Inseego (INSG) 2 Nov 232023 Q3 Earnings call transcript

Hello, and welcome to Inseego Corp.'s Third 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; Steven Gatoff, Chief Financial Officer.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. An audio replay of this call will also be archived there.Please also be advised that today's discussion will contain forward-looking statements. not current but expectations are on are statements company's the and forward-looking historical rather facts, based These beliefs.

the CEO. expectations, For like statements could in a and today's refer other from available which XX-K, cause that Sharma, press described our to please actual also to go results SEC refer our discussion to differ XX-Q on Forms risk factors to contained on Please the factors the cautionary are in filings, over would section now to website. Please note turn call regarding forward-looking ahead. release.I materially Ashish

Thank for Hello, Thanks us. today. us quarter you, operator. for was joining mixed everyone. a QX

our QX. our We chain product addition challenges revenue continue and in impacted legacy in extend will see to QX effects into of supply to which the declines,

you in see tightly. managing results, are we will As our operations our

profitability X be brings invest we about call. to us the a driving it's that, XXXX.With cover incremental a continue our made to what and in We joined joined us wireless excited Phil today we operations. this Revenue leadership brings to like a CEO profile industry joined our newly Chief and growth week around Board that as terrific with table helping created and skill Brace terrific the X on and set laser-focused past as you And finish will and I'm areas I'd the of Officer. Steven in managing to of expert. seasoned the and Steve Harmon do will role cash, growth.During Directors topics out meaningful Inseego the drive Gatoff on as CFO while team. background continuing weeks, additions several and of

QX a give of summary I'll First, business results. our quick

expectations, to QX results. about large the $X some our million our QX XG chain due talk mainly a out like challenges as we The and provide transformation We revenue Second, runoff and on close I'd solution customers progress below And company. that legacy I'd several to update full to results year.First, of into to EBITDA third, of the $XX.X adjusted insights supply reported FWA provide QX of revenues. the product of our the let's million. were an like impacted current

This expected quarter, demand was the not expected our demand our this be the better the model are than we respond products. XG underestimated ability of in moved and time.Given shorter increases cash. the demand our our worse model to disciplined to Earlier downside new for build-to-order sales. for million new legacy is a to than year, products, products for with in to that XG we our lead limited dollars than could of several And fulfill

hotspots demand, perishable half in the the of several and a including some terms we late Today, of a to this to were the portfolio. respond of solutions second that mobile, Inseego missed indoor deployment become the my to realize our progress launch of customer, FWA and that FWA quarter outdoor on our came comprehensive migrating the you FWA positive market a we the enable back product topic, delayed delivered large we due update solution hotspots, challenges product types note revenue demand, we While XG is as quarter, good missed in we second but as of our XG to couldn't this a and full like chain with targets and XG at cases, use Because to and opportunity. shipped cloud portfolio supply products hit QX, I'd In scenarios. demand which well quarter.For be the both towards results in end XG as a company, that suppressing has our summary, to will for both was the inventory. the quarter, customers this of consumed digest more our FWA discussion

As in decline declining hotspot XG for of distributed growing pronounced To early new and as The address backdrop revenue. market by dynamic use the disruptive and mainly network by spectrum new with years seen have most broadband due cases.While been quarters, anticipated capacity networks XG multiple adopt our the lot revenue investments for this new made a market a on-the-go focused and network more of develop, good taking enterprises sure the but is coverage wanted good aspect traction evolved make to the cost streams customers, our XG to driven structure revenue have FWA locations spectrum. X-part the couple to of legacy appropriately. streams, a legacy on sized we the we this against and mid-band evolving products to new we and carriers, we a capacity have solution last primary for carriers, time over is through was rapid their working of challenge XG with have technology plan FWA progress.First, there is

so of rate $XX significantly run we've removed costs over XX to million annual spend. over diligently the And from the last We've our worked months reduce company.

generate continue Our cost with with cash increasing goal of levels structure efficiency that profitable flow. to measured will adjusted EBITDA us a by is operating as free stay and enable to

the who so FWA market. our maximize ahead FWA, the leading we stay customer second this, FWA. initial the driving component and XG the to I'm plan help manage CFO Steven as driving to transition progress to for market. carriers build growth XG ourselves we our by To are profile initial happy team with transition.The accomplish join growth on very new of our opportunities to in as have we the We going can XG is drive are profitable align this profitability with

carrier relationships get We to to end the our long-standing able leverage are customers. to

