Good afternoon. Welcome to Airgain’s Fourth Quarter 2021 and Full Year 2021 Earnings Conference Call. My name is Jenna, and I will be the coordinator for today’s call. Joining us for today are Airgain’s CEO, Jacob Suen; CFO, David Lyle; and Senior Vice President of Product and Marketing, Morad Sbahi. As a reminder, this call will be recorded and made available for replay via a link available in the Investor Relations section of Airgain’s website at www.airgain.com. Following management’s prepared remarks, the call will be opened up for questions from Airgain’s publishing sell-side analysts. I would now like to turn the call over to Mr. Lyle. Thank you.

Thank you and good afternoon to everyone. I caution listeners that during this call, Airgain management will be making forward-looking statements about future events and Airgain’s business strategy, and future financial and operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are qualified by the cautionary statements contained in today’s earnings release and Airgain’s SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, February 24th, 2022. Airgain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. In addition, this conference call may include a discussion of non-GAAP financial measures. Please see today’s earnings release for further details, including a reconciliation of the GAAP to non-GAAP results. Now, I’d like to turn the call over to our CEO, Jacob Suen. Jacob?

Thank you, Dave. Welcome, everyone, and thank you for joining us on the call today. I'll start with some commentary about our 2021 financial results and then an update on the progress we've made towards executing our strategy. Dave will then provide financial details as well as our Q1 2022 outlook and color around how we expect 2022 to play out. Looking back over 2021, we really started to hit our stride in the first half of the year before the global supply shortage issues began to impact our business. In the first half, we average over $70 million in revenue each quarter, the two highest revenue quarters in the company's history. The supply shortages in the second half of the year materially impacted our business, particularly our consumer business, where we believe we lost about $8 million in revenue. Looking into Q1 of this year, we're seeing backlog indicating that the supply shortages in our consumer market revenue is starting to resolve itself. In fact, total backlog plus buildings in Q1 already exceed $16.5 million, the strongest in our history at this point in the quarter. If you look back over the last two plus years that we have been transforming the company from an embedded internet technology company focused primarily on the consumer market to an integrated wireless systems company focused on larger and faster-growing enterprise and automotive markets. You can see that we are a dramatically different company today. Looking back just three years ago, in our fiscal year end 2018 results, Airgain's consumer market revenue generated almost 80% of total revenue. In 2021, consumer market revenue was only 40% of total revenue. Looking ahead into 2022, we believe consumer market revenue will grow. But the growth from our enterprise in our multiple markets will outpace that…

Thank you, Jacob. Fourth quarter 2021 revenue was $14.1 million. Beginning with our consumer revenue, Q4 finished at $2.5 million, down from $4.6 million in Q3, primarily due to weakness from the global supply shortage. Enterprise revenue was down from $8.7 million in Q3 to $8.1 million in Q4. Due also to weakness from the global supply shortage. Our industrial IoT products grew sequentially and our traditional enterprise Wi-Fi products declined. Automotive revenue grew sequentially from $2.2 million in Q3 to $3.5 million in Q4 as we saw revenue growth from both AirgainConnect as well as our aftermarket fleet revenue. Q4 non-GAAP gross margin of 35.1% was just above the top end of our previous guidance range, primarily due to favorable product mix changes. Excluded from non-GAAP gross margin was $93,000 for amortization of purchased intangibles. Non-GAAP operating expense in Q4 of $7.2 million was just above our previous guidance range. Excluded from non-GAAP operating expense was about $1 million in stock-based compensation expense, about $663,000 in amortization of intangible assets, mostly related to the NimbeLink acquisition and about $380,000 for fair value of contingent consideration related to the NimbeLink acquisition. Adjusted EBITDA was negative $2.1 million in Q4, right at the midpoint of our previous guidance range. Non-GAAP net loss in Q4 was $2.3 million and Q4 GAAP net loss was $4.6 million. Moving to earnings per share, our Q4 non-GAAP loss per share was $0.23. GAAP loss per share was $0.46. Finally, our Q4 cash, cash equivalents, and restricted cash totaled approximately $14.7 million, about $4.4 million lower than in Q3 due to negative $1.6 million in working capital changes mostly associated with the timing of inventory purchases, as well as the timing of quarter shipments heavily toward the back half of the quarter, but also related to…

