all for standing by and welcome to the Sierra Wireless Q1 2022 earnings conference call. Please note that all lines will be in listen-only mode until the question and answer session of today's conference. To ask a question over the phone at that time, you may press the star key followed by the number one. Please also note that today's call is being recorded. I'll now turn the call over to your host, David Climie. Sir, you may now begin. Thanks, and good afternoon, everybody. Thank you for joining today's conference call and webcast. On the call today are Phil Brace, President and CEO, and Sam Cochrane, our CFO. As a reminder, today's presentation is being webcast and will be available on our website following the call. Before we get started, I'll reference the company's cautionary note regarding forward-looking statements. Today's presentation contains certain statements and information that are not based on historical facts and constitute forward-looking statements within the meaning of securities laws. These statements include our strategy, goals, objectives, expectations, and commentary regarding the outlook for our business. Our forward-looking statements are based on a number of material assumptions, which could prove to be significantly incorrect. Additionally, forward-looking statements are based on our management's current expectations, and we caution investors that forward-looking statements, particularly those that relate to longer periods of time, are subject to substantial known and unknown material risks and uncertainties that could cause actual events or results to differ significantly from those expressed or implied by our forward-looking statements. I draw your attention to a longer discussion of our risk factors in our Annual Information Form and management's discussion and analysis, which can be found on SEDAR and EDGAR, as well as other regulatory filings. This presentation should also be viewed in conjunction with our quarterly earnings release. With that, I'll now turn the call over to Phil for his quarterly update. Thanks, David, and thanks everyone for joining us on the call today. We had a strong start to the year with total revenue of $173.0 million in the Q1. Q1 revenue grew 60% year-over-year and 15% sequentially, well ahead of our guidance for the quarter. In the Q1, we generated $8.6 million in adjusted earnings from continuing operations and $15.8 million in adjusted EBITDA, our most profitable quarter in more than three years. Our strong revenue and profit growth in Q1 were the result of solid customer demand, improved execution in manufacturing and operations, and our expanded product offerings, especially in 5G modules and routers starting to ramp. We are seeing continued momentum in key IoT markets, including industrial, enterprise, energy, and first responder, as more companies are collecting business-critical data from the edge of the network. The COVID-19 pandemic has accelerated Industry 4.0, and customers are wanting to manage their equipment in the field to avoid costly downtime, monitor performance, and do important preventative maintenance. In Q1, our product revenue, which includes both modules and routers, was up 86% compared to last year. In modules, we had a strong increase in 4G shipments in the Q1, and our 5G devices are continuing to ramp. Q1, we announced availability of our next-gen 5G module, the EM92, which enables high speed, low latency connectivity for demanding industrial enterprise networking use cases. We've optimized the RF design on 68 bands for truly global coverage with just a single SKU. Our low power wide area modules are getting solid traction in areas including smart meters, public lighting, and asset management. In our AirLink business, sales of our rugged RV series routers improved year- over- year, and sequentially, we saw our 4G/5G XR series shipping into key markets, including utilities and first responders in higher volume. We are expecting the XR series to be our fastest ramping product line in our history as these routers get certified on more global carrier networks, including the Emergency Services Network in the U.K. In the Q1, we closed a number of new XR deals with major utilities and leading industrial manufacturers, and we continue to build on our leadership position in the public sector and first responder market with new state and county wins. We are especially proud that a growing number of police, fire, ambulance responders select AirLink routers for their ruggedness and reliability. In our connectivity business, we are expanding our network access, and in Q1 we partnered with Orange Wholesale France to strengthen our European coverage and global reach. We also expanded our partnership with T-Mobile in the U.S. to increase 5G and LPWA coverage in that market. Our APAC connectivity business continues to grow, especially in Australia and New Zealand. I believe that we're starting a decade of growth that is incredibly exciting for the wireless IoT