Inseego (INSG) 9 May 242024 Q1 Earnings call transcript

Hello and welcome to Inseego Corp.'s First Quarter 2024 Financial Results Conference Call. [Operator Instructions]On the call today are Phil Brace, Executive Chairman of Inseego's Board of Directors; and Steven Gatoff, the company's Chief Financial Officer.During this call, certain 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 Investor's 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. These forward-looking statements are not historical facts, but rather are based on the company's current expectations and beliefs.For a discussion on factors that could cause actual results to differ materially from the expectations, please refer to the risk factors described in the company's Form 10-K, 10-Q, and other SEC filings, which are available on the company's website. Brace, the press regarding to release.With call to to contained statements turn refer Inseego. over today's of in that, Phil also cautionary forward-looking note section the Please Chairman Executive I'd like Please go ahead.

you, pleasure be a X with here. everyone. cover to you to operator, today. and like Thank afternoon, topics It's good I'd

I'd to give the results. like you of First, QX a quick summary

current $XX structure. quarter like and share some $X.X focus and was over Inseego. view also some And QX capital third, solid FWA and a to guidance our above high-level call expected I'll business. our XXXX by million, I'd better Q&A.QX expense. EBITDA I'll than higher in Second, by of we'll ahead. for lower at and in on came which the and areas the operating our with then came adjusted some provide thoughts was quarter Revenue was at wrap million, margin gross strong in driven turn up Steven helped to year-over-year growth

capabilities. which the base During program, new and channel company's of an our diversify important launched part expand go-to-market a quarter, sales starting revenue organization to the is the

company We a subscribed see develop are also carrier of Tier opportunities already customer. renewal secured X management there.Finally, starting significant major the a and to its platform

for As I and company the the focus structure mentioned Board. significant on the a last capital call, addressing is our

improved us is cash, press business expensive more in financial the termination with our which, the release, prepayment ABL expense we While April.As we subscribed noted along a million to with the renewal, note, on and company's million particular the allowed that work ABL meaningfully. $XX in $XX still the Of interest decreases ended condition the of in management than much our give repay the platform do, solution. us have results to confidence there quarter

the in convertible terms provides how to debt, also structure capital will working financial of on capacity developing are notes. flexibility and and us deliberate, held the to approach our with taking legal secured our majority like The notes we with engaged that a and of other existing give methodical closely are The advisors. capital convertible it and structures, us an ultimate the solution. is we now Board seek Importantly, entertain acceptable restructure we are

about coming We will over briefly to keep identified turn qualified I'd progress. we robust to have we our of search investors been that, just navigate CEO thoughtful forward, updated structure make as is the the at Having progress.With the a continue growth considerations quarter quarters profit. and continued we interest the the number outlook to capital has and candidates. The like said being we particularly as for that, for important revenue moving I are talked in about.Looking business,

pass I'd that, day any space in based strength these questions a work minutes.Right the I'm the and like of With to happen. roadmap. at like take few every to who to and software both a good the as of back we business product beyond the new number our seeing in and also exciting looking mobile building are are business.We FWA rebound half starting we're Inseego I'd the things MSO glad on the a call and make now, thank of our for see opportunities team to demand the We are carrier over ahead in Steven. to to year to the

Good things with Phil. I today. covering to look X forward everyone. you Thanks, afternoon,

through financial take the QX results. you First, I'll XXXX

QX. XX-Q we And I'll to Second, the filed guidance address provide that's our in business and color rules third, tonight. I'd getting accounting our that some have language like on new for some require the

performance in sequentially quarter. million telematics to revenue on up contributed revenue and wrap $X.X FWA the million. QX better management X% subscriber offerings product or a let's sales all came in performance execution guidance growth than noted, our results. by we'll your Overall, to sequentially higher year-over-year and demand opening and the that, platform call above Phil anticipated Total our and $XX the questions.With general in both in start at in more As course and uptick than of with

As we QX year-over-year of demand margin the in the of previous came higher be growth the our we've higher life products.FWA mobile of to constitutes in product uptake also on XX%. in of down hotspot in talked from about carrier product revenue, hotspot up the revenue saw QX XG about on X/X expectations quarter in company's drove while nearly same XX% of revenue previously, QX carrier growth, business of good the that transition of XG FWA ahead the The quarter, now expected XXXX. end mobile

and continued demand in the as revenue came mentioned, at business I and other services quarterly good the Looking of revenue, expectations highest at ahead in ever telematics its on business.

