Good afternoon. Welcome to Airgain’s Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Shamaley, and I will be your coordinator for today’s call. Joining us for today’s call are Airgain’s President and CEO, Jacob Suen; and CFO, Michael Elbaz. 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, March 9, 2023. Airgain 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 results for further 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 will first cover our operational highlights and achievements for Q4 and 2022. Then I will hand it over to Michael to walk you through our financial performance for the fourth quarter and full year. Afterwards, I will provide an update on our strategic product and marketing initiatives and then share our 2023 outlook before opening the call for questions. As you saw from our earnings release, the fourth quarter was another record sales quarter at $19.9 million, up 4% sequentially and 41% year-over-year, bringing our fiscal year sales to $75.9 million. This annual sales milestone reflects an 18% year-over-year increase driven by solid contribution from our enterprise market, which accounted for $10 million in the quarter. Our strong results in the enterprise vertical were driven by higher WiFi access point and industrial IoT sales, both vectors that we expect to continue through 2023. Overall, our financial performance in 2022 and solid balance sheet coupled with our expanding product offerings will enable us to successfully mitigate the near-term headwinds we are experiencing in our current quarter, while positioning our company for even greater success in 2023. A key financial highlight for the fourth quarter was the record sales contribution from the enterprise market. This has come as we capitalize on our expanding backlog, video surveillance as a service offering and saw growth from the connected EV charging market. With market forces driving adoption in these key industries, Airgain has adeptly capitalized by offering solutions and expertise to meet the strong demand to bring products to market quickly. In the quarter, we secured several opportunities in both new and existing markets, further supporting our strategic move into IoT. Now that we have reorganized our sales team around verticals instead of product lines, our teams are gaining traction in cross-selling and upselling new and existing customers. In addition, we recently partnered with one of the leading European IoT network providers to connect our asset tracking devices for a best-in-class solution. This allows Airgain to bundle connectivity with our asset tracking customers across Europe, the Middle East and Africa as well as within the U.S. This strategic partnership gives Airgain added global reach and capabilities for future IoT projects globally. On the automotive front, our focus continues to be on the aftermarket and first responder segments. Though we saw significant interest in improved coverage within the first responder market, the adoption rate of our HPUE product was slower than anticipated due to the limitations of the total offering. With that, we're transitioning the AirgainConnect platform to the next generation product, taking key learnings from the previous product. We are working with the customers on our latest vehicle networking trials and look forward to providing superior connectivity through a broadening set of customers. We find the demand for improved fleet connectivity to be stronger than ever, influencing the speed of our transition. Our consumer vertical experienced a slight step back quarter-over-quarter in Q4, a trend that we expect to continue in Q1 due to a combination of seasonality and demand softness from supply shortage and technology transitions. Seasonality is a historical trend we have seen and communicated in the past and is typically made up for in the latter quarters of the year. However, supply chain issues have caused many of our customers to delay development in order to transition directly from WiFi 6 to WiFi 7. Though softness in market-wide chipsets and excessive inventory played a role in Q4, on a year-over-year basis, we reported a 160% increase from the $2.5 million in 2021 to the $6.5 million in 2022. Recently, we announced that Airgain's embedded antennas were selected to power the WiFi 6-based VR Air Bridge by D-Link Corporation, which allows PC gamers to use their VR headset without the hassle of a cable or WiFi router. Airgain’s custom design, testing and optimization services simplify the delivery of enhanced signal in challenging environments, as we showcase our WiFi 6 capabilities in a data-rich setting like gaming. Continuing with consumer, our increased focus on the development of new products and solutions over the last few years is beginning to bear fruit. We have built relationships over the years with service providers that now have even greater reason to turn to Airgain for solutions to their needs. Exciting developments in 5G connectivity have opened the door for more solutions-based offerings, and we have commenced trials of major U.S. operator