Inseego (INSG) 3 May 232023 Q1 Earnings call transcript

Hello, and welcome to Inseego Corp.'s First Quarter 2023 Financial Results Conference Call. Please note that today's event is being recorded. [Operator Instructions] On the call today are Ashish Sharma, CEO, Bob Barbieri, Chief Financial Officer, and other members of the management team.

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

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

to that on are Please to differ and refer contained cause actual risk other cautionary XX-K, available XX-Q, factors website. described the SEC For materially factors results refer release. forward-looking expectations, which from on regarding a our statements also today's could in discussion Form filings please the to note in our section press

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

Good doing everyone, you, I hope afternoon, well. Operator. you're all Thank and

transition on As built previous plans rolled carrier for are earnings are we've data a out, needs. connectivity the XG and XG discussed to significant from XG enterprises as their transition out, is networks Inseego in calls, midst of

high-quality our achieved higher meet is that the on focus of historically. than delivering margins needs Our achieving products Inseego while customers has

goal flow basis. on positive to a free cash achieve Our sustained and grow is

and are made, progress that with think our a the step that regard. we've quarter in pleased positive first We was we

in reflect quarter results things. X Our the

most quarter, our is cloud-driven access in continued portfolio which our seen continued work to hardware wireless transformation And we over in First, fixed for. Most notably, the are that this customers our cost margins. software few second, quarters carriers growth done hard looking to drive in products past right-size gross we business the and have improvement have XG easily structure. our best-in-class and enterprise the

adjusted In is $XX.X QX, summary million. brief a of our factors. in EBITDA a important we and recent of the the history, highest of revenue generated EBITDA company driven $X.X couple provide results. QX This million me let by Next, of

grow of in significantly a as solutions drove FWA to mix and FWA traditional margins we software momentum have than higher better adoption increases. solutions this hotspot FWA products continues quarter. and and the software market our our First,

Our is of enterprise for revenue cloud software our solutions about quarter. this which and It noting FWA with worth our when higher customers, software margins. SMB FWA XX% benefits and further deploying rate a gross accounted that attach our business have

gross translated XXX increasing quarter, mix basis XX.X%. into points to revenue the significantly higher improved margins sequentially in This by

be margins mix, While there should going may based around mid-XXs margins some that gross variability new gross our overall expectation quarter-to-quarter be forward. on is our revenue normal

is our As continues time, room to here. mix we there improve improve from over believe to

year-over-year, was OpEx our progress reflecting company in our XX% more Second, lower efficiently. running the

calls, benefits the previous significant last second we year, this in quarter. to finally of fully in discussed took we have see actions we half the As of which began

about significant extremely have going are disciplined operating believe forward and increase. maintaining to We we leverage OpEx moving be revenues as should our

quarter, Inseego. cash flow an for which milestone this a we important cash slightly positive flow were From perspective, is

However, of to capital our we as from higher modestly due expect bonds levels needs achieve variability on would cash until working we in flow quarter-to-quarter, to we our quarterly primarily and payments interest revenue. due grow

this goal consistently to important that is cash be we flow and progress quarter. objective made clear positive, towards Our

This the was in quarter direction. step a right

Now our the let's a FWA about of little progress talk business.

continued Our services customers carrier see for this increasing demand quarter. to FWA

smartphone find of look faster if that carriers announcements North you fact, public you America, continues subscriptions. the traditional their large the than in In at grow will to FWA

than revenue ever. Our for and bookings stronger pipeline FWA are

very we signs is positive revenue market how the buildup the up. will are be seeing of While gradual, shaping

could more the this where the first In than had we quarter. we in memory fill orders fact, recent in is quarter significantly

solution fast broadband companies many them for from types interest The services. gives a wide as incredibly and of range across industries of FWA growing is economic an

many real customer we spectrum retail of other government, restaurants, wide industries, including hospitality, sectors. calls, previous use construction, and on discussed and cases multi-location development, a we've are As seeing across grocery, estate

of Our which growing enterprise is carriers, of direct channel in reflecting market opportunities. with in a partners pipeline demand, continues to grow ecosystem sales lockstep and

are we capture share that to optimistic are well a market. positioned We disproportionate of this

