Cambium Networks (NASDAQ:CMBM), a leading provider of wireless networking solutions, has reported its financial results for the first quarter of 2024. During the earnings call, the company announced Q1 revenues of $43.2 million, which fell short of expectations due to delayed defense orders and FCC approval for 6 gigahertz products.
Despite the challenges, Cambium's Enterprise business saw a significant sequential revenue increase, while the PMP business in North America experienced a decline. The company also highlighted new customer acquisitions and the launch of its Wi-Fi 7 product.
Cambium's financial outlook for the second quarter and the full year of 2024 includes a focus on business performance improvement, operating cost management, and inventory balance reduction, with an anticipation of being EBITDA positive in the second half of the year.
Key Takeaways
- Q1 2024 revenues were $43.2 million, impacted by defense order delays and FCC approval timing.
- Enterprise business revenues increased by 231% sequentially.
- PMP business in North America decreased by 14%.
- New customer wins include the New Orleans Convention Center and Glencore (OTC:GLNCY).
- Launched first Wi-Fi 7 product and saw a 4% increase in cnMaestro Cloud management devices.
- Non-GAAP gross profit of $9.6 million, with a sequential increase of $19.7 million.
- Non-GAAP net loss of $12.7 million, or $0.46 per diluted share.
- Adjusted EBITDA loss of $15.5 million, with an operating cash use of $15.6 million.
- Cash balance of $38.7 million as of March 31, 2024.
- Q2 '24 revenue forecast between $43 million to $48 million.
- Full-year 2024 revenue projected between $205 million to $225 million.
- Company aims to reduce inventory balances to closer to $40 million.
Company Outlook
- Anticipates being EBITDA positive in H2 2024.
- Breakeven profitability reduced to below a $60 million quarterly revenue run-rate.
- Goals include improving business performance, managing operating costs, and reducing inventory balances.
Bearish Highlights
- Delays in defense orders and FCC product approval have impacted revenue.
- PMP business in North America saw a 14% decline.
- Non-GAAP net loss recorded at $12.7 million.
Bullish Highlights
- Enterprise business revenue up 231% sequentially.
- Successful launch of Wi-Fi 7 product.
- 4% increase in devices under cnMaestro Cloud management.
Misses
- Q1 2024 revenue missed expectations due to external delays.
- Reported a non-GAAP net loss, contrary to the company's outlook.
Q&A Highlights
- CEO Morgan Kurk discussed wireless technology deployment in the BEAD program and the slow adoption of 6 gigahertz spectrum.
- Kurk highlighted the gradual increase in adoption of the 60 gigahertz product, especially among enterprise customers.
- The company targets a gross margin of around 42% for the year, aiming for over 45% in the long term, driven by government and enterprise segments.
Cambium Networks remains committed to navigating the current challenges and is taking strategic steps to strengthen its financial position. The company will present at the upcoming Needham Technology, Media & Consumer Conference on May 16, 2024, and at the Northland Growth Conference on June 25, where it will likely discuss further details on its strategy and market prospects.
InvestingPro Insights
Cambium Networks (CMBM) has faced a challenging period, as reflected in the company’s recent financial results for Q1 2024. The InvestingPro data and tips provide additional context that investors may consider valuable when assessing the company's performance and future outlook.
InvestingPro Data:
- The company's market capitalization stands at a modest $99.87 million, indicating a smaller player in the industry.
- With a negative P/E ratio of -0.95, Cambium Networks has not been profitable over the last twelve months as of Q1 2024.
- The company's revenue has seen a significant decline, with a -40.74% change over the last twelve months as of Q1 2024, which may raise concerns about its growth trajectory.
InvestingPro Tips:
- Cambium Networks is quickly burning through cash, which is a critical consideration for investors looking at the company’s ability to sustain operations and invest in growth opportunities.
- Analysts have revised their earnings downwards for the upcoming period, which suggests that the market's expectations for the company's performance are becoming more conservative.
Investors can find additional insights and tips on Cambium Networks by visiting InvestingPro at https://www.investing.com/pro/CMBM. There are 11 more InvestingPro Tips available, which can help to provide a comprehensive analysis of the company's financial health and market position. For those interested in a deeper dive into Cambium Networks, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Cambium Networks Corp (CMBM) Q1 2024:
Operator: Good afternoon. My name is Therese, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cambium Networks' First Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. Thank you. Mr. Peter Schuman, Vice President, Investor, Industry Analysts and Public Relations, you may begin your conference
Peter Schuman: Thank you, Therese. Welcome and thank you for joining us today for Cambium Networks' first quarter 2024 financial results conference call, and welcome to all those joining by webcast. Morgan Kurk, our CEO; and Jacob Sayer, our CFO, are here for today's call. 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. 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 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 Form 10-Qs and 10-Ks filed with the SEC. 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 for otherwise noted. A reconciliation of non-GAAP measures to GAAP 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 will provide the key operational highlights for the first quarter 2024, and Jacob will provide a recap of the financial results for the first quarter 2024, and we'll discuss our financial outlook for the second quarter and full year 2024. Our prepared remarks will also be followed by a question-and-answer session. I'd now like to turn the call over to Morgan.
Morgan Kurk: Thank you, Peter. I want to begin by first introducing Jacob Sayer, our new CFO. For those of you who didn't see our press release, Jacob joined Cambium from Sensata Technologies, a global industrial technology company with over $4 billion in revenue, where he was most recently VP of Finance and headed Investor Relations, and previously held divisional CFO roles for the various segments of Sensata. Jacob has 15 years of experience with technology companies and another 17 years of experience in various investment banking roles. We are pleased to have him on board to help drive operational excellence, strategy, growth and value creation. I would also like to thank John Becerril for stepping up as interim CFO for the past quarter. As expected, the FCC finished the process for the long-awaited approval of 6 gigahertz spectrum in Q1, although later in the quarter than we had hoped, leading to lower than anticipated shipments of our Point-to-Multi-Point, PMP, products. In the last week of the quarter, Cambium received final approval for our ePMP 4600 6 gigahertz access point products and standard power subscriber modules, with high-power subscriber modules expected to be approved in May. Summarizing the performance of Q1 '24. Revenues for Q1 '24 were $43.2 million. The shortfall to guidance was mostly related to delays in defense orders in North America and Europe in the Point-to-Point, PTP, business, which decreased 34% sequentially. We expect sequential increases in this portion of the business throughout 2024. Our PMP business in North America was slower than anticipated, decreasing 14% due to the aforementioned timing of the 6 gigahertz product approval process by the FCC late in the first quarter. The FCC approval is anticipated to drive sales of Cambium's new 6 gigahertz ePMP 4600 and PMP 450v product lines, both of which are available today. On a positive note, Enterprise revenues improved 231% sequentially as demand improved and channel inventory levels declined. Also in April we launched our first Wi-Fi 7 product. While revenues came in only slightly below our outlook, gross margin did not meet expectations due primarily to an increase in reserves for excess and obsolete inventories of finished goods and components. We did see improved product mix sequentially during Q1 '24 as a result of increased Enterprise revenues and we maintained good cost controls and tightly managed our operating expenses. Sales of Cambium's products out of the distribution channel as reported by Cambium's distributors were higher for Q1 '24 than Cambium's reported revenues, and we saw corresponding declines in channel inventories. We continued to make good progress in clearing channel inventories and in aggregate the inventories are approaching healthy levels. We are diligently monitoring and managing channel inventories as shorter lead times and increased cost of capital may drive different behaviors by distributors than in the past. As communicated previously, we expect channel inventories to be back to normal by the end of Q2 '24, which will result in sales-in and sales-out approaching equilibrium. This should drive incremental improvements of sales into the channel, and therefore an incremental