Inseego Corp. (Nasdaq: INSG) (the “Company”), a pioneer in 5G and
intelligent IoT device-to-cloud solutions, today reported the following
results for the first quarter ended March 31, 2019. The Company reports
first-quarter revenues of $48.6 million, GAAP operating loss of
$2.5 million, GAAP net loss of $7.5 million, or net loss of $0.10 per
share, adjusted EBITDA of $2.1 million and non-GAAP net loss of $0.03
per share. Cash and cash equivalents at the end of the period, including
restricted cash, was $31.9 million.
“Our strategy of investing early in 5G is paying off, as global service
providers are showing great interest in our market-leading mobile and
fixed wireless portfolio, which is reflected in a rapid increase in our
opportunity pipeline,” said Dan Mondor, Chairman and CEO of Inseego.
“Our 5G NR products are showing excellent performance with multiple
customers and we are delighted to help them make the promise of 5G a
reality in 2019.”
Corporate Highlights
– Revenue of $48.6 million, at the high end of guidance
– Accelerating R&D and sales and marketing investments to support growth
in global 5G opportunities
IoT & Mobile Solutions
– Q1 2019 revenue of $32.8 million, 13.5% year-over-year growth
– 5G opportunity pipeline growth in South America, Asia, and Europe;
signed MOU with a leading European mobile operator
– Launching MiFi LTE-Advanced gigabit hotspot with Sprint in the second
quarter and Bell Canada later this year
– Launched a new line of Skyus LTE-Advanced ruggedized edge routers for
industrial IoT applications
Enterprise SaaS Solutions
– Q1 2019 revenue of $15.8 million
– Momentum in the Aviation vertical with a new global European carrier
– Solid year over year growth in the Fleet business with Europe revenues
up 8% and South Africa SMB revenues up 7%
“Inseego is making significant investments in R&D and sales and
marketing to capitalize on global high-growth market opportunities
across our portfolio, especially in 5G,” said Steve Smith, EVP and CFO
of Inseego. “In the first quarter we saw compression in gross margins
due to higher than expected costs at the time of new product
introductions and we have put in place an action plan to improve product
margins.”
Second Quarter Outlook
The following statements are forward-looking and actual results may
differ materially. Please see the section titled “Cautionary Note
Regarding Forward-Looking Statements” at the end of this news release. A
more detailed description of risks related to our business is included
in the reports filed by the Company with the Securities and Exchange
Commission (the “SEC”). Our guidance for the second quarter of 2019
reflects current business indicators and expectations as of the date of
this news release, including current exchange rates for foreign
currencies.
|
Inseego Consolidated |
Second Quarter 2019 Outlook |
|
| Revenue | $50.0 million – $56.0 million | |
| Adjusted EBITDA | $2.8 million – $4.5 million | |
|
IoT & Mobile Solutions |
||
| Revenue | $35.0 million – $40.0 million | |
|
Enterprise SaaS Solutions |
||
| Revenue | $15.0 million – $16.0 million | |
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:
- In the United States, call 1-844-881-0135
- International parties can access the call at 1-412-317-6727
An audio replay of the conference call will be available beginning one
hour after the call, through May 22, 2019. To hear the replay, parties
in the United States may call 1-877-344-7529 and enter access code
10129584 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 pioneer in 5G and
intelligent IoT device-to-cloud solutions that enables high performance
mobile applications for large enterprise verticals, service providers
and small-medium businesses around the globe. Our product portfolio
consists of Enterprise SaaS solutions and IoT & Mobile solutions, which
together form the backbone of compelling, intelligent, reliable and
secure IoT services with deep business intelligence. Inseego powers
mission critical applications with a “zero unscheduled downtime”
mandate, such as asset tracking, fleet management, industrial IoT, SD
WAN failover management and mobile broadband services. Our solutions are
powered by our key innovations in purpose-built SaaS cloud platforms,
IoT and mobile technologies including the newly emerging 5G technology. www.inseego.com
#Making5GReal
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 outlook for the second
quarter ending June 30, 2019 and 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 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
(13) 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
implementation.
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. Non-GAAP operating
expenses, adjusted EBITDA, net loss and net loss per share exclude
share-based compensation expense, amortization of intangible assets
purchased through acquisitions, amortization of discount and issuance
costs related to the Company’s convertible senior notes and term loan
and restructuring charges, net of recoveries. Adjusted EBITDA also
excludes interest, taxes, depreciation and amortization (unrelated to
acquisitions, the convertible senior notes and the term loans) and
foreign currency transaction gains and losses.