In XG is that positioned of in summary, stages early a we market development. in still very are large well

a underway with well will revenue transformation well a enterprise-focused scale company Our cost higher-margin is that into growth. our structure with

the a cost growth could irrespective disciplined winning on perspective, whatever lacked see develops develop and to from gradually, business market further. expected past lead the something we to a to any we going new We're of While investments are as attract margins returns. the FWA adoption extremely be are company will and singular market with accelerate, to beginning in market going due customers it focus and

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

you, Thank Ashish.

the how Before difficult of transition our in strategic I company market. adjusting company reiterate proud information, a important XG for we strong our EBITDA quarter wanted We've an I of to financial opportunity present are gone the and a XXXX. but environment resizing as the announce changing first FWA around again through technology to target rapidly earnings detailed to

from made of Let fiscal review for revenue primarily me metrics a reflects $XX.X release the details the reconciliation. on additional that of prior Please our to decline and now all The our on non-GAAP products. our was quarter Please hotspot non-GAAP lower earnings sales GAAP are comparisons note down basis. the QX first results million, legacy XXXX. refer year. XX% to

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

devices represented the all in cloud generation XX% solutions, comprised total of and are software of revenue our XG offerings, quarter. Next which

for revenue. of Software total revenue accounted XX%

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

improvement, onetime in were future Of expected did was XX.X%, points XXX that last XXX margin we to XX% Consolidated a XX.X% of from QX recur this and few from quarters. basis margin basis QX not in gross up points have in year. effects

margin our items, those in range. the Excluding XX% have XX% been to gross would

the Gross margin was the for quarter and XX% XX% from period. prior in and mobile up in year the IoT business prior XX.X%,

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

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

enterprise continue our in gross gross exceed our FWA which XX%, this trajectory throughout confident leaves margin of to our year. We sales us see on margins

loss the QX loss from was period. in up compared or in quarter was which higher XX.X% per prior the QX the of in the for reported loss million segment from per up of QX year XX.X% from than net loss gain quarter. million a XXXX. share negative non-GAAP million $X $X.XX We was a with Enterprise in ago an XX.X%, per share margin SaaS a $X.X Gross a year $X.XX adjusted and QX down and slightly $X.XX of in $X.X million, of $X.X EBITDA and ago a loss share

allow large excess cost reductions $XX pursue this believe fixed of our Overall, expertise As reduction enterprise profitability resulted these our market opportunity. were million. cost preserved in cost to important savings capabilities an this factor efforts wireless us XG quarter. and these and We in reductions Ashish mentioned, continue in to our annual

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

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

stood flow company XX growing to us and strategy adoption. for times behind your even will quarter creating extremely during has Thank months. we good cash that I'm to look for enterprise your create all XG stone a and past the to and free difficult was interest forward proud quickly focus QX and on keep one team you of We a Bob. with our the stepping within as Thanks, questions. our refocus that intense support. reposition positive taking helped the while

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

on the This know adjusted Could and but important structure, like you share anything takes cost for free is that be Nice mentioned else investors? and should you for I nice flow? Dan. cash you. and some maybe quarter would positive biggest Jonnathan puts the that EBITDA of given Thank quarter of the to you out progress. the point

kick and it's John, talked change one the to you. talking portfolio. our The product transformation in growth solutions thing we number we Ashish. the out helping point the new the improving in And last this quarter mix Good and that solutions And you'd cash in the resized big Cloud in FWA pulsing that started, I now our margins. is see and and are seeing mix that's would we better a the EBITDA obviously, the much structure flow. with cost in is improved that about and quarter in

the performance the good in Then have April? first Got it. the over you spill seen that into performance, quarter,

Yes. pretty the a Traditionally, driven business for of didn't we really we had orders I backlog a Like have that. mentioned which commentary have FWA. strong in by lot earlier, as into stronger with our QX customers, those a now in customers and of was sell We through in And different early orders fulfilling are FWA lot and carrier in the case, seeing orders QX. demand our on. placing process things are they're of because this we're on

than the out previous So many yes, a QX stronger started quarters. lot has of

choppiness this would that like Or I maybe ups to the the be stronger are one? see maybe first don't it say downs than some and going to -- Is year say we be following to progresses? fair want quarters and the as can

would guidance FWA, we full-blown the But In would products, trend in converting general, given side, is mix carefully as big multiple buildup depends a But we carrier and we QX you just the it as I growth the customers, factors next I say of said. is mentioned those of moving demand with before, quarter, step-by-step on take I any enterprise in beyond. to we I In providing the say are strong see are of how a the things. the want into on this just want would explosive pilots are then than into not and of rather -- strength some given and tread quickly mix because general, quarter. to what sell-through the it It's deployments. on given large seeing our we