improvement in revenues. Looking at some customer wins that are key to our future success: In the U.S., our Enterprise business had a sizeable win with the New Orleans Convention Center, a project which is expected to ship throughout the year. This win includes over $1 million of Enterprise gear and was the result of Cambium's ability to deliver industry-leading performance in a unique, high-density, dynamic deployment. The entire upgraded system will run on our cnMaestro X single pane of glass management system. The flexibility in dynamic reconfiguration is critical for the center and demonstrates the versatility of Cambium's solution. In Australia, Glencore, one of the largest mining companies in the world, selected Cambium's ONE Network to deploy and manage a Cambium Fiber and Wi-Fi upgrade for a large mining camp. The deployment will consist of a mix of over 350 indoor and outdoor Wi-Fi access points and Cambium's Fiber ONTs, all managed by cnMaestro. The combination of indoor and outdoor Wi-Fi and PON-based interconnectivity from a single vendor results in a tightly integrated, cost effective and efficient network. In the PMP space, we had a significant win with a wireless service provider in Kenya, Safaricom, for a three-year deal to roll out residential and business connectivity using our ePMP product line. Cambium won based on our technical strength, ease of deployment, and the cost effectiveness of the solution. Now, turning to upcoming product introductions since our previous quarterly update. In March we announced our first Wi-Fi 7 access point, with the launch of our new X7-35X tri-radio, tri-band 2+2+2 unit. Wi-Fi 7 is another step forward in wireless connectivity, offering data speeds reaching up to 9.2 gigabits, ensuring lightning-fast downloads, seamless streaming, and lag-free experiences. While pushing the boundaries of performance, Wi-Fi 7 remains backward compatible with previous Wi-Fi standards. Wi-Fi 7 works with Cambium Networks' cloud-managed or on-premises cnMaestro management system for secure end-to-end network control. Finally, total devices under cnMaestro Cloud management in Q1 '24 increased approximately 4% from Q4 '23 and were up 15% year-over-year. I will now turn the call over to Jacob for a review of our Q1 '24 financial results, and Q2 '24 and full year 2024 financial outlook.
Jacob Sayer: Thank you, Morgan. While the Q1 '24 results are below expectations, we do see the business beginning to improve and can now look forward to growth. The Q1 '24 revenue shortfall was isolated to delays in government orders in the PTP business and the timing of approval for the 6 gigahertz PMP solutions later in the quarter than expected, the impacts of which we expect to be behind us shortly. Q1 '24 results included additional inventory charges and additional supplier commitments, which impacted gross margin by approximately $7 million and reflect the current state of the market and product demand. Without these charges, gross margin would have been approximately 39.2%, which would have been closer to our original forecast at the start of the quarter, but only slightly lower due to the impact of mix within defense products in PTP. We continue to work hard on managing our operating costs to align with our current forecasts for 2024 and are focusing resources on those products and projects that are most critical for Cambium's future success. Turning to the quarter, Cambium reported revenues of $42.3 million for Q1 '24. Revenues increased by 5%, or $2.1 million, sequentially. The majority of the increase in revenues was the result of the improved order volume for our Enterprise business in both North America and Europe, albeit from a low base; while PMP revenues decreased 14% quarter-over-quarter due to the delayed timing of approval for 6 gigahertz products in the United States and its territories. This was partially offset by some recovery for the PMP business in Europe during Q1 '24. PTP defense revenues were lower due to delays for defense orders in Europe and North America after strong year-end results. By region, Europe increased 146% sequentially as a result of the recovery in the Enterprise business, while the other regions decreased, with North America lower by 7% due to the timing of defense orders impacting the PTP business, and delays in the approval for 6 gigahertz products hurting the PMP business, while CALA dropped by 8%, and Asia decreased by 10% sequentially. Moving on to our gross margin. Our non-GAAP gross margin for Q1 '24 was 22.7% compared to negative 25.1% in Q4 '23. The higher quarter-over-quarter non-GAAP gross margin was primarily the result of lower rebates and higher Enterprise revenues, and lower freight costs, although we were once again impacted by the need to increase inventory reserves and had a lower mix of higher margin defense products. In Q1 '24, our non-GAAP gross profit of $9.6 million was higher by $19.7 million sequentially due to lower excess inventory