Good day and thank you for standing by. Welcome to the Zoom Telephonics Inc. doing business as Minim Q1 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] I'd now like the hand the conference over to your speaker today James Carbonara from Hayden IR. Thank you. Please go ahead..

Thank you and good day everyone. We appreciate you joining us today for Minim's first quarter 2021 earnings call. Joining me on the call today are Gray Chynoweth, Chief Executive Officer; and Sean Doherty, Chief Financial Officer. Following the prepared remarks, we will open the call to your questions and instructions will be given at that time.

Company filed its Form 10-Q with the SEC and issued a press release today. All materials including today's live presentation are available on the company's investor relegations website at ir.minim.com. An audio replay of today's presentation will be available later today.

Before we begin, I want to remind everyone that today's conference call may contain forward-looking statements. Forward-looking statements include statements regarding the future including expected revenue, operating margins, expenses and future business outlook.

Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the Investor Relations page for additional risk factors discussed in Minim's filings with the SEC.

Please note, too, that today's call may include the use of non-GAAP numbers and management utilizes to analyze the company’s performance. A reconciliation of such non-GAAP numbers to the most comparable GAAP measures is available in our most recent press release, as well as in our periodic filings with the SEC.

These materials are available on the company’s Investor Relations website at ir.minim.com. With that, I will turn the call over to Chief Executive Officer, Gray Chynoweth for his prepared remarks. Gray, please proceed..

Thanks James Well, great to be with everyone. Good morning and welcome to Minim's first quarter 2021 conference call. Let's get started on slide four. We entered 2021 on the heels of a successful merger between Zoom Telephonics and Minim Inc., and a rebrand of the combined company to Minim.

This merger paved the way for a powerful combination of a proprietary AI-driven software and market-leading home networking hardware. Minim has a singular focus to make everyone's connected home safe and easy to use for life and work.

As the holder of an exclusive global license to design manufacturing distribute Motorola branded home networking products. We stand out in the market with our advanced software driven networking products that empower end users with personalized and optimized their home connectivity experience. Turning your attention to slide five.

I'm excited to discuss the momentum we have built in the first quarter of 2021. Minim delivered strong first quarter financial results. It was another record revenue quarter, our third in a row. We saw a 26% year-over-year increase from 2020. We also drove gross margin expansion on a year-over-year basis and on a sequential quarter-over-quarter basis.

Our results also showed that we've activated our subscription software revenue strategy. We now have two hardware/software bundled products in a market. I could not be more pleased that this quarter for the very first time we were reporting deferred software subscription revenue on our books.

Later in the call, Sean will further define our approach to this and share metrics we'll be using to demonstrate our progress. Moving to expenses.

This past quarter saw the last of the material merger related cash and non-cash expenses, with these now largely in the rear view mirror, we will continue to responsibly manage costs with the focus on achieving profitability in 2021. While we are managing expenses, we remain very focused on growth.

To support this growth in Q1, we worked with Silicon Valley Bank to expand our credit facility to $13 million. We invested this additional capital and the inventory necessary to meet increased demand.

Toward that end, I would like to commend our COO, John Lauten for his excellent work, managing through the manufacturing and supply chain challenges we have seen. We look spanned on our supply chain management work later on in the call.

And keeping with our growth mindset, I'm pleased to share that Minim has submitted an application to uplist to the NASDAQ capital market. We will not be disclosing the timeline for this process. However, we believe it is important to share this news, as will increase our visibility as an investment target for institutional investors.

It certainly marks an important milestone for Minim, as we continue to execute on building long-term shareholder value. Turning toward our products. We're excited to launch three new Motorola products in the quarter, including our next-generation high speed DOCSIS 3.1 networking device.

Equally exciting in today's announcement of our upcoming Motorola Wi-Fi 6 product family. This product family will include the first ever CableLabs certified low latency device. Early adoption of the DOCSIS 3.1 products exceeded our internal expectations across each of the new product sets. And our momentum only continues to build.

Importantly, our award-winning mobile app is included with each go-forward modem and router product. This enables consumers to take full advantage of speed testing, data tracking, guests network management, malware prevention, ad blocking and parental controls.

