Q3 2020 Inseego Corp Earnings Call
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The archived there.
Please also be advised that todays discussion will contain forward looking statements. These forward looking statements are not historical facts, but rather are based on the company's current expectations and beliefs for a discussion on factors that could cause actual results to differ materially from expectations. Please refer to the risk factors described in our form 10-K.
Watch this new device in September.
And as you saw announced last week, the fourth largest carrier use cellular is now customary.
You should expect to see additional announcements like this is the my five and 2000 becomes the gold standard slide Jihad slot in North America.
We're also making great progress internationally and I'm pleased to announce Swiss calm as a new <unk> customer for the Wifi and 2000.
<unk> is the leading service provider in Switzerland.
With a nationwide five G network that covers 90% of their population.
And similarly expect to see further customer announcements in Europe, Middle East and Asia for the end of 2000 in the coming months.
Customer announcements on this in the near future.
Moving on to our seat track business I'm pleased to report that fleet units bookings have returned to pre covance levels.
As we discussed on the prior calls the Ctrack business model relies on local offices selling at physically installing units on sites at the customer premises. This.
It means that enterprise Ikea organizations need to support new network architectures to her.
So we announced the commercial availability of our new Inseego connect project.
First in global markets, given five G. After blue is a new and diverse market.
Not a single product at first I need up all customers addressed is I'll use cases are all picks and audit environments.
And and Ashish mentioned earlier, some critical platform developments.
Want to emphasize how important yard for the evolution as a company.
There is little argument that five G. As in game changer for those service providers and enterprises and over the last year R&D energy and focus on advancing on hardware offerings and integrating them into a cloud based on the platform.
We believe this will and provide incredible value for our customers and build long term affinity for MCA goodbyes as we continue to add capabilities to a platform.
Armed with a stronger platform or corporate priorities are very straightforward.
Of course, you continue to diversify and expand our global customer base second Bill performance, leading products to accelerate the adoption of <unk> worldwide.
By all measurable needs Ziegel have great quarter. In fact that was the best quarter to seven years, which was well report and you. The current management team of even working at the company net.
Net revenue was 92 million, an increase of 12% sequentially to 44% year over year.
In addition, we are free cash flow positive in Q3, which is a major milestone event for the company.
We continued to see robust demand for our flagship orgy products and more importantly are seeing continued traction for our industry leading flagship portfolio.
As a housekeeping item last quarter. We noted that we are going to be reporting our DNS business, which has been rebranded as in C goes subscribed in the Iot and mobile solutions lines instead of the enterprise Sads starting to Q3 2020.
All references to prior period or year over year comparisons have been normalized to account for this change.
Turning to our business units third quarter Iot in mobile solutions revenue was 77 $3 million, an increase of 12% sequentially and 62% year over year.
10 basis points versus the same period a year ago.
Last quarter, we noted an increase in freight costs and this phenomenon continues to persist over the quarter.
As of today, we have seen some relief in the cost, but nowhere near pre pandemic levels.
The margin increase has also been caused by the substantial growth filing and CECO subscribed business.
Enterprise SaaS solutions gross margins were 64.4%, which was a 70 basis point improvement from the second quarter on improvements in hardware installations.
The total company gross margins in the third quarter were 29.8% of approximately 110 basis points sequentially. This.
This increase was due to our software subscription sales of our Fiveg products, partially offset by our continued sales surge of lower margin for key products.
Q3, non-GAAP Opex was $24.6 million compared to 22.9 million in Q2.
As planned R&D expenses of $10.2 million were higher than last quarter due to product trials and certifications with multiple service providers around the world.
Sales and marketing expenses increased $7.9 million and gene expenses were 6.5 billion, both of which were slightly up using increased activities around product launches.
Our Q3 non-GAAP net income was 1.4 million or one penny per share adjusted EBITDA for Q3 was $7.4 million as compared to 4.4 million for Q3, 2019, and 4.3 million last quarter. It.
