Inseego (INSG) - 2024 Q1 - Quarterly Results

Executive Summary & Business Outlook This section outlines Inseego's Q1 2024 financial results, management's strategic commentary, and Q2 2024 guidance Q1 2024 Financial Highlights Inseego reported Q1 2024 revenue of $45.0 million, a GAAP net loss of $4.5 million, and positive Adjusted EBITDA of $3.8 million, marking the fifth consecutive quarter of positive Adjusted EBITDA. The company also saw an increase in cash to $12.3 million Q1 2024 Financial Performance (in millions) | Metric | Q1 2024 (in millions) | | :-------------------- | :-------------------- | | Revenue | $45.0 | | GAAP Net Loss | $(4.5) | | Adjusted EBITDA | $3.8 | | GAAP Gross Margin | 38.6% | | Non-GAAP Gross Margin | 38.7% | | Cash and cash equivalents (as of March 31, 2024) | $12.3 | - Non-GAAP gross margin increased year-over-year from 36.2% to 38.7%, driven by a shift in revenue mix towards higher-margin products and services[6] Management Commentary Executive Chairman Phil Brace highlighted strong demand and Q1 2024 results that exceeded guidance, expressing optimism for future growth, including a new channel program. CFO Steven Gatoff noted significant post-quarter developments, such as a key customer extension with increased revenues and a substantial prepayment, which enabled the payoff of the ABL facility and led to improved Q2 guidance - Q1 2024 results exceeded guidance for both revenue and Adjusted EBITDA[3] - Recently launched a new channel program[3] - Actively engaged with convertible note holders on potential refinancing or restructuring[3] - Secured an extension with a key customer post-quarter end, leading to increased revenues and profitability, and received a significant prepayment in April[3] - Voluntarily paid off and terminated the ABL facility in April due to improving operations and free cash flow[3] Q2 2024 Guidance Inseego provided Q2 2024 guidance, projecting total revenue between $52.0 million and $56.0 million, and Adjusted EBITDA between $6.5 million and $7.5 million, indicating a significant improvement over Q1 2024 results Q2 2024 Financial Guidance (in millions) | Metric | Q2 2024 Guidance (in millions) | | :-------------------- | :----------------------------- | | Total revenue | $52.0 to $56.0 | | Adjusted EBITDA | $6.5 to $7.5 | Company Information & Disclosures This section provides an overview of Inseego Corp., outlines cautionary notes regarding forward-looking statements, and explains the use of non-GAAP financial measures About Inseego Corp. Inseego Corp. is a leading technology provider of 5G mobile and fixed wireless solutions, offering 5G Enterprise cloud WAN solutions to mobile network operators, Fortune 500 enterprises, and SMBs. Their 5G Edge Cloud platform integrates advanced 5G technology, cloud networking, and intelligent edge applications to enhance business connectivity, data security, and operational visibility - Inseego Corp. is an industry leader in 5G Enterprise cloud WAN solutions[8] - Provides 4G, 5G, and cloud platforms to millions of end customers and thousands of enterprise and SMB customers[8] - The 5G Edge Cloud combines 5G technology, rich cloud networking features, and intelligent edge applications to connect distributed sites, secure enterprise data, and improve business outcomes[8] Cautionary Note Regarding Forward-Looking Statements This section advises that the news release contains forward-looking statements based on management's current expectations, which are subject to significant risks and uncertainties that could cause actual results to differ materially. Key risk factors include the company's ability to refinance debt, dependence on major customers, market demand fluctuations, competition, supply chain issues, and macroeconomic factors. The company disclaims any obligation to update these statements unless legally required - Forward-looking statements are based on management's current expectations, assumptions, estimates, and projections[9] - Significant risks and uncertainties could cause actual results to differ materially from expectations[9] - Key risk factors include: ability to make payments on or refinance indebtedness, dependence on a small number of customers, future demand for wireless broadband access, increased competition, dependence on third-party manufacturers and suppliers, impact of supply chain challenges, global semiconductor shortage, inflation, rising interest rates, and geopolitical instability[11] - The Company assumes no obligation to update publicly any forward-looking statements, except as required under applicable law[12] Non-GAAP Financial Measures Explanation Inseego provides non-GAAP financial measures, such as Adjusted EBITDA and non-GAAP operating costs, which exclude specific items like share-based compensation, amortization of intangibles, and debt-related costs. These supplemental measures are not GAAP-compliant but are used by management for operational decisions, performance evaluation, and forecasting to offer greater transparency and comparability with industry peers. Investors are cautioned about their inherent limitations and encouraged to review the GAAP reconciliations - Non-GAAP financial measures (e.g., Adjusted EBITDA, non-GAAP operating costs) exclude items such as preferred stock dividends, share-based compensation, amortization of intangible assets, amortization of debt discount and issuance costs, fair value adjustments on derivative instruments, and other non-recurring expenses[13] - Adjusted EBITDA specifically excludes interest, taxes, depreciation, amortization, impairment of capitalized software, impairment of long-lived assets, certain other non-recurring expenses, and foreign exchange gains and losses[13] - These non-GAAP measures are supplemental, not GAAP-compliant, and have limitations as analytical tools; they are not substitutes for GAAP measures[14] - Management uses these non-GAAP measures for operational decisions, performance