industry. We're just beginning a multi-year 5G rollout that will introduce new high-speed applications and accelerate machine learning and AI. Leading industrial enterprise customers are digitizing their assets so they can collect data from their remote equipment, control endpoints, and run important analytics. Many of these customers are looking for a trusted Western supplier that can provide them with both IoT devices and seamless two-way data connectivity. All these trends play right into Sierra's strengths. Before I turn the call over to Sam to provide more details on the Q1, I'd like to provide an update on our manufacturing capacity and the current. Then I'll make some brief comments on the sale of the Omnilink business. Regarding manufacturing, we continue to ramp up capacity in Q1 in Mexico for production of routers and gateways. This will help us in Q2 as we build and ship more products, especially our newer RV series and XR series routers. With multi-factory production now in place, greater flexibility while keeping a sharp eye on costs and cost reduction opportunities. Regarding the tight supply chain, our procurement team continues to do a great job with our partners and suppliers, and we're using our strong balance sheet to continue to secure raw materials. We are continuing to secure orders from our customers for the out quarters, and we expect the supply chain to remain tight throughout 2022 and into 2023, particularly for semiconductor components. Regarding our offender monitoring business, on April eighteenth, we announced that we'd signed and closed the sale of Omnilink to Sentinel Advantage for $37.6 million in cash, the equivalent of 2.9 times 2020. We continue to value Sentinel as an important and growing customer, and we're providing them with our connectivity embedded modules going forward. Regarding our home security monitoring business, we have reviewed our strategic options and decided not to adapt, develop additional products for this business, which has resulted in obsolete inventory and an impairment charge in the Q1 of this year. We are taking a very disciplined approach to our business portfolio and focusing our efforts and investment dollars for the highest value for our customers and the best return for our shareholders. In summary, I would like to thank our employees, customers, and suppliers once again as we collectively work through the challenges of tight global supply chain environment, COVID-19 pandemic. We're off to a good start in Q1, and we expect 2022 to be a robust year for Sierra Wireless. With that, I'll turn the call over to Sam for his comments on- Thank you, Phil. Good afternoon, everyone. Note that we report our financial results in US dollars and on a US GAAP basis. We also present non-GAAP results to provide a better understanding of our operating performance. Full reconciliation between our GAAP and non-GAAP results is available on our website. Total revenue in the Q1 was $173.0 million, an increase of 60.1% compared to $108.1 million the same period last year. Looking at our two reporting segments, IoT solutions revenue was $133.7 million in Q1, up 79.3% year-over-year. Enterprise solutions revenue was $39.2 million, an increase of 17.2% year-over-year. In the Q1, product revenue grew by 85.6% year-over-year to $138.1 million. Connectivity software and services revenue was higher by 3.7% to $34.9 million compared to Q1 the prior year. Increase in connectivity software and services revenue included growth in our core connectivity area, including Smart Connectivity, which was partially offset by decreases in our legacy 2G, 3G European business and our home security business. The improved performance in the Q1 was primarily the result of our investment in working capital to meet strong demand from our customers. Improved sourcing of parts and components for our products with manufacturing capacity we brought on during the Q4 last year. Revenue in the Q1 of 2021 was also negatively impacted by the previously disclosed ransomware incident. Gross profit in the Q1 was $55.1 million, up 46% year-over-year. Non-GAAP gross margin improved sequentially to 32.5% in Q1 compared to non-GAAP gross margin of 32.1% in the Q4 last year. On a GAAP basis, gross margin was 31.8% compared to 34.9% in the Q1 last year, primarily due to the obsolete inventory in our home security business and expedited freight related to COVID shutdowns. Non-GAAP operating expenses in the Q1 were $45.0 million, down $1.4 million compared to Q1 last year and down sequentially. We will continue to manage our OpEx and CapEx tightly across all areas of the business. In Q1, adjusted earnings from continued operations was $8.6 million, compared to a loss of $9.6 million in the Q1 of 2021 and $1.1 million in adjusted earnings in Q4. Adjusted EBITDA was $15.8 million or 9.1% of revenue compared to negative adjusted EBITDA of $4.4 million in Q1 last year and $7.3 million in adjusted EBITDA in Q4. It was good to see improvement