Q4 2023 Airgain Inc Earnings Call

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Operator: This has been Don Short with... Good afternoon, and welcome to Airgain's fourth quarter and full year 2023 earnings conference call. My name is Diego, and I will be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Suen, and CFO, Michael Elbaz. As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at investors.airgain.com. Following management's prepared remarks, the call will be open for questions from Airgain's covering analysts. I caution listeners that during this call, Airgain management will be making forward-looking statements about future events, as well as 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.

Good afternoon, and welcome to air gains fourth quarter and full year 2023 earnings conference call.

My name is Diego and I will be your operator for today's call.

Joining us today are air gains President and CEO, Jacob swim and CFO Michael L. Beth.

As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Air games website at investors that are gay and dotcom.

Following management's prepared remarks, the call will be opened for questions from air games covering analysts.

Caution listeners that during this call are gained management will be making forward looking statements about future events as well as air games business strategy and future financial and operating performance.

Operator: These forward-looking statements are qualified by the cautionary statements contained in today's earnings release and Airgain's SEC filing. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 6, 2024. 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 will include a discussion of non-GAAP financial measures.

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 are games SCC filings.

This conference call contains time sensitive information that is accurate only as of the date of this live broadcast March six 2024 era 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 addition, this conference call will include a discussion of non-GAAP financial measures. Please see today's earnings release for further details, including a reconciliation of GAAP to non-GAAP results.

Operator: Please see today's earnings release for further details, including a reconciliation of GAAP to non-GAAP results. Now, I'd like to turn the call over to Airgain's CEO, Jacob Suen. Jacob, thank you, Operator. Welcome, everyone, and thank you for joining us this afternoon.

Now I'd like to turn the call over to Air games CEO Jacob Suen.

Jacob.

Thank you operator, welcome everyone and thank you for joining us this up to know.

Jacob Suen: To begin today's discussion, I will give some company background, followed by a review of our performance for the quarter and year, before handing the call over to our CFO, Michael Elbaz. He will review our financial results for the quarter and year in more depth, as well as provide our outlook for Q1 2024. After that, I'll share some closing remarks before opening the call for questions. All right, let's begin.

So it became today's discussion.

We'll get some company background, followed by a review of our performance for the quarter and year before handing the call over to our CFO Michael <unk>.

He will review our financial results for the quarter and year in more depth as well as provide our outlook for Q1, 'twenty 'twenty fall off.

After that I'll share some closing remarks before opening the call for questions.

All right, let's be game for those of you who may be new to our story at Elgin, we simplified wireless connectivity across the value chain. So embedded components to integrated systems, we have three core markets enterprise consumer and automotive.

Jacob Suen: For those of you who may be new to our story at Airgain, we simplify wireless connectivity across the value chain, from embedded components to integrated systems. We have three core markets: enterprise, consumer, and automotive. Our enterprise market is comprised of integrated system solutions with a mix of components. Specifically, this market includes components such as our embedded cellular modems, custom products, and antennas for access points and internet of things applications. This market also includes system solutions, such as our ACID truckers and our upcoming Lantern Fix wireless access and Lighthouse smart cement repeater products. Our consumer market is comprised mostly of our embedded antenna business, a traditional area of expertise for Airgain. Our consumer products include custom embedded antenna design for customer premises equipment, or CPE, devices such as those that enable Wi-Fi 6E and will enable Wi-Fi 7.

Our enterprise market is comprised of integrated system solutions with a mix of components.

Specifically these market includes components, such as our embedded cellular modems custom products and antennas for access points and in the internet of things applications.

This market also includes system solutions, such as all our assets truckers and our upcoming lantern fixed wireless access and lighthouse smart she meant the Peter products.

Our consumer market is comprised mostly of our embedded antenna business.

Traditional area of expertise for air again.

Our consumer products include custom embedded antenna design for customer premises equipment or CPE devices, such as those that enable Wi Fi succeed and it will enable why five seven.

Jacob Suen: Lastly, our automotive market includes both our aftermarket antennas as well as our vehicle networking devices, highlighted by our recently announced Airgain Connect fleet device. We work with a global network of system integrators, distributors, and large customers to help solve critical connectivity issues, improve wireless performance, and effectively shorten time to market for their products. We believe the global connectivity opportunity is large, and durable, secular tailwinds, including increased connectivity technology adoption and growing serviceable addressable markets across our product suite will continue to propel the industry and our company forward. At Airgain, we have a consistent track record of developing and offering optimized wireless solutions to our channel partners and customers that help them get connected quickly.

Lastly, our automotive market includes both our aftermarket and tennis Aswell I saw a vehicle networking devices highlighted by our recently announced Hagen connect fleet device.

We work with a global network of boss system integrators distributors and allows customers to help solve critical connectivity issues in <unk>.

So wireless performance and effectively shortening time to market for their products.

We believe the global connectivity opportunity is large and durable.

Secular tailwind, including increased connectivity technology adoption and growing serviceable addressable markets across our product suite will continue to propel the industry and our company for.

Jacob Suen: As new technologies emerge, we are confident that we will continue to provide leading-edge products to match. Turning now to a review of our recent operational results in three core markets. As we look back on 2023, our team managed our business through several macroeconomic headwinds, including industry-wide demand softness and inventory overhang and corrections that caused order push-outs, especially in the second half of the year. We generated $10.1 million in sales in the fourth quarter, in line with the midpoint of our guidance range, and closed 2023 with $56 million in full-year sales. However, our demand indicators, including our backlog and channel point-of-sales data, show us that our markets are starting to recover. Although we will still face some persistent headwinds in the first half of the year, we believe that we are primed for a strong 2024 with gradual growth. Moving on, we take a closer look at our three core markets.

And there again, we have a consistent track record of developing and offering optimized wireless solutions to our channel partners and customers that help them get connected quickly.

As new technologies emerge we are confident that we will continue to play by leading edge products to match.

Turning now to a review of our recent operational results in three core markets.

As we look back on 2023 our team manage our business there were several macroeconomic headwinds, including industrywide demand softness and inventory overhang and corrections that cost order push outs, especially in the second half of the.

A year.

We generated $10.1 million in sales in the fourth quarter.

In line with the midpoint of our guidance range and closed 20 twenty-three with $56 million in full year yourselves.

However, the main indicators, including our backlog and channel point of sales data show us that our markets are starting to recover.

Jacob Suen: 2023 was an important year of development for our enterprise business. Notably, we announced several new products, including our Lantern Fixed Wireless Access Solution, which is set to begin shipping in the first half of this year, our Lighthouse smart repeater platform, for which we expect first revenue shipments by early next year, and an expansion to our Recom 13 5G antenna product line, specifically designed for IOT applications to improve our rugged outdoor 5G antenna offering. A bright spot as we begin shipment in Q4 of 2023, and a new custom product offering developed through a joint engineering collaboration with a strategic customer for its transition to a new and sophisticated platform for its end market. In addition, we secured a multi-million dollar asset tracking opportunity with a real car leader in an asset tracking alliance with Sensing and Control. Still, we faced several challenges in the second half of 2023.

Although we will still face some of the persistent headwinds in the first half of the year. We believe that we are primed for a strong 2024 with QUADRA I'll quote.

Moving to a closer look at all of our three core markets 2023 was an important year of development in our enterprise business, notably, we announced several new products, including our land turns fixed wireless access solution, which is C.

It began shipping in the first half of this year.

Our lighthouse smart repeat a platform for which we expect first revenue shipments by early next year.

An expansion to our really come 13, <unk> antenna product line.

Basically designed for Iot applications to inflow of a rugged outdoor five G antenna offering it.

