Alexis Waadt - Director, Investor Relations Charles Myers - President and Chief Executive Officer Leo Johnson - Chief Financial Officer.

Anil Doradla - William Blair Timothy Arcuri - Cowen & Company Matt Robison - Wunderlich Securities Josh Goldberg - G2 Investment Partners Paul Duggan - Jackson Capital.

Good afternoon. Welcome to Airgain’s First Quarter 2017 Earnings Conference Call. My name is Bob and I will be your coordinator for today. Joining us for today’s call are Airgain’s President and CEO, Charles Myers; CFO, Leo Johnson; and Director of Investor Relations, Alexis Waadt. I would now like to turn the call over to Ms.

Waadt who will provide the necessary cautions regarding the forward-looking statements made by management during today’s call..

Thank you and good afternoon everyone. Please note that certain information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act.

I caution listeners that during this call Airgain management will be making forward-looking statements about future events and Airgain’s business strategy and future financial and operating performance, including performance for the remainder of 2017.

Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company’s business.

These forward-looking statements should be considered in conjunction with and are qualified by the cautionary statements contained in Airgain’s earnings press release and SEC filings, including its Form 10-Q, which we expect to file by May 15, 2017.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 3, 2017. Airgain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

This conference call will include a discussion of non-GAAP financial measures, including adjusted EBITDA. Please see today’s earnings release which is posted on Airgain’s website for further details, including a reconciliation of the GAAP to non-GAAP results.

Any discussion of non-GAAP measures is not intended to detract from the importance of comparable GAAP measures. Finally, I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company’s website at www.airgain.com.

Following management’s prepared remarks, we will open up the call for questions from Airgain’s publishing sell-side analysts and major institutional shareholders. Now, with that, I would like to turn the call over to our President and CEO, Chuck Myers.

Chuck?.

Thanks, Alexis. Welcome, everyone and thank you for joining us today. After the market close, we issued a press release announcing our results for the first quarter ended March 31, 2017. A copy of which is available in the Investor Relations section of our website.

Riding our strong momentum of 2016, we continued to expand our core connected home market, while adding to our sales funnel in new markets like enterprise and automotive. The company’s sales grew organically by 32% year-over-year, while our margins showed expansion.

This led to another strong quarter of profitability in adjusted EBITDA more than doubling from the same period a year ago. Complementing our healthy financial performance were several achievements on the operational front. We began shipping multiple new 802.11ac connected home devices during the quarter. I will highlight two examples.

The first is a flagship DOCSIS 3.1 8x8 Wi-Fi gigabit gateway for a Tier 1 North American carrier. The second is the DOCSIS 3.1 set-top box for a major cable operator in Europe. This is a cutting-edge 4K ultra-HD device, which enables wireless video to be streamed over 2.4 and 5 gigahertz Wi-Fi networks.

These two new devices joined an ever growing number of design wins we have had that are based on the 802.11ac standard. Additionally, we began shipping and environmentally hardened outdoor Wi-Fi access point for a major Tier 1 OEM. This product feeds our expansion into a new market with a significant existing customer.

I will say a few words regarding our recent acquisition. We acquired the assets of Antenna Plus last week for $6.4 million in cash. In 2016, Antenna Plus had unaudited revenues of around $7.5 million in gross margins greater than 60% and positive EBITDA. We expect this transaction to be EBITDA accretive within 2017.

We were able to favorably acquire these assets due to a court order of resolution of an ownership dispute and not due to financial impairment. The acquired company, Antenna Plus, is an early innovator in the mobile fleet antenna market. We are excited about this unique portfolio of cellular GPS, Wi-Fi and private radiofrequency antenna products.

We also took over an established network of sales distribution and value-added resellers. This provides leverage for Airgain’s existing products into several new markets, including in the fast growing automotive fleet and industrial IoT space.

We look forward to building our team through the addition of the employees and the leaders of Antenna Plus, that have built such a solid company.

Now, before I provide any further details about our operational results as well as our future growth strategies and outlook, I would like to turn the call over to our CFO, Leo Johnson who will walk us through the financial results.

Leo?.

Thank you, Chuck and good afternoon everyone. Let’s turn to our financial results for the first quarter ended March 31, 2017. Our sales for the first quarter increased 32% to $11.3 million from $8.5 million in the same period a year ago. The increase was driven by our continued growth in product sales.

