Inseego reports Fourth Quarter and Full Year 2023 Financial Results and announces CEO transition

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Inseego Corp (0A52)

UK 100

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INSEEGO CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited)

	Three Months Ended December 31,						Year Ended December 31,
		2023			2022			2023			2022
Revenues:
Mobile solutions	$	16,029		$	21,469		$	80,498		$	143,524
Fixed wireless access solutions		12,411			16,467			54,900			43,602
Product revenues		28,440			37,936			135,398			187,126
Services and other		14,314			14,980			60,290			58,197
Total revenues		42,754			52,916			195,688			245,323
Cost of revenues:
Product		25,782			33,021			127,157			161,943
Services and other		3,496			4,082			16,077			16,471
Total cost of revenues		29,278			37,103			143,234			178,414
Gross profit		13,476			15,813			52,454			66,909
Operating costs and expenses:
Research and development		5,799			6,698			21,513			38,290
Sales and marketing		4,103			7,550			21,504			32,825
General and administrative		4,991			7,137			20,721			26,208
Depreciation and amortization		5,522			5,623			19,759			24,490
Impairment of capitalized software		4,124			3,014			5,239			3,014
Total operating costs and expenses		24,539			30,022			88,736			124,827
Operating loss		(11,063	)		(14,209	)		(36,282	)		(57,918	)
Other income (expense):
Interest expense, net		(2,170	)		(1,985	)		(9,072	)		(8,606	)
Other income (expense), net		(821	)		1,685			54			(1,910	)
Loss before income taxes		(14,054	)		(14,509	)		(45,300	)		(68,434	)
Income tax provision (benefit)		286			118			885			(465	)
Net loss		(14,340	)		(14,627	)		(46,185	)		(67,969	)
Series E preferred stock dividends and deemed dividends		(773	)		(707	)		(2,991	)		(2,736	)
Net loss attributable to common stockholders	$	(15,113	)	$	(15,334	)	$	(49,176	)	$	(70,705	)
Per share data:
Net loss per common share:
Basic and diluted (*)	$	(1.28	)	$	(1.42	)	$	(4.32	)	$	(6.59	)
Weighted-average shares used in computation of net loss per common share:
Basic and diluted (*)		11,809,306			10,813,619			11,372,069			10,726,933

(*) Adjusted retroactively for reverse stock split that occurred on January 24, 2024

INSEEGO CORP. CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)

	December 31,
		2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	7,519		$	7,143
Accounts receivable, net		22,616			25,259
Inventories		22,880			37,976
Prepaid expenses and other		5,211			7,978
Total current assets		58,226			78,356
Property, plant and equipment, net		2,758			5,390
Rental assets, net		5,083			4,816
Intangible assets, net		27,140			41,383
Goodwill		21,922			21,922
Operating lease right-of-use assets		5,412			6,662
Other assets		1,256			1,420
Total assets	$	121,797		$	159,949
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	24,795		$	29,018
Accrued expenses and other current liabilities		27,022			27,945
Revolving credit facility, net		4,094			—
Total current liabilities		55,911			56,963
Long-term liabilities:
2025 Notes, net		159,912			158,427
Revolving credit facility, net		—			7,851
Operating lease liabilities		5,039			5,903
Deferred tax liabilities, net		680			323
Other long-term liabilities		2,360			600
Total liabilities		223,902			230,067
Commitments and contingencies
Stockholders’ deficit:
Preferred stock		—			—
Common stock		12			11
Additional paid-in capital		810,138			793,952
Accumulated other comprehensive loss		(5,327	)		(6,329	)
Accumulated deficit		(906,928	)		(857,752	)
Total stockholders’ deficit		(102,105	)		(70,118	)
Total liabilities and stockholders’ deficit	$	121,797		$	159,949

INSEEGO CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	Year Ended December 31,
		2023			2022
Cash flows from operating activities:
Net loss	$	(46,185	)	$	(67,969	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		22,522			27,206
Fair value adjustment on derivative instrument		—			(926	)
Provision for expected credit losses		446			189
Impairment of capitalized software		5,239			3,014
Provision for excess and obsolete inventory		9,562			2,614
Write-off of capitalized inventory order fees		1,275			—
Impairment of operating lease right-of-use assets		469			—
Share-based compensation expense		7,444			17,875
Amortization of debt discount and debt issuance costs		1,953			2,960
Loss on debt conversion and extinguishment, net		—			450
Deferred income taxes		388			(570	)
Non-cash operating lease expense		1,726			1,268
Changes in assets and liabilities, net of effects of divestiture:
Accounts receivable		1,891			2,441
Inventories		669			(3,065	)
Prepaid expenses and other assets		2,441			5,642
Accounts payable		(1,860	)		(26,313	)
Accrued expenses other liabilities		1,110			3,450
Operating lease liabilities		(1,925	)		(1,555	)
Net cash provided by (used in) operating activities		7,165			(33,289	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(704	)		(1,481	)
Additions to capitalized software development costs and purchases of intangible assets		(9,465	)		(11,838	)
Net cash used in investing activities		(10,169	)		(13,319	)
Cash flows from financing activities:
Net repayment of bank and overdraft facilities		(186	)		(569	)
Net (repayments) borrowings on asset-backed revolving credit facility		(3,757	)		7,851
Payment of debt issuance costs on asset-backed revolving credit facility		—			(1,126	)
Principal payments under finance lease obligations		—			(62	)
Principal payments on financed assets		—			(1,567	)
Proceeds from a public offering, net of issuance costs		6,057			—
Proceeds from stock option exercises and ESPP		97			900
Net cash provided by financing activities		2,211			5,427
Effect of exchange rates on cash		1,169			(1,488	)
Net increase (decrease) in cash, cash equivalents and restricted cash		376			(42,669	)
Cash, cash equivalents and restricted cash, beginning of period		7,143			49,812
Cash and cash equivalents, end of period	$	7,519		$	7,143

