Q3 2025 Airgain Inc Earnings Call
Speaker #1: Good afternoon and welcome to AIRGAIN's third quarter 2025 conference call. My name is Paul, and I will be your operator for today's call. Joining us today are AIRGAIN's President and CEO, Jacob Suen, and CFO, Michael Elbaz.
Speaker #1: As a reminder, this call will be recorded and made available for replay via a link found in the investor relations section of AIRGAIN's website at investors.airgain.com.
Speaker #1: Following management's prepared remarks, the call will be open for questions from AIRGAIN's covering analysts. I caution listeners that during this call, AIRGAIN management will be making forward-looking statements about future events, as well as AIRGAIN's business strategy and future financial and operating performance.
Speaker #1: differ materially from those stated or implied Actual results could by these forward-looking statements, due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings release and AIRGAIN's SEC filings.
Speaker #1: This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 12, 2025. AIRGAIN undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.
Speaker #1: In addition, this conference call will include a discussion of non-GAAP financial measures. Please see today's GAAP earnings release for further details, including a reconciliation of GAAP to non-GAAP results.
Speaker #1: Now, I’d like to turn the call over to Airgain's CEO, Jacob Suen.
Speaker #1: Jacob, Good afternoon, everyone, and
Speaker #2: thank you for joining us. Throughout 2025, we have remained deliberate about how we built AIRGAIN. Focusing on what we can control, refining where we compete, and executing step-by-step to create a stronger and more scalable company.
Speaker #2: That focus continues to show in our results. In Q3, we delivered our third consecutive quarter of sequential revenue growth. Met guidance achieved strong growth margins.
Speaker #2: And generated positive adjusted EBITDA. We also reached key certification milestones that move our growth platforms closer to scale. Before diving deeper, I want to step back and frame where we are in our growth journey.
Speaker #2: With the year nearly complete, this is a good time to reflect on the progress we have made and how it positions AIRGAIN for sustainable growth in 2026.
Speaker #2: AIRGAIN was founded on a simple idea: we simplify wireless. From day one, our mission has been to help our customers, devices, vehicles, and networks connect more reliably by removing complexity from wireless design.
Speaker #2: Our technology reaches across three core markets: consumer, enterprise, and automotive. Connecting leading carriers' service providers and OEMs that depend on reliable wireless performance. Our business drifts on two pillars: first, our core markets that provide stability and a solid foundation to fund growth.
Speaker #2: Second, our growth platforms, AIRGAIN Connect and Lighthouse, that open new, scalable opportunities in fleet and network coverage solutions. Let me start with our core business.
Speaker #2: Which remains healthy and profitable on a standalone basis. In consumer, we expect revenue to grow at a double-digit rate for the second consecutive year.
Speaker #2: Driven by the Wi-Fi 7 transition among Tier 1 cable operators, and growth of FWA antenna sales to a Tier 1 mobile network operator. Looking ahead, to 2026, we expect continued growth supported by the Wi-Fi 7 transition and new design wins.
Speaker #2: Such as the one we announced this week, with another Tier 1 US carrier for its next-gen Wi-Fi 7 fiber The new platform is broadband gateway.
Speaker #2: targeted for commercial launch in the second half of 2026, with projected shipments exceeding 5 million units within the next years. And embedded modems five will also expect double-digit revenue growth for the second consecutive year.
Speaker #2: Fueled by rising demand, and utility infrastructure monitoring, including energy management and electrical grid applications, we launched our Skywire Q1-based embedded modem and recognized initial revenue in Q3.
Speaker #2: And we expect this solution to be a growth driver in 2026. Embedded modem sales now represent more than half of our enterprise market revenue.
Speaker #2: And we continue to invest in next-generation development to extend our leadership position. While our consumer and embedded modem businesses generated higher revenue and contribution margins this year, other product lines faced challenges that we are actively addressing.
Speaker #2: Asset tracker sales have moderated, reflecting a lack of traction on customer projects. Aftermarket antenna and enterprise custom products remain way down by channel inventory overhang partly driven by government agency project deployment delays.
Speaker #2: Given the current government funding climate, we expect this overhang to persist through the first half of 2026. Additionally, we are leveraging our high-performance antenna portfolio to expand into emerging markets and applications.
Speaker #2: Including unmanned flight systems, smart infrastructure, and industrial IoT. Which are expected to create new revenue streams for AIRGAIN in 2026 and beyond. Taken together, our core markets are performing largely as expected.
Speaker #2: Providing steady revenue and EBITDA. We expect core markets to be up modestly in 2026 and to remain self-sustaining. Generating the cash flow that supports continued investment in our platform strategy.
