Inseego (INSG) 7 Aug 242024 Q2 Earnings call transcript

Hello, and welcome to Inseego Corp.'s Second Quarter 2024 Financial Results Conference Call. Please note that today's event is being recorded. [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. website. most earnings GAAP on release, section the the included measures the to of the in which company's reconciliation directly financial comparable is Investors A is available also An be audio this replay call archived of there. will

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

factors differ discussion on that materially the a actual to could For results from expectations. cause

company's also Form the filings, regarding risk factors the in the release. contained other on described Please today's cautionary section XX-Q refer SEC XX-K, in which the to and company's refer note available are statements press website. forward-looking Please to

Inseego. I'd turn With like Please to the ahead. to Phil over Chairman that, call go of Brace, Executive

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

results. First, I'd the of like QX view to a high-level provide

share improving over and some accomplishments I'll Second, and current the quarter turn I'd focus on structure. to up wrap we'll comment Steven, the Q&A. I'll call the capital my third, then our like on perspective made to areas. we with that And

Revenue expected also was percentage growth than major control. business our strong very adjusted margin XXXX came EBITDA OpEx better $X.X for was in strong effects QX which at of strong quarter the customer. above of our management renewal and was a solid platform subscriber in at driven and QX $XX at in million, discussed gross million, and by guidance Inseego. by a helped mobile and came year-over-year our previously the

the are new and continued the of already company operations quarter, executives, additions. to the the add both we to sales these leadership seeing impact and in During teams capability

outcome of enabled we quarter, on mixture warrants. very outstanding our financial stockholder. for received made we equity largest restructuring is strong favorable the transactions for Improved cash, resulted in our structure. performance series This support largest common positive and the of that new significant long-term the our our debt, from addressing a a and convert of company majority During capital a and bondholders progress

talk prepared his forma transactions profile. less a Steven remarks, debt very As the impact in leverage manageable and on significantly in will pro result these about

While I'm some today. the work to have we pleased with still very do, progress

to like search. I'd briefly is mention our CEO

earlier to as time As as some extend pleased week Executive in you filing, of search. taking Board the was saw continue things restructure drive approach the with the in business. our well and deliberate Board my good the finish a currently an have the I methodical the Board in team term and executive to The and and the to Chairman work order is are supporting as forward. in provide working engagement I momentum excellent the The well, I to company to

front, for profit cash for the On is generation. growth outlook the quarter and this continued year-over-year last in revenue,

product the our our which in front, our will and On to capabilities next-generation well provide value customers. are to advance I development, increased continue believe products

future the financial structure, and margins, With bright. performance, the road a product large Inseego for capital map improved strong growing is new

to With that, few a make questions every But Inseego team thank things now, I'd these minutes. Steven. worked at right I'm any in to like over the I'd who to take the glad day happen. like call to to pass

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

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

structure. information some to I'll improve And transactions our executed more on like on the for QX. capital notes provide share that restructure some I'd Second, business we convertible third, our to important color and and the guidance

your opening questions. call of wrap to course, as the by Phil we mentioned, we'll, As always do, up

$XX XX% million mobile QX sequentially at coming on total business QX X, our our in above grew over time hotspot revenue also a last on on in were: positive that $XX.X well more revenue And product the came strong XX% mentioned one, XX%. call. year-over-year, offering April years, we MiFi the SaaS million. we With year-over-year and revenue where guidance total into QX at in or the that, call; up side, drivers than and the Still was in grew carrier for that that renewal over X Revenue growth subscribed let's promotion with The results. in primary XXXX. start went QX last first highlighted, our nearly by contract two, performance effect growth carrier mentioned partner, from X

and of up that the product the average in team past high time new business. our to global the program demand and in record our and execution quarter pipeline our space. Rounding continued some takes came and essentially services XG on revenue, did A other at buy in as in the the out builds level channel at initiatives and quarters. drives time ramp newly came as quarter business in Looking several the revenue telematics previous good a last at consistent up their it FWA shore helped implemented

margin at gross quarter with Moving XX% among highest the past and QX a X non-GAAP in prior margin. gross percentage the in level years. on came consistent on to the basis,

