Airgain, Inc.

Good afternoon. Welcome to Airgain's fourth quarter and full year 2024 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 Suen, and CFO, Michael Alves. As a reminder, this call will be recorded and made available for replay via a link found in the investor relations section of Airgain's website at investors.airgain.com. Following management's prepared remarks, the call will be open for questions. from Airgain's covering analysts. I caution listeners during this call, Airgain management will be making forward-looking statements about future events as well as Airgain's business strategy and future financial operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements due to risk and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earning release and Airgain's SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, February 27, 2025. Airgain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. In addition, this conference call will include a discussion of non-GAAP financial measures. Please see today's earnings release for further details, including a reconciliation of GAAP to non-GAAP results. Now, I'd like to turn the call over to AirGames CEO, Jacob Suen.

Good afternoon, and thank you for joining us today. In the fourth quarter, we reached a key milestone with the successful commercial deployment of Lighthouse, marking significant progress toward our strategic objectives. We closed 2024 with strong execution across our AirGain Connect fleet and Lighthouse smart network repeater platform, positioning AirGain for its next phase of growth. 2025 is the year of execution and expansion. We remain laser focused on scaling deployments, accelerating customer adoption, and expanding into high value markets. Momentum is already building. Our strategic partnership with Omontel demonstrates Lighthouse's ability to deliver high-performance network solutions with significantly reduced deployment times and a lower total cost of ownership. 2024 was a pivotal year for Airgame. marking our transformation from a component supplier to a high-value wireless system solutions provider. These shifts have fundamentally redefined our business. We have moved from sub-$5 ASPs for embedded antenna systems to ASPs exceeding $20,000 for our Lighthouse solution. positioning us in higher value, higher margin markets. Over the past year, we have expanded our portfolio, secure key customer wins, and strengthen our position in growth markets, setting the stage for sustained long-term growth with higher ASPs and expanding market opportunities. We have grown our serviceable, addressable market from $1.1 billion in 2024 to $2.6 billion in 2025, thanks largely to our AC fleet, vehicle gateway, and Lighthouse smart repeaters. And we expect our SAM to continue growing. One of our most significant milestones was launching and expanding key product lines across multiple high-growth markets. An achievement that solidified our market position and spurred accelerated adoption. In consumer, we ramped Wi-Fi 7 antenna shipments to Tier 1 MSOs. reinforcing AirGain's position as a leader in next-generation connectivity. In IoT asset tracking, we launched ATFlight, an AI power solution designed for the healthcare sector that ensures FAA compliance and delivers over a year of battery life for temperature-sensitive medical assets. The initial purchase order from a major healthcare provider validates its market potential, with shipments scheduled to begin this year. Additionally, we introduced two advanced railcar asset trackers, and we are actively rolling out a deployment with a leading railcar provider in North America. In the second quarter of 2024, we launched Lantern, our outdoor 5G fixed wireless access solution, positioning AirGain to seize opportunities in the nation enterprise sector of the FWA market. In the third quarter of 2024, we launched AirGain Connect Fleet, our 5G vehicle gateway, securing commercial certifications from T-Mobile and AT&T. Simultaneously, we accelerated customer trials across domestic and international markets, driving towards broad market adoption. In the fourth quarter of 2024, we completed the first commercial deployment of our Lighthouse Smart Network Control Repeater, These milestones highlight AirGain's capacity to drive innovation, expand into high-value markets, and strengthen our position as a leading provider of advanced wireless connectivity solutions. Our multi-year strategic commercial partnership with Omontil is a major leap forward in scaling Lighthouse deployments. further in reinforcing our position as a leader in 5G wireless connectivity across indoor and outdoor markets. This agreement not only validates our technology through OMANTEL, but also we believe it establishes a strong foundation for sustained revenue growth in deeper market penetration. Our collaboration goes beyond deployment. It is about co-developing