Speaker #2: With that foundation in place, let's transition to our growth platforms. AIRGAIN Connect and Lighthouse, where we are seeing tangible progress and expanding engagement. AIRGAIN Connect is our integrated 5G gateway platform for enterprise applications.
Speaker #2: Such as fleets, utilities, and mobile usage. Following the AT&T FirstNet Trusted Certification earlier this year, we achieved another significant milestone by obtaining T-Mobile T-Priority certification last month.
Speaker #2: Validating AIRGAIN Connect for mission-critical connectivity and opening access to T-Mobile's public safety and enterprise networks. As we have shared on prior calls, the AIRGAIN Connect sales cycle varies by fleet size.
Speaker #2: Which impacts the timing of revenue recognition. Tier 3 customers, under 50 vehicles, move the fastest. With a sales cycle of roughly three months. Providing near-term revenue potential.
Speaker #2: Tier 2 customers, with 50 to 500 vehicles, generally take six to twelve months from engagement to deployment. Tier 1 customers, with over 500 vehicles, have the longest cycle: twelve to eighteen months.
Speaker #2: And often do structure RFPs and pilot validation programs. Our sales approach is consultative and multi-pronged. Spanning partnerships with carriers strategic value-added resellers and distributors to direct engagements with key y customers as a trusted solution provider.
Speaker #2: We have a dedicated sales marketing and customer support team which continues to evolve to better address customer needs. Our sales opportunity pipeline continues to expand.
Speaker #2: With roughly 80 opportunities in play, two-thirds of which are in pre-trial phases. We currently have approximately 60 Tier 3 opportunities. Averaging 10 units each with nearly half already in the post-trial phase.
Speaker #2: Our Tier 1 and Tier 2 opportunities vary in size. With most still in the early engagement or pre-trial stage. About two-thirds are focused on the first responder market, where adoption has been slowed by budget and funding constraints that were further accentuated by the recent government shutdown.
Speaker #2: While the AIRGAIN Connect value proposition in the first responder market centers around its all-in-one design and integrated eSIM capability, we are finding strong traction in utility and energy infrastructure markets.
Speaker #2: For these customers, the conversation shifts from replacing their current cellular setup to enabling true edge connectivity. A new level of integrated high-performance connectivity that supports advanced in-vehicle sensing, multi-camera video recording, and image recognition capabilities.
Speaker #2: An external environmental sensor with continuous cloud connectivity. AIRGAIN Connect is more than a hardware upgrade. It simplifies network management, improves coverage and performance, and meaningfully reduces OPEX by allowing fleets to consolidate multiple SIM-based connections into a single intelligent gateway.
Speaker #2: A good example is our engagement with a large fleet operator pursuing a digital transformation to improve operational efficiency, and reduce annual operating expenses. Today, each truck relies on multiple SIMs to power cameras and sensors.
Speaker #2: AC fleet is being evaluated as a single gateway solution with multiple carrier eSIM capability simplifying connectivity management and enabling remote carrier switching. Looking ahead, we are on track for Tier 2 opportunities to begin converting into design wins in the first half of 2026.
Speaker #2: With Tier 1 programs expected to follow in the second half of the year. These milestones reflect steady progress to customer validation and demonstrate strong alignment with our strategic engagement roadmap.
Speaker #2: Compare to Lighthouse, AIRGAIN Connect is the more immediate growth driver. And we enter 2026 with strong visibility and confidence in the platform's adoption trajectory.
Speaker #2: As AIRGAIN Connect establishes our leadership in fleet connectivity, Lighthouse marks our expansion into a network infrastructure optimization helping carriers and enterprises extend 5G coverage.
Speaker #2: And offload extra capacity more efficiently. We achieve FCC certification last month. A significant milestone that now enables Lighthouse to be deployed commercially in the US.
Speaker #2: Lighthouse, our 5G network control repeater, provides a faster lower-cost and more sustainable alternative to traditional base station infrastructure and passive distributed antenna systems. Equipped with an optional solar package, it can operate autonomously in off-grid or rural locations addressing both performance and sustainability objectives.
Speaker #2: We continue to make meaningful progress across our target regions. In the US, we have secured a Tier 1 carrier trial that is expected to be completed by the end of this year.
Speaker #2: This trial represents months of technical collaboration and senior executive sponsorship underscoring its significance as a company milestone. As part of this engagement, we will deploy our first dual carrier installations.
Speaker #2: Validating Lighthouse capability to aggregate multiple spectrum channels simultaneously delivering higher throughput, improve signal stability, and a superior end-user experience. These channel aggregation capability is unique to Lighthouse and represents a clear competitive differentiator in the 5G coverage extension market.
