Good day and thank you for standing by. Welcome to Minim's Q4 and Full Year 2021 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. I'd like to now hand the conference over to your speaker today, Mr. James Carbonara from Hayden IR. Thank you.

Please go ahead..

Thank you. Once again, welcome to Minim's Q4 and Full Year 2021 earnings call. With me on the call are Gray Chynoweth, Chief Executive Officer; Nicole Zheng, President and Chief Marketing Officer; Mehul Patel, Chief Financial Officer; and Dustin Tacker, Former Interim Chief Accounting Officer and Current Controller and Vice President, Accounting.

As a reminder, all materials for today's live presentation are available on the company's Investor Relations website at ir.minim.com. 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 materially differ from those contemplated by these forward-looking statements.

For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see Risk Factors detailed in the company's Annual Report on Form 10-K, contained in subsequent filed reports on Form 10-Q, as well as in other reports that the company files from time-to-time with the Securities and Exchange Commission.

Please note too that today's call may include the use of non-GAAP numbers that 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 in our periodic filings with the SEC.

Now, I would like to turn the call over to Gray Chynoweth, CEO of Minim. Gray, please proceed..

Thanks James. Good morning and welcome to Minim’s Q4 and full year 2021 conference call. Let's jump right in. For the year we continued to outperform the market on growth despite not performing as well as we had hoped in Q4. For 2021 Minim’s GAAP revenue was 55.4 million up by 16% over 2020 resulting in a three year CAGR of 21%.

But we have context the market leaders 2021 revenue dropped by 7% compared to 2020 resulting in a three year CAGR of 3%. With this context I want to share how we believe we are beating the market and our approach to sustaining outperformance in the face of headwinds.

Three points of strength that helped drive our performance relative to the market were the following. First, we delivered high value products to the market, our ASP grew 7% in 2021 over the prior year up to $105 from $98. Second, we drove tremendous sales online. The Amazon.com sales channel grew 57% in 2021 over the prior year.

Third, we captured market share. As an example on Amazon.com we grew dollar share by 10 points from 22% to 32% putting us in second position on a full year basis. Given that I have mentioned Amazon, I believe it is worth calling out how important the market place is for the consumer electronics e-commerce segment.

According to Track Line in the four quarters ending September 2021 Amazon took home 41.6% of the consumer electronics unit share with the next two players capturing 13.8% and 11% respectively.

In our own analysis using multiple data sources we estimate Amazon comprises over one third of the Motorola gateway category on a dollar share basis in tight competition with Best Buy. While our growth with Best Buy didn't keep up with our growth on Amazon, with the increase due to increased dollar sales with Best Buy by 13% in 2021.

While we outperformed the market for the year on revenue growth, we experienced significant macro level headwinds in Q4 that impacted revenue growth and as a result adjusted EBITDA performance. The biggest headwinds came from supply chain issues.

The impacts are both direct, delaying our ability to bring new products to market and increasing component costs and indirect, the shopping buying patterns at a retail and distribution partners.

In addition to supply chain headwinds other headwinds to performance included the settling of consumer demand to a level above pre-pandemic levels but below the pandemic peak and inventory rebalancing by our distribution partners.

We plan to overcome these headwinds and continue to outperform the market by diversifying suppliers at all levels of the supply chain, increasing the number of retail and distribution partners in the U.S., increasing our U.S. market share in our primary market segment cable, modems, and gateways, expanding beyond the U.S.

market and becoming more competitive in the mesh market in the U.S. and globally. Turning to our bottom line, our gross margin improved by 31.6% for 2021, an increase of 328 basis points over 2020. Adjusted EBITDA for 2021 came in at negative 4.5 million compared to 1.7 million for 2020.

I will note that as part of our continued focus on sustainable growth we tempered our investments in R&D and market entry in Q4 with an eye to increasing them as headwinds to revenue and profitability lessen. Turning to review the balance sheet, we exited the year with $13.1 million of cash and $32.5 million of inventory.

In both cases this represents a dramatically improved position when compared to the end of 2020, which saw us end with 1.6 million in cash and 16.5 million in inventory.

Given the dynamic supply chain environment, we continued to monitor our inventory levels closely seeking to hedge both the risks of not having enough inventory to meet market demands and the risks of having inventory levels that put pressure on liquidity.