The portfolio of more than 20 highly rated products we're establishing ourselves in innovation as -- an innovation with a brand that delivers real value to people working to manage and secure their connected homes.

We deliver our hardware/software combination products via three distinct sales channel categories; direct-to-consumer, internet service providers, and businesses. During the first quarter, each of these categories performed well and contributed to our overall revenue growth.

Amazon was our number one channel, delivering growth of more than 40% over there prior quarter. We see tremendous opportunity for additional growth as we expand existing channels in the U.S. and expand into new markets globally. With more than 1 billion connected homes around the world, we know we have room to grow and markets to serve.

Sean will walk you through the financial details of this growth shortly, but first I will share with you a few market trends and how we are positioned to take advantage of them. Please take the time to turn to slide six, as I turned to a review of our market and growth drivers.

Market signals continue to suggest strong persistent demand for our advanced home networking products and services. This rapidly growing the local broadband services market is valued at $356 billion and has many technology tailwinds, including 5G, satellite delivery architectures, Wi-Fi 6 and 6E, as well as DOCSIS 3.1 and the upcoming DOCSIS 4.0.

Each of these technologies enables an elicit home network upgrades. Additionally, the work-from-home trend that began in early 2020 are expected to outlive the pandemic. Large companies, such as Google, Ford, Atlassian, Infosys and Microsoft have announced flexible remote working models. Many more will follow them.

The flexibility to work-from-home is rapidly becoming table stakes for companies to attract talent around the world. This new reality means the performance, management and security demands of bring your own network are here to stay.

Also adding to the sector's momentum, smart home and telemedicine adoption are on the rise in the U.S., as is government investment in broadband infrastructure. The U.S. Federal Government's recent $100 billion infrastructure proposal signaled further interest in investing to ensure that every U.S. home has access to high speed internet.

With all of this as backdrop, the power of software-driven connectivity solutions has never been more critical. To meet this opportunity, we know we must continue to develop a resilient supply chain.

As I'm sure most of you are aware chipset demand has increased across several industries, just as the pandemic and trade disputes have disrupted supply chain. While chipset supply is currently a challenge, we are closely monitoring the situation and proactively taking steps to effectively manage the issue.

We are planning component orders with longer lead times. We are extending out our purchase forecast to rolling 52-week window with our manufacturers. We are diversifying supply chain channel relationships. We are investing in research and development to enable chipset optionality for our next-generation products.

For the very first time we have independently secured our own chipset supply. Unfortunately, we do anticipate further chipset supply challenges, including temporary pressing premiums.

However, we believe the subsequent increase in BOM costs are manageable, and we have cost levers to protect our margins, including product design, sales channels, and included software features. I hope this has been helpful context. Now, let's turn to slide seven and our product strategy. Here we share the fundamentals of our product strategy.

One way our strategy achieves differentiation is through a transformational brand. Last year, Motorola launched an exciting rebrand that has already helped our new product stand out on shelves and online. Another way we differentiate is through our software.

We continue to hone our craft in this area, designing web and mobile apps with world-class UX that empowers parents, remote workers, gamers, and streamers, and the support representatives who assist them.

Our research and development centers on using the latest technology techniques and standards and leverages multi-cloud and platform thinking to create value for retailers, partners, and customers. Now, let's dive in to new product launches on slide eight.

During the first quarter, we introduced our ultra-fast all-in-one MG8702 cable modem and Wi-Fi router, and our Motorola MB8611 cable modem, which pairs with any Wi-Fi router. These products are now available through eight channels, Best Buy, Staples, Barnes and Noble, B&H, Microcenter, Newegg, Walmart and Amazon.

These innovative products support high speed internet plans and quality connections for streaming, gaming, video conferencing, online learning and more. With the Motorola MG8702 cable modem/router end users game bundled access to the Minim powered app and the benefit from automatic firmware management and updates from the Minim cloud.

Our continuously improving app gives end users access to full network security, privacy settings, parental controls, ad blocking, speed testing and guest network settings. Importantly, this bundled hardware/software package drives our subscription revenue model and the ongoing relationship with the customer. The market is responding to our efforts.

