INSG - Earnings call transcript Q3 2020

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Operator

Good afternoon, and welcome to Inseego Corp.'s Third Quarter 2020 Financial Results Conference Call. Please note that today's event is being recorded. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity for analysts to ask questions. [Operator Instructions] On the call today are Dan Mondor, Chairman and CEO; Craig Foster, Chief Financial Officer; and Ashish Sharma, President of IoT and Mobile Solutions.

financial be non-GAAP call, this measures discussed. will During Company's directly financial release, measures reconciliation of is to included GAAP most the the section Investors earnings A is comparable in on the website. available which the An audio also there. call be archived of replay this will also discussion contain that forward-looking today's advised be statements. Please will historical but and beliefs. are statements on based forward-looking These facts, the are not rather Company's expectations current

also to described differ in the go I'd that materially Please on now website. Form Chairman over are note For our release. factors could the contained ahead. turn cause to Mondor, refer risk results Please which call to regarding a section and factors expectations, from forward-looking CEO. XX-Q statements like to our please press to XX-K, filings, other cautionary refer discussion today's in actual SEC on available Dan the and

Dan Mondor

with It's in monumental and proud turnaround our is home. want All ahead generation major consensus. well flow growth healthy. a third safe achieving great milestones both which and is phase. and and to and the a other confirm in to measure everyone. We strategy, in $XX.X $X.X any EBITDA, productive play company quarter achievement, that began point quarter. to Hello, on cash major revenue your today, can up In and to success particular, of be everyone attention in I draw and one hope XXXX million cash our shifting of stay to million had and positive this and connected the free staying people everywhere Inseego adjusted a am strongly I I at you with that helping role

rapidly access, mobile Board numerous seeing demand markets. adding and IoT are new strong we fixed wireless We the for in customers target cloud SaaS solutions, our and are our across broadband,

carrier this in hotspot, important new on MiFi MXXXX. touch me few mobile launched broadband customer. introduced Verizon announced a our September. you last is And the second-generation as new recently the XG now each. saw developments UScellular device fourth-largest Inseego in Let the week,

additional should You standard expect America. this XG North MiFi like MXXXX announcements the to as gold hotspot see becomes in the

to are internationally, Asia a nationwide coming in XX% MiFi We And months. provider the a customer of leading as for am covers XG new Middle MXXXX. to pleased progress customer great in the the Swisscom announcements Switzerland for population. Swisscom the and that announce further see East, I XG also is making in their and similarly expect service network Europe, MXXXX with

announce with customer international We new upcoming and customers are making are streams These in launches margins. excited continually access and a as America in base part the forward fixed our growth to products recurring upcoming good improving as Winning two and diversifying in domestic is our our steps of in are revenue for important and products areas. markets. first we also other North wireless launches progress our very and XG other of well strategy, major customers international both

enterprise customers, for will market we margins. strengthen First, to which gross specifically XG product our new launching increase a portfolio are addressable

convinced XG networks the want users. private are to of manage XG we businesses. We enterprise the including be and unlike deployment XG We have seen each of every Inseego anything integrated before, enterprise their adoption into will technology

are result network. running management a This sale. our the connected will devices Manage, Second on hardware suite top value provider a recurring all applications SaaS product long of discussions is integrated tremendous customers, service provide with monthly is to our announced with better our they of which launch Inseego of add products that of recently software initial want revenue the once and platform called to

future. near customer making these seeing demand in strong offerings announcements and we be are will on for the We this

our on am unit business. to bookings pre-COVID to Moving I levels. that pleased have report to returned fleet Ctrack

returning and offices second imposed on local quarter the early units calls, QX relies given the and government all physically into model the efforts This all the discussed provided teams. we the business Thanks on Ctrack We prior As on-site uninterrupted in our installing restrictions not in from during premises. geographies. at our into was more who local tireless selling fleet possible customer to service the fixed pandemic enterprise the on more pre-COVID space, municipal runs our detail Ashish Mobile Sharma strategy, initiatives to making software our well we are winning levels. go I as to progress several the IoT by on as have a and customers bit wireless product. sales going am and in our platform levels business

