Airgain, Inc.

Good afternoon. Welcome to Airgain's first quarter 2026 conference call. My name is Sherry, and I will be your 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 will be made available for replay via the 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 AIR GAINS covering analysts. I question listeners that during this call, AIR GAINS management will be making forward-looking statements about future events as well as AIR GAINS 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 questionary statements contained in today's earnings release and Airgain's SEC filings. The conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 6, 2026. 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. I would now like to turn the call over to Airgain CEO, Jacob Suen. Jacob?

Good afternoon, everyone, and thank you for joining us. The first quarter marked a solid start to 2026 as we began converting the strategic groundwork we laid last year into broader commercial momentum across the business. Over the past several years, we have been transforming AirGain into a higher value system level connectivity company. In Q1, that transformation showed up through customer wins, expanded platform capabilities, and deeper commercial engagements across our core markets and growth platforms. Let me start with our platform initiatives. First, we expand AirGain Connect's capabilities through the acquisition of the HPE MEGA52 assets from Nextivity. This acquisition expands our portfolio and strengthens our vehicle gateway capabilities across public safety, utility, and enterprise fleet applications. It also broadens what we can offer to our customers. Some customers need a fully integrated vehicle gateway. Others want a simpler, high-power router solution. With Aging Connect, we can now support a wider range of deployment needs. Both AirGainConnect Fleet and AirGainConnect MegaFive 2 are part of the AT&T FirstNet offering. And customers can order these solutions directly through the AT&T Speed Portal. We are also seeing encouraging progress in the AirGainConnect pipeline. In March, we closed a Tier 2 customer in the energy sector that operates across multiple US regions. This customer is deploying AirGain Connect across a fleet of more than 300 maintenance and service vehicles, following field trials that demonstrated improved connectivity performance and ease of installation. As of last week, our pipeline include more than 55 Tier 1 and Tier 2 opportunities, up roughly 40% from the approximately 40 Tier 1 and Tier 2 opportunities we mentioned on our last call. The mix is also becoming more attractive, with most of these opportunities now coming from non-first responder markets. Importantly, These opportunities are also advancing through the funnel. More than one third of our tier one and tier two opportunities are now in trial or post trial stages compared to a quarter on our last call. This gives us increasing confidence that the pipeline is not only broader, but also moving closer to conversion. At the same time, Tier 1 engagement continues to deepen, with several opportunities becoming more strategic. While these larger opportunities take longer to convert, we believe the pipeline is moving in the right direction. These emerging opportunities reinforce our view that the strategy we outlined on our last call is working and that AirGain Connect is positioned to become a more meaningful contributor as we move through 2026 and beyond. Second, we continue to advance Lighthouse. In the US, we are now working with a business sponsor and a tier one mobile network operator to progress toward a live enterprise trial. This moves Lighthouse from network validation into the business and commercial phase. If the trial progresses as expected, we believe initial commercialization opportunities could begin toward the end of 2026, with a broader opportunity developing in 2027. This opportunity with the Tier 1 M&O is being driven by clear customer pinpoints around coverage, capacity and the cost of network upgrades. In many in-building environments, traditional solutions such as gas or small cells can be expensive, disruptive, and slow to deploy. Lighthouse gives customers a faster and more cost-effective path to upgrading from 4G to 5G coverage. For indoor deployments, the value proposition is straightforward, better coverage, lower cost, and faster deployment. For outdoor user cases, Lighthouse reduces coverage gaps and provides network performance benefits, non-disruptive integration, and scalability. Based on our engagement with this Tier 1 MNO, we believe indoor deployments could represent the near-term opportunity, with initial deployments targeted toward the end of this year. Outdoor deployments remain an important longer-term opportunity and are expected to follow a more expanded evaluation and commercialization cycle. In the Middle East, Our relationship with Omantel remains an important entry point. Deployment activity was paused due to the conflict in the region, but engagement is now ongoing and we expect to move forward with initial deployments over the coming months. We continue to advance our roadmap for integrated 4G and 5G coverage solutions. designed for challenging indoor and outdoor environments. This roadmap supports 4G and 5G co-location, expands the range of