Thanks Dave. I would like to reiterate that we have confidence in our long-term strategy and that we are pleased with the progress we have made in becoming a high performance integrated wireless system provider. We believe the successful transition from an antenna component supplier to an integrated wireless system company, as well as our expansion into the lucrative enterprise in automotive markets, puts Airgain in a position to sustain long-term profitable growth. While we're still managing to some remaining supply shortage issues, we're seeing a recovery already taking place this quarter, and expect that positive trend to continue into 2022. With rising demand for our new and innovative industrial IoT, AirgainConnect and after-market products were optimistic about our growth prospects in 2022 and beyond. With continuing focus on customer service satisfaction, operational efficiency in product innovation, we are keen on delivering on our mission to connect the world to Airgain's optimized integrated wireless systems. And with that, we're ready to open the floor for your questions. Operator, please provide the appropriate instructions.

Thank you very much. [Operator Instructions] First question on the line comes from Michael Mani of B. Riley Securities. Please go ahead with your question, Michael. Thank you.

Hey guys, this is Michael on for Craig. Thanks for letting us ask a couple of questions. My first question is concerning gross margins. So, nice to see the guide of 37% for next quarter. I was just wondering if you could walk us through how you see the gross margin trajectory playing out throughout the year? Just a year ago, we were back at 40 -- low 40% levels. And I was just wondering if you could walk us through the relative contribution of mixed benefits and maybe even supply headwinds? And also as you outsource manufacturing, how we could potentially get back to that 40% level?

Yes, I'll take them on Michael. This is Dave. On the gross margin front, going into Q1, we're getting some beneficial product mix with the consumer revenue starting to grow. We said historically the consumer revenue has had a higher gross margin profile than on enterprise and automotive, especially as we ramp new products for automotive and enterprise. We think we'll continue to see growth as we get through the final issues related to the supply global supply shortage on the consumer front, which should help us a little bit more going into Q2 and beyond on a gross margin front. In terms of the rest of the year, I think it'll really depend on how fast and how big we grow both automotive and enterprise, which have lower gross margin profiles. And so I think if we grow much more rapidly, we're going to see more pressure on gross margin, but obviously, more dollars falling to the bottom-line in that case. In any case, I do think we can get back into this year, the 40% range from a gross margin perspective.

Got it. That's helpful. Thank you. And my next question is concerning AirgainConnect, I was wondering if there were any updates to your promotional activity with AT&T? And any updates you can get on the opportunity funnel and sell-through customer dynamics et cetera?

Yes, good afternoon. This is Morad. So, I can -- I’ll take that one. So, the promotional activity that we started last year with AT&T that's continuing to be in effect for this quarter and it's the same model where we provide $400 of cost savings and then AT&T kicks in $800, which means that the customer winds up paying $320 in total. It's really very, very -- has been very beneficial for us. So like I said in the last earnings call, what that promotion has done for us is, it not only increased the funnel in a substantial way, but it also -- the color of those customers has changed. And what I mean by that is that we are starting to see more urban customers showing up showing interest in AirgainConnect. And these are the kinds of customers that really are going to fuel that growth that we've been waiting for AirgainConnect. And so the -- if you're talking about rural customers that are ordering, let's say tens of units or low hundreds, these are the kind of customers that order mid-hundreds to over 1,000 units. So, it's really, really, very healthy for us. So, we're really excited about that and that trend continues. It started, like I said, the second half of last year and it's continuing this year and we expect it to go on for the rest of 2020.

Thank you.

Our second question today comes from Karl Ackerman of Cowen and Company. Please go ahead Karl. Thank you.

