Inseego (INSG) 1 Mar 232022 Q4 Earnings call transcript

Hello, and welcome to Inseego Corp's Fourth Quarter and Full Year 2022 Financial Results Conference Call. Please note that today's call will be recorded. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity for analysts to ask questions. [Operator Instructions]

are other CEO; team. members today Financial Barbieri, call and Officer; of the Ashish Bob Sharma, Chief On the management

this section comparable this be measure to financial release, replay which included call, of discussed. on earnings company's During reconciliation the archived website. available A audio Investors in will the also the the financial there. call GAAP be directly will is measures of is most non-GAAP An

statements. that on today's statements discussion expectations Please These also forward-looking but based forward-looking not contain are and be the facts, historical advised are will current beliefs. rather company's

For filings, please cause Statements actual refer which press our website. are a XX-Q refer in results expectations, risk that today's release. the XX-K, from described available the Forward-Looking factors on materially discussion Regarding of also Cautionary Note to our sections Please factors SEC to to in other could contained Form differ and

to would turn ahead. go the like to CEO. Please, over call I now Ashish Sharma,

afternoon, Good for operator. joining you, everyone, Thank us. thanks and

Before as into and first of to my want reflect will on the step year for we progress. quarter, our CEO. three major back I highlight areas dive Inseego's I results

has comprises transformed happy of in QX. access that our revenue. report I'm have into to XX% while evident from we an grown we is software wireless represent FWA This First, enterprise now an our XXXX, our fixed company now business momentum to the incremental in with XX% Inseego saw especially following: cloud of the revenue,

This our XX%. basis increased in QX to calls, XXX businesses hotspot margins these our produced evident two significantly points we our business. gross As than saw by discussed gross on higher legacy results, which margin prior have was

in continues. our as to gross and solutions FWA of FY expect beyond We and our cloud expand XXXX further adoption enterprise margin

FWA industry. in We've leading and RAN as the offerings managed the XG our software established portfolio

at to will our large with customers. a roll We and dozens and loving They plans well-known the are large service sites, improves. carriers their XG to coverage have solutions. distributed out more enterprise They look as enterprise pricing adept pipeline network deployments growing of get

are We that day. every seeing improvement

by we but enterprise taken several and gradually are recognize will over We that FWA progress, next the evolve market develop to quarters. encouraged the time has our

in QX of cost on market intense XXXX, focus beginning Second, we structure put the an the company rightsizing develops. FWA while

we more efficiently. So run company initiatives significant drove several the to

First, interest initial so we was good lagged, but regions XG identified where markets. is availability example those service offerings exited the high, this. of Japan a has geographic we of

disciplined focus stock in of carriers device a and new slots. few with we are pursuit our being any more programs will Second, only on premium

the well Given as R&D sustained opportunity, margins we sense. of relative think level good our as costs and investments to certification enterprise lower makes the requisite this high

spending technology and head third, external our have count companies And reduced infrastructure, also globally we many done. have as costs

So, enter we from $XX eliminated approximately million what in we effects as XXXX. spend these changes did cash cost have structure have? our In annualized total,

with QX over XXXX and has This towards the the of management the and progress build a top this been we I growth business balance have the significant flow positive taken, flow our in in want address sheet cash actions to team upon the achieving remainder we're that expect high-margin of and milestone. important priority cash year. enterprise the cost during expectations. Third, reach and we to pleased our Between progress

customers dozen the year in In the and we sold ended X,XXX well over to new a enterprise quarter total, few with customers.

margin to of our software, which over our overall obviously enterprise contributes QX Importantly, in sales improvement. included XX%

last they our products to customers of to address XG. transition Let transition carrier and me is that the reduced continued The as quarter completely decline XG also hotspot XG XG driven by lower sales revenue business. our in with from purchases

the in this We about have talked calls. couple last earnings of

carrier XG had during the we hotspots the XXXX, Qualcomm to variability which our in latest added year. In deliver addition, some chipsets, upgrades in

on focused hotspot a level new business the to segments. normalized business has Our only

market couple hotspots, customers, introduced enjoyed for last the carrier the X matured of Over years, we products. has they've with some other the competing spot G as but sole large

