Inseego (INSG) 2 Nov 222022 Q3 Earnings call transcript

Hello, and welcome to Inseego Corp's Third Quarter 2022 Financial Results Conference Call. Please note that today's event is being recorded. All participants today will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity for analysts to ask questions. [Operator Instructions] On the call today are Ashish Sharma, CEO, Bob Barbieri, Chief Financial Officer, and other members of the management team.

financial be non-GAAP call, this measures discussed. will During company's directly financial release, measures reconciliation of is to included GAAP most the the section Investors' earnings A is comparable in on the website. available which the An audio also there. call be archived of replay this will also discussion contain that forward-looking today's advised be statements. Please will historical but and beliefs. are statements on based forward-looking These facts, the are not rather company's expectations current

factors our differ Officer. to press described that Forward-Looking release. Please on materially go on our Please Ashish the Cautionary which today's For Statements factors like could would Note to cause the to results filings, refer to turn ahead. a XX-Q, website. risk Regarding the from also XX-K, to refer in I call expectations, Form SEC in Executive section Chief and contained over the please Sharma, discussion actual other available are

Thank welcome earnings you, operator and call. Inseego’s third XXXX fiscal quarter to

is SD-WAN being on phase. calls, full transitional our currently wireless suite provide previous a in a manufacturing and of core designing company mentioned a that technologies hotspots to to and and enterprises solutions Inseego via As to leverages in fixed mobility one from products. solely connectivity shifted We focused

Australia. we and we met our US right expectations Our results Verizon quarter in topline from This in and of PRO hotspot, to activity we with volume million. benefited level MiFi quarter, reflect initial our this next-generation the We revenue are on on quarter this In the delivered this believe transition shipments path. performance X strong a of Telstra of the $XX.X revenue.

stock which business us products, contributor our as why is say we margin this carries of lower this While that may you our quarter. margins, down validation have tick important a gross saw to gross is heard carrier the an

of expenses elevated in to impact a in loss capitalized nature. reported was chain the development quarter. anticipated to we due higher of a lower was that these of previously and non-cash nonrecurring the EBITDA $X.X adjustment were ongoing The million. majority than EBITDA supply adjusted Our costs R&D costs

expect to order. margin year-over-year QX, revenue. increased rebound we comprises our our in short revenue our R&D XX% XG and total of expenses XX% So, In to and gross reported now decline

Many competition. Cisco pilots. footprint. These vast multiple majority occurring to seeing with we're customers to XX% and Our margin metrics entire Both as XG. that, mission-critical, and of revenue accounts these follow deploying full base it to devices, our year-end. the of deployments Thanks XXX enterprise list enterprise over such importantly, new our test This move and evaluate, various these is over QX. devices of a exceeding purchase progress year, towards portfolio, expense of quarters. are for our of important transition represented boasts our driven In and by now made the goal XG test breakeven flow coming revenue a competitors the also more trend note more of ongoing and customers of along are the same tuning breadth these the approaching XG sold solutions we our the to are X,XXX wins software of to of initial our across with QX, deployment good in with hotspot was this added enterprises of the total of deploying in over towards to ramp important XX financial most targets. XX We've our much And software our as business. cash We've Inseego the lot the we company also over That enterprises stages traditional progress by to Inseego important the FWA and ClearPoint. goal XX% products all business business. stronger profile now path, of customers, enterprise their than of of with

want I additional we will are why reasons by three approach confident highlights, cash of we I to the share QX year. end Before this provide flow breakeven

you of few past years. and over of FWA development substantial investments we've product Inseego leading as enterprises. initiatives best-in-class Fixed go-to-market know, Wireless made First, in This the to as many solutions Access XG or the provider positions

dedicated we rate already out free flow annual cash of to close what all goals no year-to-date continue to million Second, matter we've and business XXXX out $XX will cost to will costs, run high. the tightly our manage of taken continue to remain look our

that On lower the us quarters over going past certifications R&D side, the two have mid-band forward. to key expenses enable several will completed we

spectrum becoming the Third, new with lastly, rise partners by available we meaningful of them. and all carrier plans real XG more to enterprise our of X to see this we offerings, dialogues a service roll-out and to made possible services performance network beginning this give XXXX. hearing enterprise-focused the host partners. in dramatic only now expansion And are and our increases to in support are our carrier commonplace in of the will are and Tier expect Those FWA

