Exhibit 10.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
On February 20, 2024, Inseego Corp. (the “Company”) entered into a fourth amendment (the “Fourth Amendment”) of the Company’s Loan and Security Agreement (the “Credit Agreement”) with Siena Lending Group LLC, as lender. The Fourth Amendment relaxed the financial covenants under the Credit Agreement by decreasing the minmum liquidity level the Company are required to maintain from $10 million to $8 million. No costs were incurred by the Company in connection with the Fourth Amendment.
The foregoing description of the Fourth Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Fourth Amendment, a copy of which is filed as exhibit 10.1 to this Current Report on Form 8-K.
Item 2.02. Results of Operations and Financial Condition.
The information in “Item 2.02 Results of Operations and Financial Condition” of this Current Report on Form 8-K and in Exhibit 99.1, attached hereto, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may be incorporated by reference in a filing under the Exchange Act or the Securities Act of 1933, as amended, only if such subsequent filing specifically references such disclosure in this Form 8-K.
On February 21, 2024, the Company issued a press release containing preliminary financial results for the year and quarter ended December 31, 2023.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 19, 2024, Ashish Sharma resigned as Chief Executive Officer and President of the Company, to be effective as of February 23, 2024. In addition, the Company’s board of directors (the “Board”) appointed Philip G. Brace, a member of the Board, to the newly-created role of Executive Chairman, effective as of February 19, 2024 and to continue until the earlier of six (6) months or a permanent chief executive officer and president is hired.
Mr. Brace, age 53, joined the Board in September 2023. Mr. Brace has an extensive technology and operations background. His experience at technology companies over the past 30 years includes roles in a wide array of functional areas, including engineering, software, hardware, and sales and marketing. Most recently, Mr. Brace served as president and CEO of Sierra Wireless Inc. from July 2021 until its sale to Semtech Corporation in January 2023. His previous executive roles include Executive Vice President at Veritas Technologies, President of Seagate Technology’s Cloud Systems and Electronic Solutions, Executive Vice President at LSI Corporation, and General Manager at Intel Corporation. Mr. Brace currently serves on the board of directors of Lantronix, Inc. and Blackberry Limited. Mr. Brace holds a Bachelor’s degree in Applied Science from the University of Waterloo and a Master’s degree in Electrical Engineering from California State University, Sacramento.
In consideration for his service as Executive Chairman, the Board has approved a temporary increase in Mr. Brace’s director compensation to $20,000 per month. In addition, the Board will award Mr. Brace a one-time special equity award in the form of RSUs, to be granted upon the completion of Mr. Brace’s service as Executive Chairman, with an economic value of $50,000 per month of service in such capacity that will vest immediately upon grant.
In connection with his departure from the Company, Mr. Sharma will be entitled to receive the severance and other benefits described in the previously-disclosed Change in Control and Severance Agreement, dated September 25, 2017, between the Company and Mr. Sharma, subject to the conditions contained therein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following Exhibits are filed with this report:
| 10.1 | Fourth Amendment, dated as of February 8, 2024, to Loan and Security Agreement, dated as of August 5, 2022, among Siena Lending Group LLC (as Lender), Inseego Wireless, Inc., and Inseego North America LLC (as Borrowers), and Inseego Corp. (as Guarantor). | |
| 99.1 | Press release dated February 21, 2024. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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INSEEGO CORP.
| |
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By: /s/ Steven Gatoff | |
| Name: Steven Gatoff Title: Chief Financial Officer | |
Date: February 21, 2024
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Exhibit 10.1
Exhibit 99.1
Inseego reports Fourth Quarter and Full Year 2023 Financial Results and announces CEO transition
Q4 2023 revenue of $42.8 million
Q4 2023 Adjusted EBITDA of $4.1 million
Fourth consecutive quarter of positive Adjusted EBITDA with $16.7 million in positive Adjusted EBITDA in 2023
Philip Brace appointed Executive Chairman
SAN DIEGO—February 21, 2024—Inseego Corp. (Nasdaq: INSG) (the “Company”), a technology leader in 5G and 4G mobile and fixed wireless solutions for mobile network operators, Fortune 500 enterprises, SMBs, and consumers, today reported its results for the fourth quarter and year ended December 31, 2023. The Company reported fourth quarter revenue of $42.8 million, GAAP operating loss of $11.1 million, GAAP net loss of $14.3 million, GAAP net loss of $1.28 per share, and Adjusted EBITDA of positive $4.1 million. Unrestricted cash and cash equivalents at December 31, 2023 were $7.5 million.
