[March 09, 2017] |
|
Inseego Reports Fourth Quarter 2016 Financial Results
Inseego Corp. (Nasdaq: INSG) (the "Company"), a leading provider of
solutions for the Internet of Things ("IoT"), including
software-as-a-service ("SaaS") solutions, announced financial results
for the fourth quarter ended December 31, 2016.
"Our fourth quarter business performance once again demonstrates the
financial and market strength of our portfolio of SaaS, software and
services solutions for the Internet of Things. Our overall subscriber
base for our comprehensive IoT solutions increased to 620,000 total
subscribers, driven by 20.7% year-over-year growth in subscribers of our
Ctrack telematics offerings," said Sue Swenson, Chair and CEO of
Inseego. "We continue to set company records for our high-margin SaaS,
software and services revenues, with 18.3% year-over-year growth in
these recurring revenues in the fourth quarter. I am pleased that we are
already achieving so many of our strategic goals, while we await
regulatory approval from CFIUS to close the pending sale of our MiFi
mobile broadband business, which will complete our transformation into a
pure-play IoT solutions provider."
Fourth Quarter 2016 Financial Highlights
The Company announced the following U.S. GAAP ("GAAP") financial results
for the fourth quarter of 2016:
-
Revenue decreased by 14.0% to $52.9 million in the fourth quarter of
2016, compared to $61.5 million in the fourth quarter of 2015. Revenue
from the Company's Ctrack™ products, which include a mix of hardware
and SaaS, software and services sold as a bundled telematics solution,
were greater than the midpoint of the Company's fourth quarter
guidance range, growing by 1.8% to $16.9 million in the fourth quarter
of 2016, from $16.6 million in the fourth quarter of 2015. The
Company's overall revenue decrease was driven by reduced standalone
hardware sales, particularly from the Company's MiFi mobile broadband
business, which is subject to a pending divestiture transaction to
T.C.L. Industries Holdings (H.K.) Limited and Jade Ocean Global
Limited.
-
Revenue from SaaS, software and services increased by 18.3% to $14.9
million in the fourth quarter of 2016, from $12.6 million in the
fourth quarter of 2015, as the Company continued its focus on IoT
SaaS, software and services solutions, including its Ctrack telematics
solutions. Revenue from SaaS, software and services increased to a
record 28.2% of the Company's total revenue in the fourth quarter of
2016, compared to 20.5% of total revenue in the fourth quarter of 2015.
-
Revenue from hardware products was $38.0 million in the fourth quarter
of 2016, a decrease of 22.3% from $48.9 million in the fourth quarter
of 2015. Sales of the Company's MiFi mobile broadband products in the
fourth quarter of 2016 were lower than the Company expected, primarily
as a result of the delayed launch of the Company's new Verizon
Jetpack® Mobile Hotspot MiFi 7730L, which occurred in January 2017
rather than in the fourth quarter of 2016 as had been planned. In
addition, the Company continues to strategically de-emphasize lower
margin hardware-only sales in favor of bundled solutions that include
higher-margin SaaS, software and services offerings.
-
Net loss was ($27.4 million), or ($0.50) per share, in the fourth
quarter of 2016, compared to a net loss of ($14.4 million), or ($0.26)
per share, in the fourth quarter of 2015. Net loss in the fourth
quarter of 2016 includes a $11.5 million impairment charge related to
the Company's Enfora® hardware product line as the Company exits its
Enfora standalone hardware business while focusing on the divestiture
of its MiFi mobile broadband business, and $8.5 million of charges
related to the Company's 2015 acquisition activities and its current
divestiture activities.
-
As of December 31, 2016, the Company had cash and cash equivalents of
$9.9 million, declining from $17.2 million at September 30, 2016.
The Company also announced the following non-GAAP financial results for
the fourth quarter of 2016. A reconciliation of these non-GAAP financial
measures to the Company's GAAP financial results is included in the
tables accompanying this news release:
-
The Company's overall non-GAAP gross margin increased to a record
39.9% in the fourth quarter of 2016, compared to 33.4% in the fourth
quarter of 2015, as the Company continued its transition toward an
improved mix of higher-margin IoT solutions with significant SaaS and
recurring revenue components. Non-GAAP gross profit was $21.1 million
in the fourth quarter of 2016, an increase of 2.4% compared to
$20.6 million in the fourth quarter of 2015, as the Company's
transition to higher margin SaaS, software and services solutions
enabled the Company to generate an increased non-GAAP gross profit
despite a $10.9 million decline in hardware revenue.
-
Non-GAAP gross margin on SaaS, software and services increased to
69.5% in the fourth quarter of 2016, compared to 63.6% in the fourth
quarter of 2015, primarily driven by revenues from high-margin SaaS
and software solutions delivered by Ctrack as well as Inseego's North
American sales from its Eugene, Oregon operations.
-
Non-GAAP gross margin on hardware products increased to 28.2% in the
fourth quarter of 2016, compared to 25.7% in the fourth quarter of
2015, primarily as a result of reduced sales of lower-margin legacy
hardware products in the fourth quarter of 2016.
-
The Company's Ctrack telematics solutions which include a mix of
hardware, SaaS, software and services, generated non-GAAP gross
margins of 64.5% in the fourth quarter of 2016, compared to 60.5% in
the fourth quarter of 2015, continuing to drive the Company's overall
gross margin expansion.
-
Non-GAAP operating expenses decreased by 11.8% to $20.2 million in the
fourth quarter of 2016, compared to $22.9 million in the fourth
quarter of 2015, primarily due to restructuring initiatives undertaken
during 2016 to improve the Company's strategic focus on its most
profitable business lines while de-prioritizing certain hardware-only
product lines to non-carrier customers.
-
Adjusted EBITDA increased to $2.6 million in the fourth quarter of
2016, compared to ($0.1 million) in the fourth quarter of 2015,
primarily due to the Company's emphasis on growing SaaS, software and
services revenue, while also rationalizing the costs associated with
its hardware business in an effort to generate improved performance
across multiple areas of the Company. Adjusted EBITDA contributed by
Ctrack's telematics solutions was $2.4 million in the fourth quarter
of 2016 compared to $2.5 million in the fourth quarter of 2015.
-
Non-GAAP net loss for the fourth quarter of 2016 was ($2.8 million),
or ($0.05) per share, compared to ($2.3 million), or ($0.04) per
share, in the fourth quarter of 2015.
Other Key Metrics
|
|
Q4-2016
|
|
Q3-2016
|
|
Q4-2015
|
Revenue
|
|
|
|
|
|
|
SaaS, Software and Services Revenue
|
|
$14.9 million
|
|
$14.8 million
|
|
$12.6 million
|
Non-GAAP Gross Margin
|
|
69.5%
|
|
67.3%
|
|
63.6%
|
Hardware Revenue
|
|
$38.0 million
|
|
$46.1 million
|
|
$48.9 million
|
Non-GAAP Gross Margin
|
|
28.2%
|
|
29.5%
|
|
25.7%
|
IoT Revenue(1)
|
|
$24.2 million
|
|
$23.1 million
|
|
$31.8 million
|
Non-GAAP Gross Margin
|
|
60.4%
|
|
58.5%
|
|
44.2%
|
MiFi Revenue(1)
|
|
$28.7 million
|
|
$37.8 million
|
|
$29.7 million
|
Non-GAAP Gross Margin
|
|
22.7%
|
|
26.5%
|
|
21.9%
|
Subscribers
|
|
|
|
|
|
|
Ctrack Fleet Subscribers
|
|
187,000
|
|
|
182,000
|
|
|
157,850
|
Ctrack Non-Fleet Subscribers
|
|
245,000
|
|
|
229,000
|
|
|
200,200
|
Inseego North America Subscribers (f/k/a FW Subscribers)
|
|
188,000
|
|
|
179,000
|
|
|
162,170
|
Total Consolidated Subscribers
|
|
620,000
|
|
|
590,000
|
|
|
520,220
|
__________________________
(1)
|
|
The Company currently places primary emphasis on its mix of SaaS,
software and services revenues as compared to its hardware revenues.
However, since the Company has historically reported its mix of MiFi
(or mobile computing) revenues as compared to its IoT (or M2M)
revenues, these metrics are presented as well. Commencing with the
first quarter of 2017, the Company will no longer report its IoT and
MiFi revenue metrics.
|
Divestiture of MiFi Mobile Broadband Business
On February 3, 2017, the Company announced that in connection with the
proposed sale of its MiFi mobile broadband business, with its
subsidiary, Novatel Wireless, Inc. ("Novatel Wireless"), to T.C.L.
Industries Holdings (H.K.) Limited and Jade Ocean Global Limited
("Purchasers", and together with the Company and Novatel Wireless, the
"Parties"), the Parties voluntarily withdrew and re-filed the Joint
Voluntary Notice ("JVN") that they had previously submitted to the
Committee on Foreign Investment in the United States ("CFIUS") under the
Defense Production Act of 1950 in order to provide additional time for
CFIUS to evaluate possible terms of mitigation which would allow the
transaction to be approved. Any proposed mitigation terms would also
need to be approved by the Parties before CFIUS would approve the
transaction.
On March 8, 2017, CFIUS informed the Parties that, with the conclusion
of the 30-day period for reviewing the re-filed JVN, CFIUS is
undertaking an investigation of the proposed transaction, to be
completed no later than April 24, 2017. In the interim, the Company will
continue to work cooperatively and diligently with CFIUS and the
Purchasers in an effort to obtain approval.
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 2017
reflects current business indicators and expectations as of the date of
this news release, including current exchange rates for foreign
currencies.
Given the pending divestiture of the Company's MiFi mobile broadband
business, the Company will not provide overall corporate guidance for
the first quarter of 2017. However, in order to provide visibility into
one of the Company's key post-divestiture businesses, the Company is
providing guidance as to Ctrack's anticipated contribution the Company's
overall results for the first quarter of 2017, as follows:
|
|
|
Ctrack First Quarter 2017 Outlook
|
Revenue
|
|
|
$15.5 million - $17.5 million
|
Non-GAAP Gross Margin
|
|
|
60% - 65%
|
Adjusted EBITDA
|
|
|
$2.0 million - $3.0 million
|
Conference Call Information
Inseego will host a conference call and live webcast for analysts and
investors today at 5:00 p.m. ET. 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
Inseego will offer a live audio webcast of the conference call, which
will be accessible from the "Investors" section of the Company's website
at investor.inseego.com.
The webcast will be archived for a period of 90 days. An audio replay of
the conference call will also be available beginning one hour after the
call, through March 23, 2017. To hear the replay, parties in the United
States may call 1-877-344-7529 and enter access code 10097513#.
International parties may call 1-412-317-0088 and enter the same code.
About Inseego Corp.
Inseego Corp. (Nasdaq: INSG) is a leading global provider of
software-as-a-service (SaaS) and solutions for the Internet of Things
(IoT). The Company sells its telematics solutions under the Ctrack
brand, including its fleet management, asset tracking and monitoring,
stolen vehicle recovery, and usage-based insurance platforms. Inseego
Corp. also sells business connectivity solutions and device management
services. Inseego Corp. has over 30 years of experience providing
customers with secure and insightful solutions and analytics, with
approximately 620,000 global subscribers, including 187,000 fleet
management subscribers. The Company is headquartered in San Diego,
California. www.inseego.com
Twitter @inseego
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, 2017 and our future business outlook, the
future demand for our products, the expected timing and impact of
anticipated divestiture and restructuring activities, prospects for
CFIUS approval and satisfaction of other closing conditions related to
the sale of the MiFi mobile broadband business, statements made by Sue
Swenson, 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) failure to obtain CFIUS approval,
satisfy other closing conditions and complete the sale of the Company's
MiFi mobile broadband business in a timely manner on the terms
previously approved by the Company's stockholders, (2) the future demand
for wireless broadband access to data and fleet management software and
services, (3) the growth of wireless wide-area networking and fleet
management software and services, (4) 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,
(5) increased competition and pricing pressure from participants in the
markets in which the Company is engaged, (6) dependence on third party
manufacturers and key component suppliers worldwide, (7) the success of
the Company's corporate development activities, including divestitures
of lines of business that are not essential to the Company's strategy,
(8) unexpected liabilities or expenses, (9) the Company's ability to
introduce new products and services in a timely manner, (10) litigation,
regulatory and IP developments related to our products or components of
our products, (11) dependence on a small number of customers for a
significant portion of the Company's revenues and (12) 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.
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 gross
profit, gross margin, operating expenses, adjusted EBITDA, net loss and
net loss per share exclude restructuring charges, share-based
compensation expense, amortization of the debt discount and debt
issuance costs associated with the Company's convertible notes, an
impairment charge related to the Company's abandoned Enfora hardware
product line as the Company exits its Enfora standalone hardware
business, a legal settlement in September 2016 related to the Company's
hardware products, and charges related to the Company's acquisition and
divestiture activities. Adjusted EBITDA also excludes interest, taxes,
depreciation and amortization (unrelated to acquisitions and the
convertible notes), and foreign currency transaction gains and losses.
Non-GAAP gross profit, gross margin, 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 gross profit, gross margin, operating expenses, net loss,
net loss per share or any other performance measure determined in
accordance with GAAP. We present non-GAAP gross profit, gross margin,
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 grants
issued to both current and new employees, the number of 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 gross
profit, gross margin, 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 gross profit, gross margin, 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.
(C) 2017 Inseego Corp. All rights reserved. The Inseego, Ctrack, FW,
Novatel Wireless and Enfora names and logos are trademarks of Inseego
Corp.
|
|
|
|
INSEEGO CORP.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands, except share and per share data)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net revenues:
|
|
|
|
|
|
|
|
Hardware
|
$
|
37,973
|
|
|
$
|
48,949
|
|
|
$
|
187,375
|
|
|
$
|
203,281
|
|
SaaS, software and services
|
14,946
|
|
|
12,564
|
|
|
56,180
|
|
|
17,661
|
|
Total net revenues
|
52,919
|
|
|
61,513
|
|
|
243,555
|
|
|
220,942
|
|
Cost of net revenues:
|
|
|
|
|
|
|
|
Hardware
|
27,541
|
|
|
38,062
|
|
|
136,936
|
|
|
153,815
|
|
SaaS, software and services
|
4,855
|
|
|
6,923
|
|
|
18,751
|
|
|
8,174
|
|
Impairment of abandoned product line
|
11,540
|
|
|
-
|
|
|
11,540
|
|
|
-
|
|
Total cost of net revenues
|
43,936
|
|
|
44,985
|
|
|
167,227
|
|
|
161,989
|
|
Gross profit
|
8,983
|
|
|
16,528
|
|
|
76,328
|
|
|
58,953
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
Research and development
|
6,407
|
|
|
7,311
|
|
|
30,655
|
|
|
35,446
|
|
Sales and marketing
|
5,720
|
|
|
8,496
|
|
|
29,782
|
|
|
20,899
|
|
General and administrative
|
17,643
|
|
|
10,990
|
|
|
52,387
|
|
|
34,452
|
|
Amortization of purchased intangible assets
|
1,015
|
|
|
1,030
|
|
|
3,927
|
|
|
2,126
|
|
Impairment of purchased intangible assets
|
-
|
|
|
-
|
|
|
2,594
|
|
|
-
|
|
Restructuring charges, net of recoveries
|
302
|
|
|
3,032
|
|
|
1,987
|
|
|
3,821
|
|
Total operating costs and expenses
|
31,087
|
|
|
30,859
|
|
|
121,332
|
|
|
96,744
|
|
Operating loss
|
(22,104
|
)
|
|
(14,331
|
)
|
|
(45,004
|
)
|
|
(37,791
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
Non-cash change in acquisition-related escrow
|
-
|
|
|
2,031
|
|
|
-
|
|
|
(8,286
|
)
|
Interest expense, net
|
(3,885
|
)
|
|
(3,845
|
)
|
|
(15,597
|
)
|
|
(7,164
|
)
|
Other income (expense), net
|
(572
|
)
|
|
1,786
|
|
|
414
|
|
|
1,128
|
|
Loss before income taxes
|
(26,561
|
)
|
|
(14,359
|
)
|
|
(60,187
|
)
|
|
(52,113
|
)
|
Income tax provision
|
859
|
|
|
42
|
|
|
381
|
|
|
181
|
|
Net loss
|
(27,420
|
)
|
|
(14,401
|
)
|
|
(60,568
|
)
|
|
(52,294
|
)
|
Less: Net loss (income) attributable to noncontrolling interests
|
19
|
|
|
8
|
|
|
(5
|
)
|
|
8
|
|
Net loss attributable to Inseego Corp.
|
$
|
(27,401
|
)
|
|
$
|
(14,393
|
)
|
|
$
|
(60,573
|
)
|
|
$
|
(52,286
|
)
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.50
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
(0.99
|
)
|
Weighted-average shares used in computation of net loss per share:
|
|
|
|
|
|
|
|
Basic and diluted
|
54,919,806
|
|
|
56,088,511
|
|
|
53,911,270
|
|
|
52,767,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSEEGO CORP.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands)
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
9,894
|
|
|
$
|
12,570
|
|
Accounts receivable, net
|
22,203
|
|
|
35,263
|
|
Short-term investments
|
-
|
|
|
1,267
|
|
Inventories, net
|
31,142
|
|
|
55,837
|
|
Prepaid expenses and other
|
5,208
|
|
|
6,039
|
|
Total current assets
|
68,447
|
|
|
110,976
|
|
Property, plant and equipment, net
|
8,392
|
|
|
8,812
|
|
Rental assets, net
|
7,003
|
|
|
6,155
|
|
Intangible assets, net
|
40,283
|
|
|
43,089
|
|
Goodwill
|
34,428
|
|
|
29,520
|
|
Other assets
|
163
|
|
|
201
|
|
Total assets
|
$
|
158,716
|
|
|
$
|
198,753
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
31,242
|
|
|
$
|
35,286
|
|
Accrued expenses and other current liabilities
|
27,897
|
|
|
25,613
|
|
DigiCore bank facilities
|
3,238
|
|
|
3,313
|
|
Total current liabilities
|
62,377
|
|
|
64,212
|
|
Long-term liabilities:
|
|
|
|
Convertible senior notes, net
|
90,908
|
|
|
82,461
|
|
Revolving credit facility
|
-
|
|
|
-
|
|
Deferred tax liabilities, net
|
4,439
|
|
|
3,475
|
|
Other long-term liabilities
|
18,719
|
|
|
18,142
|
|
Total liabilities
|
176,443
|
|
|
168,290
|
|
Stockholders' equity (deficit):
|
|
|
|
Common stock
|
54
|
|
|
53
|
|
Additional paid-in capital
|
507,616
|
|
|
502,337
|
|
Accumulated other comprehensive loss
|
(1,409
|
)
|
|
(8,507
|
)
|
Accumulated deficit
|
(524,024
|
)
|
|
(463,451
|
)
|
Total stockholders' equity (deficit) attributable to Inseego Corp.
|
(17,763
|
)
|
|
30,432
|
|
Noncontrolling interests
|
36
|
|
|
31
|
|
Total stockholders' equity (deficit)
|
(17,727
|
)
|
|
30,463
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
158,716
|
|
|
$
|
198,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSEEGO CORP.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(27,420
|
)
|
|
$
|
(14,401
|
)
|
|
$
|
(60,568
|
)
|
|
$
|
(52,294
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
3,217
|
|
|
3,839
|
|
|
14,053
|
|
|
8,323
|
|
Amortization of acquisition-related inventory step-up
|
|
-
|
|
|
3,332
|
|
|
1,829
|
|
|
4,097
|
|
Loss on impairment of purchased intangible assets
|
|
-
|
|
|
-
|
|
|
2,594
|
|
|
-
|
|
Provision for bad debts, net of recoveries
|
|
1,040
|
|
|
360
|
|
|
1,136
|
|
|
422
|
|
Loss on impairment of abandoned product line
|
|
11,540
|
|
|
-
|
|
|
11,540
|
|
|
-
|
|
Provision for excess and obsolete inventory
|
|
677
|
|
|
233
|
|
|
3,257
|
|
|
1,043
|
|
Share-based compensation expense
|
|
1,151
|
|
|
3,123
|
|
|
4,588
|
|
|
6,350
|
|
Amortization of debt discount and debt issuance costs
|
|
2,112
|
|
|
2,111
|
|
|
8,447
|
|
|
4,692
|
|
Gain on divestiture and sale of other assets, net of loss on
disposal of assets
|
|
(452
|
)
|
|
(50
|
)
|
|
(4,742
|
)
|
|
(50
|
)
|
Non-cash change in acquisition-related escrow
|
|
-
|
|
|
(2,031
|
)
|
|
-
|
|
|
8,286
|
|
Deferred income taxes
|
|
931
|
|
|
106
|
|
|
196
|
|
|
106
|
|
Non-cash equity earn-out compensation expense
|
|
5,804
|
|
|
-
|
|
|
7,913
|
|
|
-
|
|
Unrealized foreign currency transaction loss (gain), net
|
|
475
|
|
|
(1,298
|
)
|
|
3,513
|
|
|
(1,298
|
)
|
Other
|
|
(2,022
|
)
|
|
225
|
|
|
(1,839
|
)
|
|
225
|
|
Changes in assets and liabilities, net of effects from acquisitions
and divestiture:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
1,735
|
|
|
11,424
|
|
|
11,616
|
|
|
4,760
|
|
Inventories
|
|
(6,916
|
)
|
|
(9,999
|
)
|
|
(3,159
|
)
|
|
(3,960
|
)
|
Prepaid expenses and other assets
|
|
7,055
|
|
|
3,257
|
|
|
869
|
|
|
2,683
|
|
Accounts payable
|
|
(748
|
)
|
|
2,681
|
|
|
(7,825
|
)
|
|
(11,187
|
)
|
Accrued expenses, income taxes, and other
|
|
(4,809
|
)
|
|
(3,551
|
)
|
|
3
|
|
|
866
|
|
Net cash used in operating activities
|
|
(6,630
|
)
|
|
(639
|
)
|
|
(6,579
|
)
|
|
(26,936
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisition-related escrow
|
|
-
|
|
|
79,999
|
|
|
-
|
|
|
(8,275
|
)
|
Acquisitions, net of cash acquired
|
|
-
|
|
|
(76,928
|
)
|
|
(3,750
|
)
|
|
(85,991
|
)
|
Purchases of property, plant and equipment
|
|
(564
|
)
|
|
(979
|
)
|
|
(1,439
|
)
|
|
(1,975
|
)
|
Proceeds from the sale of property, plant and equipment
|
|
237
|
|
|
46
|
|
|
629
|
|
|
46
|
|
Proceeds from the sale of divested assets
|
|
-
|
|
|
-
|
|
|
11,300
|
|
|
-
|
|
Purchases of intangible assets and additions to capitalized software
development costs
|
|
(823
|
)
|
|
(933
|
)
|
|
(2,915
|
)
|
|
(1,157
|
)
|
Proceeds from the sale of short-term investments
|
|
-
|
|
|
265
|
|
|
1,210
|
|
|
265
|
|
Net cash provided by (used in) investing activities
|
|
(1,150
|
)
|
|
1,470
|
|
|
5,035
|
|
|
(97,087
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Gross proceeds from the issuance of convertible senior notes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
120,000
|
|
Payment of issuance costs related to convertible senior notes
|
|
-
|
|
|
(387
|
)
|
|
-
|
|
|
(3,927
|
)
|
Proceeds from the exercise of warrant to purchase common stock
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,644
|
|
Net borrowings from (repayments of) DigiCore bank facilities
|
|
125
|
|
|
1,581
|
|
|
(840
|
)
|
|
1,581
|
|
Net repayments of revolving credit facility
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,158
|
)
|
Payoff of acquisition-related assumed liabilities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,633
|
)
|
Principal payments under capital lease obligations
|
|
(181
|
)
|
|
(288
|
)
|
|
(903
|
)
|
|
(288
|
)
|
Principal payments on mortgage bond
|
|
(65
|
)
|
|
(59
|
)
|
|
(240
|
)
|
|
(59
|
)
|
Proceeds from stock option exercises and employee stock purchase
plan, net of taxes paid on vested restricted stock units
|
|
324
|
|
|
750
|
|
|
692
|
|
|
1,007
|
|
Net cash provided by (used in) financing activities
|
|
203
|
|
|
1,597
|
|
|
(1,291
|
)
|
|
119,167
|
|
Effect of exchange rates on cash and cash equivalents
|
|
306
|
|
|
(77
|
)
|
|
159
|
|
|
(427
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
(7,271
|
)
|
|
2,351
|
|
|
(2,676
|
)
|
|
(5,283
|
)
|
Cash and cash equivalents, beginning of period
|
|
17,165
|
|
|
10,219
|
|
|
12,570
|
|
|
17,853
|
|
Cash and cash equivalents, end of period
|
|
$
|
9,894
|
|
|
$
|
12,570
|
|
|
$
|
9,894
|
|
|
$
|
12,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSEEGO CORP.
|
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
(Loss)
|
(In thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended December 31, 2016
|
|
Year Ended December 31, 2016
|
|
Net Income (Loss)
|
|
Income (Loss) Per Share
|
|
Net Income (Loss)
|
|
Income (Loss) Per Share
|
GAAP net loss
|
$
|
(27,420
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(60,568
|
)
|
|
$
|
(1.12
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
Share-based compensation expense(a)
|
1,151
|
|
|
0.02
|
|
|
4,588
|
|
|
0.09
|
|
Purchased intangibles amortization(b)
|
1,533
|
|
|
0.03
|
|
|
6,049
|
|
|
0.11
|
|
Acquisition- and divestiture-related charges(c)
|
8,467
|
|
|
0.15
|
|
|
17,870
|
|
|
0.33
|
|
Convertible senior notes discount and issuance costs amortization
|
2,112
|
|
|
0.04
|
|
|
8,447
|
|
|
0.15
|
|
Restructuring charges
|
302
|
|
|
0.01
|
|
|
1,987
|
|
|
0.04
|
|
Legal settlement(d)
|
-
|
|
|
-
|
|
|
2,800
|
|
|
0.05
|
|
Impairment on abandoned product line(e)
|
11,540
|
|
|
0.21
|
|
|
11,540
|
|
|
0.21
|
|
Gain on divestiture of certain hardware modules and related assets
|
(488
|
)
|
|
(0.01
|
)
|
|
(4,988
|
)
|
|
(0.09
|
)
|
Non-GAAP net loss
|
$
|
(2,803
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(12,275
|
)
|
|
$
|
(0.23
|
)
|
(a)
|
|
Includes share-based compensation expense recorded under ASC Topic
718.
|
(b)
|
|
Includes amortization of intangible assets purchased through
acquisitions.
|
(c)
|
|
Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as the
amortization of the step-up to fair value of finished goods acquired
through acquisitions, non-cash equity earn-out compensation and
impairment charges primarily related to certain developed
technologies acquired with FW.
|
(d)
|
|
Includes a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.
|
(e)
|
|
Includes an impairment charge for the Company's abandoned Enfora
hardware product line.
|
|
|
|
|
|
|
See "Non-GAAP Financial Measures" for information regarding our use of
Non-GAAP financial measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSEEGO CORP.
|
Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
Operating Costs and Expenses
|
Three Months Ended December 31, 2016
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
Share-based compensation expense (a)
|
|
Purchased intangibles amortization (b)
|
|
Restructuring charges
|
|
Impairment of abandoned product line (c)
|
|
Acquisition- and divestiture- related
charges (d)
|
|
Non-GAAP
|
Cost of net revenues
|
|
$
|
43,936
|
|
|
$
|
79
|
|
|
$
|
518
|
|
|
$
|
-
|
|
|
$
|
11,540
|
|
|
$
|
-
|
|
|
$
|
31,799
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
6,407
|
|
|
206
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,201
|
Sales and marketing
|
|
5,720
|
|
|
114
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,606
|
General and administrative
|
|
17,643
|
|
|
752
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,467
|
|
|
8,424
|
Amortization of purchased intangible assets
|
|
1,015
|
|
|
-
|
|
|
1,015
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Restructuring charges
|
|
302
|
|
|
-
|
|
|
-
|
|
|
302
|
|
|
-
|
|
|
-
|
|
|
-
|
Total operating costs and expenses
|
|
$
|
31,087
|
|
|
1,072
|
|
|
1,015
|
|
|
302
|
|
|
-
|
|
|
8,467
|
|
|
$
|
20,231
|
Total
|
|
|
|
$
|
1,151
|
|
|
$
|
1,533
|
|
|
$
|
302
|
|
|
$
|
11,540
|
|
|
$
|
8,467
|
|
|
|
(a)
|
|
Includes share-based compensation expense recorded under ASC Topic
718.
|
(b)
|
|
Includes amortization of intangible assets purchased through
acquisitions.
|
(c)
|
|
Includes an impairment charge for the Company's abandoned Enfora
hardware product line.
|
(d)
|
|
Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as
non-cash equity earn-out compensation.
|
|
|
|
|
|
|
See "Non-GAAP Financial Measures" for information regarding our use of
Non-GAAP financial measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSEEGO CORP.
|
Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
Operating Costs and Expenses
|
Year Ended December 31, 2016
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
Share-based compensation expense (a)
|
|
Purchased intangibles amortization (b)
|
|
Restructuring charges
|
|
Legal settlement (c)
|
|
Impairment of abandoned
product line (d)
|
|
Acquisition- and divestiture- related
charges (e)
|
|
Non-GAAP
|
Cost of net revenues
|
|
$
|
167,227
|
|
|
$
|
235
|
|
|
$
|
2,122
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,540
|
|
|
$
|
1,829
|
|
|
$
|
151,501
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
30,655
|
|
|
868
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
29,787
|
Sales and marketing
|
|
29,782
|
|
|
707
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
29,075
|
General and administrative
|
|
52,387
|
|
|
2,778
|
|
|
-
|
|
|
-
|
|
|
2,800
|
|
|
-
|
|
|
13,447
|
|
|
33,362
|
Amortization of purchased intangible assets
|
|
3,927
|
|
|
-
|
|
|
3,927
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Impairment of purchased intangible assets
|
|
2,594
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,594
|
|
|
-
|
Restructuring charges
|
|
1,987
|
|
|
-
|
|
|
-
|
|
|
1,987
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Total operating costs and expenses
|
|
$
|
121,332
|
|
|
4,353
|
|
|
3,927
|
|
|
1,987
|
|
|
2,800
|
|
|
-
|
|
|
16,041
|
|
|
$
|
92,224
|
Total
|
|
|
|
$
|
4,588
|
|
|
$
|
6,049
|
|
|
$
|
1,987
|
|
|
$
|
2,800
|
|
|
$
|
11,540
|
|
|
$
|
17,870
|
|
|
|
(a)
|
|
Includes share-based compensation expense recorded under ASC Topic
718.
|
(b)
|
|
Includes amortization of intangible assets purchased through
acquisitions.
|
(c)
|
|
Includes a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.
|
(d)
|
|
Includes an impairment charge for the Company's abandoned Enfora
hardware product line.
|
(e)
|
|
Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as the
amortization of the step-up to fair value of finished goods acquired
through acquisitions, non-cash equity earn-out compensation and
impairment charges primarily related to certain developed
technologies acquired with FW.
|
|
|
|
|
|
|
See "Non-GAAP Financial Measures" for information regarding our use of
Non-GAAP financial measures.
|
|
|
|
INSEEGO CORP.
|
Reconciliation of GAAP Loss before Income Taxes to Adjusted EBITDA
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended December 31, 2016
|
|
Year Ended December 31, 2016
|
Loss before income taxes
|
$
|
(26,561
|
)
|
|
$
|
(60,187
|
)
|
Depreciation and amortization(a)
|
3,217
|
|
|
14,053
|
|
Share-based compensation expense(b)
|
1,151
|
|
|
4,588
|
|
Restructuring charges
|
302
|
|
|
1,987
|
|
Legal settlement(c)
|
-
|
|
|
2,800
|
|
Impairment of abandoned product line(d)
|
11,540
|
|
|
11,540
|
|
Acquisition- and divestiture-related charges(e)
|
8,467
|
|
|
17,870
|
|
Interest expense, net(f)
|
3,885
|
|
|
15,597
|
|
Other expense (income), net(g)
|
572
|
|
|
(414
|
)
|
Adjusted EBITDA
|
$
|
2,573
|
|
|
$
|
7,834
|
|
(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 a legal settlement entered into by the Company in September
2016 in connection with a breach of contract claim related to its
hardware products.
|
(d)
|
|
Includes an impairment charge for the Company's abandoned Enfora
hardware product line.
|
(e)
|
|
Includes professional fees, including legal, due diligence and other
related charges for acquisitions and divestitures, as well as the
amortization of the step-up to fair value of finished goods acquired
through acquisitions, non-cash equity earn-out compensation and
impairment charges primarily related to certain developed
technologies acquired with FW.
|
(f)
|
|
Includes the amortization of the convertible senior notes discount
and issuance costs.
|
(g)
|
|
Primarily includes the gain on the Company's sale of certain
hardware modules and related assets and unrealized foreign currency
losses on outstanding intercompany loans between Ctrack and certain
of its wholly-owned foreign subsidiaries, which are re-measured at
each reporting period.
|
|
|
|
|
|
|
See "Non-GAAP Financial Measures" for information regarding our use of
Non-GAAP financial measures.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170309006364/en/
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