Our gross profit for the first quarter of 2017 grew 44% to $5.3 million from $3.7 million in Q1 of last year. Gross margin as a percentage of sales increased to 47.0% in Q1 ‘17 compared to 43.2% in the first quarter of 2016. The increase in gross profit as a percentage of sales is primarily due to a shift in sales mix.

Our total operating expenses for the first quarter grew 37% to $4.9 million from $3.6 million in Q1 of last year. The increase was primarily attributed to higher personnel expenses to support sales, marketing and R&D initiatives. We also incurred increases in certain administrative cost as a result of being a public company.

Net income attributable to common shareholders for the first quarter of 2017 totaled $385,000 or $0.04 per share on a diluted basis. A significant increase from net loss attributable to common shareholders of $465,000 or a loss of $0.82 per share diluted in Q1 of last year.

Our adjusted EBITDA more than doubled to $712,000 from $354,000 in the same period a year ago. I would like to remind everyone as expected we did experienced some seasonality in our quarter because of the Chinese New Year.

Now, turning to the balance sheet, cash and cash equivalents at the end of the first quarter totaled $41.9 million compared to $45.2 million at the end of the quarter – prior quarter. This completes my financial summary. And I will now turn it back over to Chuck.

Chuck?.

Thanks, Leo. Before I get into our operational results for the quarter, I would like to briefly share the results of some of our performance indicators. Our key performance indicators were positive for the quarter. Our total number of customer devices grew 23% for the quarter to $12.9 million.

The average number of antennas per unit in these devices increased 5% to $3.12 million. And finally, our average selling price per device increased 8% to $0.86. Moving on to some of our operational highlights, I started the call by talking about how we began shipping for two new 802.11ac devices during the quarter.

The DOCSIS 3.1 set-top-box is already ramping up very quickly, while we expect shipments for the Wi-Fi gateway to ramp throughout the year. These new customer engagements expand our geographic footprint, especially within North American carriers and diversify our overall sales mix.

In addition, we believe the shipments to these customers demonstrate after much anticipation the commercial rollout of the 802.11ac adoption. We continue to focus on driving growth through penetrating new markets as well as widening our sales channels and introducing new products that can increase our market share.

We believe the acquisition of Antenna Plus will help accelerate these objectives. This acquisition also allows us to advance our presence in North America in terms of higher margin product mix and geography in the automotive and IoT landscape.

Looking ahead, we will take advantage of our enhanced cash position to opportunistically evaluate attractive technologies and business like Antenna Plus that can accelerate our future growth. We will continue to invest in our sales, marketing and R&D initiatives to drive our strong organic growth.

I want to thank all the employees at Airgain for an excellent first quarter and a solid start to 2017. The hard work has laid a solid foundation for what should be another great year. Building on our past four quarters, we continue to see the market expanding and as a long-time sailor, it’s nice to feel that market trade winds at our back.

And with that, we are ready to open the call for any of your questions. Operator, please provide the appropriate instructions..

Thank you. [Operator Instructions] Our first question comes from the line of Anil Doradla with William Blair. Please proceed with your question..

Hi, guys. Chuck, Leo, congrats on the great results..

Thank you..

So, Chuck, you set the tone very positively. You talked about the 802.11ac you talked about some of the North American service providers. So, as we look out in 2017 from a bigger picture trends point of view whether it’s ASPs, whether its unit volumes and so forth, the tone that you set out in the first quarter should be sustainable.

Is that a fair assessment?.

Well, as you know we continue to – we look at internally kind at our annual revenue and I think that you know our past performance should kind of demonstrate what we think about the business, Anil..

So, when you look at again back for the full year from your point of view, 802.11ac will be the biggest driver.

Is that a fair statement?.

I think with so much of our business in the IoT and more going to be in the automotive space, AC is I would say not the biggest right now. As I have stated regularly, AC is really in a nascent stage and it continues to expand nicely and we see strong market push for that and we see that no reason for that to not continue.

We are only in nascent stages..

Okay. On Antenna Plus, obviously there are some cross-selling opportunities right away as you expand your channel. But then there is following up there is going to be integrated product synergies. Can you walk us through, Chuck, how you are looking at 2017 NEP from this acquisition point of view..

Yes. I think that it will – just be aware we disclosed this thing last week.

So as we go through the integration what we have seen from the distribution channels that we have there – within that company there was a bit of a pent up demand for other products in probably larger service capability which Airgain provides to Antenna Plus to be able to provide even their existing products to more customers.

So we hope that we see a lot of pull from that throughout the rest of the year and we continue to see that those are some introductory products where some of the automotive opportunities that we are currently pursuing..