charges, higher Enterprise revenues, and lower rebates. Non-GAAP total operating expenses, including depreciation and amortization in Q1 '24 stood at $26.4 million, or 62.3% of revenues. When compared to Q4 '23, non-GAAP operating expenses were approximately flat during Q1 '24. The quarter-over-quarter operating expenses had higher G&A due to increased professional services, and higher bad debt expense, offset by lower payroll and less spending on R&D materials. Our non-GAAP net loss for Q1 '24 was $12.7 million, or a loss of $0.46 per diluted share, that was below our outlook for the quarter; and compared to a non-GAAP net loss of $28.2 million, or a loss of $1.01 per diluted share during Q4 '23. Adjusted EBITDA for Q1 '24 was a loss of $15.5 million, compared to a loss of $35.2 million for Q4 '23. Moving to cash flow. Cash used in operating activities was $15.6 million for Q1 '24 and compares to cash used in operating activities of $6.2 million for Q4 '23. During Q1 '24 we continued to execute on converting receivables into cash and managing working capital closely, offset by the net loss. Turning to the balance sheet. Cash totaled $38.7 million as of March 31, 2024, an increase of $20 million from Q4 '23. The sequential increase in cash primarily reflects a draw of $40 million of the company's $45 million revolver, partially offset by the net loss, material purchases to suppliers, and capital expenditures. As we look forward, we are focused on conserving cash by minimizing operating expenses, lowering capital expenditures, and continuing to convert inventory into revenues. We expect to be EBITDA positive during the second half of calendar 2024 and have reduced our breakeven profitability to below a $60 million quarterly revenue run-rate. Net revenues -- sorry, net inventories of $55.6 million in Q1 '24 decreased by $11.3 million from Q4 '23. Net inventories were lower sequentially, driven by both consumption and due to higher reserves. As a reminder, our goal for 2024 is to reduce our inventories balances to closer to $40 million. In summary, first quarter revenues turned out slightly lower than anticipated because of delays in the timing of the defense shipments as well as the FCC granting approval of 6 gigahertz spectrum later in the quarter than we had hoped. Cambium expects to soon receive our final approval for 6 gigahertz ePMP products. On a positive note, we had higher Enterprise revenues as market conditions are starting to improve. Our gross margin improved sequentially as a result of lower rebates and higher Enterprise revenues in a very competitive business environment. We continued to see improvements in channel inventories and remain vigilant about managing costs which should benefit future operating performance. During Q1 '24 we saw an improving start for the Enterprise business as channel inventories continued to decline. As we re-gain scale for Enterprise, we expect to improve our operational efficiency each quarter of this year. For the PMP business we now have approval by the FCC of the 6 gigahertz spectrum which will help that business. For our PTP business, we are pursuing several large defense opportunities. And we continue to work to consolidate to a smaller number of product platforms for our overall business over the next few years. Moving to the second quarter and full year 2024 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, our Q2'24 financial outlook is as follows: Revenues between $43 million to $48 million, representing growth of approximately 2% to 13% sequentially; non-GAAP gross margin between 40% to 42%; non-GAAP operating expenses including D&A between $24.6 million to $25.6 million; leading to a non-GAAP operating loss of between $5.4 million to $7.4 million. Interest expense, net, of approximately $1.8 million, and non-GAAP net loss of between $5.4 million to $6.9 million or net loss per diluted share between $0.19 to $0.24. Adjusted EBITDA is expected to be a between negative $4.2 million to negative $6.2 million dollars, and adjusted EBITDA margin between negative 8.8% to negative 14.4% We expect a non-GAAP tax benefit of approximately 25%, and we expect to have about 28 million weighted average diluted shares outstanding. Cash requirements are expected to be as follows in Q2: first, the paydown of debt of $700,000; cash interest of approximately $1.7 million; and capital expenditures between $1.5 million to $2.5 million. Our full year 2024 financial outlook is expected to be as follows: revenues between $205 million to $225 million, representing a decrease of 7% to up 2%; non-GAAP gross margin of approximately 40%; non-GAAP net loss between $11.6 million to a net loss of $18 million, or a loss of between $0.41 to $0.64 per diluted share; adjusted EBITDA margin between negative 2.2% to negative 6.8%; and for the year, capital expenditures are expected to be approximately $9 million to $11 million. I will now turn the call back to Morgan for some closing remarks.