total QX, QX both expense was efforts lower in Looking efficiency at sequential spend expenses, aggregate slight while saw as year-over-year, percentage dollars come uptick from of management non-GAAP operating terms a OpEx of in revenue. and to it a sound in than spend and

in and from was OpEx favorably down the favorably XX% of -- quarter in XXXX, sequentially revenue year-over-year, down from I prior apologize. of XX% XXXX XX% QX QX in

past base. bit several the call, in expense and year, and including bonus an an incentive annual that QX hasn't it areas terrific of notable realized noting achieved percentage in in expense that from the included for on even or cash after incremental We a We outcome accrual this G&A. efficiencies new so years. basis R&D of was this being spend strong It's for Inseego employee the the on quarter revenue sales cash to last far marketing to about a all been bonus OpEx paid as shared this

will it and self-funded. is Now it be

Putting coming than It revenue deliver in of us also XX%. quarter dollars and expense QX operating operating $X.X the more results adjusted high operating the double a than performance allowed favorable QX and net in EBITDA all this the of GAAP X to improved and at adjusted consecutive for sixth prior at million at first management These together, positive in focused record quarter more years. was EBITDA. margin time income resulted the

balance the our Cash QX at coming with at QX XX. improved up $XX June Wrapping results in from meaningfully million sheet.

there the the more $XX funded million on in higher from One, that that funded XX, million I'll last Our mentioned. loan subscribed we timing the cash that minutes, on SaaS discount at convertible our upfront was April that the a dynamics. up positive short-term bondholder loan large on profitability contract few day we net of on the Friday, a Accordingly, And QX. balance cash advantageous at X multiyear sheet to a took $XX.X a cash XXXX payment Two, benefit talk out benefited ongoing shows in hand business generation repurchase June that end. June the June. of and quarter as about the from renewal three, business

use the balance million sheet. With X, resulting QX of the the next reflected be was Monday, XXXX in reduction of technically and in will the our bonds cash on on $XX that debt business occurring and purchase QX of July day

or into providing within you'll As liability being them call and of paid news freeing in see the a to on restrictive outcome. notes we of the the sheet we and year, a including the ABL QX, section make event, our of the had we off with balance convertible various good benefits, briefly flexibility support the enter to that balance This action a credit convertible terminated our point enabled The that bonds the as and to is and capital last and The clearly up refinanced nearly address from longest-standing on bonds. final our achieved largest and with subsequent short-term of also relatively we the is solid transactions in discussed expensive that XX% some sheet. number facility. voluntarily stakeholders, a presented good now operating purchased us due

second that capital restructuring convertible With months. topic the few past that, and note move look improvements in and on to accomplished my let's structure we at the

driving restructuring lot been the in you As past quarters, been about and several methodical stakeholders optimized we've notes the a and thoughtful a outcome relevant our say a over This us convertible process overall heard has with considerations. of and stockholders levels. reducing our for debt multistep

face of all that the into long-term or of days, $XX.X the holders have outstanding a of XX we covers for forma convertible convertible Pro to bonds. the LTM top $XX.X pro million of million debt there only and or to $XX.X bonds $XXX $XX past brings million. XX% remaining That the and/or for million entered either transactions, Over approximately long-term debt of notes, of remaining the exchange new notes adjusted of loan debt the million. of EBITDA purchased on was binding $XX total and engaged in agreements we equity million value forma $XXX these million with with short-term XX

is forma ratio reduction and net leverage company. Xx. for profile in a Our a more pro debt is debt of far the meaningful leverage lower less appropriate than an This even

structuring. the As an to that we a out we debt on advantageous feature note also in call successful restructuring, wanted final were

and new long-term bondholders that of further cash part company their and receive equity of debt pay. warrants proceeds, means are a were As enhancement to who these will That liquidity their million transactions, that exchange for issued $XX cash bonds approximately exercise, flexibility. the convertible upon in financial the

meaningful to rightsizing growth, the cash driving our and well transactions and generation and positioned financially pleased profitable Adding these as strong flow operations, support free accomplish to capital structure. reduction to further value. a dynamic and positive that executed see stockholder We're we of company have continuing debt very our now of

bullish improvements to year-over-year the third we're let's and what the on to QX. for in on provide guidance in topic of So and our terms with in we're continue performance. current revenue growth that, business turn expect Overall, quarter show the to delivering seeing