networks. In a sense, our step into new markets is ushered in by established long-term relationships. Our commitment to being a systems company and our emerging leadership in 5G has opened market avenues in high growth verticals. With the recent introduction of our Lighthouse smart repeaters, we are streamlining our end-to-end 5G development that includes fixed wireless access, repeaters and enterprise software management solutions. This transition from exclusively component design to full systems targeted service providers increases our serviceable, available market or SAM by $7.2 billion. As we mentioned last quarter, we have identified three key differentiators Airgain has in relation to the market and our competition. First, our core competency has always been simplifying wireless connectivity. Second, we provide a breadth of product lines that span across the entire value chain, whether a customer is trying to solve a connectivity issue in a product design or in an upgrading environment. The third is Airgain's focus on high growth technologies, particularly in reference to our RF expertise. These three differentiators continue to shape our approach to addressing the market and developing solutions that meet our customers' needs. Moving forward, we are laser-focused on executing the roadmap we have put into motion and I look forward to providing updates on our programs in future quarters. With that, I'll turn the call over to 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. Airgain delivered a quarter of strong sales and cash flows. As Jacob mentioned, Q4 sales were $19.9 million within our guidance range of $19.7 million to $21.1 million. Our sales grew 4% sequentially, driven by a strong performance in our enterprise market. Enterprise sales were $10 million, which increased sequentially by $3.2 million on higher shipments of our industrial IoT and WiFi access products. Automotive sales were $3.4 million reflecting a sequential decrease of $1.7 million. Consumer sales totaled $6.5 million reflecting a sequential decrease of $0.8 million. Q4 gross margin was 30.5% as we recorded a one-time $1.1 million inventory charge related to our AC HPUE product. This non-cash charge was primarily due to excess inventory as we transition our focus to our next generation of AirgainConnect products. In addition, we recognized higher than expected purchase price variances during the quarter. These purchase price variances or PPVs generated from prior core purchases of enterprise components at higher market costs due to supply chain shortages. As we had higher than expected enterprise product shipments, these TPVs negatively impacted our gross margin. Net of the AC HPUE inventory charge and the PPV releases, our gross margin would have been 39% in line with the midpoint of our guidance range. Q4 operating expenses totaled $7.2 million lower than our guidance of $7.4 million, primarily due to tight expense management while we prioritize our focus on our engineering programs. As a result, our Q4 adjusted EBITDA was negative $0.9 million and non-GAAP EPS was negative $0.11. Excluding the AC HPUE inventory charge of $1.1 million, adjusted EBITDA and non-GAAP EPS would have been positive. Our cash balance as of December 31 was $11.9 million, 30% higher sequentially driven by working capital improvements. Day sales outstanding or DSOs for the quarter was 40, the lowest DSO result we experienced in the past two years. Net inventory was $4.2 million, $5.1 million lower sequentially. Net of the AC HPUE access to inventory charge, our inventory balance declined across all of our product lines. On a fiscal year basis, our sales totaled $75.9 million, $11.6 million or 18% higher year-over-year. Enterprise sales increased $7.1 million, driven by higher sales of industrial IoT and WiFi access products. Automotive sales grew $5 million on higher aftermarket sales. Consumer sales declined by $0.5 million resulting from the global supply shortage we experienced last year. Fiscal year '22 gross margin was 37.6%, 180 basis points lower than the prior year, driven by the AC HPUE inventory charge in Q2 of 2022 and an unfavorable sales mix on lower year-over-year consumer sales. Fiscal year '22 operating expenses totaled $29.1 million, 5% higher year-over-year on conservative expense management. Adjusted EBITDA at $0.1 million was slightly positive for fiscal year '22 compared to a negative $2 million in the prior year. Now moving to our outlook for the first quarter ending March 31, 2023. We expect sales to be in the range of $15.7 million and $17.3 million or $16.5 million at the midpoint of the range. We expect gross margin for the first quarter to be in the range of 37.5% to 40.5%. We project our expenses to be approximately $7 million. Adjusted EBITDA is expected to be negative $0.4 million at the midpoint of our guidance range. Non-GAAP EPS is expected to be negative $0.06 at the midpoint of our guidance range. Now, I would like to turn the call back over to Jacob, who will walk us through our product and marketing initiatives.

