Market Overview

Airgain Reports Record Sales and Second Quarter 2018 Financial Results and Extension of Share Repurchase Program

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Airgain,
Inc.
(NASDAQ:
AIRG
), a leading provider of advanced antenna technologies used to
enable high performance wireless networking across a broad range of
devices and markets, including connected home, enterprise, automotive
and Internet of Things (IoT), today announced record second quarter 2018
sales and announced an extension to its existing share repurchase
program for an additional twelve months.

"We are very pleased with our second quarter results. In the second
quarter, we delivered record sales for the second consecutive quarter
and returned to non-GAAP earnings profitability. The strength of our
second quarter results reflects our strong product offering combined
with the continued need for superior antenna designs," said Airgain's
Interim Chief Executive Officer Jim Sims. "We are witnessing a healthy
demand from our customer deployments, particularly as it relates to the
802.11ac and DOCSIS upgrades. We expect to build up on our current
design win momentum across the Connected Home, Enterprise, IoT, and
automotive markets with continued focus on returning to sustainable
profitable growth, both on a GAAP and non-GAAP basis."

Second Quarter 2018 Financial Highlights

  • Sales of $15.0 million
  • Gross margin of 44%
  • GAAP earnings per diluted share of $(0.34)
  • Non-GAAP earnings per diluted share of $0.02
  • Adjusted EBITDA of $0.4 million

Second Quarter 2018 Financial Results

Sales totaled $15.0 million compared to $13.0 million in the same
year-ago period.

Gross profit increased 8% to $6.6 million from $6.1 million in Q2 of
last year. Gross margin as a percentage of sales was 44% in the second
quarter of 2018, which is slightly below gross margins of 47% in the
same year-ago period.

Total operating expenses for the second quarter of 2018 increased 64% to
$10.3 million from $6.2 million in Q2 of last year. The increase was
primarily due to $1.2 million in additional stock compensation expense
due to the acceleration of options for former executives and $2.0
million in non-recurring items associated with the realignment of sales
and marketing initiatives combined with executive severance. The
remaining increase is due to an increase in expenses to support the
company's strategic initiatives.

Net loss totaled $3.2 million or $(0.34) per diluted share (based on 9.4
million shares), compared to net loss of $0.1 million or $(0.01) per
diluted share (based on 9.5 million shares) in the same year-ago period.
During the quarter, the impact of non-recurring items to our GAAP
earnings was $0.21 which included realignment of sales and marketing
combined with executive severance.

Non-GAAP net income totaled $0.2 million or $0.02 per diluted share
(based on 9.9 million shares), compared to non-GAAP net income of $1.1
million or $0.10 per diluted share (based on 10.2 million shares) in the
same year-ago period (see note regarding "Use of Non-GAAP Financial
Measures," below for further discussion of this non-GAAP measure).

Adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, acquisition expenses, other income, non-recurring items
and share-based compensation) decreased to net income of $0.4 million
from income of $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).

Total shares repurchased for the second quarter 2018 were 64,360 shares
at an average price of $8.44, for a total amount of $0.5 million. On
August 7, 2018, Airgain's board of directors approved an extension to
its existing share repurchase program for an additional twelve month
period ending August 14, 2019.

Six Months 2018 Financial Highlights

  • Sales of $28.3 million
  • Gross margin of 45%
  • GAAP earnings per diluted share of $(0.45)
  • Non-GAAP earnings per diluted share of $(0.04)
  • Adjusted EBITDA loss of $0.1 million

Six Months 2018 Financial Results

Sales totaled $28.3 million compared to $24.3 million in the same
year-ago period.

Gross profit grew 12% to $12.8 million from $11.4 million for the first
six months of last year. Gross margin as a percentage of sales was 45%
in the first six months of 2018, which was slightly below gross margins
of 47% in the same year-ago period.

Total operating expenses for the first six months of 2018 grew 58% to
$17.6 million from $11.1 million in the first six months of last year.
The increase was primarily due to $1.2 million in additional stock
compensation expense due to the acceleration of options for former
executives and $2.0 million in non-recurring items associated with the
realignment of sales and marketing initiatives combined with executive
severance. The remaining increase is due to an increase in expenses to
support the company's strategic initiatives.

Net loss totaled $4.3 million or $(0.45) per diluted share (based on 9.5
million shares), compared to net income of $0.3 million or $0.03 per
diluted share (based on 10.1 million shares) in the same year-ago
period. During the six months 2018, the impact of non-recurring items to
our GAAP earnings was $0.21 which included realignment of sales and
marketing combined with executive severance.

