Good afternoon. Welcome to Airgain's 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 Airgain's CEO, Jacob Suen; Senior Vice President of Product and Marketing, Morad Sbahi; and Vice President of Operations, Victor Blair..

As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at www.airgain.com..

Following management's prepared remarks, the call will be opened up for questions from Airgain's publishing sell-side analysts..

I caution listeners that during this call, Airgain management will be making forward-looking statements about future events and Airgain's business strategy and future financial and operating performance.

Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings release and Airgain's SEC filings.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 10, 2022. Airgain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call..

In addition, this conference call may include a discussion of non-GAAP financial measures. Please see today's earnings release for further details, including a reconciliation of the GAAP to non-GAAP results..

Now I'd like to turn the call over to our CEO, Jacob Suen.

Jacob?.

Thank you, operator. Welcome, everyone, and thank you for joining us on the call today. I'll start with some commentary about our Q1 highlights and financial results. Then our Senior Vice President of Product and Marketing, Morad Sbahi will provide an update on our product and marketing initiatives.

Afterwards, our Vice President of Operations, Victor Blair will provide an update on our key operational initiatives..

Airgain's mission to connect the world to optimized integrated wireless solutions is building momentum, demonstrated by the 24% sequential top line growth we delivered in Q1.

This robust growth was a result of 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, while utilizing technologies like Wi-Fi, LTE, 5G and LPWAN.

The enterprise market is characterized by providing solutions for reliable wireless connectivity in dense environments such as buildings, stadiums and transportation terminals.

And in the automotive market, our products are deployed 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 was 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 fleets is increasing, causing end users, software and hardware partners, carriers and integrators to turn to Airgain's solutions.

Additionally, the expanding IoT use cases across various industries, including asset tracking, logistics, packaging and supply chain management is creating significant demand for our NimbeLink IoT solutions.

Along that line, the partnership we formed with Cloudleaf a SaaS-based digital supply chain platform in January exemplified against our gentle integration of existing solutions.

NimbeLink asset truckers now assist Cloudleaf's comprehensive supply chain SaaS platform by providing location and conditional monitoring of critical components in Cloudleaf's customers supply mechanisms..

Our many partnerships over the previous quarters saw the successful ecosystem we're building to meet the needs of our growing -- growth-oriented markets.

Our recently announced collaboration with Mobix Labs highlights how Airgain's expertise in 5G millimeter wave and C-band applications can provide lasting future-proof 5G technology to meet market demand and bolster our end vertical markets. In addition, several of our major wins show the growth 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 AirgainConnect AC-HPUE to improve the connectivity of its fleet. The deployment of AirgainConnect will enable optimum connectivity for their fleet even in the most remote environments. And the first 3,000 units will be fully deployed by the end of 2022.

This customer win is significant not only because of its volume, but the fact that we're seeing sizable new market opportunities for AirgainConnect beyond the first responder market.

To meet the growing demand for advanced connectivity, Airgain launched the Multimax 5G, a high-performance antenna platform created for 5G connectivity in fleet, industrial IoT and public safety applications.

With the introduction of so many new 5G vehicle orders in the market, it was critical for us to provide flexibility to our customers to get the most out of the growing 5G suite of products we offer..

The growing partnerships and customer wins not only reflect the increasing demand for Airgain's innovative technology, but also our world-class global team, who is committed to realizing our company's vision in scaling our business. Our search for our next CFO is progressing and be led by [ the ] 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'll 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 of 2021. Beginning with our consumer revenue, Q1 finished at $6.1 million, up from $2.5 million in Q4 of 2021.

The growth in consumer revenue was due to continued easing of global supply shortages. Enterprise revenue increased from $8.1 million in quarter 4, 2021 to $8.6 million in Q1 of 2022. The 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 AirgainConnect products as we worked on product enhancements that resulted in fewer shipments during the quarter. These enhancements have now been completed.

Overall, the market demand for AirgainConnect AC-HPUE continues to improve and 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%, while exceeding our previous guidance range for Q1. The substantial 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 $431,000 and our non-GAAP loss per share was $0.04. Both represent substantial improvements from the prior quarter..

