Airgain, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. Airgain sells wireless connectivity solutions for consumer, enterprise and automotive markets. This unaudited report covers the quarter and six months ended June 30, 2021. Results include NimbeLink, an industrial IoT business acquired on January 7, 2021.
Key financial metrics
Amounts are in millions of dollars, except per-share data and percentages.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $17.30 | $11.45 | $34.67 | $22.66 |
| Gross profit | $7.30 | $5.39 | $14.20 | $10.72 |
| Gross margin | 42.2% | 47.1% | 40.9% | 47.3% |
| Operating loss | $(2.73) | $(0.60) | $(4.62) | $(1.91) |
| Net loss | $(2.61) | $(0.74) | $(2.37) | $(1.94) |
| Net loss per diluted share | $(0.26) | $(0.08) | $(0.24) | $(0.20) |
- Q2 revenue increased 51.1%; six-month revenue increased 53.0%. Enterprise revenue growth was substantially driven by NimbeLink, which contributed $4.8 million in Q2 and $8.0 million in the first half.
- Gross margin fell 4.9 percentage points in Q2 and 6.4 points for the first half. Management cited lower-margin AirgainConnect and NimbeLink product mix, acquisition-related amortization and, for the first half, inventory step-up costs.
- Operating expenses rose 67.4% in Q2 and 49.0% for the first half. Q2 included a $1.56 million expense from a higher fair value of NimbeLink contingent consideration.
- Six-month operating cash flow was negative $5.58 million, versus positive $1.29 million in 2020. Investing cash outflow was $14.59 million, primarily reflecting $14.19 million paid for the acquisition, net of acquired cash. Financing provided $2.24 million, mainly from equity-plan share issuances.
Financial position and liquidity
- At June 30, 2021, cash and cash equivalents were $20.24 million, plus $0.18 million of restricted cash; cash and equivalents were $38.17 million at December 31, 2020.
- Current assets were $38.20 million and current liabilities were $18.99 million. The latter included $8.24 million of deferred purchase price liabilities.
- No outstanding borrowing balance is reported. The $1.5 million NimbeLink revolving credit facility was closed in April 2021. Lease liabilities totaled $3.35 million, of which $0.88 million was current.
- Management stated existing cash and expected operating cash proceeds should meet working capital needs for at least the next 12 months. The company reported an accumulated deficit of $49.72 million.
Changes, outlook and risks
- The NimbeLink acquisition had total purchase consideration of $22.75 million, including $5.99 million initial fair value of contingent consideration and $0.73 million in deferred payments. Up to $8.0 million of additional contingent consideration may be payable based on 2021 revenue targets. The acquisition added $14.07 million of identifiable intangible assets and $7.15 million of goodwill; purchase-price allocation remained preliminary.
- Management described the acquisition as part of a shift toward more integrated, system-level wireless solutions and expansion in industrial IoT. It also cited AirgainConnect growth opportunities. The filing provides no specific revenue or earnings guidance.
- Management reported that the global chip shortage and constraints on other materials were delaying customer rollouts and component sourcing, raising procurement costs and potentially pressuring margins. It expected supply constraints to continue, and noted NimbeLink’s supplier transition to Vietnam could entail ramp-up delays or quality issues.
- COVID-19 continued to disrupt operations, travel and customer or supplier facilities; management said the ultimate impact remained uncertain. Other risks include customer and product concentration, pricing pressure, dependence on contract manufacturers, and the timing and volatility of customer demand.
- The six-month income tax benefit was $2.24 million; management attributed the effective tax-rate variation primarily to a partial release of the valuation allowance following the acquisition. Q2 also included a $0.13 million tax benefit.
- Management concluded disclosure controls were effective at the reasonable-assurance level. NimbeLink control integration was ongoing. The company reported no material legal proceedings and no material changes to its previously disclosed risk factors beyond the risks discussed in this filing.
Important facts for investors to verify
- How much reported growth is attributable to NimbeLink and whether acquired operations can sustain revenue and improve profitability.
- Whether supply constraints, higher component costs and customer rollout delays persist, and their effect on revenue, gross margin and cash conversion.
- The final NimbeLink purchase-price allocation and the amount and timing of contingent consideration payments.
- Cash-flow trajectory and liquidity, including working-capital needs, lease obligations and the company’s stated 12-month liquidity outlook.
- Customer concentration: three customers each represented at least 10% of Q2 revenue, with the largest at 24%.