Thanks, Michael. With our transition to solution-based selling, we have gotten deeper into markets where we found a well-suited niche such as electric vehicle charging and video surveillance as a service or VSaaS. The common thread between these industries is that they build products that need to be brought to market quickly. On the EV front, there is a convergence of government investment, automakers' increased emphasis on building EVs and consumers' increasing demand for buying these vehicles. The bottleneck in this case is the charging networks, which in turn creates a need for our products and services. Our NimbeLink embedded modems are used by several top manufacturers who require reliable connectivity for building, maintenance, data tracking, usage, monitoring and more. Airgain provides an elegant solution that shortens time to market and eliminates the need for in-house RF expertise. On the VSaaS front, wherein customers similarly need to roll out new technology quickly to absorb return on investment, our design capabilities, support and future-proof products have helped a multitude of customers in this market get connected quickly. Our partners in this space operate on subscription-based models, minimizing the focus on proprietary hardware design and manufacturing and opening the door for third-party collaboration during the design process. Most of the leaders in this space focus on differentiating through software and partner with Airgain on the hardware to deliver complete solutions to their customers. This has resulted in a growing revenue stream for Airgain from this market. We also continue to find success in bundling our aftermarket antennas with fleet and first responder solutions. We work with key players in each industry to provide a reliable signal with which to operate their technology. With the longest limited warranty in the industry at five years, Airgain antennas are designed to enhance performance in challenging conditions. In addition, we feel strongly about the initiatives we have put in place thus far on the IoT front. We have finalized a master supply agreement with one of the largest railroad companies in the U.S. to provide a unique solution to their railcar tracking needs. We look forward to sharing more about this development at our Analyst Day next week. In addition to growing our existing product lines, we have announced several new offerings that will help Airgain maintain its leadership in 5G connectivity. We recently announced the release of our fully integrated outdoor 5G fixed wireless access reference design, which comes with an optimized antenna system, a 5G NR modem, an enterprise software management system and an easy installation kit. This latest reference design expands our position as a leader in fixed wireless access antenna design by simplifying the process of bringing a full FWA device to market. Overall, this helps Airgain tackle a greater share of the rapidly expanding 5G market on both the enterprise and private networks side of the equation. In order for our customers to effectively manage our growing portfolio of connected devices, we also announced a partnership with Errigal to develop a simplified end-to-end platform that provides wireless networking monitoring management tools for both network infrastructure and client devices, simplifying the deployment and management of our solutions. The collaboration aims to combine Airgain's innovations in wireless systems and Errigal's expertise in software development and cloud management services to allow users to manage networks worldwide via an easy-to-use digital interface. Finally, we recently announced a partnership to develop a reference design for a 64T64R antenna array to pair with the partner's massive MIMO radio units, typically used in 5G infrastructure such as base stations. Massive MIMO can offer a significant improvement over traditional MIMO systems, combined with Airgain's Lighthouse smart repeaters, outdoor FWA and enterprise network management, massive MIMO adds another product line to Airgain's growing portfolio of 5G connectivity systems for network operators intended to simplify 5G deployment, save operational costs and improve the customer experience. In closing, while we are facing near-term headwinds, we are optimistic about our long-term prospects and remain focused on growth in our three markets. We expect strong growth from our enterprise market as we continue to expand our product portfolio and international footprint with our IoT solutions. We anticipate meaningful growth with our aftermarket automotive vertical upon the introduction of our latest offerings from the AirgainConnect product family, as well as expanded distribution for our aftermarket antennas. For our consumer vertical, we expect continued long-term consumer growth will be driven by our integrated product launches with the major global service providers' customers that we have built great partnerships with throughout the years. Our roadmap is paved with ambitious product initiatives. Given the products we have and the breadth of systems-based solutions we have introduced, our SAM has more than doubled from $7.6 billion to $16.5 billion. These new products are designed to address coverage issues on the service provider side, reduce deployment costs and improve the customer experience. The changes to Airgain's executive team over the past year have set the company in a position to better support sustainable growth in the coming years. The leadership team and I feel strongly about the position the company is in with its steady sales base and financial discipline. I am confident these initiatives will generate positive top and bottom-line results, as well as better position Airgain for key customer wins in new markets. I want to thank all of our team members for their dedication to our mission and ongoing commitment to our customers. Our Analyst Day next week will provide us with the opportunity to share the progress we have made in a greater fashion, showcase our latest innovative technology, and better introduce our management team to the market. And with that, we are ready to open the call for your questions. Operator, please provide the appropriate instructions.

