Earnings Call Transcript - AIRG Q4 2020

Operator, Operator

Good afternoon. Welcome to Airgain’s Fourth Quarter and Full Year 2020 Earnings Conference Call. My name is Ryan, and I will be your coordinator for today’s call. Joining us for today’s call are Airgain’s CEO, Jacob Suen; CFO, David Lyle; and Airgain's new Senior Vice President of Product and Marketing, Morad Sbahi. As a reminder, this call will be recorded and made available for replay via a link available in the Investor Relations section of Airgain’s website at http://www.airgain.com. Following management’s prepared remarks, the call will be opened up for questions from Airgain’s publishing sell-side analysts. I would now like to turn the call over to Mr. Lyle.

David Lyle, CFO

Thank you, and good afternoon to everyone. 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 broadcast, February 18, 2021. 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, including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income, non-GAAP diluted earnings per share and adjusted EBITDA. Please see today's earnings release for further details, including the reconciliation of the GAAP to non-GAAP results. Now, I'd like to turn the call over to our CEO, Jacob Suen. Jacob?

Jacob Suen, CEO

Thank you, Dave. Welcome, everyone. And thank you for joining us on the call today. I'll start with an update on the fourth quarter and a review of our strategy, and then, discuss progress on key initiatives. Dave will then provide financial details as well as our Q1 2021 outlook and insights around how we expect the year to play out. Let's begin with our two big announcements: the acquisition of NimbeLink and the release of the first AirgainConnect product into general availability. The acquisition of NimbeLink, which closed on January 7, makes an important expansion to the Airgain family while at a critical inflection point in our transition to becoming a more system-level company by providing even higher levels of innovative solutions. The acquisition is an excellent fit with our business and will play an important role in our overall growth strategy to broaden market diversification, especially within the industrial IoT space. NimbeLink significantly advances our strategic mission to deliver higher levels of integrated wireless systems solutions globally. The strategic rationale for this acquisition really revolves around six key points. First, NimbeLink’s expertise in industrial IoT puts them squarely in one of our targeted markets within the broader enterprise market. Second, NimbeLink extends the breadth and opportunity for our game-changing AirgainConnect platform with the addition of critical expertise gained through NimbeLink for future AirgainConnect products such as modem integrated design, strong management software, as well as operator certification. Expect that NimbeLink will enable critical future features, optimized cellular module designs, increased design flexibility and improved product time to market. Third, because NimbeLink’s historical revenue has been almost entirely based in the US, we have a real opportunity to leverage our international sales force to match NimbeLink's sales reach. Historically, NimbeLink has been a smaller private company focused almost entirely on the US market; however, its products can be adapted to international markets with minimal investment and can, in most cases, be deployed into a new market in a matter of weeks, not months or years. This rapid time to market is possible because NimbeLink modems are certified in 26 different bands and operator-specific adaptation can be completed quickly. Given Airgain’s existing global sales coverage through our direct sales force and channel partners across different regions in Asia, Europe and the Middle East, we expect to quickly expand the international sales of NimbeLink products. Fourth, by joining a larger company, NimbeLink can gain access to design opportunities they were not previously able to win as they can leverage the well-known brand and scale of a larger company. Fifth, all of NimbeLink's products require antennas, which provide the opportunity to leverage internet experience to enhance the performance of those products. And finally, the combined business will provide our customers with a more skilled company with a more diverse offering and expertise. We have made significant progress on all six of these fronts and believe we will see positive results on all of these this year in terms of the integration effort—we are right on schedule and our employees are excited about the prospects of the combined companies. Now let's move on to AirgainConnect; AT&T turned on and formally launched the HPUE portions of the FirstNet network on January 26. AT&T rebranded the HPUE network coverage and has been using these terms interchangeably. In turn, AT&T released our first AirgainConnect products into general availability; since then we have been providing products to prospective customers for demo purposes and have generated extensive interest. We are witnessing significant interest and engagement from police, fire, and EMS target market segments, and expect to have some converted into purchase orders for delivery this quarter. Now let's move on to our strategy. This quarter, I will keep my remarks regarding our strategy as I laid out our strategy in detail in last quarter's earnings call and on the conference call discussing the NimbeLink acquisition on January 7. Over the past few years, we've been transitioning the company from primarily a consumer market-focused company towards the enterprise and multi-market. In parallel, we have been broadening our capabilities into integrating wireless systems. We believe we have successfully executed that plan and are now ready to resume our growth this year. We expect growth from our enterprise and other multiple markets, especially with the introduction of the new game-changing platform, AirgainConnect, as well as the additions of NimbeLink. Beyond those two major growth drivers, we believe we will see growth from our enterprise market as we begin to ramp products from design wins with our two traditional Wi-Fi enterprise global customers. Additionally, following a refresh of our automotive aftermarket product portfolio to 5G, and with a renewed focus on selling our products into those markets, we believe we will see all of our historical automotive revenue growth this year as well. Now, shifting gears to our key design wins in the quarter and our ongoing programs in our three end markets. Starting first with our consumer product, we continued to see momentum for our Wi-Fi embedded antenna solutions. Airgain’s Wi-Fi 6 antenna designs provide many enhancements over preceding Wi-Fi technologies, including greater throughput, improved spectrum utilization and enhanced multi-user experiences. During Q4, we received volume orders from various OEMs for our WiFi 6 gateway program from a North American Tier 1 operator, which we mentioned in our Q3 call last November. We expect volume shipments to continue through 2021. In Q4, we received initial orders to support the first production shipments of our WiFi 6 wideband router expander program, which we first mentioned in our Q1 2020 earnings call. We expect volume shipments to ramp in the first half of 2021. We have also been selected to provide a new WiFi 6 router design for an OEM in Japan. Production shipments were placed in Q1 and we expect to begin shipping this year. In our Enterprise market, we secured a new five-year LP LAN design for an industrial IoT smart utility application. We expect volume shipments to ramp in Q2 and continue through 2025. Our design process on this project has led to engagement in two other programs with this same customer. In automotive, we continue to see solid momentum for our fleet products. This is best demonstrated by the multiple design wins we secured with a Tier 1 in-car video system provider, which we mentioned in our Q3 call. We expect these programs to launch in production in Q2. As it relates to our game-changing AirgainConnect platform, during Q4 we received a significant purchase order from our strategic distribution partner, one of the largest distributors of cellular connectivity devices that support HPUE Communications for first responders, while offering an extensive product portfolio of public safety solutions. In summary, with the addition of NimbeLink and the production launch of AirgainConnect, together with growth opportunities across our addressable market, Airgain is positioned for accelerated growth in 2021 and beyond. Now I'd like to turn the call back over to Dave, who will walk us through the financial highlights for the quarter and our outlook for 2021. Dave.

