Airgain Inc (AIRG) 2021 Q4 法說會逐字稿

Good afternoon. Welcome to Airgain's Fourth Quarter 202 and Full Year 2021 Earnings Conference Call. My name is Jenna, and I'll be the coordinator for today's call.

Joining us today are Airgain's CEO, Jacob Suen; CFO, David Lyle; and Senior Vice President of Collector Marketing, Morad Sbahi.

As a reminder, this call will be recorded and made available for replay via a link available 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 would now like to turn the call over to Mr. Lyle. Thank you.

Thank you, and good afternoon to everyone. 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, February 24, 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, Dave. Welcome, everyone, and thank you for joining us on the call today. I'll start with some commentary about our 2021 financial results and then an update on the progress we've made towards executing our strategy. Dave will then provide financial details as well as our Q1 2022 outlook and color around how we expect 2022 to play out.

Looking back over 2021, we really started to hit our stride in the first half of the year before the global supply shortage issues began to impact our business. In the first half, we averaged over $70 million in revenue each quarter, the 2 highest revenue quarters in the company's history. The supply shortages in the second half of the year materially impacted our business, particularly our consumer business where we believe we lost about $8 million in revenue. Looking into Q1 of this year, we're seeing backlog indicating that the supply shortages in our consumer market revenue is starting to resolve itself. In fact, total backlog plus buildings in Q1 already exceeds $16.5 million, the strongest in our history at this point in the quarter.

If you look back over the last 2-plus years that we have been transforming the company from an embedded antenna technology company focused primarily on the consumer market to an integrated wireless systems company focused on larger and faster growing enterprise and automotive markets, you can see that we are a dramatically different company today.

Looking back just 3 years ago in our fiscal year-end 2018 results, Airgain's consumer market revenue generated almost 80% of total revenue. In 2021, consumer market revenue was only 40% of total revenue.

Looking ahead into 2022, we believe consumer market revenue will grow, but the growth from our enterprise and automotive markets will outpace that growth. And we expect the consumer market revenue will decrease to a smaller percent of total revenue as a result of the broader growth in the other 2 markets.

All in all, we finished 2021 with over $64 million in revenue, the highest revenue in the company's history.

Our non-GAAP gross margin was just under 40%, even with significant pressure from higher costs associated with global supply shortages. We saw significant discipline in controlling our operating expenses, which finished at $27.8 million on a non-GAAP basis and included incremental expenses from the enabling acquisition, which closed on January 7, 2021.

With 2021 behind us, let's look into what will drive growth in 2022. First, in our enterprise market, we expect our industrial IoT or NimbeLink branded products to grow as we continue to benefit from a fast-growing market in the U.S. with the additional growth expected internationally. We expect asset truckers, which is one of our newer product lines to begin to show material revenue contribution while Skywire cellular modems should continue to generate the majority of revenue for Airgain in the industrial IoT market.

Second, we expect our AirgainConnect platform's first product to begin to grow in 2022 as we partner with AT&T on the renewed focus on growing its mega range service.

Third, we expect our consumer revenue specifically from our end customer service providers to rebound as the transitory supply shortage issues began to resolve themselves.

Fourth, we expect our aftermarket fleet revenue or our antenna's plus branded products to recover from the main reductions related to COVID in resolution of supply shortages, especially as we have refreshed the product portfolio to 5G and revitalized our sales strategy.

Fifth, we expect our traditional enterprise WiFi revenues to see some growth as we launch our first major WiFi 6 system product into a global enterprise WiFi customer for large venues like stadiums and arenas.

Before I hand it over to Dave, I think it's important to note that we are continuing to be very focused on improving the gross margin profile for our company. We've made great progress on setting into motion product cost reductions on several of our lower gross margin products so that over the longer term, we can improve margins on products with high-growth prospects, like aftermarket fleet, enterprise WiFi, AirgainConnect and industrial IoT.

One of the many focuses for us is to move our in-house manufacturing to external contract manufacturers in order to lower costs through efficiencies in manufacturing as well as lowering costs for parts by allowing scale contract manufacturers to manage that procurement. This will also allow us to lower our inventory significantly.

In that vein, we are in the process of shutting down our Arizona manufacturing facility, where aftermarket fleet and AirgainConnect products are mostly produce and moving them to new concept manufacturers here in North America. We expect the process to be complete in Q2 of this year. Following this action, Airgain will have no internal manufacturing facility as all manufacturing will be in the hands of highly experienced contract manufacturers.