Ashish Sharma

Dan. Thanks,

Let on some details new more our initiatives. me provide growth

an our fixed to we see our markets. solutions addition opportunity and even in service provider that for business, larger applied mobile In

of majority in the newly market of XXXX, projected alone will CAGR segment be is largest market a billion to developing XG. One the from is total XX%, segments networks. $XXX of roughly The enterprise today million and this for $XX private addressable which grow to

In are game addition be the network to market there changer. other XG opportunities enterprise segment, would a where silent many

use well enterprise these software a of products special XG liability and of wide options, markets, designed will position why and a have enterprise including low-latency with industrial-grade connectivity cases. ourselves specifically with enterprise-based developing portfolio use to are That’s that security, private developing we newly in connectivity solutions and customers requirements, cases. range customers deliver for hardware demanding new So announcing Enterprise public sector applications. we WAN for are alternate enterprise

Labs will machine way organizations these computing launch XXXX. At learning pleased in participation first With capabilities is to program expect Verizon of Lake accelerator software We a U.S.-based The real tenants. announce to operating. Lake Inseego, create working half and with a ultra-reliable combination wellbeing, and the advance and business. are XX this customers, our the network ground performance, estate in bringing been the new XG Inseego With scores the is in and the at to XG cases do in in team partners the XG on in change Nona. residential can use believe training, Living as XG in have future. develop leaders we leadership XG simulation accelerator moving new for as potential American radically commercial XG there the Nona low-latency mile key products healthcare, such edge to run and Orlando, mind, a the sectors computing the and with we square help Florida industrial, unique development of together

to new application all of of products on XG network performance, a which our use these the software. that new all their enterprise organizations lifecycle to support enterprises of To and large IT value activation support. help optimize XG Inseego architectures. applications remote manage the need integrated them management edge All second-gen SaaS management simplify service providers their from initiatives, Manage common and cases of network to enabled Inseego at suite, support throughout our based software and the Manage enhance and to and devices means

which module, the enhancements enterprise Subscribe handle SaaS growth service quarter, solution, including Inseego solution, subscriptions system connected sequential devices, new accelerating Due billing growth we This the last smartphones. our started their we made XX% from subscribe service DMS. to third government have Our XX% acquisition, providers, sequential and achieved the is customers cloud in purchasing, agencies this large quarter. formerly to significant called management and and next-generation of helps subscription reporting

insights, check Connect which with of streamlined number We and easily health and to management module, the allows enterprise configure specialized providing them is already XG customers IT valuable also WAN any data organizations by announced Inseego across dashboards, deployed real-time alarms, the the new our Inseego usage their commercial monitor repose diagnostics. powerful Inseego connections. device availability of of key enterprise Connect

the in real-time quarter those Secure of Inseego of threat and security new coming provide module security XXXX enhanced active will first Our threats. detection mitigation with

software support phone, device Care world-class configuration to live chat, these suite wireless recurring revenue includes our Lastly, that access applications grow streams. customers finally will We continue customer who Manage working the management. with on progress. and knowledge dedicated Inseego still And software have fixed with plan a Inseego base new

a growing Our streamline opportunity. is our WAN to of XG XG all time market accelerate RF for which for hardware multi platform provides common rapidly this products common helping and engine

progress tremendous with in FWA have We trials our and markets. global portfolio made with customers continue

is but of the Given XG OpEx diverse use or cases not FWAs single new that market, customers, environments. all need there is fits a all in all this in and product

use residential and to will portfolio for installations, outdoor to use [indiscernible] business and connectivity cover cases indoor delivering reach both and customers hard locations. multi-gigabit Our X everywhere XG Wi-Fi speed rural

purpose-built coming service accommodate SKUs and factors forward in and suppliers them to several variations, our was the bringing is included comments, I XX%, XG, we mentioned that my CAGR see mind, As this number. majority portfolio we FWA different these a and earlier form months. in look which market with With multiple going to of to of in at is in enterprise to

Now back you to Dan.

Dan Mondor

XG the and globally in fourth U.S. We as bring Ashish. third working quarter progress the and to Board moment enter quarter, Thanks, are Saas and we many everywhere. on the made welcome and to adds strategy. take tremendous of Directors. fronts we would power in the users to to our to the I of Board like expertise Lytle Chris computing valuable to a Chris product

to very We and to him also I you introduce to now. Foster Craig team, am Craig? welcomed our pleased the new leadership CFO,

Craig Foster

afternoon, Good everyone.

me first everyone day As second and to feel extended from Inseego in in want you thank one. Inseego, home quarter at this the likely just is making to for a take my know, I right family

I've always hardware will for I a earlier differentiating focused providers game the over build as cloud-based both that There continue long-term products believe Inseego stronger straightforward. gravitated our career them we Dan developments, incredible emphasize the management with my is for has to energy During mentioned is and Banker, very some companies changer platform, And to last the integrating to strong a are customers add provide offerings corporate towards and Investment exception. important our advancing platform. and want year, platform. to affinity and roadmaps We this on R&D service and our how Ashish is capabilities a little value company. priorities are platform they our argument and Armed into been as as to Inseego evolution critical enterprises. XG Technology CFO a with no and

measurable continue great products our base; diversify quarter. XG second, leading a that and had all of adoption build customer By First, Inseego needs, performance to worldwide. the expand accelerate global

team was quarter an increase Net was of fact, the working before sequentially it was In revenue even $XX.X at XX% current in company. well the million, management and was seven any X% the of year-over-year. years, best which

event free we milestone is which are cash addition, in a flow positive QX, major for the company. In

seeing see demand portfolio. for continued are We products and more robust importantly, we traction continued our flagship to XG industry-leading for XG our

QX in going Subscribe Inseego instead change. in been as All As our to the quarter business, or DMS the comparisons this that rebranded Enterprise & been SaaS of a noted starting has year-over-year normalized Solutions be to have reporting are IoT for last to XXXX. line we housekeeping we item, Mobile references period prior which account

to business units. Turning our

of $XX.X Third quarter IoT increase XX% Solutions & was million, Mobile and year-over-year. XX% sequentially revenue an

see demand in onset channel. second-generation launched to Demand was surge began of XG and products We that a mobile device continue our a recently the March started selling portfolio MiFi of broadband through COVID. uniformly our up across with

Subscribe year-to-date. up XXX% subscriptions Inseego Our grow software with quarter-over-quarter, number increasing rapidly of the is to XX% continues and

Third $XX.X SaaS down was an million, revenue of quarter sequentially XX% year-over-year. increase XX% Enterprise Solutions and

while during solutions. compared our customer the local revenue existing ability this revenue impacting install in customer backlog COVID revenues business, the recurring time, around our base improved That's conditions to stable Ctrack’s restrictions to restrictions Ctrack For field. hamper geographic volatile quarter, the fluctuated continue the with growth. remained although second hardware extremely to

exchange South of the beginning the is versus at FX XX.X, our during the quarter, with somewhat was U.S. XX.X. largest and African the quarter. rand we the rate the which the Additionally, ended stabilized quarter the exposure dollar At rand, dollar rate

did not seen prior see swings So that extreme in we quarters. we've the

by notes recall, longer rates refinancing term dates. with capitalized convertible paid the and senior and much you QX, we may off As company interest maturity better the debt all outstanding in our

balance opportunities with Our new optimize position sheet. our cash additional coupled providing us is flow to with generation cash free

establish to We and our credit increase could future. lines to key vendors that are in with buying costs finding the lower relationships are our component direct opportunities working our

non-GAAP especially we In forward, cash I'll We addition, quarters, non-GAAP in to measures. on our reconciliation of from few inventory $XX on we to point new with this optimize improvement some million. release. are as the a expecting introduced the to see are A quarter detailed focus products. earnings From hand balance closed continuing healthy our some and over GAAP next is

year points ago. up and versus over in the gross phenomenon same a basis the continued to compared the an persist XX.X% quarter. the costs basis & increase For Mobile IoT period Last this margins business, were for to approximately quarter, XXX XXX noticed up last quarter, points quarter we and freight

cost, near point by The improvement growth some SaaS pre-pandemic which we increase in As quarter gross market Inseego basis XX.X%, installations. levels. but in the seen on have The XX.X%, XG the sales million approximately QX. business. caused increase in also to products. up Enterprise sequentially. relief total of million of margins XXX points the substantial from $XX.X were surge today, Subscribe was third second software XX the hardware been Solutions improvements has of continued company nowhere a to by by margins was due This quarter non-GAAP OpEx our partially offset and QX our margin lower subscriptions, $XX.X products was in gross XG were the our basis sales compared

product and higher last $XX.X world. $X.X some and Sales million activities the at to million of were marketing certifications quarter $X.X product expenses the to trials and expenses around both were providers due expenses billion, of planned, increased launches. slightly which As increased were G&A due to up R&D service multiple than around

