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Inseego Reports Third Quarter 2023 Financial Results

INSG

Q3 2023 total revenue of $48.6 million

Recorded net loss of $21.8 million; delivered positive adjusted EBITDA of $4.0 million for Q3 2023

5G Fixed Wireless Access (FWA) revenue represented 23.0% of total revenue and grew 29.0% year-over-year

Inseego Corp. (Nasdaq: INSG) (the “Company”), a leader in 5G edge cloud solutions, today reported its results for the third quarter of 2023 ending September 30, 2023. The Company reported third quarter total revenue of $48.6 million, GAAP operating loss of $18.4 million, GAAP net loss of $21.8 million, GAAP net loss of $0.19 per share, adjusted EBITDA of $4.0 million, and non-GAAP net loss of $0.16 per share. Cash and cash equivalents at quarter end was $18.9 million.

“We remain focused on maintaining profitability as we transition from 4G to 5G. While supply chain challenges are impacting our business in the near term, we are well positioned to capitalize on the newly developing 5G FWA market,” said Ashish Sharma, CEO of Inseego. “During the last year, our enterprise and SMB customer base has grown by almost 56,000 customers, all driven by our 5G FWA and cloud portfolio. While the FWA market is taking a bit of time to develop, we remain focused on driving success with the early customer base we have established.”

Recent Business Highlights

– Total revenue for Q3 2023 was $48.6 million
– 5G revenue accounted for 54.0% of Q3 2023 total revenue
– Cloud software revenue was 30.0% of Q3 2023 revenue
– 5G FWA revenue grew 29.0% YoY driven by over 56,000 new enterprise and SMB customers signed up during the last year
– GAAP margin was 3.9%; Non-GAAP gross margin increased year-over-year from 26.4% to 33.0% as the revenue mix continued to shift to higher-margin products
– Operating expenses dropped to lowest in over two years
– Delivered 3rd straight quarter of positive cash flow and adjusted EBITDA
– Steven Gatoff joined as Chief Financial Officer in September
– Philip Brace joined our Board of Directors in September
– Steve Harmon joined as Chief Revenue Officer in October

“We continue to optimize and align our spend with near-term customer demand and our revenue trajectory,” said Steven Gatoff, Chief Financial Officer of Inseego. “We’re focused on managing the decline of legacy 4G revenue as we look to drive growth in 5G. In the current quarter, we see our recent cost savings actions helping to alleviate some of the revenue pressures and we are focused on delivering profitability as we manage through the transition."

Q4 2023 Guidance

– 4G mobile hotspot revenue to decline as the product category goes end-of-life
– Total revenue is anticipated to be in the range of $40.0 million to $42.0 million for Q4 2023
– Adjusted EBITDA for Q4 2023 expected to be in the range of positive $1.5 million to $2.0 million

Conference Call Information

Inseego will host a conference call and live webcast today at 5:00 p.m. ET. A Q&A session will be held live directly after the prepared remarks. To access the conference call:

An audio replay of the conference call will be available one hour after the call through November 16, 2023. To hear the replay, parties in the United States may call 1-877-344-7529 and enter access code 3005255 followed by the # key. International parties may call 1-412-317-0088. In addition, the Inseego Corp. press release will be accessible from the Company's website before the conference call begins.

About Inseego Corp.

Inseego Corp. (Nasdaq: INSG) is the industry leader in 5G Enterprise cloud WAN solutions with millions of end customers and thousands of enterprise and SMB customers on its 4G, 5G and cloud platforms. Inseego’s 5G Edge Cloud combines the industry’s best 5G technology, rich cloud networking features and intelligent edge applications. Inseego powers new business experiences by connecting distributed sites and workforces, securing enterprise data and improving business outcomes with intelligent operational visibility---all over a 5G network. For more information on Inseego, visit www.inseego.com #Putting5GtoWork

©2023. Inseego Corp. All rights reserved. The Inseego name and logo are registered trademarks of Inseego Corp. Other company, product or service names mentioned herein are the trademarks of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

Some of the information presented in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address expected future business and financial performance and often contain words such as “may,” “estimate,” “anticipate,” “believe,” “expect,” “intend,” “plan,” “project,” “will” and similar words and phrases indicating future results. The information presented in this news release related to our future business outlook, the future demand for our products, and other statements that are not purely historical facts are forward-looking. These forward-looking statements are based on management’s current expectations, assumptions, estimates, and projections. They are subject to significant risks and uncertainties that could cause results to differ materially from those anticipated in such forward-looking statements. We, therefore, cannot guarantee future results, performance, or achievements. Actual results could differ materially from our expectations.

