Airgain Inc Q4 FY2024 Earnings Call

Good afternoon. Welcome to Airgain's Fourth Quarter and Full Year 2024 Conference Call. My name is Julian, and I'll be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Suen; and CFO, Michael Elbaz. 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 the 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. 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. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, February 27, 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 further details, including a reconciliation of GAAP to non-GAAP results. Now, I'd like to turn the call over to Airgain's CEO, Jacob Suen.

Good afternoon, and thank you for joining us today. In the fourth quarter, we reached a key milestone with the successful commercial deployment of Lighthouse, marking significant progress toward our strategic objectives. We closed 2024 with strong results across our AirgainConnect Fleet and Lighthouse smart network repeater platform, positioning Airgain for its next phase of growth. 2025 is the year of execution and expansion. We remain laser focused on scaling deployments, accelerating customer adoption and expanding into high-value markets. Momentum is already building. Our strategic partnership with Omantel demonstrates Lighthouse's ability to deliver high-performance network solutions with significantly reduced deployment times and a lower total cost of ownership. 2024 was a pivotal year for Airgain, marking our transformation from a component supplier to high-value wireless system solutions provider. This shift has fundamentally redefined our business. We have moved from sub-$500 average selling prices for embedded antenna systems to average selling prices exceeding $20,000 for our Lighthouse solution, positioning us in higher value, higher margin markets. Over the past year, we have expanded our portfolio, secured key customer wins and strengthened our position in both markets, setting the stage for sustained long-term growth with higher average selling prices and expanding market opportunities. We have grown our serviceable addressable market from $1.1 billion in 2024 to $2.6 billion in 2025, thanks largely to our AC-Fleet vehicle gateway and Lighthouse smart repeaters. And we expect our total addressable market to continue growing. One of our most significant milestones was launching and expanding key product lines across multiple high-growth markets, an achievement that solidified our market position and spurred accelerated adoption. In consumer, we ramped Wi-Fi 7 antenna shipments to Tier 1 MSOs, reinforcing Airgain's position as a leader in next-generation connectivity. In IoT asset tracking, we launched AT-Flight, an AI-powered solution designed for the healthcare sector that ensures FAA compliance and delivers over a year of battery life for temperature-sensitive medical assets. The initial purchase order from a major healthcare provider validates its market potential with shipments scheduled to begin this year. Additionally, we introduced two advanced railcar asset trackers, and we are actively rolling out a deployment with a leading railcar cloud provider in North America. In the second quarter of 2024, we launched Lantern, our outdoor 5G fixed wireless access solution, positioning Airgain to seize opportunities in the nascent enterprise sector of the FAA market. In the third quarter of 2024, we launched AirgainConnect Fleet, our 5G vehicle gateway, securing commercial certifications from T-Mobile and AT&T. Simultaneously, we accelerated customer trials across domestic and international markets, driving towards broad market adoption. In the fourth quarter of 2024, we completed the first commercial deployment of our Lighthouse Smart Network Control repeater. These milestones highlight Airgain's capacity to drive innovation, expand into high-value markets, and strengthen our position as a leading provider of advanced wireless connectivity solutions. Our multiyear strategic commercial partnership with Omantel is a major leap forward in scaling Lighthouse deployments, further reinforcing our position as a leader in 5G wireless connectivity across indoor and outdoor markets. This agreement not only validates our technology through Omantel, but also establishes a strong foundation for sustained revenue growth and deeper market penetration. Our collaboration goes beyond deployment. It is about developing advanced solutions tailored to the unique needs of the Middle East by leveraging Airgain's deep expertise in wireless connectivity. Alongside Omantel's telecom leadership, we are jointly enhancing network performance, optimizing coverage, and pioneering new 5G advancements. We secured the Omantel contract by demonstrating the commercial viability of our Lighthouse smart repeater solution in a large-scale deployment last December, achieving a threefold improvement in network speed through seamless integration with existing indoor infrastructure. This milestone highlights the scalability, reliability, and efficiency of our technology, further cementing Airgain's role as a key enabler of next-generation connectivity. Our cost-effective capital expenditure and operational expenditure optimized approach accelerates time to market. While our commitment to strategic core development in research and development has resulted in tailored 5G solutions designed specifically for the Middle East. Building on these significant network performance improvements, we have leveraged our partnership with Omantel to pioneer even more advanced and sustainable connectivity solutions. This commitment to innovation and environmental responsibility has culminated in the development of Lighthouse Solar, our groundbreaking self-sustaining solar-powered network control repeater that redefines network expansion for telecom operators. Engineered with cutting-edge renewable technology, it operates entirely off-grid, delivering rapid, reliable connectivity while reducing both deployment time and costs. Its innovative technology offers a differentiated solution in areas lacking electricity access while championing environmental sustainability by reducing carbon footprint and supporting green energy initiatives across the telecom industry. Designed with versatility in mind, Lighthouse Solar targets telecom operators seeking to extend 5G coverage into remote rural areas and challenging urban landscapes, where traditional infrastructure may falter. It is fast to deploy and its eco-friendly capabilities are designed to enable operators to overcome geographical constraints and meet growing connectivity demands with a heavy reliance on conventional power grids or fiber backhaul. This positions Airgain at the forefront of next-generation wireless solutions, enabling faster 5G rollouts, improved user experiences, and long-term operational cost savings, all while advancing global efforts toward a more sustainable future. In 2025, we are aggressively driving the adoption of the AirgainConnect Fleet solution, which helps deliver superior connectivity for mission-critical fleets. AC-Fleet eliminates unnecessary external components, reducing installation complexity, maintenance costs, and total cost of ownership while enhancing performance and reliability for our customers. Feedback from fleet operators has been really positive, specifically highlighting AC-Fleet's exceptional performance and compact all-in-one design that simplifies