A bright spot as we began shipment in Q4 of 2023.

Jacob Suen: Our decline was largely driven by persistent inventory overhang in the channel on our embedded modem, combined with clients within our custom products and enterprise access points. Even as our challenges persisted through the end of the year, we believe we reached a trough in Q4, and our enterprise market is set for a gradual recovery in the first half of 2024. We see end customer demand growth for our embedded modems, as evidenced by growing point of sale at our distribution partners, as many of the inventory challenges subside, along with new sales opportunities. Also, in addition to the renewed shipments of our custom products and continued shipments ramped with our IoT antennas, our asset trucker business continues to show growth potential, with growing applications for pallet, packaging, and logistics trucking rolling in on a consistent basis. However, revenue still tends to be uneven for our asset structures.

And a new custom product offering develop two way joint engineering collaboration with a strategic customer for its transition to a new and sophisticated platform for its end markets.

In addition, we secured a multimillion dollar asset trucking opportunity with a real call either an asset trucking alliance with sensing and control.

Still we faced several challenges in the second half of 2023.

Decline was largely driven by persistent inventory overhang in the channel on our embedded modems combined with declines within our custom products and enterprise access points.

Even us all while challenges persist it towards the end of the year. We believe we can reach a trough in Q4 and up our enterprise market is set for a gradual recovery in the first half of 'twenty 'twenty four.

She and customer demand in our embedded modems as evidenced by growing point of sales at our distribution partners as many of the inventory challenges subside along with new sales opportunities.

Jacob Suen: But our pipeline includes several opportunities in railways, warehousing, equipment management and rental, lot management, and cold chain, giving us confidence that this is one of our existing product lines that presents a significant growth opportunity in the second half of 2024. Finally, we expect our Lantern fixed wireless solution to start shipping in the first half of the year in our consumer market, which again represents a vast audience utilizing wireless-enabled devices. A couple of key factors impacted our Q4 performance. First, as we have mentioned previously, service providers are on the cusp of a transition from Wi-Fi 6 N6E to Wi-Fi 7.

Also in addition to the renew and shipments of our custom products and continued shipments ramp with our Iot antennas. Our Asa truckload business continues to show growth potential with growing applications for pallet packaging and logistics.

Trucking rolling in on a consistent basis.

Revenue still tends to be uneven for all of us the truckers, but our pipeline includes several opportunities in railways warehousing equipment management and rental lot management and cold chain.

Give us confidence that this is one of our existing product lines that presents a significant growth opportunity in the second half of 'twenty 'twenty four.

Jacob Suen: They are counting on Wi-Fi 7 to improve performance and user experience, and they are looking for ways to accelerate the Wi-Fi 7 adoption and transition. Anticipation of this shift has caused widespread caution among our OEM customers as they work to avoid excessive inventory. Still, while this has created near-term pressure on our consumer market growth, we are confident that this shift presents a compelling long-term opportunity for Airgain to deliver its cutting-edge Wi-Fi 7 antenna technology, due to the fact that we secured Wi-Fi 7 design wins with two Tier 1 North American MSOs. Second, consumer demand continues to shift from wired to wireless providers for Internet services as consumers transition to FWA.

Finally, we expect our land turn fixed wireless solution to start shipping in the first half of the year.

In our consumer market, which again represents a vast audience utilizing wireless enabled devices.

A couple of key factors impacted our Q4 performance.

First how should we have mentioned previously.

Service providers are on the cusp of a transition from Wifi, six and sexy to Wi five seven.

They are counting on Wi Fi seven to improve performance and user experience and they're looking for ways to accelerate the Wi Fi seven adoption infant Jason.

Anticipation of this ship husky caused widespread caution among of our OEM customers as they work to avoid excessive inventory.

Bill.

Jacob Suen: We recognized this trend last year and have focused our strategy on penetrating this growing market, which offers significant average selling price or ASP growth, since we now provide both the Wi-Fi as well as the cellular antenna design. Even as this shift applies some downward pressure on our existing MSO revenue, it creates a greater opportunity for us in the long run as it opens up a new and exciting market. As we announced last November, we secured a design win with a Tier 1 Mobile Network Operator, or MNO, for the antenna design in their indoor FWA router.

While this has created near term pressure on our consumer market growth. We are confident that this ship presents a compelling long term opportunity for aerie game to deliver its cutting edge Wi Fi seven antenna technology.

Evidenced by the fact that we secure Wi Fi seven design wins with two tier one North American Msos.

Second consumer demand continues to shift from wire to wireless providers for Internet service.

As consumers transition to <unk>.

We recognize this trend last year and have focused our strategy on penetrating this growing market, which offers significant average selling price or a S. P growth since we now provide both the Wi Fi as well as the cellular antenna design.

Jacob Suen: We currently expect to begin shipments for this product in Q1. While we anticipate that these headwinds will continue in the first half, we remain committed to turning around our consumer market performance and are confident that the second half of 2024 is where we'll see this improvement. Lastly, our automotive market. As a reminder, our automotive market includes aftermarket products that are deployed in a wide range of vehicles, mostly focused on public safety, transportation, and municipalities.

Even as this shift applies some downward pressure on our existing M. S. O revenue it creates a greater opportunity for us in the long run.

It opens up a new and exciting market.

As we announced last November we have secured a design win with a tier one mobile network, operator or M. N O for the antenna design in there even though it W. A router.

We currently expect to begin shipments for this product in Q1.

Jacob Suen: Inventory Corrections from Leigh customers have dampened the growth in this market, and we expect this trend to continue in the first half of 2024. Still, we saw several major accomplishments in 2023. We launched our EG-Connect antenna platform to simplify external antenna ordering and installation, further developed our 5G product line of antennas, and launched Ultramax 5G high-performance windshield. As we shift into 2024,

Well, we anticipate that these headwinds will continue in the first half we remain committed to turning around our consumer market performance and are confident that the second half of 'twenty 'twenty four is where we'll see this improvement.

Lastly, our automotive market as a reminder, our automotive market includes after market products that are out there.

Ploy in a wide range of vehicles.

Mostly focused on public safety transportation in municipalities inventory.

Jacob Suen: We expect that several of these products will ramp up as inventory correction delays dissipate, especially in our 5G antenna product line. We are seeing signs that our combined focus on new and differentiated products, supply chain flexibility, and global channel expansions continues to yield results. And we are optimistic that our efforts will turn this market into the second half as well. In January, we announced our next generation of vehicle gateway, Airgain Connect Fleet or AC Fleet, which is set to begin shipping in the second half of this year. Overall, we faced significant downward pressure in 2023 across our end market, especially in the second half of the year. However, several of the factors that caused these headwinds are yet to fully clear, and will likely persist through the first and second quarters of this year.

Inventory corrections from the customers.

Dampen the growth in this market and we expect this trend to continue in the first half of 'twenty 'twenty four.

Still we saw several major accomplishments in 'twenty to 'twenty three.

We launched our EZ connect antenna platform to simplify external antenna ordering and installation.

Further develop our <unk> product line of antennas and launched Ultra Max five G high performance windshields.

As we shift into 2024.

We expect that several of these products will ramp up as inventory correction delays dissipate, especially in our five G antenna product lines.

We're seeing signs that our combined focus on new and differentiated products supply chain flexibility and global channel expansions continues to yield results.