All in all, we are very pleased how well we bear during the supply shortages as well as further impacts in 2021 and are very excited about our prospects for considerable year-over-year growth in 2022. We are especially encouraged by the momentum in our integrated wireless systems growth as we transition from a component antenna supplier to a system solution provider.

We have spent the last few years developing new, innovative integrated wireless system products, most of which have just begun to shift or are about to ramp. So 2022 will be a year laser-focused on execution and growth.

Now I would like to turn the call back over to Dave who will walk us through financial highlights. Dave?

Thank you, Jacob. Fourth quarter 2021 revenue was $14.1 million. Beginning with our consumer revenue, Q4 finished at $2.5 million, down from $4.6 million in Q3, primarily due to weakness from the global supply shortage.

Enterprise revenue was down from $8.7 million in Q3 to $8.1 million in Q4 due also to weakness from the global supply shortage. Our industrial IoT products grew sequentially, and our traditional enterprise WiFi products declined.

Automotive revenue grew sequentially from $2.2 million in Q3 to $3.5 million in Q4 as we saw revenue growth from both AirgainConnect as well as our aftermarket fleet revenue.

Q4 non-GAAP gross margin of 35.1% was just above the top end of our previous guidance range, primarily due to favorable product mix changes. Excluded from non-GAAP gross margin was $93,000 for amortization of purchased intangibles.

Non-GAAP operating expense in Q4 of $7.2 million was just above our previous guidance range. Excluded from non-GAAP operating expense was about $1 million in stock-based compensation expense, about $663,000 in amortization of intangible assets, mostly related to the NimbeLink acquisition and about $380,000 for fair value of contingent consideration related to the NimbeLink acquisition.

Adjusted EBITDA was negative $2.1 million in Q4 right at the midpoint of our previous guidance range. Non-GAAP net loss in Q4 was $2.3 million, and Q4 GAAP net loss was $4.6 million.

Moving to earnings per share. Our Q4 non-GAAP loss per share was $0.23. GAAP loss per share was $0.46. Finally, our Q4 cash, cash equivalents and restricted cash totaled approximately $14.7 million, about $4.4 million lower than in Q3 due to negative $1.6 million in working capital changes, mostly associated with the timing of inventory purchases as well as the timing of order shipments heavily toward the back half of the quarter but also related to the $2.3 million in non-GAAP loss from operations.

While on the topic of cash, last week, we put a $4 million working capital line in place with Silicon Valley Bank to enable us to adequately address potential incremental working capital needs associated with the ongoing global supply shortage issue.

Now I'd like to provide a preliminary outlook for the first quarter of 2022. In Q1, we expect revenue to grow materially and to be in the range of $16.5 million and $18 million or $17.25 million at the midpoint of the range, with most of the growth coming from the recovery of our consumer product revenue as we are seeing less impact from supply shortages.

We expect non-GAAP gross margin in the first quarter to be 37%, plus or minus 100 basis points, as we see a recovery from our higher-margining consumer product revenue. Excluded from non-GAAP gross margin is $89,000 and acquisition-related amortization of purchased intangibles and about $16,000 in stock-based compensation expense. We expect Q1 non-GAAP operating expense will be about $7.5 million, plus or minus $100,000.

Higher sequential operating expense is related to the reset of the annual management bonus program timing of engineering and development costs as well as from the acquisition of talent, mostly in our marketing and sales organization to ensure we execute on our growth prospects. Excluded from our non-GAAP operating expense estimate is about $1.3 million in stock-based compensation expense and about $668,000 in acquisition-related amortization of purchased intangibles.

At the midpoint of guidance, adjusted EBITDA in Q1 would be negative by about $1 million. At the midpoint of guidance, we expect Q1 non-GAAP loss per share to be about $0.11 and on a GAAP basis, we expect a loss per share of $0.33.

With regard to cash, we expect our total cash, cash equivalents and restricted cash balance to increase from Q4 2021 to Q1 2022 as we expect to benefit from positive working capital changes.

Now I'll turn it back over to Jacob. Jacob?

Thanks, Dave. I would like to reiterate that we have confidence in our long-term strategy and that we are pleased with the progress we have made in becoming a high-performance integrated wireless system provider. We believe the successful transition from an antenna component supplier to an integrated wireless system company as well as our expansion into the lucrative enterprise and automotive markets puts Airgain in a position to sustain long-term profitable growth.

