Airgain (AIRG) 10 Aug 232023 Q2 Earnings call transcript

Good afternoon. Welcome to Airgain's Second Quarter 2023 earnings conference call. My name is Latanya, and I'll be your coordinator for today's call.

Joining us today's call are Airgain's President and CEO, Jacob Suen; and CFO, Michael Elbaz.

As a reminder, this conference being recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at www.airgain.com. Instructions]. [Operator

performance. that about Airgain business or future future company's and listeners making will strategy implied this differ business. uncertainties financial statements could associated statements forward-looking events operating risks by during these caution those due management call be and materially forward-looking I from results to stated and Actual and the Airgain's with

after call in contains statements live date qualified this Airgain information date filings. by today's contained earnings statements revise to the are statements SEC the release no update forward-looking undertakes accurate These This broadcast, of is any to cautionary conference time-sensitive that of call. circumstances XXXX. only forward-looking conference Airgain's and events the reflect obligation or August as XX, this of or

today's this of include results. conference Please the GAAP may financial to measures. a of earnings call for addition, reconciliation a release non-GAAP non-GAAP In discussion future including details, see

over I'd to Now the Jacob Suen. like CEO, our to turn call Jacob?

Welcome, operator. you everyone, thank you, Thank us. for joining and

Afterwards, update first call, product XXXX financial it hand will marketing achievements and QX. questions. for to today's operational beyond, second highlights and an strategic opening initiatives cover I'll For to the quarter. for up before you provide for through Then Michael performance on walk our call our over our for I and I'll the

by our of connectivity and to introducing we what markets. industry. who start wireless we like briefly may to Airgain, simplified enterprise, who for you those I be automotive Airgain do At would for consumer are and the new we in

three our and IoT fleet, growing of antennas, devices kits. Airgain which of Integrated, integrated trackers, embedded connectivity from represents represents products which embedded, embedded and our products. our Airgain vehicle modems finished which including networking chain our represents stable asset XG IoT and value to cellular-based Antenna antennas, networks Plus, embedded the across Airgain spends products under for including technology systems sub-brands development and Our components

being exclusively from a evolve company. we company to systems a As components

customer creating and We designed XG experience. to on the are improve solutions, unique build up

reintroducing our are FWA this significant commercialization C-bands these or Earlier fixed and the progress solutions of Smart toward XG innovative access making wireless products. XG year, in Repeater

channel Our is customers a partners end products with perspective, to that connectivity able we the a we Airgain’s first and XXXX. in customers critical of some wireless With products, of to shipping these improved half and help help to time market distributors of go-to-market complete VSaaS integrators, growing issues, of global shorten goal large to to get solve and begin are performance for From connected them work system customers their partners portfolio and to our quickly. offer effectively solutions products. network

Now, for our performance.

near continued quarter combined demand was The when sequential drove at sales create decline a in range. lower inventory with Macroeconomic end guidance to came second our $XX.X which Enterprise of conditions markets. the in have and in Automotive industry-wide, softness correction which million, channel, our our

growth sequential our expect While sequential XE third a with we did this to sales in cable of markets, we see WiFi market continue increase consumer decrease That this quarter. two do in in our a consumer category. said, project major operators, in leading we in the the trend as an not in underperformed we these deployment to

to delayed scheduled path quarter, expect shipments a for connectivity, was enterprise headwinds, pave with contributing we expansion large fleet Furthermore, a that that current we fourth a our quarter to initially remain to and XG product XXXX combined our new that Despite and beyond. third the the lower guidance. product in growth introductions quarter in be project third of to sales optimistic strategies,

of and channels our strategies base. these distribution, diversifying expansion include of expanding geographies Some customer adding

logistics. such as tangible already verticals shipping and in key see to fleet growth results these We strategies able from and are rail,

represents market custom mix modems, products. in Enterprise asset design that antenna components a and our include trackers systems of enterprise embedded Our

we demand to year channel including grow. XXXX several gaining our of asset in inventories In excessive shipping particular our with equipment rail, first continue the in our in half logistics trackers the softness asset and trackers are products and rentals. experienced vertical custom momentum While embedded markets, and modems,

