NASDAQ:AIRG Airgain Q4 2023 Earnings Report $4.19 +0.16 (+3.97%) Closing price 05/5/2025 03:59 PM EasternExtended Trading$4.14 -0.06 (-1.31%) As of 05/5/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Airgain EPS ResultsActual EPS-$0.44Consensus EPS -$0.29Beat/MissMissed by -$0.15One Year Ago EPSN/AAirgain Revenue ResultsActual Revenue$10.07 millionExpected Revenue$10.00 millionBeat/MissBeat by +$70.00 thousandYoY Revenue GrowthN/AAirgain Announcement DetailsQuarterQ4 2023Date3/6/2024TimeN/AConference Call DateWednesday, March 6, 2024Conference Call Time5:00PM ETUpcoming EarningsAirgain's Q1 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Airgain Q4 2023 Earnings Call TranscriptProvided by QuartrMarch 6, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good afternoon and welcome to Airgain's 4th Quarter and Full Year 2023 Earnings Conference Call. My name is Diego, and I will be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Swen and CFO, Michael Elbas. As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at investors. Airgain.com. Operator00:00:31Following management's prepared remarks, the call will be open for questions from Airgain's covering analysts. I caution listeners that during this call, Airgain management will be making forward looking statements about future events as well as 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, March 6, 2024. Operator00:01:18Airgain 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 will include a discussion of non GAAP financial measures. Please see today's earnings release for further details, including a reconciliation of GAAP to non GAAP results. Now, I'd like to turn the call over to Airgain's CEO, Jacob Suen. Jacob? Speaker 100:01:46Thank you, operator. Welcome, everyone, and thank you for joining us this afternoon. To begin today's discussion, I will give some company background followed by the review of our performance for the quarter year before handing the call over to our CFO, Michael Albaas. He will review our financial results for the quarter year in more depth as well as provide our outlook for Q1 2024. After that, I'll share some closing remarks before opening the call for questions. Speaker 100:02:26All right, let's begin. For those of you who may be new to our story at Airgain, we simplified wireless connectivity across the value chain from embedded components to integrated systems. We have 3 core markets, enterprise, consumer and automotive. Our enterprise market is comprised of integrated system solutions with a mix of components. Specifically, this market includes components such as our embedded cellular modems, custom products and antennas for access points and Internet of Things applications. Speaker 100:03:10This market also includes system solutions, such as our ACI Truckers and our upcoming Lantern fixed wireless access in Lighthouse Smart Seamane repeater products. Our consumer market is comprised mostly of our embedded antenna business, a traditional area of expertise for Airgain. Our consumer products include custom embedded antenna design for customer premises equipment or CPE, devices such as those that enable WiFi 6E and will enable WiFi 7. Lastly, our automotive market includes both our aftermarket antennas as well as our vehicle networking devices highlighted by our recently announced AirgainConnect fleet device. We work with a global network of VOS, system integrators, distributors and large customers to help solve critical connectivity issues, improve wireless performance and effectively shorten time to market for their products. Speaker 100:04:27We believe the global connectivity opportunity is large and durable. Secular tailwinds, including increased connectivity technology adoption and growing serviceable addressable markets across our product suite will continue to propel the industry and our company forward. At Airgain, we have a consistent track record of developing and offering optimized wireless solutions to our channel partners and customers that help them get connected quickly. As new technologies emerge, we are confident that we will continue to provide leading edge products to March. Turning now to a review of our recent operational results in 3 core markets. Speaker 100:05:22As we look back on 2023, our team managed our business through several macroeconomic headwinds, including industry wide demand softness and inventory overhang and corrections that caused order push outs, especially in the second half of the year. We generated $10,100,000 in sales in the 4th quarter, in line with the midpoint of our guidance range and closed 2023 with $56,000,000 in full year sales. However, our demand indicators, including our backlog and channel point of sales data show us that our markets are starting to recover. Although we will still face some of the persistent headwinds in the first half of the year, we believe that we are primed for a strong 2024 with gradual growth. Moving to a closer look at our 3 core markets. Speaker 100:06:292023 was an important year of development in our enterprise business. Notably, we announced several new products, including our Lantern Fixed Wireless Access solution, which is set to begin shipping in the first half of this year. Our Lighthouse smart repeater platform for which we expect first revenue shipments by early next year. And expansion to our RECOM 13 5 gs antenna product line, specifically designed for IoT applications to improve our rugged outdoor 5 gs antenna offering, a bright spot as we began shipment in Q4 of 2023 and a new custom product offering developed through a joint engineering collaboration with a strategic customer for its transition to a new and sophisticated platform for its end markets. In addition, we secured a multimillion dollar asset trucking opportunity with a railcar leader and an asset trucking alliance with sensing and control. Speaker 100:07:48Still, we faced several challenges in the second half of twenty twenty three. Our decline was largely driven by persistent inventory overhang in the channel on our embedded modems, combined with declines within our custom products and enterprise access points. Even as our challenges persisted through the end of the year, we believe we reach a trough in Q4 and that our enterprise market is set for a gradual recovery in the first half of twenty twenty four. We see end customer demand growth in our embedded modems as evidenced by growing point of sales at our distribution partners as many of the inventory challenges subside along with new sales opportunities. Also, in addition to the renewed shipments of our custom products and continued shipment ramp with our IoT antennas, our RC Truckers business continues to show growth potential with growing applications for pilot, packaging and logistics trucking rolling in on a consistent basis. Speaker 100:09:08Revenue still tends to be uneven for our asset truckers, but our pipeline includes several opportunities in railways, warehousing, equipment management and rental, lot management and co chain give us confidence that this is one of our existing product lines that presents a significant growth opportunity in the second half of twenty twenty four. Finally, we expect our Lantern fixed wireless solution to start shipping in the first half of the year. In our consumer market, which again represents a vast audience utilizing wireless enabled devices, a couple of key factors impacted our Q4 performance. 1st, as we have mentioned previously, service providers are on the cusp of a transition from Wi Fi 6N6E to Wi Fi 7. They are counting on Wi Fi 7 to improve performance and user experience And they are looking for ways to accelerate the Wi Fi 7 adoption in transition. Speaker 100:10:23Anticipation of this chip has caused widespread caution among our OEM customers as they work to avoid excessive inventory. Still, while this has created near term pressure on our consumer market growth, we are confident that this shift presents a compelling long term opportunity for Airgain to deliver its cutting edge Wi Fi 7 antenna technology as evidenced by the fact that we secure Wi Fi 7 design wins with 2 Tier 1 North American MSOs. 2nd, consumer demand continues to shift from wire to wireless providers for Internet service as consumers transition to FWA. We recognized this trend last year and have focused our strategy on penetrating this growing market, which offers significant average selling price or ASP growth since we now provide both the Wi Fi as well as the cellular antenna design. Even as this shift applies some downward pressure on our existing MSO revenue, it creates a greater opportunity for us in the long run as it opens up a new and exciting market. Speaker 100:11:53As we announced last November, we have secured a design win with a Tier 1 mobile network operator or MNO for the antenna design in their indoor FWA router. We currently expect to begin shipments for this product in Q1. While we anticipate that these headwinds will continue in the first half, we remain committed to turning around our consumer market performance and are confident that the second half of twenty twenty four is where we'll see this improvement. Lastly, our automotive market. As a reminder, our automotive market includes aftermarket products that are deployed in a wide range of vehicles, mostly focused on public safety, transportation and municipalities. Speaker 100:12:52Inventory corrections from the customers have dampened the growth in this market and we expect this trend to continue in the first half of twenty twenty four. Still, we saw several major accomplishments in 2023. We launched our EG Connect antenna platform to simplify external antenna ordering and installation, further develop our 5 gs product line of antennas and launched Ultramax 5 gs high performance windshields. As we shift into 2024, we expect that several of these products will ramp up as inventory correction delays dissipate, especially in our 5 gs antenna product lines. We're seeing signs that our combined focus on new and differentiated products, supply chain flexibility and global channel expansions continues to yield results. Speaker 100:14:01And we are optimistic that our efforts will turn this market in the second half as well. In January, we announced our next generations of vehicle gateway, Airgain Connect Fleet or AC Fleet, which is set to begin shipping in the second half of this year. Overall, we faced significant downward pressure in 2023 across our end markets, especially in the second half of the year. Several of the factors that caused these headwinds are yet to fully clear and will likely persist through the 1st and second quarters of this year. Still, while we remain responsive to the macro economic environment, our demand indicators have provided positive signs that our business is starting to turn. Speaker 100:15:00We are cautiously optimistic that we have reached a trough and are confident that our investments in our business have positioned Airgain for growth, especially in the back half of the year. As we have communicated in past quarters, we are transitioning from being exclusively a component manufacturer to a wireless system solutions provider. As such, our growth strategy is focused on 2 key elements. 