UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-37851 AIRGAIN, INC. (Exact name of Registrant as specified in its Charter) (State or other jurisdiction of incorporation or organizat ...

SAN DIEGO--(BUSINESS WIRE)--Airgain, Inc. (NASDAQ: AIRG), a leading provider of wireless connectivity solutions, that creates and delivers embedded components, external antennas, and integrated systems across the globe secured a multi-year, multi-million dollar design win with a Tier One multi-service operator (MSO) in North America upgrading its customer premise equipment to Wi-Fi 7 with Airgain’s antenna solution. This device is expected to begin shipping in the second half of 2024. The design was awar ...

Airgain, Inc. (AIRG) has collaborated with Lenovo to introduce a groundbreaking program aimed at bolstering security for Lenovo ThinkEdge SE360 V2 Servers purchasers. Through this initiative, customers will have the option to acquire Airgain’s cellular-based AT6 Asset Tracker, seamlessly integrating it within the server's infrastructure.The AT6 Asset Tracker, a cutting-edge solution, enhances Lenovo's existing security measures by providing an additional layer of protection. It enables customers to monitor ...

Core Insights - Airgain, Inc. has launched a program to offer its AT6 Asset Tracker to customers purchasing Lenovo ThinkEdge SE360 V2 Servers, enhancing security and asset recovery capabilities [1][4] - The AT6 Asset Tracker is designed to fit within a dedicated compartment in the Lenovo server, providing minimal installation effort while complementing Lenovo's existing security features [1][2] - The AT6 device utilizes various technologies including LTE-M cellular connectivity, Wi-Fi, GPS, and sensors for comprehensive asset monitoring and condition tracking [2][3] Company Overview - Airgain specializes in wireless connectivity solutions, offering products across three sub-brands: Airgain Embedded, Airgain Integrated, and Airgain Antenna+ [5] - The company aims to simplify wireless connectivity challenges across various markets, including enterprise, automotive, and consumer sectors [5] - Airgain is headquartered in San Diego, California, and focuses on high-growth technologies to address critical connectivity needs [5]

SAN DIEGO--(BUSINESS WIRE)--Airgain, Inc. (NASDAQ: AIRG), a leading provider of wireless connectivity solutions, will unveil the first hybrid beamforming smart fixed wireless access (FWA) technology on the market, Airgain Smart LanternTM, at Mobile World Congress 2024. The Smart LanternTM is designed to transform the 5G customer experience, maximizing high gain antenna performance. It uses Airgain’s patented smart beamforming technology to simplify end user FWA installation by automatically determining t ...

Core Insights - Airgain, Inc. has launched AirgainConnect™ Fleet, a second-generation 5G vehicle gateway, at the Consumer Electronics Show, marking it as the industry's first low-profile, roof-mounted 5G gateway [1][3] - The new device combines a 5G NR modem and a Wi-Fi 6 router in a compact form factor, measuring only two inches tall, and is designed for various vertical markets including public safety and transportation [1][2] Product Features - AirgainConnect Fleet (AC-Fleet) utilizes eSIM technology for carrier flexibility and multi-carrier connectivity, and is built for rugged outdoor use with an IP67 and IP69K rating [2] - The device is designed for easy installation with fewer cables and streamlined software for remote cloud management, enhancing setup and maintenance efficiency [2] Market Opportunity - The demand for 5G connectivity in commercial and public fleets is growing rapidly, presenting significant opportunities for Airgain to address unique challenges in this sector [3] - AC-Fleet is positioned as an optimal solution for various fleet applications, including first responders, public agencies, and recreational vehicles, aligning with the company's mission to simplify wireless connectivity [3] Company Overview - Airgain specializes in wireless connectivity solutions, offering products across three sub-brands: Airgain Embedded, Airgain Integrated, and Airgain Antenna+ [4] - The company aims to connect the world by simplifying wireless technology, with a focus on high-growth technologies and critical connectivity needs across enterprise, automotive, and consumer markets [4]

