Inseego Reports Fourth-Quarter and Full-Year 2018 Financial Results

5G momentum with introduction of world’s first complete 5G NR
portfolio for global fixed and mobile applications


4G LTE Advanced customer base expansion in 2018 with multiple Tier 1
service providers


Consolidated Q4 results at top end of guidance

SAN DIEGO–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24INSG&src=ctag” target=”_blank”gt;$INSGlt;/agt; lt;a href=”https://twitter.com/hashtag/5G?src=hash” target=”_blank”gt;#5Glt;/agt;–Inseego Corp. (Nasdaq: INSG) (the “Company”), a pioneer in 5G and
intelligent IoT device-to-cloud solutions, today reported the following
results for the fourth-quarter and full-year ended December 31, 2018.
The Company reports fourth-quarter revenues of $56.0 million, GAAP
operating income of $0.8 million, GAAP net loss of $4.2 million, or net
loss of $0.06 per share, adjusted EBITDA of $5.8 million and non-GAAP
net income of $0.02 per share. Cash and cash equivalents at the end of
the period, including restricted cash, was $31.1 million.


On a full-year basis, 2018 revenues were $202.5 million, and GAAP net
loss was $8.1 million, or a net loss of $0.12 per share. This compares
to 2017 revenues of $219.3 million and GAAP net loss of $45.7 million,
or a net loss of $0.78 per share. Cash and cash equivalents at the end
of 2017, including restricted cash, was $21.3 million.


“We ended 2018 with a very strong fourth-quarter performance, including
outstanding top- and bottom-line growth, and expanded our customer base
in North America and worldwide,” said Dan Mondor, Chairman and CEO of
Inseego. “We believe that the combination of our market-leading gigabit
4G LTE and 5G NR innovation and positive industry dynamics will enable
us to further extend our leadership position in 2019 and beyond.”


Corporate Highlights


– Record Q4 2018 adjusted EBITDA of $5.8 million, up 26% sequentially
from Q3 and 107% from a year ago


– Further strengthened management team with the appointment of Douglas
Kahn, EVP of Operations and Customer Success


– Established contract manufacturing in Taiwan with Foxconn


IoT & Mobile Solutions


– Q4 2018 net revenue of $40.1 million, 16% sequential quarterly growth


– Launched MiFi 8800L Cat 18 LTE Advanced gigabit hotspot with Verizon


– Significant portfolio expansion to support global market requirements
for 4G LTE Advanced and 5G New Radio (NR) solutions


○ Strategic 5G partnerships with Ericsson, Nokia and Qualcomm


○ World’s first 5G NR portfolio supporting sub-6GHz and mmWave selected
by multiple service providers in North America and international markets


– Industry’s first live demonstration of 5G NR enabled use cases:


○ Telemedicine virtual reality demonstration at the December Qualcomm
Technology Summit jointly with Verizon, Ericsson and Columbia University


○ Showcased Inseego 5G NR mobile hotspot at Mobile World Congress,
powering live demonstrations of augmented reality for first responders
with Verizon, 4K video streaming with Ericsson and cloud artificial
intelligence for robotics with Softbank-backed company, CloudMinds


– Established global distribution agreement with Arrow Electronics for
the Skyus line of IIoT gateways and routers and Ctrack asset management
solutions


Enterprise SaaS Solutions


– Q4 2018 net revenue of $16.0 million


– Double-digit year-over-year subscription revenue growth in the United
Kingdom and Europe


– Significant government sector wins in the United Kingdom and Australia


– Continued to build momentum in the Aviation vertical


– Launch of new video-enabled telematics solution in partnership with
Garmin


“We had a strong finish to 2018 with tremendous progress in Q4. We are
investing for the future,” said Steve Smith, EVP and CFO of Inseego. “Q1
2019 revenue and new product launches have been impacted by a specific
global component shortage issue that has now been resolved. We believe
the balance of the year will be in line with expectations.”