1st, continued execution of our established business. Our embedded antennas are deployed in various consumer applications, including access points, wireless gateways, fixed wireless access devices, Wi Fi routers and extenders and smart home devices just to name a few. Speaker 100:15:56We have developed strong relationships with our partners throughout the value chain, including chipset providers, carriers, original design and manufacturers or ODMs and OEMs on the development side and MNOs and service providers on the customer side. Over the last few years, we have invested in next generation Wi Fi 7 design and testing capabilities. And we have now reached the cusp of the expected widespread transition from Y56e to Y57. As we strategize for 2024, we intend to maximize our opportunities with our consumer market. Already, in addition to the design win we secured with Tier 1 MSO for our next generation Wi Fi 7 products in November, yesterday we announced another design win with another Tier 1 MSO. Speaker 100:17:03Both are expected to start shipping in the second half of twenty twenty four. Furthermore, the new line of products we launched in 2023 for our IoT custom products, automotive markets and industry IoT antennas are expected to ramp up throughout 2024. With our customer agreements in funnel, we are confident that we will return to growth in our established business this year. 2nd, integrated wireless solutions expansion. While we continue to drive our existing components business forward, many of our forward looking indicators for 2024 point to our wireless connectivity product lines as our solutions with the greatest upside. Speaker 100:17:59Specifically, our asset tracking in 5 gs connectivity products offer the largest strategic growth opportunities for our business. On the asset tracking side, our asset trackers are deployed across transportation, supply chain, co chain and other specialized applications. RC Truckers bring a recurring revenue opportunity as well with multiple subscription based components such as our NimbleLink cloud based device enablement platform and our trucking information dashboards. We estimate an $800,000,000 serviceable addressable market in 2024 alone and believe that we are poised for success in the back half of the year. Our 5 gs connectivity products include our lantern FWA built to improve connectivity at the home or in the office. Speaker 100:19:07Our Lighthouse Smart Repeater designed to extend high quality coverage for mobile network operators and our recently announced next generation AC Fleet 5 gs vehicle gateway created to offer wide area cellular and local area WiFi connectivity across public safety, transportation and public and private vehicle fleets. 2 of these products are expected to ship this year. We recently completed our product certification for Lantern FWA and expect to ship to a funnel of customers in the next quarter. For AC Fleet, we have several customers both in the U. S. Speaker 100:19:59And abroad that have samples today and are confident that we can begin shipments in the second half. These three product lines represent over $700,000,000 of potential projected serviceable addressable market in 2024 and $1,700,000,000 of potential additional same in 2025, effectively doubling our foundational same of $1,800,000,000 for our existing product lines. Our connectivity product lines are the culmination of several years of investments in shifting air gain from exclusively components to full systems. And we believe that we have significant upside in these areas. With that, I will turn the call over to Michael to discuss our Q4 and full year 2023 financial results and 2024 Q1 outlook in greater detail. Speaker 100:21:08Michael? Speaker 200:21:10Thank you, Jacob. Before diving into the numbers, please note that my review of our financial results and guidance refers to non GAAP figures. Information about the non GAAP financial measures, including GAAP to non GAAP reconciliations can be found in our earnings release. Now let's turn to our 4th quarter results. As Jacob mentioned, Q4 sales were $10,100,000 in line with the $10,000,000 midpoint of our guidance range. Speaker 200:21:47Our 4th quarter sales declined 26% sequentially and 49% year over year, primarily due to excess inventory across both our channel and direct customers, coupled with demand softness in our consumer market. Consumer sales were $3,200,000 reflecting a sequential decrease of $1,200,000 due to continuing demand softness with cable operators. Enterprise sales were $4,600,000 reflecting a sequential decrease of $2,200,000 driven by lower sales of custom products and access points. Sales of embedded modems were flat sequentially as some distributors continue to recover from inventory overhang. Automotive sales were $2,300,000 reflecting a sequential decrease of $200,000 Q4 gross margin was 30.3%, largely due to an inventory charge of $1,000,000 we recorded in the quarter. Speaker 200:23:02This charge related primarily to the end of life of our Airgain Connect HPUE product lines. A year ago, we recorded a partial excess inventory reserve as a result of a lower demand forecast. In Q4 2023, the HPUE product line is fully reserved as we transition to the next generation of AirgainConnect vehicle networking product that we announced 2 months ago. Excluding the non cash inventory charge, our gross margin would have been approximately 40%, in line with the midpoint of our guidance range. Q4 operating expenses totaled $6,500,000 $500,000 higher sequentially and $500,000 higher than our guidance. Speaker 200:23:57The increase was driven by higher project development expenses. Sequentially, our G and A, sales and marketing expenses decreased, while our engineering expenses decreased as we focused on the development of our Lantern FWA and Airgain Connect fleet solution. As a result, our Q4 adjusted EBITDA was negative $3,300,000 and non GAAP EPS was negative $0.33 Our sales for 2023 totaled $56,000,000 19 by $7,300,000 driven by excess channel inventory corrections, specifically in our embedded modem product line as well as by our maturing and declining access points product line. Consumer sales declined by $6,900,000 due to soft demand from cable operators as well as excess inventory. Automotive sales decreased $5,700,000 driven by the lack of Airgain Connect HPUE sales in 2023 and excess inventories that impacted our lead aftermarket customers. Speaker 200:25:27Full year 2023 gross margin was 37.9%, 30 basis points higher than our full year 2022 gross margin of 37.6%. Full year 2023 operating expenses totaled $26,400,000 9% lower year over year driven by reduced marketing and G and A expenses considering the sequential revenue declines even as we prioritize our investments in our strategic initiatives. Full year 2023 adjusted EBITDA was negative $4,500,000 compared to positive $100,000 in 2022, driven by the impact of the material sales decline, which was partially offset by decreased operating expenses. Our cash balance as of December 31, 2023 was $7,900,000 $2,100,000 lower sequentially, driven by lower cash flows from operations and lower sales. Our accounts receivable balance was $7,400,000 $1,100,000 higher sequentially due to a sales linearity issue in the 4th quarter. Speaker 200:26:48Net inventory was $2,400,000 $1,500,000 more sequentially resulting from the excess and absolute inventory reserve along with inventory consumption. Now moving to our outlook for the Q1 ending March 31, 2024. As a reminder, Airgain provides quarterly guidance for sales, non GAAP gross margin and expenses, adjusted EBITDA and non GAAP EPS as we believe these metrics to be key indicators for the overall performance of our business. We project sales for the 2024 Q1 to be in the range of 13.25 dollars to $14,750,000 or $14,000,000 at the midpoint of the range. We expect a sequential sales growth of approximately 40% at the midpoint of the guidance range, driven by the enterprise market. Speaker 200:27:52We expect growth in our embedded modems product line after a year of inventory overhang along with growth in our costume products, asset trackers and IoT antennas product lines. We anticipate the enterprise market growth to be partially offset by a sequential decline in our automotive market due to continued inventory correction, while our consumer market sales will remain relatively flat sequentially. We expect non GAAP gross margin for the 2024 Q1 to be in the range of 39.5% to 42.5% or 41% at the midpoint of the range. Despite the projected decrease in the consumer sales mix from 32% in Q4 2023 to approximately 20% in Q1 2024, we expect our gross margin to increase driven by differentiated new products and applications in our enterprise market. We anticipate the enterprise, consumer and automotive gross margin to converge around the corporate gross margin, reducing the impact of market sales mix changes and opening a path to gross margin increases in future quarters. Speaker 200:29:22We