Q1 2022 Airgain Inc Earnings Call
Ladies and gentlemen, thank you for your patience you are holding for today's are gained.
First quarter 2022 earnings conference call at this time, we are gathering additional participants and will begin momentarily. We appreciate your patience and ask that you. Please continue to hold.
[music].
Good afternoon, welcome to Air gains first quarter 2022 earnings Conference call. My name is Karen and I will be your coordinator for today's call joining us for today's call are air gains CEO Jacob Suen.
Senior Vice president of product and marketing <unk>, and Vice President of operations Victor player.
As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of air gains website at Www Dot a I R. G. A I N dot com.
Following management's prepared remarks, the call will be opened up for questions from air gains publishing sell side analysts.
I caution listeners that during this call <unk> management will be making forward looking statements about future events, and our games 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 air gains SEC filings.
This conference call contains time sensitive information that is accurate only as of the date of this live broadcast may 10th 2022.
Air gain undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call in.
In addition, this conference call May include a 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.
Now I'd like to turn the call over to our CEO Jacob Suen Jacobs.
Thank you operator welcome.
Welcome everyone and thank you for joining us on the call today.
I'll start with some commentary about our Q1 highlights and financial results.
<unk>, our senior Vice president of product and marketing more rich spot. He will provide an update on our product and marketing initiatives.
Afterwards, our vice President of operations Victor player would provide an update on our key operational initiatives.
Hey against mission to connect the world through optimized integrated solutions is building momentum.
Demonstrated by the 24% sequential top line well, we deliver in Q1.
This robust growth once they reach also successful initiatives in penetrating the connectivity market by providing high quality products and solutions to the enterprise automotive and consumer markets.
For those newer to our company the consumer market encompasses a large growing consumers using wireless enabled devices, including wireless gateways smart home devices and more.
<unk> technologies like Wi Fi LTE.
<unk> and <unk>.
The enterprise market is characterized by providing solutions for reliable wireless connectivity in advanced environments, such as buildings stadiums and transportation terminals.
And in the automotive market our products deploy in a wide range of vehicles to support a variety of wireless connectivity solutions in the fleet and automotive aftermarket segments.
Historically, the consumer market, what's the foundational pillar to our model.
Today, we see the largest and fastest growing opportunities in the automotive and enterprise markets.
Demand for greater wireless connectivity across its increasing.
Hosting end users software and hardware partners carriers and integrators to attend to EGEN solutions.
Additionally, the expanding Iot use cases across various industries, including asset trucking logistics packaging and supply chain management is creating significant demand for our nimble link Iot solutions.
Along that line the partnership we formed with Crowley of SaaS based digital supply chain platform in January exemplify against horizontal integration of existing solutions.
Nimble link asset truckers now assist cloudy.
Hence the supply chain SaaS platform by providing location and conditional monitoring of critical components in cloud lease customers supply mechanisms.
Our many partnerships over the previous quarters. So the successful ecosystem, we're building to meet the needs of our growing growth oriented markets.
Our recently announced collaboration with <unk> labs highlights how it against expertise in <unk> millimeter wave and <unk> applications kimco by lasting future pool, <unk> technology to meet market demand and bolster our aim vertical markets.
In addition, several of our major wins so the goal in market demand for the products we are building.
This includes a recent win with a major U S based water utility company that selected <unk> connect AC HPV could improve the connectivity of its fleet.
The deployment of Aegean connect will enable optimum connectivity for their fleet even in the most remote environment in the first 3000 units will be fully deployed by the end of 2022.
These customer win.
<unk> not only because of it's volume, but the fact that we are seeing sizable new market opportunities for Aegean connect.
The first responder market.
To meet the growing demand for advanced connectivity <unk> launch the multi Max <unk> a high performance antenna platform created by G connectivity in fleet industrial Iot and public safety applications.
With the introductions of so many new Fi Jeep vehicles or others in the market. It was critical for us to provide flexibility to our customers to get the most all of the growing by G suite of products we offer.