Stepping back from our operational performance I will next turn to progress on our transformation efforts which began with the merger of Minim of Zoom Telephonics in late 2020.

Our new vision, making home network safe and supportive for everyone guides our new mission, to develop and distribute intelligent connectivity software that delivers frequent network updates, helpful apps, extensive personalization options, and a delightful interface.

Given the increasing awareness and concern about cyber security tax and the continued shift to hybrid working models we feel Minim’s vision and mission are more relevant than ever. Three work streams are driving this transformation. First, deliver value to consumers with intelligent products.

We've already made great headway here, increasing the number of intelligent products in our portfolio from 1 to 5 in 2021 and setting a course to reach 100,000 Minim Intelligent Networks in 2022. This growth resulted in corresponding revenue growth.

This past year saw a 10X increase in intelligent product revenue over 2020 and we have more growth planned for 2022. Second, deliver value to consumers with software regardless of where or how they connect to the internet. This is a big goal for 2022 that Nicole will discuss shortly in our product roadmap.

Third, deliver value to consumers through innovative software upgrade features and product upsells initiated in our mobile app. On this front we recently became the first home networking product company that live in app chat support with the motosync app powered by Minim.

The new functionality has already improved our customer service operations keeping a 92% customer satisfaction rating, about 4% higher than the rating for phone support and reducing time to resolution of tickets by 35%. We also recently launched a feature called Issue Tracer which help users troubleshoot connection issues.

Next I want to call out the amazing new team members that we have brought on board since our last earnings call in November. Bill Wallace, our new VP of hardware brings with him extensive experience earned as the VP of hardware at CommScope and ARRIS. across the Paris.

Lakshmi Kadiyala, our new VP of software brings with her extensive experience earned leading consumer mobile applications at Charles Schwab. Jeff Rodning, Director, National Retail Sales brings with him extensive experience earned driving retail sales at Phillips. And of course Mehul Patel, our new CFO who joined us earlier this month.

He brings this extensive experience in financial leadership and operational roles at Motorola, CommScope ARRIS. This new generation of leadership has the experience and the ambition to propel Minim’s continued growth. I'm so thrilled to be working with them to deliver value for our company stockholders, our customers, and our crew.

While it is not our normal practice, given the late timing of our Q4 earnings call, it makes sense to share some perspectives on how the business progressed in the first quarter of 2022.

In short, we expect to continue to outperform the market on revenue growth, which in Q1 means a return to quarter-over-quarter growth more specifically, we expect to significantly bounce back in revenue growth with quarter-over-quarter growth coming in between 20% and 30%, comparing Q4 of 2021 to Q1 of 2022.

Also of note for Q1 has been the tapering of production levels as we experienced COVID-related supply chain disruptions in Asia and look to balance hedging against supply chain disruptions with the quality [ph] management.

More specifically, this means that while we expect to see our cash position drop between the exit of Q4 and Q1, we expect to see an increase between the exit of Q1 and Q2.

Up next, Nicole will give you a deeper glimpse into our product sales performance and a look ahead towards progress on software and intelligent product development in fiscal year 2022. Nicole..

Thanks, Gray. At the moment, our net sales revenue is predominantly composed of cable modem and modem router products, also known as Gateway. Overall, we believe we have captured approximately 19% of the total U.S. market share in this category in 2021, up from 15% in 2020. This growth underscores our beating the market.

We believe the category itself shrank by 10% in gross sales revenue in 2021 to approximately $350 million from the exceptional prior year at $389 million. Now for a deeper look, let's return to a discussion about product pricing. As Gray mentioned, we grew our ASP by 7% last year.

This is mostly due to the growing sales of premium cable modem and gateway products. The top three sellers for 2021 were the Motorola MB8611, MG-8702, and MB8600, which made up for 54% of total net sales. I'm proud to say that the Motorola MG-8702 gateway was our first intelligent product to market as a combined company.

In our last earnings call, we discussed an average price increase of 6% across 60% of our product portfolio. The increase was well aligned with market movements and kept our products in the upper mid-tier pricing position. In 2021, the industry saw an 8% increase in ASP in the home networking market.

As planned, the new pricing has afforded us greater flexibility to run profitable promotions which has shown positive results. Prior to fiscal year 2021, the company had not participated in Amazon events such as Black Friday.