Jacob Suen: Still, while we remain responsive to the macroeconomic environment, our demand indicators have provided positive signs that our business is starting to turn. We are cautiously optimistic that we have reached a trough and are confident that our investments in other businesses have positioned Airgain for growth, especially in the back half of the year. As we have communicated in previous quarters, we are transitioning from being exclusively a component manufacturer to a wireless system solutions provider. As such, our growth strategy is focused on two key elements. First, continue execution of our established business. Our embedded antennas are deployed in various consumer applications, including access points, wireless gateways, fixed wireless access devices, Wi-Fi routers and extenders, and smart home devices, just to name a few.

And we are optimistic that our efforts will turn this market in the second half as well in January we announced our next generation of vehicle Gateway egg and connect fleet or AC fleet, which is set to begin shipping in the second half of.

This year.

Overall, we faced significant downward pressure in 2023 across our end markets.

Especially in the second half of the year.

Several of the factors that caused these headwinds are yet to fully clear and will likely persist through the first and second quarters of this year.

Still while we remain responsive to the macro economic environment, our demand indicators have provided positive signs that our business is starting to turn.

Jacob Suen: We have developed strong relationships with our partners throughout the value chain, including chipset providers, carriers, original design manufacturers, or ODMs, and OEMs on the development side, and MNOs and service providers on the customer side. Over the last few years, we have invested in next-generation Wi-Fi 7 design and testing capabilities, and we have now reached the cusp of the expected widespread transition from Y560 to Y570.

We are cautiously optimistic that we have reached a trough in our confidence.

Our investments in our business position a game for close, especially in the back half of the year.

So we have communicated in past quarters, we are transitioning from being exclusively a component manufacturer to a wireless system solutions provider.

As such our growth strategy is focused on two key elements.

First continued execution of our established business.

Jacob Suen: As we strategize for 2024, we intend to maximize our opportunities with our consumer market. Already, in addition to the design wing, we secured a Tier 1 MSO for our next generation Wi-Fi 7 products in November. Yesterday, we announced another design win with another Tier 1 MSO. Both are expected to start shipping in the second half of 2024. Furthermore...

Our embedded antennas are deployed in various consumer applications.

Clothing access points right.

S gateways fixed wireless access devices, Wi Fi routers, and extenders and smart home devices.

Just to name a few.

We have developed strong relationships with our partners throughout the value chain, including chipset providers carriers.

Jacob Suen: The new line of products we launched in 2023 for our IoT custom products, automotive markets, and industry IoT antennas are expected to ramp up throughout 2024. With our customer agreements in the pipeline, we are confident that we will return to growth in our established business this year. Second, integrated wireless solutions expansion.

National designing manufacturers or Oems and Oems on the development side.

And in OS in severe service providers on the customer side.

Over the last few years, we have invested in next generation Wi Fi seven design and testing capabilities.

And we have now reach the cost of the expected widespread transition from Wi Fi sexy to why five seven.

Jacob Suen: While we continue to drive our existing components business forward, many of our forward-looking indicators for 2024 point to our wireless connectivity product lines as our solutions with the greatest upside. Specifically, our asset tracking and 5G connectivity products offer the largest strategic growth opportunities for our business in the ashy trucking industry. Our Isotrokers are deployed across transportation, supply chain, cold chain, and other specialized applications.

How should we struggle for 'twenty 'twenty, four we intend to maximize our opportunities with our consumer market.

Already in addition to the design win we secured with a tier one MSL for our next generation Wi Fi seven products in November.

Yesterday, we announced another design win with another tier one M. S. L b.

Both are expected to start shipping in the second half of 'twenty 'twenty four.

Jacob Suen: Asset truckers bring a recurring revenue opportunity as well, with multiple subscription-based components such as our NimbleLink cloud-based device enablement platform and our trucking information dashboard. We estimate an $800 million serviceable addressable market in 2024 alone, and believe that we are poised for success in the back half of the year. Our 5G connectivity products include our Lantern FWA, built to improve connectivity at the home or in the office; our Lighthouse Smart Repeater, designed to extend high-quality coverage for mobile network operators; and our recently announced next generation AC fleet 5G vehicle gateway, created to offer wide area cellular and local area Wi-Fi connectivity across public safety, transportation, and public and private vehicle fleets.

Furthermore.

The new line of products, we launched in 2023 for our Iot custom products automotive markets and industry Iot antennas and expect it to ramp up throughout 2020 four.

With our customer agreements and funnel, we are confident that we will return to growth in our established business. This year.

Second integrated wireless solutions expansion.

While we continue to drive our existing components business for many of our forward looking indicators for 'twenty 'twenty four point to our wireless connectivity product lines as our solutions with the greatest upside.

Specifically, our us as trucking and by G connectivity products offer the largest strategic growth opportunities for our business.

On the asset trucking.

Si.

The truckers are deployed across transportation supply chain cold chain and other specialized applications.

Jacob Suen: Two of these products are expected to ship this year. We recently completed our product certification for Lantern FWA and expect to ship to a funnel of customers in the next quarter. For AC Fleet, we have several customers, both in the US and abroad, that have samples today and are confident that we can begin shipping in the second half.

Asa truckers bring a recurring revenue opportunity as well with multiple subscription based components such as our nimble link cloud based device enablement platform and all of our trucking information dashboards.

We estimate an $800 million serviceable addressable market in 2024 alone and believe that we are poised for success in the back half of the year.

Michael Elbaz: These three product lines represent over $700 million of potential projected serviceable addressable market in 2024 and $1.7 billion of potential additional SEM in 2025, effectively doubling our foundational SEM of $1.8 billion for our existing product line. Our connectivity product lines are the culmination of several years of investments in shifting Airgain from exclusively components to full systems, and we believe that we have significant upside in this area. With that, I will turn the call over to Michael to discuss our fourth quarter and full year 2023 financial results and 2024 Q1 outlook in greater detail.

Our five G connectivity products into our lane turn if W. E T.

Built to improve connectivity at the home or in the office.

Our lighthouse smart repeater designed to expand high quality coverage for mobile network operators.

Our recently announced next generation AC fleet by Jeep vehicle Gateway cream.

Created to offer wide area cellular and local area of Wi Fi connectivity across public safety transportation and public and private vehicle fleets.

Two of these products are expected to ship this year.

We recently completed our product certification for Lane turn SWA and expect to ship to a funnel of customers in the next quarter for AC fleet, we have several customers both in the U S and abroad Baja samples today and.

Michael Elbaz: Thank you, Jacob. Before diving into the numbers, please note that my review of our financial results and guidance refers to non-GAAP figures. Information about non-GAAP financial measures, including GAAP to non-GAAP reconciliations, can be found in our earnings release. Now, let's turn to our fourth quarter results. As Jacob mentioned, Q4 sales were $10.1 million, in line with the $10 million midpoint of our guidance range. However, our fourth quarter sales declined 26% sequentially and 49% year-over-year, primarily due to excess inventory across both our channel and direct customers, coupled with demand softness in our consumer market. Consumer sales were $3.2 million, reflecting a sequential decrease of $1.2 million due to continuing demand softness among cable operators.

Confident that we can begin shipments in the second half.

These three product lines represent over $700 million of potential projected serviceable addressable market in 2024, and the $1 $7 billion of potential additional same in 2025.

Effectively doubling our foundational sim of $1 $8 billion for our existing product lines.

Our connectivity product lines all the.

Culmination of several years of investments in shifting air gain from exclusively components to full systems and we believe that we have significant upside in these areas.

With that I will turn the call over to Michael to discuss our fourth quarter and full year 2023 financial results and 2020 for Q1 outlook in greater detail Michael.

