Airgain (NASDAQ:AIRG) Q1 2026 Earnings Call

0:00 Good afternoon. Welcome to Airgain's First Quarter twenty twenty six 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 Albez. 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 Airgain's covering analysts. I question listeners that during this call, Airgain's management will be making forward looking statements about future events as well as Airgain's business strategy and future financial and operating performance.

0:49 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. The conference call contains time sensitive information that is accurate only as of the date of this live broadcast, 05/06/2026. 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.

1:37 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's 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.

2:38 Let me start with our platform initiatives. First, we expand AirgainConnect's capabilities through the acquisition of the HPUE MEGA 52 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 AirgainConnect, we can now support a wider range of deployment needs.

3:28 Both AirgainConnect Fleet and AirgainConnect MegaFY two are part of the AT and T FirstNet offering. And customers can order these solutions directly through the AT and T SPEED portal. We are also seeing encouraging progress in the AirgainConnect pipeline. In March, we closed a Tier two customer in the energy sector that operates across multiple U. S. Regions. This customer is deploying AirgainConnect across a fleet of more than 300 maintenance and service vehicles, following field trials that demonstrated improved connectivity performance and ease of installation.

4:18 As of last week, our pipeline includes more than 55 Tier one and Tier two opportunities, up roughly 40% from the approximately fully Tier one and Tier two 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.

5:08 This gives us increasing confidence that the pipeline is not only broader, but also moving closer to conversion. At the same time, Tier one 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 AirgainConnect is positioned to become a more meaningful contributor as we move through 2026 and beyond.

5:56 Second, we continue to advance Lighthouse. In The U. S, 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 base. If the trial progresses as expected, we believe initial commercialization opportunities could begin toward the end of twenty twenty six, with a broader opportunity developing in 2027. This opportunity with the Tier one MNO is being driven by clear customer pinpoints around coverage, capacity, and the cost of network upgrades.

6:50 In many in building environments, traditional solutions such as DAS or small cells can be expensive, disruptive and slow to deploy. Lighthouse gives customers a faster and more cost effective path to upgrading from four gs to five gs 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.

7:37 Based on our engagement with this Tier one 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.

8:27 We continue to advance our roadmap for integrated four gs and five gs coverage solutions designed for challenging indoor and outdoor environments. This roadmap supports four gs and five gs 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 one MNO and enterprise customers has progressed, we believe we now have a clear path to commercialization with our current product roadmap.

9:17 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 secured a multiyear, multimillion dollar embedded antenna design win for a next generation five gs 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.

10:09 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 OEMs' 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 one MNO design wins, and we remain on track for those programs to ramp in the second half of the year.

11:06 In enterprise IoT, momentum is building. We received a $4,000,000 purchase order from a long standing 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 win with Cocoa Robotics, and we are seeing additional activity in adjacent areas such as showrooms, including preproduction shipments in Q2 for a new customer program focused on autonomous VTOL load graph for defense and commercial applications.

12:18 Stepping back, Q1 reflects progress across our growth platforms in our core markets. Both enterprise and automotive grew sequentially. IoT momentum improved. AirgainConnect engagement broadened. 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 upgrading model, improving visibility and clear opportunities to convert customer engagement into revenue.

13:08 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 $11,500,000 which was at the midpoint of our guidance range. Enterprise sales were $5,000,000 up $700,000 sequentially, driven by higher embedded modem sales.

13:56 Automotive sales were $900,000 up $400,000 sequentially, reflecting higher sales of AirgainConnect vehicle gateways. Consumer sales came in at 5,600,000 sequentially down $1,700,000 primarily due to seasonal impact. Non GAAP 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. Non GAAP operating expenses for the first quarter amounted to $6,100,000 while modestly higher sequentially due to typically higher first quarter marketing and trade show activities, operating expenses declined by 8% or $500,000 year over year as we continue to optimize our OpEx model.

15:08 In Q1, adjusted EBITDA was negative $900,000 or $2,000,000 lower than the midpoint of guidance. Non GAAP EPS was negative $0.8 compared to negative zero seven dollars midpoint of guidance. As of 03/31/2026, our cash balance was $7,100,000 relatively flat sequentially. Net cash proceeds from our ATM were $600,000 Now moving to our outlook for the second quarter ending 06/30/2026. 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.

