INSG

Increasing mix of enterprise revenue drives expansion in gross margin

Next generation 5G hotspot launches with a tier one carrier in North America and Telstra in Q3

Closed $50 million credit facility

Inseego Corp. (Nasdaq: INSG) (the “Company”), a leader in 5G edge cloud solutions, today reported its results for the second quarter ended June 30, 2022. The Company reported second quarter net revenue of $61.9 million, GAAP operating loss of $10.0 million, GAAP net loss of $12.4 million, GAAP net loss of $0.12 per share, adjusted EBITDA of negative $1.0 million, and non-GAAP net loss of $0.09 per share. Cash and cash equivalents at quarter end, including restricted cash, was $24.4 million.

“We made great progress deploying 5G fixed wireless access (FWA) for several enterprise customers in Q2. With our key carrier partners now starting to turn their attention to 5G enterprise FWA, and the successful launch of our next-generation of 5G products, we are primed for a strong second half of 2022,” said Ashish Sharma, CEO of Inseego. “As more of our enterprise trials move towards deployment, we are experiencing higher recurring revenue from our software solutions, which was reflected in our gross margin this quarter. Expanding gross margin and prudent management of expenses will enable us to approach cash flow breakeven by the end of the year.”

Business Highlights

– 5G revenue up 39% year-over-year

– Consolidated gross margin 29.5%, up from 27.3% in Q1 and 28.0% year-over year

– Several enterprise customers commencing deployment of 5G FWA solutions

– 5G FWA portfolio now C-Band certified with Verizon and AT&T

– Launched industry’s first 5G cloud networking solution for the enterprise, Inseego 5G SD EDGE™

– Pilots with Fortune 500 companies underway

– Launch of Inseego Wavemaker™ 5G indoor CPE FX2000 with Three Sweden in July

– Next generation 5G mobile hotspot launches with a tier one carrier in North America and Telstra in Q3

Corporate Highlights

– Jeffrey Tuder named Chairman of the Board of Inseego

– Entered into a $50.0 million secured revolving credit facility on August 5, of which $4.5 million was drawn at closing

– The facility will mature on December 31, 2024 and will bear interest at the Secured Overnight Financing Rate (SOFR) plus a margin of 3.50% per annum

“The gross margin improvement on both a sequential and year-over-year basis reflects a higher mix of enterprise sales,” said Bob Barbieri, CFO of Inseego. “We remain disciplined with our investments and operating costs. For the balance of the year, we expect our quarterly cash usage to be significantly lower than Q2 as our product mix changes to include more higher margin 5G enterprise FWA business. Additionally, the recently announced $50MM credit facility gives us ample capacity to fuel the growth we see later this year and into 2023.”

Conference Call Information

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

• Online, visit https://investor.inseego.com/events-presentations
• Phone-only participants can pre-register by navigating to https://dpregister.com/sreg/10163574/f13398ce70
• Those without internet access or unable to pre-register may dial-in by calling:
  • In the United States, call 1-844-282-4463
  • International parties can access the call at 1-412-317-5613

An audio replay of the conference call will be available beginning one hour after the call through August 22, 2022. To hear the replay, parties in the United States may call 1-877-344-7529 and enter access code 2162059 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 an industry leader in smart device-to-cloud solutions that extend the 5G network edge, enabling broader 5G coverage, multi-gigabit data speeds, low latency and strong security to deliver highly reliable internet access. Our innovative mobile broadband, fixed wireless access (FWA) solutions, and software platform incorporate the most advanced technologies (including 5G, 4G LTE, Wi-Fi 6 and others) into a wide range of products that provide robust connectivity indoors, outdoors and in the harshest industrial environments. Designed and developed in the USA, Inseego products and SaaS solutions build on the company’s patented technologies to provide the highest quality wireless connectivity for service providers, enterprises, and government entities worldwide. www.inseego.com #Putting5GtoWork

©2022. Inseego Corp. All rights reserved. The Inseego name and logo, MiFi, Inseego Wavemaker, and Inseego 5G SD EDGE are registered trademarks and 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, as well as other statements that are not purely statements of historical fact, are forward-looking in nature. These forward-looking statements are made on the basis of management’s current expectations, assumptions, estimates and projections and are subject to significant risks and uncertainties that could cause actual 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; (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) increased competition and pricing pressure from participants in the markets in which the Company is engaged; (5) dependence on third-party manufacturers and key component suppliers worldwide; (6) the impact that new or adjusted tariffs may have on the cost of components or our products, and our ability to sell products internationally; (7) the impact of fluctuations of foreign currency exchange rates; (8) the impact of geopolitical instability and supply chain challenges on our ability to source components and manufacture our products; (9) unexpected liabilities or expenses; (10) 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; (11) litigation, regulatory and IP developments related to our products or components of our products; (12) dependence on a small number of customers for a significant portion of the Company’s revenues and accounts receivable; (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, and (16) the potential impact of COVID-19 on the 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 actual 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 for any reason, even if new information becomes available or other events occur in the future, except as otherwise required pursuant to applicable law and our on-going reporting obligations under the Securities Exchange Act of 1934, as amended.

