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Airgain Reports Fourth Quarter and Full Year 2016 Results

/EINPresswire.com/ -- SAN DIEGO, CA--(Marketwired - February 16, 2017) - Airgain, Inc. (NASDAQ: AIRG), a leading provider of embedded antenna technologies used to enable high performance wireless networking, today reported unaudited results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Financial Results
Sales increased 35% to $12.6 million from $9.3 million in the same year-ago period. The increase was primarily driven by an increase in product sales.

Gross profit increased 43% to $5.5 million (43.4% of sales) from $3.8 million (41.2% of sales) in the same year-ago period. The increase in gross profit as a percentage of sales was primarily driven by an increase in the sales of board-mounted antennas, which tend to have lower per unit pricing and higher gross margins.

Total operating expenses increased 19% to $4.3 million from $3.6 million in the same year-ago period. The increase was primarily due to higher personnel expenses to support the company's sales and marketing and research and development initiatives. The increase was also due to higher administrative expenses incurred as a public company, including expenses related to the company's public equity offerings.

Net income attributable to common stockholders totaled $1.1 million or $0.12 per diluted share, an improvement from a net loss attributable to common stockholders of $(660) thousand or $(0.99) per diluted share in the same year-ago period.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, fair market value for adjustments of warrants, and share-based compensation) increased to $1.4 million from $837 thousand in the same year-ago period (see note regarding "Use of Non-GAAP Financial Measures," below for further discussion of this non-GAAP measure).

Fourth Quarter 2016 Key Performance Indicators (compared to same year-ago period)

  • Total customer devices increased 29% or 3.4 million devices to 14.9 million devices
  • The average number of antennas per device increased 11% to 2.96
  • The average selling price per device increased 7% to $0.83

Full Year 2016 Financial Results
Sales increased 56% to $43.4 million from $27.8 million in the same year-ago period. The increase was primarily driven by an increase in product sales.

Gross profit increased 66% to $19.3 million (44.4% of sales) from $11.6 million (41.9% of sales) in the same year-ago period. The increase in gross profit as a percentage of sales was primarily driven by an increase in the sales of board-mounted antennas, which tend to have lower per unit pricing and higher gross margins.

Total operating expenses increased 32% to $15.8 million from $12.0 million in the same year-ago period. The increase was primarily due to higher personnel expenses to support the company's sales and marketing and research and development initiatives. The increase was also due to higher administrative expenses incurred as a public company, including expenses related to the company's public equity offerings.

Net income attributable to common stockholders totaled $2.2 million or $0.40 per diluted share, an improvement from net loss attributable to common stockholders of $(2.7) million or $(4.30) per diluted share in the same year-ago period.

Adjusted EBITDA increased to $4.6 million from $1.2 million in the same year-ago period (see note regarding "Use of Non-GAAP Financial Measures," below for further discussion of this non-GAAP measure).

Full Year 2016 Key Performance Indicators (compared to same year-ago period)

  • Total customer devices increased 55% or 19.0 million devices to 53.6 million devices
  • The average number of antennas per device increased 18% to 2.97
  • The average selling price per device increased 1% to $0.79

Management Commentary
"2016 was an exciting year for Airgain," said Airgain president and CEO, Charles Myers. "First and foremost, we became a publicly traded company listed on the NASDAQ stock exchange. Operationally, we experienced continued growth in our core gateway and set-top-box markets, while making accelerated progress in some of our key emerging markets, and even expanding into newer markets, like automotive and small cell. This led to impressive results across the board, with our sales up 56%, gross profit up 66%, and adjusted EBITDA more than tripling for the year. On top of that, we generated $2.2 million of net income, or $0.40 per share on a fully diluted basis."

"Q4 echoed the positive performance throughout the year, especially in terms of our top and bottom-line growth. From a customer and operations standpoint, we continued to gain traction in products targeting cable operators, with increasing demand and new design wins in the gateway and set-top-box markets. We are also experiencing demand for our products in the enterprise and retail WLAN segments."

"As we move in to 2017, we will continue forward with our strategy of growing organically as well as inorganically when and where it makes strategic and financial sense. Our continued focus on R&D initiatives will enable us to not only bring new solutions to the market, but also to continue expanding into other strategic markets."

Conference Call
Airgain management will hold a conference call today (February 16, 2017) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results and provide an update on business conditions.

Company president and CEO, Charles Myers, and CFO, Leo Johnson, will host the call, followed by a question and answer period.

Date: Thursday, February 16, 2017
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
U.S. dial-in number: 1-877-451-6152
International dial-in number: 1-201-389-0879

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay in the investor relations section of the company's website.

