Good day, and thank you for standing by. Welcome to the Cambium Networks Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jacob Sayer, Chief Financial Officer. Please go ahead.

Thank you, Rita. Welcome, everyone, and thank you for joining us today for Cambium Networks' third quarter 2024 financial results conference call, and welcome to everyone else as well for joining via the webcast. My name is Jacob here. I'm the Chief Financial Officer of Cambium Networks, and I'm joined by Morgan Kurk, our President and CEO. The financial results press release for the third quarter is accessible on the Investor page of our website and has been submitted to the SEC on Form 8-K. The transcript of today's prepared remarks will also be available on our Investor page after the conclusion of the 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 from today's remarks. Except as required law, Cambium Networks does not undertake any obligation to update or revise any forward-looking statements for any reason after today's presentation. It's our 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 press release and most recent filings, including the most recent 10-K and 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 that's otherwise noted. A reconciliation of non-GAAP measures to GAAP is included in the appendix to today's financial results press release. Now let's turn to the agenda. Morgan will provide key operational highlights for the third quarter. And I will provide a recap of the financial results for the third quarter '24 and discuss our financial outlook for the fourth quarter. Our prepared remarks will be followed by a Q&A session. And now I'd like to turn the call over to Morgan.

Thank you, Jacob. Revenues for Q3 '24 were $43.7 million. Recognizing the market challenges, we are pleased that the revenues were within the outlook range we provided during our Q2 '24 financial results call on August 8, 2024. Equally important to note, we grew in all geographies in our Enterprise business, with revenues up sequentially by 34% to $15.2 million. This was offset by lower revenues in our point-to-point, PTP, business primarily due to lower defense revenues. While we are confident that defense revenues will grow next year, it appears that the defense budgets for communication equipment were constrained due to funding pressures from monies required in active conflict zones. Non-GAAP gross margin improved again quarter-over-quarter, growing to 42.3%. Operating margins also improved sequentially as we continue to lower our breakeven point. Free cash flow was a positive $5.2 million during Q3 '24, and our cash balance stood at $46.5 million as of September 30. These results support our belief that the business is moving in the right direction financially, operationally and strategically. Sales of Cambium's products out of the distribution channel, as reported by Cambium's distributors were again higher for Q3 '24 than our reported revenues, and we saw continued declines in channel inventories. We continue to expect sales in and sales out to be at equilibrium by the end of the year. Looking forward, lower channel inventories are expected to result in Cambium's revenue being more directly tied to end-user demand. Looking at some new customer launches. One of the world's largest oil and gas companies and an existing Cambium Networks customer purchased PMP 450vs to upgrade their existing deployment of PMP 450i for faster speeds in the 6 gigahertz band. The Company also selected the CN Matrix TX 2000 Series industrial grid switch that supports extended temperature…

Thank you, Morgan. Turning to revenue for the quarter. Q3 '24 top line is of $43.7 million decreased 5% sequentially as good growth in our enterprise business was offset by declines in our P2P and to a lesser extent, our PMP businesses. Looking at our revenues more specifically, our enterprise business grew 34% sequentially as demand improved in all geographies and channel inventories continue to decline. Our PMT business declined slightly down 8% sequentially, resulting primarily from slower adoption of 6 gigahertz deployments in North America. The P2P business declined by 32% sequentially due to weakness in defense orders, especially in Europe. While we typically expect defense to grow with historic trends in the second half of the year, this year, we're seeing a delay in projects, as Morgan mentioned, due to current budget prioritization for active conflict zones. By region, Europe, Middle East, Africa revenues, EMEA, decreased 9% sequentially, reflecting a decline in the P2P business for defense, somewhat offset by higher enterprise revenues. North America revenue was higher by 3%, driven by higher enterprise. Asia Pacific revenue decreased by 14% sequentially on lower PMP and P2P revenues again, partially offset by higher enterprise revenues and Central America, Latin America, CALA, improved by 11% quarter-over-quarter. Now let's move on to gross margin. Our non-GAAP gross margin for Q3 '24 continued to move higher and was 42.3% compared to 33.5% in Q2. The higher quarter-over-quarter non-GAAP gross margin primarily reflects lower E&O and losses on supplier commitments. We continue to work hard to manage our operating costs. As we discussed last quarter, focusing resources on those products and projects that are most critical for Cambium's future success. Based upon our actions, non-GAAP total operating expenses, including depreciation and amortization, in Q3 '24 stood at $22.1 million, lower by $1.2 million…