Non-GAAP net loss totaled $0.4 million or $(0.04) per diluted share
(based on 9.5 million shares), compared to non-GAAP net income of $1.7
million or $0.16 per diluted share (based on 10.3 million shares) in the
same year-ago period (see note regarding "Use of Non-GAAP Financial
Measures," below for further discussion of this non-GAAP measure).

Adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, acquisition expenses, other income, non-recurring items
and share-based compensation) decreased to a loss of $0.1 million from
income of $1.9 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).

Total shares repurchased for the first six months of 2018 were 150,528
shares at an average price of $8.79 for a total amount of $1.3 million.

Financial Outlook

The company expects sales in the third quarter 2018 to be in the range
of $15.6 million to $15.8 million. On a GAAP EPS basis, the company
expects EPS to break even and on a non-GAAP basis, the company expects
EPS to be in the range of $0.03 to $0.05, for the third quarter 2018.

The following table summarizes the reconciliation between the projected
GAAP EPS and non-GAAP EPS for third quarter 2018:

  Low (1)   High (1)
Reconciliation of projected GAAP to projected non-GAAP EPS
Projected GAAP earnings per diluted share $ (0.00 ) $ 0.00
Stock-based compensation expense 0.02 0.04
Amortization 0.02 0.02
Other income   (0.01 )   (0.01 )
Projected Non-GAAP earnings per diluted share $ 0.03   $ 0.05  
 

(1) Amounts are based off of 9.4 million diluted shares
outstanding.

For fiscal year 2018, the company projects sales outlook of at least 20%
growth over fiscal year 2017.

Conference Call

Airgain management will hold a conference call today Thursday, August 9,
2018 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss
financial results for the second quarter ended June 30, 2018, and to
provide an update on business conditions.

Airgain management will host the presentation, followed by a question
and answer period.

Date: Thursday, August 9, 2018
Time: 4:30 p.m. Eastern Time (1:30
p.m. Pacific Time)
U.S. dial-in: 1-877-451-6152
International
dial-in: 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
the company's Director of Marketing, Jules Cassano, at 1-760-579-0200.

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 call will be available after 7:30 p.m. Eastern Time on
the same day through September 9, 2018.

U.S. replay dial-in: 1-844-512-2921
International replay dial-in:
1-412-317-6671
Replay ID: 13681347

About Airgain, Inc.

Airgain is a leading provider of advanced antenna technologies used to
enable high performance wireless networking across a broad range of
devices and markets, including connected home, enterprise, automotive
and Internet of Things (IoT). Combining design-led thinking with testing
and development, Airgain works in partnership with the entire ecosystem,
including carriers, chipset suppliers, OEMs, and ODMs. Airgain's
antennas are deployed in carrier, fleet, enterprise, residential,
private, government, and public safety wireless networks and systems,
including set-top boxes, access points, routers, modems, gateways, media
adapters, portables, digital televisions, sensors, fleet, and asset
tracking devices. Airgain is headquartered in San Diego, California, and
maintains design and test centers in the U.S., U.K., and China. For more
information, visit airgain.com,
or follow us on LinkedIn
and Twitter.

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 strong
product offering and the continued need for superior antenna designs,
our ability to expand our current design win momentum, our continued
focus on returning to sustainable profitable growth, both on a GAAP and
non-GAAP basis, and our third quarter and 2018 financial outlook. 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: 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; risks and uncertainties
related to management and key personnel changes; 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; risks that we may not fully realize the
benefits associated with the partnerships we have entered into, or that
certain existing partnerships may be terminated by either party; our
ability to identify and consummate strategic acquisitions and
partnerships, and risks associated with completed acquisitions and
partnerships adversely affecting our operating results and financial
condition; 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
(SEC), including under the heading "Risk Factors" in our Annual Report
on Form 10-K and any subsequent filings with the SEC. 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 our 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), non-GAAP net income attributable to common stockholders
(non-GAAP Net income), and non-GAAP earnings per diluted share (non-GAAP
EPS). We believe these financial measures provide useful information to
investors with which to analyze our operating trends and performance.

In computing Adjusted EBITDA, non-GAAP Net income, and non-GAAP EPS, 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, acquisition related expenses, which include due
diligence, legal, integration, and regulatory expenses, non-recurring
expenses, which include realignment of sales and marketing initiatives
and severance payments, other income, which includes interest income and
gain on deferred purchase price liability offset by interest expense,
amortization and provision for income taxes. 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 non-GAAP financial
measures that exclude 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. In addition, our
recent acquisition related activities resulted in operating expenses
that would not have otherwise been incurred. Management considers these
types of expenses and adjustments, to a great extent, to be
unpredictable and dependent on a significant number of factors that are
outside of our control and are not necessarily reflective of operational
performance during a period. Furthermore, we believe the consideration
of measures that exclude such acquisition related expenses can assist in
the comparison of operational performance in different periods which may
or may not include such expenses.