David Lyle, CFO

Thank you, Jacob. Fourth quarter 2020 revenue of $12.8 million was consistent with the preliminary results we issued on January 7 and just above the midpoint of our previous guidance range issued on November 5. Consumer revenue was $9.6 million, down from $10.4 million in Q3, primarily due to initial inventory builds in Q3 as a result of product cycle transitions at our North American service provider customers. Enterprise revenue was about $1.3 million in Q4, up from $800,000 in Q3 as we began ramping two new design wins with traditional enterprise Wi-Fi customers, as well as some recovery in M2M antennas as COVID-related pressure began to ease. Automotive revenue was $1.9 million, up slightly from $1.8 million in Q3 due to incremental revenue from AirgainConnect product sales in Q4. Q4 gross margin of 45.5% was at the low end of our previous guidance range, primarily due to product mix. Non-GAAP operating expense in Q4 of $5.7 million was at the top end of our previous guidance range, primarily because of the final Q4 2020 management bonus accrual and sales commissions slightly exceeding expectations, along with higher travel expenses as our sales team in Asia began traveling again following the COVID shutdown. Excluded from non-GAAP operating expense was $606,000 in stock-based compensation expense and $121,000 in amortization of intangible assets. We also excluded approximately $484,000 in NimbeLink transaction-related expenses. Adjusted EBITDA was $277,000 in Q4. Non-GAAP net income in Q4 was $162,000 and our Q4 GAAP net loss was $1.1 million. Moving to earnings per share, our Q4 non-GAAP earnings per share was $0.02 and GAAP loss per share was $0.11. Finally, our Q4 cash, cash equivalents, and short-term investments totaled $38 million, about unchanged from the prior quarter; note that the NimbeLink transaction closed after Q4. On that date, January 7, 2021, we had about $23 million in cash, cash equivalents, and short-term investments. We did not repurchase any shares during the quarter. Now, I would like to provide a preliminary outlook for the first quarter of 2021. In Q1, we expect revenue to be in the range of $16.5 million to $17.5 million, or about $17 million at the midpoint of the range, higher sequentially by about $4.2 million from last quarter, and a sequential growth rate of approximately 33%. We expect NimbeLink product revenue to contribute about $2.7 million to our first quarter topline revenue. Today, NimbeLink’s demand exceeds $3 million in Q1; however, supply constraints at the module supplier level caused by shortages from chip suppliers will add some risks to timely shipments during the quarter. Regarding AirgainConnect, since the launch of HPUE on the AT&T network just over three weeks ago we have seen a significant number of requests for demo units and expect AirgainConnect to contribute about $1 million in revenue for the first quarter. Overall, we expect all of our three targeted markets—consumer, enterprise, and automotive—to grow sequentially in Q1. We expect non-GAAP gross margin in the first quarter to be in the range of 42.5% to 43.5%, lower sequentially versus Q4 primarily due to the addition of lower gross margin NimbeLink product revenue. NimbeLink has already executed a plan to improve those gross margins beginning in Q2 2021 following a product transition by NimbeLink's current contract manufacturers to Vietnam. Excluded from non-GAAP gross margin is approximately $260,000 of purchase accounting intangible assets amortization, including inventory step-up charges based on a preliminary valuation analysis. We expect Q1 non-GAAP operating expenses to be about $7 million plus or minus $150,000. The expected sequential increase in operating expenses is primarily due to the addition of just under $1 million of NimbeLink operating expenses. We also expect to see some operating expense increases in the remainder of the business, mostly related to an accrual reset associated with the annual management bonus and sales commissions for 2021. Excluded from our non-GAAP operating expense estimate was $880,000 in stock-based compensation expenses and $700,000 in amortization of intangible assets based on our preliminary valuation analysis. We also excluded approximately $180,000 in NimbeLink transaction-related expenses from our expected Q1 non-GAAP operating expenses. At the midpoint of guidance, adjusted EBITDA in Q1 would be approximately $500,000. At the midpoint of our guidance, we expect Q1 non-GAAP earnings per share to be about $0.03, and on a GAAP basis, we expect a loss per share of $0.18. Although we are not providing specific annual financial guidance, I