get XXX outdoor quarter. local and said We we correct. upload. they experienced of a in with cord real let's customer tested saw solutions, ISP, MBPS. into some won the our sector. of I XG the new speeds cut cable So That's commercial FWA examples the the momentum They estate in upload customer the once

secured the Another a example customer well-known wash a of new Midwest. chain in car based we is recently

reliable of locations, inclement customer After in successful retailers, surveillance with a The satellite was services. performance selected as challenges replacing testing our number payment As using existing and with their paramount. connectivity, uptime which video consistent for primary is communications in uptime. cannot they weather, their were solution XG FWA ISP all satellite transactions the was compromises facing for it deliver

in On three during we They customers are investments the moderate, to Austria, expanded Drei can inventory. our carrier the to our QX. exiting as our Australia, indoor position relationship in companies. Telstra flow to address These to now have part generation, beginning headwind want you our a also FGXXXX for inventory see of I solution side, quarter. their in been the and in business Wavemaker™ launch our group with launched addition cash

major breakeven to the challenging and thank most importantly, of we supply inventory last quarters. in approach end. trend will and meet we details to our developing times that poised results. XG Given of And all over couple done FWA needs. expect we our our new customers I significantly the needs we constrained has cash customers by adequate year and increased our on past to to many for chain believe This of progress provide with track made we've flow and the fronts, to was the positive a have over in are Bob, would free support. remain quarter demand components generate XXXX like first few to on ensure this turn to We to sustain on be market. And I long cash positive position continued Considering QX years, plateaued, to the their able more newly downward build lead remain over without thereafter. who cash manage the we now employees want will supply flow call

you, Ashish. Thank

QX details the the on refer XX% that results was all was Let Africa, a adjusting Please the basis XXXX. of July up quarter GAAP our our XXXX. Please of divestiture for reconciliation. me $XX.X review third pro on additional release the X% which note non-GAAP sequential made metrics forma year and on earnings for in revenue non-GAAP are up Ctrack to now and a prior to comparisons completed fiscal million, from South basis.

products higher-than-anticipated reflects of growth in XG MiFi Pro sales by Our offset product X our or sold partially carriers. anticipated declines new

are total quarter all cloud of compared Next-generation the revenue ago QX in quarter. represented this of of as which to solutions, increased devices XX% of XG over comprised revenue and XX% software XX% and XXXX the fiscal in our year assets

the revenue quarter up & period year. $XX.X was Third from Mobile IoT last same million, Solutions XX.X%

the we prior ample a a quarter an robust gross partners. loss that QX our loss in seen and primarily worth for was the XX.X% ago slight supply sequential capitalized of Also to from as R&D which and was abate share in of of business rebound higher-than- incurred Consolidated enterprise enterprise levels gross was period year carrier $XX.X a a the the which revenue and meaning XX% initial past quarter, on X one-time that and a our of Gross QX of prior adjustment SaaS SaaS was loss to ago from majority was per of MiFi to prior X mentioned, reported loss margin to higher was margin with continue launch million, uptake in on are and FWA from earlier comprised expansion gross now revenue further margins in hotspot the we we've Our us Pro QX. of to growth quarter. segment $X.X obtained decline our completed margin and in negative in higher over leaving in in two $XXX,XXX XX.X%, per and costs due solutions and of the these due software the not in adjusted certification $XXX,XXX of to our and $X.X launch prior loss significantly late XX.X% higher lower $X.XX down associated net by related included per of last loss alluded distribution revenue, QX which attributable solutions expenses a The in also hotspot share the has remained non-GAAP basis. our consistent recur million, and largely product. scale XX.X% expected costs QX million for key million the costs should margin change EBITDA relatively the a costs of non-cash down with gross our anticipated and in of on We QX launch basis and a margin IoT was quarter. major and representing the The product was coming will or year period. to year this QX and from The business. as by product a Ashish and contribution with room year. sales carrier chain component Enterprise mobile and enterprise certifications confident the exceeding $X.XX which XX.X% Enterprise share in our $X customers, for quarters. a than margin margin beyond, a that year-over-year was of up had have $X.XX lower XX.X% XX.X% driven compared MiFi on of XX% mix periods our quarters. of in Pro noting, sequential Gross

and equivalents, our details tables cash reconciliation $XX.X end results, and adjusted was restricted on in at the EBITDA the For cash our QX to additional million. non-GAAP release. press of refer please Cash,