Factors that could cause actual results to differ materially from the Company’s expectations include: (1) the future demand for wireless broadband access to data and asset management software and services and our ability to accurately forecast; (2) the growth of wireless wide-area networking and asset management software and services; (3) customer and end-user acceptance of the Company’s current product and service offerings and market demand for the Company’s anticipated new product and service offerings; (4) dependence on a small number of customers for a significant portion of the Company’s revenues and accounts receivable; (5) increased competition and pricing pressure from participants in the markets in which the Company is engaged; (6) dependence on third-party manufacturers and key component suppliers worldwide; (7) the impact that new or adjusted tariffs may have on the cost of components or our products, and our ability to sell products internationally; (8) the impact of fluctuations of foreign currency exchange rates; (9) the impact of supply chain challenges on our ability to source components and manufacture our products; (10) unexpected liabilities or expenses; (11) the Company’s ability to introduce new products and services in a timely manner, including the ability to develop and launch 5G products at the speed and functionality required by our customers; (12) litigation, regulatory and IP developments related to our products or components of our products; (13) the Company’s ability to raise additional financing when the Company requires capital for operations or to satisfy corporate obligations; (14) the Company’s plans and expectations relating to acquisitions, divestitures, strategic relationships, international expansion, software and hardware developments, personnel matters, and cost containment initiatives, including restructuring activities and the timing of their implementations; (15) the global semiconductor shortage and any related price increases or supply chain disruptions, (16) the potential impact of COVID-19 or other global public health emergencies on the business, (17) the impact of high rates of inflation and rising interest rates, and (18) the impact of geopolitical instability on our business.

These factors, as well as other factors set forth as risk factors or otherwise described in the reports filed by the Company with the SEC (available at www.sec.gov), could cause results to differ materially from those expressed in the Company’s forward-looking statements. The Company assumes no obligation to update publicly any forward-looking statements, even if new information becomes available or other events occur in the future, except as otherwise required under applicable law and our ongoing reporting obligations under the Securities Exchange Act of 1934, as amended.

Non-GAAP Financial Measures

Inseego Corp. has provided financial information in this press release that has not been prepared in accordance with GAAP. Adjusted EBITDA, non-GAAP net loss, non-GAAP net loss per share and non-GAAP operating costs and expenses, for example, exclude preferred stock dividends, share-based compensation expense, amortization of intangible assets purchased through acquisitions, amortization of discount and issuance costs related to our 2025 Notes and revolving credit facility, fair value adjustments on derivative instruments, a one-time prior period adjustment related to unamortized debt discount and loss on debt extinguishment pertaining to our 2025 Notes, and other non-recurring expenses. Adjusted EBITDA excludes interest, taxes, depreciation, amortization (unrelated to acquisitions and the 2025 Notes), impairment of capitalized software, impairment of long-lived assets, and foreign exchange gains and losses.

Adjusted EBITDA, non-GAAP net loss, non-GAAP net loss per share and non-GAAP operating costs and expenses are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. These non-GAAP financial measures have limitations as an analytical tool. They are not intended to be used in isolation or as a substitute for operating expenses, net loss, net loss per share or any other performance measure determined in accordance with GAAP. We present these non-GAAP financial measures because we consider them to be an important supplemental performance measure.