profile. so provider, to the markets. end, I'm is Head Harmon up sales business, looking strengthen him can looking our recently happy as As evolve so the of our full very in our FWA in create Sales of new growth thought scale.To our and I'd our approach accelerate team Steve to Wireless He ramp Sierra stack what early significantly in drive helped go-to-market market companies enterprise evolution partnering XG efforts at positive a customer to comes enterprise.As that we business. to on a the seeing deliverables expanding, are to to with marketing and most to a and some CRO sales our go-to-market especially of share FWA terms a I'm have from go-to-market we forward Global can some of major final join are like news we engagements as on and we in the the has great strategic background, change

continues enterprise several market SMB customer base XG build to segments. Our within nicely FWA and

have online. include mid-band We reduce real U.S. enhance deployments insurance outdoor latest and solutions. last our onboarded costs indoor over nationwide customers and and We majority our as provides on market companies, more over agencies and network part XG higher companies using employees portfolio.Some WAN which and stream SMB a enterprise to also sites the connect is growth are our to our the productivity. build government and XX,XXX retailers, comes will these connections, believe to continue of FWA and of the to utilizing higher revenue primary The estate and quarters their margin, to manage strategy capacity of cloud XG new customers examples coverage more the X our distributed solutions

of revenue generated that, insights challenges customer on these my be that will the early deployments, I'd these until engagements topic turn some into like large being from to customers QX and the and third the call on some to are However, facing. today modest.With move we on provide

the term, We X factors. are revenue, some on signs customer headwinds we the driven near engagement. are by facing in bullish seeing XG in But QX FWA following

in knew we've was happen First, been for quite to time XG now, backfill with going the working XG QX. revenue some declining hotspot is and to hard revenue. this it We meaningfully

launch. we fully part been prepare through requirements product cover a for QX, launch there the window revenue, weeks very the in soft new while we The September. impact in was delay frozen full by came XG Apple in in that latter revenue couple customer with a got the is customer we product the after expected. late of new iPhone caused The hasn't a ago of was the later as However, of of ramp launched decline.Second, large strong, a resulting dollar than XG launching to delay FWA able

on late are in sold positive.The point So back QX while XG revenue will from due shipments this product with customers starting impacts the that terms will new our our of higher we large QX to track be third inventories sales QX, to is in quite be reorder. in we before customers the feel QX, initial some the is on they confident feedback on need in as that friction QX

disappointing, company obviously while to So be this to with cost our to past taken have below but back responsive continue in year. business more actions expectations. profitable is solutions these and be QX additional we ensure business, meaningfully infancy. comes we by challenges, Steven looks keep we the reduction month up early This the near-term this about insights these a in XG the the will FWA is optimistic moment.Despite of on provide which I'm next our growth believe some still challenges,

last enterprise X of FWA up the our customers and and cloud a platforms. signed over quarters have We on SMB lot XG

now forefront segments turn FWA with at many to through as of learning deployments have enterprise primary XG for gone customers We a over it this are WAN to prepare market.I carrier creating get of the will lot our in Steven. we

right I'll like business: on by we Thanks, like it. Inseego financial Ashish. you core now you of doing first, I'd help brief capitalize QX guidance and on start everyone. focused afternoon, QX. here positive we're to of on to details the on today. ensure cover what view opportunity results; with sharing Good to things and X provide what that third, share I'm at a on second, protect insights to I'd our the the and my with then X value; aspects shareholder perspective cover

on team off, I of in up the us. course, call bullish where As joined the path your industry on opening an ability working our product-related of and X Inseego. and efforts convert After overhang our has the by evaluating across a the the questions.First reverse meaningful Inseego monetizing our addressing weeks strong see make of prowess through noted, input and capital that at that's technology or unique the areas leaders billion move our wrap seen and already our should focusing translate starting opportunity into out one and it. capabilities, on of clear I've in a I'm so penetrate front this, I'm forward is the unfold uniquely that advice. we to engineering a to seek price execute to split, Ashish operator in X that stock and assets we'll, positions the near-term glad businesses. help impact really company. the and management time and to Inseego overall sits value.As very my have structure on level One, $XX I'm to stock stockholder TAM This here job, to portfolio

cadence think we drive our that focused operational focused And execution, a third, metrics inspection map on on sales our partner in we're our together that as business I'm evolution to and will a to big now improvements results.I'm metrics focusing I our make Harmon fiercely ramp and looking in total let's revenue FWA Second, execution $XX.X to from term our growth look to intermediate and XG XXXX a XXXX that, the Steve management plan. look as by our performance road profile and and in having execution decline legacy from drive QX year-over-year at forward.With our runoff. being construct with QX with the QX of million, and the particularly for strong strategy results. and profitable working going driving I'm of came him X/X driven difference driving on forward it's at a