With the launch of the Motorola MG8702, we received our largest single purchase order ever from Best Buy. This helped us achieve exceptional sales at launch in terms of our velocity, clocking in at 135% more units sold in the first 90 days when we compared to the DOCSIS 3.1 predecessor product that did not have the bundled software.

In addition, the average selling price, or ASP, was 69% higher than the prior generation product. Similarly, the 2.5 Gig Motorola MB8611 cable modem sold 12% more units in the first 90 days, at a 13% higher ASP than its predecessor the Motorola MB8600. This is a solid accomplishment as the Motorola MB8600 is also a DOCSIS 3.1 product and a top seller.

Customer product is user positive, and we are excited to expand the reach for these products. Also on the product front, we've made some exciting announcements. On May 11th, we launched the Motorola MM1025 high speed MoCA adapter, an easy-to-use competitively priced solution for cable users to turn their already wired homes into information highways.

Initial sales traction is promising and healthy. Further, just today we announced our Motorola Wi-Fi 6 product family coming this fall and now available for pre-order. These products will be a landmark for our business. We're introducing attractive new product design and our highest performance yet.

In particular, the Wi-Fi 6 modem/router have up to a six gigabit theoretical throughput and have been engineered for low latency, making them the luxury cars for connected homes. Lastly, this past quarter we introduced the Zoom ZM.1. The ZM.1 is an expandable AC1300 mesh system. That includes our mobile app for seamless control and security.

Bearing our Zoom trademark and with a brand new home accessible brand, we're looking -- we are working to launch the Zoom ZM.1 on amazon.com in a few geographic markets.

Before we turn to a look at our sales channels, it's also important to note that as we introduce new products and sell more of our current products, we have also increased our average selling price per unit by more than 15% compared with the prior year quarter.

Both our ASP performance and retailer feedback suggest that consumers are willing to invest more in their home networking performance with faster replacement cycles. Our climbing product ASPs contribute to growth in both top line revenue and gross margins. With that, let's turn to slide nine for some sales channel updates.

As I mentioned before, we go to market in three distinct sales channel categories; direct-to-consumer, internet service providers, or ISPs, and businesses. With the direct-to-consumer category, we are proud to have added B&H, Staples, Barnes and Noble to our retail partnerships this quarter.

These additions helped us achieve a wider launch footprint for the DOCSIS 3.1 products. Also critical to our direct-to-consumer strategy is Amazon. This pass quarter Motorola became the number one brand in Amazon for cable modem products, up from number three spot in the prior quarter.

During this time, our analysis indicates an estimated market share jumped from 22% to 33%. Our marketing efforts on Amazon's platform translated into a 42% uptick in revenue from the prior year quarter and a 59% upgrade from the trailing sequential quarter.

Importantly, our Amazon sales channel operates as seller central versus many of our competitors that operate as vendor central. This distinction provides us with an advantage of selling direct to our customers via the Amazon marketplace and to directly control pricing and brand messaging.

Amazon continues to be an incredibly competitive sales channel, but our marketing team led by our Chief Marketing Officer, Nicole Zheng, has done a fantastic job deploying new campaign strategies. Moving onto our other channel categories. We now sell to over 130 internet service providers and businesses.

Our ISP customers choose Minim to bolster their home Wi-Fi offering for a better customer acquisition, retention and support cost management. To offer support to offer services to larger ISPs, We have partnered with Irdeto, a global leader in digital platform security, on a solution called Trusted Home.

Trusted Home pairs with Minim's Wi-Fi management and security platform with Irdeto's 24/7 NOC and integration services. This past quarter, we were pleased to announce the expansion of Trusted Home into Russia and EU service areas.

This expansion was triggered by a new customer, MicroImpuls, an IPTV/OTT technology provider to major Russian operators and more than 10 million households In the business category, we offer Minim for Work, a solution that enables employers to secure and manage distributed remote workforce and small office networks.

This is an area that we believe is prime for growth. This past quarter, we had a great new customer highlight Minim became an approved vendor for ANY LAB TEST NOW to secure patient data over Wi-Fi in their lab test sites. We are pleased to share that ANY LAB TEST NOW has approved Minim as a vendor for the franchises of 190 sites.