Michael Elbaz: Enterprise sales were $4.6 million, reflecting a sequential decrease of $2.2 million, driven by lower sales of custom products and access points. Tales of embedded modems were flat sequentially, as some distributors continued to recover from inventory overhangs. Automotive sales were $2.3 million, reflecting a sequential decrease of $0.2 million. Q4 gross margin was 30.3%, largely due to an inventory charge of $1 million we recorded in the quarter. This charge related primarily to the end of life of our Airgain Connect HPUE product line. A year ago, we recorded a partial excess inventory reserve as a result of a lower demand forecast.

Thank you Jacob.

Before diving into the numbers. Please note that my review of our financial results and guidance refers to non-GAAP figures.

Information about the non-GAAP financial measures, including GAAP to non-GAAP reconciliations can be found in our earnings release.

Now, let's turn to our fourth quarter results.

As Jacob mentioned Q4 sales were 10 $1 million.

In line with the $10 million midpoint of our guidance range.

Our fourth quarter sales declined 26% sequentially and 49% year over year, primarily due to excess inventory across both our channel and direct customers coupled with demand softness in our consumer market.

Michael Elbaz: In Q4 2023, the HPUE product line will be fully reserved as we transition to the next generation of the Airgain Connect vehicle networking product that we announced two months ago. Excluding the non-cash inventory charge, our gross margin would have been approximately 40%, in line with the midpoint of our guidance range. Q4 operating expenses totaled $6.5 million, $0.5 billion higher sequentially and $0.5 billion higher than our guidance. The increase was driven by higher project development expenses.

Consumer sales were $3 $2 million, reflecting a sequential decrease of $1 $2 million due to continued demand softness with cable operators.

Enterprise sales were $4 $6 million, reflecting a sequential decrease of $2 $2 million driven by lower sales of custom products and access points.

Sales of embedded modems were flat sequentially as some distributors continued to recover from inventory overhang.

Similar to sales were $2 $3 million, reflecting a sequential decrease of $2 million.

Michael Elbaz: sequentially, our G&A, sales, and marketing expenses decreased, while our engineering expenses increased as we focused on the development of our Lantern FWA and Airgain Connect fleet solutions. As a result, our Q4 adjusted EBITDA was negative $3.3 million, and Nongap EPS was negative 33 cents. Our sales for 2023 totaled $56 million, $19.9 million, or 26% lower year over year. Enterprise sales declined by $7.3 million, driven by excess channel inventory corrections, specifically in our embedded modem product line, as well as by our maturing and declining access points product line.

Q4 gross margin was 33%.

Largely due to an inventory charge of $1 million, we recorded in the quarter.

This charge related primarily to the end of life of our air again connect S. B U E product lines.

A year ago, we recorded a partial excess inventory reserve as a result of the lower demand forecast.

In Q4, 'twenty joined three the <unk> product line is fully reserved as we transition to the next generation of Aragon connect vehicle networking product that we announced two months ago.

Excluding the noncash inventory charge gross margin would have been approximately 40%.

In line with the midpoint of our guidance range.

Q4, operating expenses totaled $6 $5 million.

Michael Elbaz: Consumer sales declined by $6.9 million due to soft demand from cable operators as well as excess inventory; automotive sales decreased by $5.7 million driven by the lack of Airgain Connect HPUE sales in 2023 and excess inventories that impacted our lead aftermarket customers. Full year 2023 gross margin was 37.9%. 30 basis points higher than our full year 2022 gross margin of 37.6%. Full year 2023 operating expenses totaled $26.4 million, 9% lower year-over-year, driven by reduced marketing and GN expenses considering the sequential revenue declines, even as we prioritize our investments in our strategic initiatives. Full year 2023 adjusted EBITDA was negative $4.5 million compared to positive $0.1 million in 2022, driven by the impact of the material sales decline, which was partially offset by decreased operating expenses.

$5 million higher sequentially and $5 billion higher than our guidance.

The increase was driven by higher project development expenses.

Sequentially, our G&A sales and marketing expenses decreased while our engineering expenses increased as we focused on the development of our Lenten SWA and Aragon connect fleet solution.

As a result, our Q4 adjusted EBITDA was negative $3 $3 million and non-GAAP EPS was negative three three cents.

Our sales for 2023 totaled $56 million $19 $9 million or 26% lower year over year.

Enterprise sales declined by $7 $3 million, driven by excess channel inventory corrections, specifically in our embedded modem product line as well as by our maturing and declining access points product line.

Consumer sales declined by $6 $9 million due to soft demand from cable operators as well as excess inventory.

Michael Elbaz: Our cash balance as of December 31, 2023 was $7.9 million, $2.1 million lower sequentially, driven by lower cash flows from operations on lower sail. Our account receivable balance was $7.4 million, $1.1 million higher sequentially due to a sales linearity issue in the fourth quarter. Net inventory was $2.4 million, $1.5 million lower sequentially, resulting from the excess and absolute inventory reserve, along with inventory consumption.

Automotive sales decreased.

$5 $7 million driven by the lack of air can connect <unk> sales in 2023, and excess inventories that impacted our lead aftermarket customers.

Full year 2023 gross margin was 37, 9% 30 basis point higher than our full your 2022 gross margin of 37, 6%.

Full year 2023, operating expenses totaled $26 4 million, 9% lower year over year, driven by reduced marketing and G&A expenses, considering the sequential revenue declines.

Michael Elbaz: Now, moving to our outlook for the first quarter ending March 31, 2024. As a reminder, Airgain provides quarterly guidance for sales, non-GAAP gross margin and expenses, adjusted EBDAP, and non-GAAP EPS, as we believe these metrics to be key indicators for the overall performance of our business. We project sales for the 2024 first quarter to be in the range of $13.25 million to $14.75 million, or $14 million at the midpoint of the range.

Even as we prioritize our investments in our strategic initiatives.

Full year 2023, adjusted EBITDA was negative $4 $5 million compared to positive $1 million in 2022.

Driven by the impact of the material sales decline, which was partially offset by decreased operating expenses.

Our cash balance as of December 31, 2023 was seven $9 million to $1 million lower sequentially driven by lower cash flows from operations.

Michael Elbaz: We expect sequential sales growth of approximately 40% at the midpoint of the guidance range driven by the enterprise market. We expect growth in our embedded modems product line after a year of inventory overhang, along with growth in our custom products, asset trackers, and IoT Antenna Sparkline. We anticipate the enterprise market growth to be partially offset by a sequential decline in our automotive market due to continued inventory correction, while our consumer market sales will remain relatively flat sequentially. We expect non-GAAP gross margin for the 2024 first quarter to be in the range of 39.5% to 42.5%, or 41% at the midpoint of the range.

On lower sales.

Our accounts receivable balance was seven $4 million.

$1.1 million higher sequentially due to a sales linearity issue in the fourth quarter.

Net inventory was $2 $4 million.

One $5 million more sequentially, resulting from the excess and obsolete inventory reserve along with inventory consumption.

Now moving to our outlook for the first quarter ending March 31 2024.

As a reminder are gained provides quarterly guidance for sales.

non-GAAP gross margin and expenses.

Adjusted EBITDA and non-GAAP EPS as we believe these metrics to be key indicators for the overall performance of our business.

Michael Elbaz: Despite the projected decrease in the consumer sales mix from 32% in Q4 2023 to approximately 20% in Q1 2024, we expect our gross margin to increase, driven by differentiated new products and applications in our enterprise market. We anticipate the enterprise, consumer, and automotive gross margins to converge around the corporate gross margin, reducing the impact of market sales mix changes and opening a path to gross margin increases in future quarters. We project our operating expenses to be approximately $6.4 million. We will continue to invest in our engineering and sales teams as we focus on our strategic initiatives in fixed wireless access. Vehicle Networking, and Smart Seabed Repeaters Market. Non-GAP EPS is expected to be negative 6 cents at the midpoint of our guidance; adjusted EBITDA is expected to be negative $0.5 million at the midpoint of our guidance. Now I would like to turn the call over to Jacob for his closing thoughts. Jacob.