Non-GAAP Financial Measures

Inseego Corp. has provided financial information in this news 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 exclude preferred stock dividends, share-based compensation expense, amortization of intangible assets purchased through acquisitions, amortization of discount and issuance costs related to the Company’s 2025 Notes, fair value adjustments on derivative instruments, a one-time prior period adjustment related to unamortized debt discount and loss on debt extinguishment relating to the Company’s 2022 Notes, and other non-recurring legal expenses. Adjusted EBITDA also excludes interest, taxes, depreciation and amortization (unrelated to acquisitions, the 2025 Notes), foreign exchange gains and losses, and other.

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 and 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 each to be an important supplemental measure of our performance.

Management uses these non-GAAP financial measures to make operational decisions, evaluate the Company’s performance, prepare forecasts and determine compensation. Further, management believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company’s 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 the Company’s 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, management excludes certain non-cash and one-time items in order to facilitate comparability of the Company’s operating performance on a period-to-period basis because such expenses are not, in management’s view, related to the Company’s ongoing operating performance. Management uses this view of the Company’s operating performance for purposes of comparison with its business plan and individual operating budgets and in the allocation of resources.

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

In the future, the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and 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 there are material limitations associated with the use of 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 contained within this news 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

June 30,

 

Six Months Ended

June 30,

 

2022

 

2021

 

2022

 

2021

Net revenues:

 

 

 

 

 

 

 

IoT & Mobile Solutions

$54,990

 

$51,836

 

$109,495

 

$94,795

Enterprise SaaS Solutions

6,866

 

13,857

 

13,745

 

28,495

Total net revenues

61,856

 

65,693

 

123,240

 

123,290

Cost of net revenues:

 

 

 

 

 

 

 

IoT & Mobile Solutions

40,694

 

39,740

 

83,597

 

73,178

Enterprise SaaS Solutions

3,270

 

5,604

 

6,503

 

11,288

Total cost of net revenues

43,964

 

45,344

 

90,100

 

84,466

Gross profit

17,892

 

20,349

 

33,140

 

38,824

Operating costs and expenses:

 

 

 

 

 

 

 

Research and development

13,619

 

11,773

 

32,179

 

26,328

Sales and marketing

7,721

 

9,821

 

17,494

 

20,825

General and administrative

6,142

 

7,414

 

14,380

 

16,058

Amortization of purchased intangible assets

443

 

664

 

887

 

1,130

Impairment of capitalized software

—

 

1,197

 

—

 

1,197

Total operating costs and expenses

27,925

 

30,869

 

64,940

 

65,538

Operating loss

(10,033)

 

(10,520)

 

(31,800)

 

(26,714)

Other (expense) income:

 

 

 

 

 

 

 

Loss on debt conversion and extinguishment, net

—

 

—

 

(450)

 

(432)

Interest expense, net

(1,664)

 

(1,678)

 

(4,587)

 

(3,523)

Other (expense) income, net

(982)

 

(617)

 

(1,387)

 

1,117

Loss before income taxes

(12,679)

 

(12,815)

 

(38,224)

 

(29,552)

Income tax (benefit) provision

(303)

 

228

 

(625)

 

449

Net loss

(12,376)

 

(13,043)

 

(37,599)

 

(30,001)

Less: Net income attributable to noncontrolling interests

—

 

—

 

—

 

(214)

Net loss attributable to Inseego Corp.

