Airgain, Inc.

Good afternoon. Welcome to Airgain's second quarter 2025 conference call. My name is Ina, and I will be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Swinn, and CFO, Michael Albas. 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 a company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings release in Airgain's SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 6, 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 future details, including a reconciliation of GAAP to non-GAAP results. Now, I'd like to turn the call over to Airgain CEO, Jacob Swen. Thank you. Please go ahead.

Thank you, operator. And hello, everyone. Airgain entered 2025 with a clear strategy to scale our growth platforms. strengthen our existing markets, and maintain disciplined operational and financial execution. In the second quarter, we put that strategy into action, delivering sequential revenue growth, reducing operating expenses, and achieving key milestones that set the stage for second half profitability and growth inflection in 2026. I plan to cover three key topics. First, our second quarter business performance, including trends in our consumer, enterprise, and automotive markets. Second, progress on our growth platforms, Aging Connect and Lighthouse, with an update on milestones, customer traction, and the timing of applications and deployments And finally, our strategic outlook, including our path to profitability in the 2026 growth inflection as our platforms scale. Let me start with our operating environment and existing businesses, which formed the foundation of our strategy. The tariff environment remains fluid, but we have not experienced a material impact on our gross margin or end customer demand. Our Fabless model, supported by seven global contract manufacturing partners, gives us flexibility to navigate this challenging environment while maintaining a lean cost structure, an important advantage as we focus on profitability. Our existing markets remain stable and relatively predictable. In our consumer market, Y57 shipments to Tier 1 MSOs, including a leading U.S. cable provider that launched its Y57 offering in April, continue to ramp in the quarter. Demand is normalizing at healthy levels. well above the 2023 12, providing a stable revenue foundation. At the same time, we are investing in the growth areas within this market to expand our customer base and capitalize on the long-term connected device trends. In our enterprise market, Ergan's NimbleLink embedded modem line was a strong performer in Q2 and is well positioned to maintain its momentum in the second half of the year. Adoption has been highest among industrial IoT system integrators who need a turnkey cellular solution that simplifies certification, reduce engineering effort, and shortens time to market. We have seen the greatest success in utility infrastructure monitoring, including energy management, oil and gas, and electrical grid applications. Additionally, in June, we launched our SkyWire CAT1-based embedded modem, pre-certified for end application use and designed to streamline IoT deployments. By reducing certification hurdles and accelerating IoT deployment timelines, this innovation broadens our reach in industrial IoT markets. Conditions remain soft in our automotive aftermarket and asset tracking markets. Aftermarket antenna sales growth continues to be weighed down by channel inventory overhang, which we expect to persist through the second half of the year. Asset tracking sales have also moderated this year, reflecting a lack of traction on key projects. Our revenue in this area is now comprised of orders from existing customers, along with stable recurring revenue. Together, these existing markets provide a steady revenue foundation. enabling us to drive our growth platform initiatives. Now let's turn to AirGain Connect, our mission-critical mobile connectivity platform. AirGain Connect AC Fleet combines an integrated 5G modem, Wi-Fi 6 router, and high-performance antenna to deliver reliable broadband for utility and public safety fleets. AC Fleet is progressing through key carrier certifications, which are essential for unlocking larger tier one in government opportunities. We continue to make important progress on this platform. In May, we achieved FirstNet Trusted Certification for AC Fleet, a critical milestone that opened access to FirstNet dedicated public safety network. accelerates procurement with government and municipal agencies and serves as a key gating factor for large scale utility and first responder deployments. In short, this moves AC Fleet from pilot programs to being fully deployable in mission critical environments. In June, we introduced the AirGain Connect Go Kit Pro, a rugged TCA-compliant 5G mobile connectivity kit with a built-in battery, Wi-Fi 6, GPS, and multi-carrier eSIM. It is purpose-built for first responders and remote teams, enabling secure broadband deployment in seconds, and complements AC Fleet, by extending connectivity beyond the vehicle to field and temporary operations. Also in June, we secure a new tier two utility deployment with a Midwestern electric utility, marking another AC fleet win in demonstrating the value of our AC fleet solution to the utility market. This market values AC Fleet for its ability to provide real-time connectivity to crews in the field, improve situational awareness during outages and emergency response, and reduce the cost and complexity of network installations across widely distributed fleets. While multiple Tier 3 customers have deployed AC Fleet, This is the first tier two customer deploying AC Fleet today as part of its fleet modernization initiative. As I have shared on prior calls, the AC Fleet sales cycle varies by fleet size and directly impacts the timing of revenue recognition. Tier three customers on the 50 vehicles typically move the fastest with a sales cycle of roughly three months, providing near-term revenue opportunities. Tier two customers, 50 to 500 vehicles, generally take six to 12 months from engagement to deployment. Tier one customers, over 500 vehicles, have the longest cycle, 12 to 18 months, and often require a formal RFP process. We currently have roughly 40 sales opportunities in our pipeline, with a primary focus on the first responder and utility markets. Net of our design wins in Q2. Our sales opportunities pipeline grew approximately 20% in the second quarter. Our strategy is to maintain a broad, well-balanced pipeline that positions the platform for meaningful scaling in 2026. We remain on track for T-Mobile Priority One certification in Q3, Verizon Frontline certification in Q4 2025, and European certification in Q1 2026. all of which expand our addressable market, open access to Tier 1 and government contracts, and enable larger multi-fleet deployments. Customers are selecting AC Fleet because it is a true all-in-one solution with integrated eSIM technology, simplifying installation, enabling seamless carrier switching, without hardware changes, and lowering total cost of ownership for utilities, law enforcement, and emergency response agencies. This eSIM capability is a key differentiator, giving fleets the flexibility to select the best available network and maintain connectivity in mission critical scenarios. We are also investing in AC Fleet's go-to-market strategy, strengthening our marketing efforts in participating in industry events such as the FirstNet Forum, T-Mobile Fleet, and Verizon Frontline. Our multi-pronged sales strategy of expanding our dedicated Fleet Force sales team from coast to coast, identifying VARs, and working closely with our distribution partners are designed to accelerate trial conversions and drive platform adoption into 2026. Turning to Lighthouse, our 5G smart network repeater platform, serving both US and international markets. Lighthouse delivers a unique connectivity solution for expanding 5G connectivity and uploading capacity when networks are underutilized. Lighthouse stands out by significantly reducing the total cost of ownership compared to traditional micro and macro cells. With the capability to be deployed in hours rather than months, Lighthouse offers a cost-effective, low complexity, an environmentally sustainable solution, especially with its solar-enhanced package. Our go-to-market strategy is dual-pronged. Internationally, we collaborate closely with mobile network operators like Omantel, where sales cycles typically extend 12 to 18 months from design to deployment. In the U.S., We're initially targeting system integrators that serve enterprises where the sales cycle can be significantly shorter. This approach allows us to generate revenue sooner while establishing long-term relationships with MNOs for larger network-wide deployments. We are actively investing in the U.S. market. including the hiring of a dedicated business development leader to expand our system integrator network. By working with system integrators, we aim to address both outdoor and indoor connectivity pinpoints, accelerate deployments, and create a more predictable domestic revenue stream. We are scheduled for multiple trials by the end of the year across several regions. including the US, Latin America, Southeast Asia, Europe, and the Middle East. Our focus remains on completing certifications, conducting and converting trials to design wins and design-in stages, and scaling our channel and sales infrastructure for broader adoption. With that, I'll hand the call over to Michael for a deeper review of our second quarter financial results. Michael.

