Airgain (AIRG) Q4 2024 Earnings Call February 28, 2025 12:36 AM ET Company Participants Jacob Suen - Chief Executive OfficerMichael Elbaz - CFO & Secretary Conference Call Participants Anthony Stoss - AnalystTim Savageaux - MD & Senior Research Analyst Operator Good afternoon. Welcome to Airgain's Fourth Quarter and Full Year twenty twenty four Conference Call. My name is Julian, and I'll be operator for today's call. Joining us today are Airgain's President and CEO, Jacob Soon and CFO, Michael Alves. As a ...

Airgain (AIRG) reported break-even quarterly earnings per share versus the Zacks Consensus Estimate of $0.03. This compares to loss of $0.33 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -100%. A quarter ago, it was expected that this antenna products developer would post a loss of $0.02 per share when it actually produced break-even earnings, delivering a surprise of 100%.Over the last four quarters, the company has surpass ...

Financial Performance - The company reported a net loss of $8.7 million for the year ended December 31, 2024, a decrease from a net loss of $12.4 million in the previous year[75]. - The accumulated deficit stood at $87.2 million as of December 31, 2024[69]. - The company incurred an accumulated deficit of $87.2 million as of December 31, 2024, and has a history of losses since inception before 2013[91]. - Approximately 54% of the company's total revenue for the year ended December 31, 2024, came from customers that accounted for 10% or more of sales[92]. - The company expects operating expenses to increase over the next several years due to hiring additional personnel and developing new wireless ecosystems[91]. - The company’s operating results may fluctuate significantly, making future performance difficult to predict[75]. Market Strategy and Competition - The company aims to drive growth in complex system solutions in the enterprise and automotive markets, including AC-Fleet, Lighthouse, Lantern, and asset tracking solutions[71]. - The company has historically driven revenue growth primarily through embedded antennas, external antennas, embedded modems, and custom IoT products, largely in the consumer market[71]. - The company faces intense competition in the wireless connectivity solutions market, which may lead to increased pricing pressure and reduced profit margins[82]. - The company faces intense competition in the electronics market, leading to aggressive price negotiations and potential lower margins[94]. Supply Chain and Production Risks - The company relies on a limited number of contract manufacturers and original design manufacturers, which poses risks to production and sales[69]. - The company is subject to risks related to supply chain complexity and procurement of specialized components, which could impact production[73]. - The company experienced supply chain disruptions in 2021 and 2022, leading to increased costs and volatility in sales[98]. - The company relies on a limited number of contract manufacturers (CMs) and original design manufacturers (ODMs) for production, which poses risks to its ability to market and sell products[95]. - The company anticipates potential shortages and higher prices for components due to export controls and tariffs in 2025[100]. - Lengthy sales cycles for products can lead to customer cancellations, impacting anticipated sales and inventory management[90]. Regulatory and Compliance Challenges - The transition to wireless systems solutions introduces additional regulatory compliance challenges for new products[87]. - The company must maintain robust software and cybersecurity protocols to avoid product malfunctions and customer dissatisfaction[88]. - The company may incur substantial costs related to data privacy compliance due to evolving laws and regulations in various jurisdictions[140]. - The company may face increased scrutiny and regulatory challenges regarding data transfers and privacy compliance under the GDPR and other international laws[138]. - The company is subject to U.S. export control laws and regulations, which may limit its ability to conduct business internationally, particularly in China[146]. - In October 2023, the Bureau of Industry and Security announced additional restrictions on the export of certain advanced computing chips and manufacturing technology to China, which may adversely affect the company's operations[150]. - The U.S. announced an increase in tariffs on solar wafers and polysilicon imported from China, raising them from 25% to 50% effective January 1, 2025, potentially increasing production costs and disrupting supply chains[151]. - The U.S. Uyghur Forced Labor Prevention Act could impact the sourcing and availability of products, leading to potential supply chain disruptions and penalties[148]. - Regulatory changes, including the EU's Corporate Sustainability Due Diligence Directive, may introduce new compliance obligations and increase operational costs[148]. - The company faces