As a result of our new marketing programming, Minim had an historic Black Friday and Cyber Monday, totaling $1.2 million in sales, almost tripling the previous high of 465,000 in 2020. This time last year, our Motorola modem and gateway products held the number 3 position in Amazon market share at 28%.

Today, we are number 1, with an estimated 41% market share. I'm extremely proud of our e-commerce team for this exceptional performance, especially in the midst of a return to pre-pandemic consumer demand levels.

Specifically, the industry saw a 10% decrease in cable modem and gateway sales in 2021 versus 2020, with a steeper decline in retail stores of 19% according to our analysis, of retail data by NPD and a leading Amazon analytics platform.

It is with this in mind that we turn to look at our retail performance in Q4 and full year 2021, which did not hold the same exciting picture as our Amazon channel. Considering all of our retailer channels, our market share remains consistent. As such, our sales and retail were subject to the decline in demand from 2020 as described.

Our fourth quarter performed particularly suffered as retailers primarily purchased holiday inventory in the third quarter to hedge against any risk of supply chain disruption from their vendors. Now I'll turn to look at a few specific product highlights.

In 2021, we began our journey on a multiyear transformation to become a software-centered company. Throughout the year, we increased the number of intelligent products in our portfolio from 1 to 5. One of those intelligent products, the Motorola MG-8702 DOCSIS 3.1 gateway made up for an impressive 15% of our net sales.

Also last year, Minim launched the Motorola MH7600 mesh system on Amazon.com. While Amazon with its own mesh product has proven to be a competitive marketplace for this category, we are encouraged that this product has sold 10 times more in volume in its launch versus its predecessor.

We are making progress in growing awareness of Motorola mesh products and have recently launched this product in Best Buy and Walmart online. As we look ahead to 2022, we plan to launch four high-performance intelligent networking products.

While we continue to improve the in-home WiFi experience, we are also thinking bigger with an innovative product road map. It's going to be an exciting year as we embark on reimagining our mobile app experience on every WiFi network. Right now, you can purchase an intelligent Motorola product and download the motosync app.

In the future, you will be able to use our mobile app on any network regardless of hardware. What might this look like. On business travel, you might use the Minim app to search for the nearest WiFi connection that supports ultra-high-band, better verse conferencing because your hotel room simply isn't cutting it.

On the app you might find a coffee shop that has user reviews of gigabit speeds, but you need to know if the coffee shop is overloaded with connections and if it's secure.

It looks like a user has just run a Minim scan to find excellent performance and security, so you venture to this coffee shop and pay for access to this premium network, all in the Minim app. When you're done, you rate your experience and contribute test results to get a couple of credits for your next paid connection through Minim.

This is connectivity untethered where work and home can be anywhere.

We believe Minim can offer great value as a powerful WiFi navigation system and even marketplace but how do we get there? Last month, we announced our latest invention for registering and encrypting a user's WiFi network data and credentials to a block chain ledger accessible via a users wallet.

This was the first glimpse into our vision of the near future where WiFi will become a measurable, shareable, and even monetizable utility.

The signals we see include the increase of hybrid working and digital nomadism, the acceleration of metaverse development, the continued growth of mobile offloading to WiFi networks, the growing success of the gaming industry as well as 10G connectivity on the horizon.

By the end of the year, we will focus on making the motosync app available to Motorola networking buyers, cable modems included for live health, diagnostics, and product recommendations for purchase on motorolanetworks.com. This goal also marks a philosophically greater milestone, which is establishing a mobile app first user experience.

By the end of the year, we will be able to market the Minim branded mobile app as a WiFi companion to consumers. Features will include the ability to test a connection signal strength, speed, privacy, and security from anywhere and rate your experience.

Premium upgrade features on the road map include threat blocking, live support on any network, parental controls, and VPN. Imagine being able to gift a live WiFi support description to your parents.

In a nutshell, we are developing towards a new world for software user acquisition, no longer depends on a hardware purchase and where any user acquisition can lead to a software feature and/or hardware purchase. It is the beginning of a much stronger data-driven customer relationship.

Beyond our mobile app, our near-term road map also includes a focus on minimal labs development, utilizing the chip open WiFi platform. By visiting telecominfraprojects.com, you will see that this project has support which shows some of the largest communications companies in the world.