deliver to our same visibility quarterly growth the through we to QX that our drive again large On partner mobile our we're have yields mobile robust in QX robust broadband, broadband carrier the good results which ability confidence year-over-year continuing We'll and extent as produced. products see QX in promotion. to

expect considering building marginally On in FWA XG QX. FWA, channel and lower FWA revenue program overall QX and that invest the last occurred to mentioned buy, in I we time in continue the pipeline

come we and and other revenue, with expect on $X to basis. consistent solid quarter in another On have QX in at levels services XXXX QX

expenses And non-GAAP mobile the are FWA broadband, expected percentage QX and final gross is operating with as to over the be revenue QX be will that $XX margin, relatively the QX and range. Noting relatively be services million prior XXXX margin between in determinant. consistent flat to the so QX. gross in far expected QX mix ultimate non-GAAP other

And million so the range $X.X in considering EBITDA all the $XX XXXX. million. million and million QX in guidance to $XX this, following revenue adjusted we're to range for $X.X a of providing Total of

strong encouraged by we're In driving closing, growth we're delivered in the positive that through revenue the to glad profitability as business continued and move the are growth we see and in QX, profitability XXXX. and dynamics

glad support, that, open we're With and questions. we Operator? any call and the for appreciate your time to

And will our Lance Cowen. Vitanza of first Instructions] [Operator TD from come question

a on quarter. congratulations And strong

is or in On hotspot sales about saw have the stocking and a demand you final restocking with possible end weakness particularly or but do mobile lot of visibility the much was presumably, strength revenue Wondering, into underlying up, quarter I the to And talk side, demand? sell-through? market it impressed growth.

with you'll kind Yes. little our we us our had program of of -- We big of through the that kind a the kind in this of I carrier well. bit of program. of of teased we a actually collectively And really, on has one gone And I the kind initiated see call. mean quarter lot really shipping inventory is has Lance, products as there gone think well, Phil. partners down that space. that representing us

the for looks demand strong quarter. to be Our

and they're a promotion parts, Some would parts. say, has of right? I'll the a now, on perishable, and up demand product, right? There's scrambling chain executing well. say little delivering going And I we're We well gone for there's a scrambling exercising our such and we're are these we're are bit that right things, supply for

visibility take our the demand to trying the exists. the is And now, right demand we're opportunity good. So it just advantage while of and of

Great.

very incremental side, like So turning year-over-year. up gross -- as there, to then and to nicely think margin achieved the much gross terms you as in impressive of performance margin expanded. revenues I'd the

basis. profit on was a year-on-year, were while gross revenues non-GAAP up $X.X So $X.X up million million

like it fixed that's I to And seeing remember margin from incremental the you've think can which removed think was, XX% don't time it a XX% incremental any a decent cost wasn't So of means margin, I business. that a Inseego. I amount if at recently. got

job nice there. a So

But areas, periods? can you help that mentioned you can you And but us they were anything us there -- coming how is be about in tell -- changes gauge know talk subsequent durable I these would that in granular more yes. might all

level on a cost fixed we necessarily, control, don't okay? structure we want characterize OpEx we things. I think Yes. just been that. I'll Steven, improved, year-over-year, did high details. I One, disciplined year-over-year, good you with I X do ton start a as of have it has and some make So some then, seeing and our mean, you're think -- level how at look, to try help high of cost to I'd the but we've

and think gross just improvement well. seen margin mix product also core I there you've seen improvement as you've also

probably big So I things that that. would say there's X drive

forward Whether say, going the OpEx stuff dominated going mix, I products. margin it's the think mix pretty focused as between look, would I going to gross is think the sustainable, is company. be to really sustainable. And the I a on by that be We're

Steven has So know I if don't anything.

