Airgain, Inc.

Good afternoon. Welcome to Airgain's first quarter 2023 earnings conference call. My name is Doug, and I'll be your coordinator for today's call. Joining us for today's call are Airgain's president and CEO, Jacob Suen, and CFO, Michael Abbas. 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 www.airgain.com. Following management's prepared remarks, the call will be open for questions from Airgain's sell-side analysts. I caution listeners that during this call, Airgain management will be making forward-looking statements about future events and Airgain's business strategy and future financial and operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings release and AirGain's SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 11th, 2023. Air Gain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. In addition, this conference call may include a discussion of non-GAAP financial measures. Please see today's earnings release for future details, including a reconciliation of the GAAP to non-GAAP results. Now I'd like to turn the call over to our CEO, Jacob Suen. Jacob.

Thank you, operator. Welcome, everyone, and thank you for joining us today. For today's call, I'll first cover our operational highlights and achievements for Q1. Then I'll hand it over to Michael to walk you through our financial performance for the first quarter. Afterward, I will provide an update on our strategic product and marketing initiatives for 2023 before opening the call for questions. As you saw from our earnings release, the first quarter sales came in at $16.4 million, at the midpoint of our guidance range. As we communicated last quarter, the combinations of demand softness and technology transitions in the consumer market contributed to a slight year-over-year first quarter decline. However, we are optimistic that new product introductions and design wins will result in sequential quarterly sales increases in the second half of 2023. We continue to see solid performance from our enterprise market, which represented just over 50% of our total sales for the quarter. We also see growth from our key verticals, such as rail, radio surveillance, fleet, and industrial IoT. Our enterprise market represents a mix of components and systems that include our embedded modems, asset trackers, enterprise antenna design, and custom products. With its increased revenue contribution, the enterprise business continues showing resiliency against volatile market conditions. This is a result of the increased demand for connectivity to improve productivity for end customers, combined with a growing number of applications in this space. A prime example of this is the recent customer design win we announced in Q1 with a leading provider of rail cars and services to the nation's top railways. AirGain's cellular-based asset trackers and embedded modems, combined with our in-link software platform, offer a unique solution that solves key problems that have plagued this industry for years. We started shipments in Q1, which will continue to grow over the upcoming quarters. We are also in discussions with several other companies in this space to provide similar solutions. With our focus on simplifying wireless connectivity, we appeal to market segments needing RF expertise or those requiring a shorter time to market. These include video surveillance as a service, or VSAS, which requires high bandwidth and a broad deployment to provide real-time video data and processing. EV charging is another segment that continues to grow as connectivity provides its backbone. And it is struggling to keep up with market demand. AirGain's simplified connectivity solutions help markets such as these solve complex RF problems and get connected quickly. Our automotive market includes both our aftermarket antennas and our vehicle networking devices, such as the AirGain Connect platform. Within automotive, we continue to see strong engagement from our large OEM relationships that bundle our fleet antennas with their offerings to provide a total solution to the market. In addition, we are rolling out strategies to expand market share within our distribution channels. Our automotive channel strategy is threefold. First, add differentiation and flexibility to our product designs. Second, implement changes to the supply chain that make us more responsive to demand. And third, expand our channels of distribution globally. We are already beginning to see the benefits of these changes in our strategic direction and expect to make several announcements in the coming weeks. While the first responder market continues to be our primary focus for automotive. We are also seeing progress in other sectors. This includes over-the-road or OTR fleets, utilities, aquaculture, and other market segments that manage vehicles with internal equipment that need connectivity. This dependence on connectivity within commercial vehicles is fueling demand for better performance. simplified implementation, and simplified maintenance. All problems that AirGAN helps solve. Shifting now to consumer, this market is represented by our custom embedded antenna design for CPE devices sold primarily through major service providers. Consumer remains an important part of our ongoing strategy. yet we continue to see near-term challenges as a result of the macroeconomic conditions and product transitions from Wi-Fi 6 to Wi-Fi 7 in several of our key customers. Despite these headwinds, we seek both opportunities to secure wins in this space. We recently won a design from a major OEM, for their next generation Wi-Fi 6E device for a Tier 1 service provider in the US. We also announced in Q1 that D-Link Corporation selected AirGain embedded antennas to power the Wi-Fi 6 signal in its VR air bridge. The VR air bridge was built to provide a dedicated ultra-low latency wireless connection between a VR headset and PC without the hassle of long cables or dependence on a Wi-Fi router. It is Ergen's design, testing, and manufacturing capabilities that allow innovative solutions such as this to deliver optimal connectivity. In addition, as we continue to design integrated 5G connectivity products in our various markets, we can better showcase how we solve complex RF problems with our superior RF design. While the first half of 2023 presents some short-term challenges, we believe we have the right strategies and roadmap to deliver on our growth targets. Not only do we see strategic opportunities in each of our existing markets, We have some exciting announcements from our advanced development team that I will discuss later in the call that should position us to accelerate the growth in the future. With that, I will turn the call over to Michael.

Michael. Thank 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, are found in our earnings release. Now let's turn to this quarter's results. As Jacob mentioned, Q1 sales were $16.4 million at the midpoint of our guidance range of $15.7 to $17.3 million. Our sales declined 6 percent year over year primarily due to demand softness in our consumer market. Enterprise sales were $8.4 million, which declined sequentially by $1.6 million on lower shipments of our Wi-Fi access and industrial IoT products. Automotive sales were $2.9 million, reflecting a sequential decrease of $0.6 million. Consumer sales totaled $5.1 million, reflecting a sequential decrease of $1.3 million. Q1 gross margin was 39.1 percent, 860 basis points higher sequentially, as we recorded a one-time inventory charge in the prior quarter. We also experienced higher enterprise gross margins, along with operational efficiencies. Q1 operating expenses totaled $7.3 million, higher than our guidance of approximately $7 million. The variance was due to higher than expected marketing communication expenses, including trade shows and professional services in the first quarter. We completed a workforce reduction at the end of the quarter, resulting in an approximately $.5 million decrease in quarterly expenses. This action resulted in $0.2 million one-time severance and exit costs, which is excluded from our non-GAAP results. This decrease will lower our EBITDA breakeven points while allowing for increased investments for our initiatives in the second half of the year. In addition, we remain focused on streamlining our operational processes to reduce our operating expenses. As a result, our Q1 adjusted EBITDA was negative $0.7 million, and non-GAAP EPS was negative at $0.08. Our cash balance as of March 31st was in line with our expectations at $9.8 million, $2 million lower sequentially, primarily due to annual variable compensation payments. Our account receivable balance was $8.1 million, $0.6 million lower sequentially. Net inventory was $4.5 million, $0.3 million higher sequentially. Now, moving to our outlook for the second quarter ending June 30, 2023. We expect sales to be in the range of $15.7 and $17.3 million, or $16.5 million at the midpoint of the range. We expect the gross margin for the second quarter to be in the range of 37.5 percent to 40.5 percent. We project our expenses to be approximately $6.4 million. Adjusted EBITDA is expected to be $.2 million at the midpoint of our guidance range. Non-GAAP EPS is expected to be breakeven at the midpoint of our guidance range. Now, I would like to turn the call over to Jacob, who will walk us through our product and marketing initiatives. Jacob?