project our operating expenses to be approximately $6,400,000 We continue to invest in our engineering and sales teams as we focus on our strategic initiatives in fixed wireless access, vehicle networking and smart C band repeaters markets. Non GAAP EPS is expected to be negative $0.06 at the midpoint of our guidance. Adjusted EBITDA is expected to be negative $500,000 at the midpoint of our guidance. Now I would like to turn the call over to Jacob for his closing thoughts. Jacob? Speaker 100:30:02Thanks, Michael. A few closing thoughts before we head Q and A. First, I am proud of our team's ability to navigate an uncertain market environment in 2023. Even as we faced significant headwinds, we made real progress along many aspects of our business, including in new products, new partners and new geographies and markets for our sales teams. I am optimistic that our industry has started to turn a corner and I'm confident that our efforts will pay off in the coming quarters. Speaker 100:30:442nd, we've already made significant progress in 2024 with 3 new developments across our markets in the last couple of months. This include the unveiling of Airgain Connect fleet, the evolutions of our flagship vehicle connectivity line in our automotive business, the announcement of the first of its kind smart lantern FWA solution in our antenna business the partnership with Lenovo Think Edge in our asset trucking business and a Tier 1 MSO WiFi 7 design win. Still, we believe that the upside is greatest in the second half of the year and we look forward to building on our early successes through the rest of 2024. 3rd, we believe that our products are at the heart of our value proposition for our customers, especially with the many emerging trends within our industry, including transitions to WiFi 7, increased demand for asset tracking capabilities and long standing pinpoints in the 5 gs coverage space. We are confident that the worldwide connectivity opportunity is vast and growing and that many geographies around the globe represent under tapped markets for our industry and our business. Speaker 100:32:25I actually just returned from the Mobile World Congress in Barcelona last month and the interest and positive feedback we received gives me even greater confidence in our efforts. For example, our next generation smart lantern FWA product expected to launch next year. It's a product that has generated strong interest from several major players in the operator space. We expect that this product slated to ship next year could significantly reduce the number of truckloads and customers' returns the operators currently experiencing. Our AC fleet product has also garnered substantial interest with both domestic and international prospects. Speaker 100:33:14Due to its all in one capability and its low profile size that makes it easy to install and maintain with better performance at a competitive price. Finally, reliable 5 gs coverage remains a key challenge for operators around the world. And our Lighthouse Smart Repeater aims to solve 5 gs coverage gaps in an effective and timely manner. For example, we are in advanced discussions towards a strategic partnership with an international for Airgain to become their primary partner for our Lighthouse smart repeater with shipment expected in early 2025. Overall, we remain committed to helping our partners and customers get connected quickly. Speaker 100:34:13At Airgain, we can enable connectivity across both components and complete systems, and we are confident in the prospects for our overarching strategy in the years to come. And with that, operator, please open the call for Q and A. Operator00:34:33Thank you. And we will now take questions from Airgain's sell side analysts. Our first question comes from Scott Searle with ROTH MKN. Please state your question. Speaker 300:35:12Hey, good afternoon. Thanks for taking my questions. Appreciate the color and it's nice to see the market bottoming and improving outlook as we look into the March quarter. Maybe Michael to just dive in quickly, I wanted to revisit the gross margins as we go into the Q1. Given that consumer tends to be a nice gross margin driver, and that's not part of the sequential uptick. Speaker 300:35:38I was wondering if you could just clarify again. So we're expecting to see an improvement in NimbleLink margins and enterprise margins in general. That's where we're going to see the biggest improvement in the March quarter? Speaker 200:35:50Yes. Hi, Scott. Thank you for the question. Yes, the enterprise margin is building up. It's a result of the number of improvements that we have done in 2023. Speaker 200:36:02One of which was this large project that we had mentioned a quarter ago. This is a new refresh platform for a strategic customer that's part of our costume products. And that is definitely a higher value of premium product in its kind. Along with also on the antenna level, the fact that we have some IoT applications and markets. This is a part of the Recon 13 product that we announced a couple of quarters ago. Speaker 200:36:31And those are also addressing some really differentiated type of applications. This is just to name a few, but this has been a definitely a process of continuous gross margin improvement. We mentioned last quarter, Scott, that the automotive was going to give us some increase and it did actually. If you exclude the overall inventory charge that we had in Q4, the margin increased sequentially from 39% in Q3 to about roughly 40% in Q4 and that was mostly because of the automotive. And that is really kind of reconciling my comments on the overall convergence around the overall consolidated type of gross margin. Speaker 200:37:15So that the dependency and we see it in Q1, hopefully that we have had on consumer mix is not as prescient as it has been in the past. Speaker 300:37:26Great. Very helpful. And congratulations on the Wi Fi 7 wins. I just want to dive into that quickly. It's that will start to ramp up with the first two MSO customers. Speaker 300:37:36It sounds like in the second half of this year. I was wondering if you could put a magnitude size around that dollar amount, so how big that will be? And how we should think about the recovery in general of the consumer business. It peaked at north of $10,000,000 We're bottoming out now at around $3,000,000 How should we think about exiting 2024? Speaker 200:37:58Yes. So very good question. So the Wi Fi 7 we believe is going to be the major improvement for the MSOs to get back into their competitive advantages. And we do believe it will be the second half of the year as well too. Right now in Q4, I believe we closed the quarter at $3,200,000 And I mentioned that we will roughly be approximately flat in Q1. Speaker 200:38:23That is actually primarily because of the MNO design win that we had on the FWA is starting to ship in Q1. And this is going to give us some nice room as well to through the year. This actually the MNO ramp is actually offsetting the seasonality that we usually see in Q1 and that's the reason for the flatness on the overall consumer revenue. As we build up into the Q3 and the Q4 or the second half of the year, we believe we can go back to the $6,000,000,000 that we have seen in the first half of last year. But again, this is a bit preliminary at this point. Speaker 300:39:03Got you. Very helpful. And lastly, if I could, just 2 other quick follow ups. On the tracker side of the equation, it sounds like the adjustable market is pretty sizable. I was wondering if you could characterize some of the potential design opportunities that are out there. Speaker 300:39:17I believe last year the railcar opportunity was in the ballpark of $10,000,000 or so. I'm wondering if these other opportunities are similar magnitude. And as it relates to Airgain Connect 2, Jacob, I'm wondering if you could provide a little bit more color now. We've had CES, you're just at Mobile World Congress. It's a 5 gs solution that supports global bands. Speaker 300:39:38How should we think about that ramping up? I know commercially, it starts shipping in the second quarter, but how quickly does that ramp both in North America and European markets as we look forward into the second half of this year in 2025? Thanks. Speaker 100:39:54Hey, Scott. Good to hear from you. It's Jacob here. So regarding AC fleet, we're already seeing vast interest both Speaker 400:40:01domestically and internationally. And we expect that Speaker 100:40:01to be shipping in Although Q2, we're expecting a lot of customers trial happening where we've been shipping SIM post to the customers, both domestically and internationally. And it is not limiting to only USA and Europe. We actually have customers that will be doing the trials in Latin America as well as Australia. So this is truly a globalized product. And what people are so interested in is the all in one features, capabilities. Speaker 100:40:43It's one of its kind. And it's such easier to maintain, such easier to install, and it's like I mentioned earlier in the script, it's a better performance actually at a lower cost. Overall cost of ownership is actually lower. So that's why we have generating a lot of interest with this particular product. So as indicated, we expect to start to have a nice funnel building up in the coming months and then to be shipped in early second half. Speaker 100:41:16Great. Thank you. I'll get back in the queue. Thank you, Scott. Operator00:41:28Our next question comes from Anthony Stoss with Craig Hallum. Please state your question. Speaker 400:41:33Hi, guys. Nice to see the pickup for the March quarter guide. Either one of you guys, can you talk about so the enterprise business is really snapping back in the March quarter. Jacob, do you think it's going to grow sequentially every quarter this year? And then I have a couple of follow ups. Speaker 200:41:49Hi, Tony. This is Michael. I actually think that you're right. It is snapping up very nicely. It's basically a growth across all the product lines that we have. Speaker 200:42:01The embedded modem is really a welcome sign, I have to