Airgain, Inc. — Q1 2020 Form 10-Q
Business context and period. Airgain designs and sells antenna technologies for consumer, enterprise, and automotive wireless applications. This unaudited report covers the three months ended March 31, 2020, compared with Q1 2019.
Financial performance and position
- Revenue: $11.2 million, down 25.8% from $15.1 million. Management attributed the decline primarily to COVID-19 impacts and a product-cycle transition affecting several high-volume embedded antenna products.
- Gross profit and margin: $5.3 million versus $6.8 million; gross margin improved to 47.5% from 44.9%, primarily due to favorable product mix.
- Operating results: Operating loss was $1.3 million, compared with operating income of $0.2 million. Net loss was $1.2 million, or $0.12 per diluted share, versus net income of $0.3 million, or $0.03 per diluted share.
- Expenses: Operating expenses totaled $6.6 million, essentially flat year over year. R&D rose 3.4% to $2.4 million; sales and marketing fell 32.3% to $1.5 million; general and administrative expense rose 34.2% to $2.7 million.
- Cash flow: Operating activities used $0.9 million, compared with $0.9 million used in Q1 2019. Investing activities provided $10.5 million, mainly from $11.4 million in investment maturities; financing activities used $0.1 million, including share repurchases. Cash, cash equivalents, and restricted cash increased $9.5 million to $22.7 million.
- Liquidity and debt: At quarter-end, cash and cash equivalents were $22.5 million and short-term investments were $11.0 million. Current assets were $42.7 million and current liabilities $5.0 million. The $10 million revolving credit facility matured January 31, 2020, was not renewed, and had no reported outstanding balance. The company said existing cash and expected operating cash proceeds should cover working-capital needs for at least the next 12 months.
- Other balance-sheet items: Total assets were $52.3 million, total liabilities $5.1 million, and stockholders’ equity $47.2 million. Accumulated deficit was $45.3 million.
Material changes and management commentary
- COVID-19 had adversely affected operations and sales through the filing date. The company reported travel restrictions, facility closures, Asian supplier and contract-manufacturer disruptions, and delays in shipments and product launches; further effects were uncertain.
- Sales declined across channels and geographies: fulfillment distributors contributed $6.1 million versus $8.6 million; China revenue was $8.3 million versus $10.8 million. China accounted for 36% of revenue, and one customer accounted for 36% (42% in Q1 2019). The same customer represented 37% of gross receivables at March 31.
- Management plans to invest in sales, engineering, R&D, and capital expenditures. It expects R&D expense to increase in absolute dollars, while sales and marketing and G&A may fluctuate. No specific financial guidance was provided.
- In May 2020, Airgain announced AirgainConnect, an integrated antenna-modem platform for public-safety and fleet vehicles. The filing describes its intended benefits but provides no sales forecast.
- The company repurchased approximately 24,000 shares in Q1 for $0.2 million at an average $8.03 per share. About $5.8 million remained authorized under the $7 million program at quarter-end.
- A February lease amendment extended the San Diego headquarters lease through November 2025. Future minimum operating-lease payments were $4.4 million. The company reported no material legal proceedings or material off-balance-sheet arrangements.
Investor facts to verify
- Whether COVID-related customer demand, shipment delays, and supply-chain disruption continued or worsened after the filing date.
- How quickly revenue recovers from the product-cycle transition and whether AirgainConnect generates customer wins and revenue.
- Customer concentration and reliance on two China-based manufacturing vendors, including any changes in receivables or production continuity.
- Cash burn, investment maturities, and liquidity following expiration of the credit facility; the filing provides no renewed credit commitment.
- Potential dilution from outstanding options, restricted stock, and warrants; Q1 stock-based compensation was $0.7 million.