Q2 2021 Airgain Inc Earnings Call
On the line.
[music].
Good afternoon, welcome to the Aerie gains second quarter 2021 earnings conference call.
Mining is ciena and I'll be your coordinator for today's call joining us for todays call are Eric <unk> CEO Jacob Suen.
CFO David Lyle.
<unk> senior Vice president of product and marketing of Rod spy.
A reminder, this call will be recorded and made available for replay via link available in the Investor Relations section of the against web site at Www Dot <unk> Dot com.
Following management's prepared remarks, the call will be open up for questions from air against publishing sales side analyst.
I would now like to turn your call over to Mr. Lyle.
Thank you and good afternoon to everyone.
I caution listeners that during this call <unk> management will be making forward looking statements about future events and are gains business strategy and future financial and operating performance.
Actual results could differ materially from those stated or implied by these forward looking statements state of 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 the air gains SEC filings.
This conference call contains time sensitive information that is accurate only as of the date of this live broadcast August 10.2021.
<unk> undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call.
And efficient debt conference call May include discussion of non-GAAP financial measures.
Please see today's earnings release for further details, including a reconciliation of the GAAP to non-GAAP results.
Now I'd like to turn the call over the our CEO Jacob Suen.
Thank you day.
Welcome everyone and thank you for joining us on the call today I'll start with some commentary about Q2 financial results and then an update from the progress we've made towards executing our strategy.
<unk> will then provide Q2 financial details as well.
Q3, 2021 outlook and color around how we expect the play out.
The stock by addressing our Q2 financial results.
Q2 revenue from <unk>.
At the low end of our previous guidance range, but improve gross margins inclusive of operating expense controls allow us to pick the midpoint of our guidance range for EBITDA and non-GAAP earnings per share losses.
Net revenue more specifically first it's important to note the our strategy to grow our integrated wireless systems revenue is beginning to play out with our industrial Iot and traditional enterprise Wi Fi systems revenue growing in the first half of 2021.
<unk> is continuing the growth in Q3.
While our <unk> connect revenue is poised for growth in the coming quarters.
Our Q2 revenue was affected by lower than previously expected again kind of.
The revenue into a lesser extent the global supply shortage.
So let's look more closely at what.
With the <unk> connect.
Based on discussions with our channel partners. We believe this is primarily a timing issue.
Current sell through has been slower than anticipated.
1 comment for new products launching in new markets have been say, we are really excited about the prospects for growth all of Aegean connect in the future. So wanted to provide you with some additional data points.
We already have about 508 customers.
Morning, 120 of the Atmos going on as we speak we have almost 50 different customers, indicating interest for future purchases.
Were you positive feedback by those customers already using our product.
In addition, we're excited about the new promotion that we just launched with our channel partners.
The nice thing the importance of Hagen kind of such as per Firstmerit AT&T, just introduced a new customer service credit.
$800 per device for <unk>.
Okay again connect in 'twenty, 1 targeted states with a limited time.
In the spirit of good partnerships together with our distributors and value added resellers, we committed to $400 in plus the deductions to customers for purchases, Okay again connect.
I'm asked 2 of $1200 in total savings for Aegean connected by 2 of the customer.
Speaks to the commitment by AT&T not only to first net.
Physically to our product as well I'll say commitment by our distributors and value added resellers to energize sales.
All in all we are very pleased with the performance of our underlying business.
Light of the difficult global supply chain shortages and slower ramp of Aegean connect.
We're especially encouraged by the momentum in our <unk>.
The weighted.
And the scope of should we transition from a component in 10 of supplier to a system solution provider.
The embedded cost of antenna components revenue is still contributing materially to our overall revenue despite our customers being impacted by the trains of Colgate global supply chain shortages.
Let's now move on to the progress, we're making with our recent acquisitions of the nimble bank, which closed on January 7 of this year.
Yes, so Jason for the mentally placing the important role in our overall growth strategy to broaden the market diversification ex.
Especially within the industrial Iot space.
And then building has significantly advanced our strategic mission to deliver higher levels of the integrated wireless system solutions globally.
We're really excited about how well the nibbling products outperformed for.
<unk> solid revenue growth to our overall business.