Last year, we brought firmware development in-house for the first time for improved quality and development time to market. Already this year, we were pleased to announce that our 2000 WiFi support and interoperability have led to a partnership with two prominent ISPs in Indonesia and India.

As we look ahead in networking product development, we announced that CES, our next two mesh products coming in the spring summer of this year with high-speed WiFi 6 and WiFi 6E performance, the Motorola Q11 and Motorola Q14. These products will challenge competitors in price and performance and bear the latest cutting-edge Motorola design.

In modem and gateway categories, we have exciting product upgrade announcements this year and have DOCSIS 4.0 development to follow. Lastly, I'll turn to our sales channel expansion plans. In e-commerce, we were proud to launch motorolanetworks.com last year, which will be a flagship for upselling products in the motosync app.

Furthermore, as of December 2021, Minim has pivoted our Walmart online model for leveraging a third-party distributor to our own use of Walmart.com Seller Central, the second largest e-commerce platform in the U.S.

This pivot has led to increased revenue by 38% for the three months between December 2021 and February 2022 compared to the prior three months. As for brick-and-mortar retail sales, we would like to see our dollar share expand this year as retailers continue to have an Omni channel edge and strong relationships with customers.

As Gray mentioned, we recently on boarded a seasoned National Retail Sales Director, Jeff Rodning, who has already outperformed expectations in opening new and exciting relationships and a new product placement. I'll now turn to Mehul and Dustin for a review of our financial results. Mehul..

Thanks, Nicole.

Before I hand the time over to Dustin to report on Q4 and FY 2021, I would like to take a moment to introduce myself, to thank the Minim team for the opportunity to join the company as a CFO, and to express my excitement about engaging with shareholders and the rest of our stakeholders as we continue our efforts towards achieving our business objectives.

I joined Minim from Verifone, a fintech company that provides payment and commerce solutions to global retail brands, major financial institutions, and over 600,000 merchants. At Verifone, I led an international team of four major contract manufacturers to achieve material supply chain cost control during the pandemic.

I look forward to leveraging this experience here at Minim as we continue to navigate many of the same issues.

Prior to joining VeriFone, I spent 18 years working at Motorola, working across many groups, including telecom consumer premises equipment business unit, and participating in six acquisitions and saw our company's name change from Motorola Home to Motorola Mobility, a Google company, to ARRIS and in 2019 to CommScope.

I'm also excited to bring these experiences, especially my deep knowledge of consumer connectivity products market and long-standing relationship with Motorola brand to bear as Minim looks to drive continued sustainable growth.

Since joining the company earlier this month, I've only become more excited about the opportunity we have to make home network safe and supportive for everyone. With that, I will turn it over to Dustin to discuss our financial performance. Dustin..

Thank you, Mehul. A friendly reminder that the financials I will cover are depicted in the earnings presentation that has been posted on our website under the Investor Relations ir.minim.com.

Driven by the issues described by Gray above, on an annual basis, our net revenue for 2021 totaled $55.4 million, which is up 16% over 2020 with deferred revenue increasing to 736,000 as we exited the year.

While we are pleased with our revenue growth for the year, we did see fourth quarter net sales shrink 24% year-over-year to $10.5 million which is in the ballpark as Q4 2019 pre-pandemic levels. It is important to note that, as Gary indicated, we do see a return to quarter-over-quarter growth in Q1 of 2022 when compared to Q4 of 2021.

For the year, our gross margin improved 328 basis points, up to 31.6% from 28.4%. We were pleased that our gross margins increased to 33% in Q4 from 30% in Q3. And despite the headwinds brought on by inflation and component cost increases, we remain stable on a year-over-year basis.

For the year, we posted an operating loss of $3.3 million, which compares with an operating loss of $4.8 million in 2020. The bulk of this loss occurred in Q4, which saw an operating loss of $3.1 million.

Below the line, net interest and other income was negative $300,000, which when combined with our operating results resulted in a net loss of $3.6 million or negative $0.09 per basic diluted share for 2021. This compares with a net loss of $3.9 million or negative $0.15 per basic and diluted share for 2020.

For the quarter, we saw a net loss of $3.1 million or negative $0.07 per basic and diluted share. This compares with a net loss of $1.2 million or a negative $0.04 per basic and diluted share in the fourth quarter of 2020. For the year, we saw adjusted EBITDA of negative $4.5 million as compared to adjusted EBITDA of $1.7 million in 2020.