installation and deployment. We are targeting key fleet markets, including law enforcement, fire, EMS, and utility fleets through a structured go-to-market strategy designed to accelerate adoption across fleets of all sizes. Our tiered approach allows us to align sales efforts with customer needs, streamline adoption, and drive scalable growth in the fleet connectivity markets. Tier 1 customers comprise large-scale fleets with over 500 vehicles, representing high-value opportunities with 12 to 18 months sales cycles. We target these opportunities both directly and through strategic partnerships with operators. An example of a direct sales opportunity we are working on is with a 6,000 vehicle law enforcement agency. An example of a strategic partnership is our active engagement in a large, 30,000 vehicle deployment with a US operator for a leading utility provider, with an initial trial plan for the first half of this year. Tier 2 customers include mid-sized fleets ranging from 50 to 500 vehicles with a shorter six to 12-month sales cycle. We drive sales in this segment through direct efforts, BO partners, and system integrators to expand market reach. We are actively working with several leading law enforcement agencies across the US with a handful of trials underway. Tier 3 customers are smaller fleets with fewer than 50 vehicles, operating on a faster-moving three-month sales cycle. These customers represent an immediate revenue driver for 2025 and are pursued through direct sales and channel partners. Along with our product and certification investments, we are aggressively building the sales and marketing resources required to capture the short-term opportunities this year while building a strong pipeline for 2026 and beyond. With these growth initiatives well underway, I will now turn it over to Michael to walk us through our financial performance for Q4 and 2024 as well as our outlook for the year ahead. 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 fourth quarter results. Q4 sales came in at $15.1 million, which was in line with the midpoint of our preliminary results announced in late January. While this result marks a 6% sequential decline, it represents a 50% increase year-over-year driven largely by the consumer market recovery. Consumer sales reached $6.5 million, reflecting another strong sequential performance as robust Tier 1 MNO sales partially offset the anticipated moderation in our Tier 1 MSO Wi-Fi 7 sales following initial Q2 shipments and a strong demand ramp in Q3. Automotive sales came in at $3.3 million, although sales were $0.7 million higher sequentially, a high point for the year, that fell short of our expectations, driven by channel excess inventory resulting from delayed aftermarket and customer deployments. Enterprise sales were $5.3 million, reflecting a sequential decrease of $1.3 million and a low point for the year. This decline was mainly due to reduced sales of embedded modems and custom IoT products impacted by excess customer inventory. Notably, we recorded our first Lighthouse commercial deployment revenue in Q4. In Q4, gross margin reached 43.4%, marking its fourth sequential increase. It improved by 50 basis points, driven primarily by operational efficiencies and a favorable sales mix. Q4 operating expenses totaled $6.5 million, $0.4 million lower sequentially, primarily due to lower variable compensation expenses. In Q4, adjusted EBITDA reached $0.2 million, in line with our January preannouncement. This positive result was driven by higher gross margin and lower expenses, which helped mitigate the negative impact of a $2.1 million revenue shortfall. Non-GAAP EPS came in at breakeven. As of December 31, 2024, our cash balance was $8.5 million, up $1.2 million sequentially. The increase was driven by net cash proceeds of $1.1 million from our ATM operator. Turning to our results for the full year of 2024, sales totaled $60.6 million, up $4.6 million or 8% compared to the prior year. Consumer sales increased by $2.8 million or 15%, driven by the Tier 1 MSO Wi-Fi 7 transition and a ramp in demand for Tier 1 MNO FWA antennas. Following the Q1 negative seasonal impact, we expect the consumer market to experience steady, but modest growth through 2025. Enterprise sales increased by $2.3 million or 8%, driven primarily by strong sales of embedded modems and custom IoT products in the first half of 2024. The combined sales of these two product lines declined by approximately 50% in the second half of 2024, compared to the first half of 2024. The decline was due to customer-specific excessing inventories, which we expect to last through the first half of 2025. We expect the contributions of our growth initiatives, specifically Lighthouse to positively impact the enterprise market sales in the second half of 2025. Automotive sales decreased by $0.5 million or 5% due to aftermarket excess inventories, partially offset by AirgainConnect shipments. We expect the aftermarket excess inventory to also last through the first half of 2025 and for AirgainConnect design wins to drive growth in the second half of 2025. Overall, we are driving to deliver quarterly growth through 2025 as the Q1 seasonal impact diminishes and inventory headwinds ease. Gross margin was 42%, reflecting an increase of 410 basis points from the 37.9% reported in 2023. This improvement was primarily driven by steady margin gains in our enterprise and automotive solutions, resulting from ongoing cost reduction initiatives and the launch of differentiated automotive and enterprise products over the past year. Looking ahead, we expect the growth of AirgainConnect and Lighthouse solutions to further drive gross margin expansion in 2025. Operating expenses totaled $26.8 million, a 2% increase year-over-year. In 2024, we reduced our non-GAAP G&A expenses by approximately 15% to expand our R&D and sales and marketing investments and drive our strategic initiatives. Looking ahead, we plan to streamline expenses tied to our existing product lines while continuing to enhance our engineering, marketing, and sales functions to support the ramp of AirgainConnect and Lighthouse design wins and solution sales. Adjusted EBITDA was negative $0.8 million for the year, an improvement from negative $4.5 million in 2023. The year-over-year adjusted EBITDA improvement was driven by higher sales and gross margin, partially offset by slightly higher operating expenses. Through 2024, we were able to lower our quarterly adjusted EBITDA breakeven point, primarily through gross margin rate expansion. Now moving to our outlook for the first quarter ending March 31, 2025. 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 first quarter of 2025, we project sales between $11 million and $13 million, with a midpoint of $12 million. The midpoint represents a 20% sequential decline, primarily driven by the consumer seasonal impact and the aftermarket excess inventory. We expect non-GAAP gross margin for the fourth quarter to be in the range of 42% to 45%, or 43.5% at the midpoint. We expect operating expenses to be approximately $6.5 million. Non-GAAP EPS is expected to be negative $0.10 at the midpoint of our guidance. Adjusted EBITDA is expected to be negative $1.1 million at the midpoint of our guidance. The impact of the negative adjusted EBITDA on our cash balance in Q1 will be mitigated by a $1.6 million processing and receipt of an employee retention credit in Q1.