Financial Data and Key Metrics Changes - Q3 2023 sales were $13.7 million, a decline of 13% sequentially and 29% year-over-year, primarily due to high inventories and demand softness in the consumer market [19] - Q3 gross margin was 39.1%, lower than the guidance midpoint of 40%, primarily due to an unfavorable consumer sales mix [20] - Q3 operating expenses totaled $6 million, slightly higher than the guidance of approximately $5.8 million, but represented the lowest spend level since Q1 2021 [21] - Cash balance as of September 30 was $10 million, reflecting a $0.7 million increase sequentially, driven by working capital management [21] Business Line Data and Key Metrics Changes - Consumer sales were $4.4 million, reflecting a sequential decrease of $1.8 million, attributed to cautious inventory management by OEMs in anticipation of the Wi-Fi 7 transition [19][10] - Enterprise sales were $6.8 million, a sequential decrease of $0.5 million, driven by lower sales of custom products, partially offset by higher sales of embedded modems [19] - Automotive sales increased sequentially by $0.2 million to $2.5 million, supported by inventory corrections and new product introductions [19] Market Data and Key Metrics Changes - The consumer market is experiencing downward pressure due to the transition from Wi-Fi 6E to Wi-Fi 7, leading to cautious inventory management by key OEM customers [10] - The enterprise market is facing inventory overhang, but there is growing end customer demand for embedded modems, particularly in EV charging and VSaaS [12] - The automotive market is showing growth potential, with inventory corrections strengthening growth, and new product initiatives expected to contribute positively [15] Company Strategy and Development Direction - The company aims to improve the 5G customer experience by addressing coverage gaps and enhancing performance through new product initiatives [6][7] - Strategic focus includes expanding into new geographies and enhancing product offerings, particularly in asset tracking and 5G connectivity solutions [17][25] - The company is transitioning from components to full systems, which is expected to drive future growth [36] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges faced in 2023 due to macroeconomic pressures but remains optimistic about recovery starting in Q1 2024 [34] - The company expects to generate positive cash flows in early 2024, driven by resolution of inventory issues and demand for new products [35] - Management emphasizes the importance of operational efficiencies and strategic product initiatives to navigate the current environment [21][35] Other Important Information - The company has secured design wins with Tier 1 operators for new products, which are expected to begin shipping in Q1 2024 [11][29] - The serviceable available market for cellular connected asset trackers is estimated to be $900 million in 2024, indicating significant growth potential [25] - The company is focused on maintaining a strong pipeline of opportunities to accelerate future growth [34] Q&A Session Summary Question: Insights on product mix and revenue drivers for Q4 and 2024 - Management noted that consumer revenue is expected to decline further in Q4 due to OEMs managing inventories and the transition to Wi-Fi 7, with growth anticipated in Q1 2024 from a Tier 1 design win [41][42] - The enterprise segment is facing inventory overhang, but growth is expected to resume in 2024 as inventory issues are resolved [42] - Automotive sales are mixed, with inventory corrections offset by new product introductions and channel expansions [43] Question: Cash levels and inventory management - The cash balance increased to $10 million, driven by working capital management and strong collections, which is deemed sufficient for growth initiatives [47]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements, management's analysis, and key disclosures [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section contains the unaudited condensed consolidated balance sheets, statements of operations, cash flows, and accompanying notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (vs. Dec 31, 2022) | | :-------------------------------- | :-------------------------- | :-------------------------- | :------------------------ | | **Assets** | | | | | Total current assets | $22,252 | $27,154 | $(4,902) | | Total assets | $46,302 | $54,400 | $(8,098) | | **Liabilities & Equity** | | | | | Total current liabilities | $9,514 | $12,900 | $(3,386) | | Total liabilities | $10,537 | $14,575 | $(4,038) | | Total stockholders' equity | $35,765 | $39,825 | $(4,060) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Operations Summary | Metric | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------------------ | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Sales | $13,696 | $19,198 | $45,970 | $56,006 | | Gross profit | $5,236 | $7,443 | $17,833 | $22,104 | | Loss from operations | $(1,910) | $(1,264) | $(6,912) | $(5,303) | | Net loss | $(1,881) | $(1,299) | $(6,944) | $(5,439) | | Basic net loss per share | $(0.18) | $(0.13) | $(0.67) | $(0.53) | | Diluted net loss per share | $(0.18) | $(0.13) | $(0.67) | $(0.53) | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive Loss Summary | Metric | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Net loss | $(1,881) | $(1,299) | $(6,944) | $(5,439) | | Comprehensive loss | $(1,881) | $(1,299) | $(6,944) | $(5,439) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' Equity Summary | Metric | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Total stockholders' equity, beginning | $37,079 | $42,248 | $39,825 | $44,173 | | Stock-based compensation | $500 | $964 | $3,342 | $3,043 | | Net loss | $(1,881) | $(1,299) | $(6,944) | $(5,439) | | Total stockholders' equity, ending | $35,765 | $42,012 | $35,765 | $42,012 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary | Metric | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | | Net cash (used in) provided by operating activities | $(1,364) | $2,083 | | Net cash used in investing activities | $(172) | $(624) | | Net cash used in financing activities | $(458) | $(6,780) | | Net decrease in cash, cash equivalents and restricted cash | $(1,994) | $(5,321) | | Cash, cash equivalents, and restricted cash; end of period | $10,084 | $9,365 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements [Note 1. Description of Business and Basis of Presentation](index=8&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Airgain, Inc, including its subsidiary NimbeLink Corp, is a leading provider of **connectivity solutions** for consumer, enterprise, and automotive markets[24](index=24&type=chunk) - The company operates as a **single operating segment**, with its chief executive officer reviewing results on an aggregate basis[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=8&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - **No material changes** to significant accounting policies occurred during the nine months ended September 30, 2023[29](index=29&type=chunk) - The company adopted ASU 2016-13 (Financial Instruments-Credit Losses) in Q1 2023, which did **not materially impact** financial statements[54](index=54&type=chunk) [Note 3. Net Loss Per Share](index=11&type=section&id=Note%203.%20Net%20Loss%20Per%20Share) Net Loss Per Share Calculation | Metric | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss (in thousands) | $(1,881) | $(1,299) | $(6,944) | $(5,439) | | Basic weighted average common shares outstanding (in thousands) | 10,430 | 10,210 | 10,370 | 10,179 | | Diluted weighted average common shares outstanding (in thousands) | 10,430 | 10,210 | 10,370 | 10,179 | | Basic net loss per share | $(0.18) | $(0.13) | $(0.67) | $(0.53) | | Diluted net loss per share | $(0.18) | $(0.13) | $(0.67) | $(0.53) | - Potentially dilutive securities totaling **2.2 million shares** for the three months and **2.3 million shares** for the nine months ended September 30, 2023, were excluded from diluted EPS calculation as they were anti-dilutive[57](index=57&type=chunk) [Note 4. Cash and Cash Equivalents](index=12&type=section&id=Note%204.%20Cash%20and%20Cash%20Equivalents) Cash and Cash Equivalents Breakdown | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--------------- | :-------------------------- | :-------------------------- | | Cash | $9,719 | $8,323 | | Money market funds | $270 | $3,580 | | Total | $9,989 | $11,903 | - Restricted cash for lease commitments was **$95,000** as of September 30, 2023, down from $175,000 at December 31, 2022[59](index=59&type=chunk) [Note 5. Inventory](index=12&type=section&id=Note%205.%20Inventory) Company-Owned Inventory | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--------------- | :-------------------------- | :-------------------------- | | Raw materials | $864 | $1,060 | | Finished goods | $3,086 | $3,166 | | Total Inventory | $3,950 | $4,226 | Consigned Inventory | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------- | :-------------------------- | :-------------------------- | | Total Consigned Inventory | $2,570 | $2,903 | - Excess and obsolete inventory reserves increased to **$1.0 million** as of September 30, 2023, from $0.9 million at December 31, 2022[61](index=61&type=chunk) [Note 6. Property and Equipment](index=13&type=section&id=Note%206.%20Property%20and%20Equipment) Property and Equipment, Net | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Property and equipment, gross | $7,343 | $7,170 | | Less accumulated depreciation | $(4,889) | $(4,405) | | Property and equipment, net | $2,454 | $2,765 | - Depreciation expense was **$0.2 million** for the three-month period and **$0.5 million** for the nine-month period ended September 30, 2023, consistent with the prior year[62](index=62&type=chunk) [Note 7. Intangible Assets and Goodwill](index=13&type=section&id=Note%207.