(12,376)

 

(13,043)

 

(37,599)

 

(30,215)

Series E preferred stock dividends

(677)

 

(886)

 

(1,338)

 

(1,753)

Net loss attributable to common stockholders

$(13,053)

 

$(13,929)

 

$(38,937)

 

$(31,968)

Per share data:

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

Basic and diluted

$(0.12)

 

$(0.14)

 

$(0.37)

 

$(0.31)

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

 

 

 

 

 

 

 

Basic and diluted

107,511,660

 

102,935,213

 

106,585,684

 

102,157,146

INSEEGO CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

June 30,

 

December 31,

 

2022

 

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$21,090

 

$46,474

Restricted cash

3,270

 

3,338

Accounts receivable, net

22,491

 

26,781

Inventories

46,977

 

37,402

Prepaid expenses and other

10,424

 

13,624

Total current assets

104,252

 

127,619

Property, plant and equipment, net

6,930

 

8,102

Rental assets, net

4,613

 

4,575

Intangible assets, net

46,008

 

46,995

Goodwill

21,922

 

20,336

Right-of-use assets, net

6,985

 

7,839

Other assets

566

 

377

Total assets

$191,276

 

$215,843

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

Current liabilities:

 

 

 

Accounts payable

$45,640

 

$48,577

Accrued expenses and other current liabilities

24,298

 

26,253

Total current liabilities

69,938

 

74,830

Long-term liabilities:

 

 

 

2025 Notes, net

157,708

 

157,866

Deferred tax liabilities, net

864

 

852

Other long-term liabilities

6,456

 

7,149

Total liabilities

234,966

 

240,697

Commitments and contingencies

 

 

 

Stockholders’ deficit:

 

 

 

Preferred stock

—

 

—

Common stock

108

 

105

Additional paid-in capital

787,283

 

770,619

Accumulated other comprehensive loss

(5,097)

 

(8,531)

Accumulated deficit

(825,984)

 

(787,047)

Total stockholders’ deficit

(43,690)

 

(24,854)

Total liabilities and stockholders’ deficit

$191,276

 

$215,843

INSEEGO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2022

 

2021

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$(12,376)

 

$(13,043)

 

$(37,599)

 

$(30,001)

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

 

 

 

 

 

 

 

Depreciation and amortization

6,712

 

6,821

 

13,955

 

13,051

Fair value adjustment on derivative instrument

(293)

 

128

 

(902)

 

(1,823)

(Recoveries) provision for bad debts

(1)

 

165

 

(15)

 

266

Impairment of capitalized software

—

 

1,197

 

—

 

1,197

Provision for excess and obsolete inventory

649

 

669

 

896

 

496

Share-based compensation expense

2,287

 

2,307

 

13,486

 

11,405

Amortization of debt discount and debt issuance costs

372

 

372

 

2,022

 

746

Loss on debt conversion and extinguishment, net

—

 

—

 

450

 

432

Deferred income taxes

(285)

 

(288)

 

(96)

 

38

Right-of-use assets

728

 

371

 

1,070

 

883

Other

—

 

(437)

 

—

 

(330)

Changes in assets and liabilities, net of effects of divestiture:

 

 

 

 

 

 

 

Accounts receivable

(238)

 

3,815

 

5,239

 

6,483

Inventories

(9,793)

 

4,580

 

(10,148)

 

(834)

Prepaid expenses and other assets

399

 

(40)

 

3,100

 

1,158

Accounts payable

4,193

 

(14,079)

 

(6,207)

 

(16,015)

Accrued expenses, income taxes, and other

(8,559)

 

(4,718)

 

(1,740)

 

2,180

Operating lease liabilities

(755)

 

(825)

 

(1,109)

 

(1,362)

Net cash (used in) provided by operating activities

(16,960)

 

(13,005)

 

(17,598)

 

(12,030)

Cash flows from investing activities:

 

 

 

 

 

 

 

Acquisition of noncontrolling interest

—

 

—

 

—

 

(116)

Purchases of property, plant and equipment

(296)

 

(1,131)

 

(1,059)

 

(2,455)

Proceeds from the sale of property, plant and equipment

—

 

485

 

—

 

506

Additions to capitalized software development costs

(3,095)

 

(7,392)

 

(6,222)

 

(15,369)

Net cash used in investing activities

(3,391)

 

(8,038)

 

(7,281)

 

(17,434)

Cash flows from financing activities:

 

 

 

 

 

 

 

Net borrowing of bank and overdraft facilities

(85)

 

35

 

(139)

 

295

Principal payments under finance lease obligations

—

 

(936)

 

(62)

 

(2,173)

Proceeds from a public offering, net of issuance costs

—

 

(59)

 

—

 

29,369

Principal financed other assets

(224)

 

—

 

(1,231)

 

—

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

52

 

924

 

115

 

2,020

Net cash (used in) provided by financing activities

(257)

 

(36)

 

(1,317)

 

29,511

Effect of exchange rates on cash

(213)

 

1,912

 

744

 

321

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

(20,821)

 

(19,167)

 

(25,452)

 

368

Cash, cash equivalents and restricted cash, beginning of period

45,181

 

59,550

 

49,812

 

40,015

Cash, cash equivalents and restricted cash, end of period

$24,360

 