Non-GAAP operating expenses, adjusted EBITDA, net loss and net loss per
share 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 non-GAAP operating expenses, adjusted
EBITDA, net loss and net loss per share 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 operating expenses, adjusted EBITDA, net loss and net loss per
share, 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 non-GAAP operating expenses, adjusted EBITDA,
net loss and net loss per share 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 March 31, |
||||||||
| 2019 | 2018 | |||||||
| Net revenues: | ||||||||
| IoT & Mobile Solutions | $ | 32,781 | $ | 28,880 | ||||
| Enterprise SaaS Solutions | 15,775 | 17,853 | ||||||
| Total net revenues | 48,556 | 46,733 | ||||||
| Cost of net revenues: | ||||||||
| IoT & Mobile Solutions | 27,600 | 23,752 | ||||||
| Enterprise SaaS Solutions | 6,196 | 6,862 | ||||||
| Impairment of abandoned product line, net of recoveries | — | 576 | ||||||
| Total cost of net revenues | 33,796 | 31,190 | ||||||
| Gross profit | 14,760 | 15,543 | ||||||
| Operating costs and expenses: | ||||||||
| Research and development | 3,485 | 4,976 | ||||||
| Sales and marketing | 6,391 | 5,415 | ||||||
| General and administrative | 6,452 | 6,495 | ||||||
| Amortization of purchased intangible assets | 871 | 964 | ||||||
| Restructuring charges, net of recoveries | 22 | 277 | ||||||
|
Total operating costs and expenses |
17,221 | 18,127 | ||||||
| Operating loss | (2,461 | ) | (2,584 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense, net | (5,075 | ) | (5,100 | ) | ||||
| Other income, net | 313 | 64 | ||||||
| Loss before income taxes | (7,223 | ) | (7,620 | ) | ||||
| Income tax provision | 248 | 440 | ||||||
| Net loss | (7,471 | ) | (8,060 | ) | ||||
| Less: Net loss (income) attributable to noncontrolling interests | (14 | ) | 10 | |||||
| Net loss attributable to Inseego Corp. | $ | (7,485 | ) | $ | (8,050 | ) | ||
| Per share data: | ||||||||
| Net loss per share: | ||||||||
| Basic and diluted | $ | (0.10 | ) | $ | (0.13 | ) | ||
| Weighted-average shares used in computation of net loss per share: | ||||||||
| Basic and diluted | 74,366,879 | 60,721,518 | ||||||
|
INSEEGO CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) |
||||||||
|
March 31, 2019 |
December 31, 2018 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 31,878 | $ | 31,015 | ||||
| Restricted cash | 61 | 61 | ||||||
| Accounts receivable, net | 23,684 | 20,633 | ||||||
| Inventories, net | 33,288 | 26,431 | ||||||
| Prepaid expenses and other | 5,889 | 6,212 | ||||||
|
Total current assets |
94,800 | 84,352 | ||||||
| Property, plant and equipment, net | 6,976 | 6,698 | ||||||
| Rental assets, net | 5,404 | 5,769 | ||||||
| Intangible assets, net | 34,026 | 31,985 | ||||||
| Goodwill | 32,776 | 32,942 | ||||||
| Right-of-use assets, net | 3,110 | — | ||||||
| Other assets | 510 | 510 | ||||||
| Total assets | $ | 177,602 | $ | 162,256 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 42,732 | $ | 39,245 | ||||
| Accrued expenses and other current liabilities | 17,420 | 13,024 | ||||||
| DigiCore bank facilities | 1,242 | 1,412 | ||||||
|
Total current liabilities |
61,394 | 53,681 | ||||||
| Long-term liabilities: | ||||||||
| Convertible senior notes, net | 95,124 | 93,054 | ||||||
| Term loan, net | 45,419 | 45,046 | ||||||
| Deferred tax liabilities, net | 4,390 | 4,457 | ||||||
| Other long-term liabilities | 3,871 | 2,543 | ||||||
|
Total liabilities |
210,198 | 198,781 | ||||||
| Stockholders’ deficit: | ||||||||
| Common stock | 79 | 74 | ||||||
| Additional paid-in capital | 558,208 | 546,230 | ||||||
| Accumulated other comprehensive loss | (5,460 | ) | (4,877 | ) | ||||
| Accumulated deficit | (585,302 | ) | (577,817 | ) | ||||
| Total stockholders’ deficit attributable to Inseego Corp. | (32,475 | ) | (36,390 | ) | ||||
| Noncontrolling interests | (121 | ) | (135 | ) | ||||
| Total stockholders’ deficit | (32,596 | ) | (36,525 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 177,602 | $ | 162,256 | ||||
|
INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
||||||||
|
Three Months Ended March 31, |
||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (7,471 | ) | $ | (8,060 | ) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization | 3,439 | 3,887 | ||||||
| Provision for bad debts, net of recoveries | 230 | 232 | ||||||
| Provision for excess and obsolete inventory, net of recoveries | 309 | 820 | ||||||
| Share-based compensation expense | 1,057 | 880 | ||||||
| Amortization of debt discount and debt issuance costs | 2,443 | 2,443 | ||||||
| Deferred income taxes | (18 | ) | (4 | ) | ||||
| Other | 120 | 1,014 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (3,290 | ) | (3,141 | ) | ||||