Morgan Kurk: We continue to work with our channel and end customers to manage inventory and improve efficiency while maintaining service levels. This has, and continues to impact revenues; however, we believe we started this work earlier than others and expect equilibrium to occur by the end of Q2. We continue to focus on our internal processes to ensure that we don't overcorrect and fail to meet our customers' demand, while minimizing inventory throughout the supply chain. Our PMP business is well positioned to grow with the newly released 6 gigahertz spectrum as our WISP customers compete with other broadband solutions on speed and reliability. Our platforming activities continue to progress with both architectural decisions and beginning of development in both hardware and software. While the benefits from these initiatives will be in the future, it is one of the most important actions we can take to impact our long-term prospects, driving faster initial development, decreasing feature implementation time, and lowering cost. After my initial review of the business last fall, over the past three months I have been working with our go-to-market teams and our customers to make sure where we are going is aligned with where our customers need to go in our highly competitive markets. I am pleased with the level of access Cambium has to its end customers and the interest our channel has in driving the business forward. I intend to continue to be directly involved with our sales force and customer base to ensure that the direction we are going and the decisions we are making are fully aligned. While there continue to be challenges both internally and throughout the industry, I am encouraged as to how we meet these challenges, solve problems efficiently and effectively, and help move the industry forward. I'd like to share my continued appreciation for the effort and collaboration of our employees, partners, customers, as well as investor support. With that, I'd like to turn the call over to Therese and begin the Q&A session.
Operator: Thank you. [Operator Instructions] Our first question today comes from Scott Searle with ROTH MKM. Your line is open.
Scott Searle: Hey, good afternoon. Thanks for taking my questions. Jacob, congratulations and welcome aboard.
Jacob Sayer: Thank you very much, Scott.
Scott Searle: Maybe just a quick clarification. I'm not sure if I heard it, but Morgan in the past, I think you've talked about enterprise or Wi-Fi sell-through. I'm wondering if there was a number there. I also wanted to clarify the gross margin impact on reserves. I think it was about $7 million. I wanted to clarify that. And then, looking into the guidance for the full 2024, it implies a pretty significant uplift in the second half of this year, I think, north of $58 million a quarter. What gives you the comfort and visibility at the current time? And then, I had a quick follow-up.
Morgan Kurk: Yeah. So, I'll start off, Scott, with the question on enterprise sell-through. It maintains a healthy level, very similar. I think we've said in the past in the $15 million to $20 million range, the range we're giving you, and it hasn't changed much this quarter at all. And we're working to start to drive that number up. And I'll let Jacob talk specifically to your other portions of the question.
Jacob Sayer: Yeah, you heard correct, Scott, in terms of the gross profit impact on E&O reserves that was $7 million in the quarter. And then, the last bit of your question was regard to the uplift in the second half of the year, you're absolutely right, we are expecting an uplift in revenue in the second half of the year. That primarily comes from the inventory contraction in the sales channel with distributors falling away. That's been a pretty significant headwind for the company as inventory levels have come down over the last four quarters. We expect that, that process will come to an end here near the end of the second quarter of this year.
Scott Searle: Thank you. Very helpful. And if I could, Morgan, from a high level, BEAD is starting to get into the grand phase, still early, significant number of dollars that are available there, right, in terms of the $42.5 million. But wireless has been, I guess, a second candidate technology for that, right? It's a fiber-first mantra in effect, but there are initiatives to try and push wireless as a viable medium within the BEAD deployments, particularly given that this is a last time effort to connect the unconnected and that wireless is a much more cost-effective medium to be able to do that. So, I'm wondering what your early thoughts are in terms of wireless and point-to-multipoint participation in the BEAD program and specifically maybe coupling 6 gigahertz into that conversation. Thanks.
Morgan Kurk: Sure. So, a couple of things. So, [indiscernible] funding, which has been out for a while requires a set level speed but does not require licensed spectrum. So, 6 gigahertz is absolutely applicable towards this, and our customers are eagerly starting to deploy and want the 6 gigahertz for that. In the case of BEAD, BEAD has some additional restrictions. BEAD can only be put on license spectrum. So that has to be done in the 3.5 gigahertz range. And while we think there will be some uplift from this, it is probably not so much a '24 event, probably more like a '25 event.
Scott Searle: Great. Thanks. I'll get back in the queue.
Morgan Kurk: Thank you.
Operator: Thank you very much. One moment, please. Our next question comes from Simon Leopold with Raymond James. Your line is open.
Victor Chiu: Hi, guys. This is Victor Chiu in for Simon. You noted lower-than-expected 6 gigahertz shipments this quarter because of the delayed FCC approval. Does that shortfall kind of mostly roll into Q2? Or is that recovered kind of through the balance of the year? Maybe how do we think about that?
