Inseego Reports First Quarter 2018 Financial Results
Company Posts Non-GAAP Operating Profit, Meets Guidance, and Reports Continuing Progress on Customers, New 5G and Industrial IoT Products, and Cloud Telematics Markets
“I’m pleased to report that
Recent Business Highlights
- Continued progress on adjusted EBITDA, growing 17% quarter over quarter, and an improvement of
- Ctrack resumed year over year revenue growth in the quarter led by strong recurring software revenue growth and the Aviation vertical.
- Ctrack SMB and large fleet core market pipelines grew 15% to 25% across all geographies.
- Began shipments of 4G VoLTE HD quality wireless home phone solution.
- Signed Sprint to five-year contract on DMS platform.
- Won large international airline with EU based carrier, with a 140 global airport footprint.
- Made substantial headway with 5G portfolio development targeting fixed and mobile devices.
- Added key executives to management team in the
“We met our guidance as the Ctrack business outperformance offset continued softness in legacy MiFi business,” said
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
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Inseego Consolidated |
Second Quarter 2018 Outlook |
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| Revenue | $45 million - $50 million | ||||||||
| Adjusted EBITDA | $3.5 million - $4.0 million | ||||||||
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IoT & Mobile Solutions |
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| Revenue | $27 million - $30 million | ||||||||
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Enterprise SaaS Solutions |
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| Revenue | $18 million - $20 million | ||||||||
Conference Call Information
- In
the United States , call 1-844-881-0135 - International parties can access the call at 1-412-317-6727
About
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, 2018 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 fleet management software and services; (2) the growth of wireless wide-area networking and fleet 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) unexpected liabilities or expenses; (7) the Company’s ability to introduce new products and services in a timely manner, including the ability to develop and launch 5G technology at the speed and functionality required by our customers; (8) litigation, regulatory and IP developments related to our products or components of our products; (9) dependence on a small number of customers for a significant portion of the Company’s revenues; and (10) 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
Non-GAAP Financial Measures
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.
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INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) |
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| Three Months Ended March 31, |
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| 2018 | 2017 | |||||||
| Net revenues: | ||||||||
| IoT & Mobile Solutions | $ | 28,880 | $ | 38,762 | ||||
| Enterprise SaaS Solutions | 17,853 | 16,627 | ||||||
| Total net revenues | 46,733 | 55,389 | ||||||
| Cost of net revenues: | ||||||||
| IoT & Mobile Solutions | 23,752 | 32,023 | ||||||
| Enterprise SaaS Solutions | 6,862 | 7,180 | ||||||
| Impairment of abandoned product line | 576 | — | ||||||
| Total cost of net revenues | 31,190 | 39,203 | ||||||
| Gross profit | 15,543 | 16,186 | ||||||
| Operating costs and expenses: | ||||||||
| Research and development | 4,976 | 6,289 | ||||||
| Sales and marketing | 5,415 | 7,157 | ||||||
| General and administrative | 6,495 | 12,037 | ||||||
| Amortization of purchased intangible assets | 964 | 904 | ||||||
| Restructuring charges, net of recoveries | 277 | 809 | ||||||
| Total operating costs and expenses | 18,127 | 27,196 | ||||||
| Operating loss | (2,584 | ) | (11,010 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense, net | (5,100 | ) | (4,156 | ) | ||||
| Other income (expense), net | 64 | (643 | ) | |||||
| Loss before income taxes | (7,620 | ) | (15,809 | ) | ||||
| Income tax provision | 440 | 305 | ||||||
| Net loss | (8,060 | ) | (16,114 | ) | ||||
| Less: Net loss attributable to noncontrolling interests | 10 | 14 | ||||||
| Net loss attributable to Inseego Corp. | $ | (8,050 | ) | $ | (16,100 | ) | ||
| Per share data: | ||||||||
| Net loss per share: | ||||||||
| Basic and diluted | $ | (0.13 | ) | $ | (0.28 | ) | ||
| Weighted-average shares used in computation of net loss per share: | ||||||||
| Basic and diluted | 60,721,518 | 57,480,210 | ||||||
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INSEEGO CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) |
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| March 31, 2018 |
December 31, 2017 |
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| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,112 | $ | 21,198 | ||||
| Restricted cash | 61 | 61 | ||||||
| Accounts receivable, net | 18,862 | 15,674 | ||||||
| Inventories, net | 15,025 | 20,403 | ||||||
