Press release

Airgain Reports First Quarter 2019 Financial Results; GAAP EPS of $0.03

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Airgain,
Inc. (NASDAQ:
AIRG), a leading provider of advanced antenna technologies used to
enable high performance wireless networking across a broad range of
devices and markets, including consumer, enterprise, and automotive,
today announced sales of $15.1 million for the first quarter 2019 and
GAAP net income of $0.3 million or GAAP diluted EPS of $0.03.

First Quarter 2019 Financial Highlights

  • Sales of $15.1 million
  • Gross margin of 45%
  • Net income of $0.3 million
  • GAAP earnings per diluted share of $0.03
  • Non-GAAP earnings per diluted share of $0.09
  • Adjusted EBITDA of $1.1 million

“We are very pleased with our first quarter 2019 results with GAAP and
non-GAAP diluted earnings per share of $0.03 and $0.09, respectively,
well ahead of our prior expectations of $0.00-$0.01 on a GAAP basis and
$0.04-$0.05 on a non-GAAP basis,” said Airgain’s Chairman and Chief
Executive Officer, Jim Sims. “Our efforts over the past several quarters
around operational and manufacturing efficiencies culminated in gross
margins of 45%, an improvement of 3.5% sequentially achieved in a
seasonally weak quarter. Furthermore, our design win momentum across our
Consumer, Enterprise, and Automotive markets continues to be healthy as
customers increasingly seek our complex antenna solutions in solving
their high bandwidth needs. On the 5G front, we are witnessing greater
customer activity and believe Airgain is well poised to benefit from
this industry-wide shift.

“During the quarter we witnessed some customers taking longer than
expected to ramp programs due to a combination of macro headwinds and
customer-specific issues. These timing issues spilled over into our
second quarter resulting in our outlook being down on a sequential
basis. We believe these issues are short-term in nature and expect
customers to ramp in the second half of 2019 onwards.”

First Quarter 2019 Financial Results

Sales increased 14% to $15.1 million compared to $13.3 million in the
same year-ago period. The increase in sales was primarily driven by a
ramp up in existing programs as well as contributions from new designs.

Gross profit increased 10% to $6.8 million from $6.2 million in the same
year-ago period. Gross margin as a percentage of sales was 45% in the
first quarter of 2019, which declined from 47% in the same year-ago
period, largely due to a change in the product mix.

Total operating expenses for the first quarter of 2019 decreased 11% to
$6.6 million from $7.4 million in the same year-ago period. The decrease
was primarily due to decreases in personnel and marketing related
expenses.

Net income totaled $0.3 million or $0.03 per diluted share (based on
10.0 million shares), compared to net loss of $1.1 million or ($0.12)
per diluted share (based on 9.5 million shares) in the same year-ago
period. Non-GAAP net income totaled $0.9 million or $0.09 per diluted
share (based on 10.0 million shares), compared to non-GAAP net loss of
$0.6 million or ($0.07) per diluted share (based on 9.5 million shares)
in the same year-ago period (see note regarding “Use of Non-GAAP
Financial Measures,” below for further discussion of this non-GAAP
measure).

Adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, other income, software implementation costs, and
stock-based compensation) increased to $1.1 million from Adjusted EBITDA
of ($0.5) million in the same year-ago period (see note regarding “Use
of Non-GAAP Financial Measures,” below for further discussion of this
non- GAAP measure).

Financial Outlook

The Company expects sales in the 2019 second quarter to be in the range
of $14.2 million to $14.4 million. The following table summarizes the
reconciliation between the projected GAAP EPS and non-GAAP EPS for the
2019 second quarter:

Reconciliation of projected GAAP to projected non-GAAP EPS
  Low (1)   High (1)
Projected GAAP earnings per diluted share $ (0.05 ) $ (0.03 )
Stock-based compensation expense 0.04 0.04
Amortization 0.02 0.02
Other income   (0.02 )   (0.02 )
Projected Non-GAAP earnings per diluted share $ (0.01 ) $ 0.01

(1) Amounts are based off of 10.1 million diluted shares outstanding.

