Radios and wireless infrastructure; contract PCBA manufacturing
When Wulchin founded FreeWave in the early 1990s, the company was a first mover in the radio frequency (RF) space and grew rapidly. When Boston-based TA Associates invested $113 million in the company in 2007, it was one of the largest equity deals in Colorado history.
Wulchin took the opportunity to buy TA out in 2018. "It worked out really well," he says. "It's given us a lot more flexibility."
It follows that FreeWave has pivoted to a new model that encompasses hardware as well as software the Industrial Internet of Things (IIoT).
Previously VP of worldwide sales, Byles took over day-to-day operations as CEO at the time of the deal. "Since that time, we really embraced the edge and realized we needed to get more into the field of edge applications instead of just working with ecosystem partners," says Byles. "As much as we depended on narrowband business for FreeWave over the years, for us to show real growth, we needed to get into other communication technologies. We also recognized that we could support our customers with applications they needed."
It follows that FreeWave acquired CPU LLC in 2020 and rebranded the CPU Operations Software Suite as the FreeWave Operations Software Suite (OSS). It represents the company's first acquisition and its first strategic foray into software, and OSS now underpins its edge products.
New in 2021, the FreeWave Fusion Bridge is a dual-radio bridge that adds seamless W-iFi connectivity to remote networks. "It's a modular platform where we can use our narrowband technology along with standards-based radio," says Byles. "Going forward, we'll be able to add other technologies to that platform very simply."
Adds Wulchin: "It's a very different product platform and we do not want to be just a hardware manufacturer in the IIoT space and the edge space."
FreeWave's investments into software and edge technology have "really paid off," says Byles. "As we go forward this year, we're seeing quite a bit of growth and a lot of new custom acquisition with these new platforms."
Oil and gas is a big market, as are government/defense and agriculture; FreeWave has also found success supplying utilities in Europe. "Our hardware is a really good solution for any kind of tank monitoring, whether it's shrimp or oil and gas or wastewater," notes Byles. "Folks need more definition of what's going on at those sites. Our software is just key to that."
FreeWave manufactures its products at its 35,000-square-foot headquarters in Boulder. The operation has become increasingly automated in recent years as the company streamlined its catalog and production processes.
Following what Byles terms as "a very good year" in 2019, COVID-19 negatively impacted FreeWave in 2020. "Like a lot of people, we ended up with excess capacity," says Wulchin, noting that's led to a new contract manufacturing initiative that leverages in-house surface-mount capabilities for making printed circuit board assemblies (PCBAs). "We've been building our own products in-house for 20-plus years, which was unheard of 20 years ago."
He adds, "It's a good way for us to both generate cash flow and also contribute something back to the market, where we think we have a nice niche in the area."
FreeWave is also moving into value-added services for contract manufacturing customers, including QA and final assembly. Wulchin says he sees potential in offering engineering and fulfillment services as well.
The target market: high-tech manufacturers on the Front Range. "From a product standpoint, the ideal customer is one that's in the industrial space that sees the value of manufacturing stateside," says Wulchin. One customer is "a five-minute drive away," he adds, "which is a lot better than a 14-hour plane ride away."
The moves have Byles bullish on FreeWave's future, and he forecasts a minimum of 15 percent growth for 2021 based largely on customers the company acquired in 2020. "Right now, we're doing much better than that on top line and bottom line, and expect to exceed our plan significantly by the end of the year," he says. "It's not in oil and gas -- it's new customers in other verticals that are really showing promise."
Challenges: Turning hardware customers into software buyers. "The challenge now is to begin our march towards recurring revenue and managing how our customers will embrace or won't embrace that type of a model," says Byles. "Typically, it's been a one-time buy, deploy, and walk away, and now with our software, there's still an opportunity to do that, but as a company, we really want to get into that recurring revenue model and start seeing the new platforms being purchased on a monthly basis versus a one-time buy."
FreeWave's big challenge in contract manufacturing is "just getting to be known," adds Wulchin. "All of the customers we have landed so far have been gotten through networking, and we're trying to thread the needle . . . between growing contract manufacturing and not having that be our predominant volume in manufacturing."
Opportunities: Software and contract manufacturing are at the top of the list. "We've truly pivoted the company," says Byles. "Our engineering resources don't look anything like they did in 2019."
Wulchin also points to potential to expand beyond North America as well as further diversify into industries beyond its key markets. Shrimp farming is just one example: "Not only is it a significant vertical market, it is truly global."
Needs: "For us right now, it's international partnerships that are going to carry us to the next level," says Byles, noting that the company is looking to build a network of value-added resellers and integrators. "As we build up our end-user business internationally, those folks will come, but it's definitely something we have in the United States and North America that helps us quite a bit that we don't quite have across the globe today."