We use these non-GAAP financial measures to make operational decisions, evaluate our performance, prepare forecasts and determine compensation. Further, management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods. Share-based compensation expenses are expected to vary depending on the number of new incentive award grants issued to both current and new employees, the number of such grants forfeited by former employees, and changes in our stock price, stock market volatility, expected option term and risk-free interest rates, all of which are difficult to estimate. In calculating non-GAAP financial measures, we exclude certain non-cash and one-time items to facilitate comparability of our operating performance on a period-to-period basis because such expenses are not, in our view, related to our ongoing operational performance. We use this view of our operating performance to compare it with the business plan and individual operating budgets and in the allocation of resources.

We believe that these non-GAAP financial measures are helpful to investors in providing greater transparency to the information used by management in its operational decision-making. The Company believes that using these non-GAAP financial measures also facilitates comparing our underlying operating performance with other companies in our industry, which use similar non-GAAP financial measures to supplement their GAAP results.

In the future, we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and the exclusion of these items in the presentation of our non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent, or non-recurring. Investors and potential investors are cautioned that material limitations are associated with using non-GAAP financial measures as an analytical tool. The limitations of relying on non-GAAP financial measures include, but are not limited to, the fact that other companies, including other companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting their usefulness as a comparative tool.

Investors and potential investors are encouraged to review the reconciliation of our non-GAAP financial measures in this press release with our GAAP financial results.

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2023

2022

2023

2022

Net revenues:

IoT & Mobile Solutions

$

41,357

$

62,633

$

131,367

$

172,129

Enterprise SaaS Solutions

7,226

6,534

21,567

20,279

Total net revenues

48,583

69,167

152,934

192,408

Cost of net revenues:

IoT & Mobile Solutions

43,560

48,209

105,011

131,805

Enterprise SaaS Solutions

3,128

3,002

8,945

9,505

Total cost of net revenues

46,688

51,211

113,956

141,310

Gross profit

1,895

17,956

38,978

51,098

Operating costs and expenses:

Research and development

8,951

15,417

27,127

47,597

Sales and marketing

5,355

8,295

17,975

25,789

General and administrative

4,906

5,720

16,703

20,101

Amortization of purchased intangible assets

424

433

1,277

1,319

Write-down of capitalized software

611

1,115

Total operating costs and expenses

20,247

29,865

64,197

94,806

Operating loss

(18,352

)

(11,909

)

(25,219

)

(43,708

)

Other (expense) income:

Loss on debt conversion and extinguishment, net

(450

)

Interest expense, net

(2,891

)

(2,034

)

(6,902

)

(6,621

)

Other (expense) income, net

(578

)

(1,758

)

875

(3,145

)

Total other expense

(3,469

)

(3,792

)

(6,027

)

(10,216

)

Loss before income taxes

(21,821

)

(15,701

)

(31,246

)

(53,924

)

Income tax (benefit) provision

(16

)

42

600

(582

)

Net loss

(21,805

)

(15,743

)

(31,846

)

(53,342

)

Series E preferred stock dividends

(756

)

(691

)

(2,218

)

(2,029

)

Net loss attributable to common stockholders

$

(22,561

)

$

(16,434

)

$

(34,064

)

$

(55,371

)

Per share data:

Net loss per common share:

Basic and diluted

$

(0.19

)

$

(0.15

)

$

(0.30

)

$

(0.52

)

Weighted-average shares used in computation of net loss per common share:

Basic and diluted

116,967,545

107,747,468

112,247,219

106,977,201

INSEEGO CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share data)

(Unaudited)

June 30,
2023

December 31,
2022

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

18,946

$

7,143

Accounts receivable, net of provision for credit losses of $1,101 and $541, respectively

17,435

25,259

Inventories

21,916

37,976

Prepaid expenses and other

5,562

7,978

Total current assets

63,859

78,356

Property, plant and equipment, net of accumulated depreciation of $28,240 and $26,049, respectively

3,597

5,390

Rental assets, net of accumulated depreciation of $5,037 and $5,484, respectively

5,037

4,816

Intangible assets, net of accumulated amortization of $42,138 and $31,629, respectively

