Airgain, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; compared with the three months ended March 31, 2022. Airgain provides wireless connectivity components, antennas, and integrated systems for enterprise, consumer, and automotive markets. Amounts below are in millions unless otherwise noted.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Sales | $16.444 | $17.522 |
| Gross profit / margin | $6.318 / 38.4% | $7.156 / 40.8% |
| Operating expenses | $9.108 | $9.582 |
| Operating loss / margin | $(2.790) / (17.0)% | $(2.426) / (13.8)% |
| Net loss / diluted loss per share | $(2.858) / $(0.28) | $(2.521) / $(0.25) |
| Operating cash flow | $(1.434) | $4.152 |
| Capital expenditures | $0.089 | $0.128 |
At March 31, cash and cash equivalents were $9.839 million, or $10.014 million including restricted cash of $0.175 million. Current assets were $24.197 million and current liabilities $10.660 million. Total liabilities were $12.123 million, including $2.210 million of lease liabilities. The $4.0 million SVB revolving credit line had no outstanding balance and expired in February 2023. The company reported an accumulated deficit of $68.951 million.
Changes versus prior-year quarter
- Sales declined $1.078 million, or 6.2%. Consumer sales fell to $5.132 million from $6.062 million, primarily due to demand softness; enterprise sales decreased to $8.437 million from $8.629 million, driven by lower industrial IoT sales. Automotive sales increased to $2.875 million from $2.831 million.
- Gross margin decreased 2.4 percentage points to 38.4%, reflecting unfavorable consumer and enterprise product mix as well as lower sales.
- Operating expenses decreased 4.9%, mainly due to lower variable compensation and outsourced engineering services, partly offset by increased trade show, advertising, and travel costs. R&D declined 24.5%; G&A increased 8.8%.
- Net loss widened by $0.337 million. Operating cash flow shifted from $4.152 million provided to $1.434 million used, with working-capital changes a significant factor in the prior-year inflow.
Outlook, commentary, and risks
- Management expects existing cash and cash equivalents, together with cash proceeds from operations, to meet working-capital needs for at least the next 12 months. It plans continued investment in sales, engineering, R&D, and capital expenditures; no numerical revenue or earnings guidance is provided.
- Management describes first-quarter sales as typically lower due in part to the Lunar New Year. It also identifies macroeconomic uncertainty, inflation, pricing pressure, supply conditions, customer product decisions, and the ability to develop products and expand markets as factors affecting results.
- Four customers each represented at least 10% of Q1 2023 revenue; together they accounted for 54%. The filing reports manufacturing through six contract manufacturers across China, Mexico, Minnesota, and Vietnam.
- The bank holding most of the company’s cash entered FDIC receivership on March 10, 2023. The company said depositors at that bank would have access to funds above standard FDIC insurance limits, reported no losses, and was reallocating deposits to reduce concentration risk.
- The company recorded an $82,000 income tax expense despite its pretax loss. Management attributed the tax-rate variance primarily to use of deferred tax attributes subject to a full valuation allowance and released a portion of its valuation allowance during the quarter.
- Management reported disclosure controls were effective at the reasonable-assurance level and no material changes to internal control over financial reporting. It reported no material changes to the risk factors from its 2022 Form 10-K, no subsequent events, and no legal proceedings expected to materially affect the company.
Important facts for investors to verify
- Whether consumer demand and product mix improve, and whether gross margin recovers from 38.4%.
- Drivers of the operating cash outflow and the pace of cash use relative to management’s 12-month liquidity assessment.
- Customer and contract-manufacturer concentration, and any changes in customer demand or supply-chain conditions.
- Details of cash allocation following the bank receivership and any continuing deposit concentration exposure.
- Potential dilution: 2.224 million stock options and 0.822 million stock awards were outstanding at quarter-end; diluted loss per share excludes anti-dilutive potential shares.