16:05 For the second quarter of twenty twenty six, we project sales to range from $12,500,000 to $14,500,000 with a midpoint of $13,500,000 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.

16:53 We project operating expenses to decrease sequentially to approximately $5,800,000 Non GAAP EPS is expected to be positive $01 at the midpoint of our guidance. Adjusted EBITDA is expected to be positive $200,000 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.

17:38 As we look ahead, we have good visibility into Q2 and see positive momentum for both our core and growth platforms for the rest of the year. Beyond Q2, we see a broader set of drivers. Demand in our consumer business remains healthy, and we expect improvement as supply constraints ease. IoT continues to build momentum through repeat orders and new application design wins. AirgainConnect is progressing from engagement toward conversion, with growing activity across utility and enterprise markets, and Lighthouse is moving toward targeted commercial deployment in The U. S. And Middle East.

18:28 Taken together, these drivers reflect a more focused and better positioned business with a stronger platform portfolio, a broader pipeline and an operating model positioned for improved leverage as revenue scales. Our focus is execution, converting pipeline into deployments, driving growth and improving profitability as we move through 2026. Operator, we're now ready to take questions. Thank you. We will now be taking questions from Airgain's sell side analysts. Our first question is from Anthony Stoss with Craig Hallum Capital Group. Please proceed.

19:37 Great. Thank you. Good afternoon, Jacob and Michael. Michael, I was trying to rate as fast as I could. Can you just give me the revenue splits? I got consumer 5,600,000 but I missed auto and enterprise. The guidance you meant, Tony? The percent of revenue in the quarter that came from and same question for enterprise. Auto would be about 40% approximately. I don't have the other numbers in front of me. And enterprise would be about higher actually, 50% approximately.

20:24 Enterprise 50, auto 40 and consumer 10? No, no, It's Yes, consumer is 5,600,000. Yes. I'll to come back to you on this, Tony. I don't have those numbers. Yes. The bottom line is always the enterprise and automotive, we're seeing a sequential growth and we expect that momentum to continue. And consumer in Q1 was due to seasonality. So we also expect that consumer to improve throughout the year. Perfect. And then Jacob, just I the number is 49% on the consumer, 8% on the automotive and 43% on the enterprise in Q1.

21:12 Perfect. Thank you. Related to the memory shortages, I get it. A lot of people are talking about it, thinking it's going to get worse throughout the remainder of the year. But given I guess the first part of the question is how much of your revenue was affected in Q1 as a result of not being able to ship? And then, Jacob, more longer term picture, when do you think which quarter is it this year, is it next year when you can get back to the kind of 7,000,000 to $10,000,000 in quarterly revenue on the consumer side? So, yes, Tony, this is Michael. So in terms of Q1 impact, we had no revenue impact from the shortages and we had no gross margin impact from the shortages. In Q2, we have been conservative on the consumer. Typically, you would see that seasonal down in Q1, which we saw and a rebound in Q2. And right now, we are expecting to be relatively flat and mainly because one specific OEM is being impacted.

22:15 They believe it's a temporary blip right now and it will be worked out by the end of the quarter. But again, we've been conservative on that. Yes. And regarding your questions about the consumer revenue, certainly as we indicated, the good news is that we always have the stability regarding the MSOs. We are now adding the MNOs. We are now working on two major MNOs in The U. S. So that should help us well positioned for the rest of the year. Are we able to get to the 7 to $8,000,000 range like we used to have? We do have the path for that. Now is that going to be happening this year or next year? We don't know that yet, although it's trending very positively.

23:05 We mentioned about the design win with the MNO that should start shipping in another part of this year. Got it. And then my last question related to Area Connect. Are you seeing a speeding up of some of these trials or your ability to convert? It's great to see that Tier two energy customer. What's your feel on how quickly you can convert the trials into more side deals? So on the Tier one type of customers, we mentioned before twelve to eighteen months of the cycle time and we are in the cycle time. The good news here is that the pipeline is changing favorably to us, quarter over quarter. So for example, we mentioned on the call that we have a current pipeline of over 55 deals in Tier one and Tier two customers.