35,057

41,383

Goodwill

21,922

21,922

Right-of-use assets

5,819

6,662

Other assets

1,464

488

Total assets

$

136,755

$

159,017

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable

$

30,980

$

29,018

Accrued expenses and other current liabilities

28,917

27,945

Total current liabilities

59,897

56,963

Long-term liabilities:

2025 Notes, net

159,541

158,427

Revolving credit facility, net

6,919

Deferred tax liabilities, net

278

323

Other long-term liabilities

7,822

6,503

Total liabilities

227,538

229,135

Commitments and contingencies

Stockholders’ deficit:

Preferred stock, par value $0.001; 2,000,000 shares authorized:

Series E Preferred stock, par value $0.001; 39,500 shares designated, 25,000 shares issued and outstanding, liquidation preference of $1,000 per share (plus any accrued but unpaid dividends)

Common stock, par value $0.001; 150,000,000 shares authorized, 117,024,709 and 108,468,150 shares issued and outstanding, respectively

117

108

Additional paid-in capital

808,203

793,855

Accumulated other comprehensive loss

(7,288

)

(6,329

)

Accumulated deficit

(891,815

)

(857,752

)

Total stockholders’ deficit

(90,783

)

(70,118

)

Total liabilities and stockholders’ deficit

$

136,755

$

159,017

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2023

2022

2023

2022

Cash flows from operating activities:

Net loss

$

(21,805

)

$

(15,743

)

$

(31,846

)

$

(53,342

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

5,451

6,981

16,270

20,936

Provision for credit losses

368

44

612

29

Write-down of capitalized software

611

1,115

Provision for excess and obsolete inventory

6,701

434

7,011

1,330

Share-based compensation expense

2,267

2,406

6,030

15,892

Amortization of debt discount and debt issuance costs

1,071

450

2,048

2,472

Fair value adjustment on derivative instrument

(902

)

Loss on debt conversion and extinguishment, net

450

Deferred income taxes

82

(127

)

177

(223

)

Right-of-use assets

223

(13

)

437

1,057

Changes in assets and liabilities:

Accounts receivable

7,470

(5,800

)

7,703

(561

)

Inventories

1,512

4,222

7,685

(5,926

)

Prepaid expenses and other assets

1,009

(377

)

1,479

2,723

Accounts payable

(3,944

)

(7,341

)

1,162

(13,548

)

Accrued expenses, income taxes, and other

8,945

8,016

2,561

6,276

Operating lease liabilities

(239

)

(257

)

(41

)

(1,366

)

Net cash provided by (used in) operating activities

9,722

(7,105

)

22,403

(24,703

)

Cash flows from investing activities:

Purchases of property, plant and equipment

(242

)

(144

)

(403

)

(1,203

)

Additions to capitalized software development costs

(1,673

)

(3,020

)

(6,114

)

(9,242

)

Net cash used in investing activities

(1,915

)

(3,164

)

(6,517

)

(10,445

)

Cash flows from financing activities:

Net borrowing (repayment) of bank and overdraft facilities

(317

)

79

(458

)

Principal payments under finance lease obligations

(62

)

Proceeds from a public offering

6,057

Principal payments on financed assets

(337

)

(360

)

(1,567

)

Borrowings on revolving credit facility

Borrowings (Repayments) on revolving credit facility

(3,253

)

4,500

(7,851

)

4,500

Payment of debt issuance costs on revolving credit facility

(1,126

)

(1,126

)

Proceeds from stock option exercises and employee stock purchase plan, net of taxes paid on vested restricted stock units

2

80

49

196

Net cash (used in) provided by financing activities

(3,251

)

2,800

(2,026

)

1,483

Effect of exchange rates on cash

(775

)

1,172

(2,057

)

1,916

Net increase (decrease) in cash, cash equivalents and restricted cash

3,781

(6,297

)

11,803

(31,749

)

Cash, cash equivalents and restricted cash, beginning of period

15,165

24,360

7,143

49,812

Cash, cash equivalents and restricted cash, end of period

$

18,946

$

18,063

$

18,946

$

18,063

INSEEGO CORP.