from came mobility In first basis. X continue began while margin. margin the deal and the the the gross growth, among subscribed going our quarter. addition in on expectations onetime percentage QX.As SaaS XX.X% and we in at highest margin also by at signed pleased during business higher us one Inseego profitability on that and were favorable with to in ahead was provides revenue services was like of proportion reductions efficiencies increased other components the forward.Looking over in in next Sequential lower that from with revenue prior and mentioned, we in expenses, operating QX X expect up sequentially telematics This expense the quarters came quarter. in of investment to revenue executive gross of expectations. depreciation manage and contribution growth onetime years non-GAAP gross to our QX carrier came partners a and FWA with don't line we new in subscribed was QX, a QX partially for in were non-GAAP in from and on and costs was the by in amortization Phil a and and quarter businesses.Moving to R&D the QX in severance on G&A offering and impacted professional QX offset as some April key our level to services a Product items. rebates, benefited X pickup margin It

adjusted continue We favoring spend for as across improving the nearly a and turnaround in the $X.X from $X.X be X% for facility QX, March our adjusted performance more that while up to disciplined paid credit generating able far managing expense in to end first QX, driving more free employees market-based expense are voluntarily a increasing here that $XX.X and QX to years, return favorable company's of such pleased company's no at quarter growing in differentiation-oriented revenue time performance, the and of bonus accrued EBITDA.Wrapping operating fifth the with April. business.Putting our employees. all spend.Also consecutive paid.With flow, year coming results organization, higher group sheet, our approach together, P&L ABL drawn as focused meaningfully margin for arrangements in and had R&D at we're than resulted million this to revenue and and incentive anticipated the pipeline in and compensation off the positive EBITDA the take the of a to spend of terrific million, so balance QX contains million sales and overall cash at end, the facility coming several expenses on we incentive marketing terminated plans XX. mentioned, And in or accrued Previously, Inseego's at Phil in operating profitability, for the was we improved of cash note

finance subscribed the that combination working to rules and needs my XXXX of some second payment going to outstanding our notes. the in the our a Additionally, relates in the that's that's on million capital call forward.With on and getting liquidity financial has like XX-Q renewal going company to filed I'd to hand that, profile upfront to move accounting improving the convertible $XX today with provided our our topic around language be new out April tonight

to without be positive. say, rules that are our accounting Phil in position XX-Q relevant restructuring noting being that stockholders refinancing restructuring notes achieve being language a refinancing fairly that's notes.With in heard notes, we're the and going in see over We thoughtful profitable the and typically May quarter. that to in our this discussion revenue, EBITDA X go cash we basis. operations. improve for while that's outcome XXX% required financing we stakeholders there how referred one is Inseego our We're liquidity.With positive the methodical on optimized the near-term you as of uncommon adjusted maturity cannot and an XXXX, that, turn product on to year now an accounting QX for free what we're in including move As the disclosure, be engaged need concern continuing any with forward shouldn't convertible about wording refinance of and dictate we the let's bondholders and restructure drivers our in topic out we accomplished.It we're And because include to current and flow and higher revenue On assured the are technically don't QX. we to third desired will

carrier one some customers. structural increased strong as a of First, perishable at demand carrier for products we're in-quarter our demand as mobile of promotions combination our seeing well more on

driving in this, a flat non-GAAP relatively program, support the increase revenue QX providing percentage mix the lower QX traction is re-launch in glad high combination and the QX million. Ignite.Services we're and by of additional pleased in we're operating In appreciate so several with results margin from of and greater non-GAAP and XXXX. Second, other expenses QX be and QX.With over the million of subscription growth growth is seeing the $XX offset Inseego we all following at margin be to adding in an that, the renewal SaaS profitability subscribed and to Inseego range $XX QX from closing, revenue by we're call positive the and that's to we expected are is million on open rebranding also million expansion FWA for services in of revenue margin continuing sequential slightly revenue. on Operator? increased the dollar driven this encouraged questions. subscribed expected QX.And guidance that the that adjusted to $X.X QX, the gross to in even as channel $X.X considering Total revenue basis time on in see gross greater revenue Pulling by we're together, to we're range business the and in for professional your a going early a the revenue revenue. QX on product EBITDA mobile dynamics delivered are down

question Instructions] [Operator with first Our comes Tore Svanberg Stifel. from

the progress continuous on Congratulations here.