Thanks, Michael. 2024 was a year of strategic transformation for Airgain, marked by continued gross margin expansion, disciplined expense management, and the successful execution of our growth initiatives while short-term challenges such as inventory constraints impacted certain lines of business. Our focus on higher-value system-level solutions like Lighthouse and AirgainConnect continues to drive a long-term shift towards profitable growth. With this solid foundation in place, our focus in 2025 is clear: execution. We are committed to scaling deployments, accelerating market penetration, and leveraging the momentum we have built. Building on these efforts, investors can expect us to remain laser focused on strategic objectives. For AC-Fleet, we are driving to secure key certifications for first responder use from Verizon Frontline, AT&T FirstNet, and T-Mobile T-Priority, along with CE certification to support international expansion. Our commercial strategy is centered on qualifying new opportunities, transitioning them into trials, and converting existing trials into design wins. For Lighthouse, we are actively securing FCC certification and US operator approvals while simultaneously pursuing CE certification to accelerate additional international markets. We expect our partnership with Omantel will unlock new customer opportunities across the MENA region, while we concurrently drive multiple new trials across Asia, Latin America, Europe, and North America to expand our global footprint. In 2025, we anticipate deploying Lighthouse across more than 50 sites, establishing the foundation for larger scale commercial rollouts in 2026. At the same time, we remain disciplined and proactive in navigating short-term industry headwinds, such as inventory constraints affecting the broader IoT and component sectors, which we expect to persist through the first half of the year. These temporary pressures do not indicate weak demand with our robust product pipeline, increasing customer engagement, and clear commercialization strategy. We believe we are well-positioned for sustainable growth in the years ahead. Four years ago, we embarked on a bold journey to transform Airgain into a premier systems solutions company, dedicated to delivering advanced wireless connectivity and pioneering 5G innovation. By anticipating industry trends and customer needs, we introduce cutting-edge products like Lighthouse, AirgainConnect-Fleet, and Lantern. Today, as we accelerate our go-to-market strategy and commercialize our technology, our North Star strategy is playing out, and we are excited about our prospects. Before we conclude, I would like to highlight the key takeaways from today's call. First, 2024 was a transformative year as we transition into a high-value wireless systems provider, expand our addressable market, and position ourselves for long-term growth. Second, our strategic initiatives, including Lighthouse and AirgainConnect Fleet, are gaining traction in high-growth markets, validating our commitment to innovation and differentiation. Further, despite near-term industry challenges, we remain laser focused on execution, scaling deployments, driving customer adoption, and strengthening our go-to-market strategy to accelerate revenue growth in 2025 and beyond. I extend my sincere gratitude to all of our employees for their dedication and hard work in making these achievements possible. Your commitment to innovation and execution propels Airgain forward. I also want to thank our customers, partners, and investors for their continued trust and support. We are energized by the opportunities ahead and confident in our ability to deliver value as we execute our vision. With a strong foundation and clear growth initiatives, I'm quite optimistic about Airgain's future. Operator, we are now ready to take questions.