Thank you. We will now take questions from Airgain’s sell-side analysts. Our first question comes from Scott Searle with ROTH MKM. Please go ahead with your question.

Hey. Good afternoon. Thank you for taking my question. Hey, Jacob. Maybe just to dive in on the enterprise front, it was a great quarter. Could you talk a little bit about the visibility that you have on that front in terms of linearity? And otherwise, it sounds like there are some large EV charging opportunities. How long does that last? What else is filling in the pipeline? And how should we think about that $10 million over the next couple of quarters? Is that a sustainable number? Do we grow from that? Is there seasonality involved? And then I've got a couple of follow-ups.

Thank you, Scott. On the enterprise side, particularly regarding IoT, we expect the EV charging market to keep expanding. We previously noted in a press release several significant design victories, and we anticipate this trend to persist over the coming years. As mentioned, this market is certainly growing with government support and increased consumer demand for electric vehicles. This situation presents a substantial opportunity for us and is not just a one-time event; we expect ongoing growth. Regarding the next few quarters, while we do face some challenges and seasonality, we anticipate overall growth in IoT throughout the year.

Great. Very helpful. And maybe if I could just hit on 5G coming back from Mobile World Congress. I'm wondering if you could provide a little bit of color in terms of interest level from customers. I know it's very early, but what sort of level of engagements do you have? And when will we expect to see some of the first revenues on this front? Maybe if you could as well, geographies, frequencies that we should be paying attention to that will be the first areas of deployment for you guys.

Yeah. MWC, and I just got back, we actually had a nice booth there demonstrating our latest technology. And I think that people were pleasantly surprised actually to see us having a live demo in a big environment such as MWC. And I think that was really well received. We had high-quality meetings. We met with some existing customers and several potential customers. There were a lot of network operators even in Europe and the Middle East that came and expressed interest in wanting to evaluate some of our upcoming products, such as the smart repeaters on the network side, the solo side in the fixed wireless access. So I think that we had more than 100-plus meetings throughout those three or four days and some very high-quality meetings as a result of that. So that really gives us optimism about where we're heading as a company.

And so, Jacob, does that mean 2024 is when we should expect the first revenue contribution from the 5G portfolio?

I would like to clarify that while I don't want to set specific guidance, we generally believe we will see material revenue contribution in 2024 from the various products we are launching this quarter, thanks to our technology product that allows for trial runs.

Very helpful. And lastly, if I could, just to follow up on the next-gen HPUE product. There's a lot of excitement around the initial launch of the first product through AT&T, but it was a difficult process, I think, being controlled through one carrier. What's different this time around as you start to move into the next-generation solution, either across carriers, geographies or otherwise, that gives you a little bit more diversity and opportunity for better success than you had been controlled through AT&T and FirstNet? Thanks.