While we are still managing to some remaining supply shortage issues, we are seeing a recovery already taking place this quarter and expect that positive trend to continue into 2022. With rising demand for our new and innovative industry IoT, AirgainConnect and aftermarket products, we are optimistic about our growth prospects in 2022 and beyond. With continuing focus on customer satisfaction, operational efficiency and product innovation, we are keen on delivering on our mission to connect the world to Airgain's optimized integrated wireless systems.

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

(Operator Instructions) our first question on the line comes from Michael, Mani of B. Riley Securities.

This is Michael on for Craig. My first question is concerning gross margins. It's nice to see the guide at 37% for the next quarter. I was just wondering if you could walk us through how you see the gross margin structure playing out throughout the year. Just a year ago, we were back at low 40% levels. And I was just wondering if you could walk us through the relative contribution of mix benefits and maybe easing supply headwinds and also as you outsource manufacturing, how we could potentially get back to that 40% level?

Yes, I'll take that one, Michael. This is Dave. On the gross margin front, going into Q1, we're getting some beneficial product mix with the consumer revenue starting to grow. We said historically, the consumer revenue has had a higher gross margin profile than on enterprise and automotive, especially as we ramp new products for automotive and enterprise.

We think we'll continue to see growth as we get through the final issues related to the supply -- global supply shortage on the consumer front, which should help us a little bit more going into Q2 and beyond on a gross margin front.

In terms of the rest of the year, I think it will really depend on how fast and how big we grow both automotive and enterprise, which have lower gross margin profiles. And so I think if we grow much more rapidly, we're going to see more pressure on gross margin, but obviously, more falling to the bottom line in that case. In any case, I do think we can get back into this year to 40% range from a gross margin perspective.

Got it. That's helpful. And my next question is concerning the AirgainConnect. I was wondering if there were any updates to promotional activity with AT&T? And any updates you can give on the opportunity funnel and sell-through customer dynamics et cetera?

This is Morad. So I'll take that one. So the promotional activity that started last year with AT&T., that's continuing to be in effect for this quarter. And it's the same model where we provide $400 of cost savings and then AT&T gets $800, which means that the customer winds up paying $320. So really very, very -- has been very beneficial for us.

So like I said in the last earnings call, what that promotion has done for us is it not only increased the funnel in a substantial way but it also, the color of those customers has changed. What I mean by that is that we are starting to see a more urban customers showing interest in AirgainConnect. And these are the kind of customers that really are going to fuel that growth that we've been waiting for, for AirgainConnect. So the -- if you're talking about rural customers that are ordering, let's say, tens of units or low hundreds, these are the kind of customers that order in the mid-hundreds to over 1,000 units.

So it's really, really very healthy for us. So we're really excited about that, and that trend continues, it started, like I said, the second half of last year, and it's continuing this year, and we expect it to go on for the rest of 2022.

Our second question today comes from Karl Ackerman of Cowen and Company.

Yes. Thank you. And Dave, I enjoyed working with you. Best of luck in your future endeavors.

Two questions for me, if I may. I understand you're pivoting your manufacturing strategy, I think, for NimbeLink products from internal to external contract manufacturers, but I guess, first, why has inventory been creeping higher throughout the year when sales have moderated?

And then second, I guess as you address that question, you face supply shortages over the last couple of quarters. So have you've been able to lock in volume commitments that give you confidence you can achieve the backlog and billings you have today?

I'll start and Jake, you can pipe in. First of all, thank you, Karl. It's been great working with you. I'm sure we'll bump into each other again.

Related to the contract manufacturing, that's actually -- we've used contract manufacturers for NimbeLink historically, and that model is not going to change. This is more related to some of our Antenna Plus branded products as well as AirgainConnect products, which we've done in our Arizona facility. That's a facility that we're shutting down and moving to contract manufacturers. That should help us in a variety of ways, including inventory reduction.

To your question about inventory and seeing higher levels right now, that was a conscious decision on our part to go ahead and buy ahead on parts that we thought would have more problems related to the global supply shortage, the more of the risky items in terms of procurement. And so I would say, if you characterize that total inventory number, a large portion of it is AirgainConnect and NimbeLink, both of which we have high confidence in demand. So we feel pretty good there. I do think though that we're going to see a pretty significant reduction in that inventory number over the next couple of quarters, especially as we move the contract manufacturers on AirgainConnect and Antenna Plus branded products.

That's helpful. I appreciate that. I guess -- sorry, then just a follow-up on the last question I had. I mean if you just speak to the level of volume commitments you have that allow you to work down that backlog in billings, it sounds like you have some of the inventory today. But I guess as you think about the growth opportunities throughout 2022, which you spoke about earlier in your prepared remarks, how do you think about the ability or willingness to engage on some longer-term contracts with your suppliers so that you can fulfill the end customer demand both across consumer, but also in automotive and enterprise networks.