A replay of the conference call will be available after 7:30 p.m. Eastern Time through March 16, 2017

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13655519

About Airgain, Inc.
Airgain is a leading provider of embedded antenna technologies used to enable high performance wireless networking across a broad range of home, enterprise, and industrial devices. Our innovative antenna systems open up exciting new possibilities in wireless services requiring high speed throughput, broad coverage footprint, and carrier grade quality. Our antennas are found in devices deployed in carrier, enterprise, and residential wireless networks and systems, including set-top boxes, access points, routers, gateways, media adapters, digital televisions, and Internet of Things (IoT) devices. Airgain partners with and supplies the largest blue chip brands in the world, including original equipment and design manufacturers, chipset makers, and global operators. Airgain is headquartered in San Diego, California, and maintains design and test centers in San Diego, Cambridge, United Kingdom, and Suzhou and Shenzhen, China. For more information, visit airgain.com.

Airgain and the Airgain logo are registered trademarks of Airgain, Inc.

Forward-Looking Statements
Airgain cautions you that statements in this press release that are not a description of historical facts are forward-looking statements. These statements are based on the company's current beliefs and expectations. These forward-looking statements include statements regarding our future organic and inorganic growth, focus on R&D initiatives, expansion into other strategic markets and our ability to execute on our key strategic initiatives. In addition, the unaudited financial results for the fourth quarter and year ended December 31, 2016 included in this press release are preliminary and represent the most current information available to management. The inclusion of forward-looking statements should not be regarded as a representation by Airgain that any of our plans will be achieved. Actual results may differ from those set forth in this press release due to the risk and uncertainties inherent in our business, including, without limitation: adjustments to the unaudited financial results reported for the fourth quarter and year ended December 31, 2016 in connection with the completion of the company's final closing process and procedures, final adjustments, completion of the audit by the company's independent registered accounting firm and other developments that may arise during the preparation of our Annual Report on Form 10-K; the market for our antenna products is developing and may not develop as we expect; our operating results may fluctuate significantly, including based on seasonal factors, which makes future operating results difficult to predict and could cause our operating results to fall below expectations or guidance; our products are subject to intense competition, including competition from the customers to whom we sell, and competitive pressures from existing and new companies may harm our business, sales, growth rates and market share; our future success depends on our ability to develop and successfully introduce new and enhanced products for the wireless market that meet the needs of our customers; we sell to customers who are extremely price conscious, and a few customers represent a significant portion of our sales, and if we lose any of these customers, our sales could decrease significantly; we rely on a few contract manufacturers to produce and ship all of our products, a single or limited number of suppliers for some components of our products and channel partners to sell and support our products, and the failure to manage our relationships with these parties successfully could adversely affect our ability to market and sell our products; if we cannot protect our intellectual property rights, our competitive position could be harmed or we could incur significant expenses to enforce our rights; and other risks described in our prior press releases and in our filings with the Securities and Exchange Commission, including under the heading "Risk Factors" in our final prospectus. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof, and we undertake no obligation to revise or update this press release to reflect events or circumstances after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Note Regarding Use of Non-GAAP Financial Measures
To supplement Airgain's condensed financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), this earnings release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA). We believe Adjusted EBITDA provides useful information to investors with which to analyze our operating trends and performance. In computing Adjusted EBITDA, we also exclude stock-based compensation expense, which represents non-cash charges for the fair value of stock options and other non-cash awards granted to employees, as well as the fair market value adjustments for warrants. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company's non-cash operating expenses, we believe that providing a non-GAAP financial measure that excludes non-cash expense allows for meaningful comparisons between our core business operating results and those of other companies, as well as providing us with an important tool for financial and operational decision making and for evaluating our own core business operating results over different periods of time.

Our Adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. Our Adjusted EBITDA is not a measurement of financial performance under GAAP, and should not be considered as an alternative to operating income or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. We do not consider Adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of specific adjustments to GAAP results is provided in the last table at the end of this release.