Yes, we were disappointed with the adoption rate due to the overall offering. We've learned that it's crucial to remain independent of any specific service provider, as being tied to one can be challenging. We're also gaining insight into the balance between performance and costs, as those who recognize the performance advantages tend to weigh the cost considerations more carefully. We're incorporating all of this into our next-generation product, which aims to hit the sweet spot of demand. We've made several improvements in our product launch strategy, and we've realized that working closely with reliable installers is vital for successful deployment. Getting the installation right the first time is essential. Regarding demand, we clearly see a robust market; if we offer the right product at the right price point, there is definitely demand that we can capitalize on. With our unique intellectual property and features being added to the new product, we believe this will greatly support the rollout of our next-generation solution.

Great. Thanks. I’ll get back in the queue.

Hey, Jacob. Hey, Michael. Jacob, I wanted to focus on a comment you made on the weakness on the consumer WiFi side. Did you say your carrier customers want to skip WiFi 6 and now they're waiting for WiFi 7? Also, can you give us a sense of what you expect that business to be this year? Is it going to be down year-over-year or how do you view it for the full year?

Hey, Anthony. I’ll talk a bit and then Michael can add to that. I want to highlight that our forecast looks weak, and we still need to explore the reasons behind it. It's important to recognize that carriers typically upgrade their technology every two years, with each cycle lasting about three to four years. However, due to the pandemic and supply shortages, the rollout of WiFi 6 faced delays. Now, as we enter the next cycle with WiFi 7 and WiFi 6E already available, we need to observe how they manage that transition. I'm focused on what we can control. I always remind the team that we haven't lost any SKUs to competitors, although the carriers are facing some challenges which we are watching closely. Given the current softness in demand, we want to be careful, particularly in the first half of the year.

And Tony, just to echo what Jacob mentioned, this is Michael. Yes, we don't have a whole lot of visibility currently. The feedback that we're getting from our partners, our customers, even service providers is that there is a lot to be sorted out from a demand standpoint, but we do expect some recovery in the second half of the year. As to the overall full year guidance, it is just too early to talk about that right now.

Got it. I have a similar question that you've already somewhat addressed. The IoT group has performed exceptionally well, achieving close to 30% growth in calendar year 2022 compared to the previous year. It seems clear that you anticipate further year-over-year growth in that area. However, the rest of the business appears to be facing a significant decline year-over-year. What strategies can you implement to mitigate some of the challenges in that legacy business, which is currently underperforming?

We also anticipate some growth in the automotive market. We have gained better control over the automotive and enterprise markets, as we offer our own products in these areas. This transition from being a component company to a system company allows us to have more influence over our future. In the consumer sector, success depends more on securing SKUs and hoping for smooth rollouts, while in the automotive and enterprise IoT sectors, we typically sell our own products. We strongly believe that we will achieve growth in the IoT and automotive sectors in 2023.

And then my last question for Michael on the gross margin side of things. The purchase price variance, do you think you guys have your arms around gross margin, kind of, 39%? Do you think it will remain at that level for the rest of the year, or is there anything else that you could see that would have a negative impact?

So thank you, Tony. That's a very good question actually because it really speaks to the PPV item, it really speaks to the broader inventory management and also the gross margin improvement objectives that we have. And just to clarify on the PPVs, those are material costs that we are purchasing basically since the beginning of 2021, and those are basically applied to specific products and being released at the time of shipment. At this point, we have had quite a big increase in demand and shipments in the Q4 quarter for specific products that really carried quite a bit of PPVs, which was a surprise to us, but the silver lining is that we are too much done with all the PPVs on our inventory. This was one of the drivers of the inventory decrease. Our inventory decreased by 55%, $5 million. $1 million of that was at HPUE inventory reserve. The rest was really a laser focus on inventory management. Once we have now our inventory down to that level, we can take advantage of redriving gross margin improvement that will result in noticeable improvements in the second half of the year. This is still being worked on. Right now, to your point, 39% is where we are guiding Q1. It's been a run rate or even a normalized number for the Q4 quarter. We expect to see the same level in Q2, but some improvements are taking place. That improvement is coming from the leverage of the CM or contract manufacturing model. Even with the demand softness that we're seeing right now, there's quite a lot of activity going on among the CMs, specifically the regional CMs, which are looking to capture a higher share and therefore are becoming a whole lot more competitive from a cost and quality standpoint. Those are the advantages and the opportunities that we're going to be looking at and leveraging throughout the year.