in both year-over-year and sequential financial performance. Moving to the balance sheet, the end of the Q1 of 2022 with $97.4 million of cash. Cash flow used in operations was $23.7 million in Q1, primarily due to our investment in inventory, including prepaid inventory advances. This investment has allowed us to both deliver strong results in Q1 and provide strong Q2 guidance. Capital spending in the Q1 was $3.1 million. Starting guidance for the Q2, the impact of COVID-19 on our global business continues to remain uncertain. While we continue to experience and evaluate the effects on our business, the overall severity and duration of adverse impacts related to COVID-19 on our business, financial condition, cash flows, and operating results for the remainder of 2022 and beyond cannot be reasonably estimated at this time. As Phil mentioned, global demand for our products remains strong. Given this environment, we are guiding a revenue range in the Q2 of the year of $160 million-$175 million, with a midpoint of $167.5 million. With that, I will now turn the call over to questions. Operator, please open the lines. Thank you, speakers. Participants, we will now begin the question and answer session. As a reminder, you may press the star key followed by the number one to ask a question over the phone. To withdraw your request, you may press the pound key. Again, that's star one to ask a question or the pound key to withdraw your request. Here's our first question is from the line of Anthony Stoss of Craig-Hallum. Your line's now open. Thank you. Hi, guys. Congrats. Just awesome execution. I know you're guiding for the next quarter, but is it fair to think based on your backlog or order book that each quarter will be up sequentially throughout the year for revs? Then also, you know, Phil or Sam, I'd love to hear your thoughts kind of on gross margins the remainder of the year. I had one other follow-up after that. Sure. Hi, Tony, it's Phil. I'll take the kind of demand question. Sam, you can kinda comment on the gross margin question. Yeah, look, right now, I mean, the demand for our products is incredibly strong. Our backlog is far in excess of what we can ship. Right now it's really about just kind of getting the parts optimized in the supply chain and getting things in place. We're not really guiding for the H2 of the year at this point, and you know, it remains we're just gonna do it a quarter at a time. I think it's fair to say demand for the products are strong, and for us right now, it's just about execution quarter on quarter. Yeah. Thanks, Phil. Sam, you wanna comment? On the gross margin, yeah, I think I mentioned last quarter that, you know, we're not providing guidance on gross margin, but I did say that we expect slight small sequential improvements in gross margin. I think we've seen it here on a non-GAAP basis, and I expect that to continue for the rest of the year. Okay. Then Sam, just following up, what do you expect for OpEx for the June quarter? Is it kinda flattish, down a little after the sale of the business unit? I'm just curious your thoughts on just where OpEx might be. Yeah, appreciate the question. Listen, I mean, OpEx, we've been managing it pretty tightly. It's down year- over- year, down sequentially. Going forward, we'll continue to manage it tightly and, you know, it's not going up. I'll put it that way. I think that answers your question. Got it. One last question for you, Phil. Just the demand picture. Are your customers willing to, you know, place orders even for next year just to guarantee supply? Also, if you're gonna get caught with additional component shortages, is it more likely on the module side of the business or the router side? Yeah. The two parts to your question. Yes, we are seeing demand. Customers are placing orders into 2023 at this point, which gives us better visibility into the demand environment probably than we've ever had before. In terms of component shortages, it's, you know, it's a mixed bag, but I will say just given the number of components, the enterprise product lines are tend to be a little more affected by that just because we have more components in them, and we tend to use some of the semiconductor components that tend to be more highly constrained. I'd say the enterprise business is more affected by supply chain shortages than the modules at this point. Got it. That's all my questions. Great job, guys. Thank you. Thank you. Your next question is from the line of Mike Walkley of Canaccord Genuity. Your line is now open. Great. Thanks. Yeah, Phil, congratulations to you and the team on securing components. I guess I'm just trying to get a little more color on how you're able to deliver upside in securing components when so many of your competitors, you know, are continuing to struggle to, you know, procure supply to even meet their guidance. You know, credit to your team, but maybe you can provide some color and within that, what it might mean to near-term gross margins