24:01 20% of that is Tier one customers and other 20% of that the vast majority are for non first responders. So they tend to be moving quicker. However, because those tend to be also strategic type of deals, they are also very much of a multi layered type of meetings, engagements, trials taking place and so we are basically on track to what we had mentioned about the twelve to eighteen month cycle. On the Tier two, we just mentioned that we closed a Tier two customer. Overall, the velocity of the design wins that we have primarily on the Tier three and the Tier two so far is accelerating. Last year, we would be closing one deal per month and this year so far up until May it's been about two deals per month.

24:54 I hope this is helpful. Perfect. Yes, no, very helpful. Tony, I add that. Also the Tier one opportunity size, the vehicle size is also getting bigger as we go after the non first responder vehicles, because a lot of these are large enterprise fleet. So we start to work on tens of thousands of vehicles instead of just several thousands or several 100 as in the case of the first responders. Perfect. Thanks for all the color guys. Appreciate it. Sure. Our next question is from Jason Schmidt with Lake Street Capital Markets. Please proceed. Hey, Thanks for taking my questions. Just looking at Lighthouse and that potential trial here in The U. S, what additional steps, if any, do you guys need to complete to continue to move that forward?

25:53 Jason. Yes, Jacob here. So yes, it's actually a really significant milestone. And as I was alluding to in the call earlier, is the fact that basically as far as the technology validation that looks to be already proven with the trial we have done in the corporate office. So now we are working with the business sponsor. So typically they would not work with us to do a business sponsor until they feel very comfortable with the technology validation. So that phase is done. We're now working with them on their sales team to identify several potential customers, that would be able to really take advantage of our Lighthouse product.

26:46 And these are customers as we work with this particular MNO where they actually have to walk away from deals previously due to lack of budget using existing system. So our solution are giving them a fractions of the cost, otherwise. So as an example, where they have to have, using a system that's going to be $4 per square foot. Now we're going to be able to offer them a fraction of that, so we can meet that budget. So those are the customers that they are targeting, and we intend to get one or two of those customers for the live trial and hopefully in turn become permanent. So that's where we're at regarding the progress with this particular MNO.

27:31 Now as you know, dealing with MNO, it takes time, although they're really seeing a unique value with our Lighthouse. Okay. That's good to hear. And then looking at the consumer segment, understanding the near term dynamics, but do you guys have confidence that you will see that rebound in Q3? Or is it just too early right now? It's a bit early right now, but let me put this way, the demand is very healthy and the demand what we mentioned before last quarter is that we were expecting a modest growth on the consumer market across the year. From a demand standpoint, it's there. It's a question of supply and the timing of it. I should also mention from a consumer business model itself, the way it's being set up and really is based upon the strong relationship we have with the service providers, the OEMs themselves, the CMs and the distribution channel as well too. And that gives us quite a bit of visibility at least in the short term about some of the supply management that we have to do. The other piece also that I should mention is that typically service providers have two or three OEMs and typically we are designed in with two OEM.

28:47 So if there is any type of supplier allocation being redone for instance, we're still somewhat covered by it. Okay. That's helpful. And then just the last one for me and I'll jump back into queue. You're expecting a nice sequential downtick in operating expenses. Is this sort of a level we should feel comfortable with in the back half of the year? How should we be thinking about OpEx? Yes. I think first half of the year, I believe in 2026 is about 9% down compared to the first half of last year. As revenue grows, you would expect a modest uptick on that. But overall, our sense is that we definitely want to make sure that we have a very strong operating leverage so that when the top line grows and that top line should be having some higher gross margin than the corporate average.

29:45 As it grows, then we really optimize our overall business model and be really offer some positive and accretive EBITDA margin in the long run. Okay, perfect. Thanks a lot guys. Thank you. At this time, this concludes our question and answer session. If your question was not answered, you may contact Airgain's Investor Relations team at airggateway grp dot com. I would now like to turn the call over to Mr. Suen for his closing remarks. Thank you all for your thoughtful questions and for your continued interest in Airgain.

30:35 If there is one key takeaway, it is that Airgain is a more focused and disciplined company with a stronger foundation in improving operating model and growing platform momentum. We believe the work we have done positions us to drive sustainable growth and improve profitability as we move through 2026 and beyond. We appreciate everyone joining us today and look forward to keeping you updated on our progress. Operator, you may now conclude the call. Thank you for joining us today for Airgain's first quarter twenty twenty six earnings. You may now disconnect.