would like to provide some insights around how we expect revenue to play out in 2021. We expect consumer market revenue to remain a core foundational revenue base for Airgain with some small possible growth year-over-year as this is heavily dependent on the success of our top service provider and customers to deliver next-generation gateway and client devices. We expect our enterprise market revenue to grow materially year-over-year with the addition of NimbeLink revenue, and additional growth from penetration into new submarkets with 5G sub-6 gigahertz and Wi-Fi products, primarily in the traditional enterprise Wi-Fi market. We expect the most significant growth year-over-year to come from our automotive market revenue, primarily from our newly launched AirgainConnect platform's first product, but also to a lesser extent from our existing aftermarket fleet market. In terms of risks to our growth this year, until we are through the peak of the COVID pandemic, we expect to continue to see some pressure on revenue from automotive fleet as well as on enterprise products that are designed for large venues like stadiums and arenas. Additionally, in our consumer market, although we are seeing solid demand for service provider-based gateway and access point routers, we expect cord-cutting to continue, which will put ongoing pressure on our set-top box and client product revenue. However, with multiple new consumer products ramping over the past few quarters, we expect that to alleviate at least some of that potential revenue pressure. Lastly, supply shortages from chip suppliers in the first half of this year will put some minor pressure on growth expected from our enterprise IoT revenue. Before moving on, I'd like to provide some insights around NimbeLink’s financials, primarily related to historical revenue. The Skywire modem product revenue stream has historically provided the majority of revenue, as it was NimbeLink’s first major product introduced. Custom product revenue has been historically the second largest contributor to NimbeLink’s top line revenue. NimbeLink’s asset tracker product revenue has been the third largest revenue stream, but it did not begin generating revenue substantially until Q1 of last year 2020, and didn't begin to contribute materially until the second half of last year. Note that with each asset tracker sold, NimbeLink creates recurring revenue from its proprietary linked device enablement software, and has the opportunity to sell cellular data plan connectivity. That is a recurring revenue stream that averages two years and is likely to be extended further. The recurring revenue streams ramp with the sales of asset tracking last year. In summary, we expect to see growth in 2021 from all of these revenue streams, as they are mostly in the early stages of growth with exposure to abundant opportunities. Regarding gross margins, NimbeLink has been historically focused on revenue growth, as most earlier stage companies do. That leaves opportunities for gross margin improvement. NimbeLink finished 2020 at approximately 33% gross margins. Prior to the close of our acquisition, NimbeLink had already executed a plan to improve margins by transitioning products made in the US and China to a contract manufacturer in Vietnam. That transition will be completed this quarter, and the benefits are expected to materialize in Q2 of this year. While that won't get the NimbeLink products to our long-term corporate gross margin range, it will improve them materially. We have already begun to formulate a strategy to further enhance gross margins through opportunities associated with Airgain's scale. All in all, we are very excited about the long-term prospects for the NimbeLink assets and capabilities and their potential to help Airgain achieve its long-term goals. In terms of additional inorganic growth and technology expansion potential, although our primary focus is to successfully integrate NimbeLink into Airgain, we will continue to evaluate opportunities that either expedite our time to market for new innovative products or to help us gain the benefits of scale in our markets, especially in our growth markets—enterprise and automotive. Summing up where we are today, we expect 2021 to be an exciting year for Airgain as we have multiple catalysts for growth across all three of our primary target markets. Our strong balance sheet with more than $23 million in cash following the purchase of NimbeLink on January 7, and no debt, provides a durable and sustainable foundation to execute our growth plan and capitalize on the abundant opportunities in front of us. Now I’ll turn it back over to Jacob.