%20Intangible%20Assets%20and%20Goodwill) Intangible Assets, Net | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :---------------------- | :-------------------------- | :-------------------------- | | Total intangible assets, net | $8,977 | $11,203 | - Amortization expense for intangible assets was **$0.7 million** for Q3 2023 and **$2.2 million** for the nine months ended September 30, 2023[64](index=64&type=chunk) - Despite a decline in market capitalization, the company concluded **no impairment charges** were necessary for intangible assets and goodwill as of September 30, 2023[66](index=66&type=chunk)[67](index=67&type=chunk)[71](index=71&type=chunk) [Note 8. Accrued Liabilities and Other](index=15&type=section&id=Note%208.%20Accrued%20Liabilities%20and%20Other) Accrued Liabilities Breakdown | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Accrued expenses | $879 | $815 | | VAT payable | $339 | $339 | | Accrued income taxes | $201 | $166 | | Advanced payments from contract manufacturers | $124 | $210 | | Contract liabilities | $0 | $32 | | Goods received not invoiced | $821 | $529 | | Other current liabilities | $174 | $524 | | Accrued liabilities and other | $2,538 | $2,615 | [Note 9. Leases](index=15&type=section&id=Note%209.%20Leases) - The weighted average remaining lease term was **2.0 years** with a weighted average discount rate of **3.8%** as of September 30, 2023[75](index=75&type=chunk) Lease Liability Reconciliation | Metric | Sep 30, 2023 (in thousands) | | :-------------------------- | :-------------------------- | | Total minimum payments | $1,855 | | Less imputed interest | $(70) | | Less unrealized translation gain | $2 | | Total lease liabilities | $1,787 | | Less short-term lease liabilities | $(909) | | Long-term lease liability | $878 | [Note 10. Income Taxes](index=16&type=section&id=Note%2010.%20Income%20Taxes) - The effective income tax rate was **-1.2%** for the nine months ended September 30, 2023, compared to -2.5% for the same period in 2022[78](index=78&type=chunk) - As of December 31, 2022, the Company had a valuation allowance of **$11.9 million** against net deferred tax assets[80](index=80&type=chunk) [Note 11. Stockholders' Equity](index=16&type=section&id=Note%2011.%20Stockholders'%20Equity) Equity Plan Summary | Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Stock options issued and outstanding | 2,046 | 2,065 | | Stock awards issued and outstanding | 764 | 581 | | Authorized for grants under the 2016 Equity Incentive Plan | 423 | 507 | | Authorized for grants under the Inducement Plan | 335 | 294 | | Authorized for grants under the 2016 Employee Stock Purchase Plan | 440 | 378 | | Total | 4,008 | 3,825 | - The number of authorized shares in the 2016 Plan and the 2016 Employee Stock Purchase Plan increased due to **evergreen provisions** on January 1, 2023[82](index=82&type=chunk) [Note 12. Stock Based Compensation](index=17&type=section&id=Note%2012.%20Stock%20Based%20Compensation) Stock-Based Compensation Expense | Category | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Cost of goods sold | $29 | $36 | $73 | $71 | | Research and development | $230 | $255 | $747 | $800 | | Sales and marketing | $(223) | $273 | $53 | $856 | | General and administrative | $487 | $556 | $1,599 | $1,848 | | Total stock-based compensation expense | $523 | $1,120 | $2,472 | $3,575 | - Total unrecognized compensation cost was **$2.3 million** for stock options and **$3.9 million** for restricted stock units as of September 30, 2023[86](index=86&type=chunk)[87](index=87&type=chunk) - The company settled **$0.9 million** related to 2022 bonus awards by granting 187,200 immediately vested RSUs during the first nine months of 2023[90](index=90&type=chunk) [Note 13. Commitments and Contingencies](index=19&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) Severance and Exit Costs | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Jun 30, 2023 (in thousands) | Sep 30, 2023 (in thousands) | | :----------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Severance and Exit Costs | $0 | $113 | $407 | $0 | - The general warranty accrual decreased to approximately **$0.1 million** as of September 30, 2023, from $0.2 million at December 31, 2022[94](index=94&type=chunk) [Note 14. Concentration of Credit Risk](index=19&type=section&id=Note%2014.