Yes. It's an interesting question. We've -- on the NimbeLink side where we have a lot of inventory -- we care a lot of inventory, we actually have pretty significant backlog for all of '22, which gives us some pretty high confidence. Again, like I said, historically, our biggest issue has been trying to grow through the global supply shortage issues. I think our growth would be even bigger with NimbeLink if there was no supply shortage, but you're seeing us continue to grow that business. So we have pretty high confidence in terms of just hard backlog for the year, which gives us a lot of confidence there.

On the other part of the kind of inventory equation on the AirgainConnect side, that's still I would call it in its early stages. So we're still trying to grow that business. We -- the demand -- the end demand is obvious. The sales pipeline, like Morad talked about, is pretty big. We just got to close deals and get it sold through.

Anthony Stoss from Craig-Hallum.

Pretty impressive guide, all things considered up 22% at the midpoint sequentially guys, especially supply chain. So kudos to pull that off. Along the lines with the growth rate heading up into Q1, do you expect all of the business segments to grow?

And maybe a generic question for Jacob, what do you expect or what's the ballpark range of how much you think the IoT business can grow, and Dave just talking about significant backlog. I'm curious what you think the growth rate might be for IoT this year and maybe next?

Good having you joining us, Tony. It's Jacob here. Great questions, by the way, and I appreciate the fact that you recognize that the team has done a phenomenal job to be able to overcome the supply shortage issue, and we're looking really good about not only Q1 but the rest of the year.

So regarding the 3 markets, what I can tell you is that we do have high demand from the customers. That's with consumer, that's with the enterprise and that's with automotive.

Now on the consumer side, as I indicated, it's, we are in the recovery mode and the fact that the supply shortage issue is start to resolve itself. That's going to be helpful for the -- not only for Q1 but for the rest of the year.

And regarding enterprise, that's a lot of it with the industrial IoT product with our NimbeLink brand. The demand is high, but we are certainly also dealing with some part shortage issue that we got to still get overcome.

And then on the automotive side, the AirgainConnect, it's certainly also seeing a much greater demand, and then the aftermarket fleet, we're also seeing a high growth as well. But I would not be able to tell you that it's all going to we're going to be able to see sequential quarter after quarter, but we do feel strongly about the overall growth across all 3 market segments. So what I can say...

Yes, go ahead. So I was just going to add something to what Jacob said in that the direction that we set for the company to become more of an IO system integrator. All of those products that we are offering, we're seeing that those business lines are growing. That's where the trend is heading. And consumer is more or less a return to normal our supplier or our customers finding or gaining access to supply. So that's what's kind of driving really what's happening in 2022.

Okay. And then maybe as a follow-up, this transition for a couple of product lines to the contract manufacturing side. Have you done extensive qualifications with this contract manufacturer? Do you expect it to be smooth? Are you building up internal inventory those parts in case that's not smooth and there's any hiccups on the contract manufacturing side? Any color would be helpful, just to make sure that the handoff is smooth.

Yes. Very good questions again. So we actually not only have one, but we actually have a couple for our new North American manufacturing, contract manufacturers. And we have created some redundancy as well. And so out of that, we do feel strongly that one can serve us to backup us together. And then we are training them and we actually have much easy access to them and they're working very closely with our operation team as well, which is located in Arizona. So we feel pretty good about be able to make sure that they deliver.

And just so you know, we actually started to work with them at Q4 last year really closely, and they've been able to deliver the type of product and the type of quality that we expected. So it's something that we already done enough trial launch, you're going to call it, to get to where we are. That's why we have made a decision that we feel comfortable to shutting down our Arizona facility.

Yes. We kind of used Tony, a phased approach where we put our 1 larger product line from the Antenna Plus branded products first, and then we put another 1 and did it slowly over the, like Jacob said since the beginning of Q4. So we have very high confidence that they can deliver pretty high quality. We're also pretty excited about the fact that they can improve just through scale and buying parts, procuring parts more cheaply for us to improve our gross margin. So I think we're going to benefit on 2 sides there.

Our next question on the line comes from Tim Savageaux of Northland Capital Markets.

Thanks, and good afternoon. Wanted to follow up on kind of the segment dynamics going into Q1. I mean I'm going to assume that the majority, if not the vast majority of the sequential growth you're forecasting is coming from consumer. Is that supply situation recovers and that likely has a positive impact on gross margins as well? Is that a fair assumption in your estimation? Or are there any other segments driving sequential growth in a meaningful way?

