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MI

MINIM, INC. (MINM)·Q2 2022 Earnings Summary

Executive Summary

  • Q2 2022 results reflected demand headwinds and timing effects: net revenue declined 3% q/q to $12.9M and 13.6% y/y, with gross margin compressed to 19.7% due to inventory costing errors; net loss widened to $4.4M and ($0.10) per share .
  • Management expects gross margins to return to ~30% after correcting costing issues; OpEx run-rate to be flat q/q; cash and inventory positions to improve in 2H on seasonality (Prime Day/Black Friday) and AR collections .
  • Strategic positives: #1 share on Amazon for cable modems/gateways; strong Prime Day performance (+53% y/y); launch of Q11/Q14 mesh (WiFi 6/6E) bundled with motosync; deferred revenue rose to $1.1M (+32% q/q) .
  • Key risk catalysts: August 4th 8-K announced non‑reliance and restatement of FY21/impacts to Q2 gross margin; NASDAQ minimum bid price noncompliance with intent to seek a 180‑day extension and evaluate options .

What Went Well and What Went Wrong

What Went Well

  • Maintained #1 Amazon market share in core category; Prime Day gross sales +53% y/y, outperforming broader Prime Day trends; early traction for Q11/Q14 mesh launches and additional shelf space at Target/Best Buy .
  • Software transformation progressing: deferred revenue increased to $1.1M; app bundling and intelligent product roadmap aim to lift ASPs and customer lifetime value .
  • Operational actions: inventory purchasing clampdown and focus on refurbishing returns; target to improve inventory turns to 3 by YE and 4 in 1H next year .

What Went Wrong

  • Inventory costing errors reduced Q2 gross margin by ~10.5 pts (19.7% reported vs ~30% adjusted), widened net loss; FY21 and Q1’22 restatements triggered non‑reliance 8-K and delayed Q2 10‑Q filing (grace period) .
  • Cash declined to $4.7M (from $10.5M in Q1); limited $0.2M availability under the $25M credit line; inventory rose to $34.3M, pressuring liquidity and cash conversion cycle .
  • Demand softness and retailer inventory tightening; Amazon Prime Day shifted to Q3 versus Q2 last year, weighing on Q2 revenue and margin leverage .

Financial Results

MetricQ4 2021Q1 2022Q2 2022
Revenue ($USD Millions)$10.5 $13.3 $12.9
Gross Margin (%)33.0% 31.5% 19.7% (30.2% before costing errors)
Net Loss ($USD Millions)$(3.187) $(2.539) $(4.427)
EPS (Basic/Diluted) ($)$(0.07) $(0.06) $(0.10)
Adjusted EBITDA ($USD Millions)$(3.137) $(1.664) $(3.442)

KPIs and Balance Sheet

KPIQ4 2021Q1 2022Q2 2022
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$13.1 $10.5 $4.7
Inventory ($USD Millions)$32.503 $29.957 $34.341
Bank Credit Line Outstanding ($USD Millions)$5.065 $7.072 $5.554
Deferred Revenue ($USD Millions)$0.736 $0.832 $1.103

Notes:

  • Q2 reported gross margin 19.7% included the adverse impact of inventory costing errors; management indicates underlying margin around 30% absent the error .
  • “Adjusted EBITDA” reconciliation items include stock-based compensation and revenue bookings; see exhibits for definitions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin (%)Q3 2022 onwardMaintain ~30% margin structure (pricing actions, competitive moves) Expect margins “back to ~30%” post correction of costing errors Maintained (post-fix)
RevenueQ3 2022Retail seasonality; flattish/down seasonality historically Cautious outlook; “close to modeling,” tempered by retailer inventory tightening Maintained qualitative
OpEx Run-rateQ3 2022N/AExpect flat vs prior quarter via cost controls/vendor consolidation; no planned RIF New qualitative
Inventory TurnsFY 2022 / 1H 2023N/ATarget ~3 turns by YE22; ~4 turns in 1H23 New targets
Cash/Working Capital2H 2022Cash to improve over year as sell-through occurs Expect improvement in 2H via seasonality (Prime Day/Black Friday), AR collection, stable debt Maintained qualitative
NASDAQ Minimum BidThrough Apr 2023 (potential extension)Received notice (Apr 25, 2022) Will seek 180‑day extension; Board evaluating options Status update

No explicit numerical revenue/EPS guidance ranges were provided in Q2 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2021 & Q1 2022)Current Period (Q2 2022)Trend
Supply Chain & CostsSupply chain disruptions and inflation pressured margins; diversified ODMs; built inventory as hedge Still challenging; long in-transit times (70–80 days) impacting cash cycle; working with ODMs on terms Persistent headwinds; operational mitigation
E-commerce & Retail Footprint#1 share on Amazon; expanding Walmart.com; new rep groups/distribution Maintained #1 on Amazon; +53% Prime Day sales; added Target/Best Buy shelf space; cautious on retailer inventory tightening Strength online; mixed retail backdrop
Product Roadmap (WiFi 6/6E)WiFi 6 launches; planned Q11 (AX3000) and Q14 (WiFi 6E) Q11/Q14 launched on-time; bundled with motosync; higher ASP expected Execution progress
Software/Recurring RevenueDeferred revenue grew to $832k; app bundling; CLTV expansion strategy Deferred revenue $1.1M; pairing app to all products by YE; premium features roadmap Building subscription base
Inventory & CashPlan to bring down inventory; cash to improve with sell-through Inventory up to $34.3M; clampdown on purchases; target turns improvement; cash $4.7M Near-term pressure; remediation plan
Regulatory/NASDAQMinimum bid price noncompliance risk noted Will seek 180-day extension; Board evaluating options Ongoing compliance risk

Management Commentary

  • “Second quarter results reflect the near-term challenges… and a challenging year-over-year comparison as Amazon Prime Day shifted from a Q2 event last year to a Q3 event this year… We are maintaining our #1 position on Amazon… successful Prime Day… and making great strides on walmart.com, despite softening consumer demand.” — Mehul Patel, incoming CEO .
  • “We are well-positioned to meet current demand and increase recurring revenue from software. In the near-term, we will be focused on a more diligent approach to the allocation of capital and cost containment while continuing to advance our transformation…” — Mehul Patel .
  • “The restatement was caused mostly by a favorable $1.9 million inventory costing errors related to returns… however, this correction also impacted Q2 by reducing our gross margin by 10.5%.” — Dustin Tacker, CFO .
  • “We expect margins to be around 30% excluding these one-time costing… going forward it should not impact any gross margins.” — Dustin Tacker .

Q&A Highlights

  • Margin trajectory: Management expects gross margins to return to ~30% post-correction; reiterated structural pricing actions and competitor pricing support margins .
  • Revenue outlook and retailer dynamics: Q3 revenue expected “close to modeling” but cautious due to retailer inventory reductions (Target, Best Buy) and demand softness .
  • Cash flow and working capital: Plan to aggressively improve inventory turns (to 3 by YE, 4 in 1H23), clamp down purchases, negotiate ODM terms to address elongated transit times (70–80 days) .
  • OpEx discipline: No near-term RIF; vendor consolidation and cost controls aim to keep OpEx flat q/q despite inflation adjustments .
  • NASDAQ compliance: Intends to seek 180-day extension for minimum bid deficiency; Board evaluating options; investor concern acknowledged .

Estimates Context

  • Wall Street consensus via S&P Global for MINM (EPS and revenue) was unavailable due to missing CIQ mapping; as a result, comparisons vs consensus could not be presented. If SPGI mapping becomes available, we will update with “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q2 2022 and prior quarters.

Key Takeaways for Investors

  • Near-term margin recovery likely once costing errors are corrected; monitor gross margin normalization toward ~30% in Q3/Q4 as a catalyst for sentiment improvement .
  • Revenue trajectory is seasonally supported in 2H (Prime Day/Black Friday), but retail inventory tightening and demand softness warrant caution; track Amazon share retention and Walmart.com growth for confirmation .
  • Liquidity risk elevated: cash down to $4.7M with inventory at $34.3M; execution on inventory turns and ODM terms will be critical for cash conversion and reducing reliance on the credit facility .
  • Software/recurring revenue strategy is advancing (deferred revenue to $1.1M); successful rollout of motosync to all products and premium features could improve CLTV and margin mix over time .
  • Product mix upgrade: Q11/Q14 WiFi 6/6E launches at higher ASPs can support margin/ASP improvement; monitor placement and sell-through across retailers .
  • Corporate/market structure risks: restatement/internal controls remediation in progress; NASDAQ minimum bid deficiency remains a potential overhang until resolved .
  • Trading implications: stock likely sensitive to evidence of margin normalization, cash conversion (inventory reductions), and continued e-commerce outperformance; downside risks tied to further retail demand weakening or delays in restatement filings .