We project sales for the 2024 first quarter to be in the range of $13, two five to $14 $75 million or $14 million at the midpoint of the range.

We expect a sequential sales growth of approximately 40% at the midpoint of the guidance range driven by the enterprise market.

We expect growth in our embedded modems product line after a year of inventory overhang along with growth in our costume products I said truckers.

And Iot antenna product lines.

We anticipate the enterprise market growth to be partially offset by a sequential decline in our automotive market due to continued inventory correction.

While our consumer market sales will remain relatively flat sequentially.

We expect non-GAAP gross margin for the 2024 first quarter to be in the range of 39, 5% to 42, 5%.

Or 41% at the midpoint of the range.

Despite the projected decrease in the consumer sales mix from 32% in Q4 2023 to approximately 20% in Q1 2024.

Jacob Suen: Thanks, Michael. A few closing thoughts before we head to Q&A. First, I am proud of our team's ability to navigate an uncertain market environment in 2023. Even as we face significant headwinds, we've made real progress on many aspects of our business, including new products, new partners, and new geographies and markets for our sales team. I am optimistic that our industry has started to turn a corner and am confident that our efforts will pay off in the coming quarters. Second, we've already made significant progress in 2024 with three new developments across our markets in the last couple of months. This includes the unveiling of Airgain Connect Fleet, the evolution of our flagship vehicle connectivity line in our automotive business, the announcement of the first of its kind smart lantern FWA solution in our antenna business, the partnership with Lenovo ThinkEdge in our asset tracking business, and a Tier 1 MSO Y57 design wing.

Expect our gross margin to increase driven by differentiated new products and applications in our enterprise market.

We anticipate the enterprise consumer and automotive gross margin to converge around the corporate gross margin, reducing the impact of market sales mix changes and opening a path to gross margin increases in future quarters.

We project, our operating expenses to be approximately $6 $4 million with.

We continue to invest in our engineering and sales teams as we focus on our strategic initiatives in fixed wireless access vehicle networking and smart see Ben repeaters markets.

non-GAAP EPS is expected to be negative six cents at the midpoint of our guidance.

Adjusted EBITDA is expected to be negative <unk> $5 billion at the midpoint of our guidance.

Now I would like to turn the call over to Jacob for his closing thoughts.

Yep.

Thanks, Michael.

A few closing thoughts before we had Q&A.

First I am proud of our team's ability to navigate an uncertain market environment in 2023.

Jacob Suen: Still, we believe that the upside is greatest in the second half of the year, and we look forward to building on our early successes through the rest of 2024. Third, we believe that our products are at the heart of our value proposition for our customers, especially with the many emerging trends within our industry, including transitions to Wi-Fi 7, increased demand for asset tracking capability, and long-standing pain points in the 5G coverage space. We are confident that the worldwide connectivity opportunity is vast and growing, and that many geographies around the globe represent under-tapped markets for our industry and our business. I actually just returned from the Mobile World Congress in Barcelona last month, and the interest and positive feedback we received gives me even greater confidence in our efforts. For example, our next generation Smart Lantern FWA product, expected to launch next year.

Even as we faced significant headwinds we've made real progress along many aspects of our business.

Including in new products, New partners, and new geographies and markets for our sales teams.

I am optimistic that our industry has started to turn a corner and I'm confident that our efforts will pay off in the coming quarters.

Second we've already made significant progress in 2024 with three new developments across our markets in the last couple of months.

These include the unveiling of Aegean connect fleet, the evolutions of our flagship vehicle connectivity lie in our automotive business.

The announcement of the first of its kind Smart lane turn establish solution in our antenna business.

On the ship with Lenovo edge in our asset tracking business.

In a tier one M S O Wi five seven design win.

Jacob Suen: It's a product that has generated strong interest from several major players in the operator space. We expect that this product, slated to ship next year, could significantly reduce the number of truckloads and customers' returns that operators are currently experiencing. Our AC Fleet product has also garnered substantial interest from both domestic and international prospects due to its all-in-one capability and its low-profile size that makes it easy to install and maintain with better performance at a competitive price. Finally, reliable 5G coverage remains a key challenge for operators around the world.

Still we believe that the upside is greatest in the second half of the year and.

And we look for to building on our early successes to the rest of 2024.

Third we believe that our products.

At the heart of our value proposition for our customers.

Especially with the many emerging trends within our industry, including transitions to Wi Fi seven increased demand for asset tracking capabilities.

And long standing pinpoints in the Pi G coverage space.

We are confident that the worldwide connectivity opportunity is vast and growing in many geographies around the globe.

Jacob Suen: And our Lighthouse Smart Repeater aims to solve 5G coverage gaps in an effective and timely manner. For example, we are in advanced discussions with an international M&O for Airgain to become their primary partner for our Lighthouse Smart Repeater, with shipment expected in early 2025. Overall, we remain committed to helping our partners and customers get connected quickly. At Airgain, we can enable connectivity across both components and complete systems, and we are confident in the prospects of our overarching strategy in the years to come.

And under tapped market for our industry in our business.

Actually just return from the mobile World Congress in Barcelona last month in the interest and positive feedback we received.

Gives me even greater confidence in our efforts.

Example, our next generation Smart Lantern <unk> products expected to launch next year. It's a product that has generated strong interest from several major players in the operator space.

We expect that these products slated to ship next year, which significantly reduced the number of truck rolls and customer returns the operators currently experiencing.

Operator: And with that, Operator, please open the call for Q&A. Thank you, and we will now take questions from Airgain's Southside analysts. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in question. You may press star 2 if you would like to remove your question.

Our AC fleet products has also garner substantial interest with both domestic and international prospects.

Due to its only one capability and its low profile size that makes it easy to install and maintain.

With better performance and a competitive price.

Scott Wallace Searle: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we pull for questions. Our first question comes from Scott Searle on Ross MKN. Please state your question. Hey, good afternoon.

Finally, reliable <unk> coverage remains a key challenge for operators around the world and our lighthouse Smart repeater aims to saw five G coverage gaps in an effective and timely manner.

For example, we are in advanced discussions towards a strategic partnership with an international M. N O for a gain to become their primary partner for our lighthouse smartly, Peter with shipment expected in early 2025.

Michael Elbaz: Thanks for taking my questions. I appreciate the color, and it's nice to see the market bottoming and improving outlook as we look into the March quarter. Hey, maybe, Michael, to just dive in quickly, I wanted to revisit the gross margins as we go into the first quarter, given that consumer tends to be a nice gross margin driver, and that's not part of the sequential uptick. I was wondering if you could just clarify again. So we're expecting to see an improvement in NimbleLink margins and enterprise margins, in general. That's where we're going to see the biggest improvement in the March quarter. Yes, hi Scott.

Overall, we will remain committed to helping our partners and customers get connected quickly and there again, we can enable connectivity across both components and complete systems and we are confident in the prospects for our overarching strategy in.

The years to come.

And with that operator, please open the call for Q&A.

Thank you.

We will now take questions from air gains sell side analysts if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Michael Elbaz: Thank you for the question. Yes, the enterprise margin is building up. It's the result of a number of improvements that we have made in 2023, one of which was this large project that we had mentioned a quarter ago. This is a new refresh platform for a strategic customer that's part of our custom products, and that is definitely a higher-value premium product in its kind, along with also on the antenna level the fact that we have some IoT applications and markets. This is a part of the Recon 13 product that we announced a couple of quarters ago, and those are also addressing some really differentiated types of applications.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question comes from Scott Searle with Roth M. Can please state your question.