For the quarter, we saw adjusted EBITDA of negative $3.1 million as compared to adjusted EBITDA of negative $0.5 million in Q4 of 2020. As Gray noted, we remain very focused on improving these results and are encouraged by a return to quarter-over-quarter revenue growth in Q1 of 2022. Now for a look at the balance sheet.

At the end of the fourth quarter, we had cash and cash equivalents of $13.1 million, an increase of $11.5 million compared to prior year-end and a decrease of $6.3 million compared to the end of Q3 2021.

The increase in cash on a year-over-year basis was due primarily to capital that we raised with our secondary offering and the disposition of the ZOOM trademark, both of which occurred in August.

The decrease in cash on a quarter-over-quarter basis was driven by investments in areas discussed during our capital rates, investing in inventory, and the R&D and sales efforts necessary to support our transformation.

To that end, inventories rose $32.5 million at the close of 2021 compared to $16.5 million at the close of 2020, means $23.2 million compared to the end of Q3.

We do continue to monitor our production and inventory levels closely as we balance against both the risk and not having enough inventory to meet market demand and the risk of having inventory levels that put pressure on liquidity.

As of the end of the year, we had outstanding debt of $5.1 million which was drawn down on the company's $25 million line of credit. This compares with $7.1 million in outstanding debt as of September 30, 2021.

With that, I will turn it over to Gray to announce the dates from our Q1 earnings call and rescheduled Investor Day before we open the line for questions..

Thank you, Nicole, Dustin, and welcome, Mehul. We are so excited to have you on the team. As Dustin mentioned, I'd like to announce that we expect to have our Q1 earnings call in the first half of May 2022 and to conduct an Investor Day during the first half of June 2022.

In closing, I would like to reiterate that we continue to expect to unroll market on revenue growth in which Q1 means a return to quarter-over-quarter growth, then we will continue to balance hedging against supply chain disruptions with community management, which in Q1 means tapering investments in inventory and then we continue to make progress on our transformational efforts, which in Q1 means bringing thousands more intelligent networks under management and releasing important new software futures.

With that, operator, I'd like to open the line for questions..

[Operator Instructions]. Our first question will come from the line of Josh Nichols. Please proceed..

Yeah, thanks for taking my questions. Understandably, I guess, clearly, some challenges in the fourth quarter that you hit on.

But could you provide a little bit more granularity on why the retail sales were down so much despite what seems like a decent performance from Best Buy? And has that trend changed when you see what's going on thus far in the first quarter?.

Yes, I'll take that one. Thank you, Josh, good to hear your voice. I would say that the buying patterns were really disrupted by supply chain issues. And I think that the nature of that disruption really occurred as a result of the headlines that you saw in August and September.

And I think it also occurred not at the industry leaders, but at kind of followers in the industry in terms of retail as we looked at the data, kind of leaders in the Zoom Electronics and Amazon and Best Buy ended up performing much, much better than the people that were following them in that market segment.

And I think that might have been due to the Omicron and the COVID restrictions that occurred kind of what you towards the end of Q4 in the holiday buying season. So I think that we've talked about a return to quarter-over-quarter growth, and that suggests that we have experienced a return to improved retail performance.

As I did note though, I do think that while we will see improved performance on a quarter-over-quarter basis and that the total market is larger than it was pre-pandemic, there has been a somewhat subsiding from the very peak of the shutdowns and investments in home networks.

So that -- hopefully, that gives you a little bit of a bit color, I'm happy to go into more specifics.

If you have -- Nicole, do you have something you wanted to add?.

Sure, I had said the last trend that we're seeing is that the retailers that have a strong e-commerce strategy are faring better than others. So that's something to look to in 2022 and beyond..

Thanks. And then where is the cash balance at today since the last day of the quarter. I know you mentioned it was going to dip but then it kind of started trending up in 2Q.

I'm just trying to get a magnitude for what the trough looks like and any comment you could provide, are the gross margins for the first quarter expected to be comparable to 4Q?.

Yes. So we're still closing, as you know, today, the last day as you said. This is Mehul. So overall, for the quarter, we'll continue to manage our cash balance as we manage the inventory as we burn down inventory and continue to oversee what we're going to get amount of non-sales over the quarter and Best Buy and everybody else in the retail sector.