Morgan Kurk: Yeah. So there are still, I'll call it, learnings to go on in 6 gigahertz. So, I don't think that just rolls into Q2. It's probably more rolling throughout the year. So, 6 gigahertz is different for our customers than 5 gigahertz because of AFC, because they have to be granted various pieces of spectrum and then how they could use it varies based on what current users of the band are doing. And so I think we're going to see some learnings and this will take sort of three to six months for people to really get a better understanding of how they do mass scale deployments and then we'll see a significant take off on it. I'd probably model it to take on throughout the year.
Victor Chiu: Okay. So, even without the delay, the 6 gigahertz ramp was a little slower than kind of what you were expecting?
Morgan Kurk: Than we had originally anticipated, yeah, I think that's a good way of putting it.
Victor Chiu: Okay. That's helpful. And then just a quick follow-up. Can you give us an update around progress with the adoption of the 60 gigahertz product? And how we should think about [indiscernible] around that?
Morgan Kurk: Sure. On 60 gigahertz?
Victor Chiu: Yeah.
Morgan Kurk: So, we're actually finding success in this product line with, I'll call it, enterprise customers more than we had thought. We're using it for a variety of projects for what I'll call it, our original intended base, but we're finding that there are other markets. So I'm hopeful with that. But it's a slow build, I would say. It's not going to be a step function. It's going to be a continued drive and increase. And the reason for this is economics. There are specific areas where this makes a lot of sense where you have to transport a lot of data for a relatively short distance. And you don't want to be -- have any chance really of interference. And so, it's not like what I expect to happen in 6 gigahertz, where after teething period, you see a big uplift. This will just be a slow growth.
Victor Chiu: That's helpful. Thank you.
Operator: Thank you. Our next question comes from George Notter with Jefferies LLC. Your line is open.
George Notter: Hey, guys. Thanks very much. I guess I was curious about the gross margin structure of the business. I think I heard you say 42% of the target for the year. But if you just sort of step back and think about where the gross margins would naturally land, obviously, in Q1, you had some E&O expense, you mentioned that, obviously, you're going to have some more scale relative to the run rates right now as the inventory comes off, the business rebounds. Like what do you think a good sort of run rate gross margin would be as the business normalizes?
Jacob Sayer: Probably, George, in around the 40% range for the business. Obviously, there's a range of gross margins by product family with defense being at the higher end of those. But yeah, 40% overall is probably a good modelling rate.
George Notter: Got it...
Morgan Kurk: So, you referring to -- for this year, are you referring to long term?
George Notter: Long term.
Morgan Kurk: Okay. So I think we have historically sort of modeled in kind of 50% was our target, and we were hitting a few points below that. I think we're going to -- it's going to be a bit before that occurs with the excess inventory in channel, the enterprise margins are suppressed as everybody is competing to get inventory out of channel. And that probably won't recover tremendously until Wi-Fi 7 becomes the dominant term. And so, the long-term margins, we should be able to move back up as we get scale. But as Jacob said, for this year, that's what we're looking at.
George Notter: Got it. So do you think that's what a 45% gross margin of 43% or 47%, like any kind of thought on what that might look like after...
Morgan Kurk: Yes, I think it's -- I think that the long term, it's certainly my goal is to have a north of 45%. And I think with our government business, which is higher than normal and with our focus on enterprise, which is higher than average, I believe those are two.
George Notter: Got it. Okay. And then I think you mentioned a bad debt expense going through G&A. Was that in the pro forma financials or excluded? I guess I'm trying to figure out how big that is and if it's in the numbers I'm looking at.
Jacob Sayer: It's about $600,000, and it's in the non-GAAP numbers. We haven't excluded it.
George Notter: Okay. All right. Thank you very much.
Operator: Thank you very much. [Operator Instructions] I'm showing no further questions at this time. So, I will turn the call back over to Peter Schuman, Vice President, Investor, Industry Analyst and Public Relations for the closing statement.
Peter Schuman: Thank you, Therese. During Q2 '24, Cambium Networks will be presenting and meeting with investors virtually on Thursday, May 16, 2024, at the Needham Technology, Media & Consumer Conference, and on Tuesday, June 25 at the Northland Growth Conference. 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.
Operator: Thank you, everyone. You may now disconnect from the phone call.
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