Conference Call

Airgain management will hold a conference call today Thursday, May 9,
2019 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss
financial results for the first quarter ended March 31, 2019, and to
provide an update on business conditions.

Airgain management will host the presentation, followed by a question
and answer period.

Date: Thursday, May 9, 2019
Time: 4:30 p.m. Eastern Time (1:30 p.m.
Pacific Time)
U.S. dial-in: 877-703-1550
International
dial-in: 647-689-5628
Conference ID: 5657575

Please call the conference telephone number 5-10 minutes prior to the
start time. An operator will register your name and organization. If you
have any difficulty connecting with the conference call, please contact
Airgain at 1-760-579-0200.

The conference call will be broadcast live and available for replay in
the investor relations section of the company’s website.

A replay of the call will be available after 6:30 p.m. Eastern Time on
the same day through June 9, 2019.

U.S. replay dial-in: 800-585-8367 or 416-621-4642
Replay ID: 5657575

About Airgain, Inc.

Airgain is a leading provider of advanced antenna technologies used to
enable high performance wireless networking across a broad range of
devices and markets, including consumer, enterprise and automotive.
Combining design-led thinking with testing and development, Airgain
works in partnership with the entire ecosystem, including carriers,
chipset suppliers, OEMs, and ODMs. Airgain’s antennas are deployed in
carrier, fleet, enterprise, residential, private, government, and public
safety wireless networks and systems, including set-top boxes, access
points, routers, modems, gateways, media adapters, portables, digital
televisions, sensors, fleet, and asset tracking devices. Airgain is
headquartered in San Diego, California, and maintains design and test
centers in the U.S., U.K., and China. For more information, visit airgain.com,
or follow us on LinkedIn
and Twitter.

Airgain and the Airgain logo are
registered trademarks of Airgain, Inc.

Forward-Looking Statements

Airgain cautions you that statements in this press release that are not
a description of historical facts are forward-looking statements. These
statements are based on the company’s current beliefs and expectations.
These forward-looking statements include statements regarding the
buildup on our recent design win momentum, within the Connected Home,
Enterprise, and Automotive markets and the robust demand across our
service provider customer base for next-generation broadband
technologies, our continued focus on growth and sustainable
profitability, both on a GAAP and non-GAAP basis, and our first quarter
and year 2019 financial outlook. The inclusion of forward-looking
statements should not be regarded as a representation by Airgain that
any of our plans will be achieved. Actual results may differ from those
set forth in this press release due to the risk and uncertainties
inherent in our business, including, without limitation: the market for
our antenna products is developing and may not develop as we expect; our
operating results may fluctuate significantly, including based on
seasonal factors, which makes future operating results difficult to
predict and could cause our operating results to fall below expectations
or guidance; risks and uncertainties related to management and key
personnel changes; our products are subject to intense competition,
including competition from the customers to whom we sell, and
competitive pressures from existing and new companies may harm our
business, sales, growth rates and market share; our future success
depends on our ability to develop and successfully introduce new and
enhanced products for the wireless market that meet the needs of our
customers; our ability to identify and consummate strategic acquisitions
and partnerships, and risks associated with completed acquisitions and
partnerships adversely affecting our operating results and financial
condition; we sell to customers who are extremely price conscious, and a
few customers represent a significant portion of our sales, and if we
lose any of these customers, our sales could decrease significantly; we
rely on a few contract manufacturers to produce and ship all of our
products, a single or limited number of suppliers for some components of
our products and channel partners to sell and support our products, and
the failure to manage our relationships with these parties successfully
could adversely affect our ability to market and sell our products; if
we cannot protect our intellectual property rights, our competitive
position could be harmed or we could incur significant expenses to
enforce our rights; and other risks described in our prior press
releases and in our filings with the Securities and Exchange Commission
(SEC), including under the heading “Risk Factors” in our Annual Report
on Form 10-K and any subsequent filings with the SEC. You are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof, and we undertake no obligation to
revise or update this press release to reflect events or circumstances
after the date hereof. All forward-looking statements are qualified in
their entirety by this cautionary statement, which is made under the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995.