Yes. Thank you. And Dave, enjoying working with you and best of luck in your future endeavors. Two questions for me, if I may. I understand you're pivoting your manufacturing strategy, I think, for NimbeLink products from internal to external contract manufacturers. But I guess first, why has inventory been creeping higher throughout the year when sales have moderated? And then second, I guess, you address that question, you've you faced supply shortages over the last couple of quarters. So, have you been able to lock-in volume commitments that that give you confidence you can achieve the backlog and billings you have today?

I'll start and Jacob you can pipe in. First of all, thank you, Karl, it's been great working with you. I'm sure we'll bump into each other again. Related to the contract manufacturing, that's actually we've used contract manufacturers for NimbeLink historically, and that model is not going to change. This is more related to some of our antenna plus branded products, as well as AirgainConnect products, which we've done in our Arizona facility. That's a facility that we're shutting down and moving to contract manufacturers. That should help us in a variety ways, including inventory reduction. To your question about inventory and seeing higher levels right now, that was a conscious decision on our part to go ahead and buy ahead on parts that we thought would have more problems related to the global supply shortage, the more the risky items in terms of procurement. And so I would say if you characterize that total inventory number, a large portion of it is AirgainConnect and NimbeLink, both which we have high confidence in demand. So, we feel pretty good there. I do think though that we're going to see a pretty significant reduction in that inventory number over the next couple of quarters, especially as we moved contract manufacturers on AirgainConnect in 10 plus branded products.

That's helpful. I appreciate that. I guess -- sorry. Then just to follow-up on the last question I had. I mean if you could just speak to the level of volume commitments you have that allow you to work on that backlog and billings, it sounds like you have some of the inventory today. But I guess as you think about the growth opportunities throughout 2022, which you spoke about earlier in your prepared remarks, how do you think about the ability or willingness to engage on some longer term contracts with your suppliers, so that you can fulfill the end customer demand, both across consumer, but also in automotive and enterprise networks? Thank you.

Yes, it finishes in question. We've -- on the NimbeLink side where we have a lot of inventory, we care a lot of inventory, we actually have pretty significant backlog for all of 2022, which gives us some pretty high confidence. Again, like I said, historically, our biggest issue has been trying to grow through the global supply shortage issues. I think our growth would be even bigger within NimbeLink if there was no supply shortage, but you're seeing us continue to grow that that business. So, we have pretty high confidence in terms of just hard backlog for the year, which gives us a lot confidence there. On the other part of the kind of inventory equation on the AirgainConnect side, that's still, I would call it in its early stages. So we're still trying to grow that business. We -- the demand, the end demand is obvious. The sales pipeline, like Morad talked about is pretty big. We just got to close deals and get it sell-through.

Understood. Thank you.

No problem.

Anthony Stoss from Craig-Hallum, your line is now open. Please go ahead.

Thank you. Pretty impressive guide, all things considered up 22% at the midpoint sequentially guide, especially supply chain. So kudos to pulling that off. Along those lines with the growth rates heading up into Q1? Do you expect all of the business segments to grow? And maybe a generic question for Jacob, what do you expect or what's the ballpark range of how much you think your business can grow. And Dave's talking about significant backlog, I'm curious what you think the growth rate might be for IoT this year and maybe next?

Hey, good to having you joining us, Tony. It's Jacob here. Great questions by the way, and I appreciate that the fact that you'll recognize that the team has done a phenomenal job to be able to overcome the supply shortage issue. And we're looking really good about not only Q1, but the rest of the year. So regarding the three markets, what I can tell you is that we do have high demand from the customers. Thus with consumer, thus with the enterprise and thus with the automotive. Now, on the consumer side, as I indicated, it's -- we are in the recovery mode, and the fact that the supply shortage issue is starting to resolve itself, that's going to be it'd be helpful for the not only for Q1, but the rest of the year. In regarding enterprise, that's -- a lot of it with industrial IoT product, with our NimbeLink brand. The demand is high. But we are, certainly also dealing with some parts shortage issue that we got to -- still get overcome. And then on the automotive side, the AirgainConnect is certainly also seeing a much greater demand, and in aftermarket fleet, we're also seeing a high growth as well, I will not be able to tell you that, hey, is all three going to, while we're going to be able to see sequential quarter-after-quarter, but we do feel strongly about the overall growth across all three market segments.