 
 
Airgain, Inc.
Condensed Balance Sheets
(unaudited)
           
    As of December 31,
    2016     2015
Assets              
Current assets:              
  Cash and cash equivalents   $ 45,161,403     $ 5,335,913
  Trade accounts receivable, net     5,154,996       3,731,998
  Inventory     146,815       119,733
  Prepaid expenses and other current assets     349,550       191,502
Total current assets     50,812,764       9,379,146
Property and equipment, net     807,086       1,026,784
Goodwill     1,249,956       1,249,956
Customer relationships, net     2,822,918       3,137,918
Intangible assets, net     286,719       345,069
Other assets     84,060       121,541
Total assets   $ 56,063,503     $ 15,260,414
Liabilities, preferred redeemable convertible stock, and stockholders' equity (deficit)              
Current liabilities:              
  Accounts payable   $ 3,949,005     $ 2,873,471
  Accrued bonus     1,748,551       1,335,500
  Accrued liabilities     1,072,242       660,987
  Deferred purchase price     1,000,000       1,000,000
  Current portion of long-term notes payable     1,388,563       1,625,030
  Current portion of deferred rent obligation under operating lease     81,332       81,332
Total current liabilities     9,239,693       7,576,320
Preferred stock warrant liability           709,504
Long-term notes payable     1,333,333       2,721,865
Deferred tax liability     6,166      
Deferred rent obligation under operating lease     451,909       558,641
Total liabilities     11,031,101       11,566,330
Preferred redeemable convertible stock:              
  Series E preferred redeemable convertible stock— 10,500,000 shares authorized at December 31, 2015; no shares issued and outstanding at December 31, 2016 and 8,202,466 shares issued and outstanding at December 31, 2015; aggregate liquidation preference of $0 and $16,274,823 at December 31, 2016 and December 31, 2015, respectively           16,274,823
  Series F preferred redeemable convertible stock— 5,000,000 shares authorized at December 31, 2015; no shares issued and outstanding at December 31, 2016 and 4,734,374 shares issued and outstanding at December 31, 2015; aggregate liquidation preference of $0 and $10,517,081 at December 31, 2016 and December 31, 2015, respectively           10,517,081
  Series G preferred redeemable convertible stock— 23,500,000 shares authorized at December 31, 2015; no shares issued and authorized at December 31, 2016 and 10,334,862 shares issued and outstanding at December 31, 2015; aggregate liquidation preference of $0 and $17,987,553 at December 31, 2016 and December 31, 2015, respectively           16,315,002
Stockholders' equity (deficit):              
Preferred convertible stock:              
  Series A preferred convertible stock— 313,500 shares authorized, issued and outstanding at December 31, 2015 and no shares issued and outstanding at December 31, 2016; aggregate liquidation preference of $0 and $2,416,194 at December 31, 2016 and December 31, 2015, respectively           976,000
  Series B preferred convertible stock— 1,183,330 shares authorized at December 31, 2015; no shares issued and outstanding at December 31, 2016 and 1,157,606 shares issued and outstanding at December 31, 2015; aggregate liquidation preference of $0 and $5,081,890 at December 31, 2016 and December 31, 2015, respectively           2,457,253
  Series C preferred convertible stock— 682,000 shares authorized at December 31, 2015; no shares and 682,000 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively; aggregate liquidation preference of $0 and $682,000 at December 31, 2016 and December 31, 2015, respectively           549,010
  Series D preferred convertible stock— 4,276,003 shares authorized at December 31, 2015; no shares issued and outstanding at December 31, 2016 and 4,091,068 shares issued and outstanding at December 31, 2015; aggregate liquidation preference of $0 and $4,516,013 at December 31, 2016 and December 31, 2015, respectively           1,986,286
 Common shares, par value $0.0001, 200,000,000 and 80,000,000 shares authorized at December 31, 2016 and December 31, 2015, respectively; 9,275,062 and 665,842 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively     928       1,094,375
Additional paid in capital     88,582,470      
  Accumulated deficit     (43,550,996)       (46,475,746)
Total stockholders' equity (deficit)     45,032,402       (39,412,822)
Commitments and contingencies              
Total liabilities, preferred redeemable convertible stock and stockholders' equity (deficit)   $ 56,063,503     $ 15,260,414
   
   
Airgain, Inc.  
Condensed Statements of Operations  
(unaudited)  
   