risks related to compliance with anti-bribery laws, which could result in costly investigations and penalties[160]. - Changes in export or import laws may delay or prevent the introduction and sale of the company's products in international markets, adversely affecting financial results[146]. - The evolving regulatory environment may necessitate modifications to the company's products, potentially increasing costs and delaying market entry[159]. Intellectual Property and Legal Risks - The company relies on patents, trademarks, and trade secret laws to protect its intellectual property, but faces challenges in enforcement and potential infringement claims[129]. - The company may be required to indemnify channel partners and end-customers for intellectual property infringement claims, leading to significant costs[133]. - The company may face litigation risks that could result in significant liabilities and distract management from business operations[174]. Capital and Financial Strategy - The company may seek to raise additional capital through equity offerings, debt financings, or licensing arrangements, with a potential offering price of up to $5 million[111]. - The company has approximately $19.6 million in federal net operating loss (NOL) carryforwards and $11.9 million in state NOL carryforwards as of December 31, 2024, which may offset future taxable income[120]. - Federal NOLs generated after December 31, 2018, will carry forward indefinitely but can only offset 80% of future taxable income[120]. - The company has federal and state research and development tax credit carryforwards of approximately $2.4 million and $2.0 million, respectively, available to reduce future income tax liabilities[120]. - The federal NOL carryforwards begin to expire in 2029, while state NOLs will start expiring in 2026[121]. - The company recorded a $16.7 million valuation allowance related to its NOL carryforwards and other deferred tax assets due to uncertainty in realizing future tax benefits[123]. Management and Operational Risks - The company may experience management turnover, which could delay or prevent the achievement of its business objectives[109]. - The company relies on third-party consultants for design and marketing, which poses risks if these consultants do not perform effectively[117]. - The company is classified as a non-accelerated filer, which affects the ability to depend on independent registered public accounting firm attestations regarding internal control over financial reporting[124]. - The company has limited research coverage by securities and industry analysts, and adverse opinions could lead to declines in stock price and trading volume[164]. - The company incurs significant costs associated with operating as a public company, particularly in compliance with laws and regulations, which may increase as it no longer qualifies as a smaller reporting company[170]. - The company is subject to the provisions of Section 203 of the Delaware General Corporation Law, limiting stockholders owning over 15% of voting stock from merging or combining with the company[166]. - The company has anti-takeover provisions in its charter documents that could delay or prevent changes in control or management, potentially affecting the market price of its common stock[165]. Economic and Market Conditions - Economic and market conditions, including geopolitical events, may negatively impact the company's operating results and growth rates[180]. - Rising interest rates and weakening foreign exchange rates could lead to a decline in overall demand for the company's products and services[181]. - The closures of financial institutions in 2023 have created liquidity risks that may affect the company's access to working capital and overall market conditions[182]. - Future credit and financial market instability could make necessary debt or equity financing more difficult and costly, adversely affecting the company's growth strategy[182]. Environmental and Natural Disaster Risks - The company faces potential increased costs and liabilities due to compliance with various environmental and worker health and safety laws[125]. - The company is exposed to risks from natural disasters, particularly due to its headquarters in Southern California and facilities in regions known for seismic activity, which could adversely impact its business[178]. COVID-19 Impact - The COVID-19 pandemic has had a material adverse effect on the company's business and operations, highlighting vulnerability to public health crises[127]. Cybersecurity Risks - The company relies on information technology for various business processes and is susceptible to risks such as cyber-attacks, which could materially affect its financial condition and results of operations[175]. - The company has seen no material impact from information technology security threats to date, but future breaches could result in significant costs and damage to its reputation[176].

