Northland Capital Markets Reports on Airgain (AIRG) Q3 Numbers

Published on November 17, 2016 10:53 AM

(SI Newswire) Summary

Airgain (NASDAQ: AIRG) reported significant revenue and earnings growth in the September quarter, buoyed by greater than expected growth across all of its markets, with particular strength in smart televisions. We are raising our estimates moving forward, and expect continued strong growth as content gains should grow steadily as MIMO and MU-MIMO increases as a percentage of the WiFi mix.

Key Points

Q316 Results – AIRG reported revenue of $12.4 million and GAAP EPS of $0.16 per share, with non-GAAP at $0.18 by our calculation. We were estimating $10.0 million in revenue with a GAAP loss of ($0.06) and a nonGAAP loss of ($0.01). Consensus estimates were $9.7 million and a loss of ($0.01). Gross margins remained well above the company target of 40% at 44.8%.

Customers – Airgain had three 10%+ customers in the quarter driven by AT&T/DirecTV, Comcast and LeEco. Smart TV’s were singled out as a particular area of strength, and we believe this was led by LeEco entering the US market in the past two weeks.

Metrics – The average number of antennas per device increased 15% sequentially from $2.41 to $2.84 driven by 4X4 MIMO and MU-MIMO in 802.11ac products. We believe this trend will continue for the next 12-24 months as MU-MIMO becomes a must-have technology in the home networking market. The average selling price per antenna dropped 5% sequentially, in-line with historical averages in the semiconductor/antenna industry.

New Markets – Airgain has seen increasing design activity beyond the traditional cable and television industries as home security, home automation and automotive customers have begun to ask for greater throughput capabilities from their equipment vendors. These new markets could help drive additional wins for Airgain next year beyond the traditional consumer markets where they are seeing the current growth.

60 GHz – While this was not discussed on the call, we continue to believe that 60 GHz WiFi will become another driver in the second half of CY17 as QCOM pushes its availability with its chipsets. The Snapdragon 820 and 821 both include 60 GHz WiFi, and we believe QCOM will begin to incorporate this in the mid-tier chipsets next year. CPE makers will look to differentiate their products by the second half of CY17 with 60 GHz support, particularly where video content is most prevalent.

Estimates – We are raising our forward estimates given the strong results and continued growth of MIMO and video demand. We are raising our Q416 estimates from $10.0 million and $0.05 to $12.4 million and $0.12 GAAP, our FY16 estimates from $38.4 million and $0.28 to $43.2 million and $0.44 GAAP, our FY17 estimates from $46.1 million and $0.42 GAAP to $50.5 million and $0.44 GAAP and our FY18 estimates from $53.3 million and $0.68 GAAP to $59.5 million and $0.91 GAAP.

Conclusion – We continue to believe AIRG is at the beginning of a strong growth cycle as MIMO, MUMIMO and soon, 60 GHz WiFi grow rapidly to support the ever increasing demand for higher data speeds. This will only increase as 4K displays grow as a percentage of the television mix and content distribution. We are therefore reiterating our Outperform rating and $20.00 target price