I consistently focused the organization on improving operationally, platforming and optimizing our go-to-market for enterprise, and we're starting to see results. As an example, our operational costs are lower, and we are using less capital in our supply chain. At this year's Wispapalooza, the wireless service provider show, we announced our new PMP platform, EVO. This solution converges two of our major product lines, ePMP and PMP 450 into one unified platform. It offers a migration path and a road map solutions that provide best-in-class performance with economic liability merging traditional off-the-shelf WiFi chips with customized FPGA components. Our architecture has been well received, and we are currently in full development ensuring that we're able to meet the future needs of our industry. In addition, our recent software releases for both our PMP 450 and ePMP product lines significantly improved both legacy and current shipping products creating genuine optimism about our near-term opportunities in the important PMP business. Equally exciting is how our enterprise business is now moving in a positive direction. This reflects our emphasis on this high potential portion of our portfolio. We have made significant changes in go-to-market by specializing some of our sales force, focusing on specific verticals in both sales and product features and implementing a concierge service for our most important customers. I believe the progress we have made has been significant and expect it will produce meaningful results for the Company. While our defense business results were disappointing in the past quarter, I'm encouraged both by the positive technical feedback we continue to receive on significant future programs and the size and scope of our pipeline, both in the U.S. and overseas as leading indicators for our future business. I'd like to close by thanking our Cambium employees for their continued dedication to our mission and strategy. The transformation we are going through requires their continued tenacity and we're grateful for their efforts. With that, I'd like to turn the call over to Ripka and begin the Q&A session.

[Operator Instructions] Our first question comes from the line of John Roy of Water Tower Research.

So I have a couple of questions. One, you were talking about the market challenges, certainly defense stuff. What are your expectations for this getting better? I guess one of the -- things I'm looking at is gross margin. So do you think you're improving gross margin as a sign or an early sign that the market is not quite as challenging in the future?

I'd say, I mean gross margins are certainly on an upward trend. The big movements over the last couple of quarters in gross margin is really getting our own house in order from an inventory perspective and the resulting excess and obsolete inventory charges dropping away. We're now down to just about a normal low for those E&O charges. And certainly, they continue to decrease but at a smaller pace for next year. The normal operating range for Cambium should be in the high 40s to around 50% from a gross margin perspective. And so certainly without helping revenue line or increasing revenue line, we'd expect to approach those levels as we go through next year.

If you look, though, I'll just add on to that. If you look at the markets, I think, certainly, our defense market has better than average margins on it. And as that increases, margins overall for the Company will increase. In the commercial segment, there is still a great deal of price pressure. And we're dealing with that the best we can. But I don't expect that to be alleviated during most of next year. We continue to see that type of pressure going on in the market.

Great. On the defense stuff, I mean -- I kind of know the answer to this, but do you feel like it's delayed or pushed out or it's just lost opportunity at this point?

So we're very comfortable in saying the business didn't go to somebody else. However -- so that's sort of a pushout comment. What you don't know in this business is whether governments just say, I can do without. So the program doesn't go to its entire fruition. So that's the way I'd answer this.

Yes, I got it. So now on the bank situation. Can you give us any color on expectations when -- for resolution of that?

I really can't, John. We're in negotiations with the bank. Obviously, our private equity firm is involved in that as well. So there's no real news other than -- right, other than the covenant breaches that took place at the end of September and at the end of October and that we're in negotiation with them. So there's nothing concrete that we can signal to folks just yet.

Understood. And the last question I have is, I mean, obviously, enterprise is doing better which is great. Do you feel like enterprise is kind of like the future for Cambium and kind of where you're headed?

Yes. So I think for the past year, I've been signaling sort of the followed -- following direction. I think that the point to multipoint market is being compressed by a variety of forces. And while I think the work that we're doing there will allow us to maintain share, maybe even grow it depending on how we execute things. I don't see this as a growth market in and of itself. And the defense market is lumpy. So if you look at Cambium as a whole, this is our growth area.

I am showing no further questions at this time. So I would like to turn it back to Jacob Sayer for closing remarks.

Thank you very much for joining Cambium's third quarter earnings call, and this concludes today's conference call.

Thank you again for your participation in today's conference. This concludes the program. You may now disconnect.