No, I think in a meaningful way, consumer is driving the majority of the growth. There's contribution across some of the other product lines, but nothing like the consumer recovery.

Okay. Great. And then well, just to follow with consumer and then I have one more, and I think there was an earlier comment about getting back to normal. I mean which likely represents something in the $10 million a quarter range where you started calendar '21 and ended calendar '20. At this point, does that seem like a reasonable target to get back to those levels by the end of the year in consumer?

Yes. I think it's possible. I don't think, we're planning at something a little more conservative, especially with some of the supply shortage issues out there still remaining. But even if we improve off our Q1 number, which we expect to, it's going to be -- contribute both not only on top line growth but on gross margin.

Right. And then last one for me. Had a nice uptick in the quarter for automotive, which I think you attributed to AirgainConnect. And I guess given how sharp that increase was, I wonder if you could give us a little more color as to whether we could look at that as kind of maybe a stocking situation that needs to be digested or whether you're seeing that sharp of an uptick in demand that you feel like you can continue to build on throughout '22.

Yes. We saw growth out of both AirgainConnect and aftermarket fleet Q3 to Q4. We're also suffering a little bit on the supply shortage issue on the automotive aftermarket fleet revenue over the past couple of quarters, too. So I think we're starting to see a little bit of a return there. Again, we've got to keep an eye out on what the supply shortage will do to that business going forward in 2022, but we do think we can grow through it, mostly because we've kind of redone our sales strategy on the Antenna Plus branded products and we've upgraded some of the key products to 5G. And I think that should drive growth for us.

And I think we're -- in terms of AirgainConnect, we were saying we've got this really large opportunity funnel that we've been chasing. It's taking some time to close those deals. I think we should see really more of an inflection point, which I think is where you're trying to get to starting in the second half. It's possible this half, but I think it's going to be more in the second half.

(Operator Instructions) we have a question in from Scott Searle of ROTH Capital.

Nice job on seeing the consumer starting to recovery. And Dave, I want to wish you all the best. I'll miss we're asking you on a regular basis.

Thanks, Scott.

To dive in on the consumer, it sounds like you answered part of it with Tim's question. It sounds like you're seeing any sort of immediate snapback to the levels we exited in '20 entered 2021 at the $10 million level, it seems like it's going to build after the first quarter, but you're not building in that type of expectation. I just want to clarify if that's correct.

And then as part of it, there's a big transformation going on from WiFi 6 to WiFi 6. I'm wondering how important WiFi 6 is what that's doing to the dialogue, the opportunity? And are you seeing opportunities not only traditional indoor in APs, but are you starting to see some outdoor opportunities as well as it relates to 6E?

Yes. Good to talk to you. So Jacob here, I'll take the questions first and then having Morad or Dave to chime in. So regarding the consumer, you are correct, it's recovering, but no, it's going to take some time to get back to what it was. Although based on what we're seeing, as I indicated, Q1, we're already seeing a substantial improvement over Q1 of last year.

And we do see even in our backlog right now, give you some visibility into Q2, we are seeing also numbers in the backlog, but it's much higher than what we used to get at this point during the quarter. So those are positive indications that consumer is on its recovery path. How fast and when we feel good that it's going to be happening this year.

And I also want to mention that consumer used to be, like I said, 80% of our overall revenue just 2, 3 years ago. It's now last year is 40%, and I would expect these years to be even taking on a smaller percent of the overall revenue. And the reason for that is that, even though it's growing what we are doing with the system product with automotive with enterprise is really outpacing that. And I do expect that.

The number of consumer, the revenue will be better than last year, but it's actually going to become a smaller percentage of our overall revenue. And that's why we made a decision to go with the system product approach, and it's really paying dividends. The product we now have with enterprise, with automotive and with the demand that we're seeing as indicated, it's really evidence of our successful transition from an Antenna company, component company, now to a system integrator.

Now you mentioned about WiFi 6, 6E. Yes, absolutely. One carrier that I spoke to one major North American carrier that I spoke to basically told me that starting 2022, they are not going to ship anything that's not WiFi 6E, okay? So that, so what they have in the 11ac, they are no longer going to ship any of those. And that's one of the reason that, that should help with the recovery on the consumer side. And I'm sure other carriers are thinking the same thing, but all of them are going to quickly move into the 11ac or WiFi 6, 6E. Yes, I'll let Morad comment on outdoor versus indoor. Yes.