But we will see a small bit that will have to go in, and we'll continue to improve on as we continue to burn the inventory as we are secured [ph] for shutdown from the factory that we had and we're managing that along the way. So that's where -- can’t get into the specific detail and hopefully that gives you some context..

Thanks and then your inventory levels are a lot higher, right, obviously, because of what's been going on with the supply chain.

Is that expected to kind of trend lower as we move throughout 2022 and be a potential source of cash or what's the thought process on getting to sustainable cash flow profitability in 2022?.

Yes. Thanks, Josh. I would say you hit the nail in the head. We -- for the whole of last year, we're monitoring stuff very closely on supply chain. And you can see some of these disruptions kind of further ahead and you saw us build as we had concerns about how things were going to perform.

I think that proved actually to be very wise in retrospect because we did see significant disruptions in our supply chain operations and manufacturing operations at the end of last year and actually through Q1.

And what has put us in a position to continue to be able to meet consumer demand, honestly, in the context that we feel is more effective than other players in the market is that buffer that we built up.

Now as I said earlier, you want to have enough inventory to meet your demand, but you never want to have so much inventory that it puts pressure on your liquidity position. And so as we enter the year and as we manage Q1 and as we look to manage Q2, that is absolutely a focus of ours.

And I think we tapered orders in Q1, and we also saw COVID shutdowns in Q1 in our manufacturing centers. That, of course, means that the payment terms that we paid for that in Q2, we'll be bringing in less selling and selling more additional of our stock that we have on hand, which will have a positive impact on cash.

The other thing I'd say is that, one of the reasons that we were so excited to bring Mehul onboard is his deep experience with supply chain management, not both controlling costs, managing expectations and talking about inventory returns. And so I think that having a person on the team that focuses on that, it is really going to be beneficial for us.

And it's an area of great attention to make sure that we're not in a position where we need to raise additional capital this year. So that's a key focus of ours, and we certainly have very attentive cash management implications that we talked about..

And then last question for me here, if I'm just looking at it, is the deferred revenue, I know you guys have had success with a couple of new partnerships, right, that could be ramping the software piece of the business, and that's been growing pretty healthy. It's still up year-over-year, but it did dip quarter-over-quarter sequentially.

What's like the cause of that drop and any guidance you could provide on what you expect for the pace of deferred revenue growth kind for 2022 as you ramp up some of these new partnerships?.

Thanks Josh.

Nicole, do you want to take this?.

Sure. So the growth that you saw earlier in the year is expected to continue. So the first quarter, second quarter, third quarter growth is what we expect to see in 2022. What happened in Q4 was a onetime anomaly, if you will.

We actually opened up a sales channel for a product that a retailer had not sold before and they were unsuccessful with selling and sent us a onetime product return. When that one-time product return came back, we needed to take off the deferred revenue from that sale, and we will not be moving forward with that product category with that retailer.

But that's essentially what you see there in the dip in deferred revenue. Overall, we grew deferred revenue from $0 to over $700,000, and we expect that to continue to go up in 2022..

Yes. And I'll just add to that. I think some of the places that are really exciting, a lot of that work was done last year by the MG-8702, which is a real killer product for us. And I'm very excited and encouraged by the two new products that we released, the 8725 and 8733 in Q4.

With those I think they are going to be well received by the market and we continue to drive additional folks on the software side of the house and build that for revenue line. So a very -- continued growth this year on that front..

Thanks, that’s it for me..

Your next question will come from the line of David Tocos [ph]. Please proceed with your question..

Hey, good morning everybody. Calling you from Atlanta this morning. Just a couple of quick questions. I'm concerned because the stock price is below $1 and then after 30 days, you guys could be delisted, so that's very worrisome to me.

My basis is about $1.5 so I kind of like my basis, to be honest, because I feel like someday you guys stock could be $5 to $7 or $10 or some another number.

But -- so I have -- so my questions are, when do you think you'll hit profitability, I mean I've been waiting to see you guys get profitable, and you seem to be kind of going backwards, sucking through some cash flow? So that's one concern.

And the other concern is the potential for the stock to be delisted and that would be devastating for me and the reverse split is also devastating to me for whose stocks dip below $1, sometimes they consider a reverse split, I don't like hearing that.

I did hear that from the nice gentleman from Investor Relations that that's a potential thing that could be done, and I don't like that at all. So I kind of want to -- I'm kind of hoping you guys will head to profitability.