This growth is the achieved despite pressure from the global chip and other parts of the shortage issue and we'd be the we will see continued positive results throughout this year and through 2022.
We've made excellent progress with the nimbleness of integration.
In summary, with the additions of name of link and the launch of Aegean connect.
Together with growth opportunities across our addressable markets. We believe <unk> is well positioned for future growth.
Before I turn it back over to day.
I wanted to point you to our recent announcement of the New Board member Kiva Allgood.
<unk> expense of technology industry Executive management and board experience for Aegean.
Well of the adversity, who are full of directors.
<unk> knowledge and insight into markets and are central to egg in school.
Particularly in <unk> and industrial Iot.
She most recently served as the global head of Iot and automotive for Ericsson.
Prior to the Ericsson He served as Chief commercial development officer for the business innovations and the managing director of <unk> The adventures.
Steve I also served as president of Qualcomm Intelligence solutions, and Vice President of New business development for Qualcomm.
We welcome her to again and look forward of walking with her to help guide of a strategic long term goals.
I would like to turn the call back over the day, who will walk us through financial highlights.
<unk>.
Thank you Jacob.
Second quarter of 2021 revenue of $17.3 million was relatively flat with Q1 and at the bottom end of our previous guidance range let's.
Let's dig a little deeper into each of our 3 targeted markets to better understand the quarter's revenue.
This is primarily due to lower Aragon connect revenue and previously expected of Jacob discussed.
Beginning with our consumer revenue Q2 finished at $8.9 million down from $10.3 million in Q1, primarily due to weakness from the chip shortage at 1 large north American service provider and customer as well as weakness from our international service provider and customers also do the.
The global chip shortage.
Enterprise revenue was up materially from $4.4 million in Q1 to $6.2 million in Q2 due to revenue growth from both industrial Iot products, primarily for nimble linked products as well as traditional enterprise Wi Fi products.
Automotive revenue was $2.2 million in Q2 down from $2.7 million in Q1, due mainly to revenue pressure from Aragon connect but somewhat offset by growth out of our aftermarket fleet market revenue, which we grew sequentially in Q2.
Q2, non-GAAP gross margin of 42, 8% was on the high end of our previous guidance range and an increase over Q1, primarily due to better gross margin from our nimble linked products than previously expected.
Excluded from non-GAAP gross margin was $101000 for amortization of purchased in the tangibles.
Non-GAAP operating expense in Q2 of $6.8 million was much better than our previous guidance range of $7.2 million plus or minus $150000.
Excluded from non-GAAP operating expense was $1 million in stock based compensation expense $666000 and the amortization of intangible assets, mostly related to the Netherlands acquisition.
And about $1.6 million for fair value adjustment equaling the present value of contingent consideration related to the nimble ink revenue earn out which we now believe we will be fully paid out in Q1.2022 based on the outstanding revenue growth, we are seeing from its products.
Adjusted EBITDA was $716000 from Q2 about $100000 above the midpoint of the previous guidance range as the lower revenue was offset by better gross margin and lower operating expenses.
Moving on to net income non-GAAP net income in Q2 was $589000 above our previous guidance range.
<unk> GAAP net loss was $2.6 million.
Moving to earnings per share of our Q2 non-GAAP earnings per share was <unk> <unk>.
GAAP loss per share was 26.
Finally, our cash cash equivalents and restricted cash totaled approximately $24 million about $1.2 million lower than in Q1.
The declining cash was mostly related to non linearity of revenue towards the back half of the quarter and an increase of inventory to support customer demand during the global supply shortage.
We did not repurchase any shares during the quarter.
Now I'd like to provide a preliminary outlook for the third quarter of 2021 in Q3, we expect revenue to decline sequentially in the in the range of <unk> 15, and $17 million for $16 million at the midpoint of the range.
We expect both our enterprise and automotive markets to grow sequentially in Q3, primarily from nimble linked product revenue growth and traditional enterprise Wi Fi revenue growth.
Both in our enterprise market.
As well as growth from the <unk> connect and aftermarket fleet and our other automotive market.
We expect product revenue from our consumer market customers, however to see pressure in Q3 as a result of the global chip shortage.
We believe the impact of the supply shortage on our consumer revenue.
Alone will be approximately $3 million in Q3, which is already reflected in our guidance range.