product our now with hotspot the by while those market other volume hotspots. customers, other So, is the flagship carrier segments of enterprise choice for is large shared

mix the gross line, far businesses just to I drop of on a mentioned. margin lower the dollars On top improvement due impact profit is hotspot driven our the substantial sales in represented less the by our better higher-margin

that three was those the areas. So, progress on

and $X revenue a Next, generated adjusted of provide me of $XX.X EBITDA In million an loss we QX, of million. let brief summary results. our QX

enterprise deployments. continue we to see Importantly, to FWA products convert

to initial pilot important begin over for small into very devices, XX customers purchase a or who full-scale is note products with thousands often deployment with time that locations. progresses FWA It to hundreds which of five our

for been a deployments. now pilots have the we We year, seeing over little a in convert to FWA enterprise business are and

is XX% success helping FWA new programs our large to put Contributing three about the are in place of all Our who our FWA US build FWA this for new we business revenue. now the with in carriers us go-to-market accounts enterprise market.

end We enterprise previous of calls. in some But customer examples wins restaurants, retail homebuilders are the SD-WAN multi-location new and markets have construction, and space. in discussed

services for traditional material our compared mobile depend enables on Utilizing for applications monitoring XG The are connectivity and that uptime to broadband sites. real-time customers side. sector they for surveillance construction ISDs. OSHA to tracking, that and establish that compliance workers new applications XG, job on homebuilder reliable AR/VR, deploying for the solutions can this when instantaneously Our establish include

They our Fortune products to grocery smart home enabled support by their customers and One footprint we continue our our to these another XXX a retail initiatives. and applications chains, space, In apparel. agriculture the new of expand Fortune farm to existing early adopters exploring XXXX addition homebuilder. QSR, supply are now with is spanning pipeline,

retailer X,XXX stores pleased are major in off-price a alone. win the roughly We to with US

solution who their SD-WAN the won the customer as SD-WAN East we shipping We products space, in our in of customer offerings. In large will Middle QX. begin part out service rolling to this the is

deployed are the customer. XG we enterprise networks very products already edge units market this cycle the as in for of Inseego's are customer's believe of are completed. changing as to We've FWA, is rapidly We early thousands platform. part virtual shipped but this adoption

have past over nature We year and has this grown evaluating pipeline in the the the solution. seen how customers of our our

With that, let over provide Bob who me will on results. to more QX turn the our call details

Thank you, Ashish.

earnings that Please a non-GAAP Let of comparisons the Please fiscal non-GAAP on our me for in details additional was metrics now and note are completed the reconciliation. forma quarter our of July GAAP divestiture review on basis, pro Ctrack XXXX. Africa, adjusted fourth refer the for South to which results XXXX. made all release to

was revenue The legacy reflected lower from decline XX% sales million, $XX.X QX down the our products. year. of hotspot prior primarily

XX% FWA business over prior of grew year total revenue our the As and period. XXX% Ashish mentioned, comprised

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

for total the revenue accounted X% year-ago from of XX% revenue and quarter. increased Software

revenue solutions our same Fourth million, quarter decline down relatively by $X.X driven and IoT primarily million, by solutions continued flat, of Enterprise & our both year-over-year. last sales the Mobile uptake reduced offset Solutions by was sequentially revenue products, was enterprise customers. period partially SaaS hotspot of was XX% The year. $XX.X from

from the Gross basis quarter XXX period. XX.X% basis the and from Consolidated XX.X% in XX%, prior was in points up QX the prior from Mobile for XX.X%, margin XX.X% and XXX in XX.X% gross in points last margin was QX year. business IoT and year up

mix on gross comments, in As meaningful Ashish to attributable margin, enterprise of revenue. was basis, year-on-year in significantly wireless the his higher a a improvement fixed and a alluded sequential to

the revenue so reduction did Recall that contribution component gross not been the associated products the post-pandemic hotspot higher negatively materially dollars. profit margin impact has by distribution in and on costs, the our impacted