So I was just going to say, Scott, that a lot of the growth that just like Jacob said, a lot of the growth that you're seeing or a lot of the traction that you're seeing in the business in 2022 is 6E and 6 that we had won, let's say, a year ago or maybe a little bit earlier than that. Where the opportunities are, particularly in the back part of '21 is mostly in what we're seeing -- It's mostly indoor. By the way, we do some outdoor or mostly indoor, but there's a lot of traction right now in fixed wireless access, right?

As you start to see with the C-band deployments. You got a lot of the operators that want to go out there and then compete with the wired guys. And there's an opportunity for them to provide these platforms like, for instance, what T-Mobile is doing and any other guys are doing. And that provides an opportunity for Airgain to work with ODMs in that Airgain has the capabilities to solve these complex wireless problems.

And so you already have that traction in the WiFi area, but now you add the uplink being also wireless and, let's call it, cellular. That gives us the capability to not only be able to solve these even more complex problems, but also increase the ARPU per box. So that's where you're going to see some of the traction going forward and the design wins for consumer for us.

Got you. Very helpful. And if I could -- to follow up on the nibbling front, it sounds like business continues to be strong there. I was wondering if you could give us an indication of the size of the business in the fourth quarter, at least if it was up sequentially from the third quarter. And it sounds like you not only have a good visibility of backlog, but also visibility to supply. So I was wondering if you could kind of frame the growth rates at the low end and the high end of what you see or at least a baseline level expectation for NimbeLink in 2022?

Yes, I'll take a shot at that, Scott. In Q3 to Q4, we grew sequentially I don't want to talk specifically about Q1.

We do -- I think in terms of demand, we should be growing, but we still haven't solved, resolved all of the supply shortage issues, so that's putting a little pressure on us on the NimbeLink branded products right now. So the jury is still out on that. But I think for the entire year, even with supply shortages, we're going to grow '21 to '22.

Okay. And lastly, if I could, to dig in on the auto front and AirgainConnect. I'm not sure if you've provided any numbers on this call in the past. You've talked about the number of pilots and engagement kind of helping to frame the opportunity. You did mention an inflection is teeing up maybe for the second half of this year. But did AirgainConnect cross the $1 million threshold in the fourth quarter?

Are there any -- is there any other color you could kind of put around the level of activity that's going on for AirgainConnect? And then I guess in terms of other product extensions, right, you've talked about evolution with other carriers and other commercial markets. I'm kind of wondering what the updated thoughts are on that front.

Yes. In terms of the revenue breakout for AirgainConnect, we're trying to, not to disclose that at this point and just accumulate that with our automotive number. But in terms of -- like you're talking about on the opportunity and the potential demand that we're seeing here is pretty material. So I'll let Jacob and/or Morad.

I can share with you, Scott, that we are seeing really a much stronger opportunity size and the orders that we're anticipating to receive it's also in much larger volume. Morad indicated earlier, with the new approach that AT&T and has been working on since really second half of last year, we are now seeing a lot of these major urban opportunities now come to fruition, so we expect to really pick it up.

Even already happening, we expect that to continue throughout the year. And I also want to share that more that was seen in D.C. earlier this to receive innovation award during the 10 years anniversary of FirstNet. And the AT&T, FirstNet really focusing on the mega line service, which is the flagship product for that offering, it's AirgainConnect. So there's a concede the effort by AT&T, FirstNet and certain AirgainConnect to make this a really successful product for all of the first responders out there.

And the other thing I would add to that, Scott, is that what I noticed from that event is that, and I'm not here speaking for AT&T, but what I can tell you that the general theme that came out of there is that FirstNet is becoming a reality, and there are more and more towers being deployed more towers, better coverage, better opportunities for AirgainConnect. And we see that actually. We see that on the other side, not only in urban but also in rural.

Just to kind of address your point about another question that you had in terms of road map, I mentioned this last time in the call, in that AirgainConnect, HPUE, the unit that we have today, that's just the first product in this product line SKU. You can expect this year that we will have derivatives that will address other operators, not only here in North America, but also overseas.

But we do want to be disciplined. We do want to be focused. There's so much out there that needs to be taken care of and we need to do this thing carefully so that we can be successful that we have at hand and also not lose sight of what this could provide to us in terms of opportunity at the global scale.

We have no further questions registered. So I'll hand back over to Jacob for closing remarks. Thank you very much.

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

Thank you very much. That concludes today's call. You may now disconnect your lines. Have a lovely evening. Thank you.