Inseego also announced that Ashish Sharma has resigned as Chief Executive Officer and President, effective February 23, 2024, to pursue other interests, and that Philip Brace has been appointed to the newly created role of Executive Chairman, effective immediately. Among other responsibilities, as Executive Chairman, Brace will be leading the Board of Directors’ search for a new permanent CEO.
"Inseego is well positioned to capitalize on the growing FWA market and the changes being made today are in support of leading the company to execute on this next phase,” said Philip Brace. "I was excited about the possibilities ahead when I joined the Board six months ago, and I look forward to driving the business forward in this new role as Executive Chairman on an interim basis."
Board Chairman, Jeff Tuder also commented: "We are really pleased that Phil has agreed to take on this expanded role as Executive Chairman over the next few quarters. Phil has been a tremendous addition to our Board since he joined this past September, and we are confident that his deep industry experience and product expertise will be a tremendous asset to Inseego and its leadership team during this important period.” Tuder continued, "On behalf of the entire Board, I would like to thank Ashish for his contributions to Inseego over the past six years and wish him success in his next chapter.”
Q4 and Full Year 2023 Financial Highlights
| – | Revenue for Q4 2023 was $42.8 million; full year 2023 revenue was $195.7 million. |
| – | Adjusted EBITDA for Q4 2023 was $4.1 million; full year 2023 Adjusted EBITDA was $16.7 million. |
| – | GAAP gross margin for Q4 2023 was 31.5%, which was impacted by non-cash inventory reserves taken during the quarter. Non-GAAP gross margin for Q4 2023 increased year-over-year from 30.3% to 39.7% as the revenue mix continues to shift to higher-margin products. |
| – | Cash decreased in Q4 2023 due to anticipated changes in working capital. |
| – | On February 20, 2024 the Company entered into an amendment of its Credit Agreement. The amendment relaxed the financial covenants under the Credit Agreement by decreasing the Minimum Liquidity Covenant from $10 million to $8 million. This will allow the Company to have increased availability to borrow under the Credit Agreement. The amendment was done at no cost to the Company. |
| – | The Company is now reporting revenues in two revenue categories: Product Revenue (consisting of Mobile solutions and Fixed wireless access (“FWA”) solutions); and Services and Other Revenue - all prior periods have been reclassified to show revenue in these categories. |
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Q4 2023 Business Highlights
| – | Announced the launch of the Inseego Wavemaker 5G indoor router FX3100 for T-Mobile for Business, successfully transitioning from our 1st generation to our 2nd generation 5G FWA, unlocking new business opportunities with increased demand for new features and functionality. |
| – | Achieved technical acceptance of 2nd generation 5G outdoor CPE with UScellular, with a planned launch in the second quarter of 2024. |
| – | Received new awards for MiFi X PRO 5G mobile hotspot, and launched with multiple operators in North America. |
“We remain committed to delivering profitability as we invest for growth in FWA,” said Steven Gatoff, Chief Financial Officer of Inseego. “While we’re pleased with delivering revenue and Adjusted EBITDA above guidance, we’re hyper-focused on driving revenue growth as we move into 2024.”
