Airgain, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Airgain provides wireless connectivity products and systems for consumer, enterprise, and automotive markets. Figures below are in USD millions except per-share data.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Sales | $19.286 | $17.297 | $36.808 | $34.674 |
| Gross profit | $7.493 | $7.299 | $14.649 | $14.196 |
| Gross margin | 38.9% | 42.2% | 39.8% | 40.9% |
| Operating loss | $(1.613) | $(2.734) | $(4.039) | $(4.615) |
| Net loss | $(1.619) | $(2.609) | $(4.140) | $(2.372) |
| Diluted loss per share | $(0.16) | $(0.26) | $(0.41) | $(0.24) |
- Cash flow: First-half operating cash flow was $1.980 million, versus cash used of $5.579 million a year earlier. Investing used $0.164 million; financing used $6.879 million, primarily for acquisition-related payments. Cash, cash equivalents, and restricted cash declined $5.063 million.
- Liquidity and balance sheet: June 30 cash and cash equivalents were $9.448 million ($9.623 million including restricted cash). Current assets were $29.716 million and current liabilities $14.733 million. Total liabilities were $16.797 million, including $2.774 million of lease liabilities. No amount was drawn on the $4.0 million revolving credit facility.
Changes and business drivers
- Q2 sales rose 11.5% year over year; first-half sales rose 6.2%. Enterprise revenue increased to $9.1 million in Q2 from $6.2 million, and automotive revenue to $4.2 million from $2.2 million. Consumer revenue fell to $6.0 million from $8.9 million, which management attributed primarily to supply shortages affecting customers’ product rollouts and sales.
- First-half revenue followed the same pattern: enterprise increased to $17.7 million from $10.5 million and automotive to $7.0 million from $4.9 million, while consumer declined to $12.0 million from $19.2 million.
- Gross margin fell 3.3 percentage points in Q2 and 1.1 points for the first half. Management cited a higher mix of lower-margin enterprise and automotive products.
- Q2 operating expenses declined 9.2%, largely because the prior-year period included a $1.557 million charge from remeasurement of NimbeLink contingent consideration. Excluding that item, R&D and sales and marketing expenses increased.
- First-half net loss widened despite improved operating loss, primarily because the prior-year period included a $2.244 million income tax benefit; 2022 recorded $0.082 million of income tax expense.
Outlook, risks, and unusual items
- No specific revenue or earnings guidance is provided. Management expects continued investment in sales, engineering, research and development, and capital expenditures, and believes cash and operating proceeds will meet working-capital needs for at least the next 12 months.
- Management identified COVID-19 effects, supply shortages, customer product rollout delays, long-lead inventory needs, pricing pressure, inflation, customer and product concentration, and successful expansion of AirgainConnect and NimbeLink as important operating factors. It said COVID-related supply and customer disruptions had negatively affected results through Q2 and could continue.
- The company completed the transfer of Arizona in-house manufacturing to contract manufacturers and closed the Arizona facility; the lease expired in April 2022. It also reduced UK research and sales headcount. Severance paid was approximately $0.123 million in the first half. Management did not expect Arizona lease exit costs.
- A potential product warranty claim identified in January resulted in a $0.141 million warranty reserve at June 30. The filing reports no material change in risk factors, no material legal proceedings, and no off-balance-sheet arrangements.
- The SVB revolving line, entered into in February 2022, matures in February 2023, is limited by eligible receivables, and is secured by company assets other than intellectual property. No balance was outstanding at quarter-end.
Important facts for investors to verify
- Whether supply constraints and customer disruptions continue to weigh on consumer revenue and customer product launches.
- Whether growth in enterprise and automotive products can offset consumer weakness without further gross-margin pressure.
- Cash use, acquisition-related payments, and the availability and terms of the receivables-based credit facility.
- Customer concentration: four customers each represented at least 10% of Q2 sales; Customer A alone represented 39% of receivables at June 30.
- Progress integrating NimbeLink and expanding AirgainConnect, alongside warranty exposure and the effects of manufacturing transition and restructuring.