Our working quarter, to the improved orders. timing from cash due prior additional cash usage the while capital consumed of

the quarterly XXXX. for We sales, well-positioned offset decline For by cash expectation the will We is cash our approach revenue our growth year our that product a trend steady of basis leave to cash positive ramp flow generate XG XG and year, during usage a and predicated cash lower the believe upon expect fixed anticipated wireless our generating remainder hotspot in sustained in on us flow flow our in this positive we sales. breakeven. enterprise next note carrier to

to be positive year. next we cash and we cost flow previously, on are continue ensuring mentioned As focused

impact believe me our growth the comments. With will ultimately, free cash our enterprise which our margins, we for our turn strong continue business to his recurring and back Ashish closing on to prioritize let by revenue, long-term. that, of We transformative expanding higher in have increasing sustaining it over a margin mix flow sales,

Bob. Thanks,

the saw inflection from QX we our is So, initiatives key in takeaway that key to update continue point approach business. against we progress our our and steady an

prevalent, a us FWA profitability into revenue top and company and existing to high-growth for to solutions recurring growth enterprise cost This more on positive we structure taking the are questions. with transform our your well-positioned you have look XG of benefit your cash forward high-margin a from parallel, Thank enterprise cloud-based attach all layered for availability the with our rate ultimately We a of growing flow. As will Inseego sustained support. become demand products. Question-and-Answer providing our interest Session software stream. In high offerings

the question-and-answer Instructions] [Operator with from Our Please Company. question ahead. come Lance Vitanza will now & begin go Cowen will first We session.

three explore. of the thanks could guys, have I hoping that taking Hi was for questions. kind I areas we that

hotspots increase. color increased was It's I'm be first and between Any wondering those down you of categories that break $X additional helpful. just to price services, in XX% versus software, us versus on the The revenue on if help XG that of side, is sort IoT could $X up revenue would a -- about about million million XG volume? year-on-year. those versus any

Ashish. Lance, to great talking This is you.

me let take that. So,

question. in would Telstra all would two FWA One say that is would first, say increase number in enterprise And the So, and new we've had revenue. components I launch good new customer the hotspot say in new are of our I mobile IoT in net there that that's revenue, growth Australia. two, that's I revenue. continued in with revenue. year-over-year bucketed then

would I components. main two those say So were the

is you being Are to there well? we this change the on pure any seeing -- we this in respect that I think a seeing unit mean, either should increase units are side, or as component with -- I you're guess, of as pricing just selling pricing is

we embedded because of why So year, -- did don't the our say we're earlier the from of change Number to key carrier hard two side, was a we in enterprise took not that of right, quality out to every increased career revenue. FWA I you're me review air. the in higher. right? quite component hotspot respect, since And spot higher revenue did growth more over revenue priority back I still selected brand-new see are that would this business, lower-margin step started would to taking bit, we which is significantly cash a see product be continue increase grow every supply a a That's percent the it on the enterprise margins in So hotspot that have we of about. We're the particularly to while the on type all business, it, to revenue I from Lance, focused the right business. margins little but put chain on our yes, there. XX-plus impact say, FWA focus cost, flow revenue businesses. on to the our seeing elevated there right? now of mean was we let approval launching to And has an business gate, we're CEO from quarter margins quarter, comprehensive Well, given and talking to highest changing with generation, And of we chasing compared the I in low-margin a everything partners. this

so higher be of And higher and cost to shipping component there they continue costs. are

that enterprise So towards say mix I today. what that's revenue, with we see you would the than you're to much dealing as generate more really shift FWA see and more start margin we more

Great. Okay.