Our Adjusted EBITDA, non-GAAP Net income, and non-GAAP EPS measures 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, non-GAAP Net
income, and non-GAAP EPS are not measurements of financial performance
under GAAP, and should not be considered as an alternative to operating
or net income or as an indication of operating performance or any other
measure of performance derived in accordance with GAAP. We do not
consider these non-GAAP measures 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 two tables
at the end of this release.

Airgain, Inc.
Unaudited Condensed Balance Sheets
   
June 30, December 31,
  2018     2017  
Assets
Current assets:
Cash and cash equivalents $ 13,259,357 $ 15,026,068
Short term investments 18,817,655 21,287,064
Trade accounts receivable, net 6,854,651 8,418,132
Inventory 793,874 741,557
Prepaid expenses and other current assets   638,823     609,786  
Total current assets 40,364,360 46,082,607
Property and equipment, net 1,423,211 1,036,860
Goodwill 3,700,447 3,700,447
Customer relationships, net 3,834,418 4,075,918
Intangible assets, net 955,141 1,052,333
Other assets   338,121     349,743  
Total assets $ 50,615,698   $ 56,297,908  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 3,975,266 $ 3,969,083
Accrued bonus 1,498,455 2,224,517
Accrued liabilities 1,043,324 1,121,833
Deferred purchase price 1,000,000
Notes payable 666,667 1,333,333
Current portion of deferred rent obligation under operating lease   81,332     81,332  
Total current liabilities 7,265,044 9,730,098
Deferred tax liability 27,263 7,971
Deferred rent obligation under operating lease   282,923     334,860  
Total liabilities 7,575,230 10,072,929
Stockholders' equity:
Common shares, par value $0.0001, 200,000,000 shares authorized at
June 30, 2018 and December 31, 2017; 9,753,086 and 9,616,992 shares
issued at June 30, 2018 and December 31, 2017, respectively;
9,467,558 and 9,481,992 shares outstanding at June 30, 2018 and
December 31, 2017, respectively
975 961
Additional paid in capital 92,335,565 89,907,766
Treasury stock, at cost: 285,528 and 135,000 shares at June 30, 2018
and December 31, 2017, respectively
(2,580,273 ) (1,257,100 )
Accumulated other comprehensive loss, net deferred taxes (9,920 ) (16,907 )
Accumulated deficit   (46,705,879 )   (42,409,741 )
Total stockholders' equity 43,040,468 46,224,979
Commitments and contingencies    
Total liabilities and stockholders' equity $ 50,615,698   $ 56,297,908  
 
Airgain, Inc.
Unaudited Condensed Statements of Operations
 
       
For the Three Months Ended For the Six Months Ended
June 30, June 30,
  2018     2017     2018     2017  
Sales $ 14,971,681 $ 13,013,143 $ 28,276,779 $ 24,265,560
Cost of goods sold   8,370,160     6,891,619     15,481,087     12,855,577  
Gross profit   6,601,521     6,121,524     12,795,692     11,409,983  
Operating expenses:
Research and development 2,418,325 1,819,288 4,687,439 3,416,087
Sales and marketing 4,094,828 1,792,010 6,979,213 3,420,151
General and administrative   3,737,654     2,637,380     5,941,994     4,275,419  
Total operating expenses   10,250,807     6,248,678     17,608,646     11,111,657  
Income (loss) from operations (3,649,286 ) (127,154 ) (4,812,954 ) 298,326
Other expense (income):
Interest income (128,781 ) (53,965 ) (239,212 ) (91,166 )
Gain on deferred purchase price liability (388,733 ) (388,733 )
Interest expense   9,846     26,713     23,750     57,477  
Total other income (507,668 ) (27,252 ) (604,195 ) (33,689 )
Income (loss) before income taxes (3,141,618 ) (99,902 ) (4,208,759 ) 332,015
Provision (benefit) for income taxes   48,729     (29,781 )   87,379     17,045  
Net income (loss) $ (3,190,347 ) $ (70,121 ) $ (4,296,138 ) $ 314,970  
Net income (loss) per share:
Basic $ (0.34 ) $ (0.01 ) $ (0.45 ) $ 0.03  
Diluted $ (0.34 ) $ (0.01 ) $ (0.45 ) $ 0.03  
Weighted average shares used in calculating income (loss) per share:
Basic   9,439,025     9,520,285     9,459,272     9,440,368  
Diluted   9,439,025     9,520,285     9,459,272     10,120,998  
 