as you maybe expedite shipments, you know, to continue to outperform the supply environment out there. Yeah. Thanks, Mike. I think one of the things just to remind you know when we were back in the depths of the real challenges we had the Q3 of last year we kinda put a 5-point action plan in place to kinda get ourselves out of it. One of the points at the time was look we were using our balance sheet to play offense. We continued to work closely with our key suppliers and continued to frankly place orders and work with them. You may remember our you know our working capital went up the inventory went up. We achieved in Q1 was really the foundation laid by some of the investments and the actions we took kind of in the prior quarters to lead us up to that. You know, continually as we look forward, you know, that remains to be seen. You know, we've also done, I think, I'm proud of the team, they did a good job managing some of the challenges with respect to the COVID-19 impacts, particularly in China. You know, we've got multiple factories up and running now. That's enabled us to be a little more resilient than we have been previously. You know, it's a combination of some decisions we made prior to play offense with our balance sheet, solid execution, and kind of having a multi-sided manufacturing strategy in place at this point. Great. Just a follow-up to that question, just on IoT Solutions. You know, the 30% gross margin, haven't seen a number like that in a long time. Was that mix or is that because of, you know, playing offense, you're able to pass on costs to your customers and, maybe you can discuss just the competitive environment in that area 'cause it seems like you guys are, you know, once again, you know, outperforming your peers, maybe with Telit, Fibocom, and some other changes in the dynamics. Just, is this 30% level sustainable going forward? Well, I mean, like, I guess I would say that that's a multi-faceted answer. Sam, you can kind of jump in there with some specifics, like I read them. When we look at the gross margin performance, you know, one of the factors is mix. We've certainly seen a good uptake of some of our higher end, higher performance modules, which has been helpful. Scale also helps, right? We're producing a lot more product now, so we're able to kind of amortize and, you know, what costs we have, we're able to amortize them over, you know, more volume. Our routers have been constrained a little bit. So that kind of makes a bit of an impact. With respect to price increases, we are in an inflationary environment, and we have been working to pass some of our pricing along. Keeping in mind we're in a competitive environment, right? I think the message that I'm giving to my team, and we just got to work closely with our customers. Customers will remember how we behave in this environment. You know, we're working really hard to make sure that we're getting them the products we need, but also doing the right thing for our business as well. The customers, I think, understand that. They're dealing with the same situations themselves, so. That's all. Last question from me, and I'll pass the line. Just on the disposition of the Omnilink business, what is the timing for that sale? I think you threw out a metric I missed. What is the annual contribution, and what kind of impact might it have to that division's gross margins as it comes out? Thanks. Sam, you want to take that? Yeah, sure. I mean, it closed in April, so you know, there won't be much in our Q2 numbers. The exciting part about this is that, you know, it's not gonna have an impact on our profitability, right? We get to have Sentinel as a valued customer, both in modules and connectivity going forward. You know, therefore, you know, no impact to our profitability in 2022, which I think is a very important point. Now, of course, there'll be an adjustment in our CS&S revenue. I think we disclosed $13 million or so in 2021 was their revenue. There will be a top line adjustment, but no impact on profitability. Sorry, was there another question kind of in there? No, that was it. I was just looking for those metrics. I appreciate- Yeah. Yeah. No. Okay, thanks. Yeah. We're really happy with it at close to 3x revenue, you know, good price, win-win for both parties. Got you. Your next question is from the line of Thanos Moschopoulos of BMO Capital Markets. Your line is now open. Good afternoon. I'll echo the congrats on the strong execution in the quarter. Just following up on the Omnilink disposition. That $13 million, should we think of that as being sort of the gross revenue, and then some of that comes back in terms of connectivity revenue? You can think of the $13 million as that was our total recurring revenue piece, the whole piece that was in the CS&S in 2021. We'll get a portion of that revenue back in 2022 based on our connectivity agreement with Sentinel, with the buyer. Obviously, we'll get some module revenue because they're gonna be a module customer