Thanks, Michael, and good job on the cash management, by the way.

Thank you.

Thank you.

Our next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.

Thank you for taking my question, and welcome aboard, Michael. I look forward to working with you. I want to start with a clarifying question regarding the first quarter. In the first quarter revenue guidance, we see a significant decline compared to the previous quarter, which we expect due to seasonality. However, could you provide more insight into what's influencing this situation? It appears that we won't have any AirgainConnect in this quarter, but it's unclear if it was present in the fourth quarter. Could you clarify that? Also, is the decline noticeable across all segments, or is it more significant in the auto and enterprise segments, considering that gross margins are remaining strong despite the substantial decrease in revenue?

Hi, Craig. Thank you very much for the welcome. The Q1 number, as you pointed out, at the midpoint is about 17% down sequentially, which would have been expected due to seasonality compared to last year, it's about 6% down. This is really speaking about the demand softness that Jacob was mentioning on some of the inventory levels we are currently seeing, and the market is trying to sort through over the next few months. The aftermarket business on the automotive side remains a bright spot. We do expect some continued improvement on that. To your question on the AirgainConnect, we did have some shipments of the AirgainConnect HPUE in the Q4 quarter. Overall, it basically speaks mostly from the demand softness we are seeing right now for the Q1 quarter.

Got it. And then, Jacob, I wanted to cycle back to an issue that was brought up by a few of the others that inquired earlier and just focus on calendar '23 and where you think the business can grow year-on-year as you look down to your three primary segments and subsegments. So clearly, in consumer, carriers are trying to sort out what they do with Wi-Fi 6E and 6 versus just hopping straight to 7. But can you talk about what your sense is for whether or not that business can grow and when you look at enterprise and auto, what the potential is for those businesses to grow as we think about the exit velocity of the business overall as we work through the back half of the year?

Sure, Craig. As mentioned in the press release, we've expanded our addressable market with the new products we just announced, which is now more than double what it was. A key factor is our new product targeting the service provider market under consumer. We're executing the strategy we outlined a couple of years ago, focusing on upselling to the service providers we've built strong relationships and trust with over the years. Instead of the $2 to $3 antenna components, we can now offer system products that are 10 to 100 times more valuable. The trials we've initiated already include one of the largest operators in the U.S., and I anticipate more opportunities ahead. At MWC, we received numerous inquiries from major global operators regarding trials. I am optimistic about the potential of our highly differentiated products, including fixed wireless access and the networking equipment we plan to launch. Overall, I feel positive about our direction as a company. For 2023, our focus will be on hitting key milestones, increasing customer trials, building trust for success, obtaining certifications, and ultimately securing SKUs. We will maintain a steady stream of revenue to support our growth, but I expect the most significant growth to occur in 2024 and beyond. Does that address your questions, Craig?

Yeah. And we can follow up with more detail offline. Michael, I did want to cycle back on the cash point. Really nice to see it pop by $3 million in the fourth quarter. What's your expectation for what can happen in the first quarter? Can we get another $3 million increase and bring it to $15 million, or could it be flatter?

So the Q1 quarter is a bit challenging because it has to be operationally a cash outflow type of the quarter net. We are definitely very laser-focused on our cash balance and really optimizing that and through really our working capital management. In Q1, I do not expect it to be growing or to be flat. I'm hoping to be above the $10 million mark on that. But hopefully, over the next few quarters, as we strive to be EBITDA positive, it’s really a question of optimizing this overall cash balance.

Got it. Thanks, Michael. Thanks, Jacob.

Thank you.

Thank you.

Thank you for joining us on today's call. We look forward to updating you on our next call. Operator? Thank you for joining us today for Airgain's fourth quarter and full year 2022 earnings call. You may now disconnect.