say, on the overall Q1 quarter, mainly because this inventory correction that we've been anticipating is over on that specific product line. And this was one of the product lines that was mostly impacted by the excess inventory in FY 2022. In addition, the asset tracker, even though it's a bit of a lumpy business on the hardware, the recurring revenue is relatively flat. But on the hardware level, that tends to be lumpy itself, but it is a nice nicely growing as what to. The cost and product is what to and then the antenna specifically on those IoT applications. Speaker 200:42:38We do suspect that the overall enterprise market will be relatively flat at least in the near future. This is going to be basically the ups and downs of some of the product lines, but it is good to see it coming back at this point. Speaker 100:42:55Yes. And I'll comment a little bit more, Tony. When Michael says we're expecting to be flat, but it's flat over a nice improved number already from Q1 Q4 to Q1. So we expect to be able to maintain that nice level that we're going to get in Q1 for in Q2. Speaker 400:43:13Got it. And then Jacob on the Airgain Connect, the 2.0, the new product announced a couple of months ago, do you have an existing kind of customer base that are waiting for this product since they were maybe testing the original product? Speaker 100:43:27Yes. We actually have a number of customers that have been waiting. Now this product, I would say, is no longer one large customers like it was with the version 1. It really have a lot of interest from a number of system integrators. Now I expecting these deals to be nothing huge, but it's really diversified across domestically, internationally. Speaker 400:43:55Got it. And then last question for Michael. Speaker 200:43:58Yes, go ahead. Speaker 400:43:59Go ahead, Jacob. Speaker 100:44:01Yes, I was trying to say we're going to be working with a number of system integrators and channel partners on the AC fleet product line. Speaker 400:44:09Got it. And then last question for you, Michael. On the immature write down, do you expect any other product lines to have the same write down going forward? Or you think everything is pretty clean now? Speaker 200:44:20No, everything is pretty clean now. This was really the ACHPUE has been a major product line for us of concern. And we did have a partial reserve last year exactly in Q4 of FY 2022. And this at this point the product line is fully reserved and we are fully focused on transitioning to the new AirgainConnect next generation AC fleet platform. Speaker 400:44:47Perfect. Very good guys. Best of luck. Speaker 100:44:50Thank you, Tony. Operator00:44:53Thanks. Our next question comes from Tim Savageaux with Northland Capital Markets. Please state your question. Speaker 500:45:06Hi, good afternoon and my congrats on the guide as well. Jacob, I wanted to follow-up on your Mobile World Congress commentary and specifically the opportunities for the kind of coverage extension infrastructure product, you mentioned a potential strategic partnership with an international MNO. I don't know if you talked about the size of that operator. But my question is, as you look at those sorts of opportunities, can you try to size them for us? And I imagine that something like a strategic partnership would be larger than normal. Speaker 500:45:47And then how does that relate to kind of some of the served addressable market commentary that you made? Speaker 100:45:57Yes. Hey, Tim, good to talk to you. Good to hear from you. Yes, I was actually extremely excited about the feedback we got through a number of customers' meetings. And certainly, long lead, they were really interested in the smart lantern that we announced during the show and then the next gen Airgain Connect AC fleet. Speaker 100:46:18But there was a lot of interest on the smart network repeater. And what I'm hearing consistently, especially with the international community is that 5 gs coverage is an issue for them. I think that one customer told me that in Brazil, the government is mandating that they'd be able to cover 5 gs everywhere. And to do that now, especially some of the remote area or even within the metropolitan area, there's coverage gaps with 5 gs today. And even you could be really close to a base station, but between buildings, there's what they call this shadowing effect. Speaker 100:46:52And you'll notice that even in New York Metropolitan. So how do you address that? To install a lot of base station, it's really cost prohibitive, right? And also sometimes it's also challenging because you have to lay the fiber. And our Smart Lighthouse Network Repeater really addressing that particular And with our smart feature, with our carrier, we have to do this connecting to a light pole that's already existed. Speaker 100:47:19And with our smart feature, with our carrier aggregation feature, this is the perfect product, ideal product for those particular carriers or the tower company as well. And as we're talking to these customers, it's becoming obvious that we are having a product that is really addressing their need. And that's why we're actually going to have trials in Europe, in Middle East, in Latin America and here in the U. S. So we're seeing a lot of interest. Speaker 100:47:48And with this particular MNO, I mentioned internationally, it's in the EMEA area and we already discussed about a very strategic partnership. We already done a preliminary trial with them. It was extremely well received and they really want to do a much bigger trial. They are willing to enter a strategic partnership with us and I hope to update you in the really near future. As far as the size, we talk about very sizable market, really got lots of opportunities. Speaker 100:48:20So, I hope to update you more about exciting time here with our new products. Speaker 500:48:29Great. And just to follow-up on that, you mentioned, I don't know if you're coming out of Mobile World Congress with a lot of trial commitments. It sounds like that's the case, but and you've mentioned a couple of trials in the past, but as you look at it now anywhere to kind of size the number of trials you have going on for the Lighthouse product? Speaker 100:48:56Yes. I mean, look, this is in dealing with the mobile network operators, usually it takes time, right? This is an infrastructure play. So they are always very cautious about the deployment. So we have to go through several different trials. Speaker 100:49:10And that's why even though we announced the product last year, we know this was going to be a year and year and a half duration for certification, for trials. And I'm pleased that so far on the number of trials we have found, we received some extremely positive feedback from the customers. So we are proceeding to the next stage and we hope to get POs by the end of this year and we are still on track for that and those will be sizable opportunities. Speaker 500:49:45Got it. And last question for me. I think in your initial comments, you talked about gradual growth for the year. I'm guessing that refers to expectations for sequential growth throughout the year, but and it sounds like you've had this big tick up in enterprise that you hope to kind of sustain at that level and maybe have consumer and some of the asset tracking businesses kind of drive sequential growth in the second half. Is that the right way to look at it? Speaker 200:50:20Hi, Tim. This is Michael. Yes, you're correct. So the consumer, we do expect 2 good things happening. 1 is the Wi Fi 7. Speaker 200:50:28What is not in our control is, of course, the service providers launch of their own WiFi 7 solutions, but we expect that to happen in the back end of the year. The good news is that we have 2 of the key design wins here. The MNO is another one that's going to be ramping up through the year as well too. On the automotive market, the aftermarket itself, this is still being a dog by the excess inventory overhang that we still continue having with lead customers. But for their feedback, there should be through that in the back end of the year in Q3, Q4 itself. Speaker 200:51:05And then we also have the AirgainConnect space fleet coming up starting to ship in the second half of the year. And then on the enterprise business, yes, we do expect to have an overall maintenance of that product of that market with some pockets of opportunities. As we've mentioned before, we definitely are very focused on the asset tracker because of its TAM and TAM's overall growth and also with our lantern FWA product as well too. Speaker 500:51:40Okay. Thanks very much. Speaker 200:51:42Thank you. Thank you, Sam. Operator00:51:44Thank you. And at this time, this concludes our question and answer session. If your question was not taken, you may contact Airgain's Investor Relations team at airggateway grp.com. I'd now like to turn the call back over to Mr. Suen for his closing remarks. Speaker 100:52:06Thank you for joining us on today's call. I especially want to thank our dedicated employees for their ongoing contributions and our investors for their continued support. We look forward to providing additional updates at our next opportunity. Operator? Operator00:52:26Thank you for joining us today for Airgain's 4th quarter and full year 2023 earnings call. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAirgain Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) Airgain Earnings HeadlinesStockNews.com Begins Coverage on Airgain (NASDAQ:AIRG)April 28, 2025 | americanbankingnews.comAirgain Sets First Quarter 2025 Conference Call for Wednesday, May 7, 2025, at 5:00 p.m. ETApril 18, 2025 | seekingalpha.comOur $1 AI stock to buy right nowDid Elon Musk just set the stage for the next AI stock explosion? One 30-year Wall Street veteran thinks so. Musk has been quietly creating one of the most ambitious AI ventures in history.May 6, 2025 | Behind the Markets (Ad)Airgain® Reports Granting of Inducement Awards Under Nasdaq Listing Rule 5635(c)(4)April 17, 2025 | businesswire.comSky Airline Taps RateGain’s AirGain to Power Smarter PricingApril 15, 2025 | in.investing.comAirgainConnect® Fleet™ 5G Vehicle Gateway Certified on Verizon’s Ultra-Reliable 5G Network for Fleet and Mission-Critical ApplicationsApril 3, 2025 | finance.yahoo.comSee More Airgain Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Airgain? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Airgain and other key companies, straight to your email. Email Address About AirgainAirgain (NASDAQ:AIRG) provides wireless connectivity solutions that creates and delivers embedded components, external antennas, and integrated systems worldwide. The company's products include MaxBeam embedded antennas; profile embedded antennas; profile contour embedded antennas; profile ceramic embedded antenna; ultra embedded antennas; and SmartMax embedded antennas. It offers embedded and NimbeLink embedded moderms; custom cellular solutions; cellular IoT development; cellular IoT development kits; and IoT data plans. In addition, the company provides 5G connectivity, smart repeaters, and fixed wireless access; asset tracking solutions, devices, and partners; and external antennas, fleet antennas, IoT antennas, network antennas, vehicle networking, partner solutions, and accessories. It offers its products under the Antenna Plus brand. It serves industrial, consumer, automotive fleet, enterprise, energy, medical, transportation, agriculture, services, and public safety markets. The company was formerly known as AM Group and changed its name to Airgain, Inc. in 2004. 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There are 6 speakers on the call. Operator00:00:00Good afternoon and welcome to Airgain's 4th Quarter and Full Year 2023 Earnings Conference Call. My name is Diego, and I will be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Swen and CFO, Michael Elbas. As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at investors. Airgain.com. Operator00:00:31Following management's prepared remarks, the call will be open for questions from Airgain's covering analysts. I caution listeners that during this call, Airgain management will be making forward looking statements about future events as well as 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, March 6, 2024. Operator00:01:18Airgain 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 will include a discussion of non GAAP financial measures. Please see today's earnings release for further details, including a reconciliation of GAAP to non GAAP results. Now, I'd like to turn the call over to Airgain's CEO, Jacob Suen. Jacob? Speaker 100:01:46Thank you, operator. Welcome, everyone, and thank you for joining us this afternoon. To begin today's discussion, I will give some company background followed by the review of our performance for the quarter year before handing the call over to our CFO, Michael Albaas. He will review our financial results for the quarter year in more depth as well as provide our outlook for Q1 2024. After that, I'll share some closing remarks before opening the call for questions. Speaker 100:02:26All right, let's begin. For those of you who may be new to our story at Airgain, we simplified wireless connectivity across the value chain from embedded components to integrated systems. We have 3 core markets, enterprise, consumer and automotive. Our enterprise market is comprised of integrated system solutions with a mix of components. Specifically, this market includes components such as our embedded cellular modems, custom products and antennas for access points and Internet of Things applications. Speaker 100:03:10This market also includes system solutions, such as our ACI Truckers and our upcoming Lantern fixed wireless access in Lighthouse Smart Seamane repeater products. Our consumer market is comprised mostly of our embedded antenna business, a traditional area of expertise for Airgain. Our consumer products include custom embedded antenna design for customer premises equipment or CPE, devices such as those that enable WiFi 6E and will enable WiFi 7. Lastly, our automotive market includes both our aftermarket antennas as well as our vehicle networking devices highlighted by our recently announced AirgainConnect fleet device. We work with a global network of VOS, system integrators, distributors and large customers to help solve critical connectivity issues, improve wireless performance and effectively shorten time to market for their products. Speaker 100:04:27We believe the global connectivity opportunity is large and durable. Secular tailwinds, including increased connectivity technology adoption and growing serviceable addressable markets across our product suite will continue to propel the industry and our company forward. At Airgain, we have a consistent track record of developing and offering optimized wireless solutions to our channel partners and customers that help them get connected quickly. As new technologies emerge, we are confident that we will continue to provide leading edge products to March. Turning now to a review of our recent operational results in 3 core markets. Speaker 100:05:22As we look back on 2023, our team managed our business through several macroeconomic headwinds, including industry wide demand softness and inventory overhang and corrections that caused order push outs, especially in the second half of the year. We generated $10,100,000 in sales in the 4th quarter, in line with the midpoint of our guidance range and closed 2023 with $56,000,000 in full year sales. However, our demand indicators, including our backlog and channel point of sales data show us that our markets are starting to recover. Although we will still face some of the persistent headwinds in the first half of the year, we believe that we are primed for a strong 2024 with gradual growth. Moving to a closer look at our 3 core markets. Speaker 100:06:292023 was an important year of development in our enterprise business. Notably, we announced several new products, including our Lantern Fixed Wireless Access solution, which is set to begin shipping in the first half of this year. Our Lighthouse smart repeater platform for which we expect first revenue shipments by early next year. And expansion to our RECOM 13 5 gs antenna product line, specifically designed for IoT applications to improve our rugged outdoor 5 gs antenna offering, a bright spot as we began shipment in Q4 of 2023 and a new custom product offering developed through a joint engineering collaboration with a strategic customer for its transition to a new and sophisticated platform for its end markets. In addition, we secured a multimillion dollar asset trucking opportunity with a railcar leader and an asset trucking alliance with sensing and control. Speaker 100:07:48Still, we faced several challenges in the second half of twenty twenty three. Our decline was largely driven by persistent inventory overhang in the channel on our embedded modems, combined with declines within our custom products and enterprise access points. Even as our challenges persisted through the end of the year, we believe we reach a trough in Q4 and that our enterprise market is set for a gradual recovery in the first half of twenty twenty four. We see end customer demand growth in our embedded modems as evidenced by growing point of sales at our distribution partners as many of the inventory challenges subside along with new sales opportunities. Also, in addition to the renewed shipments of our custom products and continued shipment ramp with our IoT antennas, our RC Truckers business continues to show growth potential with growing applications for pilot, packaging and logistics trucking rolling in on a consistent basis. Speaker 100:09:08Revenue still tends to be uneven for our asset truckers, but our pipeline includes several opportunities in railways, warehousing, equipment management and rental, lot management and co chain give us confidence that this is one of our existing product lines that presents a significant growth opportunity in the second half of twenty twenty four. Finally, we expect our Lantern fixed wireless solution to start shipping in the first half of the year. In our consumer market, which again represents a vast audience utilizing wireless enabled devices, a couple of key factors impacted our Q4 performance. 1st, as we have mentioned previously, service providers are on the cusp of a transition from Wi Fi 6N6E to Wi Fi 7. They are counting on Wi Fi 7 to improve performance and user experience And they are looking for ways to accelerate the Wi Fi 7 adoption in transition. Speaker 100:10:23Anticipation of this chip has caused widespread caution among our OEM customers as they work to avoid excessive inventory. Still, while this has created near term pressure on our consumer market growth, we are confident that this shift presents a compelling long term opportunity for Airgain to deliver its cutting edge Wi Fi 7 antenna technology as evidenced by the fact that we secure Wi Fi 7 design wins with 2 Tier 1 North American MSOs. 2nd, consumer demand continues to shift from wire to wireless providers for Internet service as consumers transition to FWA. We recognized this trend last year and have focused our strategy on penetrating this growing market, which offers significant average selling price or ASP growth since we now provide both the Wi Fi as well as the cellular antenna design. Even as this shift applies some downward pressure on our existing MSO revenue, it creates a greater opportunity for us in the long run as it opens up a new and exciting market. Speaker 100:11:53As we announced last November, we have secured a design win with a Tier 1 mobile network operator or MNO for the antenna design in their indoor FWA router. We currently expect to begin shipments for this product in Q1. While we anticipate that these headwinds will continue in the first half, we remain committed to turning around our consumer market performance and are confident that the second half of twenty twenty four is where we'll see this improvement. Lastly, our automotive market. As a reminder, our automotive market includes aftermarket products that are deployed in a wide range of vehicles, mostly focused on public safety, transportation and municipalities. Speaker 100:12:52Inventory corrections from the customers have dampened the growth in this market and we expect this trend to continue in the first half of twenty twenty four. Still, we saw several major accomplishments in 2023. We launched our EG Connect antenna platform to simplify external antenna ordering and installation, further develop our 5 gs product line of antennas and launched Ultramax 5 gs high performance windshields. As we shift into 2024, we expect that several of these products will ramp up as inventory correction delays dissipate, especially in our 5 gs antenna product lines. We're seeing signs that our combined focus on new and differentiated products, supply chain flexibility and global channel expansions continues to yield results. Speaker 100:14:01And we are optimistic that our efforts will turn this market in the second half as well. In January, we announced our next generations of vehicle gateway, Airgain Connect Fleet or AC Fleet, which is set to begin shipping in the second half of this year. Overall, we faced significant downward pressure in 2023 across our end markets, especially in the second half of the year. Several of the factors that caused these headwinds are yet to fully clear and will likely persist through the 1st and second quarters of this year. Still, while we remain responsive to the macro economic environment, our demand indicators have provided positive signs that our business is starting to turn. Speaker 100:15:00We are cautiously optimistic that we have reached a trough and are confident that our investments in our business have positioned Airgain for growth, especially in the back half of the year. As we have communicated in past quarters, we are transitioning from being exclusively a component manufacturer to a wireless system solutions provider. As such, our growth strategy is focused on 2 key elements. 1st, continued execution of our established business. Our embedded antennas are deployed in various consumer applications, including access points, wireless gateways, fixed wireless access devices, Wi Fi routers and extenders and smart home devices just to name a few. Speaker 100:15:56We have developed strong relationships with our partners throughout the value chain, including chipset providers, carriers, original design and manufacturers or ODMs and OEMs on the development side and MNOs and service providers on the customer side. Over the last few years, we have invested in next generation Wi Fi 7 design and testing capabilities. And we have now reached the cusp of the expected widespread transition from Y56e to Y57. As we strategize for 2024, we intend to maximize our opportunities with our consumer market. Already, in addition to the design win we secured with Tier 1 MSO for our next generation Wi Fi 7 products in November, yesterday we announced another design win with another Tier 1 MSO. Speaker 100:17:03Both are expected to start shipping in the second half of twenty twenty four. Furthermore, the new line of products we launched in 2023 for our IoT custom products, automotive markets and industry IoT antennas are expected to ramp up throughout 2024. With our customer agreements in funnel, we are confident that we will return to growth in our established business this year. 2nd, integrated wireless solutions expansion. While we continue to drive our existing components business forward, many of our forward looking indicators for 2024 point to our wireless connectivity product lines as our solutions with the greatest upside. Speaker 100:17:59Specifically, our asset tracking in 5 gs connectivity products offer the largest strategic growth opportunities for our business. On the asset tracking side, our asset trackers are deployed across transportation, supply chain, co chain and other specialized applications. RC Truckers bring a recurring revenue opportunity as well with multiple subscription based components such as our NimbleLink cloud based device enablement platform and our trucking information dashboards. We estimate an $800,000,000 serviceable addressable market in 2024 alone and believe that we are poised for success in the back half of the year. Our 5 gs connectivity products include our lantern FWA built to improve connectivity at the home or in the office. Speaker 100:19:07Our Lighthouse Smart Repeater designed to extend high quality coverage for mobile network operators and our recently announced next generation AC Fleet 5 gs vehicle gateway created to offer wide area cellular and local area WiFi connectivity across public safety, transportation and public and private vehicle fleets. 2 of these products are expected to ship this year. We recently completed our product certification for Lantern FWA and expect to ship to a funnel of customers in the next quarter. For AC Fleet, we have several customers both in the U. S. Speaker 100:19:59And abroad that have samples today and are confident that we can begin shipments in the second half. These three product lines represent over $700,000,000 of potential projected serviceable addressable market in 2024 and $1,700,000,000 of potential additional same in 2025, effectively doubling our foundational same of $1,800,000,000 for our existing product lines. Our connectivity product lines are the culmination of several years of investments in shifting air gain from exclusively components to full systems. And we believe that we have significant upside in these areas. With that, I will turn the call over to Michael to discuss our Q4 and full year 2023 financial results and 2024 Q1 outlook in greater detail. Speaker 100:21:08Michael? Speaker 200:21:10Thank you, Jacob. Before diving into the numbers, please note that my review of our financial results and guidance refers to non GAAP figures. Information about the non GAAP financial measures, including GAAP to non GAAP reconciliations can be found in our earnings release. Now let's turn to our 4th quarter results. As Jacob mentioned, Q4 sales were $10,100,000 in line with the $10,000,000 midpoint of our guidance range. Speaker 200:21:47Our 4th quarter sales declined 26% sequentially and 49% year over year, primarily due to excess inventory across both our channel and direct customers, coupled with demand softness in our consumer market. Consumer sales were $3,200,000 reflecting a sequential decrease of $1,200,000 due to continuing demand softness with cable operators. Enterprise sales were $4,600,000 reflecting a sequential decrease of $2,200,000 driven by lower sales of custom products and access points. Sales of embedded modems were flat sequentially as some distributors continue to recover from inventory overhang. Automotive sales were $2,300,000 reflecting a sequential decrease of $200,000 Q4 gross margin was 30.3%, largely due to an inventory charge of $1,000,000 we recorded in the quarter. Speaker 200:23:02This charge related primarily to the end of life of our Airgain Connect HPUE product lines. A year ago, we recorded a partial excess inventory reserve as a result of a lower demand forecast. In Q4 2023, the HPUE product line is fully reserved as we transition to the next generation of AirgainConnect vehicle networking product that we announced 2 months ago. Excluding the non cash inventory charge, our gross margin would have been approximately 40%, in line with the midpoint of our guidance range. Q4 operating expenses totaled $6,500,000 $500,000 higher sequentially and $500,000 higher than our guidance. Speaker 200:23:57The increase was driven by higher project development expenses. Sequentially, our G and A, sales and marketing expenses decreased, while our engineering expenses decreased as we focused on the development of our Lantern FWA and Airgain Connect fleet solution. As a result, our Q4 adjusted EBITDA was negative $3,300,000 and non GAAP EPS was negative $0.33 Our sales for 2023 totaled $56,000,000 19 by $7,300,000 driven by excess channel inventory corrections, specifically in our embedded modem product line as well as by our maturing and declining access points product line. Consumer sales declined by $6,900,000 due to soft demand from cable operators as well as excess inventory. Automotive sales decreased $5,700,000 driven by the lack of Airgain Connect HPUE sales in 2023 and excess inventories that impacted our lead aftermarket customers. Speaker 200:25:27Full year 2023 gross margin was 37.9%, 30 basis points higher than our full year 2022 gross margin of 37.6%. Full year 2023 operating expenses totaled $26,400,000 9% lower year over year driven by reduced marketing and G and A expenses considering the sequential revenue declines even as we prioritize our investments in our strategic initiatives. Full year 2023 adjusted EBITDA was negative $4,500,000 compared to positive $100,000 in 2022, driven by the impact of the material sales decline, which was partially offset by decreased operating expenses. Our cash balance as of December 31, 2023 was $7,900,000 $2,100,000 lower sequentially, driven by lower cash flows from operations and lower sales. Our accounts receivable balance was $7,400,000 $1,100,000 higher sequentially due to a sales linearity issue in the 4th quarter. Speaker 200:26:48Net inventory was $2,400,000 $1,500,000 more sequentially resulting from the excess and absolute inventory reserve along with inventory consumption. Now moving to our outlook for the Q1 ending March 31, 2024. As a reminder, Airgain provides quarterly guidance for sales, non GAAP gross margin and expenses, adjusted EBITDA and non GAAP EPS as we believe these metrics to be key indicators for the overall performance of our business. We project sales for the 2024 Q1 to be in the range of 13.25 dollars to $14,750,000 or $14,000,000 at the midpoint of the range. We expect a sequential sales growth of approximately 40% at the midpoint of the guidance range, driven by the enterprise market. Speaker 200:27:52We expect growth in our embedded modems product line after a year of inventory overhang along with growth in our costume products, asset trackers and IoT antennas product lines. We anticipate the enterprise market growth to be partially offset by a sequential decline in our automotive market due to continued inventory correction, while our consumer market sales will remain relatively flat sequentially. We expect non GAAP gross margin for the 2024 Q1 to be in the range of 39.5% to 42.5% or 41% at the midpoint of the range. Despite the projected decrease in the consumer sales mix from 32% in Q4 2023 to approximately 20% in Q1 2024, we expect our gross margin to increase driven by differentiated new products and applications in our enterprise market. We anticipate the enterprise, consumer and automotive gross margin to converge around the corporate gross margin, reducing the impact of market sales mix changes and opening a path to gross margin increases in future quarters. Speaker 200:29:22We project our operating expenses to be approximately $6,400,000 We continue to invest in our engineering and sales teams as we focus on our strategic initiatives in fixed wireless access, vehicle networking and smart C band repeaters markets. Non GAAP EPS is expected to be negative $0.06 at the midpoint of our guidance. Adjusted EBITDA is expected to be negative $500,000 at the midpoint of our guidance. Now I would like to turn the call over to Jacob for his closing thoughts. Jacob? Speaker 100:30:02Thanks, Michael. A few closing thoughts before we head Q and A. First, I am proud of our team's ability to navigate an uncertain market environment in 2023. Even as we faced significant headwinds, we made real progress along many aspects of our business, including in new products, new partners and new geographies and markets for our sales teams. I am optimistic that our industry has started to turn a corner and I'm confident that our efforts will pay off in the coming quarters. Speaker 100:30:442nd, we've already made significant progress in 2024 with 3 new developments across our markets in the last couple of months. This include the unveiling of Airgain Connect fleet, the evolutions of our flagship vehicle connectivity line in our automotive business, the announcement of the first of its kind smart lantern FWA solution in our antenna business the partnership with Lenovo Think Edge in our asset trucking business and a Tier 1 MSO WiFi 7 design win. Still, we believe that the upside is greatest in the second half of the year and we look forward to building on our early successes through the rest of 2024. 3rd, we believe that our products are at the heart of our value proposition for our customers, especially with the many emerging trends within our industry, including transitions to WiFi 7, increased demand for asset tracking capabilities and long standing pinpoints in the 5 gs coverage space. We are confident that the worldwide connectivity opportunity is vast and growing and that many geographies around the globe represent under tapped markets for our industry and our business. Speaker 100:32:25I actually just returned from the Mobile World Congress in Barcelona last month and the interest and positive feedback we received gives me even greater confidence in our efforts. For example, our next generation smart lantern FWA product expected to launch next year. It's a product that has generated strong interest from several major players in the operator space. We expect that this product slated to ship next year could significantly reduce the number of truckloads and customers' returns the operators currently experiencing. Our AC fleet product has also garnered substantial interest with both domestic and international prospects. Speaker 100:33:14Due to its all in one capability and its low profile size that makes it easy to install and maintain with better performance at a competitive price. Finally, reliable 5 gs coverage remains a key challenge for operators around the world. And our Lighthouse Smart Repeater aims to solve 5 gs coverage gaps in an effective and timely manner. For example, we are in advanced discussions towards a strategic partnership with an international for Airgain to become their primary partner for our Lighthouse smart repeater with shipment expected in early 2025. Overall, we remain committed to helping our partners and customers get connected quickly. Speaker 100:34:13At Airgain, we can enable connectivity across both components and complete systems, and we are confident in the prospects for our overarching strategy in the years to come. And with that, operator, please open the call for Q and A. Operator00:34:33Thank you. And we will now take questions from Airgain's sell side analysts. Our first question comes from Scott Searle with ROTH MKN. Please state your question. Speaker 300:35:12Hey, good afternoon. Thanks for taking my questions. Appreciate the color and it's nice to see the market bottoming and improving outlook as we look into the March quarter. Maybe Michael to just dive in quickly, I wanted to revisit the gross margins as we go into the Q1. Given that consumer tends to be a nice gross margin driver, and that's not part of the sequential uptick. Speaker 300:35:38I was wondering if you could just clarify again. So we're expecting to see an improvement in NimbleLink margins and enterprise margins in general. That's where we're going to see the biggest improvement in the March quarter? Speaker 200:35:50Yes. Hi, Scott. Thank you for the question. Yes, the enterprise margin is building up. It's a result of the number of improvements that we have done in 2023. Speaker 200:36:02One of which was this large project that we had mentioned a quarter ago. This is a new refresh platform for a strategic customer that's part of our costume products. And that is definitely a higher value of premium product in its kind. Along with also on the antenna level, the fact that we have some IoT applications and markets. This is a part of the Recon 13 product that we announced a couple of quarters ago. Speaker 200:36:31And those are also addressing some really differentiated type of applications. This is just to name a few, but this has been a definitely a process of continuous gross margin improvement. We mentioned last quarter, Scott, that the automotive was going to give us some increase and it did actually. If you exclude the overall inventory charge that we had in Q4, the margin increased sequentially from 39% in Q3 to about roughly 40% in Q4 and that was mostly because of the automotive. And that is really kind of reconciling my comments on the overall convergence around the overall consolidated type of gross margin. Speaker 200:37:15So that the dependency and we see it in Q1, hopefully that we have had on consumer mix is not as prescient as it has been in the past. Speaker 300:37:26Great. Very helpful. And congratulations on the Wi Fi 7 wins. I just want to dive into that quickly. It's that will start to ramp up with the first two MSO customers. Speaker 300:37:36It sounds like in the second half of this year. I was wondering if you could put a magnitude size around that dollar amount, so how big that will be? And how we should think about the recovery in general of the consumer business. It peaked at north of $10,000,000 We're bottoming out now at around $3,000,000 How should we think about exiting 2024? Speaker 200:37:58Yes. So very good question. So the Wi Fi 7 we believe is going to be the major improvement for the MSOs to get back into their competitive advantages. And we do believe it will be the second half of the year as well too. Right now in Q4, I believe we closed the quarter at $3,200,000 And I mentioned that we will roughly be approximately flat in Q1. Speaker 200:38:23That is actually primarily because of the MNO design win that we had on the FWA is starting to ship in Q1. And this is going to give us some nice room as well to through the year. This actually the MNO ramp is actually offsetting the seasonality that we usually see in Q1 and that's the reason for the flatness on the overall consumer revenue. As we build up into the Q3 and the Q4 or the second half of the year, we believe we can go back to the $6,000,000,000 that we have seen in the first half of last year. But again, this is a bit preliminary at this point. Speaker 300:39:03Got you. Very helpful. And lastly, if I could, just 2 other quick follow ups. On the tracker side of the equation, it sounds like the adjustable market is pretty sizable. I was wondering if you could characterize some of the potential design opportunities that are out there. Speaker 300:39:17I believe last year the railcar opportunity was in the ballpark of $10,000,000 or so. I'm wondering if these other opportunities are similar magnitude. And as it relates to Airgain Connect 2, Jacob, I'm wondering if you could provide a little bit more color now. We've had CES, you're just at Mobile World Congress. It's a 5 gs solution that supports global bands. Speaker 300:39:38How should we think about that ramping up? I know commercially, it starts shipping in the second quarter, but how quickly does that ramp both in North America and European markets as we look forward into the second half of this year in 2025? Thanks. Speaker 100:39:54Hey, Scott. Good to hear from you. It's Jacob here. So regarding AC fleet, we're already seeing vast interest both Speaker 400:40:01domestically and internationally. And we expect that Speaker 100:40:01to be shipping in Although Q2, we're expecting a lot of customers trial happening where we've been shipping SIM post to the customers, both domestically and internationally. And it is not limiting to only USA and Europe. We actually have customers that will be doing the trials in Latin America as well as Australia. So this is truly a globalized product. And what people are so interested in is the all in one features, capabilities. Speaker 100:40:43It's one of its kind. And it's such easier to maintain, such easier to install, and it's like I mentioned earlier in the script, it's a better performance actually at a lower cost. Overall cost of ownership is actually lower. So that's why we have generating a lot of interest with this particular product. So as indicated, we expect to start to have a nice funnel building up in the coming months and then to be shipped in early second half. Speaker 100:41:16Great. Thank you. I'll get back in the queue. Thank you, Scott. Operator00:41:28Our next question comes from Anthony Stoss with Craig Hallum. Please state your question. Speaker 400:41:33Hi, guys. Nice to see the pickup for the March quarter guide. Either one of you guys, can you talk about so the enterprise business is really snapping back in the March quarter. Jacob, do you think it's going to grow sequentially every quarter this year? And then I have a couple of follow ups. Speaker 200:41:49Hi, Tony. This is Michael. I actually think that you're right. It is snapping up very nicely. It's basically a growth across all the product lines that we have. Speaker 200:42:01The embedded modem is really a welcome sign, I have to say, on the overall Q1 quarter, mainly because this inventory correction that we've been anticipating is over on that specific product line. And this was one of the product lines that was mostly impacted by the excess inventory in FY 2022. In addition, the asset tracker, even though it's a bit of a lumpy business on the hardware, the recurring revenue is relatively flat. But on the hardware level, that tends to be lumpy itself, but it is a nice nicely growing as what to. The cost and product is what to and then the antenna specifically on those IoT applications. Speaker 200:42:38We do suspect that the overall enterprise market will be relatively flat at least in the near future. This is going to be basically the ups and downs of some of the product lines, but it is good to see it coming back at this point. Speaker 100:42:55Yes. And I'll comment a little bit more, Tony. When Michael says we're expecting to be flat, but it's flat over a nice improved number already from Q1 Q4 to Q1. So we expect to be able to maintain that nice level that we're going to get in Q1 for in Q2. Speaker 400:43:13Got it. And then Jacob on the Airgain Connect, the 2.0, the new product announced a couple of months ago, do you have an existing kind of customer base that are waiting for this product since they were maybe testing the original product? Speaker 100:43:27Yes. We actually have a number of customers that have been waiting. Now this product, I would say, is no longer one large customers like it was with the version 1. It really have a lot of interest from a number of system integrators. Now I expecting these deals to be nothing huge, but it's really diversified across domestically, internationally. Speaker 400:43:55Got it. And then last question for Michael. Speaker 200:43:58Yes, go ahead. Speaker 400:43:59Go ahead, Jacob. Speaker 100:44:01Yes, I was trying to say we're going to be working with a number of system integrators and channel partners on the AC fleet product line. Speaker 400:44:09Got it. And then last question for you, Michael. On the immature write down, do you expect any other product lines to have the same write down going forward? Or you think everything is pretty clean now? Speaker 200:44:20No, everything is pretty clean now. This was really the ACHPUE has been a major product line for us of concern. And we did have a partial reserve last year exactly in Q4 of FY 2022. And this at this point the product line is fully reserved and we are fully focused on transitioning to the new AirgainConnect next generation AC fleet platform. Speaker 400:44:47Perfect. Very good guys. Best of luck. Speaker 100:44:50Thank you, Tony. Operator00:44:53Thanks. Our next question comes from Tim Savageaux with Northland Capital Markets. Please state your question. Speaker 500:45:06Hi, good afternoon and my congrats on the guide as well. Jacob, I wanted to follow-up on your Mobile World Congress commentary and specifically the opportunities for the kind of coverage extension infrastructure product, you mentioned a potential strategic partnership with an international MNO. I don't know if you talked about the size of that operator. But my question is, as you look at those sorts of opportunities, can you try to size them for us? And I imagine that something like a strategic partnership would be larger than normal. Speaker 500:45:47And then how does that relate to kind of some of the served addressable market commentary that you made? Speaker 100:45:57Yes. Hey, Tim, good to talk to you. Good to hear from you. Yes, I was actually extremely excited about the feedback we got through a number of customers' meetings. And certainly, long lead, they were really interested in the smart lantern that we announced during the show and then the next gen Airgain Connect AC fleet. Speaker 100:46:18But there was a lot of interest on the smart network repeater. And what I'm hearing consistently, especially with the international community is that 5 gs coverage is an issue for them. I think that one customer told me that in Brazil, the government is mandating that they'd be able to cover 5 gs everywhere. And to do that now, especially some of the remote area or even within the metropolitan area, there's coverage gaps with 5 gs today. And even you could be really close to a base station, but between buildings, there's what they call this shadowing effect. Speaker 100:46:52And you'll notice that even in New York Metropolitan. So how do you address that? To install a lot of base station, it's really cost prohibitive, right? And also sometimes it's also challenging because you have to lay the fiber. And our Smart Lighthouse Network Repeater really addressing that particular And with our smart feature, with our carrier, we have to do this connecting to a light pole that's already existed. Speaker 100:47:19And with our smart feature, with our carrier aggregation feature, this is the perfect product, ideal product for those particular carriers or the tower company as well. And as we're talking to these customers, it's becoming obvious that we are having a product that is really addressing their need. And that's why we're actually going to have trials in Europe, in Middle East, in Latin America and here in the U. S. So we're seeing a lot of interest. Speaker 100:47:48And with this particular MNO, I mentioned internationally, it's in the EMEA area and we already discussed about a very strategic partnership. We already done a preliminary trial with them. It was extremely well received and they really want to do a much bigger trial. They are willing to enter a strategic partnership with us and I hope to update you in the really near future. As far as the size, we talk about very sizable market, really got lots of opportunities. Speaker 100:48:20So, I hope to update you more about exciting time here with our new products. Speaker 500:48:29Great. And just to follow-up on that, you mentioned, I don't know if you're coming out of Mobile World Congress with a lot of trial commitments. It sounds like that's the case, but and you've mentioned a couple of trials in the past, but as you look at it now anywhere to kind of size the number of trials you have going on for the Lighthouse product? Speaker 100:48:56Yes. I mean, look, this is in dealing with the mobile network operators, usually it takes time, right? This is an infrastructure play. So they are always very cautious about the deployment. So we have to go through several different trials. Speaker 100:49:10And that's why even though we announced the product last year, we know this was going to be a year and year and a half duration for certification, for trials. And I'm pleased that so far on the number of trials we have found, we received some extremely positive feedback from the customers. So we are proceeding to the next stage and we hope to get POs by the end of this year and we are still on track for that and those will be sizable opportunities. Speaker 500:49:45Got it. And last question for me. I think in your initial comments, you talked about gradual growth for the year. I'm guessing that refers to expectations for sequential growth throughout the year, but and it sounds like you've had this big tick up in enterprise that you hope to kind of sustain at that level and maybe have consumer and some of the asset tracking businesses kind of drive sequential growth in the second half. Is that the right way to look at it? Speaker 200:50:20Hi, Tim. This is Michael. Yes, you're correct. So the consumer, we do expect 2 good things happening. 1 is the Wi Fi 7. Speaker 200:50:28What is not in our control is, of course, the service providers launch of their own WiFi 7 solutions, but we expect that to happen in the back end of the year. The good news is that we have 2 of the key design wins here. The MNO is another one that's going to be ramping up through the year as well too. On the automotive market, the aftermarket itself, this is still being a dog by the excess inventory overhang that we still continue having with lead customers. But for their feedback, there should be through that in the back end of the year in Q3, Q4 itself. Speaker 200:51:05And then we also have the AirgainConnect space fleet coming up starting to ship in the second half of the year. And then on the enterprise business, yes, we do expect to have an overall maintenance of that product of that market with some pockets of opportunities. As we've mentioned before, we definitely are very focused on the asset tracker because of its TAM and TAM's overall growth and also with our lantern FWA product as well too. Speaker 500:51:40Okay. Thanks very much. Speaker 200:51:42Thank you. Thank you, Sam. Operator00:51:44Thank you. And at this time, this concludes our question and answer session. If your question was not taken, you may contact Airgain's Investor Relations team at airggateway grp.com. I'd now like to turn the call back over to Mr. Suen for his closing remarks. Speaker 100:52:06Thank you for joining us on today's call. I especially want to thank our dedicated employees for their ongoing contributions and our investors for their continued support. We look forward to providing additional updates at our next opportunity. Operator? Operator00:52:26Thank you for joining us today for Airgain's 4th quarter and full year 2023 earnings call. You may now disconnect.Read morePowered by