as well. There will be an adjustment to the CS&S revenue, right? I mean, our connectivity revenue from Sentinel won't be at those levels. Right. Okay. Hey, Phil, I think I heard you say that Mexico is still ramping. As that continues to ramp, what might be the incremental benefits that we'll see in subsequent quarters from getting Mexico humming? Well, look, I think we've assumed that we've got a certain level of ramp going into Q2 that's reflected in the strong guidance. I mean, really, the biggest thing we're trying to manage there is kind of a transition of products from our older products to our newer products, which are the XR series 4G, 5G routers. We are trying to basically accelerate the movement there and ramp that up as fast as we can for two reasons. One, that's a better product for us and for our customers. Second off, we have better availability. Third, some of our older products, the MG and other series are tend to be very highly constrained. you know, I think the ramp-up in Mexico is kind of included in our guidance, and it really, underneath the covers there, it's around kind of migrating some of our towards some of our newer products. Great. From a working capital perspective, inventory went up $6 million sequentially, which isn't all that bad at all given the revenue uptick. How should we think about that kind of going forward? Maybe a bit of a modest increase, or is it kind of hard to call just given the lead parts. Yeah. Let me jump in there. When you look at inventory, you kind of also have to look at our prepaids to kind of get a sense of them, 'cause some of it is prepaid in terms of how we work with our contract manufacturers. We did have an investment in working capital in the quarter, right? That is, again, to basically invest in that higher revenue base, in that growing higher revenue base, we made that investment. Going forward, you know, we expect our working capital to normalize at those higher revenue levels, and we don't expect, you know, to need to make investments in that level, right? I mean, it's been made, and we're happy with that. Sure. Finally on 5G and the ramp there, I think typically, you know, as new products ramp, there's a temporary impact on margins. I mean, is that something to think about or in the grand scheme of things, not enough of a material impact versus the other push and takes in the margin side? Yeah. Yeah. I'll give you a high level. You know. Okay. Go ahead, Phil. Why don't you take? Yeah. No, you can comment. Yeah, sure. I mean, yeah, it's not really material, to be honest. It's sort of baked into the cake that what I talked about earlier, that we expect, you know, small sequential increases in gross margins going forward, for all the reasons we've talked about, you know, price increases, mix, recovery from 2021 COVID-related shutdowns. All those things, you know, more volume on the scale. We do expect to have, you know, small sequential increases in gross margin in the near term. That's sort of baked into the cake, a small impact from new product releases. Great. Thanks, guys. I'll pass the line. Next question is from the line of Josh Nichols of B. Riley. Your line's now open. Yeah, thanks for taking my question. Great to see the type of execution here in the Q2 where a lot of competitors have found it to be pretty challenging. Just, I wanted to ask if you could provide a little bit more detail. I mean, such strength from the IoT Solutions business. Are there any particular pockets of strength regarding industries and markets that are driving the growth mostly, or is it spread fairly evenly across your end markets? That's a good question. This is Phil. I mean, we're seeing very strong uptake in our 4G products. I mean, particularly some of our products in smart meters, industrial lighting, asset control, very strong demand there. Some of our new 5G modules are also getting really good pickup in industrial networking and public safety environments there as well. You know, our new products are getting great reviews. From an IoT Solutions perspective, it's really, I would say, very strong in industrial smart meters, energy, oil and gas, those kind of markets. Public safety, really very strong demand from there. That's great. Then just thinking about how things are likely to play out for the remainder of the year. The company's clearly invested heavily in the inventory balance over the last several quarters, and that's paid off pretty well for the company. What's the expectation going forward? Is that previous investment likely to become a significant source of cash flow as it unwinds and the working capital improves, or is it likely to kind of maintain around these levels? You know, I think I'll make some comments, and then Sam, you can comment. Look, I think Sam kind of mentioned, we do expect our inventory levels to kind of peak here in the Q1. Sam commented the fact we've made the investment in working capital and, you know, we are going to contain our expenses