The growing partnerships and customer wins, not only reflects the increasing demand for against innovative technology, but also our world class Global team, who is committed to realizing our company's vision is scaling our business.
Our search for our next CFO is progressing <unk> in.
National Executive search firm.
We are being patient to find the right CFO to build on our solid foundation and take us to the next level of growth and profitability.
On that note I will discuss our financial results for the first quarter ended March 31 2022.
Revenue increased 24% sequentially to $17 $5 million.
Up from $14 1 million in Q4, 2021.
Beginning with our consumer Germany Q.
Q1 finished at $6 $1 million.
Up from $2 $5 million in Q4 of 2021.
Growth in consumer revenue.
To continue easing or global supply shortages.
In the past revenue increased from $8 $1 million in quarter, four 2021 to $8 6 million.
In Q1 of 2022.
Growth in enterprise revenue was mainly due to higher revenue generated from the enterprise Wi Fi access point products.
Automotive sales declined from $3 $5 million.
In Q4 of 2021 to $2 8 million in Q1 of 2022.
Primarily due to lower sales from EGEN connect products as we worked on product enhancements resulted in fewer shipments during the quarter.
These enhancements have now been completed.
Overall, the market demand for Aegean connect AC HPV continues to improve in the backlog for the product has grown substantially since the beginning of the year.
This positive momentum is expected to continue through 2022 and beyond.
Our non-GAAP gross margin was strong at 41, 4%.
Exceeding our previous guidance range.
Q1.
Potential improvement in gross margin was primarily due to the favorable sales mix in the quarter, including increased sales of consumer products, which yield a higher gross margin and lower materials and other production related costs.
non-GAAP operating expense of $7 7 million was slightly above our guidance range, mainly due to higher than anticipated professional fees.
non-GAAP net loss in Q1 was $431000 and our non-GAAP loss per share was <unk>.
Both represent substantial improvement from the prior quarter.
Adjusted EBITDA was negative $263000 in Q1, an improvement from our guidance range and an improvement from negative $2 1 million in.
In Q4 of 2021.
Finally, our balance sheet remains strong with cash cash equivalents and restricted cash at quarter end of $18 $8 million.
Nimble link exceeded the financial pro forma matrix for 2021 and.
And we paid $8 million.
In earn out plus $570000 in hold back.
Post earn out payment, we will have approximately $9 million in cash and $4 million in credit facility.
Now I would like to provide a preliminary outlook for the second quarter ending June 32022.
In Q2, we expect sales to be in the range of $18 $5 million and $20 million.
<unk> 19 $25 million.
Point of the range.
Our billings and backlog are currently trucking over our projected target for revenues in Q2.
On that line as we look ahead deeper into 2022, we believe the growth from enterprise and automotive markets will outpace that of the consumer segment moving forward.
The consumer market will remain a healthy business for air gain but will represent increasingly smaller percent of the total revenue because of broader growth in the other two markets.
We expect non-GAAP gross margin for the second quarter to be in the range of 38, 5% to 42, 5%.
We expect Q2, non-GAAP operating expense will be about $7 $7 million.
Plus or minus 200 Allison.
Yes.
non-GAAP net income per share for Q2 is expected to be one at the midpoint.
Adjusted EBITDA is.
<unk> is expected to be $260000 at the midpoint.
Now I would like to turn the call over to Margaret who will walk us through our sales and marketing initiatives for 2022.
Alright.
Thanks Jacob.
Our sales and the marketing team has created an efficient comprehensive and flexible framework to further penetrate our core growth markets.
We internally call the framework, the three es, which our evolution.
Ecosystem.
And expansion.
The evolution pillar represents our current list of products as well as new versions of those products and.
And subsequently the wins associated with those offerings.
Jacob referenced with the major utility company to deploy <unk> connect products at a large scale.
Represents a solid example of how our products evolve and improve based on customer feedback and data from the field.
The next he is ecosystem, which focuses on the partnerships, we're forming with leading software developers component and device manufacturers channel partners and carriers generally.
Really there are two types of partners.