Jacob Suen, CEO

Thanks, Dave. We continue to experience robust demand for our products and we are really excited about the prospects for us to grow in 2021, even in this very challenging environment. With the formal launch of the first AirgainConnect product, the expected revenue contribution and growth from our NimbeLink products, and the ramp of products into traditional global Wi-Fi enterprise customers, along with the refresh of our aftermarket products to 5G, we believe we have positioned Airgain for a year of growth in 2021 with new and innovative products being developed for our targeted enterprise submarkets, along with multiple new products from our AirgainConnect platform. We believe we are positioned for long-term profitable growth. Additionally, we are very appreciative of all the hard work our employees have put into our company during an unprecedented and difficult environment. We also really appreciate our supportive customers, suppliers, and shareholders. As we announced in our earnings call release today, our Senior Vice President of Engineering, Kevin Thill, will be retiring from Airgain effective May 7, 2021. Kevin has made many contributions to our organization since he joined the company in 2017 through Airgain’s acquisitions of Antenna Plus where he was the Founder and CEO. Under Kevin's leadership, our engineering organization is well-structured with strong management at each of our R&D centers across the globe to continue the engineering development and research efforts. Over the next two and a half months, Kevin will assist in the search process to identify a successor, to execute our technology roadmap and to ensure a smooth leadership transition. On behalf of the entire organization, I wish Kevin the utmost happiness and health as he enjoys retirement with his wife, four adult children, and three grandchildren, two of whom were just born in the last eight months. In addition, earlier today we announced the promotions of Morad Sbahi to the position of Senior Vice President of Global Product and Marketing. Since joining Airgain in 2013, Morad has held a number of senior management positions including General Manager of EMEA and most recently as Vice President of Corporate Strategy, where he spearheaded our recent acquisitions of NimbeLink. Prior to joining Airgain, Morad held various executive management roles at leading semiconductor companies like Texas Instruments, Applied Micro, and Broadcom. While at Broadcom, Morad was an integral part of a senior marketing team responsible for a $215 million business within the company. With Morad’s strong mix of semiconductor service provider sales and marketing experience, we look forward to leveraging his skillset to accelerate adoptions of our product portfolio, including AirgainConnect, the NimbeLink portfolio, and 5G millimeter wave products. With that, we are ready to open the call for your questions. Operator, please provide the appropriate instructions.

Operator, Operator

Thank you. We will now take questions from Airgain’s publishing sell-side analysts. Our first question comes from Karl Ackerman from Cowen.

Karl Ackerman, Analyst

Yes, good afternoon gentlemen. Two questions if I may. Jacob, to me your first quarter outlook implies the core business is growing above seasonality after backing out the NimbeLink and FirstNet acquisitions. And I think many of us are aware of that. There are supply shortages and customers are seeking continuity of supply. But as we think about several of the product launches you spoke about in your prepared remarks, how does channel inventory play into your outlook for the first quarter? Do you believe that you are shipping in line with demand? And I have a follow up.