closely. It's our expectation that we start turning this into cash. Sam, you wanna comment anymore? Yeah. I mean, listen, cash will be up in Q2, right? We have a divestiture of Omnilink, which obviously helps a lot, right? Looking back, we chose to invest in working capital to support our higher revenue base, right? On a free cash flow basis, we do expect that working capital to normalize at those higher levels. Therefore, looking ahead, you know, free cash flow into Q2, you know, you can expect that to flatten out. Then for sure, you know, when you run it through the models, you're gonna be looking at positive in the H2 of the year. You know, just directionally, I hope that helps. No, thanks. That's good color. Just for, like, the revenue trajectory, I mean, the H1 has been, you know, quite strong. Thinking about the H2, is there any regarding seasonality trends or order flows that you're getting, you have some stuff going into 2023. Is the H2 expected to be kind of relatively comparable to the H1 based on what you're seeing on the backlog here, or up or down a bit? You know, I just think from a demand environment, it is so difficult to say what is quote-unquote normal and what is seasonal, because there is so much noise in the system with respect to the supply environments. It's not even just our supply, it's our customers, right? Even if they're able to get stuff from us, are they able to get the rest of what they need to put stuff into the market? I think what we see and kind of what's comprehended in our guidance is, you know, our backlog remains far in excess of what we're able to ship. We are starting to secure orders into 2023, and we expect to remain supply constrained, certainly throughout 2022 and probably into 2023 as well. That's what we're seeing right now. Great. That's it for me. Thanks. Here's your next question is from the line of Paul Treiber of RBC Capital Markets. Your line's now open. Oh, thanks very much, and good afternoon. Congratulations on the quarter as well. Just wanted to hone in on a couple of comments you made on COVID in China. You mentioned, you know, good job managing the COVID impact in China. Can you elaborate on that and exactly how you mitigated potential challenges there? Yeah. I mean, sure. When we gave guidance, I mean, both Suzhou and Shanghai have been affected by COVID in the past, certain times. We, along with our manufacturing partners there, were able to do a pretty good job in managing those situations, so they didn't impact the financial results. We were able to kind of move some stuff around, and frankly, our partner did a pretty good job of helping manage some of that as well. That's about all I can say. Is that all execution within China? You weren't moving it to your other facilities like Mexico or I think Vietnam? The most of what's built in China these days is modules, and so we kind of flex back and forth between China and Vietnam. Okay. Thank you. There was a comment in the prepared remarks just around COVID uncertainty in general for the remainder of the year makes it difficult to forecast. Is that, you know, a fairly like boilerplate comment, or is there anything specific that concerns you know, that you may have picked up you know, in your supply chain or elsewhere? There's nothing unique. And I'll- Uh. Yeah. Go ahead. Yeah, there's nothing unique to us. It is boilerplate in a way, but I mean, the pandemic is ongoing. There are shutdowns in China. The supply chain is impacted and, you know, it continues to cause, you know, unforeseen things to happen, like the shutdown in China in the Q1 when we were guiding. Right? You know, is that gonna go away soon? You know, we hope, and there's good indication that that's getting a lot better, but I don't think it's time to remove that risk language yet. Last one from me. You mentioned orders going out to 2023. Can you put that into perspective in terms of like the lead times that you normally have? Then if, you know, with these orders that are out so far, are you able to get additional commitments from your customers, either, you know, contractually or other terms in those agreements? Yeah. I mean, look, I think that it's fair to say that this is probably the longest lead time that we've seen from our customers. I mean, certainly goes back, I'm not a historian, but a long, long time. It could be the longest ever. Some of it is I think just the new realization, the new world that customers recognize that they need to give us and give their other suppliers as well, more visibility, from that side. Yes, in some cases, we are working through non-cancellation kind of provisions in some of those orders, particularly for orders that have very long lead time or unique components that are difficult to move around. The short answer is, I think the visibility is probably as good or as certainly the best we've ever seen. Yes, in some cases, we are working through some special terms that give us some protection on the downside. Great. Thanks for