Airgain(AIRG) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, reporting a net loss and decreased assets Condensed Consolidated Balance Sheets 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 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 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 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] 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][144] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 12.3% sales decline from market softness, reduced operating expenses, and liquidity Overview and Core Markets 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] - Core markets include Enterprise, Consumer, and Automotive, all of which have been affected by industry-wide demand softness and excess channel inventories[102][103][106] Results of Operations 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] 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] Liquidity and Capital Resources 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] - 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][141] - 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] Quantitative and Qualitative Disclosures about Market Risk 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity sales, and other related information Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[156] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[157] Mine Safety Disclosures This item is not applicable to the company - None[158] Other Information The company reported no other information required to be disclosed under this item - None[159] Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL data files