Good afternoon. Welcome to Airgain's Third Quarter 2023 Earnings Conference Call. My name is Sheri, and I will be coordinator for today's call. Joining us for today's call are Airgain's President and CEO, Jacob Suen; and CFO, Michael Elbaz. As a reminder, this call will be recorded and made available for replay via the link found in the Investor Relations section of Airgain's website at investorrelations.airgain.com. Following management's prepared remarks, the call will be opened for questions from Airgain's sell-side analysts. I caution listeners that during this call Airgain's management will be making forward-looking statements about future events and Airgain's business strategy and future financial and operating performances. 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 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, November 09, 2023. 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 future details, including a reconciliation of the GAAP to non-GAAP results. I would now like to turn the call over to our CEO, Jacob Suen. Jacob?

Thank you, operator. Welcome, everyone, and thank you for joining us. For today's call, I will first cover our operational highlights and achievements for Q3. Then, I will hand over to Michael to walk you through our financial performance for the third quarter and our guidance for the fourth quarter. Afterward, I will provide an update on our strategic product and marketing initiatives for Q4 and beyond before opening the call up for questions. I would like to start by briefly introducing who we are and what we do for those who may be new to Airgain in our industry. At Airgain, we simplify wireless connectivity for the consumer, enterprise, and automotive markets. Our technology spans across the value chain from embedded components to integrated systems. Our products fall under three sub-brands, including Airgain Embedded, Airgain Antenna+, and Airgain Integrated. At the beginning of the year, we announced our initiative to improve the 5G customer experience by fixing coverage gaps, boosting performance, and simplifying the delivery of 5G connectivity to the home, office, and vehicle. Earlier this year, we introduced our Lantern 5G Fixed Wireless Access device and Lighthouse 5G C-Band Smart Repeater, and we will be announcing a third product initiative in the coming months that fits into our effort to improve the 5G customer experience. Our goal is to begin shipping some of these innovative products to partners and end customers in the first half of 2024. We work with a global network of VSaaS system integrators, distributors and large customers to help solve critical connectivity issues, improved wireless performance and effectively shorten time to market for their products. With Airgain's growing product portfolio, we offer complete wireless solutions to our channel partners and customers that help them get connected quickly. Now for our performance, third quarter sales…

Thank you, Jacob. Before diving into the numbers, please note that my review of our financial results and guidance refers to non-GAAP figures. Information about the non-GAAP financial measures, including GAAP to non-GAAP reconciliations, are found in our earnings release. Now, let's turn to this quarter's results. As Jacob mentioned, Q3 sales were $13.7 million below the $14 million midpoint of our guidance range. The variance was primarily due to lower than forecasted consumer sales. Our sales declined 13% sequentially and 29% year-over-year, primarily due to the high inventories across both our channel and direct customers, coupled with demand softness in our consumer market. Consumer sales were $4.4 million, reflecting a sequential decrease of $1.8 million, as our future quarter had a strong uptick of Wi-Fi 6E embedded antenna shipments. Enterprise sales were $6.8 million, which decreased sequentially by $0.5 million. The decline was driven by lower sales of custom products, partially offset by higher sales of embedded modems as some distributors are recovering from inventory overhang. Automotive sales were $2.5 million, reflecting a sequential increase of $0.2 million. Q3 gross margin was 39.1%, compared to our guidance range midpoint of 40%. The variance was primarily due to the unfavorable consumer sales mix. Q3 gross margin was 130 basis points lower sequentially, due to the unfavorable consumer sales mix, and a lower enterprise margin driven by an unfavorable product mix change. Q3 operating expenses totaled $6 million, slightly higher than our guidance of approximately $5.8 million. Operating expenses decreased sequentially by $0.5 million, driven by lower contractor and other variable expenses, resulting from G&A efficiencies. Our Q3 operating expenses at $6 million represents the lowest spend level since the acquisition of NimbeLink in Q1 of 2021. As we mentioned in prior earnings calls, we are focused on driving operational efficiencies…