Our $X.X million as million last QX COVID million consider compared we $X.XX quarter. to movement, share. work-from-home XXXX was from not or net but per benefited $X.X and do for million be QX It Adjusted non-GAAP we QX a that should for certainly $X.X EBITDA have noted ourselves response company. was $X.X the income

XG movement trends we faster enterprise exceed current providing potential. or distributed to comfortable only In analyst for Our people a COVID of respect and solutions data, connectivity our and accelerated only has provide consensus. are ability guidance, platform reshaping more which the worldwide. how with work is our to adoption workforce secure QX macro that increases a towards to meet are

continued believe In that, turn in gross Thanks with an some we Dan. and see Inseego Manage. to for growth back And XG margins that I sales due in addition, we increase to improvement the will call listening. in over will our

Dan Mondor

Craig. you, Thank

financial a We November to which pleased XX, the be on are is NASDAQ. XXth at also our hosting Analyst Day anniversary

demand product closely sincere and products customers an tested bringing multiple work XG in momentum in XG our these access market, stay XXXX wireless forward are resilience and strong, you a engaged the our for and international We fixed with base very major which will employees who Stay This investors. joining upcoming I has Inseego Customer extraordinary today's new and want are markets. streams. Thanks and domestic broadband healthy. and illustrates both safe customer customers and exciting a around times. diversifying during step to to continue a our products is launches to clock. thank everyone winning demonstrated new company current throughout This portfolio. for its The to mobile express call. revenue for make for the

Operator

session. Schmidt [Operator will first We ahead. question-and-answer the from begin Instructions] Jaeson go now comes Please our Lake And question Street. of

Jaeson Schmidt

taking questions. for Thanks guys. Hey, my

constraints you're there thinking about in supply Just situation any were QX? comment curious seeing and if from QX in what if that a you you're could on situation, how

Dan Mondor

to again. with The Yes. the the challenging you Good in industry overall Jaeson. supply speak dynamic is chain. Hi, Yes.

sure we're working with We did As mentioned basically day. heard a make ago quite as some as it at you've diversifying and our far fairly moves we've going I'm before, strengthening diligently widely, contract manufacturers. as Foxconn. And while every

specifically the lead need. thing those we to important to other the working times quantities secure that mention with are suppliers, directly we with is component that The long

has very So keep a working helped well. with with closely Foxconn flowing both and quite supply providers, the chain component working directly really us together

but to of say matter fact, aren't working every a them challenges, we day. are going at there As not

Jaeson Schmidt

follow-up. inventory MiFi out just situation looks the it what on on That's Okay. you And could like a the you Curious if there think comment then hotspots? as helpful.

Dan Mondor

held referring You're by our the to customers. inventory

Jaeson Schmidt

Correct.

Dan Mondor

on I’m on going Yes. for it quite decision is their the comment not to levels part. frankly, that's actually, inventory customers strategic

So comment I Jaeson. to want on wouldn't that

Jaeson Schmidt

Okay. Thanks guys. lot a

Dan Mondor

Thank you.

Operator

comes of go next from ahead. question The Please Vitanza Lance Cowen.

Lance Vitanza

next here, I quarter. on going to portfolio I [indiscernible] you of products wanted about private know Hi Congratulations. new and first year. guys. great think questions this launch next but half taking of not Thanks guess said start until with I networks. year to the the to hear I it's for focused exciting

could bit more have for sense at to are services And closely a looking or this I these and whether are any product And with again, sure CAGR and kind it go those a and so that products you get what of you're involved? launches huge customers is come, working and do you services wondering the was like? XX% well a and to about they that little customers like look make will kind received? of I'm you well talk this is flagship – a trying build

Dan Mondor

Yes. you. Ashish I’ll to ask comment. Thank

Lance. and to hold, leverage high thank with our adoption a see We private we expertise enterprise naturally, in a networks. Firstly, growth. XG and market XG you, take in tremendous that's very beginning want It’s opportunity huge a

products So launching very, be early year. up very of part important. next We’ll coming these