I mean, I think you'll be profitable in 2022 that's kind of the question? And then I need to know if you're concerned about being delisted?.

Yes. So thanks very much. Appreciate the question. I think there's a couple of responses to it. The first is we continue to be very focused on sustainable growth. And what that means to us is not having to go out to raise additional capital at this time.

So I think we talk about the cash position and where it sat at the end of the year, where it will sit in Q1, where it will sit for the rest of the year, and we believe that puts us on that path to sustainable growth. I'd also say that the sustainable growth certainly includes adjusted EBITDA profitability.

So these are all things that we're focused on achieving. And there are macro level effects that impact us, impact the market that we're working hard to continue to beat the market and continue to communicate. I'm really excited to be able to -- I think we haven't had an earnings call since November of last year.

In the next three months, we're going to have -- we have this call, where we'll be able to communicate about the strength of the business. We have a -- we have our Q1 earnings call coming up shortly in May. And then we're going to have an Investor Day coming up in the early part of June.

So I think those are all three opportunities for us to tell what's going right about our business, continue to share what we believe to be positive momentum that we are garnering.

And I'm going to also be -- now that we have the earnings out, I'm going to be able to do more stockholder engagement on an individual basis, which we're working with our IR partner to up. And lastly, I think that we are obviously very attentive to the issue of the stock price.

And I think that that's one of the reasons why I'm excited to get out on the road to talk to people because I think it's a very attractive price to purchase that. And I'm not concerned about delisting. I believe that the fundamentals of the company will bring us back into alignment with a price that will not result in us getting delisted.

And I am focused on making sure that the company performs in a way that supports that and that we share our story with people that are interested in purchasing shares in the company. So hopefully, that's responsive to your set of questions. And I'm happy to engage with you further if you are interested in a follow-on call..

Your next question will come from the line of Tim Savageaux. Please proceed..

Hi, good morning.

Maybe somewhat along those same lines, I wonder if you can give us your thoughts on when the company might be able to return to growth on a year-on-year basis, could that be as soon as Q2, given the current rebound or a continued rebound in retail or should we be thinking more Q3 given the launch of new product launches upcoming? And I've got a follow up from there..

Yes. Thanks, Tim. So it's not -- we don't tend to usually provide guidance. It was kind of nominal because we're so close to Q1. I would say that we continue to expect to outperform the market.

What the industry leader had set expectation around previously was that they would be flat from Q1 -- flat from Q1 to Q2 and then kind of rebounding to have a flat year. I think that we will beat the market and that means, obviously, having a year-over-year improvement compared to what that industry said.

So I think, hopefully, that gives you a little more detail. And I forgot the second part of your question, but happy to take the next part..

Yes, I wanted to follow up on additional potential growth drivers for calendar 2022, most notably kind of channels outside of cable, if you were, I think you mentioned something with the telecom info project and some ISP relationships coming out of that.

But I also wanted to touch on any opportunities stemming from rural broadband build-outs or fiber builds and how they might be able to contribute to growth in either this year or next?.

Yeah, thank you. I'll take this first and then maybe I'll add it to Nicole who has a lot of thoughts on the product side of this. So we're very encouraged by that.

We -- this is one of the reasons why we're so excited about our emerging mesh portfolio because that works obviously in conjunction and access an accelerant to software and the hardware revenue growth as it gets attached to cable modems. But also can work on any network, including networks that have seen so much investment.

And as those people get those -- get that higher speed, they're going to be looking for improved performance from their home network. So I think there's a lot of growth drivers there for us. But Nicole, you think a lot about this segment.

Do you have any thoughts to add on that?.

Sure. So let me just break it down by sort of our product portfolio and what we see as the growth drivers. Taking a look at cable modems and gateways, there's still very healthy adoption happening of DOCSIS 3.1, which is the highest speed DOCSIS that's available on the market to date.

So we are benefiting certainly in our top three sellers that I spoke about earlier. We're benefiting from that adoption, and we plan to continue to benefit as we've rolled out a WiFi fixed portfolio of gateways and modems. So very excited about that this year.

And also the WiFi 6 gateways and modems are enabled with Minim, they're intelligent products, we will see deferred revenue from those. When I take a look at the mesh side, we have a lot of Greenfields there. Mesh has proven to be a more dynamic category than perhaps consumer networking cable products. But Motorola is a new entrant here.

