Minim, Inc.

Good day and thank you for standing by. Welcome to Minim's Q1 2022 earnings call. At this time, all participants' line are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. I'd now like to hand the conference over to your speaker today, Mr. James Carbonara from Hayden IR. Thank you. Please go ahead.

Once again, welcome to Minim's Q1 2022 earnings call. With me on the call are Gray Chinoweth, Chief Executive Officer, Nicole Tseng, President and Chief Marketing Officer, and Mahul Patel, Chief Financial Officer. 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 forelooking statements. For discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forelooking statements, please see risk factors detailed in the company's annual report on Form 10-K, contained in subsequent filed reports on Form 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 Q1 2022 conference call. Let's start things off with a look at market dynamics. The world continues to need incredible broadband at home. The experts at Ladder say remote work is here to stay and predict it will continue to increase through 2023. Smart home analyst Parks Associates just released their estimate for the number of connected devices per U.S. broadband home. In 2021, this number went up by 16 devices, a 23% increase. In its most recent fiscal quarter, Disney added 11.8 million Disney Plus subscribers. And just this Monday, President Biden announced that some 48 million American households will become eligible for a $30 monthly 100 megabit plus per second internet plans. Net, this means our mission to help everyone do more and live better with connectivity has never been more relevant. Amidst this backdrop, we have seen a return to pre-pandemic purchasing levels and home networking equipment. Yes, it appears that there was a rush to upgrade home networks at the height of the pandemic, and much of the industry is adjusting to back-to-normal demand levels. However, despite this trend, Minim continues to outperform. For Q1 2022, Minim's gap revenue was $13.3 million, up 27% compared to last quarter. By way of context, a leader in the market recently announced its Q1 2022 revenue dropped by 11% compared to the prior quarter. With this context, I want to share our approach to sustaining growth in the face of headwinds. We are particularly proud of three points of strength that drove our outperformance this past quarter. First, we continued to perform on Amazon.com, holding the number one market share position for the full first quarter. Second, working closely with our retail and distribution customers, we reestablished order volumes that were disrupted by supply chain concerns in the second half of 2021 and the Omicron variant. The resumed purchasing is evidenced by 100% plus growth in Q1 orders when compared to last quarter. Third, we continue to deliver high-value products to the market and see durable demand for our products despite price increases we implemented in the second half of last year. The primary headwinds to further accelerating our growth are those brought by continued supply chain disruptions, consumer demand that remains elevated when compared to pre-pandemic levels but is below the pandemic peak, and potential impacts that inflation may have on home networking purchases. These headwinds, among others, have affected several technology sectors on both major U.S. exchanges. Despite the headwinds, we continue to execute against our plan to drive outperformance. We are diversifying our suppliers at all levels of the supply chain. We're working to increase the number of retail and distribution partners in the U.S. We're driving growth in the U.S. market share in our primary market segment and expanding penetration into new segments and we continue our efforts to expand beyond the US market. In Q1, we made progress on all these fronts. On supply chain diversity, we scaled production of an intelligent product with our second material ODM partner, and we'll bring a new intelligent product to market with a third ODM partner this summer. On distribution, we established several new rep groups that we expect will support continued expansion into new sales channels in the US. On product, we were pleased to see solid performance from professional and consumer reviews of our MH7600 product, including great reviews from PCMag and ZDNet, and that sales of this product remain elevated when compared to those of our initial offering in the category. On geographic expansion, we were pleased to announce paid trials, which includes sale of Motorola branded mesh hardware to an 800,000 subscriber ISP in Indonesia and a 300,000 subscriber ISP in India. Turning to our profitability metrics, our gross margin in Q1 was 31.5%, down from 33% in Q4. Adjusted EBITDA came in at a negative $1.7 million, an improvement when compared to a negative $3.1 million for last quarter. With continued disruptions to the supply chain in Q1, we remain focused on mitigating the negative impact of component price increases on gross margins. Additionally, while we continue to focus on investments in R&D and distribution, We are doing so with a clear focus on growth without requiring the need for additional capital from the equity markets. Turning to our cash and inventory positions, as we indicated in our last call, we expect to settle down inventory in Q1 and Q2. See our cash position drop as we pay for that inventory, and thereafter increase as we collect on accounts receivable. This is occurring as expected. We exited Q1 with $30 million in inventory, down from $32.5 million as we exited Q4. As we paid down invoices in Q1 due to our Q4 inventory buildup, cash came in at $10.5 million exiting the quarter, compared to $13.1 million exiting the prior quarter. We continue to expect our cash position to improve over the course of the year as we sell through. The team is very focused on hedging against both the risks not having enough inventory to meet market demands, and the risks of having inventory levels that put pressure on liquidity. I will now turn to progress on our software transformation efforts. With hybrid working models becoming permanent, home networks becoming more complex, and cybersecurity events constantly in the news, Minim's mission to help people do more and live better with connectivity is more relevant than ever. And we're excited to be executing on this with powerful software. Three work streams are driving this transformation. The first is our work to deliver value to consumers with intelligent products. As we continue to accelerate sales of our existing intelligent products, bring new intelligent products to the market, and incorporate intelligence to all our products this year, we expect to surpass our 2022 goal of 100,000 minimum intelligent networks. Additionally, Q1 deferred software revenue grew to $832,000. Second, is our work to deliver value to consumers with software regardless of where or how they connect to the Internet. The first step on this journey will occur over the summer when we begin distributing the mobile app software with our cable modems. This addition will further differentiate our products on shelves and drop consumers into a more valuable relationship with the brand and the company. The third is our work to deliver value to consumers through innovative software upgrade features and product upsells initiated in our mobile app. On this front, in Q1, we became the first home networking product company to add live in-app chat support in the MotoSync app powered by Minimum. The new functionality has improved our customer support operations, reducing time to resolution of tickets by 35%. 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 during the rest of the year. Nicole?