So what I can tell--

Okay. Yes. Go ahead.

So I was just going to add something to what Jacob said in that, the direction that was set for the company to become more for wireless system integrator, all of those products that we are offering, were seeing that that those business lines are growing, that's where the trend is happening. And consumer is more or less that returned to normal with our supplier or what our customers finding or gaining access to supply. So that's what's going to drive in really what's happening in 2022.

Okay. And then maybe it's a follow-up, this transition for a couple of product lines to the contract manufacturing side. Have you done extensive qualifications with this contract manufacturer? Do you expect it to be smooth? Are you building up internal inventory those parts, and in case it's not smooth, and there's any hiccups on the contract manufacturer side, any color would be helpful, just to make sure that the handoff is smooth?

Yes, so very good questions again. So we actually not only have one, but we actually have a couple for our new North American manufacturing -- contract manufacturers. And we have created some redundancy as well. And so all of that we do feel strongly that, one can serve as the backup of the other, then we are training them, and we actually have a much easy access to them and they’re working really closely with our operation team as well, which is located in Arizona. So we feel pretty good about be able to make sure that they deliver. And just so we actually started work with them in Q4 last year really closely. And they've been able to deliver the type of quality product and the type of quality that we expect it. So it's something that we've already done enough triathlons, you want to call it to get to we are at. That's why we have made the decision that we feel comfortable to shoving down our Arizona facility.

Yes. We kind of used, Tony, a phased approach where we put our one larger product line from the Antenna Plus branded products first, and then we put another one on and did it slowly over the, like Jacob says, since the beginning of Q4. So we have very high confidence that they can deliver pretty high quality. We're also pretty excited about the fact that they can improve just through scale and buying parts, procuring parts, more cheaply for us to improve our gross margin. So I think we're going to benefit on two sides there.

Great. Thanks all the detail, guys. Best of luck.

Thanks a lot, Tony.

Our next question on the line comes from Tim Savageaux of Northland Capital Markets. Please go ahead, Tim. Thank you.

Thanks, and good afternoon. I wanted to follow-up on kind of the segment dynamics going into Q1. I mean, I'm going to assume that the majority, if not the vast majority of the sequential growth you're forecasting is coming from consumer, is that supply situation recovers and that likely has a positive impact on gross margins as well. Is that a fair assumption in your estimation? Or is there any other segments driving sequential growth in a meaningful way?

No, I think in a meaningful way, consumer is driving the majority of the growth. There's contribution across some of the other product lines, but nothing like the consumer recovery.

Okay. Great. And then -- well, just to follow with consumer and I have one more, and there was an earlier comment about getting back to normal. I mean, which likely represents something in the $10 million a quarter range where you started calendar 2021 and ended calendar 2020. At this point, does that seem like a reasonable target to get back to those levels by the end of the year in consumer?

Yes, I think it's possible. I don't think we're planning at something a little more conservative, especially, with some of the supply shortage issues out there still remaining. But even if we improve off our Q1 number, which we expect to, it's going to be contribute both not only on top line growth, but on gross margin.

Right. And then last one for me. Had a nice uptick in the quarter for automotive, which I think you attributed to AirgainConnect. And I guess, given how sharp that increase was, I wonder if you can give us a little more color as to whether we could look at that as kind of a maybe a stocking situation that needs to be digested? Or whether you're seeing that sharp of an uptick in demand that you feel like you can continue to build on throughout 2022?