And sort just my gross gross margin. the follow-up of so questions, most margin answers to on actually of but that

too didn't those the companies able to increase some of competitive I market the nature that have your or should in going nature to think simply Thanks. just go and give time You for that of wondering back cost pass wondering, that, the about did needed I'm call is -- that out And one-time if on increased how lot of -- or I'm cover, would that you that -- out you do we the the forward? the back, the quarter. chain and you do get elevated And cost you costs go it these costs just any that's ability of we is customers. would supply the really think to like be a to you --

Yes. Good Lance. question,

a is of piece product though have even revenue side, the of even but still it market carrier is our the it I our say competitive very slots done quarterly of have grew pricing a on would right? to But have those they that, customers, on for pricing and there's pricing, the on side, So, with this XX% there the volume certain out enterprise and all of hotspot slots. time. smaller We increased we it revenue, elasticity

that, the those said, given quarter pricing. margins. in customer's Having ahead, consent, we've general, increase cases, FWA and too just But downwards quite it hotspot costs. the hotspots the So, lower like are compared pass on much enterprise to challenging with the shifted is for said I in surgically gone like still, there still that us some to margins super this revenue the was margins and

recall the earnings late on looks call. quarter. then don't And identifying in on I when up. mean, cost -- thank though Understood. like seems for spoke and you we up so I you lastly the about margin, came months detailed Okay. these very the these came non-recurring it that -- ago And it explanation they the three items as

we XX here should be one-time are visibility So to the today you your come we items over with relates as sit or so? worry well, and confident could up turnaround my that fourth sort to days that question in or -- the you margin, quarter of crop do is, have it other in feel as there that up some gee, do next or the where

ones given the that at next see I of least product, new margins don't again. quarter, improved two confident headwinds us were see big this fairly launches to going Lance, hitting we're are quarter. type we those that executed the of Yes,

sort But also you shifting, last know -- of the have I But relationship could, wrap you could I'll that your with cash note a in minimum cash how you of stay the XXXX, But know addressing then business? just that then you is? quite operating -- imagine it but of Okay. from I could early, we your will then May great. mean, of a would minimum promise. which is And balance expect on Foxconn, up, Thanks. there need standpoint sheet, that? of could years, should to that I the that I given just above have talk -- the I you if I revolver, balance I is low. And and about anticipate a maturity balance I it's much the about, know how you believe talk have couple you I convertible couple is

Yes, Lance.

chime here. overview a and me let I'll to then in So there, give ask Bob high-level

three in out things million a rate So highlight, I as $XX took One, run to year right? cost already. this want that we

chain inventory, stuff were putting Number the one. going times, script, times trying high that's mentioned pretty lead and So is on given with inventory, by running cost manage moderating and two the long really lead the the in to now, that's pre-buy we boat trend to long trying supply just right? by downwards. and So I on that's the as to

So will on there. spending pressure leave cash more it

So of that's up lot revenue. number one signed with two. already FWA are customers new number with we and hundreds And traction the enterprise margin higher is, year, three, important in we our of a seeing have most business, this

of the team through three, fairly for So different those modeling. three manage in a use confident don't moving has we've some done and It's forward we'll combination the But revolver tightly there. for be we revolver I those working got. capital the the with very very, Bob's and about. We're cash able things here cash with our business plan pretty to We a go the to mostly detailed changes quarter, talked needs.

Bob, add. have So anything you if to

with even so would transition I generation fixed And you previous add, we've earlier to mean, position. the that transitions. made XG then it, and know and the call XG Yes. transition those The from, correct generation generation wireless Hello, new having in the XG second hotspots portfolio previous the of Lance. already investments. I two and heavy the thing or investment us, you've this, the and only been

good spend feel to is first, of investment the we but course, need, lift from some the behind money, us. going So really we're heavy that,

stockouts other limited wanted some could they companies we were avoid found supply. second, The to what they what to and and

very, if have demand should anything, up, intentionally that, speak, to so So to very optics SKU we good be. inventoried by the we to what now as cycle

by a kind -- cost Instead, don't need who for then -- of focus audience we'll those we to company behind what reduce grade down. But we we investment. Ashish a already to in I mentioned, investments so we and saw is we such, not muscle, cost, feel So heavily was talk Hopefully, bone also really, the as do have now it full opportunity. do This that of have on. they when XG all Lance. as the in it's waste. wasn't those the about moderate but and company not since just a correctly cutting can ask it place. cost, same a follow-up. free by invested helps, us, And sizing, want that of And

Appreciate it. Thanks, guys.