Hey, good afternoon. Thanks for taking my questions I appreciate the color on it is nice to see the market bottoming and an improving outlook as we look into the March quarter.

Hey, maybe Michael to just dive in quickly I wanted to revisit the gross margins as we go into the first quarter.

Given that consumer tends to be a nice gross margin driver.

And that's not part of the sequential uptick I was wondering if you could just clarify again, so we're expecting to see an improvement in nimble Inc margins.

In enterprise margins in general, that's where we're going to see the biggest improvement in the March quarter.

Michael Elbaz: This is just to name a few, but this has definitely been a process of continuous gross margin improvement. We mentioned last quarter Scott that the automotive business was going to give us some increase, and it actually did. If you exclude the overall inventory charge that we had in Q4, the margin increased sequentially from 39% in Q3 to about roughly 40% in Q4, and that was mostly because of the automotive business, and that is really kind of reconciling my comment on the overall convergence around the overall concentrated path of a gross margin so that the dependency, and we see it in Q1 hopefully, that we have had on consumer mix is not as prescient as it has been in the past, very I just want to dive into that quickly.

Yes, Hi, Scott.

You for the question, yes, the enterprise margin is building up its a result of the.

A number of improvements that we have done in 2023.

Wish was this lost margin I think we had mentioned.

Quarter ago. This is a new refresh platform for a strategic customer that's part of our customers' products.

And that is definitely a higher value a premium product in sky.

Along with also on the antenna level.

Fact that we had some iot applications in markets.

This is a part of the recon 13 products that we announced a couple of quarters ago and those are also addressing some really differentiated applications. This is just to name a few but this has been a definitely a process of continuous gross margin improvement, we mentioned last quarter Scott.

Jacob Suen: That will start to ramp up with the first two MSO customers. It sounds like in the second half of this year. I was wondering if you could put Scott Searle, Jacob Suen, Michael Elbaz, Airgainn, Tim Stoss, Craig Ellis on the list.

The automotive was going to give us some increased and it did actually.

If you exclude the overall inventory charge that we had in Q4 the.

The margin increased sequentially from 39% in Q3 to about roughly 40% in Q4 and that was mostly because of the automotive and that is really kind of reconciling my comments on the eagle convergence around the overall victory our gross margin so.

Jacob Suen: Yes, so very good question. So the Y57, we believe is going to be the major improvement for the MSOs to get back into their competitive advantages, and we do believe it will be in the second half of the year as well. Right now, in Q4, I believe we will close the quarter at $3.2 million.

So that the dependency and we see it in Q1, hopefully that we have had on consumer mix is not as Christian as it has been in the past.

Michael Elbaz: And I mentioned that we will roughly be approximately flat in Q1. That is actually primarily because of the MNO design that we had on the FWA is starting to ship in Q1. And this is going to give us some nice room as well through the year. This MNO ramp is actually upsetting the seasonality that we usually see in Q1.

Great.

Very helpful and congratulations on Wi Fi seven wins I, just wanted to dive into that quickly that will start to ramp up with the first two M. S N customers. It sounds like in the second half of this year I was wondering if you could put.

A magnitude size around that dollar amount and you know how big that will be and how we should think about the recovery in general the consumer business. It peaked at north of $10 million.

Bottoming out now at around 3 million, how should we think about exiting 2024.

Yes, so very good question. So the wife I said that we believe is going to be this.

Michael Elbaz: And that's the reason for the flatness in overall consumer revenue. As we build up into the third quarter and the fourth quarter of the second half of the year, we believe we can go back to the $6 billion that we saw in the first half of last year. But again, this is a bit preliminary at this point, but very helpful. And lastly, if I could,

The basic improvements toward the msos to get back into their competitive advantages.

And we do believe it will be the second half of the year as well too.

Right now in Q4, I believe we closed the quarter at $3 2 million those and I mentioned that we will roughly be.

Approximately flat in Q1 that is actually primarily because of the new design win that we had on the SWA is starting to ship in Q1.

Scott Wallace Searle: There are two other quick follow-ups. On the tracker side of the equation, it sounds like the adjustable market is pretty sizable. I was wondering if you could characterize some of the potential design opportunities that are out there. I believe last year the rail car opportunity was in the ballpark of $10 million or so.

And this is going to give us some nice room as well too through the year. This actually the <unk> ramp is actually offsetting the seasonality that we usually see in Q1 and that's the reason for the flatness on the overall consumer revenue as we build up into the third quarter and the fourth quarter or the second half of the year. We believe we can do.

Scott Wallace Searle: I'm wondering if these other opportunities are of similar magnitude. And as it relates to Airgain Connect 2, Jacob, I'm wondering if you could provide a little bit more color now. We had CES.

Go back to the $6 billion that we have seen in.

Jacob Suen: You're just at Mobile World Congress. It's a 5G solution that supports global bands. How should we think about that ramping up? I know commercially it starts shipping in the second quarter.

In the first half of the.

Last year.

But again this is a bit preliminary at this point.

That's very helpful and lastly, if I could just two other quick follow ups on the tracker side of the equation. It sounds like the addressable market is pretty sizeable I was wondering if you could characterize some of the potential design opportunities that are out there I believe last year. The railcar opportunity was in the ballpark of $10 million or so I'm wondering if these other off.

Jacob Suen: But how quickly does that ramp up both in North America and European markets as we look forward into the second half of this year in 2025? Hey, Scott. Good to hear from you. It's Jacob here.

For two years or so.

Similar magnitude and as it relates to irrigate connect to Jacob I'm wondering if you could provide a little bit more color now we've had two yes youre just at mobile World Congress, It's a <unk> solution that supports global bands how.

Jacob Suen: So regarding AC Fleet, we're already seeing vast interest, both domestically and internationally, and we expect that to be shipping in the early second half of the year, not the second quarter. Although in the second quarter, we're expecting a lot of customer trials to happen. We've already been shipping samples to customers, both domestically and internationally, and it is not limited to only the USA and Europe.

How should we think about that ramping up I know commercially it started shipping in the second quarter, but how quickly does that ramp both in North America and European markets as we look forward into the second half of this year in 2025.

Hey, Scott good to hear from you. It's Jacob here, So Oh regarding AC fleet, we're already seeing in our vast interest both domestically and internationally and we expect that to be shipping in the second early second half of the year in that second quarter, Although second quarter, we're expecting a lot of.

Jacob Suen: We actually have customers that will be doing the trials in Latin America, as well as Australia. So this is truly a globalized product. And what people are so interested in is the all-in-one features and capabilities. It's one of its kind.

Cosmos trial happening really been shipping samples to the customers both domestically internationally and it is not limited to only USA in Europe.

Jacob Suen: And it's such easier to maintain, such easier to install. And it's, like I mentioned earlier in the script, better performance, actually, at a lower cost. Overall cost of ownership is actually lower.

We have customers that will be doing the trials in Latin America as well as Australia.

So this is truly a globalized product.

And what people are so interested it it's the all in one features capabilities.

Jacob Suen: So that's why we are generating a lot of interest in this particular product. So, as indicated, we expect to start to have a nice funnel building up in the coming months and then to be shipping early in the second half. Thank you. I'll get back in the queue.

It's one of these high.

And as such easier to maintain such easier to install.

And it's like I mentioned earlier in the script it's up.

So better performance actually at a lower cost overall cost of ownership is actually lower so that's why we have generating a lot of interest with this particular product. So as indicated we expect to start to have a nice funnel building up in the coming months and into the shipping early second half.