Namely partners that we sell to.
And partners that we sell with.
And they sell to partners are those we sell our products and solutions directly to a good example of this is Exxon and a leader in connected public safety technologies.
<unk> designs and build a range of small form factor and high performance antennas.
For use in exon solutions, which are primarily used in first responder vehicles.
Another example is our work with cloud leaf of SaaS based digital supply chain platform.
Cloud leaf platform Leverages supply chain edge, Iot and contextual data to provide one of the world's leading end to end supply chain digital twin solutions to manage risk and volatility in product flows.
Leaf is partnering with air gain to utilize our asset trackers to monitor not only location, but environmental conditions, such as temperature humidity motion and more to increase the quantity and the quality of data inputs on their operations platform.
Our cell with partnerships represent joint selling opportunities, where <unk> goes to market with the partner.
Prime example of this is air games antenna solution set for Cradle point routers and gateways.
<unk> has an extensive portfolio of enterprise class wireless routers, and adapters and their solutions span branch connectivity Iot and mobile in vehicle networks.
<unk> provides the high performance antennas recommends for Cradle point.
Simply put we are able to couple of our products with existing systems, which leads not only to joint sales opportunities, but also lead sharing agreements. We frequently receive requests for these arrangements for our asset trackers aftermarket antennas.
And with our area and connect products.
In addition, there is a growing opportunity for these types of partnerships with our embedded product.
The final year of our framework is expansion, representing our development of future technology.
The <unk> collaboration is a great example.
The collaboration is intended to provide new growth opportunities for both companies as the combined solution would serve multiple industries, such as consumer electronics infrastructure automotive and Iot.
Combining <unk> expertise and <unk> systems, and moving slabs expertise and system on chip design. The collaboration will focus on development of products designed to significantly reduce the cost of ownership and provide solutions in <unk> coverage gaps among carriers that fall within the high band millimeter wave.
<unk> operating frequencies.
With the <unk> expansion, we are establishing <unk> technology leadership in the space of advanced development and leading edge connectivity.
Looking ahead, that's exactly where <unk> is positioned as the company becomes synonymous with the concept of wireless technology leadership.
In recognition of our advancements over the quarter, we were honored to receive the Andrew Seybold Award for Technology Innovation Might've public safety Broadband Technology Association.
Illustrated our dedication to producing and providing technology for customers that has a lasting and multifaceted use case value.
Looking ahead, our product suite is aligned with the expanding demand from our markets and customers.
In addition, we are focused on leveraging air gamed proven expertise in radio frequency to help build a world class hardware, coupled with software solutions that often run across multiple product lines.
To deliver on our strategies, we've added four positions in marketing in just the past 45 days.
The bolster sales and marketing teams will continue to work to engage the customers on all of the incredible advancements on our products and engineering teams have accomplished.
Now I'd like to turn the call over to Victor to give an operational update Vic.
Thanks, Brad.
Jacob alluded to share gains operations team is fully implemented strategies to maintain and grow the gross margins across the breadth of the year gain product offering.
The Companys gross margin performance in Q1 is solid evidence that the execution of the various programs. We have put in place are delivering the expected outcomes.
Macroeconomic headwinds still affect the world economy, as we see manufacturing shutdowns in various provinces of China.
Despite this we were able to both mitigate and overcome this issue with our implemented manufacturing redundancy strategy with the expressed goal to reduce the risk factors of the supply constraints.
With the closing of our manufacturing plant in Arizona and the addition of two manufacturers. We now have eight independent contract manufacturers two in Vietnam, two in China and for North America.
The consumer and embedded components and modules are manufactured in Vietnam, and China. Meanwhile, the integrated antennas plus products are manufactured in Vietnam and North America.
I am pleased to announce that air gain is now 100% fabless.
Taking this step has given are gained greater scalability, while mitigating risks surrounding manufacturing wholesale countries and municipalities, where governments and markets are subject to different fluctuating macroeconomic forces. Additionally.