Yes. We saw growth out of both AirgainConnect and aftermarket fleet Q3 to Q4. We're also suffering a little bit on the supply shortage issue on the automotive aftermarket fleet revenue over the past couple of quarters to so. I think we're starting to see a little bit of a return there. Again, we've got to keep an eye out on what this supply shortage will do to the business going forward in 2022. But we do think we can grow through it mostly because we've kind of redone our sales strategy on the Antenna Plus branded products. And we've upgraded some of the key products to 5G. And I think that should drive growth for us. And I think we're -- in terms of AirgainConnect, we were saying we've got this really large opportunity funnel that we've been chasing, taking some time to close those deals. I think we should see really more of an inflection point, which I think is where you're trying to get to starting in the second half. It's possible this half, but I think it's going to be more in the second half.

Okay. Thanks very much.

No problem.

[Operator Instructions] We have a question in from Scott Searle of ROTH Capital. Please go ahead, Scott. Thank you.

Hey, guys. Thanks for taking my questions. Nice job on seeing consumer started recovery. And Dave, want to wish you all the best. I'll miss for asking you on a regular basis.

Thanks, Scott.

Hey. To dive in on the consumer it sounds like you answered part of it with Tim's question, it doesn't sound like you're seeing any sort of immediate snap back to the levels we exited 2020 and enter 2021 in at the $10 million level seems like it's going to build after the first quarter. But you're not building in that type of expectation. I'm just want to clarify if that's correct. And that is part of it, there's a big transformation going on from Wi-Fi 6 to Wi-Fi 6E. I'm wondering how important Wi-Fi 6E is what that's doing to the dialog the opportunity? And are you seeing opportunities not only traditional indoor, in EPS pretty stunning to see some outdoor opportunities as well as it relates to 6E?

Yes. Hey, good to talk to you, Scott, Jacob here, I pick the questions first, and then having Morad or Dave to chime in. So regarding the consumer, you're correct, the it's recovering, but now it's going to take some time to get back to where it was. Although, based on what we're seeing, as indicated, Q1, what it is seeing a substantial improvement over Q4 of last year. And we do see, even in our backlog right now, give you some even visibility into Q2, we are seeing also numbers in a backlog that is much higher than what we used to get at this point during the quarter. So those are positive indication that consumer is on his recovery path, how fast and when we, we feel good that it's going to be happening this year. And also want to mention that consumer, used to be like I say 80% of our overall revenue just two, three years ago, it's now largest, fully percent. And I would expect this year's to be even taking on a smaller percentage of the overall revenue. And the reason for that is that even though it's growing, what we are doing with the, the system product with automotive within the price is really outpacing that, in other expect that the number of consumer the revenue will be better than last year, but it's actually going to become a smaller percentage of our overall revenue. And that's why we made the decision to go with the system product approach, and it's really paying dividends. The product we now have within enterprise, with automotive and with demand we're seeing, I've indicated, it's really evidence of our successful transition from an antenna company, component company, now to a system integrator. Now, you'd mentioned about WiFi 6, 6E. Yes, absolutely. One carrier that I spoke to one major North American carrier that I spoke to, basically told me that starting 2022, they are not going to ship anything, that's not WiFi 6E. Okay. So that -- so what they have in the 11ac, they are no longer than ship any of those. And that's one of the reasons that that should help -- help with the recovery on the consumer side. And I'm sure other carriers are thinking the same thing about all of them are going to quickly move into the 11x or WiFi 6, 6E.

Okay. Very good. Okay. Great. Very helpful. Thanks, Jacob.

Yes. Let Morad commenting on the outdoor versus indoor. Yes.

Yep, yes. So I was just going to say, Scott, that, a lot of the growth that just like Jacob said, a lot of the growth that you're seeing, or a lot of the traction that you're seeing in the business in 2022 is 6E and 6 that we had one must say, a year ago, or maybe a little bit earlier than that, where the opportunities are, particularly in a back part of 2021 is mostly in what we're seeing. It's mostly indoor, by the way, we do some outdoor, we're mostly indoor. But there's a lot of traction right now in fixed wireless access, right, as you start to see with the C Band deployment, you got a lot of the operators that want to go out there and then compete with the wired guys. And here's an opportunity for them to provide these platforms like, for instance, what T-Mobile is doing and the other guys are doing. And that provides an opportunity for Airgain to work with OEMs in that Airgain, has the capabilities to solve these complex wireless problems. And so you already had that traction in the WiFi area, but now we add the uplink being, also wireless and let's call it cellular. That gives us the capability to not only be able to solve these even more complex problems, but also increase the ARPU per box. So that's where you're going to see some of the traction going forward and design wins for Consumer for us.