$40,383

 

$24,360

 

$40,383

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

June 30, 2022

 

Six Months Ended

June 30, 2022

 

Net Loss

 

Net Loss Per Share

 

Net Loss

 

Net Loss Per Share

GAAP net loss attributable to common shareholders

$(13,053)

 

$(0.12)

 

$(38,937)

 

$(0.37)

Adjustments:

 

 

 

 

 

 

 

Preferred stock dividends(a)

677

 

0.01

 

1,338

 

0.02

Share-based compensation expense

2,287

 

0.02

 

13,486

 

0.12

Purchased intangibles amortization

529

 

—

 

1,093

 

0.01

Debt discount and issuance costs amortization(b)

372

 

—

 

2,022

 

0.02

Fair value adjustment on derivative instrument(c)

(293)

 

—

 

(902)

 

—

Loss on debt conversion and extinguishment, net (d)

—

 

—

 

450

 

—

Other

—

 

—

 

(109)

 

—

Non-GAAP net loss

$(9,481)

 

$(0.09)

 

$(21,559)

 

$(0.20)

(a) Includes accrued dividends on Series E Preferred Stock. (b) Includes the debt discount and issuance costs amortization related to the 2025 Notes. (c) Includes the fair value adjustment related to the Company’s interest make-whole derivative instrument. (d) Includes the loss on debt conversion and extinguishment of the 2025 Notes.

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 June 30, 2022

(In thousands)

(Unaudited)

 

 

GAAP

 

Share-based compensation expense

 

Purchased intangibles amortization

 

Non-GAAP

Cost of net revenues

$43,964

 

$259

 

$86

 

$43,619

Operating costs and expenses:

 

 

 

 

 

 

 

Research and development

13,619

 

428

 

—

 

13,191

Sales and marketing

7,721

 

554

 

—

 

7,167

General and administrative

6,142

 

1,046

 

—

 

5,096

Amortization of purchased intangible assets

443

 

—

 

443

 

—

Total operating costs and expenses

$27,925

 

$2,028

 

$443

 

$25,454

Total

 

 

$2,287

 

$529

 

 

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

Six Months Ended June 30, 2022

(In thousands)

(Unaudited)

 

 

GAAP

 

Share-based compensation expense

 

Purchased intangibles amortization

 

Non-GAAP

Cost of net revenues

$90,100

 

$1,674

 

$206

 

$88,220

Operating costs and expenses:

 

 

 

 

 

 

 

Research and development

32,179

 

4,498

 

—

 

27,681

Sales and marketing

17,494

 

2,597

 

—

 

14,897

General and administrative

14,380

 

4,717

 

—

 

9,663

Amortization of purchased intangible assets

887

 

—

 

887

 

—

Total operating costs and expenses

$64,940

 

$11,812

 

$887

 

$52,241

Total

 

 

$13,486

 

$1,093

 

 

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

June 30, 2022

 

Six Months Ended June 30, 2022

GAAP net loss attributable to common shareholders

(13,053)

 

$(38,937)

Preferred stock dividends(a)

677

 

1,338

Income tax provision

(303)

 

(625)

Depreciation and amortization

6,712

 

13,955

Share-based compensation expense

2,287

 

13,486

Fair value adjustment of derivative(b)

(293)

 

(902)

Interest expense, net(c)

1,664

 

4,587

Loss on debt conversion and extinguishment(d)

—

 

450

Other(e)

1,275

 

2,334

Adjusted EBITDA

$(1,034)

 

$(4,314)

(a) Includes accrued dividends on Series E Preferred Stock. (b) Includes the fair value adjustment related to the Company’s interest make-whole derivative instrument. (c) Includes the debt discount and issuance costs amortization related to the 2025 Notes. (d) Includes the loss on debt conversion and extinguishment of the 2025 Notes. (e) Primarily includes a benefit recorded related to non-recurring legal settlements and 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

 

June 30, 2022

 

March 31, 2022

 

December 31, 2021

 

September 30, 2021

 

June 30, 2021

IoT & Mobile Solutions

$54,990

 

$54,505

 

$66,214

 

$56,975

 

$51,836

Enterprise SaaS Solutions

6,866

 

6,678

 

6,678

 

9,242

 

13,857

Total net revenues

$61,856

 

$61,183

 

$72,892

 

$66,217

 

$65,693

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220808005678/en/

Inseego Corp. Media Contact: Anette Gaven +1 (619) 993-3058 Anette.Gaven@inseego.com

Investor Relations Contact: Kevin Liu (626) 657-0013 Investor.Relations@inseego.com