Adjusted EBITDA was negative $263,000 in Q1, an improvement from our guidance range and an improvement from negative $2.1 million in Q4 of 2021. Finally, our balance sheet remains strong with cash, cash equivalents and restricted cash at quarter end of $18.8 million.

NimbeLink exceeded the earn-up financial performance metrics for 2021, and we paid $8 million in earn-out plus $570,000 in holdback. 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 30, 2022. In Q2, we expect sales to be in the range of 18.5 and $20 million or $19.25 million at the midpoint of the range. Our billings and backlog are currently tracking 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 Airgain, but will represent an increasingly smaller percent of the total revenue because of broader growth in the other 2 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 $200,000. Non-GAAP net income per share for Q2 is expected to be $0.01 at the midpoint. Adjusted EBITDA is expected to be $260,000 at the midpoint..

Now I would like to turn the call over to Morad, who will walk us through our sales and marketing initiatives for 2022.

Morad?.

Thanks, Jacob. Our sales and marketing teams created an efficient and comprehensive and flexible framework to further penetrate our core growth markets. We internally call the framework, the 3 Es, which are evolution, ecosystem and expansion.

The evolution pillar represents our current list of products as well as new versions of those products and subsequently the wins associated with those offerings.

The win that Jacob referenced with the major utility company to deploy AirgainConnect 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 E is ecosystem, which focuses on the partnerships we're forming with leading software developers, component and device manufacturers, channel partners and carriers. Generally, there are 2 types of partners, namely partners that we sell to and partners that we sell with.

And the sell to partners are those we sell our products and solutions directly to. A good example of this is Axon, the leader in connected public safety technologies. Airgain designs and builds a range of small form factor and high-performance antennas for use in Axon solutions, which are primarily used in first responder vehicles.

Another example is our work with Cloudleaf, a SaaS-based digital supply chain platform. Cloudleaf 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.

Cloudleaf is partnering with Airgain 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 [ sell-with ] partnerships represent joint selling opportunities where Airgain goes to market with the partner.

Prime example of this is Airgain's antenna solution set for Cradlepoint routers and gateways, Cradlepoint has an extensive portfolio of enterprise class wireless routers and adapters and their solutions span branch connectivity, IoT and mobile in-vehicle networks. Airgain provides the high-performance antennas it recommends for Cradlepoint.

Simply put, we are able to couple 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 AirgainConnect products.

In addition, there is a growing opportunity for these types of partnerships with our embedded products..

The final E of our framework is expansion, representing our development of future technology. The Mobix Labs 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 Airgain's expertise in 5G systems and Mobix Lab's expertise in system on chip design, the collaboration will focus on development of products designed to significantly reduce the cost of ownership and provide solutions in 5G coverage gaps among carriers that fall within the high-band millimeter wave and C-band operating frequencies.

With the third E expansion, we are establishing Airgain technology leadership in the space of advanced developments and leading-edge connectivity. Looking ahead, that's exactly where Airgain 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 by the Public Safety Broadband Technology Association. This 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 Airgain's proven expertise in radio frequency to help build world-class hardware coupled with software solutions that often run across multiple product lines.

To deliver on our strategies, we've added 4 positions in marketing in just the past 45 days. The [ Buster ] sales and marketing teams will continue to work to engage the customers on all 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, Morad. As Jacob alluded to, Airgain's operations team has fully implemented strategies to maintain and grow the gross margins across the breadth of the Airgain product offering. The company's 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 express goal to reduce the risk factors of the supply constraints.

With the closing of our manufacturing plant in Arizona and the addition of 2 manufacturers, we now have 8 independent contract manufacturers, 2 in Vietnam, 2 in China and 4 in North America.

The consumer embedded components and modules are manufactured in Vietnam and China, meanwhile, the integrated and Antennas Plus products are manufactured in Vietnam and North America. I am pleased to announce that Airgain is now 100% fabless.

Taking this step has given Airgain greater scalability while mitigating risks surrounding manufacturing halts in countries and municipalities where governments and markets are subject to different fluctuating macroeconomic forces..

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 Airgain to efficiently and productively manufacture and ship products on foreseeable time lines to greater match demand..

Now I'll hand it back over to Jacob to close out our remarks.

Jacob?.

Thanks, Vic. The theme for this year is execution. Our global team is laser-focused on executing our strategic road map which is designed to scale Airgain to the next level of growth and profitability. As you can see from our Q1 numbers, our strategy is working. We have discussed the big wins that demonstrated the demand for our current products.

We have touched on the many partnerships and paths we will take for future collaborations. We also 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. We are being mindful of risks associated with various macroeconomic factors, we expect sequential growth throughout 2022.

Our outlook for growth is supported by the strong tailwinds in our end markets and our confidence in our team's ability to capitalize on the demand for Airgain's advanced wireless technologies..

And with that, we are ready to open the call for your questions. Operator, please provide the appropriate instructions. .

The floor is now open for questions. [Operator Instructions] We'll take our first question today from Scott Searle with ROTH Capital. .

Jacob, congratulations nice job on a difficult operating environment, particularly on the Wi-Fi supply chain. .

Thank you, Scott. .

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, what you're seeing the backlog on that front because it sounds like your backlog has been building.

And in the past, you run that business, at least on the consumer Wi-Fi front, a $8 million to $10 million a quarter.

Is that something that's 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, a nice recovery in the consumer side. So as we indicated, we went from $2.5 million in Q4 to $4.1 million in -- or $6.1 million in Q1. We do expect that trend to continue. How quickly can we get back to the normality? We don't have the interest yet.

As you can tell, I mean the pandemic is still impacting China, as an example, right? You're still seeing unexpected shutdown by the Chinese government on certain cities periodically and that's creating the kind of uncertainty, we will not be able to tell you.

But we do feel strongly that it's trading up well and we expect the recovery to happening over time. .

Okay. Maybe real quickly to just hit on NimbeLink. I'm not sure if you kind of broke it down 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 NimbeLink 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 a supply constrained in the area, but it looks like things are starting to improve on that front. .

Yes. I mean we don't give the specifics, although I think the indication that we already gave is the fact that we pay the earnout, and they actually exceeded the number that we have agreed to for the earnout. So we're very pleased with the performance, and we also feel strongly about this year. We really got very strong backlog support.

And you're absolutely right, the hindrance is about how do we overcome some of these supply shortages. Although our team, engineering and operations have done a tremendous work to mitigate that, such as doing some redesigning to accommodate multiple chipset instead of being single source.

And we're doing the redundancy that Vic alluded to that we're creating redundancy among the different CMs we now have. So we feel strongly about the outlook for the IoT products, although as you indicated, I think that we have -- we could have 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 talked a little bit more about some of the opportunities in millimeter wave. You referenced Mobix today in that relationship. But also on your website, you started to talk about other opportunities, not just with 5G and things like C-band and the mid-band, but 60 gigahertz and 802.11ad.

I was wondering now that you're becoming a little bit more public in these moves out of stealth operations, when do these opportunities start to contribute? And do they become meaningful in 2023? Thanks and congrats again. .

Maybe I'll start and then I'll turn it over to Morad. Certainly, we are very excited about the partnership with Mobix Labs, right? They are one of the well-recognized player when it comes to 5G. And we are partnering with them, not -- it's for really not only on the millimeter wave, but for the C-band.

It's for me and for the company, this is our reinforcement about our commitment to 5G. And I'm going to have Morad speak to the opportunities that it could project. .

Scott, hope you're doing well. So just to give you a little bit more color on our partnership with Mobix Labs, which is something that we're really excited about. What that partnership does for us, and if you see like the evolution where the consumer -- or our consumer business is heading, you can see that there are 2 things that are happening.

The technology road map is moving forward and I'm talking here about LTE to 5G, millimeter wave. And then also the fact that Airgain is 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 relevance to our customers, those that want to buy just the components from us or those that want to buy systems from us.

One can expect Airgain being a CPE company to be relevant in the -- making sure that the signal strength coming into the consumer home 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, let's say, 2, 3 years ago. And now there's a lot of focus in C-band. And so our strategy is to continue to drive the road map, 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 together steam. And obviously, as you know, with millimeter-wave, we've got the volumes and the relevance that Airgain has that should materialize in a significant market for us. .

Yes. And Scott, to finishing up your questions is that we do not expect revenue from this partnership in 2022, although we expect some of the product, we will be able to demonstrate hopefully come early 2023. .

We'll take our next question from Alex Vecchi with William Blair. .

This is Sabrina on for Alex. Last quarter, you mentioned bringing gross margin back to the 40% range this year and achieved 41.4% this quarter.

Can you talk about or provide any additional detail here maybe by like end market growth and how to think about that going forward for the remainder of this year?.

Okay. Good to hear from you, Sabrina. I'll start, and then I may turn it over to Vic to talk more about his teams, some of his team's work to be able to achieve the gross margin.

Certainly, we are also pleasantly surprised to see that -- we thought we're going to be able to come close to fully -- pleasantly surprised that we have 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, and we were 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.

It's the way we're managing our logistics, the redundancy, and even how do we work around the tariffs, all of that really help contributing to the overall gross margin improvement. And I'm going to turn it over to Vic to elaborate further. .

Thanks for the question, Sabrina. Really, Jacob did hit on some of the highlights of it. In the reconfiguration of fabless, we've had a really decrease in our cost of logistics.

We've 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 restraints that helped us to avoid any of the PPVs, 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. .

That's really helpful. And then just another question. I saw 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, I mean we really appreciate KPMG has been helping us throughout the years. But as you know, they start having some resource constraint because what's out there and also as a result of that, they also expressed the need to raise more fees.

And really, that's -- you saw one of the issues we identified in Q1 was the excess of professional fees. And we -- and this is one of the efforts we're making to go ahead and make the change to a very lucrative company, Grant Thornton that will help us moving forward. .

For our next question, we'll turn to Anthony Stoss with Craig-Hallum. .

Nice execution and really strong guide, Jacob. A couple of questions. I just wanted to hone in on a statement in the press release talking about on the AirgainConnect side that it was down sequentially as you work on product enhancements. I'm curious what that is.

And then also, I'd love to hear more in addition to the water utility AirgainConnect win, kind of thoughts on additional launches perhaps in the second half of the year? And then I had follow-ups after that. .

Okay. Great questions, Tony. I'm going to start, and I'm going to turn it over to Vic to talk a little bit more about the enhancements and certainly to more like to talk about the product side and regarding the utility opportunity..

So certainly, just overall, I just want to share with you that we are seeing a strong demand for AirgainConnect. And because of the trials we have gone to and also the much greater footprint now we have, certainly, we're recognizing some of the enhancements we will need to perform and Vic will elaborate further. But that's all behind us.

We actually were able to make some enhancement. We're actually going to provide an enhancement kit to customers who would have a need. And overall, the AirgainConnect demand is increasing, and I would -- I can add even a little bit more color that the backlog, we are doubling the backlog since the beginning of the year.

So with that being said, I'm going to turn it over to Vic to talk a little bit about some of the enhancement specifics and then more on what utility opportunity. .

Thanks for the question, Anthony. Really, the whole purpose of our reset was due to the fact that we wanted to maximize the customer experience on AGC, and we wanted to be absolutely certain that we could increase the performance to the level of expectations that was required with the product.

I mean 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-HPUE. .

Yes. So Anthony, yes, and just to give some color. So Jacob talked about how the pipeline has doubled for AirgainConnect. What I can tell you that's actually more interesting than the fact that the pipeline has doubled, it's the color of that pipeline.

And if you look at that opportunity that we've announced with this major utility company, that'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 AirgainConnect is in that upswing momentum where it's going to give us those type of size opportunities that we like the ones that are in urban that are large in size that have the visibility, that have the stickiness that have the size to make this a very successful product line for us. .

I'm curious. That's intriguing.

Have you signed additional deals, you just can't announce them yet? Or do you expect those launches sometime this year?.

I can't talk about what's in there in terms of deals. Obviously, if we have them and we secure deals, we would be sure to do the maximum to make sure that we have a press release behind that. But all I can tell you right now is that 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 auto expected to grow the fastest. Would you say that the IoT business is growing ultimately the fastest? Or is it WiFi? Or kind of if you could break out kind of your thoughts on growth rates, that would be helpful. .

Yes. Well, Tony, I think that, as I indicated in the earnings script, 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 2 markets. And when it comes to the enterprise, which is a big part of is the IoT and then the automotive, I would say it's a 2-horse race.

I think that we got tremendous opportunities in both. And if you look into the IoT side, I think that it's -- some of it's more about how quickly can we build them, right? The market demand is there. That's also similar to what we're seeing with the automotive market as well.

With automotive market besides AirgainConnect, we also have started seeing a really good traction on the traditional Antenna Plus aftermarket products as well. And we expect that this is also to grow substantially throughout the year. So I would not be able to tell you which ones should grow faster, although I really feel good about both. .

We'll take our next question from Craig Ellis with B. Riley Securities. .

Yes. 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 "normal" is normal the $10-ish million a quarter levels that we would have seen at times in the past? Or just given the current environment, would it be something lower than that, maybe 7% to 9% or for whatever reason, do you actually see it going into the low double digits or even better than that?.

Craig, yes, look, it's -- we do feel like, is there a potential to get back to normal? The answer is absolutely yes. Where exactly what that number would be? I think that previously, we fluctuate -- it's seasonal, right, between anywhere from -- I would say $8 million to $11 million or even the $8 million to $12 million.

And I say we can get back to that range, but 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 a lot more dependent on others. And I want to reiterate, we don't have an issue with our product when it comes to the consumer on shortages.

We have the product we can build, right? The issue is with our partners or the product or our antennas going into a gateway, a set-top box that are missing the other key components, and that's what's holding up. And because of that, there's a lot more uncertainties there that we cannot predict.

So I think that it's going to take some time given what the macro environment currently. .

Yes, that's understandable. There's just so many components on a set-top box system board. The next question and issue I wanted to dig into was AirgainConnect. So just great to see the water utility win, very substantial.

The question is this, if we estimate that that's worth about $3 million, given AirgainConnect ASPs, how much of that is included in the second quarter guide? And how should we think about the rev rec on the balance through calendar '22?.

Yes. Great questions, Craig. So certainly, we're also pleased to see that particular design win. And as I indicated, even with these particular customers, I want to mention this is only the first order from them.

They actually have -- it's a nationwide utility company across many different states, and this was only the first order and they have a lot more vehicles that could use AirgainConnect in the foreseeable future..

With that being said, the other key point I want to reiterate is that this was actually not part of our SAM, the Subscriber Addressable Market that we've been telling the market, which is the first responders, which is actually $500 million plus same for us. So this is in addition to that..

Now how is this year going to play out? Certainly, not all of these are going to be shipping second quarter. It's going to be shipping throughout the year for this utility purchase order that we mentioned. We do have other opportunities, other wins that we really got that should produce the revenue stream for the rest of the year.

And I do see that we're getting -- looking to the opportunity funnel, if I look into the customers' trial, we're seeing every one of them is increasing. And also the promotions that AT&T continue to put forth, it's also making all of us feel confident about the future for AirgainConnect.

I think that last year, we're hoping to be able to see that last year, but I really feel like it really took a year to 1.5 year to ramp up and right now we're at the cusp of that growth going forward. .

So are you saying you would expect that AirgainConnect revenues to grow sequentially through the year? Jacob, was that the message that you were conveying there?.

Yes. .

Got it. Okay. And then moving on to NimbeLink, and I wanted to ask a revenue and a gross margin question because they're related. So as we saw the business perform exceptionally well 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 NimbeLink actually rose or declined in the first quarter.

So can you clarify that? And then 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 ways to go before that business would be at low to mid-40s gross margin?.

Okay. Yes. Great questions again, Craig. So let me try to make sure I answer both of them correctly. So the first question is in regard to the demand for the IoT product.

Am I correct?.

Yes. .

Yes. So we -- I think 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 is going ship because of some of the shutdown, unexpected shutdown in Asia, right? Now we do -- I mean -- but as I indicated, we actually have backlog even throughout the rest of the year, and they're looking really strong.

It's more about can we build and make sure you can meet the demand. Some of the last-minute chipset shortage issue creating some issue for us. And we're going to continue to see that. But as I indicated, as Vic alluded to earlier, is that we are now creating different designs. So that way you can mitigate the risk.

So we feel good about the growth of the IoT products..

The second question you asked is about the gross margin. So I think that when we acquired NimbeLink, we already know that, that was an issue. But quarter-after-quarter, we continue to execute. And this is where I really want to complement our operation team. They really stepped up in looking into different avenues.

So definitely, if you think about our average, if you look into the average we disclose, I would say we have increased from what they have previously substantially. I won't be able to give you the specifics, but I do think that we have a path to be above the 40s.

And they were not the one that actually -- with IoT, they are different product lines, some are actually looking really good. And certain ones, that's not as good, but we are working our ways to address that. But overall, that IoT is pretty good. .

[Operator Instructions] We'll take our next question from Tim Savageaux with Northland Capital Markets. .

Congrats on a good report and outlook. I wanted to come back on kind of the drivers of your guidance for pretty solid sequential growth here.

Early on, it seemed like your commentary was to the effect you expect some continued recovery in consumer to maybe account for -- I don't know, as much as half of that, but any color there, as well as the initial ramp of AirgainConnect shipments into the utility space.

If I look at those 2 factors, would that account for the majority of the growth you're looking at to the midrange? Or are there any other factors to consider?.

Yes, Tim. So I would say, actually, there are a number of other growth. The IoT is definitely a strong growth engine we would be counting on as well as the aftermarket. We do see -- because we did a refresh on a lot of our product on the 5G side. And overall, we do expect that growth to be happening as well..

So you're right about the consumer. I think it's going to be steady. It's going to be -- it's going to take its course. We do feel bit good about you're going to see the improvement quarter after quarter until we get back to normality, that could maybe another 3 quarters, another 2 courses, we're going to see. We don't know that yet..

As far as AirgainConnect, certainly, we do see a bright future for that product. I think that it's a couple -- it took us 2 or 3 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 the aftermarket are 2 of the key growth driver for us in the foreseeable future. .

Got it.

Given the win that you're shipping this year in AirgainConnect the potential for follow-ons with that customer, new wins and more traction in the first responder market; is it possible that we see AirgainConnect revenue at or above 10% of total revenue for the year? And as a follow-on, what would be the margin implication to that?.

Well, I certainly -- we certainly hope so, right? And that's what we're going to strive for. We feel there's definitely a really good chance we can exceed that. But 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 improve.

One of the -- I would say, one of the issue right now with AirgainConnect is the gross margin, because when we ship small volume, the cost is high. But a couple of things that we already are working on. One is what I indicated to you about is being more scale..

The other thing is the fact that we actually transitioned. That product now, we used to build that in-house, and now we transitioned that to -- with the CMs.

It's actually creating a lot of benefit from a quality supply chain perspective, -- so we do expect that under Vic and his team's effort, we're going to start to continue see improvement from a gross margin perspective for AirgainConnect. .

And the other thing I would add, Tim, is that in the road map of AirgainConnect, so just as you could imagine, with every product that you release, there will always be areas of cost optimization, and that's what Vic and his team have been doing for us the past 12 months.

There 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 really get those margins much higher than where they are today. .

At this time, this concludes our question-and-answer session. If your question was not taken, you may contact Airgain's Investor Relations at AIRG@gatewayir.com. I'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. We look forward to updating you on our next call.

Operator?.

Thank you for joining us today for Airgain's First Quarter 2022 Earnings Call. You may now disconnect, and have a great day..