Got you, very helpful. And if I could the follow-up on the NimbeLink front, sounds like business continues to be strong there. I was wondering if you could give us an indication of the size of the business in the fourth quarter, at least, if it was up sequentially from the third quarter? And it sounds like you only have a good visibility backlog, but also visibility supply. So, I was wondering if you could kind of frame the growth rates at the low end and the high end of what you see -- or at least a baseline level expectation for NimbeLink in 2022?

Yes, I'll take a shot at that Scott. In Q3 to Q4, we grew sequentially. I don't want to talk specifically about Q1. We do I think in terms of demand, we should be growing. But we still haven't solved -- resolved all of the supply shortage issues. So, that's putting a little pressure on us on the NimbeLink branded products right now. So, the jury's still out on that, but I think for the entire year, even with supply shortages, we're going to grow 2021 to 2022.

Okay, and lastly, if I could to dig in on the auto front and AirgainConnect, I'm not sure if you've provided any numbers on this call. In the past, you've talked about the number of pilots and engagements kind of helping to frame the opportunity. You did mention an inflection is teeing up maybe for the second half of this year. But there AirgainConnect crossed the $1 million thresholds in the fourth quarter. Are there any -- is there any other color you could kind of put around the level of activity that's going on for AirgainConnect? And then I guess, in terms of other product extensions, right, you've talked about evolution with other carriers and other commercial markets, I'm kind of wondering what the updated thoughts are on that front? Thanks.

Yes, in terms of the revenue breakout for AirgainConnect, we're trying to not to disclose that at this point, and just accumulate that with our automotive number. But in terms of -- like you're talking about on the opportunity and the potential demand that we're seeing here is pretty material. So, I'll let Jacob and/or Morad--

I can share with you, Scott, that we are seeing really -- a much stronger opportunity size and the orders that we are anticipating to receive, it's also in a much larger volume loss. Plus Morad indicated earlier, with the new approach that AT&T and us have been working on since really, second half of last year, we are now seeing a lot of these major urban opportunities now come to fruition. So, they expect to really pick it up in -- even already are already happening, we expect that to continue throughout the year. And I also want to share that, more there was the scene in DC earlier this week, to receive an Innovation Award during the 10 years anniversary of FirstNet. And there AT&T, FirstNet are really focusing on the MegaRange service, which is the flagship product for the offering, it's AirgainConnect. So, there's a concerned effort by AT&T FirstNet, and certainly, AirgainConnect to make these a really success product for all of the first-responders out there.

And the other thing I would add to that, Scott is that what I noticed from that event is that -- and I not here speaking for AT&T, but I can tell you that the general theme that came out of there is that FirstNet is becoming a reality. And there are more and more towers being deployed, more towers, better coverage, better opportunities for AirgainConnect and we see that -- we actually see that on the other side, not only in urban, but also in rural. Just to kind of address your point about another question that you had, in terms of roadmap, I mentioned this last time in the call that AirgainConnect HPV, the unit that we have today, that's just the first product in this product line SKU. You can expect this year that we will have derivatives that will address other operators, not only here in North America, but also overseas, but we do want to be disciplined, we do want to be focused. There's so much out there that needs to be taken care of. And we need to do this thinking carefully so that we can be successful with we have at hand and also not lose sight of what this could provide to us in terms of opportunity at the global scale.

Great. Thanks so much.

Thank you. We have no further questions registered. So, I'll hand back over to Jacob for closing remarks. Thank you very much.

Thank you for joining us on today's call. We look forward to updating you on our next call. Later.

Thank you very much. That concludes today's call You may now disconnect your lines. Have a lovely evening. Thank you.