Thank you, Jacob. Before I dive into the numbers, I will note that my remarks refer to non-GAAP figures unless otherwise indicated. Reconciliations to GAAP results can be found in today's earnings release. Second quarter revenue came in at $13.6 million. slightly above the midpoint of our guidance, and up 13% sequentially from the first quarter. Breaking this down by market, enterprise revenue was $7.2 million, increasing $2.8 million sequential. The growth was driven by strong demand for embedded modems and custom IoT solutions, specifically by end customers in the utility infrastructure monitoring market, including energy management and electrical grid applications. These customers can focus on their core expertise while accelerating their product development timelines with our modem solutions. Consumer revenue was $5.6 million, down $.8 million sequentially, consistent with our expectations following the inventory pull forward tied to tariffs in Q1. Demand continues to normalize at healthy levels, providing a stable baseline for the company. Automotive revenue was $0.8 million down $0.4 million sequentially, reflecting software demand. Second quarter non-GAAP growth margin was 43.8%, down slightly from 44.3% in Q1, On a year-over-year basis, gross margin increased 230 basis points, primarily driven by improved enterprise product margins. Second quarter non-GAAP operating expenses were $6.5 million, lower both sequentially and year-over-year, reflecting continued OPEX discipline. Adjusted EBITDA improved to a loss of $0.4 million $1.2 million in Q1. Q2 non-GAAP net loss was $.5 million, or $0.04 per share. We ended the quarter with $7.7 million in cash and equivalents, up $.3 million sequentially. This increase reflects disciplined working capital management, underscoring our focus on cash optimization as we drive second-half profitability. Year-to-date, we received $2.1 million in net proceeds from the employee retention credits we applied for two years ago. The ERC credits helped offset the impact of $1.8 million year-to-date non-GAAP operating loss on our cash balance. Looking ahead to the third quarter, we expect revenue in the range of $13 million to $15 million. with a midpoint of $14 million, representing approximately 3% sequential growth. We expect the sequential growth will be driven by initial contributions from our platform products, including AC Fleet and Early Lighthouse, alongside the stable existing business in consumer and enterprise. AC Fleet revenue in Q3 is expected to come from Tier 3 and initial Tier 2 deployments. while Lighthouse will begin contributing modest revenue from early international trial conversions. These early platform contributions are expected to build through the second half of the year and set the stage for meaningful scaling in 2026. We expect non-GAAP gross margin for the third quarter to be in the range of 42.5% to 45.5% or 44% at the midpoint. We do not anticipate a material impact from tariffs, although this environment remains fluid and may result in supply chain disruption costs. We expect Q3 non-GAAP operating expenses of approximately $6.1 million, reflecting a sequential decrease of roughly 6%. The projected decrease reflects expense realignment within our existing product lines, and a decrease in G&A expenses. At the same time, we continue to invest in sales, marketing, engineering, and customer support to advance our growth platforms. Our first half non-GAAP engineering expenses decreased by 18% year-over-year. Within that, we estimate the engineering expenses for our existing product lines decreased by approximately 50%. while investment in our AC fleet and lighthouse platforms increased by about 45%. Similarly, first half non-GAAP sales and marketing expenses increased 5% year-over-year, reflecting a roughly 20% decrease in our existing product lines and a 70% increase in our growth platforms. We expect this realignment of expenses between existing product lines and new platforms to continue in the second half of the year. At the midpoint of our guidance, we expect positive adjusted EBITDA of approximately $0.2 million and positive non-GAAP EPS of one cent per share. Now, I will turn the call back over to Jacob for his closing remarks. Jacob? Thank you, Michael.