Yes. Yes, good good question, and that's really Phil, a points.

at look and my big cost X first buckets the wholesale. a a hunkered on business looked really we those took side, costs at cost back at, immediately QX, out we here which down implemented in lot just the a least was you and driver, and quarter of If restructuring big looking year-over-year, of

margins And pretty that in in right so uptick saw QX. much you beginning an after

part cost was that So structure mentioned. of that the structural Phil

us manage that. and So continue that's to up right? part that's to pretty to sustainable, That's

back And nitty-gritty actually was as behind certainly, year mobile now the the then last year, XG most half the the opposed we are lower-margin to higher-margin of points have products broadband. two, more Phil's of of that mobile XG basically

that changed. has structurally so And

of an margin on so fairly a a And sustainable bit that's basis. uptick in

Great. guess I one me. And then for the last

quarter speak, important I'm for bunch we make that's be that of I'd that's priority accommodate personnel the and the year-to-date. imagine just a did terms You of the aligning also in of in Should great will for company expect think further the not an that, just hires noticeable? notable compression any -- to growth. there I And the below forth? going profit in up in kind so sort so SG&A term, of near-term short all gross incremental of and margin, is perhaps that sort line to Or you. the

and headcount The will. brought rifle if very a and some added punchline a folks And done in kind in were there was and pruning that is many shot, changes, surgically cases, in and adds we was of organizational switch-out. very, recruited it you decidedly,

all not gross So they were adds.

headed that had glad there's These and step past. the you it's skills Like in So in structure. I'm question. we not good clarify a cost a done are we didn't we're for what the adding the direction need Lance. and that folks increase are it, these in really function some

control do headcount And over to that. total maintain so compensation and we

at So we drive something growth we it but on profitability. also adding that we're maintain do look focused as while

QX higher, tightly. probably some marketing little but and it savings so net-net, even managing dollar we sales be also -- think this That of and on little a And you script, and is G&A, a QX pretty total then in to total so we're bit OpEx will. basis, punchline trade-off. I to is on going have net-net, OpEx, a there's the Maybe and But on a the flat I little forward. expect if pretty bit bit mentioned we

comes The Scott Capital. from of ROTH next Searle question

phenomenal It's I And I I a is then done period. a us of onetime job on September you services level? the the to of could as apologize, just a over I'm directionally on I in your sustainable you've what guess, if item looking is that or X-quarter couple I in, here. late, guys. so something line redundant [indiscernible] wondering have there sequentially. process of Steve, And step-up But follow-ups. looking call services? out of some big being then we're got there the note how is hope Great guidance, a not at quarter, I'm thought or give the a

on get I I choppy revenue, one and got didn't guidance. it first end. the business question on the but services the was Scott, QX I hotspot mobile apologize our on for

think that I the what question was.

apologies. outlook, warehouse fixed Sequential My Steve, for hotspots access.

you. Got

quarter color beginning the I'll we were of and start and [indiscernible] services last able billing Okay. were of billing maybe the I in Yes, really of which team. of and will for and subscriber a large subscribe, with an Inseego the that. then numbers up punchline a Phil secure we renew pricing end and subscriber take. some Phil the pleased management and the uptick to others, -- at customer, tag The to on platform quarter, our with is to carrier

call, on this so surprised We just it. effect quarter into by is mentioned went that It no an though. one earlier

into is effect. it X April So went when

you therefore, impact that the to X-year saw quarter's And fixed revenue step-up a QX. a is QX, centrally QX contract. So full in and from in

And so the that sustainable. probably is of definition

And all them great we have work. some It's pretty relationship great the with way a so and really are pleased we're with around. doing customer that --

we're to out. that go pleased extend And so

other. of kind of that lot and subset services good a of So color and kind adds to

one And promotions well a seeing we're in mobile uptake we that of even large about really did customer our then and nice as product overall bit through the talked on really carrier QX. little side, the broadband specifically in

QX. again engaged with in We are them

helpful, we and X expectations obviously we quarter, hopes months visibility, -- it's and into little left. a see going we'll more and that's so we're have have high And good well. and have so And the bit

mobile for that expect QX. level that as to what broadband for what extent comes solutions we to We'll to levels strong move a reaches. But see the QX see we'll quarter we forward. do So

in diversification, large access, in operators helpful. guys front? diversification are a still America. And mobile of hotspot there's both give for of fixed and you if North I'm with mobile Very progressing you terms fairly wireless us your insight terms on couple of that how efforts, you in concentrated remain any wondering could

take Scott, that Yes, I'll one.

love need us. of customers. recognize work a a we bit. earn and We business a for day. there, time little continue to we also does our we to single hard remain that their that ourselves we spend lot Obviously, So But priority every to diversify biggest

seen building up in And make a investments channel. kind us reseller value-added some of so you've