Additionally to mitigate the effects of widespread supply shortages, we've selectively built and purchased inventory in advance that along with flexible product designs to align with material availability have properly positioned era gain to efficiently and productively manufacture and ship.
Products on foreseeable timelines to greater match demand now I'll hand, it back over to Jacob to closeout, our remark Jacob.
Thanks Vic.
The theme for this year is execution.
Our global team is laser focused on executing our strategic roadmap, which is designed to scale a game to the next level of growth and profitability.
You can see from our Q1 numbers our strategy is working.
We have discussed the big wins that demonstrate the demand for our current products.
We have touched on the many partnerships and Pos will take for future collaborations.
So share our vision for advanced development that will carry us into the future.
Moreover, our focus on driving profitable growth optimizing our cost structure and realizing organizational efficiencies give us confidence in our ability to generate cash going forward.
While being mindful of risks associated with various macroeconomic factors, we expect sequential growth throughout 2022.
Our outlook for growth.
Supported by the strong tailwind in our end markets.
And our confidence in our team's ability to capitalize on the demand for air against advanced wireless technologies and with that we're ready to open the call for your questions. Operator, please provide the appropriate instructions.
Thank you the floor is now open for questions.
You do have a question. Please press star one on your telephone keypad at this time, if you're using a speaker phone. We ask that you pick up your handset while posing your question to provide the best sound quality again, if you do have a question or comment you May press star one on your telephone keypad at this time.
We will take our first question today from Scott Scott from Scott Searle with Roth Capital. Please go ahead Sir.
Hey, good afternoon. Thanks for taking my questions Jacob Congratulations nice job on a difficult operating environment, particularly on the Wi Fi supply chain.
Yeah.
Thank you Scott.
Hey, maybe to start on Wi Fi I'm wondering if you could talk a little bit about the supply chain give us an update in terms of your visibility of what youre seeing the backlog on that front because it sounds like your backlog has been building and in the past.
On that business at least on the consumer Wi Fi front at $8 million to $10 million a quarter is that something thats achievable and you have visibility to over the next couple of quarters or is it going to take a little bit longer on that front.
Yes, so certainly as you can see in Q1 nicely carvey on the consumer side. So as we indicated we went from $2 five mill in Q4 to $4 one mill in.
$6 one mill in Q1, we do expect that trend to continue how quickly can we get back to normality. We don't have the answers yet as you can tell I mean, the pandemic impacting China as an example.
Are you still seeing expected shutdown.
The Chinese government on a certain Cds periodically.
Creating the kind of uncertainty we will not be able to tell you, but we do feel strongly that.
Training up block H.
You should expect to recovery happening over time.
Okay, maybe real quickly to just hit on <unk> I'm not sure. If you kind of broke it out in the quarter, but if you could give us some guideposts in terms of how much it was up sequentially.
Did you leave revenue on the table as it relates to nimbly kind of similar supply chain issues on the cellular front.
And what the outlook is for the remainder of this year, that's certainly been supply constrained area, but it looks like things are starting to improve on that front.
Yes, I mean, we.
Don't get the specifics, although I think that the indication that we already gave is the fact that we pay the earn out.
Actually exceeded the number that we have agreed to for the earn out. So we were very pleased with the performance.
And we also feel strongly about this year you already got really strong backlog support.
And Youre absolutely right.
The hindrance is about how do we overcome some of these supply shortages, although our team engineering and operation Hofmann.
A tremendous work to mitigate that such as cooling some redesigning to accommodate multiple chipset instead of being single source and we know during the redundancy that Vic alluded to that we are creating redundancy among the different CMC. We now have so we feel strongly about.
The outlook for the for the Iot products, although as you indicated I think that we have we could've done even better if not for some of these supply constraints and this is going to continue I would think throughout the year, but we feel strongly that with the team on hand, we're going to be able to overcome that.
And lastly, if I could you've talked a little bit more about some of the opportunities in millimeter wave you referenced <unk> today in that relationship but also on your website you started to talk about other opportunities not just with <unk> and things like C band and mid band, but 60 gigahertz in 2011.