We expect non-GAAP gross margin in the third quarter to be 40% plus or -100 basis points as we should see growth kind of lower gross margin and product revenue with higher gross margin and consumer revenue expected to be considerably lower.
Excluded from non-GAAP gross margin was $102000 in acquisition related amortization of purchased intangibles.
We expect Q3, non-GAAP operating expense will be about $6.9 million plus or minus $100000. As we continue to aggressively focus on minimizing operating expenses until chip shortage pressure on our revenue begins to ease.
Excluded from our non-GAAP operating expense estimate was about $1.1 million of stock based compensation expense and about $670000 and acquisition related amortization of purchase intangibles.
And $300000 of additional fair value adjustment related to the nimble ink revenue for now.
At the midpoint of guidance adjusted EBITDA in Q3 would be about negative $350000 at the midpoint of guidance. We expect Q3 non-GAAP loss per share to be about <unk> and on a GAAP basis, we expect the loss per share of 2007.
In addition to providing you with the Q3 guidance. We also thought it would be valuable to share some color commentary about Q4 of this year as well as 2022.
We believe that we will see revenue growth in Q4 across all 3 of our markets.
We believe that our consumer revenue of growth sequentially in Q4 and.
And our enterprise and automotive revenue will continue to grow sequentially, particularly with the integrated system product revenue throughout our industrial Iot revenue and traditional enterprise Wi Fi as.
As well as through the beginning ramp of there again connect with.
We believe this will continue in 2022.
Now I'll turn it back over to Jacob Jacob Thanks Day.
I wanted to reiterate our confidence in our long term strategy and our ability to manage through our near term transitory of supply chain issues. We are seeing our integrated wireless systems products the Gainesville range.
And I'm really excited about the next leg of growth, particularly from our newer products with industrial Iot traditional enterprise wide body and Aegean connect leading the way.
We have confidence the our foundational consumer the revenue will continue to provide foundational cash flow for <unk>, while we transition the business with new and innovative products being developed for our targeted in the price submarkets.
For new product all of our <unk> connect platform.
We are positioned for long term profitable growth.
We are ready to open the call for your questions. Operator, please provide the appropriate instructions.
Alright, so as a reminder to ask the question you will need to press star 1 on your telephone.
First of all your question press the pound key.
That is star 1 on your telephone please standby will be composite of Q&A roster.
First question comes from the line of Karl Ackerman from Cowen and company. Your line is now open.
Yes, good afternoon, gentlemen, I appreciate the question.
I first wanted to begin with the.
The comment on gross margin.
How much of the 300 basis point decline in gross margin that you are forecasting for the third quarter relates to the rebates youre announcing for air connect.
I also thought that consumer tended to have less favorable mix of sales.
The lower I would've thought there wouldn't be as substantial of the.
Margin hit so if you could talk about those dynamics share would be helpful.
Yeah sure I'll take that.
On the <unk> connect piece.
On the promo that we just announced which is the fantastic promo.
If you haven't seen it.
Check our website.
The net will be a pretty de minimis amount of pressure on our gross margins.
That being said your comment about consumer of being.
Potentially lower gross margin is actually the opposite the gross margins on the consumer side are actually pretty high.
Right now they are above our corporate gross margins. So as we start the ramp some of these new products.
We'll see a little pressure you talked about the historical gross margins.
But just in Q3 alone having you know like I said $3 million kind of.
<unk> shipped in Q3 out of concern that it didn't get kind of put pressure on our revpar.
Gross margin.
Got it.
I appreciate that.
How much of a decline in consumer was due to supply chain constraints that impacted your gateway Oems.
Cash for our ability to procure the entire kit versus perhaps your customers own specific.
Challenges.
And then secondarily you indicated I appreciate the <unk>.
Further outlook beyond Q3, it sounds like from that revenue will snap back I was hoping you could just touch on.
Why you see that snapping back whether you have firm orders in hand.
Can you just talk about the order visibility you have extending beyond Q3 there'll be very helpful. Thank you.
Yeah, Hi, Thanks, Thanks call. So this is Jacob here.
So based on indications from our customers.
The indication you start this chipset shortage issue of throughout the supply chain.