It should be noted that we have certainly benefited from the work from home movement, but we do not consider ourselves a code that response company Arkansas.
Our connectivity platform is providing solutions for macro trends that are reshaping how people work worldwide.
It has only accelerated a movement towards a distributed workforce and the enterprise adoption of Fiveg provide faster and more secure data, which only increases our potential.
In respect the Q4 guidance, we are comfortable with our ability to meet or exceed current analyst consensus. In addition, we believe that we will see some improvement in our gross margins due to an increase in fiveg sales and continued growth in inseego match. Thanks.
Thanks for listening and with that I will turn the call back over there.
Thank you Greg we're.
We are pleased to be hosting a financial analyst day on November 17th.
Which is also our twentyth anniversary on the NASDAQ, we are bringing multiple new products to market staying closely engaged with current customers and winning new customers in domestic and international markets.
This is bill tested and demonstrated our resilience during these extraordinary times.
I want to express a sincere thank you to Inseego employees, who continue to work around the clock.
Customer demand for mobile broadband and fixed wireless access products is very strong which illustrates momentum throughout our fiveg product portfolio.
The upcoming Fiveg launches are a major step forward in diversifying our customer base and revenue streams.
The next question comes from Lance Vitanza of Cowen. Please go ahead.
Hi, guys. Thanks, Sara so taking the questions and great quarter. Congratulations I guess I wanted to start with I don't disagree it's exciting to hear about this new partner portfolio products focused on private networks I know, it's not going to launch until next year, but I think he said the first half of next year.
So I was wondering again could you talk a little bit more about what those products and services look like do you have any flagship customers involved I'm trying to get a sense for whether this is kind of a you know you're looking at this huge 60% Cagar and is kind of like a build it and they will come or are you working closely with customers to make sure that these launches go.
Well in that the products and services are well received.
Yes, all else the Chicago. Thank you firstly, thanks last time.
We see tremendous opportunity fiveg adoption in the enterprise and private networks is.
I need to take hold.
We want to leverage our expertise naturally and that's that's a huge market with a very high growth. So very very important though we'll be launching these products coming up.
Early part of next year. So it's really an exciting time, it's a complement to our carrier strategy quite frankly.
If you could comment further please thanks and then so as Dan said.
It's a new market in the making it's it's you know it's one of the one of the growth markets, they're looking at and as you know there is.
Activity happening in any fees on the private fiveg or gene that you know licensing on the balance of the frequency bands I mean, there was at least in Austin and in North America in the U.S. on CBS, all access and so those are.
He is a new opportunities that is an ecosystem Monday, so there absolutely working with some key partners and and customers to help build that market. It's a brand new market. So it's not.
It's not a big Satish, consequently market and.
And we feel very good about the money.
Okay. Thanks, that's helpful can I shift gears ask another question actually about on the.
On the margin performance. So the revenue blew me away, but I was actually surprised to see gross margin and I would see mobility somewhat constrained and I'm wondering if that is to some extent timing related I mean, it occurs to me you might be scrambling somewhat to deal with the surging demand and if that's the case I mean.
You expect should we think that that number is gonna continue to grow maybe maybe not quite double but will that continue to grow in 2021 now that you know for balance sheet arguably has been prenup, you're sitting there with a big <unk>.
Ah Lok gas et cetera.
[noise] another great question.
For the first of RMB. He will continue to see I think there will be some.
Increase R&D spend but primarily the junk for us is going out to get any certifications. So that we can watch with different carriers around the world. So I think it's a healthy sign that you should have it.
Cost for us not do too.
January Ms growth.
New head counter things like that.
I think they're probably cute work Russell E. A relative peak for us in terms of our spending and then maybe over the rest a little bit over the first time.
I guess that last week and last border.
You know pursuing certifications off white front and there are separate certifications in North America.
You in parts of Asia, Pat So all of those are big pursued in parallel.
Virtually that's a phenomenon that's that's gone through the latter part of.