Was wondering now that you're becoming a little bit more public and this moves out of stealth operations. When do these opportunities start to contribute and do they become meaningful in 2023, alright, thanks, and congrats again.
Okay. Thanks, Scott, maybe I'll start and then I'll turn it over to Marlborough at certainly we're very excited about the partnership with <unk> labs right now one of the.
We'll recognize a player when it comes to <unk>.
A partner with them.
For a really not only on the millimeter wave after the C band.
For me and for the company.
Our reinforcement.
Our commitment to <unk> and I'm going to have more of that speak to the opportunities that equal.
Hey, Scott Hope you're doing well.
So just to give you a little bit more color on our partnership with <unk> labs, which is something that we're really excited about.
With that partnership does for us and if you see like the evolution of where the consumer where our consumer business is heading you can see that there are two things that are happening. The technology Road map is moving forward and I'm talking here about LTE to hygiene to millimeter wave in and also the fact that are gaining to becoming more of a systems company, where we are selling systems.
What that does for US is that it gives us access to be able to continue to provide that relevant to our customers those that want to buy just the components from us or those that want to buy systems from us.
One could expect air gain being a CPG company to be relevant.
In the.
Making sure that the signal strength coming into the consumer homes is one that is optimized and one that allows you to carry the maximum data rate and so in terms of how that's going to play out obviously, everybody knows that millimeter wave got a little bit ahead of itself.
So, let's say two three years ago and now there is a lot of focus in C band and so our strategy is to continue to drive the roadmap, perhaps more so closely in C band and then soon after that we will have that opportunity to transition to millimeter wave when it starts to gather steam and obviously as you know we met them.
The way, we've got the volumes and the relevance that Aegean has that should.
Materialize any significant market for us.
Yes, Scott, finishing up your question is is that we do not expect revenue from these partnership in 2022.
Although we expect some of the product.
Be able to demonstrate hopefully come early 2023.
Okay, great. Thanks, so much.
Thank you Scott. Thank you our next.
We will take our next question from Alex <unk> with William Blair. Please go ahead.
Hi, This is sabrina on for Alex Thanks for taking my question.
Last quarter, you mentioned, bringing gross margin back to the 40% range. This year and achieve 41, 4%. This quarter can you talk about or provide any additional detail here, maybe by end market growth and how to think about that going forward for the remainder of this year.
Okay, Hey, good to hear from you Sabrina.
I'll start and then turn over to Vic.
To talk more about his teams.
His teams work to be able to achieve the gross margin certainly will also pleasantly surprised to see that we thought were going to be able to come close to fully.
And pleasantly surprised that we are actually able to exceed that at 41, 4% for Q1.
And really it's a number of things certainly the favorable sales mix as you know our consumer business always have a higher gross margin.
We're able to achieve a higher expected revenue stream.
From the consumer business in Q1 that helps but it's also a number of other things.
The way, we managing our logistics the redundancy.
How do we look at.
Around the tariffs all of that really help contributing to the overall gross margin improvement and I'm going to turn it over to Victor elaborate further.
Thanks for the question Sabrina really Jacob did hit on some of the highlights of it.
And the reconfiguration to Fabless, we've had a really decrease in our cost of logistics, we have been able to eliminate the tariffs and we've really gone through a lot of redesign on cost initiatives to make sure that we have the appropriate configurations of parts on the printed circuit board, which also eliminated some of the component risk rates.
Helped us avoid any of the Ppv's price purchase price variances that were occurring in the markets. So that really gave us a very sustainable model for Q2, and we expect it to continue.
Thank you that's really helpful. And then just another question.
The announcement of the Auditor change for this year can you provide any insight into the motivation there any commentary about the change.
Well, yes.
We really appreciate it.
P&G has been helping us throughout the years.
But as in all day.
They started having.
Some resource constraints because of what's out there and also as a result of that.
Also.
Expressed the need to raise more multi and really that you saw one of the the issue identified in Q1. It was the access of our professional fees.