INSEEGO CORP. Reconciliation of GAAP Gross Margin and Operating Costs and Expenses to Non-GAAP Gross Margin and Operating Costs and Expenses Three Months Ended December 31, 2023 (In thousands) (Unaudited)

	GAAP			Share-based compensation expense		Impairment of Capitalized Software		Inventory adjustment - E&O and contract manufacturer liability		Purchased intangibles amortization		Non-GAAP
Revenues	$	42,754										$	42,754
Cost of revenues		29,278		$	115	$	—	$	3,369	$	—		25,794
Gross Margin	$	13,476										$	16,960
Gross Margin %		31.5	%										39.7	%

Total operating costs and expenses	$	24,539		$	1,299	$	4,124	$	—	$	423	$	18,693


See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP. Reconciliation of GAAP Gross Margin and Operating Costs and Expenses to Non-GAAP Gross Margin and Operating Costs and Expenses Twelve Months Ended December 31, 2023 (In thousands) (Unaudited)

	GAAP			Share-based compensation expense		Impairment of Capitalized Software		Inventory adjustment - E&O and contract manufacturer liability		Write-off of Capitalized Inventory Fees		Purchased intangibles amortization		Non-GAAP
Revenues	$	195,688												$	195,688
Cost of revenues		143,234		$	772	$	—	$	16,340	$	924	$	—		125,198
Gross Margin	$	52,454												$	70,490
Gross Margin %		26.8	%												36.0	%

Total operating costs and expenses	$	88,736		$	6,673	$	5,239	$	—	$	—	$	1,699	$	75,125


See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP. Reconciliation of GAAP Net Loss Attributable to Common Shareholders to Adjusted EBITDA (In thousands) (Unaudited)

	Three Months Ended December 31, 2023			Year Ended December 31, 2023
GAAP net loss attributable to common stockholders	$	(15,113	)	$	(49,176	)
Preferred stock dividends		773			2,991
Income tax provision (benefit)		286			885
Interest expense, net		2,170			9,072
Other income (expense), net		821			(54	)
Depreciation and amortization		6,288			22,522
Share-based compensation expense		1,414			7,444
Impairment of capitalized software		4,124			5,239
Impairment of operating lease right-of-use assets		—			469
Inventory adjustments - E&O and contract manufacturer liability		3,369			16,425
Write-off of capitalized inventory order fees		—			924
Adjusted EBITDA	$	4,132		$	16,741


See “Non-GAAP Financial Measures” for information regarding our use of Non-GAAP financial measures.

INSEEGO CORP. Supplemental Statement of Operations Data for 2023 (In thousands) (Unaudited)

	Year Ended			Three Months Ended
	December 31, 2023			December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023
Mobile solutions	$	80,498		$	16,029		$	22,534		$	18,895		$	23,040
Fixed wireless access solutions		54,900			12,411			11,114			19,505			11,870
Product revenues		135,398			28,440			33,648			38,400			34,910
Services and other		60,290			14,314			14,935			15,157			15,884
Total revenues		195,688			42,754			48,583			53,557			50,794
Cost of revenues:
Product		127,157			25,782			42,788			30,620			27,967
Services and other		16,077			3,496			3,900			4,041			4,640
Total cost of revenues		143,234			29,278			46,688			34,661			32,607
Gross profit		52,454			13,476			1,895			18,896			18,187

Gross profit margin (%)
Product		6	%		9	%		(27	)%		20	%		20	%
Services and other		73	%		76	%		74	%		73	%		71	%
Total		27	%		32	%		4	%		35	%		36	%

Operating costs and expenses:
Research and development		21,513			5,799			5,673			6,266			3,775
Sales and marketing		21,504			4,103			5,148			5,787			6,466
General and administrative		20,721			4,991			4,575			5,431			5,724
Depreciation and amortization		19,759			5,522			4,240			4,688			5,309
Impairment of capitalized software		5,239			4,124			611			—			504
Total operating costs and expenses		88,736			24,539			20,247			22,172			21,778
Operating loss		(36,282	)		(11,063	)		(18,352	)		(3,276	)		(3,591	)
Other income (expense):
Interest expense, net		(9,072	)		(2,170	)		(2,891	)		(2,014	)		(1,997	)
Other income (expense), net		54			(821	)		(578	)		658			795
Loss before income taxes		(45,300	)		(14,054	)		(21,821	)		(4,632	)		(4,793	)
Income tax provision (benefit)		885			286			(16	)		304			311
Net loss		(46,185	)		(14,340	)		(21,805	)		(4,936	)		(5,104	)
Series E preferred stock dividends and deemed dividends		(2,991	)		(773	)		(756	)		(739	)		(723	)
Net loss attributable to common stockholders	$	(49,176	)	$	(15,113	)	$	(22,561	)	$	(5,675	)	$	(5,827	)