Financial Results - Airgain, Inc. announced preliminary unaudited financial results for Q4 2024, ending December 31, 2024[7]. - The company reported a cash position of $XX million as of December 31, 2024, indicating a strong liquidity position[7]. - Specific revenue figures and growth percentages for Q4 2024 will be detailed in the attached press release[7]. - The management provided guidance for Q1 2025, projecting revenue growth of XX% compared to Q1 2024[7]. Strategic Initiatives - The company is focused on expanding its market presence and developing new technologies to enhance product offerings[7]. - Airgain, Inc. continues to explore strategic partnerships and potential acquisitions to drive growth[7]. - The company is investing in R&D for new product lines aimed at increasing market share[7]. - Airgain, Inc. is committed to maintaining operational efficiency while scaling its business[7]. Future Outlook - User data metrics and customer engagement statistics will be highlighted in the upcoming detailed report[7]. - Future outlook remains positive with expectations of continued revenue growth and market expansion initiatives[7].

Core Insights - Airgain, Inc. has launched a solar-powered Smart Network-Controlled Repeater named Lighthouse Solar to enhance 5G connectivity in underserved areas, aiming to bridge the digital divide and create new revenue opportunities [1][5] Product Overview - The Lighthouse Solar is a wireless signal booster that actively monitors and adjusts its transmission settings to optimize signal strength and quality, making it more effective than traditional signal boosters [2] - This solution is scalable, cost-efficient, and can expand telecommunications infrastructure in hard-to-reach areas, providing approximately 20% expansion in 5G coverage [3] Performance and Benefits - Recent trials indicate that Lighthouse Solar offers over 50% improvement in spectrum efficiency, maximizing network utilization and enhancing operator profitability [4] - The solution is easy to install and can be deployed in less than a day without reliance on power grids, significantly reducing capital and operating costs for telecom carriers [4] Market Impact - The introduction of Lighthouse Solar is expected to strengthen Airgain's market position and encourage carriers to undertake large-scale deployments, leading to incremental revenue generation for the company [6] - Airgain's stock has increased by 71.4% over the past year, outperforming the industry growth of 38% [6]

Today, I’ll be covering Airgain, Inc. (NASDAQ: NASDAQ: AIRG ) a micro-sized player in the world of wireless connectivity. Airgain specializes in crafting antenna systems—both embedded and external—along with integrated solutions and IoT solutions for a mix of industries. Their reachThe mission of Grassroots Trading rests on the following principles: providing objective, unbiased, and balanced research, backed by solid data and completely void of emotional influences or preference for companies; focusing on ...

Financial Data and Key Metrics Changes - In Q3 2024, Airgain reported sales of $16.1 million, a 6% increase sequentially and an 18% increase year-over-year, driven largely by strong performance in the consumer market [8][27] - Gross margin for Q3 was 42.8%, up 130 basis points sequentially and 380 basis points year-over-year, reflecting stronger margins in enterprise and automotive markets [29] - Adjusted EBITDA was $0.1 million, an improvement from negative $0.4 million in the prior quarter, while non-GAAP EPS came in at breakeven [32] Business Line Data and Key Metrics Changes - Consumer market sales reached $6.9 million, a sequential increase of $2 million, driven by demand for Wi-Fi 7 antennas [27][10] - Automotive market sales were $2.5 million, up $0.8 million sequentially, primarily due to higher sales of RECON13 antennas and initial shipments of AirgainConnect Fleet [12][28] - Enterprise sales decreased to $6.7 million, down $1.9 million from the previous quarter, primarily due to lower sales of custom IoT products impacted by excess inventory [15][28] Market Data and Key Metrics Changes - The consumer market showed exceptional growth, marking the best performance since Q3 2022, with significant demand for advanced connectivity solutions [10] - The automotive market is expected to see continued growth, driven by the strong momentum of AirgainConnect Fleet and positive customer feedback [14][12] - The enterprise market faced challenges with a larger-than-anticipated decline, but there are expectations for a modest recovery as inventory levels normalize [15][18] Company Strategy and Development Direction - Airgain is shifting from being solely a component supplier to a comprehensive provider of wireless system solutions, focusing on maximizing established business and expanding into integrated wireless solutions [19][20] - The company aims to capitalize on emerging growth opportunities in asset tracking and 5G connectivity solutions, with a projected serviceable addressable market of $1.1 billion in 2024, expanding to $5.5 billion by 2028 [25][20] - Investments in new product launches and an expanded sales force are expected to help navigate industry-wide inventory adjustments and drive growth [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about market potential and broader industry recovery, despite challenges in certain product segments [35] - The company anticipates a modest quarter-over-quarter uptick in enterprise sales as inventory levels normalize, with strong momentum in key product lines [18][36] - Future growth is expected to be driven by the ongoing ramp-up of Wi-Fi 7 shipments and the expansion of the RECON13 antenna sales pipeline [20][36] Other Important Information - AirgainConnect Fleet achieved certification from major operators, including T-Mobile and AT&T, validating technology performance and ensuring network compatibility [9] - The company has received its first commercial order for the Lighthouse smart repeater from an international MNO, which is expected to accelerate customers' time to market [37] Q&A Session Summary Question: Details on ongoing customer trials for Lighthouse and AirgainConnect Fleet - Management indicated there are roughly 40 ongoing trials for AC-Fleet, with expectations for continued growth [41] - For Lighthouse, two trials are expected to complete in Q4, with one pending domestically [41] Question: Market size for the auto airplane mode tracker and trial requirements - Management noted the market is still niche but has potential applications across various sectors, with AI technology enhancing predictability [45][46] Question: 5G network infrastructure opportunity and initial order shipping timeline - Management confirmed initial revenue from Lighthouse is expected in Q4, with broader deployment anticipated in the first half of next year [48][52] Question: Growth expectations for 2025 and breakdown of existing businesses - Management stated it is early to provide guidance beyond Q4 but expects growth across all three markets, with automotive being a significant contributor [53][64] Question: Revenue conversion timeline for Lighthouse and NimbeLink - Initial revenue from Lighthouse is expected in Q4, while inventory challenges persist in the custom IoT products space [62][63]

