we will still face some headwinds until inventories at our third-party manufacturers normalize.
In addition, inventories will reduce as sales orders and revenues increase, driven by enterprise channel inventories returning to pre-COVID levels, PMP revenues increasing from the introduction of our 6 GHz products, and PTP growth driven by our defense products. Now turning to the balance sheet. Cash totaled $27.5 million as of September 30, 2023, a decrease of $4.4 million from Q2 2023. The sequential decrease in cash primarily reflects lower revenues and net income, as well as CapEx and income taxes. Net inventories of $79.8 million in Q3 2023 decreased by $2.6 million from Q2 2023 and higher by $29.1 million year-over-year. Net inventories were sequentially lower as a result of higher inventory reserves.
Channel inventories continued to go down sequentially for both enterprise and PMP products, and we continue to take aggressive actions to work with our distributors and return channel inventories to pre-COVID levels. In summary, Cambium's third quarter results were impacted by lower sales orders and higher stock rotations in our enterprise business, delays in the timing of defense shipments in our PTP business, and sluggish order volume in our PMP business as our distributors await the FCC approval of the 6 GHz spectrum. We continue to manage costs prudently. We have taken significant actions to reduce our cost structure, along with aggressive sales actions to move enterprise inventories through the channel.
We continue to expect positive momentum from our PMP products, driven by the expected FCC approval of our 6 GHz products, and although lumpy, the continued ramp of our 28 GHz 5G revenues as more service providers move to commercial deployment. Moving to the fourth quarter 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 Q4 2023 financial outlook is expected to be as follows: Revenues of between $45 million and $50 million, representing a sequential increase of approximately 10.5% at the midpoint of our outlook. Non-GAAP gross margin of between 38% and 45%. Non-GAAP operating expenses between $25.7 million and $26.7 million.
Non-GAAP net loss of between $4 million and $7.5 million, or a net loss per diluted share of between $0.14 and $0.27. Further, due to the impact of lower revenues and cash requirements, we will evaluate whether or not to draw a portion, likely less than one half, of our $45 million revolver as we prepare to enter 2024. I will now turn the call back to Morgan for some closing remarks.
We still have a ways to go before returning to normalized revenue in our enterprise business, but we're making good progress with our channel partners to digest the current level of channel inventory, and sell-out remains significantly stronger than sell-in. While our PMP business has not yet turned the corner, we expect it will accelerate with the FCC's approval of Cambium's affordable 6 GHz solutions. Bookings in our PTP business remain strong. We expect a record year of defense revenues in 2023, and we continue to expand the number of programs and countries in which we participate. We continue to manage our costs, and we are taking additional actions to reduce them, which will serve us well in the future.
We are investing in innovative new products, but realize that we can't be all things to all customers, which requires focusing on those areas that provide the most compelling value to our customers and a solid financial return to our shareholders. Finally, I'd like to show my appreciation for our employees, partners, and customers as we reposition the company for continued success in the long run. This concludes our prepared remarks, and with that, I'd like to turn the call back to Eric and begin the Q&A session.
Thank you very much. As a reminder, to ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising that your hand is raised. To withdraw your question, simply press star one one again. Please limit yourself to one question and one follow-up question. Now stand by while we compile the Q&A roster. Our first question comes from Scott Searle with Roth Capital Partners, LLC. Scott, your line is open. Please go ahead. Hello, Scott?
Oops, my apologies. Thanks for taking my question. Morgan, maybe just to dive in on the Wi-Fi front, trying to get my hands around where the channel inventory is. I know you guys are continuing to burn it down, but it's certainly, you know, in terms of the posted results in the third quarter, very low. Can you give us an idea of what the actual sell-through was in the Wi-Fi product portfolio? I think you mentioned getting back to pre-COVID levels, but previously the company had indicated, I think, that sell-through had been last quarter, more in the $16+ million range. I was wondering if you could calibrate us on that front and what we should think about normalized revenues looking like once channel inventory comes back to normal levels sometime in mid-2024.
Absolutely. So, I think it's very similar. It's in the $15 million-$20 million range. And we expect that after the channel inventory is burned off, that our revenues will return to levels and grow from there.
... Gotcha. Okay. And maybe quickly then for the follow-up, shifting over to the point-to-point front, some product transitions going on there as we're sitting and waiting for AFC approval. It sounds like that's expected in the fourth quarter, but in the meantime, it sounds like 28 GHz had a really big impact in the third quarter. So I'm wondering if you could calibrate us to the magnitude of that. You know, the European revenues were up quite a bit sequentially with 28 GHz, the biggest chunk of that movement. And then as we look into 2024, if you could frame the opportunity for us, as it relates to 6 GHz, assuming that there's AFC approval, you know, how big is the pipeline? I think when we last saw you at WISPA, you were talking about 100+ POCs.