We have a lot of space to differentiate and a lot of space within retailers to offer them a product that is not made by one of their competitors. So we are looking to grow our mesh placement this year and also grow awareness amongst consumers.

So mesh is actually a $560 million annual market in the U.S., which is larger than cable modems and gateways at $350 million. So our penetration here is definitely something to watch. And then finally, I'll say, we talked about software a lot on the call.

Adding and layering in that software as a way to improve our customer lifetime value with the ability to cross-sell and upsell right there in the mobile app is going to be an important part of our growth. We're going to be hitting that towards the tail end of the year, but that's certainly a growth driver that we expect to be taking forth in 2023..

Okay, thank you. .

Your next question will come from the line of Keith Rosenbloom. Please proceed with your question..

Thank you. I wanted to ask about inventory and the quality of inventory. It's rare when you see a company today that's trading below working capital, which I think is what the company is today. I think your market cap is below your working capital. That's interesting and you have about $33 million worth of inventory.

Can you speak to the quality of that inventory, is there any anticipation that, that has to be written down, or are you able to take advantage, like you said in your slide deck that some competitors have supply chain disruptions, and this gives you an advantage by having that inventory available? And then as a quick follow-on to that, which I think addresses some of the other questions that have been asked.

If that inventory is solid, the company seems like it's highly liquid and I'm wondering why with the stock here at $0.90, the company doesn't buy back, let's say, 1 million shares, which would be meaningful in terms of the volume and value of the stock? Thank you. .

Yes. Thanks, Keith. So I guess first question on inventory. I mean, I will -- there's -- we have as part of our strategy, have been building inventory. And obviously, some of that inventory goes faster than other parts of that inventory, as you'd expect.

But overall, the inventory is of very high quality, and we are excited to have it on in the water or on the water and in hand and actually at Amazon. Those are the three big buckets for us that's on the water, what we have at our facilities in Southern California and Mexico, and then what we have on Amazon.

So we're excited about the inventory levels that we have. We think they've effectively hedged against the risk. I mean, I think it's interesting for us, we entered the year with, as you know here, a significant amount of inventory on the books. And at the end of last year, the factory was completely shut down.

And so as return to some operations or some of the -- several of the companies have returned operations, but they've been led by supply chain shortages. And so we've seen that inventory burn down exactly as we kind of had have expected it might as the supply chain disruptions sort of impact our specific supply chain.

I think the inventory is of high quality. I'm excited to see it sell-through. It is selling through. And so I think we're in a good position.

And like I said, I have a lot of confidence in John Lauten, our COO; and in Mehul to make sure that we are managing those risks, making sure we have enough not just the chips and the parts and plastic housing and all the different things that we need to come together to make our products.

And also make sure that we are in a liquidity position that -- that’s putting pressure on us. So we're very focused on that, very comfortable with both the location of our -- how much inventory we have and our strategy to let that burn down as we manage liquidity.

So on the stock buyback, it's certainly something to consider as we convert inventory to cash and produce that cash position that we talked about. It's interesting that when we raised the money, we certainly focused somewhat on inventory but also on R&D investment and driving our software strategy.

And so I think those [indiscernible] certainly invested in inventory, we've been investing in R&D.

And I think the question for us is to weigh what will have a better long-term impact on the stock price, is it going to be a repurchasing of shares or is it going to be taking that capital and pushing it into accelerating our transformation into software business. So those are the things that we weigh.

And I'm happy to have Mehul on board who's been a seasoned veteran in lots of different kind of decisions like that in his previous context. And it's something that we will absolutely be continuing to track and go and take it to the Board for its consideration. So thank you for suggesting that.

Certainly something that we suggesting you take seriously and I will be consulting with Mehul and the teams on our cash position, talking with the Board about it. And if we make a decision to do that, then obviously, we'll be making that news public..

And at this time, there are no further questions. I will now turn it back over to the panel for closing remarks. .

Thank you, everyone for joining our call today.

Again, we remain excited about the return to quarter-over-quarter growth in Q4 to Q1 and look forward to the next two opportunities to speak with everyone in the first part of May and the first part of June to discuss our Q1 performance and then a broader Investor Day, which we'll discuss our go-forward strategies.

Thank you all, and speak to you soon..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..