%20Concentration%20of%20Credit%20Risk) Customer Revenue Concentration | Customer | Three months ended Sep 30, 2023 (Revenue %) | Three months ended Sep 30, 2022 (Revenue %) | Nine months ended Sep 30, 2023 (Revenue %) | Nine months ended Sep 30, 2022 (Revenue %) | | :--------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Customer A | 22% | 1% | 15% | 16% | | Customer B | 12% | 12% | 10% | 12% | | Customer C | 8% | 12% | 16% | 13% | - Products were primarily manufactured by **six contract manufacturers** located in China, Mexico, Minnesota, and Vietnam[98](index=98&type=chunk) - Following a bank receivership in March 2023, the company moved most of its cash deposits to a larger institutional bank, experiencing **no losses**[99](index=99&type=chunk) [Note 15. Revenue](index=20&type=section&id=Note%2015.%20Revenue) Revenue by Market Group | Market Group | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Enterprise | $6,791 | $6,747 | $22,594 | $24,496 | | Consumer | $4,404 | $7,334 | $15,725 | $19,377 | | Automotive | $2,501 | $5,117 | $7,651 | $12,133 | | Total sales | $13,696 | $19,198 | $45,970 | $56,006 | Revenue by Geography | Geography | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :-------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | North America | $8,261 | $11,128 | $27,867 | $34,031 | | China (including Hong Kong and Taiwan) | $4,961 | $7,443 | $16,989 | $20,170 | | Rest of the world | $474 | $627 | $1,114 | $1,805 | | Total sales | $13,696 | $19,198 | $45,970 | $56,006 | [Note 16. Subsequent Events](index=21&type=section&id=Note%2016.%20Subsequent%20Events) - There were **no subsequent events** to report[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook [Overview](index=22&type=section&id=Overview) - Airgain is transitioning from a component provider to a **wireless systems provider**, leveraging expertise in RF technology, embedded antennas, and modems[109](index=109&type=chunk) - Key product offerings include **Airgain Embedded™**, **Airgain Antenna+™**, and **Airgain Integrated™**[108](index=108&type=chunk) - The company adopted a **fabless manufacturing model** in 2022, relying on third parties for production[110](index=110&type=chunk) [Core Markets](index=23&type=section&id=Core%20Markets) - Airgain focuses on three core markets: **Enterprise**, **Consumer**, and **Automotive**[112](index=112&type=chunk) [Macroeconomic conditions](index=23&type=section&id=Macroeconomic%20conditions) - Macroeconomic conditions have led to **industry-wide demand softness** and excess inventories, resulting in year-over-year sales declines[114](index=114&type=chunk) - These conditions worsened in the second half of the fiscal year, contributing to a **material sales decline** and increased volatility[114](index=114&type=chunk) [Factors Affecting Our Operating Results](index=24&type=section&id=Factors%20Affecting%20Our%20Operating%20Results) - Performance depends on macroeconomic uncertainties, inflation, the transition to a wireless systems provider, and **product diversification**[115](index=115&type=chunk)[116](index=116&type=chunk) - Inflation increases raw material and employee-related costs, while **global economic conditions** and political instability also pose risks[117](index=117&type=chunk) [Seasonality](index=24&type=section&id=Seasonality) - Operating results are not historically subject to significant seasonal variations, but sales tend to be **lower in the first quarter** due to the Lunar New Year[119](index=119&type=chunk) [Key Components of Our Results of Operations and Financial Condition](index=24&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations%20and%20Financial%20Condition) - Revenue is primarily generated from **product sales**, recognized at shipment[120](index=120&type=chunk) - Operating expenses are categorized into research and development, sales and marketing, and general and administrative, with **personnel costs** being the largest component[123](index=123&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Operations Summary | Metric | Three months ended Sep 30, 2023 (in thousands) | Three months ended Sep 30, 2022 (in thousands) | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------------------ | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Sales | $13,696 | $19,198 | $45,970 | $56,006 | | Cost of goods sold | $8,460 | $11,755 | $28,137 | $33,902 | | Gross profit | $5,236 | $7,443 | $17,833 | $22,104 | | Operating expenses | $7,146 | $8,707 | $24,745 | $27,407 | | Loss from operations | $(1,910) | $(1,264) | $(6,912) | $(5,303) | | Net loss | $(1,881) | $(1,299) | $(6,944) | $(5,439) | - Sales decreased by **28.7%** for the three months and **17.9%** for the nine months ended September 30, 2023, due to demand softness and inventory correction[132](index=132&type=chunk)[133](index=133&type=chunk) - Gross profit decreased by **29.7%** for the