up win first solution expect the asset Airgain announced management software positioned embedded is and in modems the well design wins trackers, and With secure started a solve that this capacity we end-to-end to key market. cellular-based offer for the its industry, to to we to problems. in the complete customer data our includes to in rail quarter further shipments QX ramp in customer

track industry, bearing rail hand weight status, of These customize the to low rail more. location as ability several the conditions Airgain portion Airgain, status, meaningful our For revenue and asset features impacts bridge provide cut which for recurring pools, to offers such open, a sales. represents increased solution critical a door tracker

our team well believe our to as to to long-term loyalty Recurring strategic the innovations stable our retention growth. an customer product can been investments streams revenue contribution we has growth advantage. as drive place continue and increase for in top to we ability maintain emphasis competitive and new With line strengthen revenue in

been for Our has This custom reduce products with features us. offering develop bright our time products for offering them applications, collaboration, market. their spot specific joint while a to customers engineering helping to

we and from while on seen based fluctuate acknowledge However, this sector, quarter-to-quarter we customization. can shipments from of that momentum level the have integration

quarter, now occur example, For delayed scheduled third to complex the mentioned time have in the shipments fourth earlier lines been to often quarter inherent to as shifting in product due some projects.

to seeing connectivity we and and enterprise products. VSaaS, for shipping looking our rentals or video time equipment In logistics to These generally and addition better environments. are segments market a for equipment shorter charging challenging to also surveillance performance industrial EV easy path in growth in are and as-a-service and

complete and that a on With design eliminate provide wireless connectivity, with bottlenecks, products focus shelf connectivity, the RF with reliable these to life. appeal for markets and our need simplifying expertise, remove long we help rugged

saw our market this decline in devices. due both in vehicle includes sequential to a market forecasting changes. QX and excessive automotive inventory Our aftermarket customers' We networking and

flexibility We this chain mentioned automotive changes responsive last our quarter differentiation us channels our globally. that designs, lead to expanding strategy demand, make QX adding beyond. will supply of these to and and on product and strategies includes, growth We're channel the believe implementing a to distribution more threefold in to executing and that sequential in

new the announced ordering line In May, to we differentiated. addition MULTIMAX antennas. platform, antennas week, Earlier highly which time, of of the announced are antennas, another fleet Easy two that same our believe we we and to we simplifies XG. the migration this and Connect IoT our our of At mobile also the XG the products installations announced

than for for in Our inches This as designed one connectivity includes all stealth that solution be XX XG in universal this as a solution RECONXX and a many measures height. is believe, less combined cutting-edge fixed We antenna design design that device, mobile is applications. form allows mounting it with service. in will X elements a low and adapt to any both to

the responder our We effort Both to first windshield made class first also for XG-ready cell fleet antenna. dashboard or products in build connectivity the markets. XG, announced ULTRAMAX XG-ready support our

industry. lead offers also implemented times, to Connect flexibility have aftermarket general chain shorten demand, in we the While to supply a solutions responding EV key differentiator market in us

our several international expanding we are reach. broaden channels also to Lastly, into geographical

starting new new will customers expect in greater growth that prospects We channels lead introductions us new QX. product and combined to with

by represented custom devices to of antenna an sold We deployment QX devices for of as our major major the Finally, cable market, primarily in providers. market embedded increase XE our service WiFi consumer operators. design is saw CPE by in result this primarily a US

we that market. However, have two saw impacted trends this negatively

FWA availability channel, cable for in in subscriber at softness year. with the the the operators. has and broadband major First, excessive core the loss has first created half the cutting of along caused industry, This demand inventory cable of and

transition growth ensure this operators as transition. key while WiFi basis to are XE excessive will a opportunities cable XXXX, they transitioning during cautiously deployment technology Operators to Airgain the for Second, that seven offer deliver inventory don't are to best-in-class create solutions. needed new for a on WiFi in driver antenna approaching accumulate this technology

design with work devices devices operators and broadband or the broadband produce MNOs performance, highest CPE major CPE operators on securing cable the for XG with network level While continue also to audience. wins their we of we wireless are to with mobile

currently WA US router X indoor Tier with an on MNO. are a opportunity working We

customer we on combined navigate will drive strategic While challenging WiFi a investment X our base demand environment focus expansion year, we this year. next believe with growth

challenges growth in While thus road to some We and XXXX right has presented into maps future the drive have expansion XXXX. we and product QX far. strategies believe

conditions lay we While this investing in actively distribution revenue of growth major that market customer We channels as base, and the initiatives. geographies, our foundation of our believe three we’re improve. will product are expanding

turn Michael? With call the Michael. will over to that, I

Thank you, Jacob.