| Inventories | (7,850 | ) | 2,798 | |||||
| Prepaid expenses and other assets | 314 | 3,555 | ||||||
| Accounts payable | 3,509 | (9,093 | ) | |||||
| Accrued expenses, income taxes, and other | 2,175 | 289 | ||||||
|
Net cash used in operating activities |
(5,033 | ) | (4,380 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant and equipment | (428 | ) | (326 | ) | ||||
| Proceeds from the sale of property, plant and equipment | 50 | 25 | ||||||
|
Additions to capitalized software development costs and purchases of intangible assets |
(3,942 | ) | (555 | ) | ||||
| Net cash used in investing activities | (4,320 | ) | (856 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from the exercise of warrant to purchase common stock | 10,639 | — | ||||||
| Net repayment of DigiCore bank and overdraft facilities | (35 | ) | (218 | ) | ||||
| Principal payments under finance lease obligations | (268 | ) | (209 | ) | ||||
| Principal payments on mortgage bond | — | (85 | ) | |||||
|
Proceeds from stock option exercises, net of taxes paid on vested restricted stock units |
287 | 382 | ||||||
| Net cash provided by (used in) financing activities | 10,623 | (130 | ) | |||||
| Effect of exchange rates on cash | (407 | ) | 280 | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 863 | (5,086 | ) | |||||
| Cash, cash equivalents and restricted cash, beginning of period | 31,076 | 21,259 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 31,939 | $ | 16,173 | ||||
|
INSEEGO CORP. Reconciliation of GAAP Net Loss to Non-GAAP Net Loss (In thousands, except per share data) (Unaudited) |
||||||||
|
Three Months Ended March 31, 2019 |
||||||||
|
Net Income |
Income (Loss) |
|||||||
| GAAP net loss | $ | (7,471 | ) | $ | (0.10 | ) | ||
| Adjustments: | ||||||||
| Share-based compensation expense(a) | 1,057 | 0.01 | ||||||
| Purchased intangibles amortization(b) | 1,383 | 0.02 | ||||||
| Debt discount and issuance costs amortization | 2,443 | 0.04 | ||||||
| Restructuring charges, net of recoveries | 22 | — | ||||||
| Non-GAAP net loss | $ | (2,566 | ) | $ | (0.03 | ) | ||
(a) Includes share-based compensation expense recorded under ASC Topic
718.
(b) Includes amortization of intangible assets purchased
through acquisitions.
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 Three Months Ended March 31, 2019 (In thousands) (Unaudited) |
|||||||||||||||||||
| GAAP |
Share-based |
Purchased |
Restructuring |
Non-GAAP | |||||||||||||||
| Cost of net revenues | $ | 33,796 | $ | 123 | $ | 512 | $ | — | $ | 33,161 | |||||||||
| Operating costs and expenses: | |||||||||||||||||||
| Research and development | 3,485 | 175 | — | — | 3,310 | ||||||||||||||
| Sales and marketing | 6,391 | 214 | — | — | 6,177 | ||||||||||||||
| General and administrative | 6,452 | 545 | — | — | 5,907 | ||||||||||||||
| Amortization of purchased intangible assets | 871 | — | 871 | — | — | ||||||||||||||
| Restructuring charges, net of recoveries | 22 | — | — | 22 | — | ||||||||||||||
| Total operating costs and expenses | $ | 17,221 | 934 | 871 | 22 | $ | 15,394 | ||||||||||||
| Total | $ | 1,057 | $ | 1,383 | $ | 22 | |||||||||||||
(a) Includes share-based compensation expense recorded under ASC Topic
718.
(b) Includes amortization of intangible assets purchased
through acquisitions.
See “Non-GAAP Financial Measures” for information regarding our use of
Non-GAAP financial measures.
|
INSEEGO CORP. Reconciliation of GAAP Loss before Income Taxes to Adjusted EBITDA (In thousands) (Unaudited) |
||||
|
Three Months Ended March 31, 2019 |
||||
| Loss before income taxes | $ | (7,223 | ) | |
| Depreciation and amortization(a) | 3,439 | |||
| Share-based compensation expense(b) | 1,057 | |||
| Restructuring charges, net of recoveries | 22 | |||
| Interest expense, net(c) | 5,075 | |||
| Other income, net(d) | (313 | ) | ||
| Adjusted EBITDA | $ | 2,057 | ||
(a) Includes depreciation and amortization charges, including
amortization of intangible assets purchased through acquisitions.
(b)
Includes share-based compensation expense recorded under ASC Topic 718.
(c)
Includes the amortization of debt discount and issuance costs related to
the convertible senior notes and term loan.
(d) Includes foreign
currency transaction 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 | |||||||||||||||||||
|
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
|||||||||||||||
| IoT & Mobile Solutions | $ | 32,781 | $ | 40,092 | $ | 34,636 | $ | 31,741 | $ | 28,880 | |||||||||
| Enterprise SaaS Solutions | 15,775 | 15,951 | 15,994 | 17,316 | 17,853 | ||||||||||||||
| Total net revenues | $ | 48,556 | $ | 56,043 | $ | 50,630 | $ | 49,057 | $ | 46,733 | |||||||||
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