We trajectory slightly periods. leaves and continue here. fixed to up the XX.X%, our margin margin segment which compared sequential Enterprise expansion margin of margins year from gross XX%, to in exceed the gross and us further SaaS sales see our prior the Gross for was confident enterprise wireless on

loss QX higher $X in was year-ago the $X.XX than period. of the or loss $X.XX adjusted million $X.X loss and EBITDA million with QX non-GAAP the was in which million a an quarter share We per prior of a $X.X of the of in share loss per share reported $X.XX and loss the per million, quarter. $XX.X loss year-ago net compared in

was this the quarter do expenses loss going that $X recur approximately million we not Included forward. in in expect to

mentioned, expenses during our efforts million the identify As resulted QX. Ashish operating elimination cash has approximately expenses of in in to $XX additional

reduction highlighted quarter. last note annualized savings is to incremental we cost in million this that $XX the We

reconciliation For to our tables additional details refer adjusted please non-GAAP in EBITDA results, and the our press release. on

of equivalents QX cash million. and restricted Cash, end was the cash $X.X at

payments suppliers payroll, usage of cost was by one-time our made timing efforts. reduction impacted year-end to expenses cash our the and Our related to

in our expect of this balance As in we the free Ashish increase current to point as near levels beginning generation. cash QX trough inflection we an flow noted, reach cash year and

expect cash flow We XXXX. fiscal in positive and EBITDA

FY reduction in gross over wireless in from million of in fixed realization business improvement throughout in a mix continued enterprise outlook recently Our margin the XXXX a achieved implemented. assumes and steady of XX% full the also $XX our costs increase in year, QX the XXXX

QX back quarterly of with providing in we slightly half in before higher sequential see we revenue the expect business, usual specific the declining not the guidance, trends to our QX Although seasonal year. are to from ramping

cash and taken flow will hotspot a XG of our business, at respect partners transition away conservative carrier EBITDA expectations, our from which to formulating we've In particularly to pace the our view with products. continue

the which our our and quarters said, gross or scales, may revenue where restocking volatility That of be create at being margin. enterprise pace reported the there orders business timing in could

highlight year. they the to these should over course of endeavor will occur the impacts, We

back closing to me for that, his With it let turn Ashish comments.

past Bob. tremendous Inseego amount progress transforming the over in Thanks, year. of a made We've

efforts as to reduce clearly expansion Combined potential growth. drive generation. sales Our FWA XG positive demonstrate flow our QX inherent we our are with our closer and enterprise goals inching cash our business results the costs, to in profitability increasingly for margin

forward questions. your for you taking We Thank support. to interest and all your look

question begin from Instructions] Scott We will Capital. with Our now Searle the session. [Operator first come question-and-answer ROTH will

Scott now ROTH Searle with Your open. may line go Capital? You ahead. is

XG I had the mix thanks customers. XG quick the but sales mute. sure I guys, and wondering, I you for a earlier could missed on and it percentage not call, of it questions. XX% breakout of your on then Hey the apologies. if My taking if give was I'm

talking good you. Scott, to Hey

sales, second question. So we over representing your three answer XX% customers had in to

-- Your the which first were XG overall say XX% the say sales in question, XX% revenue, of of the probably were range the the of X% hotspots of revenue. would would approximately I I

terms of C-band coverage. to past, related starting of had There And arguing Very the Ashish, the it's improve been moving delays in right I FAA, in in are the That direction. Okay. ongoing helpful. now. in the but with like know still the some is issues rollout some to

what So, aggressive start I'm wireless bit fixed front wondering, the on on pushing of front seeing the terms that that more visibility XG to for in C-band? access a is carriers

three these carriers. who've of Many to is go Hey years. beyond our Every starting as X.X now Scott, for mid-band the been And It more has holding all starting look question. and and seeing day, customers Like, we large pop more progress that sites is few better. from what you lot now. a been past to solutions trialing more up we're up know, the are seeing piloting coverage year, on enterprise market, one to great sites. are a

is it looking definitely So better.

on was bottom in being Obviously, right, of next XXXX, I from gradual as that our revenue huge of that developing. market market, But And for hotspots. going will quarter where us is see how ago, the develop. of a the transformation the expect a came first a be a new QX it of that, company, year say this the we several from market inning, would over hotspot build-up to in is company quarters XX% FWS still that we're you

jumped in and This margin. quarter, uplift FWA the that obviously, big over revenue hence, was XX% which plus, the And less time, constitutes XX%. our than the of business now

are super So early is truly, signs a but what in positive. transforming market, very is company the

could, or flattish, as I it you're historic was come give you're of if SaaS tends to hotspots starting have little that strength wondering, sequentially, sequentially you. you I'd bit idea the well, an build some imagine as if And some a sounds by terms enterprise Got seasonality. stayed momentum? But product us there enterprise of does in to expecting could probably some I mobile category. down there FWA, is like seasonality.

gradual revenue to Yeah. see side, the side, mean the improvement. I the on continue to FWA on SaaS on we're going side cloud business and

to that. continues be effect So I'm And a there. the seasonal. lower see not and I is you that, side, would seasonality say generally so forecasting QX Hotspot would on

And so would improve. start second half the hopefully And the to first that's half.

revenue Having them been on away we've revenue totally to that as said hotspot that the down this revenue. XG a the XX being from XX% all revenue we've X% forecasting that quarter, of from this business in that's hence, and go to sometime mentioned will us. for happen months not reason just that, the look, But of ago, side, before, and the literally year. eventually our wind And went high-margin

so we're that revenue. we'll really our anything take from And while that customers, comes not on opportunistically counting lead

costs in quarter, you. normalized you lastly, around OpEx be I the number there going sure if $X is in somewhere, to there million I heard costs I'm recognized was terms then that get well, if think said as out. just basis also quarter. could, hands in And in the annualized I of $XX about what trying you've in forward, million taking a Got but on of was an not talked And nonrecurring fourth to was million $XX there going my

that you that? that in sort rate So closer to does get what just second cash as to getting Is million? positive number what charges, hit under Is Thanks. quarter revenue at was And that flow like level, breakeven XXXX comp to $XX out cash pro to then of then closer to your number and OpEx, terms flow I here? do net the of million – look if run need it forma. this of one-time I think quarter stock we $XX look of

Yeah. Scott. Great questions,

So let on the answer OpEx. me question first your

million. $XX for of piece that below in be right? pro the than $XX So range the QX, forma $XX actually said actually, you QX, cash the by was it, of million, lower million, In would it's QX,

$XX said is when of have close So like cost full removed $XX the overall, I we all QX we've like north place, to By removed would in million. from OpEx. the we in effect mean, million

and see So mix could huge the mix, change not in you change, that, to really not with need to mix top profitable. the going get to a going line we're revenue the margin with we're and

that, – million close I'd and $XX-ish to could enough that will get but that anything So on in even than be flow positive. like to say, FWA, to revenue number more would us more get obviously, it and depends be us lower cash

Got you.

Okay. Thanks so much.

Thank you, Scott.

come Svanberg will Stifel. Our next with question from Tore

You go may now ahead.

Jeremy Yes. calling Kwan Good This is Tore. for Yes. afternoon.

Just first on -- of margin here. congrats, all, the gross execution

order any Just a question in of that, terms of the backlog that we you of move can quarter commentary provide kind maybe terms for bookings in today prior through the as where stand we levels? us, trends, the around and

Jeremy. Yes,

me let that. So address

to business weekly have the work right? on of certain two to a business, about basis is continues our sell-through. off, the is, first then hotspot them is, pieces of that and the large like carriers base, business, we like, which and we So the works business, slots with in the way continues that So, with certain subscription like as XX% grow. as the Number piece monitor

we've hotspot here the forecasted; kind so in bunch and QX. hotspot rate that XG seeing in carriers so we dwindling seasonality as of of where in that's seen with large QX, a there's we second, that multiple lower launched we on down just XG QX and we're the saw XG And generation basically with run some switchover, business: new variability of had a one,

in rebound, say, say, some I business, not at continue grew our which level, right? although in lowest I -- at we and at significantly quarter. we now, know. our and would to continue if that, it So to, FWA models, the future really don't QX, business expect Even grow this we're that level right probably this improve the was would baking hotspot We point, you

I think we company. are a totally different

routes to that very going enterprise business, stocking distribution second coming different is going FWA to market. through now broad business, market: channel is carriers, a we're So two through through and and one to partners

would both are but of on and businesses, both those, QX. this would sell-through by, more I not by are second, the the health those strong -- much or And in the of hence pipeline both point either of I at really FWA business as they're say, the And opportunities. say, much the measured results backlog,