Speaker #2: While we are excited about this US trial, we remain cautiously optimistic given the lengthy carrier engagement cycle. We're also finalizing a system integrator agreement with a leading US system integrator covering thousands of sites transitioning from 4G LTE to 5G.
Speaker #2: The integrator plans to use Lighthouse to upgrade these locations and support future deployments. This is a strategic relationship designed to enable and scale customer deployments while also supporting the integrator's enterprise clients.
Speaker #2: In the Middle East, installations are progressing with Amantial through the initial phase. And we are planning for a joint sales and marketing rollout in 2026.
Speaker #2: In parallel, we are engaged in additional regional discussions and at expanding Lighthouse adoption across neighboring markets. In South America, we are currently executing a trial with a top five global tower provider.
Speaker #2: In collaboration with two regional Tier 1 mobile network operators, this trial marks the industry's first dual operator deployment. With Lighthouse, supports two independent carriers through a single installation.
Speaker #2: This capability eliminates redundant hardware, reduces deployment costs, and accelerates network expansion. While the opportunity could be significant, we remain cautiously optimistic regarding the financial impact, which is expected to materialize over the next 12 to 18 months.
Speaker #2: Looking ahead, our focus is on completing active deployments scaling commercial pilots. And expanding system integrator partnerships globally. We expect modest Lighthouse revenue contribution in the first half of next year.
Speaker #2: Followed by stronger growth in the second half as US system integrator engagements expand and international projects advance. Our strategy is working. Momentum is remains our priority.
Speaker #2: As we conclude 2025, our focus remains clear. To complete our transition from a component supplier to a scalable wireless systems solutions company. We're maintaining financial discipline.
Speaker #2: Executing on our engineering roadmap. Advancing customer pilots. And delivering on our sales and operational goals. All of which position us to scale efficiently and sustain growth in 2026 and beyond.
Speaker #2: Our model remains capital efficient and supported by the resources needed to execute our strategy effectively. With that, our handover to Michael to discuss our financial results.
Speaker #2: Michael, Thank you, Jacob. Before I dive into the numbers, I will note that my remarks refer to non-gap figures unless otherwise indicated. Reconciliations to gap results can be found in today's earnings release.
Speaker #2: Third quarter revenue came in at 14 million dollars at the midpoint of our guidance. And up 3% sequentially from the second quarter. Breaking this down by market, consumer revenue was 6.7 million sequentially, driven dollars.
Speaker #2: by higher Wi-Fi Up 1 million dollars 7 antenna shipments to cable operator. On a year-to-date basis, our sales to cable operators grew by over 50%, fueled by the Wi-Fi 7 technology refresh.
Speaker #2: Enterprise revenue was 6.9 million dollars. Down 0.3 million dollars sequentially, due to lower Our embedded modems prior client enterprise antenna sales. recorded a third consecutive quarter of sequential sales growth.
Speaker #2: growth was driven by end The customers in the utility infrastructure monitoring market. Automotive revenue was 0.5 million dollars, down 0.3 million dollars sequentially, driven by lower aftermarket antenna sales.
Speaker #2: Third quarter non-gap gross margin was 44.4%, up from 43.8% in Q2. On a year-over-year basis, gross margin increased by 160 basis points, driven by improved enterprise and consumer product margins.
Speaker #2: Third quarter non-gap operating expenses were 6.1 million dollars, lower both sequentially and year-over-year, and reflecting an expense realignment within our core product lines, and a decrease in our G&A expenses.
Speaker #2: While total expenses have decreased, we continue to invest in our growth platforms specifically the sales, marketing, and engineering functions to support a scalable system solution company.
Speaker #2: On a year-to-date basis, our non-gap engineering, sales, and marketing expenses decreased 10% year-over-year. Within that, we estimate the engineering, sales, and marketing expenses for our core product lines decreased by approximately 30%.
Speaker #2: While investment in our growth platforms increased by about 30%. Adjusted EBITDA improved to a gain of 0.3 million dollars, compared to a loss of 0.4 million dollars in Q2.
Speaker #2: Q3 non-gap net income was 0.1 million dollars, or 1 cent per share. Compared to a loss of 0.5 million dollars, or 4 cents per share, in Q2.
Speaker #2: We ended the quarter with 7.1 million dollars in cash and equivalents, down 0.6 million dollars sequentially, and down 0.3 million dollars on a year-over-year basis.
Speaker #2: Year-to-date, we received 2.1 million dollars in net proceeds from the employee retention credits, we applied for over two years ago. The ERC credits helped offset the impact of 1.7 million dollars year-to-date, non-gap operating loss, on our cash balance.
Speaker #2: Looking ahead to the fourth quarter, we expect revenue in the range of 12 million dollars to 14 million dollars, with a midpoint of 13 million dollars, representing a sequential decline of approximately 7%.