One we've saw actually the to work of differentiated slightly the for things and you is got have to there. there, got some we've announcements products

capabilities For example, got when and sell specific even sell in you've are management certifications into When that products the are might particular And to that. cases, that you like things to carrier. capable different sets. some requires multi-carrier large broader different you carrier, reseller that and like have into a channel, multi-tenant imagine have you some a maybe

to say I on to that as expected, as I we fast investments time. committed but are things So would make sometimes front. not some take go It's continue these moving to

ask an to for in as as the going team be a a we for, us I'd quarters. and to go area that's so area us be to forward item And continue an watch going it's management

that, the over sticking for you M&A have see earlier, quarter, I apologize a that given you're forward if nice you the going lines executed while going you standpoint? now the part could, lastly, and start offensive as recap -- but if past Phil, about on next covered your role. I XX And to guys this over And the those of an do from priorities Executive Along thinking months. It's Chairman around to in the going congratulations. be

side. still Yes. have on Good do mean, the work some look, restructure I I to we question. mean,

Okay.

few for bits finish to last kind of So me little priority of kind up #X of that. is the

We're doing As prepared of opportunities. methodical think footprint. certainly, we'll revenue be labor terms and from I looking the restructure, going realizing in And think priority and what be in support us get and the of I is search, diversity. taking to I my the remarks, organic going team. to and to that and we're think the priorities, And already to But on just great are we I of CEO be board now I've deliberate get extent we have. start portfolio our kind footing mentioned looking got a fruits at that expanding expanding approach like at our on I at management but to to solid continue inorganic the certainly think we growing, is of looking ourselves right both from some

to doing to the I just some a about consider quarters say of -- we few can at where were from pleasure just And talking those where ago. point things then be got it's even it's we a

the So question me thank you asking that smile. for make

Kyle next comes Smith question from The Stifel. of

on first congrats Smith to the on for Tore revenue. on also is capital and results Stifel. my strong I My Kyle geographic structure. improved Svanberg question at wanted extend

So you to see the any do shifting where trends surprises in And over the note or quarter? June geographic time? mix company's

we ANC. Yes. answer Europe surprises. Thanks, that North majority that do. the no, is and geography products right? is closely subscribe short America, have interestingly the vast is And telematics then business The centric, Kyle. the business. tracks is America businesses pretty It's The not of no which the and we business business It's North Steven. the to The

do doing the to in respective bunch in of we're then last those their since we're here that business. operate to grow well work business that, got to the or on been looking so all X profitably or good And we focused go the ships continue feels big think do regions. that a that I points, quarters continuing And global we've businesses to expansions it whole so there's really not any and grow in

of is kind right it we're kind geographic and focusing our what And on now. knitting the so of is concentration

Switching the an could the the of call. prior mentioned us also Maybe progress press the us release competitive give benefits channel was The which of gears and the on on bit. program, you that program program remind provides? if Ignite earnings helpful. the a update Very and differentiation highlighted

mean, most I question. so a would to how that. had for being through went been, program we That's a the I say, it's prior mean this -- part, I carrier good launched exclusively major Inseego, product. really, Yes,

a of And is be some executives. the so some there including doing I local of [indiscernible]. launched and institutions expand of but our via goal in the new the I FWA unique new products, for even differentiated cases, even And kind reach lot expand goal to these products, program federal on more side, governments, MiFi that the reach a sold is businesses, small we think included channel. some think, state on sold our kind have mentioned resellers are to we'll We've our brought because to multi-carrier medium into side, sometimes really, that many resellers. And I to certifications. on packaging

in the have that rugged this and me, and view coming are included by of competitors We know space a from -- business design, that validated in frankly, of in think we that carriers. some at excuse space. are been a differentiated the there, it, a very we that experience robust unique And decades have have of I point packaging a embedded in compact major antennas that exist

a value so think And we're to proposition. going have I unique

this and I need little just focus need to to be area that... going so continue. We continue build to to to a hold to takes And develop, ourselves accountable that it's a time continue to

concluded. conference Thank disconnect. may now question-and-answer our attending now and presentation, for has also session. The today's concludes you you This