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Cambium Networks Corp (CMBM)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue was $43.7M, down 5% sequentially, with GAAP gross margin up sharply to 39.9% and non-GAAP gross margin to 42.3%; non-GAAP EPS was a loss of $0.14, and adjusted EBITDA margin improved to -5.3% .
  • Enterprise revenue grew 34% sequentially to $15.2M, offset by weakness in Point-to-Point (P2P) defense orders; management highlighted broad-based enterprise strength across geographies .
  • Q4 2024 guidance: revenue $40–$45M; GAAP gross margin 40–42% and non-GAAP 42.5–44.5%; non-GAAP operating loss $3–$5M; adjusted EBITDA loss $1–$3M; management expects continued operational improvement .
  • Liquidity/covenant update: the company breached its quarterly consolidated EBITDA covenant as of Sept 30 and its monthly liquidity covenant as of Oct 31, is seeking bank forbearance; lenders may accelerate amounts due, and debt was reclassified as current—an important stock risk catalyst .
  • S&P Global consensus estimates for Q3 were unavailable at time of query; results are compared against company guidance and prior periods below due to data access constraints (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • Enterprise momentum: “we generated continuing growth in the Enterprise portfolio of products” with enterprise revenue up 34% sequentially to $15.2M, growing in all geographies .
  • Margin and cash improvements: non-GAAP gross margin rose to 42.3% on lower inventory reserve charges/supplier commitment losses; cash from operations was $8.9M and free cash flow $5.2M, both improving sequentially .
  • Lower breakeven: adjusted EBITDA breakeven revenue run-rate reduced to approximately $50M, signaling expense discipline and improved operating leverage .

What Went Wrong

  • Revenue softness: total revenue fell 5% sequentially, driven by a 32% sequential decline in P2P defense orders; management cited defense budget constraints tied to active conflict zones .
  • Bank covenant breaches: noncompliance with EBITDA and liquidity covenants and debt reclassification to current heighten near-term financing risk; forbearance negotiations are underway .
  • Continued losses: GAAP net loss of $9.7M (diluted loss per share $0.34) and non-GAAP net loss of $3.8M reflect ongoing recovery rather than full turnaround, despite sequential improvements .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$43.0 $42.3 $45.9 $43.7
GAAP Gross Margin %25.5% 20.5% 31.4% 39.9%
Non-GAAP Gross Margin %27.7% 22.7% 33.5% 42.3%
GAAP Operating Margin %-51.3% -49.6% -26.3% -18.4%
Non-GAAP Operating Margin %-36.1% -39.5% -17.3% -8.2%
Adjusted EBITDA Margin %-33.5% -36.7% -14.5% -5.3%
GAAP Net (Loss) ($USD Millions)$(26.2) $(26.4) $(9.1) $(9.7)
Non-GAAP Net (Loss) ($USD Millions)$(12.1) $(12.7) $(7.1) $(3.8)
GAAP Diluted EPS ($)$(0.95) $(0.95) $(0.33) $(0.34)
Non-GAAP Diluted EPS ($)$(0.44) $(0.46) $(0.25) $(0.14)
Cash from Operations ($USD Millions)$(0.246) $(15.647) $2.401 $8.897

Segment revenue mix (Product):

Product CategoryQ3 2023Q2 2024Q3 2024
Point-to-Multi-Point (PMP) ($USD Millions)$23.596 $19.647 $17.999
Point-to-Point (P2P) ($USD Millions)$15.809 $13.656 $9.347
Enterprise ($USD Millions)$2.499 $11.310 $15.160
Other ($USD Millions)$1.142 $1.333 $1.220
Total ($USD Millions)$43.046 $45.946 $43.726

Geographic revenue mix:

RegionQ3 2023Q2 2024Q3 2024
North America ($USD Millions)$17.768 $20.647 $21.300
EMEA ($USD Millions)$14.274 $15.003 $12.200
Caribbean & Latin America ($USD Millions)$5.726 $5.306 $5.902
Asia Pacific ($USD Millions)$5.278 $4.990 $4.324
Total ($USD Millions)$43.046 $45.946 $43.726

KPIs and balance sheet:

KPIQ3 2023Q2 2024Q3 2024
Devices under cnMaestro Cloud (YoY/ QoQ)—+15% YoY; +6% QoQ +14% YoY; +3% QoQ
Channel sell-out vs sell-in—Destock ≈ $10M/quarter (sell-out > sell-in) Sell-out > reported revenue; inventories declined
Free Cash Flow ($USD Millions)$(3.556) $(1.769) $5.235
Cash ($USD Millions)$27.529 $42.574 $46.491
Net Inventories ($USD Millions)$—$49.969 $42.980
Debt classification—LT debt $65.685M; current portion $3.173M Debt reclassified as current due to covenant breaches

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 2024$43–$48M (Aug 8) Actual $43.7M Achieved within range
GAAP Gross Margin %Q3 202439.5–41.5% Actual 39.9% In range
Non-GAAP Gross Margin %Q3 202441.5–43.5% Actual 42.3% In range
Non-GAAP Op Loss ($USD Millions)Q3 2024$(3.6)–$(5.6) $(3.6) At high end (better)
Adjusted EBITDA ($USD Millions)Q3 2024$(2.4)–$(4.4) $(2.3) Better than guide
Revenue ($USD Millions)Q4 2024—$40–$45M New issued
GAAP Gross Margin %Q4 2024—40–42% New issued
Non-GAAP Gross Margin %Q4 2024—42.5–44.5% New issued
Non-GAAP Op Loss ($USD Millions)Q4 2024—$(3)–$(5) New issued
Adjusted EBITDA ($USD Millions)Q4 2024—$(1)–$(3) New issued

Note: Prior Q4 implied levels were discussed qualitatively; formal Q4 guidance first provided Nov 7, 2024 . Interest expense/tax rate were included in prior Q3 guidance; Q4 guidance did not specify these items .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
Enterprise performanceRecovery starting; destocking underway Strength across geographies; +58% seq +34% seq to $15.2M; broad-based growth Improving
Gross margin/E&O chargesNon-GAAP GM 22.7%; heavy reserves Non-GAAP GM 33.5%; ~$7M E&O (placeholder) Non-GAAP GM 42.3%; E&O/commitment losses declined Improving
PMP 6 GHz adoptionFCC approval cited; timing delays Early adoption; slower NA ramp; operators learning nuances PMP down 8% seq; ongoing 6 GHz adoption challenges Mixed/Delayed
Defense demand (P2P)Funding delays in US/EU Recovery in EMEA; lumpy; project delays -32% seq; budgets constrained by active conflicts Weaker near-term
Channel inventoryReducing channel inventory Sell-out > sell-in; destock ≈ $10M/qtr Sell-out > reported revenue; inventories declined Improving
Liquidity/Bank covenants——EBITDA and liquidity covenant breaches; seeking forbearance Deteriorating
Product launches/tech—ePMP 4600, E-band PTP-850EX PMP 450b SM (5/6 GHz), ePMP releases, “EVO” platform; cnMaestro Market Apps Building pipeline

Management Commentary

  • CEO: “We are pleased that, despite the market challenges, revenue and margins were within our guidance range... Margins improved and we delivered increased positive cash from operations … and $5.2 million in free cash flow.”
  • CFO: “We have now reduced our adjusted EBITDA breakeven point to an approximately $50 million quarterly revenue run rate.”
  • CEO on defense: “Defense budgets for communication equipment were constrained due to funding pressures from monies required in active conflict zones.”
  • CFO on margins: “The normal operating range for Cambium should be in the high 40s to around 50% gross margin... we’d expect to approach those levels as we go through next year.”

Q&A Highlights

  • Gross margin trajectory: Management expects continued improvement as E&O charges normalize, aiming for high-40s to ~50% gross margin longer term; commercial price pressure remains .
  • Defense pushouts vs lost business: Management sees delays rather than displacement; acknowledges uncertainty around government program fruition .
  • Bank covenant resolution: Negotiations ongoing with lenders and PE sponsor; no concrete timeline provided .
  • Strategic focus: Enterprise is positioned as Cambium’s growth area while PMP is compressed and defense is lumpy; enterprise mix supports margin recovery .

Estimates Context

  • S&P Global consensus estimates for Q3 2024 EPS and revenue were unavailable at time of query due to access limits, so formal beat/miss vs Wall Street cannot be provided. Compare results to company guidance instead: revenue and margins were within Q3 guidance ranges; adjusted EBITDA and non-GAAP operating loss were modestly better than guided .
  • Implication: In absence of consensus, sell-side models likely adjust upward for margins and cash flow trajectory, with revenue mix (enterprise > defense/P2P) driving near-term expectations.

Key Takeaways for Investors

  • Enterprise momentum and margin recovery: Strong enterprise growth (+34% seq) and non-GAAP GM at 42.3% underpin improving unit economics; watch sustainability into Q4 given guidance .
  • Liquidity risk is the near-term stock catalyst: Covenant breaches and debt reclassification raise financing/forbearance risk; resolution updates will likely drive stock moves .
  • Mix shift away from defense/P2P: Defense budget constraints weighed on P2P (-32% seq); enterprise and selective PMP/ePMP ramps are key revenue drivers .
  • Operating leverage improving: Adjusted EBITDA margin improved to -5.3%; breakeven revenue now ~$50M, indicating potential to reach EBITDA breakeven if revenue sustains at high end of Q4 guide .
  • Channel inventory normalization: Sell-out exceeding sell-in and declining inventories should better align reported revenue with end-demand into year-end .
  • Product pipeline: EVO platform, PMP 450b SM (5/6 GHz), ePMP upgrades, and cnMaestro Market Apps support medium-term portfolio differentiation .
  • Trading implications: Near term, headline risk around bank negotiations could overshadow operational improvements; positive surprise potential if forbearance achieved and Q4 margins land at high end of guide .

References: Q3 2024 8-K and Exhibit 99.1 ; Q3 2024 press release ; Q3 2024 earnings call transcript ; Q2 2024 press release and call ; Q1 2024 press release .