know EBL been I lines? to in you the want due of conversations I have already if question, or there the call know it. last 'XX, that those along my And EBL want sense. anything extending the -- if December years to internal maturity coming you is just any makes X.X just That And about

this create been Board, our that and management and success. Yes. the we say, members key we yes, team move continue forward as I that and our look conversations internal with have will would FWA at Jonathan, mean there I to of

come [Operator Instructions] will Stifel. with Our next question Jeremy from Kwan

that flow. Is you remarks, I Congrats targeting for is the a to that, for you can quickly Kwan target? gross see the can the positive X follow-up I on This And question potentially your this mentioned quick maybe cash to the margin. the achievable mid-XXs. next -- get think a Jeremy long that to or -- on Tore. in prepared how you guess something In maybe it in be

a cutting bit, Hey, quickly you're asking can mid-XXs. off I little Jeremy, we think how like get you to but were

we be this move favorable some see right trajectory in business, as right quarter, would then more be throughout to any that. And XX%. mid-XXs. variability, had enterprise year, it are going And we I on could we now. drove might that say are I quarter beyond there obviously, that, as forward, given we more would at that some go but we in so, business yes, And we but this we now. say there onetime and that up are we're build And

seems And talk managing in bit a I or channel customers? your inventory forward talk chain had about nice internally. your how in supply guess It terms right like your and of a now? like it. Can you the can for seeing going you about maybe drawdown also with little what plans inventories the you Got you're you're

late we given material in question, the the had Yes, bunch we of 'XX time, to built up gone crazy had at What sometime times and a good had and XXXX bought was lead XX done Jeremy. weeks.

demand us. well going we're that converting building into this material We getting now and been for and finished of that's products with now goods the shipped, product. so think shipping FWA up those on We're a very I seeing lot have

yet we making on those will demand to the That's of of have helping semiconductor next-generation working swings And then of I and we're monitoring lot know, carefully and would products in in the place say that leave built other you had lead kind inventory the would sure favor the shorter build to on don't levels up. very are some a the late Those able take in general, next-generation that we the is, many in any inventory has released last see table. that industry hotspots. so chipsets, our on And products be lot year next-generation these times we now as a inventory. what's kind are we of not on

shapes is might regardless picture very customers. a on I on that That's you. the pretty Do I have customers current you is your of And up? going of is to on enterprise something hinge they're quickly they Or deployments. helpful. that Thank it. have this that mentioned a going to how a sense the guess Got environment? know something how spending question you from macro on macro are on lot adamant it your the question you pilots move and

Yes. Good that Jamie. that we're I would seeing say And latter, the slowdown. any it's question, not

customers, the that majority quickly. only to carrier on coverage thing slowed is building just their down And of over XG the kind last want lot In able the is But a about are fact, that's carriers, XX locations. to things as that very of the large has soon -- partners our of mid-band cover XG months. they jump to as

on And a And I distributed a transformation big that that would locations, lot time. of say expensive, it driver and today enterprise locations takes very for of getting distributed is into is lot broadband the hard and their and of large lot that these very for rely to CLECs connectivity. of they manage to lot a in it's given customers to enterprise of dozens cases different have get a ILECs all

or large their will think X get improves. Now transformation they greater We and them. savings coverage covered. cost efficiency This the actually all to of and that go continue X operational carriers that can as for provides stores

landscape question, then side? Whether wireless -- in fixed terms And of I it's enterprise seeing? Great. competitive one update SaaS on can the on your you or give with the you. the guess last us any you're what side on Thank

clarification, just landscape? asking landscape are about of type or a the Jeremy, which you competitive

Yes, competitive sorry, the landscape.

because ecosystem. entry, -- we've I it's to XX that's and there. team to been it. That's FWA us Got this it see expertise takes look, of the got, in strength we we've and of a long which a what competitor longer out competitors. kind by is lot these mean do time ecosystem I it's this break Yes, because Okay. to of large don't And say a with to the is develop. terms right? solutions big I you. small hard not match Got any into seasoned how our an it years, a to is very of go we've portfolio barrier who approved extremely portfolio. can would the to modem a complex figure takes pretty all to even then how doing get for them the carriers, know And got build

conference turn Instructions] question-and-answer over any concludes our remarks. session. to like Sharma to This back closing for the Ashish would I [Operator

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

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

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