Issue some of that is due to shop now of the pandemic right. They were shutting down factories of the results of the pandemic and right now they're predicting that things are going to be stability current.
The around a lot of the Pollo this quarter and by Q4 things should look a lot better again busy space on the the latest inflammation of.
How much of the impact it certainly the demand is high so when I look into the demand all of them.
The really.
Really strong demand so it's about the shortage issue with the not only on the chipset from all about the capacity how much they can feel all of that all of the Fox Walgreens.
Okay. So does that help you.
Yes, it does.
Thank you.
Next question comes from the line of Scott <unk> from Roth Capital partner for your line is now open.
Afternoon, Thanks for taking my questions.
Just the diamond quickly on the <unk> connect.
It sounds like that was part of the problem of initially in terms of sell through in the second quarter was it down sequentially in terms of absolute dollars I think the target number you talked about was the $1 million in half can you just calibrate us.
Where that is and then you provided some detail in terms of what that pipeline is looking like it sounds like it'll be up.
As we get into the back half of this year. What gives you. The comfort there are you seeing the sales cycle materialized, a little bit better. So you know how long the distillation period is.
And as you start to think about that opportunity in 2022, how should we be thinking about that in terms of units for maybe those pilots that you've got ongoing what do they represent those customers that are near term lower end of the funnel what are they represent in terms of the potential units from 22.
So why don't I think the first part of the question and then Jacob can take the second part of the question.
Just in terms of the revenue impact was pretty big going from Q1 to Q2.
It was the decline.
So it did have a big impact most of the the.
The.
The midpoint of the lower low end of our guidance range, where we landed was related to that AG and connect revenue.
And Jacob why don't you kind of addressed the how comfortable we are there.
They're getting connect ramping in Q4 and beyond.
Yes sure.
I have to say for us.
<unk> been talking and meeting with the executive team of AT&T and first day.
And in the last several weeks and I have to say.
The feedback and the confidence they demonstrate its the nominal all of them, it's pointing to a timing issue all of US. We're really hoping that this thing can be picking of a lot quicker a lot faster given the value of that it provides for the customers.
All of US 1 executive of AT&T, probably a lot to me what we see the it's really try to get these cruise ship going and it just takes little bit longer than you would with a speedboat as an example, so I think that the feedback from the customers of <unk>.
<unk>.
With the some of the guys out there we actually have 1.
The update the cheap.
Alright.
Managing wildfire and the feedback from them was that he was having 12 of them in many area.
Previously.
Now with Aegean connect is able to not only from the pack is able to actually be able to capture video.
It just makes a huge difference from how you're able to communicate and be able to managing the wildfire losses more effectively.
All of the people from how they again connect they don't even have the signal so that speaks volume.
And more and more you're going to see and that's 1 of the reason why they feel strongly about giving a promo going with us.
And the commitment they show, let me feel surely about Q4 and the yeah I I really feel like this you said product I'll put place tremendous value there.
It's not the small or the extent of coverage. It's also for urban area.
This is <unk>.
It's the only be needed during the crisis and I really feel strongly that these product by sick of buys.
At the beginning of next year I think the as you may begin to pick off not sure.
Thank you.
Very helpful. Thanks is there Jacob is there any way to quantify what the sales funnel looks like I think you've talked about.
500 customers I think it was 120 pilots.
What are those kind of customers represent in terms of potential annualized units as we get out the 'twenty through 'twenty 3.
Okay.
I'll share some of it could some of the it's.
I mean, all of the customers up simple units right.
So looking into the going back to the the Tam in the sense that we mentioned we told you about the about 500000 plus the vehicles out there that is the Tam and also the same and that's why we feel strongly that even a small portions of that.
Since forming can do quite a bit.
The amount for us.
Given the fact that it's about $1000 per device.
So as far as how many units.
I think that.
We don't know the precise timeline, but I am just share with you the pain in the sand and we feel strongly that the.
How long is the annuity to start picking off once the cruise ships start rolling I think that you're going to see really great results.
Okay great.
Ill give you a straight answer.
Yes, Janet and just to give you a little more flavors Scott generally speaking, we're seeing customers interested in single digit units all the way to the hundreds of units.
I would say in the round. If you got any color you can kind of follow up here, but I believe.
Kind of the.
