Operator: Standby for our next question. And this is coming from Erik Suppiger with JMP Securities. Erik, your line is open. Go ahead.
Erik Suppiger: Yes, thank you for taking the question. Morgan, can you talk a little bit about the competitive environment particularly for you and your enterprise products? Are you seeing a significant discounting out there, or are you the ones that are doing 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?
Morgan Kurk: 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, reduction in this company is across the entire company, but it does have an oversized impact on where we have the majority of our costs 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.
Erik Suppiger: Can you comment what your headcount was at the end of the September quarter and how you think it will proceed from there?
Andrew Bronstein: So in terms of the overall headcount reduction is in terms of specific numbers of people is 12% to 15%.
Erik Suppiger: Okay. And can you remind us what your current headcount is?
Andrew Bronstein: So if you look at our overall headcount including contractors that we’re using it’s in the 800 range.
Erik Suppiger: All right very good. Thank you.
Operator: Thank you. And our next question comes form John Roy, Water Tower Research. John, your line is open. Please go ahead.
John Roy: Thank you and great. Thanks 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 a product mix?
Andrew Bronstein: Yes, 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, 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 means – 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.
John Roy: Great.
Andrew Bronstein: Those are the two main drivers. Go ahead.
John Roy: Yes. I’m just going to ask about that 28 gig is that at this point kind of a little bit higher margin items since it’s somewhat newer?
Andrew Bronstein: It’s right. It’s not one of the higher margin products it’s running you know as many of the PMP products are in the in the mid to high 40s on average. So that’s about right for 28 gigahertz.
John Roy: Great. Thanks so much.
Andrew Bronstein: Sure.
Operator: And our final question comes from Scott Searle with ROTH Capital Partners. Scott go ahead. Your line is open.
Scott Searle: Hey, good afternoon. Thanks for taking the follow-ups. I just wanted to dive in again real quickly on the gross margin recovery, understanding that there were headwinds near term in terms of discounting moving life fly 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.
Andrew Bronstein: Yes. I mean I think after we get through the headwinds that we have and I think as the overall industry kind of settles out longer-term I think we’re going to get back to the similar levels that we’ve had historically in that 50% range ultimately. I don’t know where you’re going to see that in the second half of 2024 as you go into 2025. But I think that’s ultimately where we’re going to pan out when all of a said and done. And I think with the cost reductions we’ve had as I said in my comments, I think that positions us well for generating more significant free cash flow in the future once we get to those levels.
Scott Searle: Great. Thank you.
Andrew Bronstein: Take one more.
Operator: And we have Erik Suppiger again, with JMP Securities. Erik, your line is open.
Erik Suppiger: Yes, just a quick follow up. In terms of the cash any sense of how we should be modeling out the either free cash flow when do you anticipate getting to breakeven or do you have a target cash balance that you want to preserve and anything we can work from rule of thumb wise?
Andrew Bronstein: Yes. 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 going to be prudent for us as we get into 2024. We had some headwinds, especially in the first quarter, where you were really collecting receivables from the previous two quarters in terms of cash coming in the previous couple of quarters being such a 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 going to be prudent for us to think that a portion of the revolvers which I don’t see being any more than half of it could be even a little bit less than that as we enter into 2024. And 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.
Erik Suppiger: Are there any loan covenants associated with the revolver that we should be aware of that would restrict any of that?
Andrew Bronstein: There are some covenants associated with the revolver but we don’t see that as being restrictive right now.
Erik Suppiger: Very good. Thank you.
Operator: And 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?
Peter Schuman: Thank you, Eric. During Q4 2023 Cambium Networks will be meeting with investors virtually on November 14 at the Needham Virtual Security Networking & Communications Conference and on November 15 at the ROTH Capital Conference held in New York and on December 11 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.
Operator: Ladies and gentlemen, this concludes today’s quarterly earnings call. Thank you for your participation. You may now log off.