Third quarter in earlier.
Fourth quarter, there's some some information that you might've seen out there so.
To tackle Craig's commenters.
Really aggressive.
Pursuant certifications as shaken that of course of course in malls.
The non hit calculated related expenditures.
Thank you I will pass the baton and congratulations again.
Thanks again months.
The next question comes from Scott Hassle Stifel. Please go ahead.
Hey, guys congrats on the quarter and thank you for taking my question I was wondering if you could talk to your outlook for the demand environment around my five for 2021.
Can you repeat the question.
Yeah sure.
I was wondering if you could talk to your outlook for the demand environment around my five for 2021.
Well yeah. So.
As we've talked to in the past we have.
Multiple products coming to market as well as our existing products.
And our new products or <unk> across.
Mobile broadband and fixed wireless so when we think of my fiery kind of refer to the hot spot.
Wider range and number a few stomach and market by a G.
As far as the.
The the Covid dynamic and the demand we continue to see.
Very high demand for a current generation porgy products.
We are beginning to ramp or Prada.
Products nicely and.
That will go into 2021 so.
As we broaden the product portfolio as we brought in the number of launches.
We're going to see a wide range of of five new product ramp up.
And in terms of the the new paradigm with me said before we referred to a surge as opposed to spike.
We believe we can forecast the future, but we believe that levels of demand for our current generation products will be is higher will plateau at a higher level and pretty covid remains to be determined.
That plays out, but as we see demand as you get weekly updates on demand and we still see.
Into new strong demand.
Alright, great. Thank you I appreciate it.
You bet.
The next question comes from Scott Cyril off Roth Capital. Please go ahead.
Good afternoon, Thanks for taking my questions nice job in a difficult operating environment, especially on the top line.
I apologize I got on the cold little bit late I was wondering did you provide any color related to five G mix in the quarter.
Top customers or the number of carriers that you're expecting to ship five G. This year or in certification process any any numbers are on that front.
We didn't breakdown specific.
Numbers now.
We're safe side, you wrap up quite nicely.
As we had expected we continue to see.
Great demand a great level of interest from carriers.
Tears around the World, we indicated Swiss calm as a new.
<unk> customer for us under certain more in the works.
And both are mobile broadband and our fixed wireless.
So.
What's happening loss of them and we see as we expected slides wrapping in the second half of this year, which is doing and continuing throughout 2021.
Gotcha, and maybe just to follow up on the outlook to the fourth quarter I think you said you're.
Comfortable to to to meet or beat the current fourthquarter estimates I'm wondering what you're seeing specifically and some of the line items there you're expecting C track growth. It sounds like things are bottom there is that starting to recover sequentially and what are your I guess expectations in terms of fixed wireless access going into the fourth quarter does that start to become a big contributor and <unk>.
Up now and otherwise five G kind of how how you are seeing that sequentially progress on those line items.
Yeah, well the last part first Scott.
Is we expect to see six wireless revenue wrapping up at the end of this year.
In the fourth quarter now and we are actually.
Preparing for for.
Fixed wireless customer lunches, and we'll make announcements as those occur naturally as you know in cost carriers. The announcements occurred jointly if we're going to name names. So we have to we have to work with them on the timing of the announcements but.
Six Wireless's press progressing along very nicely, we won't have revenue in the fourth quarter from fixed wireless.
And again as we move into 2021, I think relative to see track where commented that the the.
The bookings the level of activities return to pre Covid levels modulating factor is always see foreign exchange.
And again, the large fairly large things that we see signs of the South African Rand, but.
We see a resumption and return to growth.
The C track business.
Gotcha, and lastly, if I could on the gross margins Craig some some progress this quarter given the scale, but you're still facing some basically covid headwinds related to frighten otherwise and component availability, but it sounds like certainly five G is gonna Gonna help gross margins to the upside wanted just confirm that in terms of how the new products or.
