Airgain's Third Quarter 2026 Conference Call - AIRGAIN INC

Explicit Guidance:

• Q4 2026 Sales: Projected range of $15.5 million to $17.5 million (midpoint $16.5 million), representing approximately 8% sequential growth.
• Q4 2026 Non-GAAP Gross Margin: Expected range of 40% to 43% (midpoint 41.5%); second-half 2026 aggregate margin expected at ~42% (vs. ~44% in first half 2026).
• Q4 2026 Non-GAAP Operating Expenses: Projected at approximately $6.2 million.
• Q4 2026 Non-GAAP EPS: Expected to be positive $0.05 at midpoint.
• Q4 2026 Adjusted EBITDA: Expected to be positive $0.8 million at midpoint.
• 2027 Margin Recovery: Anticipated gradual return to first-half 2026 gross margin levels (~44%) within the next two quarters following Q4 2026.

Business-Segment Outlook:

• Enterprise IoT: Revenue increased nearly 50% sequentially in Q3; demand remains strong across energy management, smart buildings, public safety, EV charging, and remote monitoring.
  • Robotics: Initial production shipments to Cocoa Robotics completed in Q3; sampling ongoing with three additional potential robotics customers.
  • Drones: Sampling with three potential drone customers; pursuing opportunities in this sector.
  • AI Data Centers: Secured two design wins (remote energy monitoring, intelligent RIC-level power management); expected to begin contributing revenue in 2027.
  • Strategic Customer: A longstanding IoT customer accelerated shipments to be delivered by September 2026 (originally scheduled for March 2027) and placed additional orders for subsequent quarters.
• Consumer: Revenue declined sequentially in Q3 due to memory shortages affecting gateway production. Recovery expected starting in Q2 2027, driven by improved memory availability and the Wi-Fi 7 transition (transition took place last year; new generation ramping up in 2027).
• Automotive: Expected to remain relatively flat or slightly up sequentially in Q4 2026, with growth fueled by enterprise antenna design wins.
• AirGain Connect:
  • Public Safety: Targeting completion of a Tier 1 opportunity by year-end 2026 (subject to certification). Pipeline includes ~30 opportunities (55% of total), with half in trial/post-trial stages. Launching Mega 5 II product with AT&T for larger agencies.
  • Commercial Fleets: Focused on construction, utilities, waste services, and vegetation management. Secured initial PO from a leading national construction company; active trials with waste services and design wins in utilities. Pipeline includes ~30 opportunities (45% of total), with half in trial/post-trial stages.
  • Pipeline: Total pipeline of ~60 Tier 1 and Tier 2 opportunities, with four new Tier 2 design wins secured since the last call.
  • Revenue Trajectory: Expected to become an increasingly meaningful contributor to growth as programs progress to broader commercial deployments in 2027.
• AirGain RF Intelligence: New AI-powered antenna selection platform targeting compact IoT devices. Initial customer access via early evaluation program targeted for the first half of 2027.
• Lighthouse: Focused on U.S. market with system integrator partnerships. Recent deployment in Southern California (T-Mobile m41); advancing warehouse/logistics solution (AT&T/Verizon mid-band); in trial with an international customer for 4G/5G combo.

Market and Competitive Outlook:

• Enterprise IoT: Diverse demand base across multiple end-customers reduces dependency on single product cycles; momentum building in emerging applications (robotics, drones, AI infrastructure).
• Consumer: Market constrained by memory shortages and component cost inflation; major service providers transitioning to Wi-Fi 7 platforms. Recovery dependent on OEMs securing supply and launching new products.
• Connectivity Markets: Public safety demand driven by need for reliable edge connectivity; commercial fleet demand driven by consolidation of data planes and operational cost reduction.
• Supply Chain: Component and module availability (specifically memory for consumer gateways) remains a key determinant for shipment timing and order visibility.

Macro / Industry Outlook:

• Supply Chain Dynamics: Persistent memory shortages creating uncertainty in consumer gateway launch schedules; expects recovery to start in Q2 2027.
• Technology Transitions: Wi-Fi 7 transition identified as a critical driver for future consumer growth and MSO demand.
• Regulatory: FCC regulatory waivers for new mobile operator programs received last quarter, enabling production ramp in the first half of 2027.
• Cost Environment: Higher component and module costs persist; management expects pricing initiatives to offset these increases.

Strategic Initiatives:

• AirGain RF Intelligence: Launching AI platform to simplify antenna selection for compact IoT devices; aim to access markets previously uneconomic to serve via custom engineering.
• Mega 5 II Launch: Deployment of next-generation HPE technology for public safety to support larger agency deployments.
• Carrier Partnerships: Expanding AT&T collaboration for Public Safety and extending the carrier-assist sales model to other partners for commercial fleets.
• Board Addition: Stefan Mehman joined the board to support growth strategy execution in wireless/antenna industries.
• Investor Events: Management plans to present at the Quarterly Helm Alpha Select and Roth Technology Compensations conferences in New York later in the month.

Risks and Headwinds to Outlook:

• Supply Chain Constraints: Continued memory shortages and component availability issues may delay consumer gateway production and shipments; supply chain management impacts on IoT module deliveries.
• Timing Uncertainty: Larger deployment timings for AirGain Connect and Lighthouse remain variable; consumer recovery timing is contingent on OEM supply resolution.
• Sales Mix Dynamics: Shift toward lower-margin IoT custom products in Q4 2026 is expected to compress gross margins.
• Regulatory/Certification: Public safety deployments are subject to final commercial and network certification requirements.
• Long Sales Cycles: Commercial fleet sales cycles are typically long with phased deployments, potentially delaying revenue recognition.
• Market Volatility: Potential lulls or drop-offs in orders during technology transitions (e.g., Wi-Fi 6 to 7) remain a consideration, though management expects a smooth transition similar to the previous cycle.

Management Tone on the Future:

• Confidence Level: Increasingly optimistic about growth prospects for 2027; described current state as having a "stronger foundation" and "clear path to growth."
• Strategic Clarity: Management emphasizes a "more focused" strategy with clear growth drivers identified for each of the four business lines (Consumer, IoT, AirGain Connect, Lighthouse).
• Profitability: Confident in sustaining sequential revenue growth and positive adjusted EBITDA into Q4 2026, with a focus on converting pipeline into revenue and improving profitability over the next two quarters.
• Guidance Changes: Guidance reflects a continuation of Q3 sales mix dynamics but maintains expectations for sequential top-line growth and margin recovery in the subsequent two quarters.

Miscellaneous:

• Cash Position: As of September 30, 2026, cash balance was $7.7 million; $0.2 million net cash proceeds from ATM.
• Q&A Highlights: Confirmed that AI data center revenue contribution will be material in 2027; supply chain misses in Q3 IoT business resulted in lower reported revenue but did not impact gross margin due to pricing initiatives.