Under WSA’s IPO Scanner: Airgain Inc.

Airgain raised $12 million in its IPO priced at $8 per share on August 12th, 2016

The U.S. IPO market has picked up pace during 2Q FY16, with the momentum continuing during 3Q FY16, during which 17 IPOs have been priced. So far in 2016, there have been 59 IPOs priced and 84 IPOs filed, raising a total of $9.8 billion. Of the total number of IPOs filed, 30 have been in the Healthcare sector, raising total proceeds of $2.6 billion, followed by Financials with 9 deals raising $2.5 billion, and IT with 9 deals raising $1.8 billion.

In the recent past, several tech IPOs have shown promising returns, pointing to an increased risk appetite on the part of investors. Of the 9 tech IPOs so far in 2016 that have raised $1.8 billion, all are above their offer price and the average return is +117%. The year’s two best-performing IPOs are Acacia Communications Inc. (NASDAQ: ACIA) and Twilio (NYSE: TWLO), both of which surpassed conservative estimates in their first public earnings releases last week.

*includes IPOs that have raised over $25 million; Source: Renaissance Capital
*includes IPOs that have raised over $25 million; Source: Renaissance Capital

Airgain Inc. is a leading provider of embedded antenna technologies used to enable high performance wireless networking across a broad range of home, enterprise, and industrial devices. The San Diego, California-based company produces antenna systems that find applications in devices deployed in carrier, enterprise, and residential wireless networks and systems including set top boxes, routers, gateways, and digital television. Airgain is involved in the design, integration, and testing of high performance embedded antenna technology used in residential wireless local area networks (WLAN) and Wi-Fi (wireless fidelity), supplying to leading carriers, Original Equipment Manufacturers (OEMs), Original Design Manufacturers (ODMs), and system designers.

i2In addition, Airgain also develops embedded antenna technology for adjacent markets, including enterprise Wi-Fi systems for on-premise and cloud-based services, and for small cellular applications using Long-Term Evolution (LTE) and Digital Enhanced Cordless Telecommunications (DECT), and high-performance designs for the in-building wireless market.

To cater to the rapidly evolving technology needs of the industry, Airgain has remained on the leading edge of next generation development including solutions for Multiple Input, Multiple Output (MIMO), Multi-User MIMO, (MU-MUMIO), beam forming, and active antenna systems. The company also offers early design, custom engineering support, and superior over-the-air (OTA), testing capability; its design teams partner with customers from the early stages of antenna prototyping, throughput testing, performance and device integration to facilitate optimal throughput performance and fastest possible time to market. Airgain uses third parties to manufacture its products while maintaining oversight for critical test and calibration functions. The company has 47 issued patents in the U.S. and 22 companion patents outside the U.S., and 93 patent applications on file.

Airgain has approximately 330 antenna products in its portfolio, having shipped approximately 87 million antenna products worldwide in 2015, enabling approximately 34 million devices. Airgain counts Actiontec Electronics Inc., ARRIS Group Inc. (NASDAQ: ARRS), Belkin International Inc., DIRECTV LLC (NASDAQ: DTV), EchoStar Corporation (NASDAQ: SATS), Huawei Technologies Co. Ltd., and ZTE Corporation among its clients. In the period of 2011 to 2015, Airgain’s sales grew from $10.0 million to $27.8 million, while it has narrowed losses from a net loss of $5.1 million in 2011 to a net loss of $0.3 million in 2015. For the three months ended March 31st, 2016, Airgain reported net income of $0.1 million. Airgain’s financial backers include Gen3 Capital Partners, as well as angel investors. It has about 50 employees.

IPO details

Airgain announced its IPO of 1.5 million shares of common stock at a public offering price of $8.00 per share, before underwriting discounts and commissions. All of the common stock is being offered by Airgain. The shares began trading on the NASDAQ Capital Market under the ticker symbol “AIRG” on Friday, August 12th, 2016. In addition, Airgain had granted the underwriters a 30-day option to purchase up to an additional 225,000 shares of common stock at the IPO price to cover over-allotments. Airgain raised $12 million in its IPO, which closed on August 17th, 2016.

Northland Capital Markets and Wunderlich were the joint book-running managers for the offering. Airgain plans to use the IPO proceeds for working capital and general corporate purposes, including sales and marketing, product development and capital expenditures. In a securities filing, Airgain said it may make acquisitions or technology investments.

Key strengths

On January 6th, 2016, Airgain announced a definitive agreement to acquire the North American assets of SkyCross Inc. a leading provider of advanced RF solutions for the wireless data networking market. The acquisition gives Airgain ownership of certain North American accounts as well as key sales and engineering resources, and is expected to augment Airgain’s operations in the connected home, enterprise, and outdoor antenna solutions, including data networking and smart metering applications. The acquisition of SkyCross assets strengthens Airgain’s position in the core gateway and set-top box markets, while expanding its customer base into more diverse product categories and antenna solutions.

The SkyCross product portfolio consists of a broad range of antenna solutions targeting the home networking, enterprise, and Machine-to-Machine (M2M) markets. With the acquisition, Airgain would gain technology that will allow it to deliver an optimized feature set for these markets.

Airgain is poised for growth as demand for wireless video streaming to smartphones and tablets increases. It also sees potential in the Internet of Things (IoT), where the number of connected devices is expected to almost double to 11.6 billion in the next five years. The company faces tough competition, however. Its top three customers made up 55% of its sales.

Stock performance

i3Airgain’s stock stood at $11.61, gaining 0.35%, at the close on Tuesday, September 6th, 2016, having vacillated between an intraday high of $11.95 and a low of $11.13 during the session. The stock’s trading volume was at 307,837 for the day. The Company’s market cap was at $86.15 million as of Tuesday’s close.

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