Note Regarding Use of Non-GAAP Financial Measures

To supplement our condensed financial statements presented in accordance
with U.S. generally accepted accounting principles (GAAP), this earnings
release and the accompanying tables and the related earnings conference
call contain certain non-GAAP financial measures, including adjusted
earnings before interest, taxes, depreciation, amortization (Adjusted
EBITDA), non-GAAP net income and non-GAAP earnings per diluted share
(non-GAAP EPS). We believe these financial measures provide useful
information to investors with which to analyze our operating trends and
performance.

In computing Adjusted EBITDA, non-GAAP Net income, and non-GAAP EPS, we
also exclude stock-based compensation expense, which represents non-cash
charges for the fair value of stock options and other non-cash awards
granted to employees, non-recurring expenses which include software
implementation cost, other income, which includes interest income offset
by interest expense, depreciation, amortization and provision for income
taxes. Because of varying available valuation methodologies, subjective
assumptions and the variety of equity instruments that can impact a
company’s non-cash operating expenses, we believe that providing
non-GAAP financial measures that exclude non-cash expense allows for
meaningful comparisons between our core business operating results and
those of other companies, as well as providing us with an important tool
for financial and operational decision making and for evaluating our own
core business operating results over different periods of time.

Our Adjusted EBITDA, non-GAAP Net income, and non-GAAP EPS measures may
not provide information that is directly comparable to that provided by
other companies in our industry, as other companies in our industry may
calculate non-GAAP financial results differently, particularly related
to non-recurring, unusual items. Our Adjusted EBITDA, non-GAAP Net
income, and non-GAAP EPS are not measurements of financial performance
under GAAP, and should not be considered as an alternative to operating
or net income or as an indication of operating performance or any other
measure of performance derived in accordance with GAAP. We do not
consider these non-GAAP measures to be a substitute for, or superior to,
the information provided by GAAP financial results. A reconciliation of
specific adjustments to GAAP results is provided in the last two tables
at the end of this release.

Airgain, Inc.
Unaudited Condensed Balance Sheets
     
March 31, 2019 December 31, 2018
Assets
Current assets:
Cash and cash equivalents $ 11,747,420 $ 13,620,656
Short term investments 21,137,627 20,168,981
Trade accounts receivable 7,980,631 7,013,220
Inventory 1,283,060 1,351,104
Prepaid expenses and other current assets   916,126   931,254
Total current assets 43,064,864 43,085,215
Property and equipment, net 1,382,329 1,400,591
Goodwill 3,700,447 3,700,447
Customer relationships, net 3,472,168 3,592,918
Intangible assets, net 815,792 858,805
Other assets   207,449   269,136
Total assets $ 52,643,049 $ 52,907,112
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 4,640,622 $ 4,136,943
Accrued bonus 463,143 2,075,526
Accrued liabilities 1,198,030 1,217,019
Current portion of deferred rent obligation under operating lease   81,332   81,332
Total current liabilities 6,383,127 7,510,820
Deferred tax liability 43,211 37,577
Deferred rent obligation under operating lease   170,941   211,383
Total liabilities 6,597,279 7,759,780
Stockholders’ equity:
Common shares, par value $0.0001, 200,000,000 shares authorized at
March 31, 2019 and December 31, 2018; 10,036,442 and 9,958,448
shares issued at March 31, 2019 and December 31, 2018, respectively,
and 9,664,778 and 9,601,134 shares outstanding at March 31, 2019 and
December 31, 2018, respectively 		1,003 995
Additional paid in capital 94,328,206 93,583,069
Treasury stock, at cost: 371,664 shares and 357,314 shares at March
31, 2019 and December 31, 2018, respectively 		(3,624,808 ) (3,431,530 )
Accumulated other comprehensive loss (1,013 ) (11,141 )
Accumulated deficit   (44,657,618 )   (44,994,061 )
Total stockholders’ equity 46,045,770 45,147,332
Commitments and contingencies   —   —
Total liabilities and stockholders’ equity $ 52,643,049 $ 52,907,112
 
   
 
Airgain, Inc.