Most of those are in the kind of low tens of units per customer that we're talking about.
Yeah, absolutely so as you look at the sample.
To add a little bit more detail Jim of Jacob in the you've mentioned, we're talking thousands of leads if you want to get your hands around the numbers and if we're talking about customers that have committed.
Net are saying we will proceed with of data and connect purchase we're talking hundreds and so again when that mechanical items like Jacobs said. This is just like with any new product that you introduced with the new initiatives.
The many testimonials of on first net and <unk>.
The promotional activity that show.
The sales that have tried the agencies that have tried and installed Indian connects and what they say about that and so really just a matter of timing for US is 1 of the things that could become for you.
Okay, great very helpful and if I could 2 quick follow ups.
Dave could you remind us the.
The earn out on nimble link what kind of sales number that was tied to because it sounds like that's progressing do you expect to hit the so because of some idea of of the growth in the second half and also it sounds like there you've got a lot of comfort in terms of the consumer consumer Wi Fi bouncing back in the fourth quarter could you quantify that a little bit more in terms of what youre, saying neutral follow up on the earlier question.
How quickly do we see that snapback of snap back of term of you would actually use given its found 3 million sequentially does it come back that quickly does it take several quarters, what's the early thought process there. Thanks.
Sure.
In terms of the earn out for nimble link we never publicly disclosed what the target revenue was.
That being said, we have said that it's materially better than where they were last year at $12.5 million net revenue. They finished last year.
So it's the it's.
It's a pretty large growth number.
Which we're pretty excited about.
And just based on what we're seeing today with the.
We're seeing even more growth than expected and Thats why were.
We are addressing the skin of the accounting of that earn out.
In this quarter of upwards.
In terms of the.
Consumer coming back and keep for this really is.
Kind of pure and simple related to the <unk>.
Supply chain shortages of globally.
And assuming we start to see that come back in our customers like Jacobs set of really much more positive on this.
But the but you never know, we got to wait and see what happens.
I think.
We're going to see some piece of decent size growth back to.
For the levels, we should of been probably of before.
Jacob <unk> of any of the color commentary, yes, yes, I was just kind of see start date again.
In that space.
It's really a cycle right and so.
We had the first wave of people loans from the dual band and now you've got the volume.
The Wifi, 6 and why pricing see right after that and so the opportunity of the opportunities are there right. The complexity of the increase and when the complexity increases the need of devices that pain in the room from here going into play.
So we.
We will execute on those opportunities and again, what gates translates to revenue is really depends on how the.
Chipset shortage issue resolves itself and the constraints on the supply chain.
Okay, great. Thank you.
Next question comes from the line of Craig Ellis from B Riley Securities. Your line is now open.
Yeah. Thanks for taking the question guys and I apologize if you've already addressed some of these items I was very late getting on the call. So.
I just wanted to start a better understanding of the press release that came out with what looks like chunk marketing of bear den connect with AT&T, so sort of it looks like they are.
Providing.
Okay.
And the incentive on the cloud subscription and then they are saying.
Send it up on the price of the Hurricane connect device, so sort of 1 what does that do to the way, we think about share gain connect margins near term and how long could that be something that could potentially impact hurricane connect margins of that program.
<unk>.
Yes.
For the question I'll take that so we did as we started this effort will gain share gain connecting to the market we made instead of debt.
Theres a lot of interest right. There's also customers that have shown interest in handy, having moving forward with the purchase and with this partnership for the state with AT&T and of the way plenty of Walt as debt.
It's the following 200 all of the total savings of $800 of which is covered by AT&T and then the rest is by the gain on partners.
And so we feel that this will enable folks that really wanted to go ahead, and then move forward with <unk> connect I think this is an enabler.
And hopefully you can help us to accelerate.
The customer adoption and then get the sell through to the fastener falling.
In terms of the pressure on margin, but let the speak for them, but this is really something that we have.
We expect to it to play out nicely in the future for handling of maybe you want to maybe just ask the cause of that.
Yes sure.
Yes, this will have a little bit of pressure on the organic connect revenue, but really it's the kind of a de minimis amount.
The the <unk>.
Bars in the season really stepped up big on the $400 debt has improved for contributing to so.
It's less of an impact for us, which the really appreciate the.