portfolio. XG.Beyond prior quarter While quarter the is the generated dynamics with revenue QX of XX% for QX revenue quarter, in revenue than ago. the other business positive not its mobile was offset just Unfortunately, our in XX% most the inventory was supply a core chain impact bulk there FWA and X in business, XG line margin XX% XX% business increasing of FWA since FWA up a telematics respectively. revenue gross margin that our were in at growth organic it the year-over-year. issues to and in XG A years and the total and steady basis, FWA top inception our products nearly an QX gross on the and and growing of record year-over-year hotspot the to positive declines the revenue of coming non-GAAP challenging some delivered enough on the our in QX,

had partners in modestly down was our customer the a number us. of revenue This one a subscriptions software revenue QX had Solutions Mobile as small of loss Our carrier reduced that for in business continued gross year. moment.Our at scaled larger effect, not I'll level margin a channel and that in impact this VAR on a has tepid but get QX a to unfortunately

that this As on Steve growth is a move new business XXXX In resources longer term. from prior be should percentage be to highlighted to versus benefit trajectory Harmon's to now may is meaningfully but mid-XX% intended believe of in We we've Ashish rebalancing leadership. non-GAAP a baseline relatively will from multiples gross of and higher that margin from and The gross discussed, area XXXX. order.Moving should a be on calls, revenue VAR perspective earnings expected quarter-to-quarter, basis the it short what driver our higher margin. around the in from low

XX% due mid-XXs topic product these drove of That large macro taking The non-GAAP at manufacturer from materials QX margin, revenue, marketing reduced on based far excluded of aggregate amounts like prior to QX in lifting expenses, revenue continue another that in tonight, coming contract current in all value. cost gross aggregate a margin updated and margin of and to the QX at that being protect the end forecast dollar calculation we than helped as dynamics wanted doing XXXX we we positive more capitalized by first us result percentage and improvement also in the we're partners. company elements a the hand these QX managing our quarter carrier of charges to years. the and of that's are products a the inventory filed dollar to year the spend to mobile at materials manage on some in to on and stockholder In from inventories The level, deliver sequentially we're QX and we disciplined XX-Q at and discussed was to recorded result non-GAAP on half QX sales EBITDA decline our of portfolio the our low-margin see a in the the part EBITDA.As a of QX move looking talk related amount estimates from a the for as in my adjusted adjusted our customer. reserve to moment in of X again hotspot booked The I'd XXXX so business, was perspective, carrying we operating older there XX%. and the second sales combination At values With total while the lowest of a was R&D. of finished raw the our to GAAP relative QX. year's as QX our quarter.Spending spend spend. million actions in are reserve life was COGS reserve $X gross that gross across of a total, the took million.With to XG costs in in QX the goods, what of to today first from non-GAAP a largest product now that, XG lower mix, our areas approach QX, of respectable For on $XX.X

XXXX continue into addressing flow. strength costs the adjusted we we're cash of we're delivering the take that to needs, continuing of so business go-to-market from head EBITDA make sure As in of to and position out our form growth and free we a profitability

R&D improved where focus of and strong revenue and of and but $X board removed combination predominantly we XX forward with the able and last reduced and we made we've the total, we across addition and and structure the near-term to were capability, this see in have XXXX, in the a quarterly spend. customer efficiencies spend, outside cost of further a spend costs. about In in to internal team company part production going just million program further generation.You'll aligned trim days, that first investments have In XXXX previous actions the

very current up of that, topic some shore is will as current generation our third financial profitability While it into timing to marginally that the profile going much far and the will let's only our in be and this implementation, turn the in presenting QX, XXXX.With helpful the path QX so challenges. given cash

off about carrier of today, transitioned quarter. XG mobile we've this As talked one customers buying largest hotspots our effective

And so that of product line is lifed. now essentially end

our nicely we XG FWA past dollars past the have not fraction While large decline hotspot is legacy million revenue known XG enough now seen it, where of $XX growing revenue now our legacy excess per the around has planning QX. in to have mobile quarters, been the about in aggregate.This of not-so-distant it's is yet in and but new It XG in decline squarely that in few been the product portfolio, the quarter. was offset a just

QX internal our And below so considering this, looks meaningfully all to expectations. be

managing As such, with current our to the range to $XX some drive line, and hotspot like with investors restocking first million issues. for quarter inventory top being to around this revenue guidance what we're no quarter.Starting total we'd XG provide is in the to XXXX QX and fourth million, the through of wanting $XX be the anticipated revenue seeing, of with transparency

that, call EBITDA, we for QX to XXXX. our and support, deliver can our We're monetizing closing, cost glad open quarter.In for and we're and execution quickly of responsibly Operator? to of some appreciate questions. and in effectively XG the savings $X.X the revenue and us.With $X maintain we alleviate any as addressing in For in recent the we we your confidence our initiative, focused the for plan helping time range pressure profitability, go-to-market the adjusted profitability, spend see have so we to we're million XXXX million albeit performance on the continue that to business oriented around managing front driving opportunity

Instructions] [Operator Vitanza comes Cowen. from The Lance question with today first

I to of understand Let you you said. a XG things, in couple just me start to Steven, try the hotspot revenue guess Did with -- I I expect you say think quarter? X want fourth that that

amount. Very de minimis

amount. de a minimis Yes. Or

Yes.