Thank you. We will now take questions from Airgain's sell-side analysts. Our first question comes from Anthony Stoss with Craig-Hallum. Please proceed with your question.

Good afternoon Jacob and Michael. Jacob, I wanted to focus more on the enterprise segment. When you pre-released the quarter, you mentioned two customers delaying projects, which seems to be your weakest segment. What kind of visibility do you have that gives you confidence in a recovery in the second half of the year? And for Michael, regarding the Lighthouse product, could you provide some insight into the revenue contribution you might expect in the second half of 2025? Or is this more about the beginning of revenues in 2026?

Hi, Tony, yes, great questions. So regarding the IoT, the two customers are all relating to the custom projects we've been doing. The thing is that they have not been able to give us the visibility because of the inventory issue they have been having. However, one of them told us that they should expect the second half to be better. They are working on a couple of key projects with a couple of key customers, and they're expecting some turnaround, I would say, starting in the second quarter. So those are the feedback we got. That gives us some assurance that the second half should be getting better. Certainly, we still don't have the concrete evidence of that, but we're hopeful so to speak. Now regarding the revenue for the Lighthouse, maybe a comment before turning over to Michael. So Lighthouse, as we indicated, has secured a strategic contract partnership with Omantel. And part of the contract includes revenue commitments for the next several years. So for 2025, even though it will be small, there's already a plan for deployments starting this quarter. And maybe you can add more color to it.