Scott Wallace Searle: Thank you Scott. Our next question comes from Anthony Stoss with Craig Hallam. Please state your name. Hey guys, nice to see the pickup for the March quarter guide. Any one of you guys, can you talk about the enterprise businesses really snapping back in the March quarter? Jacob, do you think it's going to grow sequentially every quarter this year? Then I have a couple. Hi Tony, this is Michael. I actually think that you're right; it is snapping up very nicely.

Great. Thank you I'll get back in the queue.

Just a reminder to the audience to ask a question press star one to remove yourself from the question queue Press Star two.

Our next question comes from Anthony Stoss with Craig Hallum. Please state your question.

Hey, guys nice to see the pickup from the March quarter Guide.

Either one of you guys can you talk about to the enterprise business is really snapping back in the March quarter. Jacob do you think it's going to grow sequentially every quarter. This year.

Michael Elbaz: It's basically growth across all the product lines that we have. The embedded modem is really a welcome sign, I have to say, for the overall Q1 quarter, mainly because this inventory correction that we've been anticipating is over for that specific product line. And this was one of the product lines that was mostly impacted by the excess inventory in FY2022. In addition, the asset tracker, even though it's a bit of a lumpy business on the hardware, the recurring revenue is relatively flat, but on the hardware level, that tends to be lumpy itself, but it is nicely growing as well. The custom product as well, too, and then the antenna specifically for those IoT applications. We do suspect that the overall enterprise market will be relatively flat, at least in the near future. This is going to be basically the ups and downs of some of the product lines, but it is good to see it coming back at this point. Scott Searle, Jacob Suen, Michael Elbaz, Airgain, I got it.

And then I have a couple of follow ups.

Hey, Tony This is Michael.

I actually think that you're right. It is snapping up very nicely.

It's basically a growth across all the product lines that we have.

The embedded modem is video welcome sign I have to say on that.

The overall Q1 quarter, mainly because this inventory correction that we've been anticipating is over on that specific product line and this was one of the prior client that was most impacted by the excess inventory in FY 'twenty to be true.

In addition, the asset tracker, even though it's a bit of a lumpy business on the hardware the recurring revenues relatively flat, but on the hardware level that tends to be lumpy itself, but it is a nice betsy growing as what you. The costume product is what two and then the antennas specifically on those Iot applications.

Do you suspect that the overall enterprise market will be relatively flat.

At least in the near future.

This is gonna be basically.

The ups and downs of some of those product lines, but it is good to see it coming back at this point.

Yeah.

And then Tony when Michael was saying is we are expecting to be flat based brought over at nice improved number already from Q1.

Jacob Suen: And then Jacob, on Airgain Connect 2.0, the new product announced a couple months ago, do you have an existing customer base that are waiting for this product since they were maybe testing the original product? Yeah, we actually have a number of customers that have been waiting. Now, this product, I would say, is no longer just one large customer like it was with version 1. We already have a lot of interest from a number of system integrators. Now, I'm expecting these deals to be nothing huge, but, you know, it's really diversified across, you know, domestically, and internationally. Got it. And last question for Michael: Yep, I've done it. Bye Jacob.

From Q4 to Q1, so we expect them to be able to maintain that nice level, you know that we're going to get in Q1 four in Q2.

Got it and then Jacob on the Evergreen connect the two pointed out the new product now it's a couple of months ago do you have an existing customer base that are waiting for this product since they were maybe testing the original product.

Yes, actually there are a number of customers that have been waiting now this product I always say is no longer a one large customers like it was with the version. One is you know we already have a lot of interest from a number of systems integrators now expecting this.

He has to be not nothing huge but.

It's pretty diversified across domestically internationally.

Got it and then last question for Michael.

Yes, okay.

Michael Elbaz: Yeah, I was going to say, we're going to be working with a number of system integrators and channel partners on the AC Fleet product. Got it. And the last question for you, Michael, on the inventory write-down: do you expect any other product lines to have the same write-down going forward? Or do you think everything's pretty clean now?

Hi, Jacob.

Yeah, I was trying to say we were going to be working with a number of system integrators and channel partners on the on the AC fleet product line.

Got it and then last question for you Michael on the inventory write down do you expect any other product lines to have the same breakdown going forward or do you think everything is pretty clean now.

No everything is pretty clean now this was a really.

Michael Elbaz: No, everything is pretty clean now. This was really, the AC HPUE has been a major product line for us of concern. And we did have a partial reserve last year, exactly in Q4 of FY 2022. And this, at this point, the product line is fully reserved, and we are fully focused on transitioning to the new Airgain Connect next generation AC fleet platform. Very good, guys. Best of luck. Thank you, Tony.

<unk> has been.

A major product line for us of concern and we did have a partial reserves last year exactly in Q4 of FY 2022 and this at this point the product line is fully reserved and we are fully focused on transitioning to the new <unk> connect next generation AC fleet platform.

Okay very good guys best of luck.

Thank you so it literally.

Anthony Joseph Stoss: And thanks, another minor task question: press star 1. Our next question comes from Tim Savagew with Northland Capital Markets. Please stay right there. Hi, good afternoon, and my congratulations on the guide as well.

I think another minor to ask a question press star one or.

Our next question comes from Tim Savage, you with Northland Capital markets. Please state your question.

Hi, Good afternoon, and my congrats on the guide as well.

Tim Savagew: Jacob, I wanted to follow up on your Mobile World Congress commentary and specifically, um, you know, the opportunities for the kind of coverage extension and infrastructure product you mentioned, a potential, strategic partnership with an international M&O. I don't know if you talked about the size of that operator, but my question is, you know, as you look at those sorts of opportunities, could you try to size them for us?

Jacob I wanted to follow up on your mobile World Congress commentary and specifically.

The opportunities for the kind of coverage extension.

Infrastructure products, you mentioned the potential.

Strategic partnership with the International <unk> I don't know if you talked about the size of that operator, but Mike.

My question is you know as you look at those sorts of opportunities.

Can you can you try to size them for us and I imagine that something like a strategic partnership would be la.

Jacob Suen: And I imagine something like a strategic partnership would be larger than normal. And then how does that relate to kind of some of the served addressable market commentary that you made?

Larger than normal.

And then how does that relate to kind of the some of the served addressable market.

Commentary.

That's your mix.

Jacob Suen: Yeah, hey, Tim, good to talk to you, good to hear from you. Yeah, I was actually extremely excited about the feedback we got from a number of customer meetings. And certainly, not only were they really interested in the Smart Lantern that we announced during the show, and then the next gen Airgain Connect AC fleet, but there was a lot of interest in the Smart Network Repeater. And what I'm hearing consistently, especially from the international community, is that 5G coverage is an issue for them. I think that one customer told me that in Brazil, the government is mandating that they'd be able to cover 5G everywhere. And to do that now, especially some of the remote areas, or even within the metropolitan area, there's coverage gaps with 5G today. And even you could be really close to a base station, but between buildings, there's what they call this shadowing effect.

Yes.

Good to talk to you you're going to hear from you. Yes, I was actually extremely excited about the feedback we got to a number of customer meetings.

And certainly.

Not only that we're really interested in the smart lane trend that we announced during the show and then the nexgen. It can connect AC fleet, but there were a lot of interest on the Smart network, Peter and what I was hearing consistently.

Especially with the international community is the <unk> coverage is an issue for them and I think that one customer told me that in Brazil. The government mandating that they'd be able to cover five G everywhere and to do that now, especially some of the <unk> LVL, even with in the Metropolitan area.

Coverage, yes with <unk> today.

