Airgain, Inc.

Welcome to Airgain's first quarter 2025 conference call. My name is Diego, and I will be your operator for today's call. Joining us today are Airgain's president and CEO, Jacob Suen, and CFO, Michael Elbass. 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 that during this call, Airgain management will be making forward-looking statements about future events as well as Airgain's business strategy and future financial and operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings 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, May 7, 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 earning release for further details, including a reconciliation of GAAP to non-GAAP results. Now, I'd like to turn the call over to Airgain CEO, Jacob Suen. Jacob?

Good afternoon, and thank you all for joining us today. Ergen entered 2025 with real momentum and a focused strategy. We are now executing on the foundation we laid last year and approaching this year as a period to scale Lighthouse and Ergen Connect and deepen our presence in key global markets. Before I get into product-related details, I want to briefly address the broader macro backdrop and its potential impact on our business. Our standard customer terms, the flexibility of our fabulous model, and the tariff classifications for many of our products have, to date, resulted in no material impact on our product costs. we recognize the tariff environment remains fluid and are prepared to adapt quickly to minimize any potential impact on our customers. We are closely monitoring broadband and enterprise markets for any signs of downstream demand disruption. As of early May, we have not observed meaningful changes in customer purchasing behavior due to tariffs. Our public model supported by nine cancer manufacturers operating across diverse geographies, containers to provide operational resilience. We have experienced no significant disruption to date and are ready to adjust as needed. Importantly, our leadership team has navigated similar challenges in the past, and we are applying that experience to manage evolving conditions. Our transformation from a low ASP component supplier to a high-value wireless solutions provider is well underway. With platforms like Lighthouse and AirGain Connect, we are moving up the value chain into higher margin system-level solutions that address some of the most difficult connectivity challenges, including coverage, power, and deployment constraints. This shift from components to intelligent wireless systems has expanded our addressable market from $1.1 billion in 2024 to $2.6 billion today with continued growth expected as adoption scales. We have fundamentally redefined our business model, transitioning from sub-five dollars embedded components to full system solutions like Lighthouse, which carry ASPs in excess of $20,000. These positions, again, to deliver not only top-line growth, but also long-term gross margin expansion and improve operating leverage. As noted on our Q4 call, excess inventory persisted across certain product areas, including IoT-embedded modems, custom products, and aftermarket automotive antennas. We are seeing improvement on the IoT side with sales returning to more normal levels that say we expect the inventory correction in our aftermarket automotive channel to take additional time. Looking to the remainder of the year, we expect to drive sequential revenue growth supported by the consumer and IoT market recovery and the transition of our Lighthouse and AirGain Connect platforms from trial to deployment. laying the groundwork for broader commercial adoption in 2026. When we refer to Lighthouse and AirGain Connect as platforms, we mean they are not single products, but scalable, modular solution families. Each platform is designed to support a range of use cases, deployment environments, and customer segments. with the flexibility to evolve through new skills, certifications, and geographic expansion. This platform-based approach allows us to build repeatable go-to-market models and extend the value of our IND investments over time. In Q1, we executed effectively across both of our primary growth vectors. Let's start with the Lighthouse. In January, we entered into a strategic and commercial agreement with Omantia, a leading telecom operator in the Middle East. We view this as a multi-year opportunity supporting both indoor and outdoor deployment across Oman and potentially into broader regional markets. This partnership extends beyond deployment. It includes commercial collaboration, joint marketing, and co-development of new solutions. We are working closely with Omantia on implementation plans with revenue contribution expected to ramp in the second half of 2025 and expand further in 2026. The Omantia engagement also led to the debut of Lighthouse Solar. our off-grid solar power smart repeater, designed for coverage challenge in sustainability-driven deployments. Initial field trials demonstrated strong performance, including meaningful gains in coverage and spectral efficiency, reinforcing our technical differentiation. Recent field trials of Lighthouse Solar have confirmed its market potential. including a 20% expansion in 5G coverage, average speeds increasing from 1 megabits per second to 250 megabits per second, with peaks over 425 megabits per second, over 50% improvement in spectrum efficiency, and same-day installation with no need for fiber or power grid access. Multiple Lighthouse trials are underway or planned across key regions, including the Middle East, Latin America, Southeast Asia, and Europe. Each represents a meaningful opportunity as we work toward broader commercial adoption. Turning to AirGainConnect, we also made key strides during the quarter. we achieved commercial certifications with all three major US carriers and achieved AT&T FirstNet capable status, supporting our aim to address mission critical public safety communications. We remain focused on converting solar cycle tier two and tier three opportunities in the near term while building a long cycle tier one pipeline for 2026. Our sales fleet team now includes dedicated reps across five U.S. regions and a targeted channel strategy aligned with carrier partnerships. In the first quarter, we also secured several notable wins across our embedded modems, asset trackers, and aftermarket product lines, alongside a tier one MSO launching its Wi-Fi 7 offering. These design wins underscore the continued strength of our core business and play a critical role in supporting our overall operations as we scale revenue from our new strategic product platforms. Finally, I want to take a moment to highlight the strength of our leadership team. This is a seasoned, resource-focused team built for today's environment. One that knows how to drive operational performance, strategically engage customers and navigate global uncertainty, all while positioning again for long-term value creation. We are building a wireless connectivity company that doesn't just participate in the 5G expansion. We help make it possible in places others can't. With that, I'll turn it over to Michael to walk through our financial results and outlook.