evaluation, forecasting, and compensation, believing they provide greater transparency and facilitate industry comparisons[15][16] - Investors are cautioned about the material limitations of non-GAAP measures and encouraged to review reconciliations with GAAP results[17][18] Financial Statements (GAAP) This section presents Inseego's consolidated GAAP financial statements, including statements of operations, balance sheets, and cash flows for the reported periods Consolidated Statements of Operations For Q1 2024, Inseego reported total revenues of $45.0 million, a decrease from $50.8 million in Q1 2023, primarily due to a decline in mobile solutions revenue. Despite this, the company improved its GAAP operating loss to $(1.7) million and reduced its net loss to $(4.5) million, compared to $(3.6) million and $(5.1) million respectively in the prior year. Net loss per common share improved to $(0.44) Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------- | :------ | :------ | :----------- | | Mobile solutions revenue | $15,270 | $23,040 | $(7,770) | | Fixed wireless access solutions revenue | $14,182 | $11,870 | $2,312 | | Product revenues | $29,452 | $34,910 | $(5,458) | | Services and other revenue | $15,557 | $15,884 | $(327) | | Total revenues | $45,009 | $50,794 | $(5,785) | | Cost of revenues | $27,617 | $32,607 | $(4,990) | | Gross profit | $17,392 | $18,187 | $(795) | | Total operating costs and expenses | $19,076 | $21,778 | $(2,702) | | Operating loss | $(1,684) | $(3,591) | $1,907 | | Interest expense, net | $(2,174) | $(1,997) | $(177) | | Net loss | $(4,455) | $(5,104) | $649 | | Net loss per common share (Basic and diluted) | $(0.44) | $(0.54) | $0.10 | Consolidated Balance Sheets As of March 31, 2024, Inseego's total assets slightly increased to $122.1 million from $121.8 million at December 31, 2023, driven by a rise in cash and accounts receivable. Total liabilities grew to $227.7 million, primarily due to the 2025 Notes. The company reported a total stockholders' deficit of $(105.6) million Consolidated Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2024 | December 31, 2023 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $12,297 | $7,519 | $4,778 | | Accounts receivable, net | $23,476 | $22,616 | $860 | | Inventories | $20,797 | $22,880 | $(2,083) | | Total current assets | $63,096 | $58,226 | $4,870 | | Total assets | $122,068 | $121,797 | $271 | | Accounts payable | $24,013 | $24,795 | $(782) | | Accrued expenses and other current liabilities | $30,805 | $27,022 | $3,783 | | Revolving credit facility | $4,677 | $4,094 | $583 | | Total current liabilities | $59,495 | $55,911 | $3,584 | | 2025 Notes, net | $160,284 | $159,912 | $372 | | Total liabilities | $227,657 | $223,902 | $3,755 | | Total stockholders' deficit | $(105,589) | $(102,105) | $(3,484) | Consolidated Statements of Cash Flows In Q1 2024, Inseego generated $4.5 million in net cash from operating activities, a decrease from $7.7 million in Q1 2023. Net cash used in investing activities significantly decreased to $(0.6) million from $(2.5) million. Notably, net cash from financing activities turned positive at $0.6 million, compared to a net use of $(3.3) million in the prior year. Overall, cash and cash equivalents increased by $4.8 million, ending the period at $12.3 million Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------- | :------ | :------ | :----------- | | Net cash provided by operating activities | $4,546 | $7,659 | $(3,113) | | Net cash used in investing activities | $(577) | $(2,504) | $1,927 | | Net cash provided by (used in) financing activities | $583 | $(3,340) | $3,923 | | Net increase in cash and cash equivalents | $4,778 | $1,543 | $3,235 | | Cash and cash equivalents, end of period | $12,297 | $8,686 | $3,611 | Non-GAAP Reconciliations This section provides reconciliations of GAAP gross margin, operating costs, and net loss to their respective non-GAAP measures, including Adjusted EBITDA Reconciliation of GAAP Gross Margin and Operating Costs and Expenses to Non-GAAP For Q1 2024, Inseego reconciled its GAAP gross margin of 38.6% to a non-GAAP gross margin of 38.7% by adjusting for $31 thousand in share-based compensation expense within cost of revenues. Total GAAP operating costs and expenses of $19.1 million were adjusted to $17.5 million on a non-GAAP basis, primarily by excluding share-based compensation, impairment of capitalized software, and purchased intangibles amortization Reconciliation of GAAP Gross Margin and Operating Costs and Expenses to Non-GAAP (in thousands) | Metric (in thousands) | GAAP | Share-based compensation expense | Impairment of Capitalized Software | Purchased intangibles amortization | Non-GAAP | | :-------------------- | :--- | :------------------------------- | :--------------------------------- | :--------------------------------- | :------- | | Revenues | $45,009 | – | – | – | $45,009 | | Cost of revenues | $27,617 | $(31) | – | – | $27,586 | | Gross Margin | $17,392 | $31 | – | – | $17,423 | | Gross Margin % | 38.6% | | | | 38.7% | | Total operating costs and expenses | $19,076 | $(686) | $(420) | $(423) | $17,547 | Reconciliation of GAAP Net Loss to Adjusted EBITDA In Q1 2024, Inseego reconciled its GAAP net loss of $(4.5) million to an Adjusted EBITDA of $3.8 million. This reconciliation involved adding back non-cash and non-operating items such as income tax provision, interest expense, depreciation and amortization, share-based compensation expense, and impairment of capitalized software Reconciliation of GAAP Net Loss to Adjusted EBITDA (in thousands) | Metric (in thousands) | Q1 2024 | | :-------------------- | :------ | | Net loss | $(4,455) | | Income tax provision (benefit) | $237 | | Interest expense, net | $2,174 | | Other income (expense), net | $360 | | Depreciation and amortization | $4,375 | | Share-based compensation expense | $717 | | Impairment of capitalized software | $420 | | Adjusted EBITDA | $3,828 |