And even it could be really close to a base station, but between buildings. That's what they call. The shadow is back and Youll see youll notice that even in New York Metropolitan.

Jacob Suen: And you'll notice that, you know, even in New York metropolitan. So how do you address that? To install a lot of base stations, it's really cost prohibitive, right? And also, sometimes it's also challenging because you have to lay the fiber.

How do you address that to install a lot of base station. It's you know, it's really cost prohibitive right and also as you know sometimes you social challenging because you have to lay the pipe and our smart lighthouse network repeater really addressing that particular club line.

Jacob Suen: And our smart lighthouse network repeater really addresses that particular problem. Because with our smart network repeater, you only have to do this connecting to a light pole. That's all that existed.

With our smart Napoli Peter you. All you have to do is just connecting to it like claw that's all it existed.

Jacob Suen: And with our smart feature, with our carrier aggregation feature, this is the perfect product, the ideal product, for those particular carriers, and all the power companies as well. And as we're talking to these customers, it's becoming obvious that we have a product that is really addressing their needs. And that's why we are actually going to have trials in Europe, in the Middle East, in Latin America, and here in the US. So we're seeing a lot of interest. And with this particular M&O, I mentioned internationally, it's in the EMEA area. And we have already discussed a British strategic partnership. We have already done a preliminary trial with them. It was extremely well received.

With our smart feature with all of them.

We have location feature this is the perfect product ideal product for those particular carriers all the all the.

The company as well and as retouching. These customers, it's becoming obvious that we are having a product that is really addressing that need and that's why we actually gonna have trials in Europe in middle East.

Latin America Asia, and the U S. So we're seeing a lot of interest and where these particular.

I mentioned internationally in the EMEA area, and we're really discuss about it really strategic partnership will it be a preliminary trial with them. It was extremely well received and they really wanted to have a much bigger trial. They are willing to enter a strategic partnership with us and I hope to update you in.

Jacob Suen: And they really want to do a much bigger trial. They are willing to enter into a strategic partnership with us. And I hope to update you in the really near future. As far as size is concerned, we talk about a very sizable market where there are lots of opportunities. So I hope to update you more, but it's an exciting time here with our new product. Great, and just to follow up on that, you mentioned... I don't know if you're coming out of Mobile World Congress with a lot of trial commitments. Sounds like that's the case, but, and you've mentioned a couple of trials in the past, but, you know, as you look at it now, anywhere to kind of size the number of trials you have going on for the Lighthouse product. Yeah, I mean, look, this is, dealing with the mobile network operators, you know, usually takes time, right? Because they, you know, this is an infrastructure play. So they are always really cautious about the deployment of their equipment.

The bill in near future.

As far as the size.

Talk about you know a very sizable market, where there is lots of opportunities.

So I hope to update you more but exciting time here without new products.

Great and just to follow up on that.

And you mentioned.

And I don't know.

If you're coming out of mobile World Congress through.

A lot of trial commitments it sounds like Thats, the case, but and you've mentioned a couple of trials in the past, but you know.

As you look at it now anywhere kind of size the number of trials you have.

Going on for the lighthouse product.

Yeah, I mean look this is in dealing with a mobile network operators, usually takes time right.

This is an infrastructure play so they are always really cautious about the deployment. So I'd have to go through several different trials and that's why even though we announced the product last year. We know this was going to be a year and year and half.

Jacob Suen: So we have to go through several different trials. And that's why, even though we announced the product last year, we knew this was going to be a year and a year and a half, you know, duration for the, you know, for certification, for trials. And I'm pleased that so far, on the number of trials we have found, we have received some extremely positive feedback from customers. So we are proceeding to the next stage, and we hope to get POs by, you know, by the end of this year. And we are still on track for that. And those will be sizable opportunities. I got it.

It does.

<unk> for the certification for trials and I'm pleased that so far on the.

Novel, Charles Vietnam will receive some extremely positive feedback from the customers. So we are proceeding to the next stage.

And we hope to get poached by you know by the end of this year and we are still on truckload and those will be sizable opportunities.

Got it.

Tim Savagew: And last question for me, I think in your initial comments, you talked about, you know, gradual growth over the year. I'm guessing that refers to expectations for sequential growth throughout the year, but it sounds like you've had this big kickoff at enterprise that you hope to kind of sustain at that level and maybe have, you know, consumer and some of the asset tracking businesses kind of drive sequential growth in the second half. Is that the right way to look at it? Hi Tim. This is Michael.

And last question for me I think in your initial comments you talked about gradual growth for the year.

So.

I'm guessing that refers to expectations for sequential growth throughout the year, but.

And it sounds like you've had there.

Big pickup.

Pickup in enterprise that you hope to kind of sustain at that level and maybe have.

Consumer.

And in some of the asset tracking.

Businesses kind of drive sequential growth in the second half is that the right way to look at.

Hi, Tim This is Michael Yes, you're correct. So the consumer we do expect to see is happening one is seven.

Michael Elbaz: Yes, you're correct. So, the consumer, we do expect two good things to happen. One is Wi-Fi 7. What is not in our control is, of course, the service providers' launch of their own Wi-Fi 7 solutions, but we expect that to happen at the back end of the year.

This is not in our control is our cost.

Service providers launch or their own set of solutions that we expect that to happen in the back end of the year. The good news is that we have two key design wins here.

Michael Elbaz: The good news is that we have two key design wins here. The M&O is another one that's going to be ramping up through the year as well. On the automotive market, the aftermarket itself, this is still being dogged by the excess inventory overhang that we still continue having with lead customers, but per their feedback, there should be through that by the back end of the year, in Q3, Q4 itself. And then we also have the Airgain Connect AC fleet coming up, starting to ship in the second half of the year. And then on the enterprise business, yes, we do expect to have an overall maintenance of that product, of that market, with some pockets of opportunities. As we mentioned before, we definitely are very focused on the asset tracker because of its SEM and its overall growth, and also with our Lantern FWA product as well. Okay, thanks very much.

<unk> is another one that's going to be ramping up through the year as well too on the automotive market the aftermarket itself. This.

Still being adopted by the excess inventory overhang that we still continue having with lead customers, but for their feedback there should be through that in the back end of the year. In Q3 Q4 itself and then we'd also have the again connect us AC fleet coming up.

Starting to ship in the second half of the year and then on the enterprise.

Rice business, yes, we do expect to have an overall maintainer of that parts of that market with some pockets of opportunities as we've mentioned before.

Definitely are very focused on the asset tracker, because Sam and <unk>.

Overall growth and also with a lantern SWA product as well.

Yeah.

Okay. Thanks very much.

Thank you. Thank you Sam.

Thank you and at this time. This concludes our question and answer session. If your question was not taken you may contact air gains Investor Relations team at a I R. G at Gateway Dash G. R. P dot com.

Operator: Thank you. If your question was not taken, you may contact Airgain's investor relations team at AIRG at gateway-grp.com. I'd now like to turn the call back over to Mr. Suen for his closing remarks. Thank you for joining us on today's call. I especially want to thank our dedicated employees for their ongoing contributions and our investors for their continued support. We look forward to providing additional updates at our next opportunity. Operator. Thank you for joining us today for Airgain's 4th quarter and full year 2023 earnings call, and Abdul-Mateen Abdel-Saleh.

I'd now like to turn the call back over to Mr. <unk> for his closing remarks.

Thank you for joining us on today's call.

I, especially want to thank our dedicated employees for their ongoing contributions and our investors for their continued support.

Look forward to providing additional updates at our next opportunity operator.

Thank you for joining us today for air gains fourth quarter and full year 2023 earnings call you may now disconnect.