Great. And Leo, switching gears to the balance sheet, DSOs went up. It looks like accounts receivable was the factor, had an impact on free cash flow too.

So, can you build up and explain what happened there?.

Yes. I mean, basically we had a – March was obviously our biggest month of the quarter, because the way Chinese New Year fell we ended up doing almost $5 million or access over $5 million in the month of March..

Okay. So it will hit the timing thing..

Just the timing..

Alright, wonderful and congrats once again from my side..

Thank you. Our next question comes from the line of Timothy Arcuri with Cowen & Company. Please proceed with your question..

Thank you very much. I had a couple. So I guess Chuck, you don’t want to really get too specific about the guidance, but you have now grown in excess of 30% for two quarters in a row. Can I just sort of take that sort of growth and then add Antenna Plus of maybe $8 million, so you are like in the mid 60s for the year.

I know you don’t want to like put a number out there and guide, but is that completely crazy?.

You know what I love about the analysts. I never mentioned $8 million, I said that unaudited with $7.5 million and you already added $0.5 million. That’s a tough one to add.

But as you know if you have a public company of our size an we are growing it better than 20%, we feel that’s kind of where our business model has been modeled and I think you can see from our performance in the past, we feel comfortable with our performance in the past..

Okay, alright.

How about this one? So, can you help us sort of what the impact will be from Antenna Plus on antennas per device and maybe total devices, is there going to be any material change, do they have even mix that would make those numbers a little different?.

Great. They have a much different mix. They tend to be definitely a significantly higher ASP than what we do. It can go anywhere. I mean, Leo, do you want to hit on kind of what those numbers are, but it could be anywhere from – these could be…..

Some of the Antenna’s $100..

$100 right. So, it’s going to change at some point we are going to – as we build up our automotive and kind of IoT business and outdoor business. Our key indicators for what we do on cost per device, is going to change significantly and at some point we will come out with new direction on how we see our KPIs..

Okay, got it. And then can you talk about gross margin, it was obviously a lot better and you guys haven’t done 47% before I don’t think so.

Is that a sustainable number, when I put in Antenna Plus, I mean you should be able to do possibly 50% this year if you are sort of already at 47% without them and they are much higher, is that rational?.

Well, as I stated on the other calls, it all comes down to product mix. And as we change things, in and out, depending on the quarter, the mix changes, this is probably a good time that people will always love to touch on LECO with us.

As we said in the fourth quarter call and the first quarter call or in the end of year call that we didn’t put near as much emphasis on LECO as probably, I don’t know if I’d almost call it the social media impact stead. We don’t view them necessarily as a significant customer going forward although we still ship to them as I said in the last call.

We still ship to one of their key vendors. But as for instance their margins are lower than some of the margins on some of the other products we ship. So it’s things as product mix ship can shift our margin. We have had 15 or 16 quarters now straight of greater than 40% margin and there is no reason for us to believe that, that’s going to change..

Okay.

And then I guess last question can you talk about the top customers in the quarter who were they and how much were they?.

Tim, I don’t think we have ever really called out. We have never called out the top customers that this quarter the top – we have always given the percentage of what the top three were and again this quarter is about the same. This quarter is 47% out of the top three customers..

But be cautious because next quarter it maybe a completely different set of three. They tend to switch quarter-to-quarter depending on the shipping schedules and/or customer demands. A retail product customer will have very different. They will ship more in one quarter than they would compared to what another person would.

And it’s important to know when you segment customers those customers could have multiple products in multiple product lines with multiple end customers in their own right..

Right. Got it, okay. Thanks so much..

There is lot of diversification there..

Thank you. Our next question comes from the line of Matt Robison with Wunderlich Securities. Please proceed with your question..

Hi, this is Peter [indiscernible] for Matt Robison. Thanks for taking my question.

I am just wondering based on order flow that you guys are already seeing what kind of equipment is going to be driving demand in the June quarter and how does that compare to the previous year?.

I would say that I am not – I don’t necessarily follow your question. We ship as many – to as many of about 150 different products and I don’t know that personally I have seen what the breakdown is on each of those individually. So, maybe if you have some clarity on the question, maybe I can help you out a little..

Just trying to get at if there is any product specifically that you are seeing that’s a high percentage or if you don’t have any clarity that’s alright too?.

No, I would say that it’s – there is no one specific product that I think I understand your question. There is no one specific product you know our revenues tend to be quite diverse. So, that’s how we see it..

Alright, thank you..