And we and this is one of the efforts we're making.
We'll go ahead and make the change to it.
Reputable company.
Gwen Thor turn that to help us moving forward.
Thank you so much.
Thank you Sabrina.
Our next question will turn to Anthony Stoss with Craig Hallum. Please go ahead.
Hi, guys nice execution in a really strong guide Jacob.
Couple of questions I, just wanted to hone in on a statement in the press release talking about on the Airgun connect side that it was down sequentially as you work on product enhancements I'm curious what that is and then also love to hear more in addition to the water utility air again connect win kind of thoughts on.
Additional launches perhaps in the second half of the year, then Ed follow ups after that.
Okay, great great questions Tony.
I'm going to start and im going to turn it over to Vic to talk a little bit more about the enhancements and certainly to more ready to talk about.
The.
Product side, yes. So.
And regarding the utility opportunity. So certainly I just overall I just wanted to share with you that we are seeing a strong demand for Aegean connect and because of the trials. So we have to turn to.
Also the much greater foot.
Now we have <unk>.
Certainly we recognizing some of the enhancements, we will need to perform and we.
<unk> will elaborate further.
That's all behind US, we actually were able to make some enhancements, we're actually going to provide an enhancement to customers.
Who would have a need.
And overall.
The Aegean connect.
It's increasing and I would I can't even little more collar that the backlog, we have doubling the backlog since the beginning of the year.
So with that being said I'm going to turn it over to desktop a little bit about some of the enhancements specifics in our model on the water utility opportunity.
Thanks for the question Anthony really the whole purpose of of our reset was was due to the fact that we wanted to maximize the customer experience on Hec and we wanted to be absolutely certain that we could increase the performance to a level of expectations that was required with the product that means.
Specifically, we took a look at the performance of the interaction between the Ethernet injector and the modem and we're able to really reset that into a configuration that just maximizes the output of our AC HPV.
Yes, so Anthony yes, and just to give some color. So Jacob talked about how the pipeline has has doubled for Iranian connect what I can tell you that's actually more interesting than the fact that the pipeline has doubled.
<unk> of that pipeline and if you look at that opportunity that we've announced with this major utility company.
It's one of many opportunities of similar size and color that we are starting to see in the pipeline and this is very exciting because now that means that are game connect is in that upswing momentum, where it's going to give us those type of size of opportunities that we like the ones that are in urban that are large in size that have the visibility to have the <unk>.
Is that have the size to make this a very successful product for us.
I'm curious thanks for the detail that's intriguing have you signed the additional deals you just can't announce them yet or do you expect those launches sometime this year.
I cant talk about whats what what's in there in terms of deals.
Obviously, if we have them and we and we secure deals we would be sure too.
Due to the maximum to make sure that we have a press release behind that but all I can tell you right now is that the.
The health of the pipeline is looking very good and the engagements that we have today are very promising.
Got it and then last question for me on growth rates going forward. I know you guys talked about enterprise and I don't expect it to grow the fastest.
Is the would you say that the Iot businesses growing ultimately the fastest or Wi Fi or kind of if you could break out kind of your thoughts on growth rates that'd be helpful.
Yes, Tony I think.
As I indicated in the earnings script that the consumer side, we do feel like it's steady.
So that's the one that's not going to be growing as rapidly as the other two markets and when it comes to the enterprise, which is up <unk>, the Iot and automotive.
I would say, it's a two horse race.
We got tremendous opportunities in both.
And if you look into the Iot side I think that.
It's some of it coming in small about how quickly can we build in.
The market demand is there that's also similar to what we're seeing with the automotive market as well with the with the automotive market, Besides egg and connect with us.
<unk> started seeing a really good traction on the traditional <unk>.
Antenna plus aftermarket products as well and we expect that business also did well.
Substantially throughout the year, so I would not be able to tell you, which one sunoco faster, although I really feel good about both.
Thanks for the color Jacob Best of luck guys.
Thank you Tom.
We will take our next question from Craig Ellis with B Riley Securities the floor is yours.