Sure. And I would add to this, Tony. First of all, on the Lighthouse, the partnership itself, and this is not a supplier-type of agreement. This is really a strategic partnership where we are a long-term partner to Omantel. But at the same time, there's also a joint sales and marketing initiative to be able to penetrate not only Oman, but also the Middle East and the MENA region altogether. We are also very much focused on the customer trials that we have. We have a couple this quarter and a couple of next quarter already scheduled or planned, and we expect to see through so that we can have a customer pipeline that is really ready for FY 2026. In terms of the enterprise business, a couple of additional comments on that. The asset tracker is really a source of potential growth for us, specifically starting in the first half of the year. This has to do with the strategy shift that we've done last year toward the railcar, but also the air transportation sector. And so we've had new products and an overall partnership with some of our key customers, albeit I have to say that there is a lack of visibility primarily because of some of the macro factors that we're seeing specifically in terms of tariffs, in terms of sanctions, or at least a threat of that. And so there is an overall lack of visibility in the short-term. I hope this is helpful.

Yes, that was helpful. Thank you. And then if I could sneak in one more, and maybe I missed it in your prepared remarks. I think last quarter you talked about, Jacob, having 40 different trials ongoing for the new AirgainConnect product. Are they still ongoing? What have you found? And kind of what's the hit rate if they are converting from a trial to revenue?

Yeah. So Tony, yes, the trials are ongoing, and the feedback that we have received so far on the trials has been really positive. Overall performance improvement was well spoken. All of them were impressed with the performance improvement. They were able to get connected in areas where they could not achieve connectivity before. For them, that was very impressive. Definitely, the ease of installation was also something that they really enjoyed about the product. Now as well as how many design wins, we're able to get a few of them out of the 43 trials, and as I described earlier in the call that we are now seeing three different tiers. For the projects that are in Tier 1, those are the ones with 500 vehicles or more. They take longer time. Usually, it takes about 12 to 18 months because for those bigger deals, typically, they're going to go out and do an RFP. Even though they like our product, they're still going to have to go through what they call an RFP process. That's why it takes much longer. The smaller deals, those in Tier 2, ranging from 50 to 500, we see that some of them will be able to come to a commitment a lot sooner. They may not have to go through an extensive RFP process like the bigger deals. Those are the ones we think that we can secure within six to 12 months. Then the smaller deals, under 50 units, we feel like those are the ones who really want a few of those, and we can convert them into revenue as early as within three months. We will continue to grow the pipeline, and we now have a clear strategy on how to attack them, which I described earlier with a partnership and with a VAR, system integrator model.

Got it. Thanks for the color, Jacob. Appreciate it.

Thank you.

Thank you, Tony.

Thank you. And our next question comes from Tim Savageaux with Northland Capital Markets. Please proceed with your question.

Good afternoon. I have a question regarding the Lighthouse segment. I'm trying to understand the metrics or set of metrics you use to evaluate the size of the opportunities in that area. Is it based on subscribers with certain carriers or the number of base stations? You mentioned there will be 50 sites launched in 2025 with Omantel, which I assume is just a small part of the overall opportunity. I would appreciate any additional details you can provide, as well as insights on how we should view the addressable market opportunity for Lighthouse based on those metrics like subscribers and base stations. Thank you.