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. Now, let's turn to our first quarter results. Q1 sales came in at $12 million, in line with the midpoint of our guidance range. Consumer sales reached $6.4 million, down just $0.1 million sequentially, reflecting another strong performance. Automotive sales were $1.3 million, down $2 million sequentially, driven by lower shipments of aftermarket antennas and air-gain-connect gateways. Enterprise sales were $4.3 million, down $1 million sequentially, marking a low point for the year due primarily to lower shipments of enterprise antennas and custom IoT products. Q1 gross margin was 44.3%. marking our fifth consecutive quarterly increase. The 90 basis points sequential improvement was largely due to higher enterprise product margins. Operating expenses totaled $6.6 million, up $.1 million sequentially and flat year over year. While expenses have remained stable over the past year, Our engineering sales and marketing organizations have undergone some significant changes. In Q1 2025, our strategic initiatives accounted for two-thirds of our total R&D sales and marketing expenses, up from roughly 50% in Q1 of 2024. Over the past year, we have built dedicated sales, marketing, and customer support teams to support AC Fleet and Lighthouse, while streamlining the engineering and sales expenses of our existing business. As a result, adjusted EBITDA was negative $1.2 million, primarily due to the lower revenue base. Non-GAAP EPS came in at negative 11 cents. We ended the quarter with a cash balance of $7.4 million, down $1.1 million sequentially, and up $.2 million from the same quarter a year ago. Now, moving to our outlook for the second quarter ending June 30, 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 are key indicators of our overall performance. For Q2, we project sales to range between $12.5 million and $14.5 million, with a midpoint of $13.5 million, representing approximately 12% sequential growth. The growth is expected to come from a rebound in our enterprise market. Enterprise performance will be supported by the correction of excess inventory and increased design wind activity, specifically among our industrial IoT customers. We also anticipate lighthouse deployments beginning to contribute to enterprise revenue in the second half of the year. Our consumer market remains a bright spot as an uptick in March shipments ahead of anticipated tariff activity offset the negative seasonal impact. We do expect some moderation in Q2, followed by steady growth throughout the rest of the year, especially as another tier one MSO launched its Y57 platform this quarter. Automotive hit a low point in Q1, and it is expected to remain relatively flat in Q2. However, shipments of AgainConnect gateways are expected to drive meaningful growth in the second half of 2025. We expect non-GAAP growth margin to be 42% to 45%, or 43.5% at the midpoint. We expect operating expenses to be approximately $6.6 million. Non-GAAP EPS is expected to be negative 6 cents at the midpoint, and adjusted EBITDA is expected to be negative $.6 million at the midpoint. We expect to receive at least half a million dollars in ERC refunds this quarter, which will help mitigate the impact of the adjusted EBITDA loss. We remain mindful of the current macroeconomic environment. and we are focused on executing our strategy while targeting positive adjusted EBITDA in Q3. Finally, as a housekeeping item, we plan to file an updated S3 shelf as our current shelf registration is set to expire in two days. While we have no imminent plans to raise capital, maintaining this filing reflects good corporate governance and financial flexibility in time of uncertainty. Now, I would like to turn the call over to Jacob for his closing thoughts. Jacob.