reconciliations Information please including and my numbers, refers financial found guidance financial the about the measures earnings non-GAAP note non-GAAP to into Before diving our to our in are of figures. review non-GAAP results that release. GAAP

to let's quarter's Now, turn results. this

As range QX at low $XX.X to our $XX.X were Jacob mentioned, guidance the of sales of million. end $XX.X million million

due customers. Our corrections with and and channel primarily XX% sales year-over-year, to inventory sequentially declined X% direct our

were Enterprise lower which new decline offset higher increase of $X.X to channel reflecting uptick on tracker by Consumer corrections, million million, by due sales $X.X modem of sales $X.X sales a were The antenna on wins. inventory sequential was decreased embedded million. by million, $X.X shipments. sequentially XE sales Wi-Fi customer embedded a strong driven partially asset

sequential decrease million, a of inventory direct primarily corrections. due $X.X sales customer $X.X Automotive million, were reflecting to

favorable QX lower XX.X% was from driven points high by QX cost gross margin guidance of mix was indirect along consumer higher of gross range with our to of XXX sales, efficiencies. at revenue resulting basis XX.X%. the operational end margin sequentially, XX.X%

contract and are to of order reduce product second-source increasing six of to We in the supply number our adequate ensure of process cost. products from the XX in to manufacturers

first this expect driver with antennas, leveraging automotive prior is initiative. We gross our QX. impact of positively in XXX gross mentioned in a points by our primary our earnings margin completed will which our we calls, phase of margin model basis the CM improvement As leverage

of employee expenses million. professional decreased fees. with $XXX,XXX, QX totaled and million, approximately Operating expenses lower lower and operating driven guidance sequentially by in marketing expenses $X.X line $X.X our by

We to initiatives. and expenses are efficiencies for three major operational make the our room for reduce needed our continuously investments driving

a $X.XX. As adjusted was negative EPS result, and EBITDA positive our was non-GAAP $XX,XXX QX

cash $X.X June million, more was $X.X balance as XXth of million Our sequentially.

Net million sequentially inventory in or receivables $X.X quarter. linearity Our $X.X sequentially. was million $X.X due $X revenue higher balance higher the accounts to million was million,

the Now, million XXXX. the quarter $XX.XX and $XX.XX moving to, outlook the range ending at million $XX midpoint or to the be sales range. for million We in XXth, September third of our project of

the third expect to expected be midpoint to of expenses to approximately the gross in at XX.X% We range in range. EPS is of midpoint be the million. our or guidance. XX% $X.X XX.X% be operating be non-GAAP to our of quarter at the project margin the negative We to $X.XX, Non-GAAP

EBITDA Adjusted to a EBITDA at is we model, we quarter to to while we adjusted Despite continue remain map. expected the third execute our midpoint revenue the guidance. of in breakeven the achieving challenges be road strategic faced our on committed breakeven

will turn initiatives. product Now, strategic our to I back would Jacob? to the to walk like us through over Jacob, call who

Thanks Michael.

exciting several initiatives. those saw quarter QX of on executing QX While was product growth announcements. the

significant at new trajectory business We on and have technology the in initiatives our Day made these the progress, of impact Investor discussing our Analyst since March. market and