How are things on that front? What's a successful year in terms of 6 GHz when we look at 2024? Thanks.
Sure. So, a couple of things to unpack there. The impact of the 28 gigahertz product this past quarter was in the $5 million-$10 million range. And it is significant, and this is what happens when new spectrum collides with new products. You get a nice bump from it, and it's the same sort of benefits that ourselves and the whole industry will get in 6 gigahertz as that becomes available. A sizable bump as people build that out. You're correct, we have more than 100 POCs. Some folks are doing early deployments. Of course, they cannot turn on this equipment prior to approval except under an experimental license.
We expect that to ramp in the first half of the year rather significantly with approval happening in this quarter.
Great. Thank you.
Thank you.
Standby for our next question. We have Simon Leopold with Raymond James. Simon, your line is open. Please go ahead.
Great. Thanks for taking the question. First one is, I want a little bit of help, maybe deciphering or getting a bridge on the gross margin. I think you mentioned that there was $5 million inventory adjustment, and so that looks like if I back that out, gross margins would have been around 39%. Just check on my math there, and then help us understand really what's going on by segment, because I'm wondering or guessing that maybe Wi-Fi business is low enough that it could even be contributing a negative gross margin. Anything you can offer to help us unpack what contributes to this weak gross margin? Thank you.
Yeah. No, thanks for the question. Appreciate that. So you mentioned the $5 million. That certainly had the biggest impact in terms of the additional inventory reserve. In addition to that, I had mentioned that we have less capitalization of freight as a result of purchasing less from our vendors because our inventory, you know, we have enough inventory right now. We're not looking to bring in more inventory. And the third area is that we are working very closely with our distributors in terms of moving inventory, especially in enterprise, through the channel. And that includes discounting the inventory that is in the channel, especially for older products. So those are the three areas that impacted the gross margin.
We do expect that once we get to a more normalized rate, even with discounting, as we look ahead to 2024, that we will be at least at the 40% + range.
Great. And then, if we could get maybe an update on your thinking of some of the tailwinds from government programs like BEAD, as an example, and even, you know, thinking about any international opportunities, but what's your current thinking on how to consider the timing and contribution from those? Thank you.
Yes. So Simon, the BEAD and other funding continues to be primarily focused on fiber. And, although we expect this to have more of an impact in the future, we really don't have a good view of exactly when that timing will happen. There clearly is not enough money going around to connect everybody with the current methodology of predominantly using fiber, and so we think that will favor us over time. But, as I said, we don't have a real timing on that, where we will get a big uplift because of it in the United States. There are other programs throughout the rest of the world requiring different requirements for gaining government funding.
While we're actively working with them, I don't have a number to give you on what sort of an impact we have. I believe it will be just as part of our normal business.
Okay. Thank you.
Thank you.
Our next question comes from George Notter with Jefferies. George, your line is open. Please go ahead.
Hi, guys. Thanks very much. I guess one for Morgan. You know, Morgan, in your, I guess, monologue, you talked about, you know, kind of doing less as a company, being more focused as a company. Can you talk about, you know, your views on the product portfolio? Are there pieces that you might look to rationalize or areas where you can become more focused? Any thoughts on, you know, product set? Thanks.
Absolutely. And, you know, this is a passion of mine. I'll kind of go through our methodology. I won't speak specific to a product that will be de-emphasized or emphasized, but if you look across our product lines, we have a multitude of products, in some cases, covering the same spectrum and addressing the same customers. And my immediate plan is to try to emphasize, I'll call it the best-in-class, if there are competing products, and de-emphasize without reducing the ability to support a product that is in the field. Over the longer term, it is to consolidate products on a single unified platform.
And this is something which I am fervent about because it really means that your R&D gets spread out along a larger customer base, and you can address more of the market from a single product. That, however, takes time. So step one is just where you're gonna emphasize your spend, and step two is the engineering involved with consolidation.
Got it. That helps. Thanks very much, guys. I appreciate it.
Thank you.
Standby for our next question. This is coming from Erik Suppiger with JMP Securities. Eric, your line is open. Go ahead.
Yes, thank you for taking the question. Morgan, can you talk a little bit about the competitive environment, particularly for your your enterprise products? Are you seeing significant discounting out there, or are you the ones that are doing the discounting, in particular? And then also, from a headcount perspective, it sounds like you've already made some reductions. Can you give us a sense of where things stand from a headcount perspective?
Sure. So, in terms of the competitive landscape in enterprise, I think the industry as a whole is facing the similar challenges. When you have supply chain shortages, channel typically places lots and lots of orders on lots of different suppliers, and I think everybody is dealing with that same issue. We are not the leaders in discounting. We're following others. We attempt to hold price where possible. But that's a fact of the market today, is that there's a lot of discounting going on. In terms of our reductions, our reductions in this company is across the entire company, but does have a oversized impact on where we have the majority of our cost, and that's in R&D as a primary example.