    For the Three Months Ended December 31,     For the Year Ended December 31,  
    2016     2015     2016     2015  
Sales   $ 12,625,966     $ 9,333,483     $ 43,433,867     $ 27,793,073  
Cost of goods sold     7,149,563       5,490,667       24,156,792       16,148,163  
  Gross profit     5,476,403       3,842,816       19,277,075       11,644,910  
Operating expenses:                                
  Research and development     1,525,462       1,158,320       5,622,132       4,257,400  
  Sales and marketing     1,592,376       1,231,666       5,670,625       4,035,591  
  General and administrative     1,227,360       1,278,975       4,532,151       3,453,288  
  IPO costs     -       (26,376 )     -       229,332  
Total operating expenses     4,345,198       3,642,585       15,824,908       11,975,611  
Income (loss) from operations     1,131,205       200,231       3,452,167       (330,701 )
Other expense (income):                                
  Interest income     (6,067 )     -       (7,803 )     -  
  Interest expense     36,867       14,489       178,371       39,489  
  Fair market value adjustment - warrants     -       236,501       (460,289 )     (85,325 )
  Exercise and expiration of warrants     -       -       -       (15,145 )
Total other expense (income)     30,800       250,990       (289,721 )     (60,981 )
Income (loss) before income taxes     1,100,405       (50,759 )     3,741,888       (269,720 )
Provision (benefit) for income taxes     103       (8,600 )     8,181       622  
Net income (loss)     1,100,302       (42,159 )     3,733,707       (270,342 )
Accretion of dividends on preferred convertible stock     -       (617,493 )     (1,537,021 )     (2,444,954 )
Net income (loss) attributable to common stockholders   $ 1,100,302     $ (659,652 )   $ 2,196,686     $ (2,715,296 )
Net income (loss) per share:                                
  Basic   $ 0.14     $ (0.99 )   $ 0.65     $ (4.17 )
  Diluted   $ 0.12     $ (0.99 )   $ 0.40     $ (4.30 )
Weighted average shares used in calculating income (loss) per share                                
  Basic     7,911,185       664,133       3,373,316       651,593  
  Diluted     8,855,433       664,133       4,667,503       651,593  
 
 
Airgain, Inc.
Condensed Statements of Stockholders' Equity (Deficit)
(unaudited) 
   
    Preferred
Convertible Stock
    Common Stock     Additional
Paid-in
    Note to     Accumulated     Total
Stockholders'
 
    Shares     Amount     Shares   Amount    
Capital
    Employee    
Deficit
    Equity (Deficit)  
Balance at December 31, 2013   6,244,174     $ 5,968,549     380,566   $ 1,016,783     $ -     $ -     $ (46,491,004 )   $ (39,505,672 )
  Stock-based compensation   -       -     -     -       657,730       -       -       657,730  
  Shares issued pursuant to stock awards   -       -     244,616     -       -       -       -       -  
  Exercise of Stock Options   -       -     100     220       -       -       -       220  
  Issuance of note to employee   -       -     -     -       -       (266,282 )     -       (266,282 )
  Effect of accretion to redemption value   -       -     -     -       (657,730 )     -       (1,486,704 )     (2,144,434 )
  Net income   -       -     -     -       -       -       3,588,300       3,588,300  
Balance at December 31, 2014   6,244,174     $ 5,968,549     625,282   $ 1,017,003     $ -     $ (266,282 )   $ (44,389,408 )   $ (37,670,138 )
  Stock-based compensation   -       -     -     -       341,554       -       -       341,554  
  Shares issued pursuant to stock awards   -       -     16,300     -       -       -       -       -  
  Exercise of Stock Options   -       -     24,260     77,372       -       -       -       77,372  
  Forgiveness of note to employee   -       -     -     -       -       266,282       -       266,282  
  Effect of accretion to redemption value   -       -     -     -       (341,554 )     -       (1,815,996 )     (2,157,550 )
  Net loss   -       -     -     -       -       -       (270,342 )     (270,342 )
Balance at December 31, 2015   6,244,174     $ 5,968,549     665,842   $ 1,094,375     $ -     $ -     $ (46,475,746 )   $ (39,412,822 )
  Stock-based compensation   -       -     -     -       298,535       -       -       298,535  
  Conversion of warrants   -       -     127,143     -       249,215       -       -       249,215  
  Exercise of stock options   -       -     58,155     112,101       25,302       -       -       137,403  
  Effect of accretion to redemption value   -       -     -     -       (547,750 )     -       (808,957 )     (1,356,707 )
  Change in par value from no par value to $0.0001   -       -     -     (1,206,391 )     1,206,391       -       -       -  
  Issuance of common stock upon initial public offering, net of issuance costs   -       -     1,700,100     170       10,816,808       -       -       10,816,978  
  Issuance of warrants   -       -     -     -       126,218       -       -       126,218  
  Conversion of preferred redeemable convertible stock to common stock upon initial public offering   -       -     3,778,753     378       44,463,235       -       -       44,463,613  
  Conversion of preferred convertible stock to common stock upon initial public offering   (6,244,174 )     (5,968,549 )   1,259,187     126       5,968,423       -       -       -  
  Issuance of common stock upon secondary public offering, net of issuance costs   -       -     1,685,882     169       25,976,093       -       -       25,976,262  
  Net income   -       -     -     -       -       -       3,733,707       3,733,707  
Balance at December 31, 2016   -     $ -     9,275,062   $ 928     $ 88,582,470     $ -     $ (43,550,996 )   $ 45,032,402  
   