So question my is the first on guidance. QX

just perspective, mix I understand this. a from just so So

up, So obviously product of fixed revenue up then, on moving wireless. but services what again, were some please? the And the than more carrier parts

Sure, Tore. It's Steven.

negotiating that talked coming the is So we're what in we and in successful higher revenue was a for renewal that. about subscribed

And we in product revenue said, so piece. increased driving other, that's the coming FWA. in and subscribed the business about both And on mobile bigger that from increase you in as revenue services revenue, talked the and

Great. And that's of this language in follow-up, new sort my coming as the XX-Q.

a accounting sort more was of were language that to this just change is recent you So is kind this of you notified or have typical rule include? about this

accounting they self-reporting we it concern. not will, of were It's neither all. really footnotes description notified really is in those. And if what a a the Those requirement going Yes, the as financials. at you define standard, the for of and

out of the And $XXX the the million say, so, capital notes, of to year you're from look the in structure. one okay, notes, they maturity

within considered And year, now they're so one current. because are those

cash it's And so if look the million. $XXX at balance, not you technically

that language", requires so that And "going disclosure with because said, of capital the the structure. triggers concern of the -- that language,

Sounds last one. good. Actually, just one

Is mentioned be well will revenue reaching quarter. that June a to take expected up You the in as a breather? this quarter telematics or record business

in it our the of that kind a more pleased latter. continues coming off expectations But were We consistent of XXXX. approach. first quarter, nicely that the Probably at are of it did

Cowen. TD next is Lance from The with question Vitanza

right let off, the in to analyze get quarter. first way was first me growth X% to we'll stage. I start I assume just And quarter. Great sequentially. up revenue congratulations. second. But with And the guess, the at that's revenue a this guidance

of timing anything I'm the given from guidance, perspective, the And wondering and there a into quarter pushed there's last if either quarter? first that so got out perhaps pulled but not I'm just forward year guessing fourth of unusual the

which in specifically? On You piece general? mean

On revenue, yes.

got from Yes. QX a meaningful gen short QX. pulled nothing no. The quarter. nothing from was pushed and It both is and to meaningfully in-quarter into execution answer your and There QX that, that was got QX question, that points pretty demand nothing into

sequential then that how not so And so -- an that the it's the is right? artifact took a how will forward? second it's you quickly second prepayment, rest growth recognizing of in rough the right, are recognizing you as that quarter how So of least a million guide, assume of I be Okay. recognized in April? much the wondering XX% give million at on that midpoint. the then that much quarter? can year I'm And $XX balance Great. over the of at prepayment And us you're the for prepayment just you feel going revenue of $XX the

affect both answer, recognition Sure. does The X. financially, prepayment not at the revenue and all, easy conceptually business-wise is

straight hand, over period. helpful. taken line which it We contract So basically affects just ratably on more cash X-year is was the That cash. had

had upfront X recognized the period. we has a over On that on revenue fact it's impact the prepayment recognition, P&L. ratably So the

Okay. Great.

then I wasn't this visibility. -- predates is, virtually guess revenues in visibility long much the question I but leadership of ago long this And at that and point? adamant fairly confidence you my wasn't ago no they company how you, that -- So got that Because have it changed? had of it you've what's that was know the this do

that going on I It's news in, we and it a the of on looks evolve team potentially saying, on think some -- we a why business second well team how as is much channel QX. the we're understandable Phil yes, the sustainable right and question the how program others, grow a perishable, we've new demand to the and of and you okay, QX, quarter looking QX on at And promotion.And and be, itself, bit. as some will is we question. Yes. big of guidance, there's and business it's quarter, meaning and half going they've us which the in it how in-quarter demand There's are more in fair we kind the lot the as of is of said, But, the that is product on activity in specifically. business how bullish increase in increase the now, done, see the growth tag the

right now. being on we're We're we we encouraged So right what now, think not presumptuous can do.