Unaudited Condensed Statements of Operations

 
Three Months Ended March 31,
2019 2018
Sales $ 15,107,890 $ 13,305,098
Cost of goods sold   8,322,428   7,110,927
Gross profit   6,785,462   6,194,171
Operating expenses:
Research and development 2,338,324 2,269,114
Sales and marketing 2,274,065 2,884,386
General and administrative   1,994,671   2,204,340
Total operating expenses   6,607,060   7,357,840
Income (loss) from operations 178,402 (1,163,669 )
Other expense (income):
Interest income (188,005 ) (110,431 )
Interest expense   600   13,904
Total other income (187,405 ) (96,527 )
Income (loss) before income taxes 365,807 (1,067,142 )
Provision for income taxes   29,364   38,649
Net income (loss) $ 336,443 $ (1,105,791 )
Net income (loss) per share:
Basic $ 0.03 $ (0.12 )
Diluted $ 0.03 $ (0.12 )
Weighted average shares used in calculating income (loss) per share:
Basic   9,625,678   9,479,742
Diluted   9,961,048   9,479,742
 
Airgain, Inc.
Unaudited Condensed Statements of Cash Flows
   
Three Months Ended March 31,
2019 2018
Cash flows from operating activities:
Net income (loss) $ 336,443 $ (1,105,791 )
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation 177,388 121,417
Amortization 163,763 169,346
Amortization of discounts on investments, net (81,770 ) (8,280 )
Stock-based compensation 514,266 358,896
Deferred tax liability 5,634 2,592
Changes in operating assets and liabilities:
Trade accounts receivable (967,411 ) 238,085
Inventory 68,044 222,869
Prepaid expenses and other assets 76,815 (510,637 )
Accounts payable 503,679 246,723
Accrued bonus (1,612,383 ) (1,505,593 )
Accrued liabilities (18,989 ) (40,555 )
Deferred obligation under operating lease   (40,442 )   (15,678 )
Net cash used in operating activities (874,963 ) (1,826,606 )
Cash flows from investing activities:
Purchases of available-for-sale securities (10,461,995 ) (3,724,200 )
Maturities of available-for-sale securities 9,585,247 7,500,000
Purchases of property and equipment   (159,126 )   (503,214 )
Net cash provided by (used in) investing activities (1,035,874 ) 3,272,586
Cash flows from financing activities:
Repayment of notes payable — (333,333 )
Common stock repurchases (193,278 ) (779,913 )
Proceeds from exercise of stock options   230,879   103,705
Net cash provided by (used in) financing activities 37,601 (1,009,541 )
Net increase (decrease) in cash and cash equivalents (1,873,236 ) 436,439
Cash and cash equivalents, beginning of period   13,620,656   15,026,068
Cash and cash equivalents, end of period $ 11,747,420 $ 15,462,507
Supplemental disclosure of cash flow information
Interest paid $ 600 $ 15,340
Taxes paid $ 20,894 $ 7,409
 
Airgain, Inc.
Unaudited Reconciliation of GAAP to non-GAAP Net Income (Loss)
   
For the Three Months Ended March 31,
2019 2018
Reconciliation of GAAP to non-GAAP Net Income (Loss)
Net income (loss) $ 336,443 $ (1,105,791 )
Stock-based compensation expense 514,266 358,896
Amortization 163,763 169,346
Software implementation costs 20,538 —
Other income (187,405 ) (96,527 )
Provision for income taxes   29,364   38,649
Non-GAAP net income (loss) attributable to common stockholders $ 876,969 $ (635,427 )
Non-GAAP net income (loss) per share:
Basic $ 0.09 $ (0.07 )
Diluted $ 0.09 $ (0.07 )
Weighted average shares used in calculating non-GAAP income (loss)
per share:
Basic   9,625,678   9,479,742
Diluted   9,961,048   9,479,742
 
Airgain, Inc.
Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA
   
For the Three Months Ended March 31,
2019 2018
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Net income (loss) $ 336,443 $ (1,105,791 )
Stock-based compensation expense 514,266 358,896
Depreciation and Amortization 341,151 290,763
Software implementation costs 20,538 —
Other income (187,405 ) (96,527 )
Provision for income taxes   29,364   38,649
Adjusted EBITDA $ 1,054,357 $ (514,010 )