advanced solutions tailored to the unique needs of the Middle East by leveraging AIGEN's deep expertise in wireless connectivity alongside Omontel's telecom leadership. We are jointly enhancing network performance, optimizing coverage, and pioneering new 5G advancements. We secured the Omontel contract by demonstrating the commercial viability of our Lighthouse smart repeater solution in a large-scale deployment last December, achieving a threefold improvement in network speed through seamless integration with existing indoor infrastructure. This milestone highlights the scalability, reliability, and efficiency of our technology, further cementing Ergen's role as a key enabler of next-generation connectivity. Our cost-effective CapEx and AppEx optimized approach accelerates time-to-market, While our commitment to strategic co-development in research and development has resulted in tailored 5G solutions designed specifically for the Middle East. Building on these significant network performance improvements, we have leveraged our partnership with Omontil to pioneer even more advanced and sustainable connectivity solutions. This commitment to innovation and environmental responsibility has culminated in the development of Lighthouse Solar. Our groundbreaking, self-sustaining solar power network control repeater that redefines network expansion for telecom operators. Engineer with cutting-edge renewable technology, it operates entirely off-grid, delivering rapid, reliable connectivity while reducing both deployment time and costs. This innovative technology offers a differentiated solution in areas lacking electricity access, while championing environmental sustainability by reducing carbon footprints and supporting green energy initiatives across the telecom industry. Designed with versatility in mind, Lighthouse Solar targets telecom operators seeking to extend 5G coverage into remote rural areas in challenging urban landscapes where traditional infrastructure may falter. It's fast to deploy. Ego-friendly capabilities are designed to enable operators to overcome geographical constraints. and meet growing connectivity demands without heavy reliance on conventional power grids or fiber buckles. This position is again at the forefront of next-generation wireless solutions, enabling faster 5G rollouts, improved user experiences, and long-term operational cost savings. all while advancing global efforts toward a more sustainable future. In 2025, we are aggressively driving the adoptions of the AirGain Connect Fleet solution, which helps deliver superior connectivity for mission-critical fleets. AC Fleet eliminates unnecessary external components, reducing installation complexity, maintenance costs, and total cost of ownership while enhancing performance and reliability for our customers. Feedback from fleet operators has been really positive, specifically highlighting AC Fleet's exceptional performance and compact all-in-one design that simplifies installation and deployment. We are targeting key fleet markets, including law enforcement, fire, EMS, and utility fleets, through a structured go-to-market strategy designed to accelerate adoption across fleets of all sizes. Our tiered approach allows us to align sales efforts with customer needs. streamline adoption and drive scalable growth in the fleet connectivity markets. Tier 1 customers comprise large-scale fleets with over 500 vehicles, representing high-value opportunities with a 12- to 18-month sales cycle. we target these opportunities both directly and through strategic partnerships with operators. Example of a direct sales opportunity we are working on is with a 6,000 vehicle law enforcement agency. An example of a strategic partnership is our active engagement in a large 30,000 vehicle deployment with a U.S. operator for a leading utility provider with an initial trial plan for the first half of this year. These two customers include midsize fleets ranging from 50 to 500 vehicles. with a shorter six to 12-month sales cycle. We drive sales in this segment through drug efforts, VARs, and system integrators to expand market reach. We are actively working with several leading law enforcement agencies across the U.S. with a handful of trials underway. Tier 3 customers are smaller fleets with fewer than 50 vehicles, operating on a faster-moving three-month sales cycle. These customers represent an immediate revenue driver for 2025, pursued through direct sales and channel partners. Along with our product and certification investments, we are aggressively building the sales and marketing resources required to capture the short-term opportunities this year in building a strong pipeline for 2026 and beyond. With these both initiatives well underway, I will now turn it over to Michael to walk us through our financial performance for Q4 and 2024. as well as our outlook for the year ahead.