And So compliment exciting carrier time. to strategy, our could quite it's Ashish frankly. you It's a please. comment if really an

Ashish Sharma

and North And Yes. was the I in of market many mean, it's a as CBRS. markets looking it's we’re a happening America, Thanks, on bands, countries the one in growth Dan. recent you bands. is frequency there in activity the U.S. there licensing new XG know, the Dan XG making, of auction private on at. And here the in said, as

ecosystem new are And There Omega. is creating so an opportunities. those

build a So a so working It's feel market. market, we market, and and about market some brand not are it's it’s brand market. new with very the new absolutely partners that key good to help they customers a established big

Lance Vitanza

on about actually margin ask gears the helpful. Thanks. That's question Okay. Can shift I and another performance.

that is to see case, I mean, there it in IoT mobility, should constrained. somewhat continues of ramp scrambling should cadence kind related. any remain we away. occurs some But strong with will, extent which in actually we ramp I'm we timing surge revenue be about that how think if was me, that going So it surprised be demand gross to the blew in that's about And rapid? how to to And wondering if the will you assuming might – And I to it's the the margins? mean, somewhat demand. do if margin me I the of think think

Dan Mondor

Craig?

Craig Foster

Lance. question, Great right. All

is of short I sensitive inside think on happening margin side, there's for think the we're comment a that I'll points markets. the I couple accretion is, there lot one, mix A things the of opportunity in is, for answer but product to ample the very company.

so to continue XG on products, fast of increase we're And our portfolio our for continues another or obviously go have sell And continue contract cost very bunch continue the we margin a to down paying with up. new build to And we as of down. products as ramp point is, lower our how we a materials. to prices our that number internally will the finished manufacturers on initiatives then volumes goods

are And around we when And shipping coupled margins, we hardware to with some channel. increase we our margins through about innovative adoption things reduction ecosystem announced we the – other some are initiatives. the software the and see just into can also we think continue software as of we as product and that the cost that will selling that do our

Lance Vitanza

know It's maybe And with is expect arguably Is number think in that Is should sheet what grow freed but to kind You're not to double Craig. one balance year, little in for last sort you we has spent ask to it. and will continue more et of big bit continue If a that. there double QX? about spend. Got did I you year? wanted going we that obviously talked R&D to lot quite running could Thanks, remarks. XXXX cash up? about you in. double, that do of Appreciate you – about that what just now I that any cetera. grow been the a your that I slip last baseline sitting

Craig Foster

Another great question.

out R&D, primarily so to with will increased us You're I With – spend, the getting R&D that regards launch these for we will but the some can we and two to jump there for different certifications, think around be continue two. going carriers is world. see

increased or growth So I think us not for see is but headcount a a new ginormous you things like that, when it's due of a the that. healthy costs to sign

for over maybe terms will us probably in think QX and of the will relative little I then our for that bit of us next regress a spending a be year. you first half peak

Dan Mondor

commented just pursuing last front in I parts of America, to were there Asia-Pac. separate North certifications certifications quarter, on EU, think add in to and Lance, wide are we we in that

the seen those that's the virtually of of all that out pursued are out early third in There's part some and a phenomenon the information being gone and of in through So you parallel, that's quarter. quarter there. latter might've fourth

to really So as certifications involves the Craig’s pursuit related echo a [indiscernible] expenditures. non-headcount aggressive course of comment, there's

Lance Vitanza

I Dan. the will Thanks, again. baton pass congratulations and

Dan Mondor

Lance. again, Thanks

Operator

The Fessler Scott comes of ahead. next from question Stifel. Please go

Scott Fessler

around on quarter if I talk Hey thank Congrats outlook environment the wondering for you MiFi my guys. for demand your was question. the you XXXX. to taking for and could

Dan Mondor

Can repeat question? the you

Scott Fessler

you Yes, if outlook talk environment MiFi XXXX. was demand your wondering around for to sure. for I the could

Dan Mondor

Well, yes.

