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spk03: We also have, you know, started seeing a really good traction on the traditional, you know, antenna plus aftermarket products as well. And we expect that business also to grow substantially throughout the year. So I would not be able to tell you which one's going to grow faster, although I really feel good about both.
spk05: Thanks for the call, Jacob. Best of luck, guys.
spk03: Thank you, Tom. Thank you.
spk02: We'll take our next question from Craig Ellis with B Reilly Securities. The floor is yours.
spk04: Yeah, thanks for taking the question and congratulations on the progress team. I wanted to start clarifying some comments around consumer. So clearly consumer has rebounded off severely restrained levels. The question is this, Jacob, as you look at the business returning to quote unquote normal, is normal the 10-ish million a quarter levels that we would have seen at times in the past? or just given the current environment, would it be something lower than that, maybe seven to nine, or for whatever reason, do you actually see it going into the low double digits or even better than that?
spk03: Hey, Craig, good to hear you again. Yes, look, we do feel like is there the potential to get back to normal? The answer is absolutely yes. Where exactly would that number be? I think that previously, We front rate, you know, it's seasonal, right between anywhere from 8, I would say, 8 to 11 mil, or even to 8 to 12 mil. And I say we can get back to that range. But, you know, it's going to take some time to get there. As I indicated earlier, the headwinds on the overall supply shortage is still there. And with the consumer market, we are a lot more dependent on others. And I want to reiterate, we don't have an issue With our product, when it comes to the consumer-owned shortages, we have the product we can build. The issues with our partners or the product or our antennas going into a gateway, it's set-top box that are missing the other key components. That's what's holding up. Because of that, there's a lot more uncertainties there that we cannot predict. I think that it's going to take some time, given the macro environment currently.
spk04: Yeah, that's understandable. There's just so many components on a set-top box system board. The next question and issue I wanted to dig into was AirGain Connect. So just great to see the water utility win, very substantial. The question is this, if we estimate that that's worth about $3 million given AirGain Connect ASPs, how much of that is included in the second quarter guide and And how should we think about the rev rec on the balance through calendar 22?
spk03: Yeah, great questions, Craig. So certainly we're also pleased to see that particular, you know, design win. And as I indicated, even with these particular customers, this, I keep wanting to mention, this is only the first order from them. They actually have, it's a nationwide utility company across many different states. And this was only the first order, and they have a lot more vehicles that could using AirGain Connect in the foreseeable future. With that being said, the other key point I want to reiterate is that this was actually not part of our same, you know, the subscriber addressable market that we've been telling the market, which is the first responders, which is actually $500 million plus sent for us. So this is in addition to that. Now, how is this year going to play out? Certainly not all of these are going to be shipping second quarter. It's going to be shipping throughout the year just for this utility purchase order that we mentioned. We do have other opportunities, other wins that we already got that should produce the revenue stream for the rest of the year. And I do see that we're getting, you know, If you look into the opportunity funnel, if I look into the customer's trial, we're seeing every one of these, it's increasing. And also the promotions that AT&T continue to perform, it's also making all of us feel confident about the future for AirGain Connect. I think that last year, You know, we're hoping to be able to see that last year. I really feel like, you know, it really takes a year to a year and have to ramp up. And right now we're at the cuffs of that growth now going forward.
spk04: So are you saying you would expect that AirGain Connect revenues to grow sequentially through the year? Jacob, was that the message that you were conveying there?
spk03: Yes.
spk04: Got it. Okay. And then moving on to... And I wanted to ask a revenue and a gross margin question because they're related. So as we saw the business perform exceptionally well last year, we also saw that it was one that had an adverse gross margin mix impact. So the question is this. I wasn't clear if Nimblink actually rose or declined in the first quarter, so can you clarify that? And then given that it was previously very significantly below corporate gross margin average, are there things that have been done operationally to get that margin back to corporate average, or do we still have a ways to go before that business would be at a low to mid 40s gross margin?
spk03: Okay, yeah, great questions again, Craig. So let me try to make sure I answer both of them correctly. So the first question is in regard to the demand for the IoT product. Am I correct? Yeah. Yeah, so... So, I think the revenue for Q1 versus Q4, I think that was steady to a slightly increase. And some of them, it's because we actually got more demand, and some of them just couldn't ship because of some of the shutdown, the unexpected shutdown in Asia. Now, we do, I mean, as I indicated, we actually have backlog even throughout the rest of the year, and they're looking really strong. It's more about can we build and make sure you can meet the demand. Some of the last minute chipset shortage issue creating some issue for us. And we're going to continue to see that. But as I indicated, as Vic alluded to earlier, is that we are now creating different designs. So that way you can mitigate the risk. So we feel good about the growth of the IoT products. The second question you asked is about the gross margin. So I think that when we acquired NimbleLink, we already know that that was an issue. But quarter after quarter, we continued to execute. And this is where I really want to compliment our operation team. They really stepped up in looking into different avenues. So definitely, if you think about our average, if you look into the average we disclosed, I would say we have increased from what they had previously substantially. I won't be able to give you the specifics, but I do think that, you know, we have a path to be, you know, above the 40s. And they were not the one that actually, you know, with IoT, there are different product lines. Some are actually looking really good. And there are certain ones that are not as good, but we are working our ways to address that. But overall, the margin for our IoT is pretty good.
spk04: Got it. That's all really helpful, Jacob. Thank you.
spk03: Thank you, Craig.
spk02: As a reminder, if you do have a question or comment, you may press star 1 on your telephone keypad at this time. Again, that's star 1 if you'd like to queue up for a question. We'll take our next question from Tim Savageau with Northland Capital Markets. Please go ahead.
spk05: Hi, and congrats on a good report and outlook. I wanted to come back on kind of the drivers of your – your guidance for pretty solid sequential growth here. Early on, it seemed like your commentary was to the effect you expect some continued recovery in consumer to maybe account for, I don't know, as much as half of that, but any color there, as well as the initial ramp of AirGain Connect shipments. into the utility space. If I look at those two factors, would that account for the majority of the growth you're looking at to the mid-range, or are there any other factors to consider?
spk03: Yes, Tim. I would say, actually, there are a number of other growth. The IoT is definitely a strong growth engine we would be counting on, as well as the aftermarket. We do see, you know, because we did a refresh on a lot of our product on the 5G side, and overall, we do expect that growth to be happening as well. So you're right about the consumer. I think it's going to be steady. You know, it's going to take its course. We do feel good about you're going to see the improvement quarter after quarter until we get back to normality. That could maybe another three quarters, another two quarters. We're going to see. We don't know that yet. As far as Egg and Connect, certainly we do see a bright future for that product. I think that it took us two or three quarters more than what we were hoping for, but it's now here for us to really take advantage of. And as I indicated, I think that the IoT and the aftermarket are two other key growth drivers for us in the foreseeable future.
spk05: Got it. And thanks for that. Given the wind that you're shipping this year in AirGain Connect, the potential for follow-ons with that customer, new winds, and more traction in the first responder market, is it possible that we see AirGain Connect revenue at or above 10% of total revenue for the year? And as a follow-on, what would be the margin implications of that?
spk03: Well, we certainly hope so, right? And that's what we're going to strive for, we feel there's definitely a really good chance we can exceed that. The gross margin is something we're going to have to work on. I think that as it becomes more scalable, the gross margin is going to improve. One of the issues right now with AirGain Connect is the gross margin, because when we ship a small volume, the cost is high. But a couple things that we already are working on. One is what I indicated to you about this being more scale. The other thing is the fact that we actually transitioned that product. Now, we used to build that in-house, and now we transitioned that to with the CMs. It's actually creating a lot of benefit from a quality supply chain perspective. So we do expect that under Vic and his team's effort, we're gonna start to continue to see improvement from a gross margin perspective for AirGain Connect.
spk01: And the other thing I would add, Tim, is that in the roadmap of AirGain Connect, so just as you could imagine, with every product that you release, there will always be areas of cost optimization, and that's what Vic and his team have been doing. for us the past 12 months. There are also product derivatives that are being planned to address markets that are very specific and also a redesign of the current platform that would allow us to really get those margins much higher than where they are today.
spk03: Thanks. Sorry about that. Thanks, Tim.
spk02: At this time, this concludes our question and answer session. If your question was not taken, you may contact Air Gains Investor Relations at AIRG at G-A-T-E-W-A-Y-I-R.com. I'd now like to turn the call back over to Mr. Suen for his closing remarks.
spk03: Thank you for joining us on today's call. We look forward to updating you on our next call. Up later.
spk02: Thank you for joining us today for AirGain's first quarter 2022 earnings call. You may now disconnect and have a great day.
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