We will into our beyond. XXXX these believe that growth initiatives and carry

on shorter it from comes the station. and of base the delivers increased throughput latency, promises XG While lower a expense higher its of range capacity signaled at

both major XG customers. this coverage is these for gaps MNOs customers. Airgain and the believe Consequently, We the benefiting end solve coverage positioned well efficiencies, economically creates to

or Wireless solutions, with for the Improving allow Access. with wireless experience, XG cable These technology customer broadband home in office and connection. devices compete and the begins to connectivity wire Fixed

design that and an In January performance and of XXXX, device hardware software with installation helps kit of reference to the FWA unique trade-off installation. an directional ease our tool for solve outdoor easy we announced between its

moved to workers excited have testing into product long-term from are shipped We major and customers samples design to stage the we production this evaluation. announce and under have FWA brand that trial, for

failover the strong and applications remote our appeals interest integrated MNOs, access. also enterprise only as partners, is receiving for Broadband from such to system not product but This

has feedback from generating half expect revenue positive. Early product XXXX. in this begin first been of And market to we the

to the XG high of With equipment signals, due required to ownership infrastructure expand for the significantly reduced coverage. and range cost the quality of network transmission increases operators

bands aim of challenge to of smart high-quality efficient Airgain smart existing signal. steering An are announced carrier wireless active the facilitating and for use infrastructure major initiative feature a cost which of active this to overcome theme capability. active infrastructure single QX the upgrader eco can forefront developing for frequency repeaters in operators. The multi pole at and cancellation, lighthouse stable support is a aggregation, installation, repeater smart and reduce ensure relators, advanced by

performance trials completed further conducting products. We optimize are to and upgrader X our networks multiple tests the lab on Tier have of

expect We to these by end revenue generating the XXXX. begin of products

are on better we initiative major Airgain at third working for signal The a involves vehicles. delivering XG

and been many have the years. vehicle in We networking fleet for industry

With of more. have important segments especially applications utilities the rate safety, higher data This many and transportation, deployment for including the is XG, use multiplied cases agriculture, public for substantially. several

provide information the near future. additional opportunity We will in for this

cutting-edge continue create While initiatives trajectory organic growth, well grow a through these our core lines in the the focus for compete, can our strong to product solutions we markets on XG and generate Airgain. fundamentally experience we improving as we offer believe major which for customer as growth

a into headwinds to duration. seeing are In the closing, while motion due set initiatives conditions, macroeconomic short-term major have we nearing we

initiatives, while serviceable which positive are our geographies, customer multibillion-dollar investments major expanding our EBITDA entering We these represent generation. diversifying distribution on new product are our also and we base, while in keeping channels market, investing available focus making three of

pleased made three are major have We initiatives. for our significant process we go-to-market multi-step our development that in advancements

wireless of now completed consistent far with customer and remains prospects. XXXX. timetable and thus several lab in both half testing to and access device launch in projected first is enterprise international offering trials the domestic fixed consumer The Our this environment for has and for field

Our vehicle both networking a is similar partner demand. in and customer following in terms next-generation of platform trajectory

We we look in of our updating the from During you get market. throughout this to chain. we from closer in this have to amounts value process, customers as lessons forward previous space, offerings collected further, feedback considered

offering. repeater is testament and quality representative through trials direct domestically demand a network receiving is the our smart lighthouse is and goals from internationally. to MNOs of our progressing our platform Finally, installers also steadily and now late of interest, both This and

passion team solve XG has base to materialization, of solid team we for As the our throughout deployment members, the the initiatives that, am its soon. to in MNOs I have intent many And start I their problems, our express our and feel forth commitment common the see transformation. company's of should nearing put results networks. of is proud work and

years ongoing we over sales strategy, laid an process in in and a operations couple technology maps, road been every and we that on Transformation that that effective executing is out for feel successful have have company, of ago. we

dedicated the made, substantial very development has in cutting-edge solutions, strides across wireless to confident simplifying for team broad are We commitment the our of our thus far connectivity, a spectrum with on a customers. our

in evolving course a in partners. a the unparalleled cater of company the deliver set for connectivity and continue have not to innovation We but industry products to We Airgain. bright only that as a we the future ourselves, look driving establishing customers to the as process. leader that industry, By our is needs the believe shapes the in market,

for And your provide the with call to are that, open questions. instructions. appropriate the please we ready Operator,

updating you look on joining to forward you on call. We Operator? Thank our us call. for today's next

Thank you.

Relations were at you questions us you you. for look contact We on Thank you may Investor call. updating today's airg@gateway-grp.com. next our Thank your not forward Airgain's team taken to call. on joining If