deployment scenarios we can address, and strengthens the long-term commercial opportunity for Lighthouse. We are seeing customer interest in trialing the combined solution as units become available. As our engagement with the Tier 1 M&O and enterprise customers has progressed, we believe we now have a clear path to commercialization with our current product roadmap. As a result, we have realigned our resources and priorities to focus on accelerating commercialization and revenue generation. Now, turning to our core markets, in consumer, we secure a multi-year, multi-million dollar embedded antenna design win for a next generation 5G home connectivity platform with a tier one North American MNO with production units anticipated later this year. As expected, consumer revenue declined sequentially due to seasonality. Looking into Q2, we expect consumer revenue to remain relatively stable with underlying demand still healthy. The primary factor we are monitoring in the near term is a supply constraint at the gateway level, particularly around memory availability and pricing. This is impacting our OEM's ability to ship finished systems and in turn can affect the timing of our antenna shipments. At this point, this dynamic is limited to a single OEM serving cable operators. Based on feedback from this OEM, they are actively working to address the issue, and we believe the impact is temporary. As we mentioned earlier, we have secured two Tier 1 MNO design wins. and we remain on track for those programs to rip in the second half of the year. In enterprise IoT, momentum is building. We received a $4 million purchase order from a longstanding IoT solution customer with shipments expected to be completed this year, including initial shipments in Q2. This order reflects the resumption of demand from this customer and improves our near-term visibility. We are also seeing continued traction across our embedded modem portfolio and expanding opportunities in emerging applications. We increased our IoT presence in robotics through a new design wing with Cocoa Robotics. and we are seeing additional activity in adjacent areas such as storms, including pre-production shipments in Q2 for a new customer program focused on autonomous VTOL logograph for defense and commercial applications. Stepping back, Q1 reflects progress across our growth platforms and our core markets. Both enterprise and automotive grew sequentially. IoT momentum improved. AgenConnect engagement broader. Lighthouse moved into more focused commercialization discussions. And our consumer business remains supported by strong tier one relationships. Just as important, our pipeline is broader and continues to expand. We enter this next phase with a more focused operating model, improving visibility and clear opportunities to convert customer engagement into revenue. With that, I'll turn the call over to 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 $11.5 million, which was at the midpoint of our guidance range. Enterprise sales were $5 million, up $0.7 million sequentially driven by higher embedded modem sales. Automotive sales were $0.9 million, up $0.4 million sequentially, reflecting higher sales of air-gang connect vehicle gateways. Consumer sales came in at $5.6 million, sequentially down $1.7 million, primarily due to seasonal impact. NUMGAP gross margin for the first quarter was 44.2%, compared to 46.3% in the prior quarter and relatively flat year-over-year. The sequential decline was primarily due to a lower enterprise margin rate, driven by an unfavorable product mix. NUMGAP operating expenses for the first quarter amounted to $6.1 million, While modestly higher sequentially due to typically higher first quarter marketing and trade show activities, operating expenses declined by 8% or $0.5 million year over year as we continue to optimize our OPEX model. In Q1, adjusted EBITDA was negative $0.9 million, $0.2 million lower than the midpoint of guidance. Non-GAAP EPS was negative $0.08 compared to negative $0.07 midpoint of guidance. As of March 31, 2026, our cash balance was $7.1 million, relatively flat sequentially. Net cash proceeds from our ATM were $0.6 million. Now, moving to our outlook for the second quarter ending June 30, 2026. 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 second quarter of 2026, We project sales to range from $12.5 million to $14.5 million, with a midpoint of $13.5 million. The midpoint represents a 17% sequential increase driven by enterprise and automotive. We believe our outlook reflects improving demand visibility across the business, and continued progress in converting the commercial traction Jacob discussed into revenue. We expect non-GAAP gross margin for the second quarter to be in the range of 42.5% to 45.5%, or 44% at the midpoint. We project operating expenses to decrease sequentially to approximately $5.8 million. NOMGAP EPS is expected to be positive $0.01 at the midpoint of our guidance. Adjusted EBITDA is expected to be positive $0.02 million at the midpoint of our guidance. Overall, the actions we have taken over the past few quarters have improved our operating leverage and positioned us to convert top-line growth more effectively into profitability. Now, I would like to turn the call back over to Jacob for his closing thoughts. Jacob? Thanks, Michael.