And for Us.
And then a more strategic question in terms of the approach, we're taking with AT&T on the program. So I can see why for some entities of price incentive would work.
There are many of incentives where are there are many.
Agencies for I wouldn't think pricing would be the primary consideration just given what's on the line of communication of isn't working out in the field and so I'm wondering if you can help us with in the further insight on the discussions that you've had with AT&T about other mechanisms too.
Incentivize demand and what may or may not be under consideration of possible beyond just pricing incentives.
Yes, absolutely so.
It's a very good question because with the price.
And the initiatives that we have interest.
Promotional activity it helps us to address those.
Folks that we're talking to you that we only want to make that move.
To your point absolutely there are some agencies, where there's really it's not going to make a difference for them and the ones that we're talking about are those that are held by the cycle as you understand in this in this first responders business.
Agencies that have the budget.
And you have to wait for that budget.
The 1 of that we're targeting that we can look at specifically for any of those that really took off from those thousands of feet of that I've talked about earlier and those hundreds of customers that said they want to move forward with and again, we seem like debt provides us with a short term opportunity to really get these products.
And of those that meet that need the products and so in terms of additional promotional activity. We are talking to AT&T. This was the first week I don't expect that to be the last 1.
It should be a series of of.
Partnerships that we plan to have of AT&T to help us to get more first responders to the to go on with the first net initiative and with the hedging connect as well.
That's helpful. And then my next question is more of the longer term question that may be 1 for.
Hi, Jacob.
Dave.
For the following comment oftentimes, it's harder to forecast the very near term.
Then it is the intermediate term and all of our checks have shown.
A very enthusiastic response of the capabilities that the hurricane connect offers the first responder community.
And we've seen quarter after quarter over the last year and a half very steady growth in the number of agencies from the number of subscribers that are part of that can you maybe sort of we know that it's a growing population, but the question is this guidance. If we just look beyond the back half of this year and what the calendar 'twenty, 2 and I'm not asking for guide.
So I know you're not ready to give that today, but can you help characterize what you think the opportunity is and again really.
A couple of key areas of the business 1 whats the realistic way to think about some of the gives and takes with her again connect to given the momentum you have and remember link in with the absence of some of the component constraint issues, assuming they get solved.
What's a good way to think about 'twenty 2 potential even if qualitatively.
And then as we look at other businesses.
Maybe just supposed to.
On the enterprise side, we've seen almost 2 years of good design brands with the products that you have there what can happen there and on the flip side of that consumer scenario, where I think all of US are aware of some of the secular pressures is that of business that can be flat next year or are what are the Gibson takes us we look at the consumer next share.
Thank you.
Okay, great questions quick.
I'll try to address them as much as I could and I can let dave or more of that chime in.
So first of all let's go back to how are we executing for.
Overall company strategy perspective.
I could not be more pleased with the team for executing towards our long term strategic growth.
As I mentioned, we're transitioning from a component antenna company now becoming integrated system provider and the type of projects and the type of momentum building, it's phenomenal Aegean kind of each 1 of them and the old EDC in the kind of traction that we.
We're able the pan with AT&T and is it possible that we're going to come up with future products.
For other market. In addition, what we already described.
What we're doing with the industrial Iot with the.
The enterprise wireless systems all of that.
The positioning of the company very well for 2022 in addition.
So welcome <unk> system product, that's going to also support our future growth beyond just next year.
And with the.
With the the additions of missed the subsidiary Ali.
From a.
The projects for all of the building strongly for the against the future growth now going back to the Aegean kind of I think that.
With the promotions that we're having with what we do at working closely with AT&T.
AT&T is really working with AT&T on 3 separate fronts.
First is the sales side. So we are now interfacing with the senior executive at AT&T, and we're gonna be able to do co selling together with the regional sales team and that's huge they've got 3500 people out there promoting the product. Additionally, we're working with the marketing team and Laura It's gene.
It's in the basically the interfacing with them very closely and sort of you're gonna see more and more in marketing campaigns that we're going to be launching together third is 1 of the Appalachian side and Thats. The promo both of the stuff of how can we make it easier for people to sign up for right. So that way they don't get a picture of shop, so and that's sort of.
We're doing all 3 of Fox and as of May.