First 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 first 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


 


 


First Quarter 2019 Outlook






Revenue






$45.0 million – $50.0 million






Adjusted EBITDA






$2.0 million – $4.0 million












 






IoT & Mobile Solutions












Revenue






$30.0 million – $33.5 million












 






Enterprise SaaS Solutions












Revenue






$15.0 million – $16.5 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 March 21, 2019. To hear the replay, parties
in the United States may call 1-877-344-7529 and enter access code
10128252 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.
Inseego is headquartered in San Diego, California with offices
worldwide. 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 first
quarter ending March 31, 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 income (loss) and net income (loss) per
share exclude share-based compensation expense, amortization of
intangible assets purchased through acquisitions, a gain related to the
extinguishment of certain acquisition-related liabilities, amortization
of discount and issuance costs related to the Company’s convertible
senior notes and term loan, restructuring charges, net of recoveries,
and impairment charges related to certain product lines the Company
abandoned, net of recoveries, as well as the impairment of certain other
assets of one of the Company’s foreign subsidiaries. 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 income (loss) and net
income (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 income (loss) and net
income (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 income (loss) and net
income (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 income (loss) and net income (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 EndedDecember 31,




Year EndedDecember 31,






2018


 


2017




2018


 


2017


Net revenues:


















IoT & Mobile Solutions




$


40,092






$


29,708






$


135,349






$


152,851




Enterprise SaaS Solutions




 


15,951


 




 


16,826


 




 


67,114


 




 


66,446


 


Total net revenues






56,043








46,534








202,463








219,297




Cost of net revenues:


















IoT & Mobile Solutions






30,176








24,332








105,344








127,293




Enterprise SaaS Solutions






6,074








6,412








26,167








24,938




Impairment of abandoned product line, net of recoveries




 


—


 




 


(1,758


)




 


355


 




 


(269


)


Total cost of net revenues




 


36,250


 




 


28,986


 




 


131,866


 




 


151,962


 


Gross profit




 


19,793


 




 


17,548


 




 


70,597


 




 


67,335


 


Operating costs and expenses:


















Research and development






5,332








4,574








20,593








21,362




Sales and marketing






6,070








4,679








23,027








25,019




General and administrative






6,691








7,166








25,325








34,415




Amortization of purchased intangible assets






860








887








3,624








3,601




Extinguishment of acquisition-related liabilities






—








—








(17,174


)






—




Restructuring charges, net of recoveries




 


26


 




 


(546


)




 


1,191


 




 


5,152


 


Total operating costs and expenses




 


18,979


 




 


16,760


 




 


56,586


 




 


89,549


 


Operating income (loss)






814








788








14,011








(22,214


)


Other expense:


















Interest expense, net






(5,084


)






(5,066


)






(20,444


)






(19,332


)


Other expense, net




 


(341


)




 


(672


)




 


(895


)




 


(4,080


)


Loss before income taxes






(4,611


)






(4,950


)






(7,328


)






(45,626


)


Income tax provision (benefit)




 


(370


)




 


(1,056


)




 


815


 




 


214


 


Net loss






(4,241


)






(3,894


)






(8,143


)






(45,840


)


Less: Net loss attributable to noncontrolling interests




 


50


 




 


72


 




 


85


 




 


105


 


Net loss attributable to Inseego Corp.




$


(4,191


)




$


(3,822


)




$


(8,058


)




$


(45,735


)


Per share data:


















Net loss per share:


















Basic and diluted




$


(0.06


)




$


(0.06


)




$


(0.12


)




$


(0.78


)


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


















Basic and diluted




 


73,579,670


 




 


60,384,116


 




 


66,104,376


 




 


58,718,483


 


























 


























 


INSEEGO CORP.


CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands)




 




 








December 31, 2018




December 31, 2017






(Unaudited)






ASSETS










Current assets:










Cash and cash equivalents




$


31,015






$


21,198




Restricted cash




61






61




Accounts receivable, net




20,633






15,674




Inventories, net




26,431






20,403




Prepaid expenses and other




6,212


 




9,101


 


Total current assets




84,352


 




66,437


 


Property, plant and equipment, net




6,698






6,991




Rental assets, net




5,769






7,563




Intangible assets, net




31,985






38,671




Goodwill




32,942






37,681




Other assets




510


 




864


 


Total assets




$


162,256


 




$


158,207


 


LIABILITIES AND STOCKHOLDERS’ DEFICIT










Current liabilities:










Accounts payable




$


39,245






$


29,332




Accrued expenses and other current liabilities




13,024






27,558




DigiCore bank facilities




1,412


 




3,075


 


Total current liabilities




53,681


 




59,965


 


Long-term liabilities:










Convertible senior notes, net




93,054






84,773




Term loan, net




45,046






44,055




Deferred tax liabilities, net




4,457






5,261




Other long-term liabilities




2,543


 




9,768


 


Total liabilities




198,781


 




203,822


 


Stockholders’ deficit:










Common stock




74






59




Additional paid-in capital




546,230






519,531




Accumulated other comprehensive (loss) income




(4,877


)




4,604




Accumulated deficit




(577,817


)




(569,759


)


Total stockholders’ deficit attributable to Inseego Corp.




(36,390


)




(45,565


)


Noncontrolling interests




(135


)




(50


)


Total stockholders’ deficit




(36,525


)




(45,615


)


Total liabilities and stockholders’ deficit




$


162,256


 




$


158,207


 


















 


















 


INSEEGO CORP.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


(Unaudited)




 




 








Three Months EndedDecember 31,




Year EndedDecember 31,






2018


 


2017




2018


 


2017


Cash flows from operating activities:


















Net loss




$


(4,241


)




$


(3,894


)




$


(8,143


)




$


(45,840


)


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


















Depreciation and amortization




3,169






3,176






13,733






14,274




Provision for bad debts, net of recoveries




19






632






555






1,618




Provision for excess and obsolete inventory, net of recoveries




(179


)




798






1,040






1,674




Share-based compensation expense




1,198






806






4,876






3,748




Amortization of debt discount and debt issuance costs




2,444






2,443






9,772






10,283




Loss on extinguishment of debt, net




—






—






—






2,035




Deferred income taxes




18






310






14






319




Non-cash gain on extinguishment of acquisition-related liabilities




—






—






(17,174


)




—




Unrealized foreign currency transaction loss (gain), net




83






478






402






(316


)


Other




712






(144


)




1,620






1,684




Changes in assets and liabilities:


















Accounts receivable




6,155






5,024






(6,883


)




5,638




Inventories




(13,216


)




(617


)




(11,437


)




3,020




Prepaid expenses and other assets




828






832






3,251






(3,239


)


Accounts payable




8,767






(2,698


)




9,646






(730


)


Accrued expenses, income taxes, and other




(3,653


)




(6,931


)




(3,037


)




(8,744


)


Net cash provided by (used in) operating activities




2,104


 




215


 




(1,765


)




(14,576


)


Cash flows from investing activities:


















Purchases of property, plant and equipment




(402


)




(52


)




(1,338


)




(1,789


)


Proceeds from the sale of property, plant and equipment




35






71






144






253




Purchases of intangible assets and additions to capitalized software
development costs




(1,513


)




(583


)




(3,040


)




(2,839


)


Net cash used in investing activities




(1,880


)




(564


)




(4,234


)




(4,375


)


Cash flows from financing activities:


















Gross proceeds received from private placement




—






—






19,661






—




Payment of issuance costs related to private placement




(500


)




—






(500


)




—




Proceeds from term loans




—






—






—






64,917




Payment of issuance costs related to term loans




—






—






—






(905


)


Principal payments on term loans




—






—






(500


)




(20,000


)


Repurchase of convertible senior notes




—






—






—






(11,900


)


Net repayment of DigiCore bank and overdraft facilities




(250


)




544






(1,453


)




(76


)


Principal payments under capital lease obligations




(490


)




(263


)




(977


)




(876


)


Principal payments on mortgage bond




(75


)




(72


)




(316


)




(288


)


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




730


 




287


 




1,752


 




(506


)


Net cash provided by (used in) financing activities




(585


)




496






17,667






30,366




Effect of exchange rates on cash, cash equivalents and restricted
cash