Okay.

Okay.

end? then like hotspot of that more in to been and So is that we've XXXX maybe there then guess the a -- sort the suggest ongoing, that's so XG there that's is -- that of -- an glitch additional -- come does I a couple the was runoff get contribution? we quarters Or

No, it XG the Lance. This for it. hotspot. is is This

This is it.

Okay.

Okay.

okay. Well, Okay.

-- okay. then So

on XG business. just we So then the can focus

guess I is -- Steven, I there there weeks. I know question So you -- X the and been know, don't you've if only

So I of are you with you get associated as get like sense what what But really do then costs, the kind fixed those margin basic it. of expect? of economic have costs I'm contribution variable the yet we trying proposition XG a beyond from And you fixed platform? sense incremental for as kind a the for look revenues do cost ahead. to the just of get kind kind

it Yes, I part of business. crux and costs is been it's have there's that the I've amount a we've that onboarding. time costs on great you're exact that the question, news should decent variable have a good what spending the one is words, controllable of of and In of things out. that pan The in we been as other and saying

control as you grow and perspective, that start for so to in when you be that pressure we a B, from that step a long-term spend steeper in of contractor will the at profitability example, are structure. more should outside product of So A; a exponentially, there's there's scale your more revenue can cost function can such facing fairly see and to we that programmatic labor that revenues costs out cost we costs than curve second now, near-term immediately.So structure have, you'll we were that, and revenue point, variable, reduce it

So you should get an expansion in profitability.

create very with is for things I sort hear that guess high a Ashish. routinely are, delays the for plans? as your I competitive customers and of very -- the situation I guess, delays you then of of forced you Ashish, the But product you product they did are from good. customers? we I one relationships, how that unfortunate did would guess And does discussed, how did the they other relationships of the Or is guess And technology that -- kind would of that kind how to level that stable where key what of a some of sort you the have describe standpoint, your just make see?

Yes. Good question, Lance.

say in. that our I in the we are slots really product would So is preferred

facing inability in are quickly this late During supply One dynamics. quarter, up June. the to demand chain supply because we to was due challenges went I product X the very would say, different the

of So we in for which lot then the we couldn't of from the -- headwinds is shipped and to a creating some mid and the lot product in of QX. between supply product first the half quarter, a quarter, next that's quarter, late

delayed got in product, There's with And when dynamic. perishable through mean and customers hour. second a feedback because very is fact, working are the soft customers that came delayed I there We're end some at in the eleventh on new it. launched because is that, one from And is additional could have that's customer. the we QX, have.The the diligently launch positive. requirements the impacting demand there mean, especially we -- So hotspots, I the dynamic again, that with some one ship products customer. other

So product like in, I demand the we the preferred is the say in are would up, to slots are sum perishable. it but we

result I really actually other They're the the are are ones, we're It of saying not supplier. weeks driven going oh, doesn't at But to you're X get you. of like, it another by I'm customers. customers the to losing with And what late, hanging the -- so you they then this. delays is, a share guess trying are some sounds market sound as are like like

That's correct.

out a touch just about early MD&A? have And just the And coming does of around the next maturity. converts my I'll along over liquidity last just time. do be in have you I'm of is you I next sheet. if unless anything on lines? balances then mean about the expire the we balance as over one, doesn't know the the months, things. but it to Number obligations, the start sort couple question I don't the December, recording But guess, here. wondering, year And then debt warning that of shortfalls Or ABL, liabilities you'll XX hand before XX-Q to sort thinking maybe until Okay. that the baton those But current to yet. worry any section of wondering liquidity if that I there then have I'm either possible you which until you of a for some XXXX, not mentioned then Steven, prognosis extend that.And know briefly, at obviously mature the least but May this gives will

spring plan how better? the of converts Or is we about to -- momentum is the when little kind should presumably respect until bit the with operating So think wait a momentum the that? to

and glad important Really we're asked questions, equity because obviously you meaningfully Yes. it's to good and material value.

spring we So the waiting not until your to last The is thank answer manage short situation. question you. are on

the on We are convert.