Yes, Thanks for taking my question and congratulations on the progress team I wanted to start clarifying some comments around consumer so clearly consumer has rebounded off severely restrained levels. The question is this Jacob as you look at the business returning to quote unquote normal as normal.
The 10 ish million a quarter levels that we would've seen at times in the past or just given the current environment would it be something lower than that maybe seven to nine or for whatever reason.
We see it going into the low double digits for even better than that.
Hey, Greg good to hear you again, yes.
Look it's we do feel like is the is there the potential to get back to normal the answer is absolutely yes.
Exactly what that number will be I think that previously.
France right.
It is seasonal right between anywhere from I would say eight to 11 now or even the eight to 12 Mil and I'd say, we can get back to that range.
Bob.
It's going to take some time to get there as I indicated earlier the headwinds on the overall supply shortage is still there and with the consumer market. We are lot more depend on others and I want to reiterate we don't have an issue with our product when it comes to the consumer almost shortages.
Can we have the product we can bill right the issues with our partners or the product that our intent is going into a gateway and set top box that are missing the other key components and thats whats holding up and because of that.
Uncertainties, there that we cannot prepay. So I think that is going to take some time given what the.
The macro environment currently.
Yes, that's understandable theres just so many components on us.
Uh huh.
Set top box system Board. The next question and issue I wanted to dig into Aragon connect so just great to see the the water utility win very substantial.
Question is this if we estimate that that's worth about $3 million given <unk> connect asp's.
Much of that is included in the second quarter guidance and how should we think about the Rev. Rec on the balance through calendar 'twenty two.
Yes, great questions. Craig. So certainly we're also pleased to see that particular.
Design win and as I indicated even with this particular customer.
This keep Mona mentioned and this is only the first order from them they actually it's a nationwide.
Utility company.
Across many different states and this was only the first older and they have a lot more vehicles now using egg and connect in the foreseeable future.
With that being say the other key point.
At right is that this was actually not part of our our same.
The subscriber adjustable market that we've been telling the market, which is the first responders, which is actually 500 mill.
$1 million plus.
Plus same for US. So this is in addition to that now how is this year is going to play out.
Certainly not all of this.
We're going to be shipping second quarter, it's going to be shipping throughout the year to support this utility.
Purchase order that we mentioned.
We do have other opportunities other wins that will be the gap that produce the revenue stream for the rest of the year and I do see that we are getting.
Looking to the opportunity funnel developing into the customers' trial.
We're seeing every one of these is.
It's increasing.
And also the the promotion and stop AT&T continue to put forth.
It's also making all of us feel confident about the future for Aegean connect I think that last year, we are.
We are hoping to be able to see that last year I really feel like it really takes a year to even have the ramp up in rate right now with the cost of that growth now going forward.
So are you, saying you would expect that.
Paragon connect revenues to grow sequentially through the year checkup.
The message that you were conveying there.
Yes.
Got it Okay, and then moving on to.
Nimble when can I wanted to ask a revenue and a gross margin question because they are related we saw the business perform exceptionally brought last year. We also saw that it was.
One that had an adverse gross margin mix impact. So the question is this I wasn't clear if nimble and casually rosier declined in the first quarter. So can you clarify that and then Mike given that it was previously very significantly below corporate gross margin average are there things that have been done operationally to get.
That margin back to corporate average or do we still have a ways to go before that business would be at all.
Low to mid <unk> gross margin.
Okay, Yeah, great questions again, Craig So let me try to ensure both of them correctly. So the first question is in regard to.
The demand for for the for the Iot product.
Am I correct, yes, yes, yes.
Yes so.
<unk>.
The revenue for Q1 versus Q4, I think that was steady to slightly increase.
And some of them is because we actually got more demand and some of them. We just couldn't ship because of some of the shutdown.
Expect a shutdown in Asia right now we do.
As I indicated we actually have backlog even throughout the rest of the year and Theyre looking really strong. It's all about can we built in and make sure. We can meet the demand some of the lost chipset shortage issue, creating some issue for us.
And we're going to continue to see that but as I indicated.
Alluded to earlier is that we have.
Now, creating different designs, so that we can mitigate the risks so.
So we feel good about the growth of the Iot products. The second question that you asked is about the gross margin.
I think that.
When we acquired <unk>, we already know that this is an issue.
After the quarter, we continue to execute.
And this is where I really want to compliment our ablation team really step up and looking into the different avenues. So.
Definitely.
If you think about our average if you look into the average we disclose I would say we will have increased from what they have previously substantially.
Well be able to giving you the specifics, but I do think that we have a path to being above.
The <unk>.
And they were not the one that actually.
With Iot that different product lines, so much looking really good.
<unk> does not look good but we are looking at ways to address that.
But overall, that's hardware module of our Iot is pretty good.
Yeah.
Got it that's all really helpful. Jay Thank you.
Thank you Craig.
As a reminder, if you do have a question or comment you May press star one on your telephone keypad at this time again Thats star one if you'd like to queue up for a question.
We will take our next question from Tim <unk> with Northland Capital markets. Please go ahead.
Hi, Congrats on a good report and our outlook.
I wanted to come back on.
Kind of the drivers of your your guidance were pretty solid sequential growth here.
Early on it seemed like.
Your commentary was.
The effect do you expect some continued recovery in consumer.
Maybe account for I don't know theres much as half of that but any color there.
As well as.
No.
The initial ramp of Aragon connect shipments.
Into the utility space, if I look at those two factors would that account for.
The majority of the growth Youre looking out to the mid range or any other factors to consider.
Yeah, Tim So I would say actually.
A number of other growth the Iot is definitely a strong growth engine.
The accounting on as well as the aftermarket we do see.
We did a refresh on a lot of our product on the <unk> Psi and overall, we do expect.
To be happening as well so yes, you're right about the consumer I think it is going to be steady.
We're going to be it's going to take its course, we do feel good about you're going to see the improvement quarter after quarter until we get back to normality that could maybe another three quarters. Another two causes we're going to see we don't know that yet.
As far as the Aegean connect certainly we do see a bright future for that product I think that it's a couple took us two or three quarters more than what we were hoping for but it's now here for us to really take advantage of.
And as I indicated I think that the Iot and in the aftermarket our two other key growth driver for us in the subsequent in the foreseeable future.
Got it and thanks for that.
Given the win that you're shipping this year and Aragon and connect the potential for follow on with that customer new wins and more traction in the first responder market is.
Is it possible that we see.
<unk> and connect revenue at or above 10% of total revenue for the year.
And as a follow on what would be the margin implications of that.
Well I certainly we certainly hope so.
And that's what we're going to strive for we feel there is definitely.
A really good chance, we can exceed that.
The gross.
Margin is something we're going to have to work on I think that as we become more scalable.
The gross margin is going to include.
One of the I would say one of the issue right now with Aegean connect is the gross margin that because when we ship a small volume the cost is high.
Couple of things that we already are working on one is what I indicated to you that was being more scale. The other thing is the fact that we actually transition.
That product now Easter build that in house and now we transitioned that to with the <unk>.
It's actually creating a lot of benefit if I may.
From a quality supply chain perspective, so we do expect that the.
Vic and his teams.
The effort, we're going to start the continuous improvement from a gross margin perspective for Aegean connect.
And the other thing I would add Tim is that in the roadmap of Aragon and connect.
So just as you could imagine with every product that you release, there will always be areas of cost optimization and thats, what Vic and his team have been doing for us. The past 12 months that are also product derivatives that are being planned to address markets that are very specific and also a redesign of the current platform that would allow us to <unk>.
<unk>.
Good.
Those margins much higher than where they are today.
Okay. Thanks, sorry about that.
Okay. Thanks, Tim.
At this time this concludes our question and answer session.
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Now like to turn the call back over to Mr. Smith for his closing remarks.
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 <unk> first quarter 2022 earnings call. You may now disconnect and have a great day.
Yeah.
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