Financial Performance - Sales for the three months ended September 30, 2024, increased by $2.4 million or 17.6% compared to the same period in the prior year, reaching $16.1 million [88]. - Gross profit for the three months ended September 30, 2024, increased by $1.5 million or 28.2%, with a gross profit margin of 41.7% compared to 38.2% in the prior year [91]. - Total operating expenses for the three months ended September 30, 2024, increased by $1.4 million or 19.3%, totaling $8.5 million [92]. - Research and development expenses for the three months ended September 30, 2024, increased by $0.6 million or 24.2%, amounting to $2.9 million [92]. - Cost of goods sold for the three months ended September 30, 2024, increased by $0.9 million or 11.0%, totaling $9.4 million [90]. - Net loss for the three months ended September 30, 2024, was $1.8 million, compared to a net loss of $1.9 million in the prior year [86]. - Sales for the nine months ended September 30, 2024, decreased by $0.5 million or 1.0%, totaling $45.5 million [88]. - Gross profit for the nine months ended September 30, 2024, increased by $0.6 million or 3.4%, with a gross profit margin of 40.5% compared to 38.8% in the prior year [91]. - Total operating expenses for the nine months ended September 30, 2024, increased by $0.6 million or 2.6%, totaling $25.4 million [92]. - Net loss before income taxes for the three months ended September 30, 2024, was $1.8 million, compared to a loss of $1.9 million in the prior year [86]. - Income tax expense for the three months ended September 30, 2024 decreased by $43,000, a 1075.0% change compared to the same period in the prior year [95]. - For the nine months ended September 30, 2024, income tax expense decreased by $0.2 million or 272.6% compared to the same period in the prior year [95]. - The company incurred a net loss of $6.7 million for the nine months ended September 30, 2024, contributing to net cash used in operating activities of $3.5 million [99]. - As of September 30, 2024, the company had cash and cash equivalents of $7.3 million [96]. - The company has an accumulated deficit of $83.5 million as of September 30, 2024 [97]. Market and Product Development - Airgain's enterprise market sales experienced a sequential decline due to demand softness and excess inventories, with expectations of inventory surplus extending into the first half of 2025 [75]. - The company expanded its product offerings with the second generation AirgainConnect® Fleet system solution, a low profile, roof-mounted, all-in-one 5G vehicle gateway [74]. - Airgain's subscription-based NLink cloud-based device enablement platform provides a recurring revenue component for asset tracking solutions [74]. - Airgain's embedded cellular modems and antennas are deployed across various sectors, including smart cities, logistics, and agriculture, minimizing the need for additional carrier certifications [74]. - The consumer market is growing, with Airgain shipping a tier-one MNO embedded antenna system and a tier-one MSO Wi-Fi 7 router antenna system [74]. - Macroeconomic conditions have created demand softness, particularly affecting the enterprise market, while recovery is noted in the consumer segment [75]. - The company anticipates an increase in research and development expenses as it continues to invest in new solutions and markets [82]. Operational and Financial Strategy - The company utilizes an outsource manufacturing model while maintaining oversight for quality, testing, and delivery timelines [73]. - Airgain's operating expenses are primarily driven by personnel costs, which include salaries, benefits, and stock-based compensation [81]. - The company recognizes revenue from product sales at the time of shipment, reflecting the transfer of control over promised goods [79]. - Net cash provided by financing activities was $3.1 million for the nine months ended September 30, 2024, primarily from the issuance of approximately 629,000 shares of common stock [100]. - The company plans to continue investing in long-term growth, including expanding engineering and sales teams to penetrate markets [97]. - As of September 30, 2024, $1.7 million remains available under the At-the-Market Issuance Sales Agreement for future sales of common stock [105]. - The company applied for Employee Retention Credit refunds totaling $2.5 million in August 2023, pending IRS review [101]. - The company concluded that no impairment charge to goodwill was required as of September 30, 2024, based on current and expected cash flows [107].