I am balancing what we need to accomplish with what we can afford to accomplish, and that's how I figure out how we can reduce our operating expenses while still maintaining a healthy portfolio.
Can you comment what your headcount was at the end of the September quarter and how you think it'll proceed from there?
So in terms of the overall headcount reduction is in terms of specific, you know, again, numbers of people, is 12%-15%.
Okay. And can you remind us what your current headcount is?
So if you look at, if you look at our overall headcount, including contractors that we're using, it's in the 800 range.
All right. Very good. Thank you.
Thank you. Our next question comes from John Roy with Water Tower Research. John, your line is open. Please go ahead.
Thank you, and great, thank you for taking my question. So I kind of wanted to circle back to gross margins. And you guys are guiding to a little bit of recovery in the fourth quarter. Was curious as to any color you can give on that and any kind of specifics, maybe on product mix.
Yeah, and that's a big part of it, is product mix. So, we're expecting our revenues in the defense sector to increase pretty significantly, given the deferral that occurred in Q3 because of the budgetary timing issues. As you may know, the defense products have the highest margin within the company. We are also, as Morgan said earlier, working with our distributors and looking at enterprise, making sure that we're working as aggressively as we need to with them to move the inventory through the channel. Which often means making sure we're being as price competitive as we can, because we have other competitors that have very similar issues in terms of inventory in the channel, and they've taken actions to decrease price to move their inventory through the channel.
So that's partially what's happening as well, especially in one particular product within enterprise.
Great, and-
Those are the main, those are the two main drivers. So, yeah, go ahead.
Yeah, I was just gonna ask about the 28 gig. Is that, at this point, kind of a little bit higher margin items since it's somewhat newer?
It's not one of the higher margin products. It's running, you know, as many of the PMP products are in the mid- to high 40s, you know, on average. So that's about right for 28 GHz.
Great. Thanks so much.
Sure.
Our final question comes from Scott Searle again with Roth Capital Partners. Scott, go ahead. Your line is open.
Hey, good afternoon. Thanks for taking the follow-up. I just wanted to dive in again real quickly on the gross margin recovery, understanding that, you know, there are headwinds near term in terms of discounting, moving life supply through the channel, et cetera. But as you look out to a recovery scenario in the second half of 2024, what's your expectations in terms of what the gross margin profile will look like at that point in time? Thanks.
Yeah, I mean, I think, I think after we get through the headwinds that we have, and I think as the industry, you know, the overall industry kind of settles out, longer term, I think we're gonna get back to the similar levels that we've had historically in that 50% range, ultimately. I don't know whether you're gonna see that in, in the second half of 2024 or as you go into 2025, but I think that's, that's ultimately where we're gonna, where we're gonna pan out when all is said and done. And I think with the cost reductions we've had, as I said in my comments, I think that, I think that positions us well for generating more significant free cash flow in the future once we get to those levels.
Okay, great. Thank you.
Take one more.
We have Erik Suppiger again with JMP Securities. Eric, your line is open.
Yes, just a quick follow-up. In terms of the cash, any sense of how we should be modeling out either free cash flow or cash flow? When do you anticipate getting to break even, or do you have a target cash balance that you wanna preserve? Anything we can work from rule of thumb-wise?
Yeah, I mean, I think we'll talk more about that in next quarter's call. But as I mentioned, the way I see it right now is that it's gonna be prudent for us as we get into 2024 with some headwinds, especially in the first quarter, where, you know, you're really collecting receivables from previous two quarters in terms of cash coming in. Since the previous couple of quarters being such low revenue quarters, it makes it very challenging, obviously, in terms of cash coming in. And we'll also have costs associated with the restructuring. So I think it's gonna be prudent for us to take down a portion of the revolver, which I don't see being any more than half of it, maybe even a little bit less than that, as we enter into 2024.
As we're modeling it right now, we don't see a need to take down any more than that throughout the year of 2024.
Are there any loan covenants associated with the revolver that we should be aware of that would restrict any of that?
There are some covenants associated with the revolver, but we don't see that as being restrictive right now.
Very good. Thank you.
This concludes the question-and-answer session. I would now like to turn it back to Mr. Peter Schuman, Vice President, Investor and Industry Analyst Relations, for closing remarks. Peter?
Thank you, Eric. During Q4 2023, Cambium Networks will be meeting with investors virtually on November fourteenth at the Needham Virtual Security, Networking, and Communications Conference, and on November fifteenth at the Roth Capital Conference held in New York, and on December eleventh at the Oppenheimer Virtual 5G Summit. 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, this concludes today's quarterly earnings call. Thank you for your participation. You may now log off.