You are welcome..

Thank you. Our next question comes from the line of Josh Goldberg with G2 Investment Partners. Please proceed with our question..

Thanks, Chuck and Leo.

How are you doing?.

Hi Josh..

I had a couple of questions. I guess, first of all, can you tell us how much – because you said it’s very always stages. I assume that the 802.11ac and the DOCSIS 3.1 modem business is still very, very small less than 10% of your revenue.

Is that fair to assume?.

It’s a tough question without seeing the numbers in front of us. Hang on..

Okay..

The two projects that Chuck alluded to are under 10%..

Okay. Based on the comment that the tailwinds are starting to come your way and you are seeing further orders.

It’s fair to say that you probably entered April and now May in our conference call with a better order book than you did starting the year?.

I would assume so, yes..

Okay.

And also you are comfortable saying that the products, the 802.11 and the DOCSIS 3.1 are not significantly below corporate average gross margins?.

That would be correct..

Okay. So, typical…..

Those are very early products. Those are very early products. So, that’s going forward those tend to be decent margin products when it gets varied over the life of the product..

How do you look out to some of the other opportunities is it fair to say at least that the DOCSIS 3.1 upgrade could be pretty significant to your top line?.

I think that DOCSIS 3.1 is in very, very early stages. So, as a market of a whole I would absolutely agree with your comment..

Okay. Is there any comments from customers that we are seeing there or not – or they are delaying the spend or they are holding it back or just because you are only seeing the early indications that you are saying it’s an early market.

There is no cancellations or changes in their buying patterns?.

To the contrary, I think the designs are all geared for the most part are geared in that particular product set, the products or the new designs are very much geared towards 3.1 DOCSIS products and AC products..

Okay..

And those are very, very early stages..

Sure.

But it looks like they are going to ramp pretty hard pitching now in the end of the year according to the customer forecast?.

Right. I mean, I think as you could see from our numbers we continue to ramp nicely..

Okay. Regarding the acquisition just so everyone is clear, you can only have 2 months in the acquisition in the second quarter and then fourth quarter and third quarter.

Is there any seasonality in the business, is it more back-end loaded to the fourth quarter or are people looking at this 7.4 and saying okay, divide that over whatever, you got 8 months of it, divided by 8 months and it’s a pretty good indication of what the revenue will be each quarter?.

We will have to see how they operate under us in terms of seasonality. They do have a little seasonality there. As we get into the integration, we will be able to going forward give you some better clarity on that. We will see some revenue from them in the first two quarters. There will be some cost associated with the integration on that..

Okay.

So you are saying is that maybe the first two quarters is not as accretive as when you guys see here?.

Exactly..

Okay.

In terms of just balance sheet, fair to say that you think DSOs will normalize again back to 40, 45 day in the second quarter?.

Yes, I believe so..

As there is no indication that they are not..

Got it.

So just to dovetail that, Leo, it sounds like that the quarter and the ordering patterns of booking seem to be much more front-end loaded this quarter?.

They were, yes..

Okay, great. Thanks so much..

Thanks Josh..

Thank you. [Operator Instructions].Our next question comes from the line of Paul Duggan with Jackson Capital. Please proceed with your question..

Good afternoon, guys. Nice quarter. I have got a question. It’s little off topic from what these gentlemen have been asking. This tax seems to be overrun by short-sellers in the open short interest continues to go higher and higher.

Would the company consider paying a cash dividend or instituting a buyback that kind of combat that? We have got a lot of cash in the drawer a buyback or cash dividend would use the cash and provide some defense against the outstanding short-sellers.

Any thoughts?.

We are thanking, Paul. Actually, we are kind of hoping Paul that results would speak for themselves..

Well, the results are great. But it seems there is a lot of social media negative stories one way to counteract it is just with tax, company has a lot of cash, more accretive acquisitions like Antenna Plus or a dividend or a buyback, I think it would send the stock running..

Well, we will bring that up in the board. I think, it’s good comment..

Alright, thank you..

Thank you. Our next question comes from the line of Will Hamilton. I am sorry – that’s all the time we have for questions today. If your question was not taken, you may contact Airgain’s Investor Relations team at investor@airgain.com. I would now like to turn the call back over to Mr. Myers for closing remarks..

Thank you for joining us on our call today. I especially want to thank our employees, partners and investors for their continued support and we look forward to updating you on our next call.

Operator?.

Thank you for joining us today for Airgain’s first quarter 2017 earnings call. You may now disconnect..