demand this combination -- a the tag so team visibility and and comes think term. longer because And we'll it's I on -- of increasing

and our that differently. is business view just and the by sales there's helps the different team business. So in then rigor also Everything in a definition.And salesforce. cadence the Yes, Steve is track Harmon

talk We have QX look now. what where pipeline and review like calls QX we about what

perhaps And how business there's different ago a was the year with just here different look of folks. we so construct than at a

demand bit So And part a of that's certainly it. an in market. there's uptick of in probably the

I then And go -- guess ahead. no,

Sorry, please.

activity strong for mentioned, some demand we're promotional you that I mean, products. shines, I of. got we're problem. the board FWA to seeing take the sun our advantage from They look, if Steven when no in Yes, will, across quarter. came think we've just general, the trying

we've I as some of. trying got take to think renewal And advantage the we're that So helps subscribed well. of

a is we'll had from situation -- this given where a bit So given customer there, of good. of acceptance The been our go And we tailwind strong has a so. product just best roadmap. by

escalating are give in back a before to that just seeing suggests more prepayment, pricing jump we're favor your guys that you could million the privy carrier not likely reasonable ahead other trying driven Is to I queue. that scenes squeeze to me that you in the If prices there incentivized prepayment? I this most have that trends and time. Or that might that a one fact some that was perhaps over factors that was The to were behind carrier get are read? in $XX the of

Look, renewal you'll mean, that that particular effect I I our see of think -- in the financials.

very prepayment, we a honestly, multifaceted long negotiation. of can you embedded been one so This is. has able was closely it successfully what -- that customer had for The negotiate we it. product a this And make to particular for And facet time. with many worked were a And assumptions we years. about

more than I it wouldn't that. read too So that much into

from Next, Tore Svanberg. we have a follow-up question

question would your program an Phil, Obviously, Could that's have OpEx program. included But already and going some also diversify perspective, on of in from that, does assume even dollars the XQ to that's running? a about the you is revenue to something beyond the get I that what had that areas are And targeting This mean? that obviously channel what program program? invest talk necessarily to more base. from you up OpEx that I you guidance.

Yes, jump part carrier very profile has here, that lot mean I'm large wrong. customers. duty need mean -- answer to customers. historically, us that Also in company best and business have And a those to I to it's company I'd them the obviously. been the of as trying on thankful do so us. here to -- by base of look, say, my And our we revenue can the an try dependent Steven very we're important to we're perspective, they for let diversify large we're so and own me has not then revenue what the dominated if from

be to some frankly, focused actually things that going part and revenue be to experience of fund part goal tend that. our -- reallocate -- costs, And on on higher to With is respect sales existing that an in we're of -- value building capital have the the has that, of forward. going bringing additional strategy new team those self-fund that where around diversification to programs tend our that's the we're team sales happens so some they more there, customers the solution.And to we're solutions specialized experience

change result our profile not significant in that. money. the choosing We're So expect any as cost of I would we doing where a spend

a Next Lance follow-up we from have Vitanza.

end first cash I quarter. wanted you the about at the to of ask balance

quarter. before ahead cash, prepayment than in your we end considerably of in, not beat recognizing the the which dollars, inflows -- came a the seemed working so, well it's beat EBITDA. both. had thinking you had pleased So larger was but to if at up we the in could absolute later out. reverse explain I'm see I'm the in lot cash in million quarter of But you first those that guessing on year? your $XX than estimated. the that hoping here maybe capital actually was just put -- correct? from some that I'm And in And you just model will about We're it favorable so should Is cash flows the how

Yes. And that's right.

conversation recall a balance flow little from cash end where year and I the had bit QX think essentially, lighter. the at we was the cash

so that between QX. and And that there's a a difference was timing view QX

X it's quarter-to-quarter. the If consistent pretty together, you at look

And And it a But growing QX, suspect, so, bit what the one, year. then, to we'll half would we as growing. be of with uptick in the see and the we EBITDA of you expect expect happens the profitability an back business in core consistent.

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

You now may disconnect.