Airgain, Inc.
Unaudited Condensed Statements of Cash Flows
   
Six Months Ended June 30,
  2018     2017  
Cash flows from operating activities:
Net income (loss) $ (4,296,138 ) $ 314,970
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation 266,455 222,459
Amortization 338,692 321,804
Amortization of discounts on investments, net (53,273 )
Stock-based compensation 2,127,858 249,888
Deferred tax liability 19,292 21,331
Gain on deferred purchase price liability (388,733 )
Changes in operating assets and liabilities:
Trade accounts receivable 1,201,412 (2,358,425 )
Inventory (52,317 ) (29,655 )
Prepaid expenses and other assets (17,415 ) (163,428 )
Accounts payable 131,985 82,616
Accrued bonus (726,062 ) (549,601 )
Accrued liabilities (78,509 ) 174,188
Deferred obligation under operating lease   (51,937 )   (61,477 )
Net cash used in operating activities (1,578,690 ) (1,775,330 )
Cash flows from investing activities:
Cash paid for acquisition (6,348,730 )
Purchases of available-for-sale securities (12,650,298 )
Maturities of available-for-sale securities 15,179,967
Purchases of property and equipment   (652,806 )   (169,931 )
Net cash provided by (used in) investing activities 1,876,863 (6,518,661 )
Cash flows from financing activities:
Repayment of notes payable (666,666 ) (721,896 )
Payments on acquisition related deferred purchase price (375,000 )
Reversal of costs related to initial public offering 781
Common stock repurchases (1,323,173 )
Proceeds from exercise of stock options   299,955     436,695  
Net cash used in financing activities (2,064,884 ) (284,420 )
Net decrease in cash and cash equivalents (1,766,711 ) (8,578,411 )
Cash and cash equivalents, beginning of period   15,026,068     45,161,403  
Cash and cash equivalents, end of period $ 13,259,357   $ 36,582,992  
Supplemental disclosure of cash flow information
Interest paid $ 26,713 $ 60,934
Taxes paid $ 18,213 $
 
Airgain, Inc.
Unaudited Reconciliation of GAAP to non-GAAP Net Income (Loss)
       
For the Three Months Ended For the Six Months Ended
June 30, June 30,
  2018     2017     2018     2017  
Reconciliation of GAAP to non-GAAP Net Income (Loss)
Net income (loss) $ (3,190,347 ) $ (70,121 ) $ (4,296,138 ) $ 314,970
Stock-based compensation expense 1,768,962 176,414 2,127,858 249,888
Amortization 169,346 224,458 338,692 321,804
Acquisition expenses 795,469 795,469
Non-recurring items (1) 1,956,489 1,956,489
Other income (507,668 ) (27,252 ) (604,195 ) (33,689 )
Provision (benefit) for income taxes   48,729     (29,781 )   87,379     17,045  
Non-GAAP net income (loss) $ 245,511   $ 1,069,187   $ (389,915 ) $ 1,665,487  
Non-GAAP net income (loss) per share:
Basic $ 0.03   $ 0.11   $ (0.04 ) $ 0.18  
Diluted $ 0.02   $ 0.10   $ (0.04 ) $ 0.16  
Weighted average shares used in calculating non-GAAP income per
share:
Basic   9,439,026     9,520,285     9,459,272     9,440,368  
Diluted   9,900,437     10,196,497     9,459,272     10,279,096  
 
Airgain, Inc.
Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA
       
 
For the Three Months Ended For the Six Months Ended
June 30, June 30,
  2018     2017     2018     2017  
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Net income (loss) $ (3,190,347 ) $ (70,121 ) $ (4,296,138 ) $ 314,970
Stock-based compensation expense 1,768,962 176,414 2,127,858 249,888
Depreciation and amortization 314,384 331,470 605,147 544,263
Acquisition expenses 795,469 795,469
Non-recurring items (1) 1,956,489 1,956,489
Other income (507,668 ) (27,252 ) (604,195 ) (33,689 )
Provision (benefit) for income taxes   48,729     (29,781 )   87,379     17,045  
Adjusted EBITDA $ 390,549   $ 1,176,199   $ (123,460 ) $ 1,887,946  
 
(1)   Non-recurring items include $2.0 million in executive severance and
sales and marketing realignment for the three and six months ended
June 30, 2018.

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