Michael. Thank you, Jacob. Before diving into the numbers, please note that my review of our financial results and guidance refers to non-GAAP figures. Information about the non-GAAP financial measures, including GAAP to non-GAAP reconciliations, can be found in our earnings release. Let's turn to our fourth quarter results. Q4 sales came in at $15.1 million, which was in line with the midpoint of our preliminary results announced in late January. While this result marks a 6% sequential decline, it represents a 50% increase year-over-year driven largely by the consumer market recovery. Consumer sales reached reflecting another strong sequential performance as robust Tier 1 MNO sales partially offset the anticipated moderation in our Tier 1 MSO Y57 sales following initial Q2 shipments and a strong demand ramp in Q3. Automotive sales came in at $3.3 million, Although sales were $0.7 million higher sequentially, a high point for the year, they fell short of our expectations, driven by channel excess inventory, resulting in some delayed aftermarket and customer deployments. Enterprise sales were $5.3 million, reflecting a sequential decrease of $1.3 million and a low point for the year. This decline was mainly due to reduced sales of embedded modems and custom IoT products impacted by excess customer inventory. Notably, we recorded our first lighthouse commercial deployment revenue in Q4. In Q4, gross margin reached 43.4%, marking its fourth sequential increase. It improved by 50 basis points, driven primarily by operational efficiencies and a favorable sales mix. Q4 operating expenses totaled $6.5 million, $.4 million lower sequentially, primarily due to lower variable compensation expenses. In Q4, adjusted EBITDA reached $0.2 million, in line with our January pre-announcement. This positive result was driven by higher gross margin and lower expenses, which helped mitigate the negative impact of a $2.1 million revenue shortfall. Non-GAAP EPS came in at break-even. As of December 31, 2024, our cash balance was $8.5 million, up $1.2 million sequentially. The increase was driven by net cash proceeds of $1.1 million from our ATM offering. Turning to our results for the full year of 2024, sales totaled $60.6 million, up $4.6 million, or 8%, compared to the prior year. Consumer sales increased by $2.8 million, or 15%, driven by the Tier 1 MSO Y57 transition, and a ramp in demand for Tier 1 MNO FWA antennas. Following the Q1 negative seasonal impact, we expect the consumer market to experience steady but modest growth through 2025. Enterprise sales increased by $2.3 million, or 8%, driven primarily by strong sales of embedded modems and custom IoT products in the first half of 2024. The combined sales of these two product lines declined by approximately 50% in the second half of 2024 compared to the first half of 2024. The decline was due to customer-specific excess inventories, which we expect to last through the first half of 2025. We expect the contributions of our growth initiatives, specifically Lighthouse, to positively impact the enterprise market sales in the second half of 2025. Automotive sales decreased by $0.5 million, or 5%, due to aftermarket excess inventories, partially upset by AirGain Connect shipments. We expect the aftermarket excess inventory to also last, through the first half of 2025, and for AgriConnect design wins to drive growth in the second half of 2025. Overall, we are driving to deliver quarterly growth through 2025 as the Q1 seasonal impact diminishes and inventory headwinds ease. Growth margin was 42%. reflecting an increase of 410 basis points from the 37.9% reported in 2023. This improvement was primarily driven by steady margin gains in our enterprise and automotive solutions, resulting from ongoing cost reduction initiatives and the launch of differentiated automotive and enterprise products over the past year. Looking ahead, we expect the growth of AirConnect and Lighthouse solutions to further drive growth margin expansion in 2025. Operating expenses totaled $26.8 billion, a 2% increase year-over-year. In 2024, we reduced our non-GAAP G&A expenses by approximately 15%, to expand our R&D and sales and marketing investments and drive our strategic initiatives. Looking ahead, we plan to streamline expenses tied to our existing product lines while continuing to enhance our engineering, marketing, and sales functions to support the ramp of AgriConnect and Lighthouse design wins and solution sales. Adjusted EBITDA was negative $0.8 million for the year. an improvement from negative $4.5 million in 2023. The year-over-year adjusted EBITDA improvement was driven by higher sales and gross margin, partially offset by slightly higher operating expenses. Through 2024, we were able to lower our quarterly adjusted EBITDA breakeven point primarily through gross margin rate expansion. Now, Moving to our outlook for the first quarter ending March 31, 2025. As a reminder, we provide quarterly guidance for sales, non-GAAP gross margin and expenses, non-GAAP EPS, and adjusted EBITDA, as we believe these metrics to be key indicators for the overall performance of our business. For the first quarter of 2025, we project sales between $11 and $13 million, with a midpoint of $12 million. The midpoint represents a 20% sequential decline, primarily driven by the consumer seasonal impact and the aftermarket excess inventory. We expect non-GAAP gross margin for the fourth quarter to be in the range of 42%, to 45% or 43.5% at the midpoint. We expect operating expenses to be approximately $6.5 million. Non-GAAP EPS is expected to be negative 10 cents at the midpoint of our guidance. Adjusted EBITDA is expected to be negative $1.1 million at the midpoint of our guidance. The impact of the negative adjusted EBITDA on our cash balance in Q1 will be mitigated by a $1.6 million processing and receipt of an employee retention credit in Q1. Now, I would like to turn the call back over to Jacob for his closing thoughts. Jacob? Thanks, Michael.