And and I you customers able for a to are mentioned little bit you. kind that three guess, think Thank XX%-plus provide of size Great. I you there? detail having us more

our Yes. Its T-Mobile -- the third Verizon. one U.S. Cellular. is list traditional two and customers now largest And are the on

the just back guess, access then, then, And question market. to I wireless Got going it. a fixed final

XX of next you Thank think it just any as that continues over driving you yes, XX where -- grow? the kind I could near-term? which idea of to you. months kind you said of in Do and the And, in that that to XX% kind was piece QX. verticals see of have go an

not I Yes, to the question. XX% that XX in quarter. providing our Jeremy, become And great months, guidance. directionally, revenue look, to But we're would to say every we XX% of next expect XX

that is right, I board, need second very FWA got And across So So customers mix healthcare FWA mean, after the now, city pandemic. to especially we've a efficiently enterprises companies. just would quick we're very seeing to these market it's -- pretty infrastructures, is which that a provide pipeline. look, horizontally, it's it lot economically and the across manner. We're construction the driven of technology of of and a a the great being by a right? XG the distributed great pilots. in And and all question -- become the verticals I much from say in there the your opportunity in verticals, many retail, to seeing board, new about to nature

Great. very you Thank much.

Thank you, Jeremy.

come Navarrete next Our question will with Instructions] Cowen. Jonnathan from [Operator

ahead. go now may You

out on additional in question there's can't the of with you guys Jonnathan pretty there or cost My have And for XXXX need in cost Lance. on that, first much that with XXXX, helped some are generate call reductions reductions could savings? levers no expanding up terms you Hey, or keep of are in can have implemented annualized those any more? guys. is, which margins how you hit following an on It's guys do where end you are you

Jonnathan. questions, Good Yes.

different So out. that the there we right, took of number are areas, a cost

years. reason these there's would mean developed over I enough. out a there haven't But some they enough. one was markets interest quick of for just I in of last one huge interest, where regions but of XG getting say, the So number few was geographic developed amount or quick another, the haven't

So of we've many out of gotten those markets. kind of international

focused. on number one, R&D focused of Number before that's of bit really to were not there's America those on two, based specifically kind just focus that Australia, and lot in markets extremely like chase we we've contracting on the a are we a here and slots North action that put the be where in where chasing little

So a big that change. was

I Europe, to And of of third, at number that New And I lot Middle remove East, did look would very America, the a all mean we whole Australia, from the of cost company. including a hard took reductions Zealand, company, the North say we infrastructure Japan. the cost

say I have a have would huge still the leverage we've in strategy we built. that that -- we built

not though that core right we quite forward. And the from forward have the very, and focus very So is top that quickly use do the grow areas the got we've we moving removed I in core and could to say with here. we yet, even moving quickly, believe that the business that's core happening the that, the were would very business can but the we expand the areas line

Okay. That makes sense.

a those it mix, quarters as can margins XXXX? of steadily each we expect throughout non-GAAP improving well four in remain to cost XX% assume that gross above as basis given the to reductions revenue is on So safe

above gradually just not mean but I XX%, I say, improving. keep Yeah. would remain

So absolutely.

have Is able $XX still, availability I And your give your Great. been it but XX-K revolver? take, in here, about million? or me. the to much for haven't yet, out last one seen do I so how check you haven't

that in it's correct. Yeah, That's range.

that do Okay. you cash just need you to Got given in feel the Do like of this expect no will you be $X quarter, that? using there's do or million you. balance that low

that's stuff for mean, look, the was very use the sure, and revolver as I inventory we have to a to that exactly perspective, is and That's we we chain working reason of just focus going our to environment revolver. what lead and continue we're lead take make it orders go constrained Yeah. which material, for. it a what put that able to in time capital the is all to that, still get customers procure the in from in these from put And use we're that the just right, supply some demand.

it. Got you. Thank

Jonnathan. Thank you,

Ashish session. there are This our for over appears no It turn like concludes conference any questions. Sharma question-and-answer further the to I would to closing back remarks.

thank us on and operator, updating Thank progress. joining We today. you everyone, forward call you, continued look our to quarter for the you, all on Thank next again. you

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

now disconnect. may You