Earlier, the type of commitment we're seeing from AT&T is phenomenal for state and we see the body of the feedback they're giving from the customers.
It's reinforcing their commitment to Aegean connect.
So hopefully that the health insurer some of the what I see the futures will be again from the strategic perspective.
Most of that please chime in.
I just wanted to add just 1 will know Jacob in terms of data and conduct I just want to clarify the <unk> connect is a product initiatives of the only the product that we have today in <unk> is just the first of all leased the target AT&T and so and we've learned a ton from debt and we expect that a significant opportunity out of debt with AT&T.
That being said there are a number of products that we are looking at debt will address other markets and other first responders that are not on At&t's network, which allows us to really.
Augment the market and provide a better opportunity not only for with the first responder here in North America thoughtful worldwide.
Yeah, and I'll, just add give a little more color on the 2022 and how we expect.
What we expect to grow.
And our and our kind of nature the may.
The products in terms of contribution on the on the.
Aragon connect side of the nimble Inc. Product side. There is it is clear that we believe those are the biggest growth drivers and the 2022.
I think they've got the.
The largest of immediate market to address.
And it's really going to be.
Just the tiny thing on the other day and connect side, so the ex expectations and Youre getting connect in 2022 really haven't changed all that much on our side.
Last we see continued slow.
Sell through.
Through the through the end of the year, which for this new promo.
We can't really guess, but.
Looking pretty good.
After that we have the traditional enterprise Wi Fi business, which I believe you are citing.
We believe we can grow.
From a small number.
The revenue number in this year into 2022.
We still have high hopes there and on the consumer side.
We're seeing a lot of change.
Changes out of the major service providers there.
But we think this Wi Fi 6 and 62.
The gateway product for instance is going to continue to really drive revenue growth for us into next year.
So can consumer grow next year.
I think I think it has the potential to grow I think it is just going to be how the timing of these products.
The rollout.
In terms of the design win for Black.
And then the thing that we would have to watch on that day. There is just the.
The response of.
The first responder agencies for some of the early promotions that you have.
And kind of the duration of with which those might stay in place. So if they were to stay in place say through the first half of next year, we would have to think about that with our asps and the margins on those asp's in and if you get a stronger early response spend maybe those are just some of them better in place for the back half of the or is that does that pretty simple.
Yes, I think if you look historically at the promos at AT&T puts out they typically do it quarterly.
This is an unusual 1 and I think it was more of a response to hey, we're not just not seeing the sell through that we need so the.
Supplied the entire supply chain.
Including the AT&T really got together the 2.
Figure out how we kind of stimulate the sell through.
To get that ramp going.
So.
In terms of patents of how long, it's going to last we'll have the kind of play of that quarter to quarter Thats typically how they do they do that it's late in the quarter already to introduce it so.
We're hoping that's the last for a while.
Got it and then just lastly for me and I'll jump back in the queue.
Yes.
We've been in touch with company sort of for the last 9 months 1 of the things that we've seen this debt as companies have to make decisions about how to allocate.
The components.
How they are prioritizing.
Different things that theres been an opportunity to increase the margin mix of the business.
I know that there was it looked like from the release there was about $1 million more in component constraint headwinds from the business from what we expected 3 months ago.
But are you able to do things that are improving the quality of the cash.
The gross margin of the future revenue stream just amidst all of the things that are happening or is that however, the so far knock on the available therapy. Thank you.
Yes, so I think.
I think the all of opportunities that we are.
In front of us to lock in on product initiatives that we want to consider in the future.
It gives the company of balance in terms of hall of product and also volumes without the.
The.
The.
The gross margin as well and so.
We have this opportunity of that now the P&G.
Plan too.
We're fully committed to that and then.
It comes out of debt will give us direction of how we want to execute on.
On that path.
Yes, I am trying many of those margin Yeah go ahead of that.
Yes.
On the consumer side I think the yeah.
Typically we have pretty good margins, there and we're working closely.
So improve operational margins and gross margins on the NIM.
The link product and also the egg income and.
And again connect products among others.
Yeah.
That answer your question Craig.
Yes, Thanks Scott.
Alright.
Okay again, if you would like to ask the question. Please press star 1 on your telephone.