Jacob Suen, CEO

Hey, good afternoon Karl. Thanks for joining the call today. The question is a good one. We have channel partners, and they do have some stocking inventory. I think that some of the supply chain constraints on our traditional consumer business appears to be minimal. There are some supply constraints related to the NimbeLink products, but we believe it will be very short-term. We are already making the proper adjustments to ensure everything is under control in the second quarter of this year.

Karl Ackerman, Analyst

Got it. I guess for Dave then, we've heard several suppliers across the supply chain have raised prices given shortages across the semiconductor supply chain. Now that you have pivoted toward an integrated device company, what's your strategy regarding the trade-off between pricing and volume commitments from your customers? Thank you.

Jacob Suen, CEO

Yeah. That's a complex question because it depends on the markets we are addressing and the type of products we are discussing, which is quite diverse as it stands today. That being said, I think we have good control over where those ASPs are going to go and what kind of margins we are achieving. I would note, however, that historically on the enterprise side as well as the automotive side, gross margins have been tighter relative to our historical gross margins, and those are our growth markets. But we are being discerning about how we assess projects from an ROI perspective to ensure we maximize value.

Operator, Operator

We have more questions on the line; the next one comes from Carlin Lynch from B. Riley.

Carlin Lynch, Analyst

Hey, guys, and congrats on the good quarter. Quick question on some of the supply constraints: do you guys feel confident that NimbeLink can still hit that $13 million in targeted revenue in calendar 2021, given everything that's going on in the supply chain? And I have two follow-ups.

Jacob Suen, CEO

Yeah. First of all, we haven't guided revenue for 2021 on the NimbeLink side of the business. That being said, they did over $12 million last year, so we expect growth to be pretty good in the NimbeLink business, especially since many of those revenue streams I mentioned in my comments are in their early stages. So, we expect decent growth across all of NimbeLink's revenue streams.

Carlin Lynch, Analyst

And then regarding gross margin in Q2, assuming that the business continues to grow, particularly in automotive, could you provide more clarity around what the corporate gross margins will look like in Q2? Assuming we get the material step-up in NimbeLink gross margins, does that mean NimbeLink gross margins can approach closer to 40%? Or do we need some more volume before we can achieve that?

Jacob Suen, CEO

Yeah. The NimbeLink gross margin I mentioned last year was 33% for the year, and I believe we can come close to achieving what we have with our existing historically Airgain business. However, it may take a couple of quarters to get there. I think it is important to note that gross margins vary by revenue stream. For example, if the business really takes off, that could apply more pressure even on our corporate gross margins, even if we see improvements on the overall NimbeLink gross margin. So I just want to clarify that for you. The opportunities in the industrial IoT market, particularly for NimbeLink, appear robust, and that makes us optimistic. However, we may see higher margin pressures as we scale. That all said, we do expect to see improvements on the NimbeLink side. That improvement may not be substantial from a gross margin perspective, but it will be dependent on mix and will be contingent on supply issues resolving, which we expect to happen soon. Again, our overall corporate gross margins should not vary dramatically from what we achieved during Q1.

Carlin Lynch, Analyst

And just one more from me for clarification. Regarding AirgainConnect, did you expect roughly $500,000 in AirgainConnect revenue in calendar fourth quarter? Did that materialize as expected?

Jacob Suen, CEO

Yes.

Carlin Lynch, Analyst

Okay. That's it for me for now; I'll hop back in the queue if anything comes up. Thanks, guys.

Jacob Suen, CEO

Thanks a lot.

Operator, Operator

We do have more questions on the line. The next question comes from Alex Vecchi from William Blair.

Jake Gariup, Analyst

Hi, it’s actually Jake on for Alex. I know it's still early days. I would love to get some color on how NimbeLink has been integrated so far and how that synergy is developing. Any color on that front would be helpful.

Jacob Suen, CEO

Yeah, absolutely. We’re integrating NimbeLink to sell NimbeLink products not only within North America, where we already have an established sales force, but more importantly in regions where NimbeLink has not sold before in APAC and Europe. We are witnessing many opportunities arising there and our Airgain sales force is also excited because NimbeLink products are strong offerings.

Jake Gariup, Analyst

That's great. Thank you.

Jacob Suen, CEO

Also, I want to add that with the ability to bundle some of the Skywire product with the Airgain antenna solutions, we can now offer our customers a more complete solution instead of simply deploying off-the-shelf antennas.

Jake Gariup, Analyst

That’s great. Thanks for the color. That’s it from me.

Operator, Operator

Our next question comes from the line of Scott Searle from ROTH Capital.