taking my questions. Thank you. Next question is from the line of Scott Searle of Roth Capital. Line's now open. Good afternoon. Thanks for taking my questions. Absolutely phenomenal job on the quarter, guys. Hey, Phil, maybe to just jump in on the services side of the equation, that's one area where there hasn't been a lot of growth. There's been some fixing that you need to do there. I was wondering if you could. Yeah talk a little bit about what you're doing on that front from a gross margin standpoint, from a pricing of a connectivity standpoint, and how we should be thinking about that business in terms of where gross margins can get to and at what level of scale do you need for that segment to be profitable? Yeah, a lot of questions in there, so let me try my best. I do wanna, you know, if you just kinda look underneath that, I think I've talked about that, there are a number of sub kind of constituents in that portion of the business. The major big portion we're focused on is what I'll call our core connectivity business. This is Enhanced Coverage Connectivity and Smart Connectivity. Both of these businesses are continuing to grow. We've got some pockets of strength, certainly in APAC and other where the growth, so those businesses are growing. We also have some other businesses that I'll call them legacy businesses, non-core businesses. You saw that we divested one of them, the prisoner tracking business. We talked about the home security business that we're starting to harvest. Frankly, I've probably got some more work to do in there. Gross margins from that point of view, I think there are some public comps out there and I think our goal is to kinda get near there. I mean, I think our goal should be in the 50s% for that kind of business. Okay, perfect. Maybe switching gears over to the enterprise side of the equation, just wanna clarify a couple of things. You had obsolete inventory written off in there, cost you 900 basis points. When I think about the normalization of that, it's still below where it's been. Just wanna clarify, it sounds like there are still some component availability issues on that front. You know, do we expect the gross margins there to bounce back a little bit? Or there's some other mix issues going on with new products like the 5G solutions? Hey, let me Danny, Jump in and take that one. Yeah, yeah. There's a few things, you know. Correct, there was the sort of obsolete inventory related to the decision around harvesting the home security business, which you also saw an impairment in the GAAP numbers for that. There was also some expedited freight in there. There's one-time in nature getting Mexico ramped up, you know, as we were sort of shut down in Vietnam with COVID, you know. There was some rushing happening there. And a little bit of mix. Like the new product introduction is a small impact there as well, with the new 5G product. Nothing material on that front. Again, as we sort of move forward and that mix improves, those one-time items dissipate, we'll see improvements there in the gross margins. Gotcha. Very helpful. Maybe if I could follow up on their services component to that. Are you starting to see the ability for a higher attach rate or Cradlepoint-like models to go along with the enterprise business, Phil? Yeah. That's an area of key focus for us, an area I don't think we focused as much on as a company. I think it's early to say with that, Scott. I think rest assured we are clearly focused in driving that kind of attach rate up. It's a key part of our products going forward. Okay. Last one, I'll put it in the unfair category. As you know, I like to ask. As we look at the world today, I mean, the Q1 results are where we expected you to be maybe four, six quarters out. It's an absolutely phenomenal job on that front. When I think about a normalized level of operations, maybe if we call it the Q2, still supply constrained. I'm trying to get my hands around what the growth rates are as we're thinking about 2023 in a normalized environment for modules, the enterprise side, and then the services side. Thanks and great job again. You know, I think honestly it's fair for us to comment on what's going on in 2023 at this point, other than we've got to continue to build order books in there, and we continue to have super strong demand. The customers are loving our new products, and we continue to make forward traction. With that, we're just gonna do one quarter at a time and continue to focus on delivering profitable growth. Fair enough. Nice job. Thanks, Phil. Thank you, participants. I'll now turn the call back over to panel for final remarks. Great. I just wanna thank everybody for joining us on the call today. Appreciate the support. Once again like to thank our customers, suppliers, employees for helping us work through a difficult situation. It's been a strong start to the year, and we look forward to continuing the momentum into 2022. Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect.