Airgain, Inc. (AIRG)

Published by Roth yesterday…giddy the F..k up!

AIRG: Defying Gravity and WiFi Headwinds
Despite supply chain headwinds, Airgain reported upside to 1Q22 sales/ EBITDA/EPS arising from a WiFi recovery and better than expected GMs. This should dispel investors’ immediate worst case fears. Additionally, guidance is ahead of consensus (EPS) and has 100% backlog coverage for 2Q22. With continued improvements of the supply chain, we expect continued sequential growth throughout 2022. Consequently, we raise our 2022/23 outlook (largely on GMs improvements) and see further upside potential from AirgainConnect (2H22) and next-gen 5G solutions (2023). Buy.
WiFi, Nimbelink and GMs drive upside: Despite ongoing supply chain constraints (WiFi and cellular), Airgain reported upside to 1Q22 sales/EBITDA/ EPS, reporting $17.5M/($300k)/($0.04) versus our $17.4M/($1.0M)/($0.12) estimates. Sales of $17.5M, up 14% y/y and 24% seq, reflected a recovery in Consumer (WiFi), $6.1M (34% of sales) up from $2.5M in 4Q22, but below 1Q21's near-peak level of $10.3M. This continues to reflect the WiFi recovery, which has experienced significant supply chain issues and should dispel worst case investor fears (and rebuke results of other WiFi exposed vendors such as Cambium Networks (CMBM-Buy), Netgear (NTGR-NC), and Extreme Networks (EXTR-NC). Additionally, Enterprise sales ($8.6M, 49% of the mix) remained healthy, up 6% seq, driven by Nimbelink (despite cellular constraint headwinds). Automotive ($2.8M of sales, 16% of sales) was soft, but featured a growing backlog for AirgainConnect. Corporate GMs of 41.4% were 400bps ahead of our expectations reflecting a combination of mix (more Consumer) and product redesigns. The net result was adj EBITDA & EPS of ($300k) and ($0.04) versus our ($1.0M) & ($0.12) estimates. Ending cash was $18.7M, but is closer to $9M when adjusted for the fully realized Nimbelink earn-out.
Outlook reflects continued strong GMs: Airgain raised the immediate outlook largely based on sustained GM improvements. On the top-line, 2Q22 sales guidance of $18.5M-20.0M, up 11% y/y and 10% seq at the midpoint, is slightly above consensus of $18.9M and brackets our expectation of $19.4M. This is driven by a continued recovery in WiFi and Nimbelink (cellular), as well as the ramp of AirgainConnect. GM guidance of 38.5-42.5% is down 90bps seq at the midpoint and 180bps ahead of our prior expectations (due to mix). This translates to Adj EBITDA and EPS of $260k and $0.01 at the midpoint (versus our prior ($300k) and ($0.05), respectively). Importantly, we believe this 2Q22 outlook is 100% covered by existing backlog. Consequently, we are raising our 2022/23 adj EPS outlook to $0.18 and $0.56 (from ($0.04) and $0.48).
Recovery plus new growth cycles; Buy: We maintain our Buy rating and $18PT given the ongoing recovery in WiFi, supply chain improvements in cellular (Nimbelink), and promise of emerging product cycles such as AirgainConnect (and soon (2023)...system level 5G solutions). We believe the current expectations are conservative, supported by existing backlog, which de-risks AIRG from potential future supply chain disruptions. Overall, we remain encouraged by Airgain’s evolution from a component to a systems level supplier, starting with AirgainConnect and continuing with next gen 5G solutions expected in late 2022/early 2023. Buy

SAN DIEGO--(BUSINESS WIRE)--
Airgain, Inc. (NASDAQ: AIRG), a leading provider of advanced wireless connectivity technologies and systems used to enable high performance networking across a broad range of devices and markets, announced today that a major US-based water utility company has selected AirgainConnect® AC-HPUE™ to improve the connectivity of its fleet.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220413005844/en/

AirgainConnect AC-HPUE (Photo: Business Wire)

With up to 10x the power and up to 4x the coverage area of a traditional router-mounted antenna, the utility plans to equip its 3,000 plus vehicle fleet with the roof-mounted antenna-modem to enable optimum connectivity, even in the most remote and difficult environments. The multimillion dollar contract for the AirgainConnect devices will be deployed through the end of the year.

Airgain’s customer, one of the largest and most geographically diverse waste-water utility companies in the U.S., provides safe, clean, affordable, and reliable water services to millions of people. With such an expansive service area, connectivity is critical, especially in remote areas. After dealing with unstable connections with its service vehicles for years, the company decided to upgrade to a high-power solution that included an AirgainConnect AC-HPUE.

Morad Sbahi, Senior Vice President, Global Product & Marketing at Airgain added, “When we launched the AirgainConnect platform almost a year and half ago, we were looking to solve the connectivity issues that had long plagued public safety and critical infrastructure. By equipping the fleet of a major utility with the AirgainConnect AC-HPUE, we can help its service technicians, inspectors, engineers and field operators to stay connected in order to deliver water where it is needed most.”