three months and **19.3%** for the nine months ended September 30, 2023, driven by lower sales and unfavorable product mix[136](index=136&type=chunk)[137](index=137&type=chunk) - Operating expenses decreased by **17.9%** for the three months and **9.7%** for the nine months ended September 30, 2023, due to lower employee compensation and marketing expenses[138](index=138&type=chunk)[139](index=139&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary | Metric | Nine months ended Sep 30, 2023 (in thousands) | Nine months ended Sep 30, 2022 (in thousands) | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | | Net cash (used in) provided by operating activities | $(1,364) | $2,083 | | Net cash used in investing activities | $(172) | $(624) | | Net cash used in financing activities | $(458) | $(6,780) | | Net decrease in cash, cash equivalents and restricted cash | $(1,994) | $(5,321) | - The company had **$10.0 million** in cash and cash equivalents at September 30, 2023, and an accumulated deficit of $73.0 million[143](index=143&type=chunk) - Management believes existing cash will be **sufficient to meet working capital requirements** for at least the next 12 months[145](index=145&type=chunk) [Employee Retention Credit](index=29&type=section&id=Employee%20Retention%20Credit) - In August 2023, the company applied for **$2.5 million** in Employee Retention Credit (ERC) refunds[149](index=149&type=chunk) - Receipt of ERC refunds is anticipated within the next nine months, but there is **no assurance** of the ultimate amount or timeframe[149](index=149&type=chunk) [Contractual Obligations and Commitments](index=29&type=section&id=Contractual%20Obligations%20and%20Commitments) - **No material changes** to contractual obligations occurred during the nine months ended September 30, 2023[150](index=150&type=chunk) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) - **No material changes** to critical accounting policies and estimates were reported[153](index=153&type=chunk) - The company performed interim impairment tests and concluded **no impairment charges** were necessary for intangible assets and goodwill as of September 30, 2023[154](index=154&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 2, "Summary of Significant Accounting Policies," for information on recent accounting pronouncements[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Airgain is not required to provide these disclosures - Airgain, Inc is a smaller reporting company and is **not required to provide disclosures** about market risk under this item[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023 - Disclosure controls and procedures were evaluated and deemed **effective** at a reasonable assurance level as of September 30, 2023[164](index=164&type=chunk) - **No material changes** in internal control over financial reporting occurred during the nine months ended September 30, 2023[165](index=165&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers other required disclosures including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) Current legal proceedings are not expected to have a material adverse effect on the business - The company believes current legal proceedings will **not materially adversely affect** its financial condition or business[168](index=168&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to previously disclosed risk factors - **No material changes** to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2022[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the reporting period - **No unregistered sales** of equity securities occurred[170](index=170&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - **No defaults** upon senior securities occurred[171](index=171&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There are no mine safety disclosures to report - No mine safety disclosures are **applicable**[172](index=172&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - **No other information** is reported under this item[173](index=173&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q - The exhibits include certifications, corporate governance documents, and various **Inline XBRL documents**[174](index=174&type=chunk)[175](index=175&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section contains the certifying signatures of the company's authorized officers - The report is signed by Jacob Suen, President and Chief Executive Officer, and Michael Elbaz, Chief Financial Officer, on **November 9, 2023**[179](index=179&type=chunk)