| Prepaid expenses and other | 5,560 | 9,101 | ||||||
| Total current assets | 55,620 | 66,437 | ||||||
| Property, plant and equipment, net | 6,856 | 6,991 | ||||||
| Rental assets, net | 7,602 | 7,563 | ||||||
| Intangible assets, net | 38,568 | 38,671 | ||||||
| Goodwill | 39,279 | 37,681 | ||||||
| Other assets | 871 | 864 | ||||||
| Total assets | $ | 148,796 | $ | 158,207 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 20,349 | $ | 29,332 | ||||
| Accrued expenses and other current liabilities | 36,135 | 27,558 | ||||||
| DigiCore bank facilities | 3,060 | 3,075 | ||||||
| Total current liabilities | 59,544 | 59,965 | ||||||
| Long-term liabilities: | ||||||||
| Convertible senior notes, net | 86,843 | 84,773 | ||||||
| Term loan, net | 44,428 | 44,055 | ||||||
| Deferred tax liabilities, net | 5,520 | 5,261 | ||||||
| Other long-term liabilities | 1,697 | 9,768 | ||||||
| Total liabilities | 198,032 | 203,822 | ||||||
| Stockholders’ deficit: | ||||||||
| Common stock | 59 | 59 | ||||||
| Additional paid-in capital | 520,793 | 519,531 | ||||||
| Accumulated other comprehensive income | 7,781 | 4,604 | ||||||
| Accumulated deficit | (577,809 | ) | (569,759 | ) | ||||
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Total stockholders’ deficit attributable to Inseego Corp. |
(49,176 | ) | (45,565 | ) | ||||
| Noncontrolling interests | (60 | ) | (50 | ) | ||||
| Total stockholders’ deficit | (49,236 | ) | (45,615 | ) | ||||
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Total liabilities and stockholders’ deficit |
$ | 148,796 | $ | 158,207 | ||||
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INSEEGO CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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| Three Months Ended March 31, |
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| 2018 | 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (8,060 | ) | $ | (16,114 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 3,887 | 4,079 | ||||||
| Provision for bad debts, net of recoveries | 232 | 101 | ||||||
| Loss on impairment of abandoned product line | 576 | — | ||||||
| Provision for excess and obsolete inventory, net of recoveries | 820 | (29 | ) | |||||
| Share-based compensation expense | 1,142 | 1,091 | ||||||
| Amortization of debt discount and debt issuance costs | 2,443 | 2,348 | ||||||
| Loss on disposal of assets | 118 | 130 | ||||||
| Deferred income taxes | (4 | ) | 21 | |||||
| Unrealized foreign currency transaction loss (gain), net | (324 | ) | 37 | |||||
| Other | 382 | 291 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (3,141 | ) | (8,375 | ) | ||||
| Inventories | 2,798 | 397 | ||||||
| Prepaid expenses and other assets | 3,555 | (3,820 | ) | |||||
| Accounts payable | (9,093 | ) | 14,319 | |||||
| Accrued expenses, income taxes, and other | 289 | 2,347 | ||||||
| Net cash used in operating activities | (4,380 | ) | (3,177 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant and equipment | (326 | ) | (917 | ) | ||||
| Proceeds from the sale of property, plant and equipment | 25 | 58 | ||||||
| Purchases of intangible assets and additions to capitalized software development costs | (555 | ) | (855 | ) | ||||
| Net cash used in investing activities | (856 | ) | (1,714 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net repayment of DigiCore bank and overdraft facilities | (218 | ) | (84 | ) | ||||
| Net borrowings from revolving credit facility | — | 2,750 | ||||||
| Principal payments under capital lease obligations | (209 | ) | (241 | ) | ||||
| Principal payments on mortgage bond | (85 | ) | (70 | ) | ||||
| Proceeds from stock option exercises, net of taxes paid on vested restricted stock units | 382 | (785 | ) | |||||
| Net cash provided by (used in) financing activities | (130 | ) | 1,570 | |||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | 280 | (188 | ) | |||||
| Net decrease in cash, cash equivalents and restricted cash | (5,086 | ) | (3,509 | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of period | 21,259 | 9,894 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 16,173 | $ | 6,385 | ||||
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INSEEGO CORP. Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss) (In thousands, except per share data) (Unaudited) |
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| Three Months Ended March 31, 2018 |
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Net Income |
Income (Loss) |
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| GAAP net loss | $ | (8,060 | ) | $ | (0.13 | ) | ||
| Adjustments: | ||||||||
| Share-based compensation expense(a) | 1,142 | 0.02 | ||||||
| Purchased intangibles amortization(b) | 1,548 | 0.03 | ||||||
| Debt discount and issuance costs amortization | 2,443 | 0.04 | ||||||
| Restructuring charges, net of recoveries | 277 | — | ||||||
| Impairment of abandoned product line(c) | 576 | 0.01 | ||||||
| Non-GAAP net loss | $ | (2,074 | ) | $ | (0.03 | ) | ||
(a) Includes share-based compensation expense recorded under ASC Topic 718.