Thanks, Michael. During Q3 and Q4 our team has spent a significant amount of time and effort on our strategic planning process. As a result of this analysis of our products and markets, we developed a product roadmap that stretches into 2025 and captures our strategic product launches that we believe will shape our revenue in the future. Both our current product lines, we believe that our asset trackers offer the greatest, strategic growth opportunity. When we narrow the market to cellular connected asset trackers, we estimate the 2024 serviceable available market, or SAM, to be $900 million. In addition, we have been in the market for over three years and have built a strong pipeline of deals. As mentioned previously, because of the pilot process and size of the end customer, the sales cycles can be longer than some of our other products. However, the deals are larger, more sustained, and involve a significant component of recurring revenue. We continue to make very good progress and are optimistic that our asset tracking offering will become an even greater revenue contributor to the overall business. In addition, we have previously discussed our initiative to improve the 5G customer experience. While 5G delivers on its promises of lower latency, increased capacity, and higher throughput, it comes at the expense of a shorter signal range from the base station. Consequently, this creates coverage gaps for 5G customers. We believe Airgain is well positioned to solve these major coverage deficiencies, and we have identified three key areas where we believe we can make an impact. These areas include the network itself, customer premises, and the vehicle. Improving 5G connectivity and customer experience begins at the edge in the home or office with Fixed Wireless Access. These devices allow wireless operators to compete with…

Thank you. We will now take questions from Airgain’s sell-side analysts. [Operator Instructions] Our first question is from Craig Ellis with B. Riley Securities. Please proceed.

Hi. This is Stacy [ph], calling on behalf of Craig. And I was just wondering if you could provide some color as we move the product mix towards higher volume in clients and services? And in a tough macro, what are some products in the consumer and enterprise that can drive meaningful revenue to 4Q or potentially into 2024? And is there any changes in the segment gross margin like consumer gross margin or enterprise gross margin? Thank you.

Hi, Stacy [ph]. This is Michael. I hope I can answer your question if I understand it correctly. From the consumer standpoint, as we mentioned, the revenue level is a bit depressed. We saw it in Q3. We’re expecting a further decline in Q4, primarily because of our OEMs trying to manage their inventories or excess inventories with the pending WiFi 7 technology transition along with some soft demand taking place at the MSO level. And so what we have secured so far is really an MNO Tier 1 design win which we expect to start shipping in Q1. So this will give us a bit of a bump in Q1, but really the overall growth on that market will really come from the WiFi 7 technology transition which we expect to see at the end of Q2 and certainly in the second half of the year. On the Enterprise business, what we are facing right now is more of an inventory overhang with one of our lead customers and this is also the same lead customer where we have also a custom design of a platform, a new platform. This is a complex project which is now delayed to the early part of next year of Q1, specifically speaking. And so while we see overall depressed or lower revenues in Q4, we expect to see the uptick in Q1 and then some resumption after that of growth in the fiscal year 2024 mainly because of the inventory corrections being sorted out through the first half of the year. And then finally on the automotive, it’s more of a mixed story here between some of the inventory correction going on with some of our lead customers but also that being offset with growing new products. We recently announced a number of new products but also new channels and new geographies as well too and those again for the second half of the year will start to really pan out for us as well too, along with the new product initiatives. In terms of mix, it’s a bit uncertain right now given the low level of visibility on how everything plays out. All of our OEMs are certainly trying to be very conservative in the inventory level. We could see some surprise in December with some surprise orders but we are not counting on that. And so in terms of the mix, it could be fluctuating quite a bit. The good news here is that on the margin front with the automotive product cost reduction that we have initiated about two, three quarters ago and those are becoming effective in Q4, we do see our overall gross margin starting to improve with the CM leverage that we have been counting on and this trend will continue on. And so I think we will be somewhat protected with some of the consumer market mix which has been unfavorable over the past few quarters. I hope that answered your question.

Thank you, that’s very helpful. Thank you so much. And I was wondering if I can squeeze in another one. So, what are some of your views about cash or any change in the inventory days? How do you feel about your cash level whether it’s sufficient for your working capital? Thank you.

Sure. So our cash actually increased in Q3 at the end of September, increased compared to quarter-over-quarter but also year-over-year basis. We are at $10 million right now. And this has been mostly driven out of working capital management, lower inventories, and as I mentioned, but also lower account receivable not only because of lower sales, but also primarily because we achieved a record low DSO with some very strong collections. So the team is definitely very focused on whatever we can do from a working capital management standpoint with the EBITDA loss that we are projecting for Q4 of $1.8 million. At the midpoint of the guidance, we expect our cash balance to be at around $8 million which is definitely sufficient for enough of resources to be able to pursue our growth initiatives and especially in light of growth resuming in the first half of the year.

Got it. Thank you so much.

Thank you.

That will conclude our question-and-answer session. If your question was not taken you may contact Airgain’s Investor Relations team at AIRG@gateway-grp.com. I would now like to turn the call back over to Mr. Suen for closing remarks.

Thank you for joining us on today’s call. We look forward to updating you on our next call. Operator?

Thank you. This concludes today’s call. Thank you for joining us for Airgain’s third quarter 2023 earnings call. You may now disconnect.