Yes. Great questions, Tim. I'll start and then have Michael chime in. So you are right, the 50 deployments that we announced. Those are certainly relating to the Omantel commitment. We feel really good about that, and it will be a small fraction of what we're going to be able to do with them. We certainly are working with them on a much more strategic sales and marketing plan outside of Oman. That is something that we're going to actually have a joint announcement next week at MWC, that's next Wednesday. So certainly, you're going to expect another announcement. We are going to go in-depth about what the partnership is going to look like with a really innovative solution that is going to be announced as well. That's really going to be addressing the MENA region. Now talking about the market size, we talk about the total addressable market, and we indicated $700 million relating to the lighthouse. That's only taking into account some of the opportunities we are chasing. On a much bigger scale, we can see a much bigger total addressable market in the U.S. and the rest of the world. I think there are two different major applications that we're seeing: one is indoor, the other one is outdoor. The deployment in December that we described, the commercial deployment, relates to an indoor application. And those require a solution approach; we are not only selling just the Lighthouse product itself, we're actually going to be acting as what I call a mini-TEM, a telecom equipment manufacturer that will provide a total solution product to ensure that the site is able to be up and running with 5G. We're able to accomplish that with the Lighthouse being a big part of that but other products as well to ensure the system or the site is able to be functional. The outdoor applications will be more of a product sale. In rural areas, there will be areas in the urban environment, where they have a coverage gap. This is where we're going to be able to sell just the Lighthouse product itself. It's really complementing what's out there today with the base station and the small cell. We talked about earlier this week; we talked about our sustainable Lighthouse Solar. That solar device will be able to go out there without requiring backhaul or electricity, taking advantage of solar to provide cellular and Wi-Fi connectivity within a day. We genuinely think that it's a huge market, and we're reevaluating the sizing of the market in the coming weeks. But certainly, you can see the potential there. Within three miles of a base station, you can place this Lighthouse Solar, and within half day, have that area up and running with cellular and broadband connectivity. I really think there are many applications. I mean, one area I can think of right now is LA, which has been through a wildfire and really has no more electricity or cellular towers nearby. You can place a Lighthouse Solar there, and that's a great way for people to get connected. Even the workers restoring those sites can use our Lighthouse Solar to have cellular and broadband connectivity. I really think that the market is huge. We just don't have the right sizing just yet. And Michael, you can maybe comment a little bit more?

I think you said it well. Thank you, Jacob. But Tim, in terms of the internal work ahead of us, our team has been on the ground with Oman for the past six months on and off, and we are still working with them very closely in terms of developing the overall deployment plan of those 50 sites that we just mentioned. There is a lot of work in terms of making sure we are part of the process. We are aggressively pursuing all those opportunities and meeting all the customers' satisfaction requirements. At the same time, being ready as well to expand in the overall Middle East region. In parallel, we are also engaging quite a number of customer trials. Those are also pretty complex. Our goal ultimately is to have a trial a month, and this is really to secure that customer pipeline. We expect to do so across South America, Europe, and the U.S. So really building both the short-term and long-term approach as well.

Great. And if I could just follow up on that. I know you mentioned, I think, a trial a month. But are there currently ongoing trials or are ones expected throughout 2025? Can you quantify, I mean, is it 12? That's a trial a month. But can you quantify the number of trials ongoing or expected to be ongoing this year for Lighthouse?

Yeah. So right now, in Q1, we already completed two trials that started, and in Q1 regarding Lighthouse. In Q2, we already have two committed for the Lighthouse. In Q3, we already have one committed. So the two that were done we saw in the Middle East in Q1. In Q2, we are expecting one trial to be done in Latin America and then another trial to be done in the Middle East. In Q3, we really have a trial committed in Asia, and we're also having another trial pending in e-certification. These are significant opportunities. All of these involve major mobile network operators, indicating millions of subscribers.

Okay. Thanks.

Thank you. And remember, these are sizable opportunities. All of these involve major mobile network operators.

Thank you. At this time, that does conclude our question-and-answer session. If your question was not answered, you may contact Airgain's Investor Relations team at airg@gateway-grp.com. I'd now like to turn the call back over to Mr. Suen for any closing remarks.

Thank you for your engaging questions. We appreciate your continued support and look forward to connecting with you again soon. Operator, please conclude the call.

Thank you for joining us today for Airgain's fourth quarter 2024 earnings conference call. You may now disconnect your lines.