Reconciliation of GAAP Net Loss Attributable to Common Shareholders to Non-GAAP Net Loss

(In thousands, except per share data)

(Unaudited)

Three Months Ended

September 30, 2023

Nine Months Ended

September 30, 2023

Net Loss

Net Loss Per Share

Net Loss

Net Loss Per Share

GAAP net loss attributable to common shareholders

$

(22,561

)

$

(0.19

)

$

(34,064

)

$

(0.30

)

Adjustments:

Preferred stock dividends(a)

756

0.01

2,218

0.02

Share-based compensation expense

2,267.4

0.02

6,030

0.05

Purchased intangibles amortization

424

1,277

0.01

Debt discount and issuance costs amortization(b)

881

0.01

1,819

0.02

Non-GAAP net loss

$

(18,233

)

$

(0.16

)

$

(22,720

)

$

(0.20

)

Note: Amounts may not foot due to rounding.

(a)

Includes accrued dividends on Series E Preferred Stock.

(b)

Includes the debt discount and issuance costs amortization related to the 2025 Notes, and the issuance costs related to the revolving credit facility.

See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP.

Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP Operating Costs and Expenses

Three Months Ended September 30, 2023

(In thousands)

(Unaudited)

GAAP

Share-based compensation expense

Purchased intangibles amortization

Non-GAAP

Cost of net revenues

$

46,688

$

251

$

$

46,437

Operating costs and expenses:

Research and development

8,951

599

8,352

Sales and marketing

5,355

373

4,982

General and administrative

4,906

1,044

3,862

Amortization of purchased intangible assets

424

424

Write-down of purchased intangible assets

611

611

Total operating costs and expenses

$

20,247

$

2,016

$

424

$

17,807

Total

$

2,266

$

424

See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP.

Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP Operating Costs and Expenses

Nine Months Ended September 30, 2023

(In thousands)

(Unaudited)

GAAP

Share-based compensation expense

Purchased intangibles amortization

Non-GAAP

Cost of net revenues

$

113,956

$

657

$

$

113,299

Operating costs and expenses:

Research and development

27,127

1,291

25,836

Sales and marketing

17,975

1,093

16,882

General and administrative

16,703

2,989

13,714

Amortization of purchased intangible assets

1,277

1,277

Write-down of purchased intangible assets

1,115

1,115

Total operating costs and expenses

$

64,197

$

5,373

$

1,277

$

57,547

Total

$

6,030

$

1,277

See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP.

Reconciliation of GAAP Net Loss Attributable to Common Shareholders to Adjusted EBITDA

(In thousands)

(Unaudited)

Three Months Ended

September 30, 2023

Nine Months Ended September 30, 2023

GAAP net loss attributable to common shareholders

(22,561

)

$

(34,064

)

Preferred stock dividends(a)

756

2,218

Income tax provision (benefit)

(16

)

600

Depreciation and amortization

5,451

16,270

Share-based compensation expense

2,267

6,030

Write-down of capitalized software

611

1,115

Right-of-use asset impairment

469

Interest expense, net(b)

2,891

6,902

Inventory adjustment - E&O and contract manufacturer liability

13,058

13,058

Write-off of capitalized inventory order fees

924

924

Other(c)

578

(875

)

Adjusted EBITDA

$

3,959

$

12,647

(a)

Includes accrued dividends on Series E Preferred Stock.

(b)

Includes the debt discount and issuance costs amortization related to the 2025 Notes, and the issuance costs related to the revolving credit facility.

(c)

Primarily relates to foreign exchange gains and losses.

See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP.

Quarterly Net Revenues by Product Grouping

(In thousands)

(Unaudited)

Three Months Ended

September 30, 2023

June 30, 2023

March 31, 2023

December 31, 2022

September 30, 2022

IoT & Mobile Solutions

$

41,357

$

46,383

$

43,627

$

46,272

$

62,633

Enterprise SaaS Solutions

7,226

7,174

7,167

6,643

6,534

Total net revenues

$

48,583

$

53,557

$

50,794

$

52,915

$

69,167