Speaker #2: This decline reflects a temporary moderation in our consumer and enterprise sales following strong year-to-date performance. We expect non-gap gross margin for the fourth quarter to be in the range of 42.5% to 45.5%, or 44% at the midpoint.
Speaker #2: We do not anticipate a material impact from tariffs, or the recent government shutdown, although this environment may result in supply chain disruption costs. We expect non-gap operating expenses for the fourth quarter of approximately 5.8 billion dollars, resulting in positive adjusted EBITDA of approximately 0.1 million dollars, at the midpoint of our guidance range.
Speaker #2: Now, I will turn the call back over to Jacob for his closing remarks. Jacob?
Speaker #3: Thanks, Michael. To put it simply, 2025 has been a year of validation in discipline and execution, and we are entering 2026 with stronger visibility and a clear roadmap in the foundation to scale.
Speaker #3: We have achieved key certifications and deepened customer engagement across our growth platforms. Our core business provides stability, our platforms create drivers for growth, and our team continues to execute with focus and accountability.
Speaker #3: The opportunity ahead of us is clear, and our conviction has never been higher. Thank you. To our employees, partners, and investors for your continued trust and support.
Speaker #3: Up later, we are now ready to take
Speaker #3: questions. Thank you, we'll now be
Speaker #2: conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker #2: You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker #2: One moment, please, while we pull for questions. As a reminder, if you would like to ask a question, please press star one on your telephone keypad.
Speaker #2: Thank you, our first question is from Anthony Stoss with Craig Hallam
Speaker #2: Capital. Hey guys, hey Jacob, hey Michael,
Speaker #4: it's Ryan on for Tony. I'm just curious on your recent Wi-Fi 7 design win with the Tier 1 carrier. Is this an existing customer upgrade for you guys, or is it a completely new customer?
Speaker #4: And then how do you think of the cadence of the ramp and the revenue impact for next year? Thanks.
Speaker #5: Hi Brian, yeah, this is Jacob here. The customers, it's an existing customer. Although this is as far as the end customers, it's a US Tier 1 operator, and this is their flagship gateway for the next generation.
Speaker #5: So this is their largest SKU.
Speaker #4: Okay, got it. And then how do you guys think of the, I know it's kind of ramped second half of next year, how do you think of the revenue impact for
Speaker #4: 2026? You know,
Speaker #5: look, we talk about the size, it's, you know, we talk about it's, you know, in excess of 5 million units. You know, it's going to be, within five years, because that's usually how operators, you know, roll out their, you know, their deployment.
Speaker #5: As far as 2026, we will be able to get more visibility, I would say, in the first half of the year, because it's planned to be, you know, start deploying in the beginning of the second half of next year.
Speaker #4: one for Michael on OPEX, it's nice to see continued cost discipline, both in the results and the guide for December. I'm curious how you think about, you know, OPEX fluctuation next year, as you ramp some of the new products.
Speaker #6: So our goal is really to be at EBITDA breakeven, if not positive. And so as we have some runway left to have the revenue ramp in the AC fleet and lighthouse, we will maintain that tight management of OPEX.
Speaker #6: We always looking for efficiencies in our GN expenses. This is always been the case. And at the same time, we're also looking very deliberately at our investment in our core markets, mainly because we want to make sure that we continue to invest on the growth platform, just like we have done over the past few years.
Speaker #6: So it would be basically a tight management of OPEX, it would be deliberate type of investment, it would be focused on the growth platforms, on the core markets, as we mentioned, the consumer product line along with the embedded product line, which is part of the enterprise, market, definitely have been bright spots for us in FY25.
Speaker #6: And so we have a, as well, an engineering roadmap along with increased focus on the sales and marketing effort, as we continue to win designs on those two major product lines.
Speaker #4: All right, got it. Thank you, Jacob. Thank you, Michael.
Speaker #6: Thank
Speaker #2: Thank
Speaker #2: you. This concludes our question and you. answer session. If your question was not answered, you may contact Air Gain's Investor Relations team at airg@gateway-grp.com.
Speaker #2: I'd now like to turn the call back over to Mr. Suen for any closing
Speaker #7: Thank you for your thoughtful questions, and for your continued interest in Air Gain. If there's one takeaway, it's that Air Gain is a more focused discipline company.
Speaker #7: 2026, positioned for sustainable growth and increasing platform adoption. Michael and I Entering will be attending the Craig Hallam Conference in New York City on Tuesday, November 18.
Speaker #7: And we look forward to connecting with many of you there. Up later, you may now conclude the
Speaker #7: call. Thank you for joining us today