Financial Data and Key Metrics Changes - Q2 2023 sales were $15.8 million, at the low end of guidance, reflecting a 4% sequential decline and an 18% year-over-year decrease due to inventory corrections [18][19] - Q2 gross margin was 40.4%, at the high end of guidance, and improved by 130 basis points sequentially due to a favorable consumer revenue mix and operational efficiencies [20] - Adjusted EBITDA for Q2 was positive $37,000, while non-GAAP EPS was negative $0.01 [21] Business Line Data and Key Metrics Changes - Consumer sales increased to $6.2 million, driven by a strong uptick in Wi-Fi 6E embedded antenna shipments [19] - Enterprise sales decreased to $7.3 million, primarily due to lower embedded modem sales from inventory corrections, although asset tracker sales increased [19] - Automotive sales fell to $2.3 million, reflecting a sequential decrease due to direct customer inventory corrections [19] Market Data and Key Metrics Changes - The consumer market saw growth due to the deployment of Wi-Fi 6E, but is expected to decline in Q3 due to core cutting and inventory issues [8][16] - The enterprise market is experiencing demand softness, but asset trackers are gaining momentum in verticals like rail and logistics [9][10] - The automotive market is facing challenges due to excessive inventory and forecasting changes [12][13] Company Strategy and Development Direction - The company is transitioning from a components provider to a systems provider, focusing on 5G customer experience and connectivity solutions [6][7] - Strategic initiatives include expanding distribution channels, diversifying the customer base, and entering new geographies [9][15] - Major product initiatives include fixed wireless access devices, smart repeaters, and enhanced vehicle networking solutions, with expected revenue generation starting in 2024 [24][26][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic conditions have created demand softness, impacting sales across various markets [8][28] - Despite current challenges, the company remains optimistic about growth prospects in 2024 due to strategic investments and new product introductions [8][28] - The focus on improving 5G connectivity and customer experience is expected to drive future growth [27][30] Other Important Information - The company is increasing the number of contract manufacturers to ensure adequate supply and reduce product costs [20] - Operating expenses for Q2 were $6.5 million, in line with guidance, and decreased sequentially due to lower employee and marketing expenses [21] - The company expects Q3 sales to range between $13.25 million and $14.75 million, with a projected non-GAAP gross margin of 38.5% to 41.5% [22] Q&A Session Summary - No specific questions or answers were recorded in the provided content, indicating a lack of interaction during the Q&A segment [31][32]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, reporting a net loss and decreased assets [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$49.5 million** by June 30, 2023, driven by reduced cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $9,270 | $11,903 | | Total current assets | $24,381 | $27,154 | | Total assets | $49,512 | $54,400 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $11,207 | $12,900 | | Total liabilities | $12,433 | $14,575 | | Total stockholders' equity | $37,079 | $39,825 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Sales decreased to **$32.3 million** for the six months ended June 30, 2023, widening the net loss to **$5.1 million** Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Sales | $15,830 | $19,286 | $32,274 | $36,808 | | Gross Profit | $6,279 | $7,493 | $12,597 | $14,649 | | Loss from operations | $(2,212) | $(1,613) | $(5,002) | $(4,039) | | Net loss | $(2,205) | $(1,619) | $(5,063) | $(4,140) | | Diluted Net loss per share | $(0.21) | $(0.16) | $(0.49) | $(0.41) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was **$2.0 million** for the six months, resulting in a **$2.6 million** decrease in cash Cash Flow Summary (in thousands) | Activity | Six months ended June 30, 2023 | Six months ended June 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,004) | $1,980 | | Net cash used in investing activities | $(104) | $(164) | | Net cash used in financing activities | $(525) | $(6,879) | | **Net decrease in cash** | **$(2,633)** | **$(5,063)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, customer concentration, and a **$2.5 million** ERC refund application - The company operates as a single operating segment providing connectivity solutions, including embedded components, external antennas, and integrated systems[26](index=26&type=chunk) Revenue by Market Group (in thousands) | Market Group | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Enterprise | $7,366 | $9,120 | $15,803 | $17,749 | | Consumer | $6,189 | $5,981 | $11,321 | $12,043 | | Automotive | $2,275 | $4,185 | $5,150 | $7,016 | Customer Concentration (% of Total Revenue) | Customer | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Customer A | 24% | 14% | 19% | 14% | | Customer B | 14% | 8% | 13% | 8% | | Customer C | 9% | 22% | 12% | 19% | - In August 2023, the company applied for **$2.5 million** in Employee Retention Credit (ERC) refunds, which it anticipates receiving within the next six months, pending IRS review[95](index=95&type=chunk)[144](index=144&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **12.3%** sales decline from market softness, reduced operating expenses, and liquidity [Overview and Core Markets](index=20&type=section&id=Overview%20and%20Core%20Markets) The company transitions to a wireless systems provider, with core markets impacted by demand softness and excess inventories - The company is transitioning from a component provider to a wireless systems provider, leveraging its expertise in RF technology[100](index=100&type=chunk) - Core markets include Enterprise, Consumer, and Automotive, all of which have been affected by industry-wide demand softness and excess channel inventories[102](index=102&type=chunk)[103](index=103&type=chunk)[106](index=106&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Sales decreased **12.3%** for the six months, with declining gross profit and reduced operating expenses Sales Comparison (in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended June 30 | $15,830 | $19,286 | $(3,456) | (17.9)% | | Six months ended June 30 | $32,274 | $36,808 | $(4,534) | (12.3)% | - The sales decrease for the first six months of 2023 was driven by lower sales of IIoT products in the Enterprise market and a decrease in AirgainConnect HPUE and aftermarket sales in the Automotive market[126](index=126&type=chunk) Gross Profit Comparison | Period | 2023 | 2022 | | :--- | :--- | :--- | | **Three months ended June 30** | | | | Gross Profit | $6,279K | $7,493K | | Gross Margin | 39.7% | 38.9% | | **Six months ended June 30** | | | | Gross Profit | $12,597K | $14,649K | | Gross Margin | 39.0% | 39.8% | - Total operating expenses for the six months ended June 30, 2023 decreased by **$1.1 million (5.8%)** compared to the prior year, driven by lower company-wide people costs and professional outsourced services[133](index=133&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds **$9.3 million** in cash, used **$2.0 million** in operations, and expects 12 months of liquidity - Cash and cash equivalents were **$9.3 million** at June 30, 2023, with an accumulated deficit of **$71.2 million**[137](index=137&type=chunk) - Net cash used in operating activities was **$2.0 million** for the first six months of 2023, compared to **$2.0 million** provided by operating activities in the same period of 2022[140](index=140&type=chunk)[141](index=141&type=chunk) - The company believes its existing cash balance and operational cash flow will be sufficient to meet working capital requirements for at least the next 12 months[139](index=139&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Airgain, Inc. is exempt from providing market risk disclosures - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide quantitative and qualitative disclosures about market risk[149](index=149&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal financial reporting controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[151](index=151&type=chunk) - No changes in internal control over financial reporting occurred during the six months ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, internal controls[152](index=152&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity sales, and other related information [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) No current legal proceedings are expected to materially affect the company's financial condition or business - The company is not currently party to any legal proceedings that are expected to have a material adverse effect on its financial condition or business[154](index=154&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the Annual Report on Form 10-K for December 31, 2022 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[155](index=155&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[156](index=156&type=chunk) [Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[157](index=157&type=chunk) [Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[158](index=158&type=chunk) [Other Information](index=29&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed under this item - None[159](index=159&type=chunk) [Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL data files