Q1 2024 Guidance
| – | Total revenue in the range of $40.0 million to $42.0 million. |
| – | Adjusted EBITDA in the range of $2.5 million to $3.0 million. |
Conference Call Information
Inseego will host a conference call and live webcast today at 5:00 p.m. ET. A Q&A session will be held live directly after the prepared remarks. To access the conference call:
| • | Online, visit https://investor.inseego.com/events-presentations |
| • | Phone-only participants can pre-register by navigating to https://dpregister.com/sreg/10186208/fb845e01a0 |
| • | Those without internet access or unable to pre-register may dial in by calling: |
| • | In the United States, call 1-844-282-4463 |
| • | International parties can access the call at 1-412-317-5613 |
An audio replay of the conference call will be available one hour after the call through March 6, 2024. To hear the replay, parties in the United States may call 1-877-344-7529 and enter access code 6171170 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 the industry leader in 5G Enterprise cloud WAN solutions, with millions of end customers and thousands of enterprise and SMB customers on its 4G, 5G, and cloud platforms. Inseego’s 5G Edge Cloud combines the industry’s best 5G technology, rich cloud networking features, and intelligent edge applications. Inseego powers new business experiences by connecting distributed sites and workforces, securing enterprise data, and improving business outcomes with intelligent operational visibility---all over a 5G network. For more information on Inseego, visit www.inseego.com #Putting5GtoWork
©2024. Inseego Corp. All rights reserved. The Inseego name and logo are registered trademarks of Inseego Corp. Other company, product, or service names mentioned herein are the trademarks of their respective owners.
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 future business outlook, the future demand for our products, and other statements that are not purely historical facts are forward-looking. These forward-looking statements are based on management’s current expectations, assumptions, estimates, and projections. They are subject to significant risks and uncertainties that could cause 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.
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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 and our ability to accurately forecast; (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) our ability to develop sales channels and to onboard channel partners; (5) dependence on a small number of customers for a significant portion of the Company’s revenues and accounts receivable; (6) increased competition and pricing pressure from participants in the markets in which the Company is engaged; (7) dependence on third-party manufacturers and key component suppliers worldwide; (8) the impact of fluctuations of foreign currency exchange rates; (9) the impact of supply chain challenges on our ability to source components and manufacture our products; (10) unexpected liabilities or expenses; (11) 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; (12) litigation, regulatory and IP developments related to our products or components of our products; (13) the Company’s ability to raise additional financing when the Company requires capital for operations or to satisfy corporate obligations; (14) 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 implementations; (15) the global semiconductor shortage and any related price increases or supply chain disruptions, (16) the potential impact of COVID-19 or other global public health emergencies on the business, (17) the impact of high rates of inflation and rising interest rates, and (18) the impact of geopolitical instability on our business.
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 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, even if new information becomes available or other events occur in the future, except as otherwise required under applicable law and our ongoing reporting obligations under the Securities Exchange Act of 1934, as amended.
Non-GAAP Financial Measures
Inseego Corp. has provided financial information in this press release that has not been prepared in accordance with GAAP. Adjusted EBITDA and non-GAAP operating costs and expenses, for example, exclude preferred stock dividends, share-based compensation expense, amortization of intangible assets purchased through acquisitions, amortization of discount and issuance costs related to our 2025 Notes and revolving credit facility, fair value adjustments on derivative instruments, and other non-recurring expenses. Adjusted EBITDA excludes interest, taxes, depreciation, amortization, impairment of capitalized software, impairment of long-lived assets, certain other non-recurring expenses and foreign exchange gains and losses.
Adjusted EBITDA and non-GAAP operating costs and expenses 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. They 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 these non-GAAP financial measures because we consider them to be an important supplemental performance measure.
We use these non-GAAP financial measures to make operational decisions, evaluate our performance, prepare forecasts and determine compensation. Further, management and investors benefit from referring to these non-GAAP financial measures in assessing our 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 our stock price, stock market volatility, expected option term and risk-free interest rates, all of which are difficult to estimate. In calculating non-GAAP financial measures, we exclude certain non-cash and one-time items to facilitate comparability of our operating performance on a period-to-period basis because such expenses are not, in our view, related to our ongoing operational performance. We use this view of our operating performance to compare it with the business plan and individual operating budgets and in the allocation of resources.
We believe that these non-GAAP financial measures are helpful to investors in providing greater transparency to the information used by management in its operational decision-making. The Company believes that using these non-GAAP financial measures also facilitates comparing our underlying operating performance with other companies in our industry, which use similar non-GAAP financial measures to supplement their GAAP results.
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In the future, we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and the 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 material limitations are associated with using 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 in this press release with our GAAP financial results.
Investor Relations Contact:
IR@inseego.com
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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
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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 | ||||
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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 | ||||
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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.
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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.
| 9 |
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.
| 10 |
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 | ) | |||||
| 11 |
INSEEGO CORP.
Supplemental Statement of Operations Data for 2022
(In thousands)
(Unaudited)
| Year Ended | Three Months Ended | |||||||||||||||||||
| December 31, 2022 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||
| Mobile solutions | $ | 143,524 | $ | 21,469 | $ | 40,292 | $ | 37,469 | $ | 44,294 | ||||||||||
| Fixed wireless access solutions | 43,602 | 16,467 | 14,173 | 9,935 | 3,027 | |||||||||||||||
| Product revenues | 187,126 | 37,936 | 54,465 | 47,404 | 47,321 | |||||||||||||||
| Services and other | 58,197 | 14,980 | 14,702 | 14,452 | 14,063 | |||||||||||||||
| Total revenues | 245,323 | 52,916 | 69,167 | 61,856 | 61,384 | |||||||||||||||
| Cost of revenues: | ||||||||||||||||||||
| Product | 161,943 | 33,021 | 46,777 | 39,953 | 42,192 | |||||||||||||||
| Services and other | 16,471 | 4,082 | 4,434 | 4,011 | 3,944 | |||||||||||||||
| Total cost of revenues | 178,414 | 37,103 | 51,211 | 43,964 | 46,136 | |||||||||||||||
| Gross profit | 66,909 | 15,813 | 17,956 | 17,892 | 15,248 | |||||||||||||||
| Gross profit margin (%) | ||||||||||||||||||||
| Product | 13% | 13% | 14% | 16% | 11% | |||||||||||||||
| Services and other | 72% | 73% | 70% | 72% | 72% | |||||||||||||||
| Total | 27% | 30% | 26% | 29% | 25% | |||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Research and development | 38,290 | 6,698 | 10,211 | 8,566 | 12,815 | |||||||||||||||
| Sales and marketing | 32,825 | 7,550 | 8,147 | 7,554 | 9,574 | |||||||||||||||
| General and administrative | 26,208 | 7,137 | 5,210 | 5,796 | 8,065 | |||||||||||||||
| Depreciation and amortization | 24,490 | 5,623 | 6,297 | 6,009 | 6,561 | |||||||||||||||
| Impairment of capitalized software | 3,014 | 3,014 | – | – | – | |||||||||||||||
| Total operating costs and expenses | 124,827 | 30,022 | 29,865 | 27,925 | 37,015 | |||||||||||||||
| Operating loss | (57,918 | ) | (14,209 | ) | (11,909 | ) | (10,033 | ) | (21,767 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest expense, net | (8,606 | ) | (1,985 | ) | (2,034 | ) | (1,664 | ) | (2,923 | ) | ||||||||||
| Other income (expense), net | (1,910 | ) | 1,685 | (1,758 | ) | (982 | ) | (855 | ) | |||||||||||
| Loss before income taxes | (68,434 | ) | (14,509 | ) | (15,701 | ) | (12,679 | ) | (25,545 | ) | ||||||||||
| Income tax provision (benefit) | (465 | ) | 118 | 42 | (303 | ) | (322 | ) | ||||||||||||
| Net loss | (67,969 | ) | (14,627 | ) | (15,743 | ) | (12,376 | ) | (25,223 | ) | ||||||||||
| Series E preferred stock dividends and deemed dividends | (2,736 | ) | (707 | ) | (691 | ) | (677 | ) | (661 | ) | ||||||||||
| Net loss attributable to common stockholders | $ | (70,705 | ) | $ | (15,334 | ) | $ | (16,434 | ) | $ | (13,053 | ) | $ | (25,884 | ) | |||||
| 12 |