Thank Lance. you,

Latimore Northland Capital. next Instructions] come from ahead. [Operator question Please Mike will with The go

international is was of on tell percentage you Hi. Aditya a behalf of Latimore. This as what Mike revenue? Could me,

we So, revenue one as that I would our percentage. broken say traditionally, thing have out not a international

the say, would significant revenue. big the part This Telstra quarter, launch, given that a of I was

Yes.

granular, So so it's we I it's out give don't that's would say over was -- -- it but specific -- that XX%.

So we took advantage Telstra, opportunity good of and satisfied we with that. a

macroeconomic And on you buyers concerns? the give Thanks. some the could right. color among hesitancy if seeing All given you're enterprise any

Good question.

location, and every untethered essential the to this irrespective the any have. continuing services And call, so needs from from we and enterprises the has evaluating Internet in XG those and deploy and market, then service, perspective, -- see a of from the businesses as lot slowdown to where gives an of enterprise, pandemic the look broadband of a you broadband the So to bit quite customers access in and I of mentioned back because perspective, capability actually seeing every our our previous SMB we're based for the enterprise the employee XG. the when lifeline this, location we momentum on see of a became began, if totally so to on enterprise XG that employee them as not

Thanks. Thank you. That’s helpful. right. All

you, Thank Aditya.

the like conference our This would concludes Instructions] back Mr. to [Operator to over question-and-answer I session. turn

come Please Ashish questioner that it have ROTH we that from closing with Mr. Sharmafor Scott another Actually, sir, actually remarks. Searles go will any Capital. And that just ahead. seems through. came

the taking questions. Thanks for afternoon. good Hey,

margin issues. hopped earlier some headwinds the you the on. a well this call, as availability just through component from that I logistics impact Can quarters? of I quick supply through but in gross is you us impact of take looking the on now? see you apologize, the I'm right Could how that how take where And you of are Ashish, the us in front, covered give chain terms over next us today sure progressing couple we update a probably as kind and of

Hey, Scott, to talking Yeah. the nice for Thanks you. question.

So orders gross this had margin a and that's the margins couple on it's overall facing couple on air little the bit took on positive a high very front, launches of everything of now a higher One, the quite percent the happening stocking the all kind had revenue, had put our that supply quarter, it because hotspot quarter, things we big of in quarter. at down, still we bit quarter. of and also But of enterprise chain costs, did margin FWA that. this grew this XX-plus business end and the we we And margin XX% the a significant that revenue, given long. times lead were to new hotspots from a launch were very was

had material bunch we in advance. order So well at to

bit Number chain out definitely focus the of One, over same gross of our And $XX business, that, flow three a don't what We FWA One that margin things quite of the did And close take new two focus irrespective the happening we is quarter. this getting in couple quite enterprise quarter. quality more versus is margin. the next would got cash quarter. in earlier. great enterprise will we of third mentioned cash now facing I saw forward, revenue, QX did we we're moving gross we the see which chasing flow say, that quite in generation on not revenue. the so I quarter. a in things breakeven is in this the this revenue two, all free really and highlight. our of to million are hotspot FWA. given – again. quantity very that's repeating pressure those – in driven And Scott, focused all growth So into those improve a from cost you And by is, change things launched and quarter this supply about you're is last don't from number

so come QX, that in And should up.

margin a thinking So quick how the cash of summary both and of that's kind flow. the we're about,

Perfect. follow on June help and in And the could you access ramping right should up us terms are September the geographies calibrate if what for big is maybe that – what fixed of the customers that And over XX% was number product the quarter. a us volume in couple just wireless comment, in the now, quarter? then Could it in I Ashish, the quarters next understand we full expect the of line?

the enterprise right internationally. Yeah, the couple of the say Scott. on one carriers FWA carriers What now, America are North aggressive predominantly here most I would is that, geography because is versus

from in a of America number saw what we coming ballpark XX% quarter. most the that north is would and was of So North just I it say, previous

Great.

guys. much, so Thanks Okay.

you, Scott. Thank of End Q&A

all us to and look the on Thank So Thank for We today. I'm call summarize everyone again. quarter to updating you our you, you, joining you, forward next progress. continued just going operator, thank now. on

The conference attending has concluded. for today's now Thank you presentation.

may You now disconnect.