Inseego (US:INSG)2024-05-10 00:46PART I—FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements For Q1 2024, Inseego Corp. reported $45.0 million in revenue, a net loss of $4.5 million, and significant liquidity concerns due to upcoming debt maturity Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $122.1 million, total liabilities $227.7 million, resulting in a $105.6 million stockholders' deficit Selected Balance Sheet Data (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $12,297 | $7,519 | | Accounts receivable, net | $23,476 | $22,616 | | Inventories | $20,797 | $22,880 | | Total Assets | $122,068 | $121,797 | | Current Liabilities | | | | Accounts payable | $24,013 | $24,795 | | Revolving credit facility | $4,677 | $4,094 | | Long-Term Liabilities | | | | 2025 Notes, net | $160,284 | $159,912 | | Total Liabilities | $227,657 | $223,902 | | Total stockholders' deficit | ($105,589) | ($102,105) | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2024 total revenues decreased 11.4% to $45.0 million, driven by lower Mobile solutions revenue, resulting in a $4.5 million net loss Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $45,009 | $50,794 | | Mobile solutions revenue | $15,270 | $23,040 | | Fixed wireless access solutions revenue | $14,182 | $11,870 | | Gross profit | $17,392 | $18,187 | | Operating loss | ($1,684) | ($3,591) | | Net loss | ($4,455) | ($5,104) | | Net loss attributable to common stockholders | ($5,245) | ($5,827) | | Net loss per common share (Basic and diluted) | ($0.44) | ($0.54) | Condensed Consolidated Statements of Cash Flows Q1 2024 generated $4.5 million in operating cash flow, a decrease from prior year, with cash and equivalents increasing to $12.3 million Summary of Cash Flows (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,546 | $7,659 | | Net cash used in investing activities | ($577) | ($2,504) | | Net cash provided by (used in) financing activities | $583 | ($3,340) | | Net increase in cash and cash equivalents | $4,778 | $1,543 | | Cash and cash equivalents, end of period | $12,297 | $8,686 | Notes to Condensed Consolidated Financial Statements Key notes highlight liquidity challenges, going concern doubt, a 1-for-10 reverse stock split, customer concentration, and subsequent credit facility termination - The company's ability to refinance its $161.9 million 3.25% convertible senior notes due May 1, 2025 cannot be assured, which raises substantial doubt about its ability to continue as a going concern31 - On January 24, 2024, the company completed a 1-for-10 reverse stock split of its common stock25 - For Q1 2024, two customers accounted for 39.3% and 18.2% of revenues, respectively, indicating significant customer concentration76 - As a subsequent event, the company voluntarily paid off and terminated its revolving credit facility on April 18, 202482 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 11.4% revenue decline, improved gross margin, and critical liquidity challenges related to the 2025 Notes maturity Results of Operations Q1 2024 total revenues declined 11.4% to $45.0 million due to Mobile solutions, while gross profit margin improved to 38.6% Revenues by Product Category (in thousands) | Product Category | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Mobile solutions | $15,270 | $23,040 | ($7,770) | (33.7)% | | Fixed wireless access solutions | $14,182 | $11,870 | $2,312 | 19.5% | | Product revenues | $29,452 | $34,910 | ($5,458) | (15.6)% | | Services and other | $15,557 | $15,884 | ($327) | (2.1)% | | Total revenues | $45,009 | $50,794 | ($5,785) | (11.4)% | - The increase in gross profit margin to 38.6% in Q1 2024 from 35.8% in Q1 2023 was attributed to a larger proportion of higher-margin service revenues as a percentage of total revenues105 Operating Costs and Expenses (in thousands) | Expense Category | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $5,043 | $3,775 | $1,268 | 33.6% | | Sales and marketing | $4,995 | $6,466 | ($1,471) | (22.7)% | | General and administrative | $4,983 | $5,724 | ($741) | (12.9)% | | Depreciation and amortization | $3,635 | $5,309 | ($1,674) | (31.5)% | | Total | $19,076 | $21,778 | ($2,702) | (12.4)% | Liquidity and Capital Resources The company's liquidity improved with positive operating cash flow and a $15.0 million customer payment, but the 2025 Notes maturity remains a significant concern - The company is in active negotiations to restructure or refinance its $161.9 million 2025 Notes due May 1, 2025, but there is no assurance of success, raising substantial doubt about its ability to continue as a going concern116 - In April 2024, the company received a $15.0 million upfront payment from a customer for a two-year service contract, positively impacting liquidity115 - Effective April 18, 2024, the company voluntarily paid off and terminated its revolving credit facility, which had a $4.7 million balance at the end of Q1 2024114120 Quantitative and Qualitative Disclosures About Market Risk Primary market risks include inflation and foreign currency fluctuations, with interest rate risk eliminated after credit facility termination - Interest rate risk from the revolving credit facility was eliminated when the company paid off and terminated the agreement on April 18, 2024140 - For Q1 2024, sales denominated in foreign currencies (primarily South African Rand, British Pound, Euro, and Australian Dollar) were 21.2% of total revenue143 - A hypothetical 10% change in foreign currency exchange rates would have impacted Q1 2024 revenue by approximately $1.0 million143 Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - Based on an evaluation as of March 31, 2024, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective145 - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls146 PART II—OTHER INFORMATION This section covers legal proceedings, risk factors, other required disclosures, and a list of exhibits Legal Proceedings The company is not currently involved in any litigation expected to materially adversely affect its business or financial results - The company reports that it is not currently party to any legal proceedings that would be reasonably expected to have a material and adverse effect on its business147 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - The company states there were no material changes to the risk factors disclosed in its Form 10-K filed on February 21, 2024148 Other Items (Items 2, 3, 4, 5) The company reported no unregistered sales of equity securities, defaults on senior securities, mine safety disclosures, or other material information - The company reported 'None' or 'Not applicable' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)149150151152 Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications