FiEE, Inc. Q2 FY2021 earnings call

• Financial momentum: Second quarter showed 45% revenue growth, accelerated from 26% in Q1. Gross margin improved to over 30%. Deferred revenue increased, with a 7% ratio in Q2 vs. 2% in Q1.
• Vision: Believes in transforming routers into intelligent devices for connected homes. Operates in a growing market for high-performance WiFi.
• Financials: Adjusted EBITDA was negative $300,000 in Q2 2021 vs. positive $300,000 in Q1. Cash flow from operations improved from net negative $5 million in Q1 to net negative $400,000 in Q2.
• Corporate development: Changed name to Minim Inc., uplisted to NASDAQ, and elevated Nicole Zheng to President.
• Sales and marketing: Strong Prime Day sales, sold more than past four Prime Day events combined. Added new retailer partners like Home Shopping Network, The Home Depot, etc.
• Product and innovation: Awarded a patent for mesh network setup. Scaled cloud platform with a European data center available for production use.
• Supply chain management: Implemented a five-pronged strategy to mitigate chipset supply challenges, including extending component order forecast, negotiating with vendors, and sourcing alternatives.
• Future plans: Launch premium products for highly connected homes, including WiFi 6 mesh system and DOCSIS 3.1 modem routers, and a network speed performance test suite for ISPs.

In the second quarter of 2021, Minim grew top-line revenue by 45% to $14.9 million. The top three earning products were: the Motorola MG8702 DOCSIS 3.1 modem router combo with mobile app, making up 13% of sales; the Motorola MB8611 DOCSIS 3.1 modem, accounting for 26% of sales; and the Motorola MH7020 tri-band mesh system with mobile app, representing 11% of sales.

• Expect strong growth in the second half, driven by new product launches and market expansion. - Anticipate gross margin expansion as software-driven product strategy is executed, limited airfreight use, and operational efficiency improvements are realized. - New products with software will contribute to continued growth in deferred revenue.

• Supply chain disruptions and chipset challenges persist, though mitigated by a five-pronged strategy. - Competition in the technology sector for talent remains a risk.

Q: Thanks for taking my question, and good to see some strong operating performance out of what is typically a seasonally slower period. You, kind of, hit on it briefly, but you have a couple of significant tailwinds coming on in the second half with like India and some new product launches. Well, you haven't provided specific guidance. Fair to assume that we should see a significant step-up in sales as we move into the stronger second half and what are the opportunities to kind of increase the gross margin level from the current levels?

A: Good morning. Yes, we expect strong growth in the second half. New product launches like the WiFi 6 family products will contribute. Gross margin is expected to expand as we execute software-driven strategy, limit airfreight use, and improve operational efficiency.

Q: Thanks for elaborating on that some of the product releases coming up. And then just to kind of hit on it again since you mentioned it very strong deferred revenue growth quarter-over-quarter here. Now, you're $1 million right of deferred revenue. What's the expectation for how quickly that could ramp? And if you could help or maybe talk about one or two of the larger opportunities that could accelerate that trajectory as we think about the next say 12 months or so in deferred revenue software sales?

A: Deferred revenue is expected to continue growing as more products with software are brought to market. New products like the three new WiFi 6 family products will drive growth. With more products having software, deferred revenue should ramp up.

Q: Hello and good morning. I had a couple of questions. First is kind of a little high level on end market dynamics, and to what extent you see the following factors was kind of key in driving growth from a market perspective. And those would be additions of new broadband Internet subscribers by cable and other ISPs, which obviously have been strong for the pandemic, but kind of normalizing a bit. Upgrades in connection speed and capability on the part of consumers and maybe probably associated with that just upgrades and overall Wi-Fi capability regardless of speed here. As you look at those three factors, which do you see really driving your business? And I know you mentioned kind of growing ahead of the market and your TAM estimate is based on a pretty big TAM, but how fast do you think your end markets are growing right now?

A: Growth is driven by persistent trends of people needing better Internet for living, earning, and learning from home. Upgrades in products, availability in retail, and international market expansion are key drivers. End markets are growing as people expect faster speeds and better connectivity.

Q: Guys thanks for the update. I came in a little late, but I just wanted to get some clarity on the balance sheet. You guys did this offering with Wiley in July and you reported a balance sheet at June 30. So, on the pro forma, can you give us a sense for how much cash the business is sitting on net cash and what your liquidity profile looks like today? And then on that, I just also want to clarify Gray, you personally participated in that deal as well right?

A: Net proceeds from the secondary offering were $22.7 million, and disposition of Zoom-related trademark assets netted $4 million. Expect to have around $21 million to $22 million in cash by end of Q3. Gray participated in the deal by buying 200,000 shares.