-- engaged, relatively are group some actively been to we're convert We it's group whom have them and a of that a on small looking have on manage with and we're holders through. of the some Board, our

So are waiting. we not

guess taking good facility, the -- I capacity. and is cap structure.To around aspect really important short-term points, your ample an are that and the which have nutshell it is care of now, we we earlier We are of liquidity the

a is do working facility. we It true feel not borrow. our a ability capital So on really constraint to

they large customers awesome, this they very pay that really like quarter. have sometimes did carrier We

of lots have cash. We

longer. take they Sometimes

capital where that's working comes place that facility And really in so well.

view on facility that are focused or not our that, an waiting not that. convert, is either sense? longer company, and for which nut on, Does issue I is the are we is think make for really we bigger term term. short to that The focus the

Yes, luck. it of and much best thanks does. very And

Thanks, Lance.

[Operator Instructions] Tore The from next Stifel. Svanberg question comes from

to that just any This for there The little guess a fixed on whether or SAM is wireless carrier, guys? any -- strategy there SAM the any is potential requirements maybe bit Tore. just deeply you into access are or Are the because the side. of the possible to trying the to first upside clear delay? a shift calling it's question, the into new a smaller in I more behalf picture I'm there the of on delay product, indication the the for larger -- for digging this in change get in maybe Jeremy

as not a Yes. customer. the mean relates of to I case. this specific it it's Jeremy, no, particular the requirement network it's very

that change it's the pointed doesn't So very in market really for It us. fashion. broader

net And -- the I net to guess, know Great. added the of I adjustment non-GAAP income? are mentioned like Is XX% of $X you non-GAAP. up when not the show non-GAAP it of guess that you is any isn't this there because show that moving back, reason get margins mentioned and non-GAAP why you inventory won't the I gross if the take fees, they're million But this in income inventory this out -- so looks sort in these costs excluded maybe write-off from -- XX%. financials. order so we

to said, Yes, out get XX.X% for purpose. and we we it of to that Solutions recorded how it EBITDA you that's out line to of the COGS pulling made [ a point of ], And the Mobile will as specifically come it.

Got it.

be I guess, of, guess, on is any, kind back going forward Or end potential is I And charges? Okay. impact there there going from of it? benefit to for these the a any

there part. any Is on what I forward? that couldn't Is was benefit first the... -- hear that

back of can now, is recovered? there be some that the charge chance end, on a could I guess, some this if take Sorry, you

in bluebird And that much there's obviously sales months so not charge But to we've what bluebird reserve. we'll essentially a raw P&L with on upside. that's making see is positively, the a a of forecast like not the now and happens sold really mean something clear to not not inventory, based the it's It's just we're what and and there's and materials upside, a okay, say, inventory then planning disposition break you looks and I absolutely. and good forward we or destruction charge. so yes, a why well it your on is we have and you point, if Yes, It's able a reserve. how be some amount, will going take of last today a or XX things inventory. things

Great. And questions. fraction million it. in realized next of to QX see coming would on year? maybe fully just something Got then then OpEx more And Can maybe in that's $X X be like QX? that fair One say it a quick the that we of out. be would

and full based the on will that's it Yes, part on. the exactly of benefit be QX just in fact in QX, early then A it's November spot right. that

dropped the Got it. receivable would cash working late with went the the last was to reconcile surprised in shipments which really able shipments? question collect looking those And million. what nice kind the Were on a quickly you your on how see happened -- accounts I we be Is quarter? just side. is that of bit, And quite that down flow to there? capital at $X

and X exactly we this that large that a quarter, the said quickly to we or we happened. the what And customers have That's We sell side on X -- we through. table, very stuff. as lot of before, had of other carrier on paid

period time. not We'd tremendously. that improved much obviously nice to DSOs an cash Awesome, improvement a of a It's have, to our short large dynamic rather earlier. collections. We cash it's of it's in have right? a so have but had And very -- bit anomaly

And in so pop see huge a you cash.

it. Got

squeeze basis? in. it on have or flow cash question, breakeven Do for last you adjusted targets I EBITDA one if a free sorry, new could whether And

maintaining on our of and commitment adjusted Well, focus in our EBITDA. the profitability is form

and this also an particularly adjusted as flow. free we important head focused generating on metric to next into quarter We're be EBITDA exit of burn year for -- So that's EBITDA us cash the positive. cash and

for and for So us we target set plan out a as that's ourselves up QX.

Very good.

on. Thank right Good Yeah, questions. you.

Jeremy. you, Thank

This concludes and the our Thank for today's concludes attending question-and-answer presentation. session call. you conference

may You disconnect. now