Minim, Inc.

Good day, and thank you for standing by. Welcome to MNIMS Q4 and Full Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. I'd like to now hand the conference over to your speaker today, Mr. James Cabanara from Hayden IR. Thank you. Please go ahead.

Thank you. Once again, welcome to MNIMS Q4 and Full Year 2021 Earnings Call. With me on the call are Gray Chinoweth, Chief Executive Officer, Nicole Tsang, President and Chief Marketing Officer, Vahul Patel, Chief Financial Officer, and Dustin Tacker, former Interim Chief Accounting Officer and Current Controller and Vice President, Accounting. As a reminder, all materials for today's live presentation are available on the company's investor relations website at ir.minim.com. Before we begin, I want to remind everyone that today's conference call may contain forward-looking statements. Forward-looking statements include statements regarding the future, including expected revenue, operating margins, expenses, and future business outlook. Actual results or trends could materially differ from those contemplated by these forward-looking statements. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, contained in subsequent filed reports on Forms 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Please note, too, that today's call may include the use of non-GAAP numbers that management utilizes to analyze the company's performance. A reconciliation of such non-GAAP numbers to the most comparable GAAP measures is available in our most recent press release as well as in our periodic filings with the SEC. Now I would like to turn the call over to Gray Chinoweth, CEO of Minim. Gray, please proceed.

Thanks, James. Good morning and welcome to Minim's Q4 and full-year 2021 conference call. Let's jump right in. For the year, we continued to outperform the market on growth, despite not performing as well as we had hoped in Q4. For 2021, Minim's GAAP revenue was $55.4 million, up by 16% over 2020, resulting in a three-year CAGR of 21%. By way of context, the market leader's 2021 revenue dropped by 7% compared to 2020, resulting in a three-year CAGR of 3%. With this context, I want to share how we believe we are beating the market and our approach to sustaining outperformance in the face of headwinds. Three points of strength that helped drive outperformance relative to the market were the following. First, we delivered high-value products to the market. Our ASB grew 7% in 2021 over the prior year, up to $105 from $98. Second, we drove tremendous sales online. The Amazon.com sales channel grew 57% in 2021 over the prior year. Third, we captured market share. As an example, on Amazon.com, we grew dollar share by 10 points from 22% to 32%, putting us in second position on a full year basis. Given that I've mentioned Amazon, I believe it is worth calling out how important the marketplace is for the consumer electronics e-commerce segment. According to TrackLine, in the four quarters ending September 2021, Amazon took home 41.6% of the consumer electronics unit share, with the next two players capturing 13.8% and 11% respectively. In our own analysis using multiple data sources, we estimate Amazon comprises over one-third of the Modem and Gateway category on a dollar share basis, in tight competition with Best Buy. While our growth with Best Buy didn't keep up with our growth on Amazon, We did increase dollar sales with Best Buy by 13% in 2021. While we outperformed the market for the year on revenue growth, we experienced significant macro-level headwinds in Q4 that impacted revenue growth and, as a result, adjusted EBITDA performance. The biggest headwinds came from supply chain issues. The impacts were both direct, delaying our ability to bring new products to market and increasing component costs, and indirect, disrupting buying patterns out of retail and distribution partners. In addition to supply chain headwinds, other headwinds to performance included the settling of consumer demand to a level above pre-pandemic levels, but below the pandemic peak, and inventory rebalancing by our distribution partners. We plan to overcome these headwinds and continue to outperform the market by diversifying suppliers at all levels of the supply chain, increasing the number of retail and distribution partners in the U.S., increasing our U.S. market share in our primary market segment, cable items and gateways, expanding beyond the U.S. market and becoming more competitive in the mesh market in the U.S. and globally. Turning to our bottom line, our gross margin improved by 31.6% for 2021, an increase of 328 basis points over 2020. Adjusted EBITDA for 2021 came in at negative 4.5 million compared to 1.7 million for 2020. I will note that as part of our continued focus on sustainable growth, we tempered our investments in R&D and market entry in Q4, with an eye to increasing them as headwinds to revenue and profitability lessen. Turning to a view of the balance sheet, we exited the year with $13.1 million in cash and $32.5 million in inventory. In both cases, this represents a dramatically improved position when compared to the end of 2020, which saw us end with $1.6 million in cash and $16.5 million in inventory. Given the dynamic supply chain environment, we continue to monitor our inventory levels closely, seeking to hedge both the risks of not having enough inventory to meet market demands and the risks of having inventory levels that put pressure on liquidity. Stepping back from our operational performance, I will next turn to progress on our transformation efforts, which began with the merger of Minimum Zoom Telephonics in late 2020. Our new vision, making home networks safe and supportive for everyone, guides our new mission, to develop and distribute intelligent connectivity software that delivers frequent network updates, helpful apps, extensive personalization options, and a delightful interface. Given the increasing awareness and concern about cybersecurity tax and the continued shift to hybrid working models, we feel Minimum's vision and mission are more relevant than ever. Three work streams are driving this transformation. First, deliver value to consumers with intelligent products. We've already made great headway here, increasing the number of intelligent products in our portfolio from one to five in 2021, and setting a course to reach 100,000 minimum intelligent networks in 2022. This growth resulted in corresponding revenue growth. This past year saw a 10X increase in intelligent product revenue over 2020, and we have more growth planned for 2022. Second, deliver value to consumers with software, regardless of where or how they connect to the internet. This is a big goal for 2022 that Nicole will discuss shortly in our product roadmap. Third, deliver value to consumers through innovative software upgrade features and product upsells initiated in our mobile app. On this front, we recently became the first home networking product company to add live in-app chat support with the Moto Sync app powered by Minimum. The new functionality has already improved our customer service operations, achieving a 92% customer satisfaction rating, about 4% higher than the rating for phone support, and reducing time to resolution of tickets by 35%. We also recently launched a feature called Issue Tracer, which helps users troubleshoot connection issues. Next, I want to call out the amazing new team members that we have brought on board since our last earnings call in November. Bill Wallace, our new VP of Hardware, brings with him extensive experience earned as the VP of Hardware at Comscope Eris. Lakshmi Kadiyala, our new VP of Software, brings with her extensive experience earned leading consumer mobile applications at Charles Schwab. Jeff Rodman, Director, National Retail Sales, brings with him extensive experience earned driving retail sales at Philips. And of course, Mahul Patel, our new CFO who joined us earlier this month. He brings extensive experience in financial leadership and operational roles at Motorola, ComScope Eris, and Verifone. This new generation of leadership has the experience and the ambition to propel Minimum's continued growth I'm so thrilled to be working with them to deliver value for our company stockholders, our customers, and our crew. While it is not our normal practice, given the late timing of our Q4 earnings call, it makes sense to share some perspectives on how the business progressed in the first quarter of 2022. In short, we expect to continue to outperform the market on revenue growth, which in Q1 means a return to quarter-over-quarter growth. More specifically, we expect to significantly bounce back in revenue growth. with quarter-over-quarter growth coming in between 20 and 30%, comparing Q4 of 2021 to Q1 of 2022. Also of note for Q1 has been the tapering of production levels as we experienced COVID-related supply chain disruptions in Asia and looked to balance hedging against supply chain disruptions with liquidity management. More specifically, this means that while we expect to see our cash position drop between the exit of Q4 and Q1, We expect to see an increase between the exit of Q1 and Q2. Up next, Nicole will give you a deeper glimpse into our product sales performance and a look ahead towards progress on software and intelligent product development in fiscal year 2022. Nicole?