as XG as we've multiple past, in products as and products, So broadband coming new market mobile we products, fixed wireless. across well our and to the existing our have talked

but the we and MiFi, SKUs wider number of to think we a for XG. market when kind hotspot, of range of coming to refer there's So much

our As as products. products to go ramp demand COVID a the XXXX. beginning very dynamic will nicely and demand, and we XG high We're continue XG to generation see that the far current into for

get before, products the portfolio, launches, So can broaden continued referred XG as how see levels that of demand level will the wide strong surge the for product we our We out. a in of at as we updates weekly we of the And up. higher still see a as as products and to spike. as demand be determined, demand, opposed we current will we higher, we terms plateau demand. range a But future, believe we we're but plays see we a to new said to as of going be on number generation ramp broaden that paradigm, than forecast as to pre-COVID believe we remains

Scott Fessler

Thank right. Appreciate it. All Great. you.

Dan Mondor

bet. You

Operator

from comes Capital. Scott question Please ahead. Searle of go next The ROTH

Scott Searle

Good got Thanks mix Hey, I late. color XG any number on to on call related the topline. provide operating apologize. questions. or to that job the numbers in difficult XG wondering my was taking Nice I a did afternoon. bit – for a environment, in especially I little process, in quarter? any are of customers you're the you Top the that front? this year shift expecting certification carriers around

Dan Mondor

We seeing didn't numbers Scott. we break quite specific nicely out a now, expected. We're had as XG ramp-up

level continue works We great around for us. as see great interest world. more to XG our broadband both There's a carriers the and customer indicated the mobile fixed and certainly demand of We new our from in wireless. a in Swisscom

happening demand? expected second in which XXXX. we it the see half And is XG as loss this So of we of and in year, continuing what's ramping doing throughout

Scott Searle

Got fourth quarter. to the outlook on And just the maybe to follow-up it.

Kind are a now of otherwise XG? progress in those of items? the fourth big on access become wireless up that quarter? quarter sequentially things in fixed meet guess, what in fourth into to specifically the start to I'm that the sequentially? how terms line Is Ctrack you're comfortable I beat And there. expectations Are It expecting estimates. of current you're said you bottomed like you you're sounds recover wondering or some have think I there. seeing and what Does growth? seeing your, that to starting going contributor ramp line items

Dan Mondor

part Yes. first, Well, Scott. the last

quarter end jointly actually this to up customer if revenue year. cost occur those the preparing carriers, the names. and ramping in we'll you we're wireless at fixed the make know and And occurred see we the of now. as name We announcements to going launches announcements of in fixed It's wireless as are actually four fourth for expect

again, to fixed revenue XXXX. wireless have nicely. the work have We'll timing we quarter is progressing the very So announcements, wireless as we along with fourth into of from in but move on them those fixed

the I is returned think the that foreign levels, always the level South see Ctrack rand, and bookings, And we've again, large swings that activities to times to resumption the fairly commented Ctrack, could pre-COVID to in we but exchange. business. the return factor the of the growth see a modulating we African relative with

Scott Searle

lastly, And gross it. could, the Got margins, if on Craig. I

basically are coming to but the availability. confirm this get kind target gross XX% is Are upside. you front going just progress thinking still certainly gross should given on how guys of in? then the hardware the But I the they products freight want level sounds XX%, in to it related some timeline? that And like otherwise that the to Some quarter to to COVID help coming terms you're headwinds and and scale, margins of facing component new XG reaching timeframe still margins? the in about XX% is that? of kind is what And target of what of the we Thanks. be

Craig Foster

questions. for question. the Thanks Great

think QX, And our in of timeline – us. products, there's to event of and beyond start build channel kind we when that some the then year builds products, channel think little when we bit will sensitive second we we which target I there's for building think QX, like is real-time some as below base I a in new the it's introduce And initial then dynamics, the to volumes, half that markets. QX. build more we obviously get volume-based very very, And are that expect. and we as of think think be to markets. a initial And think in can I happening plus I build a targets we

Scott Searle

you. Thank

Operator

like the to back closing remarks. Mondor over This I to would turn session. concludes any for Dan conference our question-and-answer

Dan Mondor

call. for stay Well, Great. operator. Thank just joining to Thank today's saying you, you. again Please I safe want thanks and by to everyone close healthy.

Operator

for may you attending has Thank concluded. now The now conference disconnect. presentation you today's and

Inseego (INSG) 5 Nov 202020 Q3 Earnings call transcript