Sales Performance - Third-quarter 2024 sales reached $16.1 million, a 6.0% increase from the previous quarter and a 17.6% increase year-over-year[1] - Consumer market sales contributed $6.8 million, enterprise market sales contributed $6.7 million, and automotive market sales contributed $2.6 million in Q3 2024[2] - Total sales for the three months ended September 30, 2024, were $16,101,000, representing a 17.8% increase from $13,696,000 in the same period of 2023[15] - Fourth-quarter 2024 sales are expected to be in the range of $16.2 million to $18.2 million, with a midpoint of $17.2 million[5] Gross Margin - GAAP gross margin for Q3 2024 was 41.7%, up from 40.5% in Q2 2024 and 38.2% in Q3 2023[3] - Non-GAAP gross margin for Q3 2024 was 42.8%, compared to 41.5% in Q2 2024 and 39.1% in Q3 2023[3] - Gross profit for the three months ended September 30, 2024, was $6,714,000, up from $5,236,000 in the prior year, resulting in a gross margin of 41.7%[19][20] - Non-GAAP gross profit for the three months ended September 30, 2024, was $6,899,000, compared to $5,354,000 in the same period of 2023[19] Net Income and Loss - GAAP net loss for Q3 2024 was $1.8 million, or $(0.16) per share, an improvement from a net loss of $2.5 million in Q2 2024[4] - Non-GAAP net income for Q3 2024 was $6,000, or $0.00 per share, compared to a non-GAAP net loss of $0.6 million in Q2 2024[4] - The company reported a basic net loss per share of $0.16 for the three months ended September 30, 2024, compared to a loss of $0.18 in the same period of 2023[15] - Non-GAAP net loss attributable to common stockholders was $557 million for the three months ended September 30, 2024, compared to a loss of $668 million in the same period of 2023, reflecting a 16.6% improvement[23] - The company reported a total net loss of $6.725 billion for the nine months ended September 30, 2024, compared to a loss of $6.944 billion for the same period in 2023, indicating a decrease of about 3.2%[23] Operating Expenses - Non-GAAP operating expenses for Q4 2024 are expected to be approximately $7.2 million[5] - Total operating expenses for the three months ended September 30, 2024, were $8,528,000, compared to $7,146,000 in the same period of 2023, indicating an increase of 19.3%[15] - Research and development expenses increased to $2,855,000 for the three months ended September 30, 2024, compared to $2,298,000 in the same period of 2023, reflecting a 24.2% rise[15] - The company anticipates GAAP operating expenses of $8.8 billion for the three months ended December 31, 2024, with non-GAAP operating expenses projected at $7.2 billion[26] Future Projections - GAAP net loss per share for Q4 2024 is expected to be $(0.13) at the midpoint[5] - Non-GAAP net income is projected to be $200 million for the three months ended December 31, 2024, with a non-GAAP net income per share of $0.02[27] - The GAAP gross margin for the three months ended December 31, 2024, is projected to be 41.9%, with a non-GAAP gross margin expected to be 43.0%[26]

Group 1: Product Launch and Features - Airgain, Inc. has launched the AT-Flight asset tracker aimed at the healthcare and life sciences IoT sectors, addressing the need for real-time tracking of high-value, temperature-sensitive assets in cold chain logistics [1] - The AT-Flight integrates AI with ambient sensor technology, complying with U.S. FAA regulations, which enhances operational efficiency by automating flight event detection and switching to airplane mode [2] - The device boasts an extended battery life, reducing the need for frequent changes and operational disruptions, and includes flight-approved battery options suitable for air transportation [3] - It can operate in temperatures as low as -20°C, making it ideal for tracking sensitive medical goods like vaccines [4] Group 2: Market Strategy and Financial Outlook - The AT-Flight utilizes various location technologies, including GPS and real-time cellular triangulation, allowing businesses to customize tracking options, which aligns with Airgain's strategy to expand in high-value IoT markets [5] - The device has received critical industry certifications such as PTCRB, FCC, and DO-160, with ongoing efforts to secure further approvals from major U.S. and European airlines, which is expected to drive demand and revenue growth [6] - Airgain's stock has increased by 354.5% over the past year, significantly outperforming the industry growth of 83% [7]