Of course, this deal was brought to us by our partner Telarus, a leading privately held technology distributor in the U.S. With all of this momentum, I'd like to summarize why we believe Minim is an attractive investment opportunity on slide 10. Here are key investment highlights. Minim is opportunity is simply massive.

There are now more than 1 billion connected internet subscribers, but there's still a long runway. Only 50% of homes have access to broadband worldwide. And there are great tailwinds, including macro technology trends, telemedicine, government investments in infrastructure and smart home adoption. We are a transformational SaaS play.

Our software-driven Motorola branded connectivity solutions create tremendous opportunity for us to lead the market with exceptional and lasting value for our customers. Our software strategy helps us grow our revenue, improve our margins and give us the potential for product up-sells and cross-sells.

It is much more attractive economic profile than that of a traditional hardware company, our execution and momentum, just as important as our current momentum and our ability to execute. Our first quarter results give you an indication of what we can do and where we are headed. We were the number one fastest growing cable product brand in the U.S.

in 2020, and we are gaining momentum. Revenue is increasing. Our reach is expanding, and we believe we are just getting started. Looking ahead on slide 11, we have high expectations for performance in 2021. There are several near term mile markers that investors can track to gauge our success.

Up first is customer acquisition through existing and new channel expansion. Specifically, we intend to bring on five new retail channels with a focus on home goods and new geographic markets, all backed by fierce marketing efforts.

Second is exceptional product value delivery and the launch of our high speed Motorola Wi-Fi 6 products family and a next-generation Motorola app. We also plan to launch a new broadband performance testing suite to help U.S. based ISP customers meet the federal requirements as connect America fund recipients.

Third is continued corporate risk management and our supply chain, as well as human resources. We have already discussed the supply chain measures. On the HR front, we are placing a focus on employee acquisition and retention. We believe these preparations as large tech companies tap the globe for talent for the hybrid work remote workplace.

Fourth is growth driven financial management. We plan to complete our legal name change to Minim Inc. and have applied to uplist to the NASDAQ Capital Market. We are excited about the new investor exposure this will bring. And critically, we plan to responsibly fund growth with a target to achieve profitability this year.

With that, I turn the floor over to Sean for more details on our financial performance..

Thank you, Gray. I'd like to direct you to slide 13 for a look at our revenue. As Gray stated, we recorded record revenue for the first quarter of $15.0 million, a 26% year-over-year increase. This marks our third consecutive quarter of record revenue growth.

This growth continues to be driven by new investment in sales and marketing talent and a shifted focus to digital marketing, both of which have resulted in higher retail and amazon.com sales performance. Also contributing to revenue and profit margin is a climbing average sales price, which Gray spoke to earlier.

Going forward, we are targeting a 10% to 20% lift to our average selling prices for bundled hardware/software products. Gross margin improved for the fourth consecutive quarter. For the first quarter of 2021, we reported a 34.0% gross margin, which represents an 810 basis point improvement compared to 25.9% in the first quarter of last year.

This also compares favorably to the 32.8% gross margin recorded in the fourth quarter of 2020, a sequential improvement of 120 basis points. Gross margin improvements are being driven by an increasing proportion of revenues from software, as well as prudent management of various elements we set our cost of goods sold.

Over the long term, and as we fully realize our software-driven product strategy, we expect our gross margin to normalize and expand. Please turn to the next slide for additional color regarding our revenue. We are introducing a key performance indicator this quarter, that is our revenue bookings.

Bookings is a non-GAAP metric that we believe is important to understanding our business as we grow and shift our sales mix to include a larger portion of software subscription versus hardware only sales. Revenue bookings is our total recognized revenue, plus the changes in deferred revenue in the period.

Bookings for the first quarter were $15.3 million, which includes the $15.0 million in recognized revenue that was referenced earlier and approximately $265,000 in deferred revenue, that was the result of software service sales that will be recognized as revenue ratably over the next 36 months.

Importantly, our ratio of deferred revenue to recognized revenue for the quarter was 2%, clear proof that we are delivering on our stated merger goal of bundling software subscriptions into hardware products.

As we build this deferred revenue from software subscription sales now available on two Motorola products and in upcoming products, we anticipate this ratio to continue to grow. Turning now to slide 15 for a look at some bottom line metrics.

For the first quarter of 2021, our operating loss was $536,000, which compares favorably to an operating loss of $740,000 in the first quarter of 2020. This is a year-over-year improvement of $204,000.

Sequentially, this compares to an operating loss of $2.2 million, which was inclusive of $1.3 million in non-recurring merger related expenses in the fourth quarter of 2020. Clearly, you can see the momentum that is building in our operating results.

These improvements are due in large part to our continuing efforts to reduce our reliance on airfreight, the launch of our partnership with WPI relating to 5G research and our reduction in tariff expense exposure by shifting our production out of China and into Vietnam.

Adding the below the line items of interest and other income and expenses, our net loss was $546,000 or $0.02 per basic share outstanding for the first quarter of 2021, which is approaching breakeven and compares favorably to a net loss of $752,000 or $0.04 per share in the first quarter of 2020.

This is again a favorable comparison sequentially to a net loss of $1.2 million or $0.04 per share in the fourth quarter of 2020. These improvements are due in part to the reduction of non-recurring merger related and stock-based compensation expenses in the current quarter, but also to higher gross margins on a higher base of revenue.

Quarter-over-quarter adjusted EBITDA also improved for the first quarter to positive $380,000 when normalized for non-cash items and deferred revenue compared with negative $449,000 in the fourth quarter of 2020.

This $829,000 improvement was the result of a lower net loss based on the higher top line revenue, the improved gross margins, and the improved operational efficiencies I've just mentioned. Turning now to slide 17 for a look at the balance sheet.

We ended the first quarter with cash and cash equivalents of $1.2 million, a decrease of $351,000 compared to $1.6 million as of the prior year-end. This change was due to our continued investment in inventory, both ahead of growth and as a risk mitigation factor to hedge against chipsets shortages.

As a reminder, our cash balance for Q1 ending includes $800,000 of restricted cash related to prior period issuance of performance bonds for the payment of tariffs. Tariffs are fully paid as invoiced, and we expect these performance bonds to start being released beginning in mid 2021.

Accounts receivable on a net basis ended the quarter at $8.6 million, representing a $2.7 million increase compared to the prior year, and is a reflection of the strong recent that has led to our continued top line revenue growth.

Inventories were at $18.0 million at the end of the first quarter, an increase of $1.5 million compared to the prior year-end as a result of our proactive decision to invest in inventory to meet our projected demands and to hedge against those chipset shortages that we're seeing.

As of March 31st, 2021, the company has outstanding debt of approximately $7 million, which was comprised of $60,000 related to a PPP loan after approximately $1 million was forgiven in Q4, 2020 and $6.9 million drawn on the company's $13 million line of credit.

This compares with $2.5 million in outstanding debt as of December 31st, 2020, which was comprised of $80,000 related to a PPP loan and $2.4 million drawn on the company's credit line. Towards the end of the first quarter, we closed on our $13 million credit facility with Silicon Valley Bank that replaced our previous credit facility.

This new facility more than doubled our previous capacity and gives us much more financial flexibility to invest in sales, marketing and the new product introductions that Gray discussed earlier to respond to consumer demand. As of the end of the first quarter, we had $7 million drawn on the facility and $449,000 in remaining availability.

First quarter results set us off on a good start for 2021. With integration expenses behind us and consumer demand indicate future growth, we are on a trajectory to achieve profitability over the coming quarters. With that, we would like to open the call for questions.

Operator?.

At this time, there are no questions in the queue..

Awesome. Well, thank you everyone for joining us this morning. And as a reminder, we'll be presenting at the Sidoti Microcap Virtual Conference later this week on Thursday, May 20th. You can find details in our Investor Relations website ir.minim.com. We hope you can join us again then.

If you have any questions, please contact Sean or our Investor Relations team. Thank you and have a great day..

Thank you. This concludes today's conference call. You may now disconnect..