(b) Includes amortization of intangible assets purchased through acquisitions.
(c) Includes the additional write down of certain inventory related to product lines the Company abandoned during the fourth quarter of 2016.
See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.
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INSEEGO CORP. Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP Operating Costs and Expenses Three Months Ended March 31, 2018 (In thousands) (Unaudited) |
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| GAAP |
Share-based |
Purchased |
Restructuring |
Impairment |
Non-GAAP | ||||||||||||||||||
| Cost of net revenues | $ | 31,190 | $ | 54 | $ | 584 | $ | — | $ | 576 | $ | 29,976 | |||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Research and development | 4,976 | 215 | — | — | — | 4,761 | |||||||||||||||||
| Sales and marketing | 5,415 | 309 | — | — | — | 5,106 | |||||||||||||||||
| General and administrative | 6,495 | 564 | — | — | — | 5,931 | |||||||||||||||||
| Amortization of purchased intangible assets | 964 | — | 964 | — | — | — | |||||||||||||||||
| Restructuring charges, net of recoveries | 277 | — | — | 277 | — | — | |||||||||||||||||
| Total operating costs and expenses | $ | 18,127 | 1,088 | 964 | 277 | — | $ | 15,798 | |||||||||||||||
| Total | $ | 1,142 | $ | 1,548 | $ | 277 | $ | 576 | |||||||||||||||
(a) Includes share-based compensation expense recorded under ASC Topic 718.
(b) Includes amortization of intangible assets purchased through acquisitions.
(c) Includes the additional write down of certain inventory related to product lines the Company abandoned during the fourth quarter of 2016.
See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.
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INSEEGO CORP. Reconciliation of GAAP Loss before Income Taxes to Adjusted EBITDA (In thousands) (Unaudited) |
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| Three Months Ended March 31, 2018 |
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| Loss before income taxes | $ | (7,620 | ) | |
| Depreciation and amortization(a) | 3,887 | |||
| Share-based compensation expense(b) | 1,142 | |||
| Restructuring charges, net of recoveries | 277 | |||
| Impairment of abandoned product line(c) | 576 | |||
| Interest expense, net(d) | 5,100 | |||
| Other income, net(e) | (64 | ) | ||
| Adjusted EBITDA | $ | 3,298 | ||
(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 additional write down of certain inventory related to product lines the Company abandoned during the fourth quarter of 2016.
(d) Includes the amortization of debt discount and issuance costs related to the convertible senior notes and term loan.
(e) Includes foreign currency transaction gains and losses.
See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.
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INSEEGO CORP. Quarterly Net Revenues by Product Grouping (In thousands) (Unaudited) |
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| Three Months Ended | |||||||||||||||||||
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March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
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| IoT & Mobile Solutions | $ | 28,880 | $ | 29,708 | $ | 41,116 | $ | 43,265 | $ | 38,762 | |||||||||
| Enterprise SaaS Solutions | 17,853 | 16,826 | 16,345 | 16,648 | 16,627 | ||||||||||||||
| Total net revenues | $ | 46,733 | $ | 46,534 | $ | 57,461 | $ | 59,913 | $ | 55,389 | |||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180508006630/en/
Source:
Inseego Corp.
Media Contact:
Anette Gaven, +1 (619) 993-3058
Anette.Gaven@inseego.com
or
Investor Relations Contact:
MKR Group
Joo-Hun Kim, +1 (212) 868-6760
joohunkim@mkrir.com