Scott Searle, Analyst

Hey, good afternoon. Thanks for taking my questions. Nice quarter. Nice outlook. I do apologize; I got on the call very late. So I did want to hit real quickly any of the high-level commentary related to AirgainConnect in terms of the early go-to-market or mega range product in terms of demand that you're seeing? And if you could share any numbers for the first quarter and/or for 2021, that would be great.

David Lyle, CFO

Jacob?

Jacob Suen, CEO

Hey, good to have you here Scott. So I just want to make sure I answer your questions correctly. You are looking for how we roll out the AirgainConnect in the first quarter and during the latter part of the year, am I correct?

Scott Searle, Analyst

Yes, and the visibility of demand. I don't know if you put any numbers around it.

Jacob Suen, CEO

Certainly, I think Dave already shared some insights regarding AirgainConnect. As of January 26, FirstNet and AT&T formally launched it. We are seeing a lot of excitement around the launch. As you may have seen in the news, FirstNet actually offered a $300 promo among other incentives, really encouraging people to sign up for the service. We already have hundreds of leads in our pipeline from customers eager to acquire demo units. We feel very optimistic regarding the growth potential of the AirgainConnect product this year.

Scott Searle, Analyst

Very good. And maybe if I could on the 5G front, you mentioned in the last call some opportunities later in 2021 and 2022 related to 5G fixed wireless access and other opportunities. Could you provide any updates on that front in terms of design activity, level of engagement and interest that you're seeing for those types of products?

Jacob Suen, CEO

Certainly, that's a really good question. I will start and then perhaps have Morad add more context. This year, we are planning to release products on the 5G sub-6 gigahertz side, especially with the recent Antenna Plus products. We expect those products to come into play in the second half of the year. We are also pursuing developments on 5G millimeter wave. As a matter of fact, we anticipate incorporating that alongside our next-generation AirgainConnect products.

David Lyle, CFO

Yes, just to add a bit more context: our first entry into the particular product category related to millimeter wave will be in the enterprise space. As the market starts to mature and become more pronounced, we'll explore rolling out those products into our traditional consumer space as well. So, we are genuinely excited about the trajectory that we expect to gain from it, which will provide a lot of growth.

Scott Searle, Analyst

Very good. Thank you. And I apologize for being redundant again, but regarding NimbeLink and component availability: it certainly diversifies the product portfolio and complements what you guys are doing. Are you seeing any near-term issues on that front related to component availability or pricing? I'm sure you’ve already answered this, but thanks for indulging me.

Jacob Suen, CEO

No problem, Scott. We noted in our earlier comments during the call that we expect that NimbeLink revenue in Q1 to be about $2.7 million. While that is lower than the actual demand we have, which exceeds $3 million, supply constraints are impacting the overall revenue. The good news is the demand is present and robust. However, we anticipate that potential shortfall will apply pressure on overall revenue in the short term. I think $2.7 million is a conservative number that serves as our target.

Scott Searle, Analyst

Yeah, thanks so much guys.

Jacob Suen, CEO

It's a temporary issue and we must resolve it.

Operator, Operator

We do have a follow-up question from Carlin Lynch from B. Riley.

Carlin Lynch, Analyst

Hey, guys, really quick, just wanted to follow up on that supply point. Obviously, the $300,000 delta in Q1 raises questions. As you work with your suppliers, how confident are you that, assuming this does materialize in Q1, that it could come back in Q2? And what steps are you taking to ensure supply throughout the year, especially as industry tightness continues?

Jacob Suen, CEO

Yeah. We began addressing that issue early on. It's really about getting in line for the right supply from our suppliers. Regarding the demand we see, we are confident in our pathway to meet supply through our vendors for Q2. We expect that demand will remain robust, particularly in our main business, and we have communicated with our customers across our supply chain to verify that we are positioned to meet demand well. Overall, we feel good going into Q2 and have expectations for good alignment of supply and demand.

Carlin Lynch, Analyst

Got it. All right, thanks, guys.

Operator, Operator

There are no other questions in the queue. At this time, this concludes our question-and-answer session. If your question was not taken, you may contact Airgain’s Investor Relations at airg@gatewayir.com. I would now like to turn the call over back to Mr. Suen for his closing remarks.

Jacob Suen, CEO

Thank you for joining us on today's call. We look forward to updating you on our next call. Operator?

Operator, Operator

Thank you for joining us today for Airgain's fourth quarter 2020 earnings call. You may now disconnect.