Next question comes from the line of Tim side of the Ju from Northland Capital markets. Your line is now open.
Okay. Good afternoon.
I will try to keep this brief.
<unk>.
On the consumer side, where given the impact you've seen to date.
We've seen amongst.
The kind of customer base and service provider customer premise equipment spend.
The other supply issues, but very strong bookings and backlog by and large so I.
I guess the overall question is no.
For the consumer business have grown this year absent the <unk>.
Supply issues and given what may be of pusher of day.
And into next year there.
There's a decent chance for growth from the consumer business.
Hey, I'll go ahead, and ensure that 1 and then <unk>.
And all of it can chime in so you're absolutely correct that in the absence of the pandemic.
The issues and the chipset issue shortage issues.
You'll have seen the accrual.
The main I think that you can see the other broadband demand overall by the service providers are very strong.
And the industrial translate into a much bigger revenue for us if not for the for the macro issue issue. We're dealing with now with I've been saying I think that we still doing fairly decently for the first half I think that this quarter is the quarter 6 credit quality is the quarter that we feel like we're going to get more of a lot more.
Headwind before it goes back to <unk> and recovering mall in queue for next.
The next year, we do feel strongly that the macro issues should be behind us and as you see.
Back to our traditional growth on the on the consumer side.
I have to say that you know from the business perspective, we have not lost any business still a competitor right. So what we're seeing right now it's all related to macro issues.
Yes Anna.
What I will say is that we are in that cycle unit volume wins in the consumer space right. I mean, we see the opportunities we see the activity in that business, we see the complexity increasing.
With these gateways is as you know a lot of the functionality of that used to sit on the set top box is the move into the gateway.
And a lot of the functionality of that used to sit in other devices inside of the home all of it.
Also being moved to the gateway and what that does is that interest in policing the increases the complexity of that box and adds more or a change in the more complex designs. The more of a change the more of the opportunities are for are going and we see that across the board here in North America and in EMEA and other markets as well so the opportunities are there.
The cycle is here, it's just a matter of how we get beyond the pandemic, how do we get beyond the chip shortage shortage issue.
So that the you know the guys that make the losses 10 shifted the boxes.
They need the chipsets and hopefully that can give us the opportunities to.
To bring a more health and fitness and some of it.
Great. Thanks, and then over on the enterprise side, when you heard of pretty big step function higher there.
But I think the characterized as maybe equally driven.
Our traditional enterprise and the industrial Iot for.
Any color there and then look to regarding 2 of our.
The step up even from that elevated level.
And is this sort of run rate.
Do you think the company can build on the heading into next year I know you maybe address that for some degree of feeling like.
That's the growth area for you, but just given the magnitude of the scrubber.
You saw in Q2.200 get a little more color on the.
So let me talk about the industrial Iot first and Thats, mostly a nimble and so theres a lot of growth both in the asset tracking and also on the in the modem business.
As you can see that segment of our connectivity cellular Iot is really growing 120, plus operators around the world of all adopting the narrow band initiative and then driving it for then that gives the opportunity.
Many customers don't come into the air game.
They want that complete the 1 stop shop solution that we are able to provide the design wins that we have seen in Q2.
The 20 plus design wins.
And the tangible followings that day.
Other than we have been able to choose to walk in.
Standard again, and we're talking of stimulus train role digital also caused charging stations it's really.
The almost in every area that we want to see that business and so we felt very very good about where we're heading of the industrial Iot that's sort of the nimble and folks.
In the traditional enterprise Wi Fi space again.
Lots of complexity of gone into the whole of the volumes and and what we see that it does the the first.
The opportunities that are providing the spike in the business that you saw in the report we expect that momentum to continue to increase and we remember that product line is.
In terms of of the dynamics is different than all consume them in any kind of consumer need and we're talking about.
For 1.
1 of the $1.1 of them.
We're talking about the enterprise space, we're talking hundreds of dollars in terms of ASP, so truly going in the direction of the we're aggregating heading in terms of the becoming more of a systems company and the growth is there. So we're really excited about it.
Okay. Thanks very much.
And there are no further questions at this time I will now turn the call over back to Citigroup for closing remarks.
Thank you for joining us on today's call. We look forward updating you allow the next call operator.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
Okay.
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