   
Airgain, Inc.  
Statements of Cash Flows  
(unaudited)  
             
    For the Year Ended December 31,  
    2016     2015  
Cash flows from operating activities:                
Net income (loss)   $ 3,733,707     $ (270,342 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
  Depreciation     495,347       458,734  
  Amortization     373,350       14,013  
  Fair market value adjustment - warrants     (460,289 )     (85,325 )
  Exercise and expiration of warrants           (15,145 )
  Stock-based compensation     298,535       341,554  
  Forgiveness of note to employee           266,282  
  Gain on disposal of fixed assets            
  Changes in operating assets and liabilities:                
    Trade accounts receivable     (1,422,998 )     210,140  
    Inventory     (27,082 )     (119,733 )
    Prepaid expenses and other assets     (120,567 )     (36,265 )
    Accounts payable     1,075,534       298,920  
    Accrued bonus     413,051       516,409  
    Accrued liabilities     411,255       361,067  
    Deferred tax liability     6,166        
    Deferred obligation under operating lease     (106,732 )     (91,482 )
Net cash provided by operating activities     4,669,277       1,848,827  
Cash flows from investing activities:                
Cash paid for acquisition           (4,000,000 )
Purchases of property and equipment     (275,650 )     (132,854 )
Proceeds from sale of equipment            
Net cash used in investing activities     (275,650 )     (4,132,854 )
Cash flows from financing activities:                
Proceeds from notes payable           4,000,000  
Repayment of notes payable     (1,624,998 )     (273,175 )
Issuance of note to employee            
Proceeds from initial public offering     13,600,800        
Costs related to initial public offering     (2,657,604 )      
Proceeds from secondary public offering     26,797,094        
Costs related to secondary public offering     (820,832 )      
Proceeds from exercise of warrants           225,000  
Proceeds from exercise of stock options     137,403       77,372  
Net cash provided by financing activities     35,431,863       4,029,197  
Net increase in cash and cash equivalents     39,825,490       1,745,170  
Cash, beginning of period     5,335,913       3,590,745  
Cash, end of period   $ 45,161,403     $ 5,335,915  
Supplemental disclosure of cash flow information                
Interest paid   $ 177,460     $ 39,489  
Income taxes paid   $     $ 6,171  
Supplemental disclosure of non-cash investing and financing activities:                
Accretion of Series E, F, and G preferred redeemable convertible stock to redemption amount   $ 1,356,707     $ 2,157,549  
Property and equipment acquired through lease incentives   $     $  
Conversion of warrants   $ 249,215     $  
Conversion of preferred stock into common stock   $ 50,432,162     $  
Issuance of warrants to underwriters in connection with initial public offering   $ 126,218     $  
                 
   
   
Airgain, Inc.  
Reconciliation of Net Income (Loss) to Adjusted EBITDA  
(unaudited)  
   
    For the Three Months Ended December 31,     For the Year Ended December 31,  
    2016   2015     2016     2015  
Reconciliation of Net Income (Loss) to Adjusted EBITDA                              
  Net income (loss)   $ 1,100,302   $ (42,159 )   $ 3,733,707     $ (270,342 )
    Stock-based compensation expense     74,496     30,836       298,535       341,554  
    Depreciation and amortization     235,267     129,218       868,697       472,747  
    Non-recurring expenses (1)(2)     -     476,320       -       732,028  
    Other expense (income)     30,800     250,990       (289,721 )     (60,981 )
    Provision (benefit) for income taxes     103     (8,600 )     8,181       622  
  Adjusted EBITDA   $ 1,440,968   $ 836,605     $ 4,619,399     $ 1,215,628  
                               
(1) Non-recurring expenses for the three months ended December 31, 2015 consists of $266,282 related to the foregiveness of a loan and $236,414 for taxes arising from the forgiveness of the loan offset by $26,376 related to IPO expenses.                              
(2) Non-recurring expenses for the year ended December 31, 2015 consists of $266,282 related to the foregiveness of a loan, $236,414 for taxes arising from the forgiveness of the loan and $229,332 related to IPO expenses.                              

Investor Relations Contact
Matt Glover or Najim Mostamand
Liolios Group, Inc.
+1 949 574 3860
AIRG@liolios.com

Airgain Public Relations Contact

Jules M. Cassano
Director of Marketing
Airgain, Inc.
+1 760 444 6008
media@airgain.com

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