Coming in or are they coming in at target level of 30% kind of gross margins and then what is the timeline and is 30% still the target on the hardware front to get to 30% what kind of timeframe, we should be thinking about you guys, reaching it. Thanks.
Great question. Thanks for the question.
I think it is we interviewed as you introduce new products. There's obviously initial bills and then there's volume based markets and I think when we when we start building our products. The initial base is there are below the targets exactly.
And as we feel to hide way real time chat.
Channel built plus volumes and you think that you can get too target markets and timeline will be very very sensitive too.
Channel Bill dynamics, which are happening with a little bit in queue for.
One somebody who do I think it's more of a second half of the year and beyond even for us.
Thank you.
Oh, that's not a question and answer session I would like to turn the conference back.
Mandara for any closing remarks.
Alright, Thank you an operator, well I just want to close by saying, Thanks again, everyone for joining today's call. Please stay safe and healthy. Thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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Good afternoon, and welcome to see go Corp's third quarter 2020, <unk> financial results Conference call.
Please note that today's event is being recorded.
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Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity for analysts to ask a question.
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To withdraw your question. Please press Star then too.
On the call today are Dan Mandar, Chairman and CEO.
Craig Foster Chief Financial Officer, and Ashish Sharma, President of I O T and mobile solution.
During this call non-GAAP financial measures will be discussed a reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the investors section of the company's web site.
An audio replay of this call will also be archived there.
Please also be advised that todays discussion will contain forward looking statements. These forward looking statements are not historical facts, but rather are based on the company's current expectations and beliefs.
For a discussion on factors that could cause actual results to differ materially from expectations. Please refer to the risk factors described in our form 10-K, 10-Q, and other SEC filings, which are available on our website.
Please also refer to the cautionary note regarding forward looking statements section contained in today's press release I.
I would now like to turn the call over to Dan Mandar, Chairman and CEO. Please go ahead.
Hello, everyone, it's great to be with you today hope everyone staying safe and healthy.
I, probably wouldn't signal can play a major war and helping people everywhere [laughter] productively.
We had a fundamental for quarter.
2 billion in revenue and 7.4 million adjusted EBITDA.
So strongly on any measure well under the consensus.
That's great color I want to draw your attention to one other achievement.
That has achieved positive free cash flow this quarter.
All are major milestones confirms the success of our turnaround strategy, which began in 2017 and point to the company shifting to a growth and cash generation Sage.
We're seeing strong demand across the board for our mobile broadband fixed wireless access I don't see and close out solutions and we're rapidly they numerous new customers in our target markets let.
Let me touch on a few important developments in each.
She'll recently introduced the new second generation Fiveg mobile hotspot Lifesize and yourselves.
As we watch this new device in September.
As you saw announced last week, the fourth largest carrier in U.S.. So there is no customer.
You should expect to see additional announcements like this is my fourth 2000 becomes the gold standard.
Jihad slot in North America.
We're also making great progress internationally and I'm pleased to announce let's call them as a new 500 customer for the might find them 2000.
Let's call it a leading service provider in Switzerland.
With a nationwide Fiveg network that covers 90% of their population.
And similarly expect to see further customer announcements in Europe, Middle East and Asia, where there in 2000 and the coming months.
We're very excited to announce upcoming launches of our fixed wireless access products customers, both in North America and international markets.
These and other upcoming launches are major steps forward in diversifying our customer base and recurring revenue streams as well as to generally improving our margins.
Winning new domestic and international customers for Fiveg products is the first part of our growth strategy.
We're also making good progress in two other important areas.
First we are watching a new fiveg product portfolio, specifically for enterprise customers.
It will increase our addressable markets strengthen gross margins.
We are convinced the enterprise adoption of Fiveg will be unlike anything we've seen before including the deployment of private networks to manage their businesses.
No one single Fiveg technology integrated into each and every enterprise fiveg users.
Second is our recently announced SaaS platform called Inseego manage the suite of integrated software applications.
Tremendous value to our products and provide monthly recurring revenue on top of the initial hardware sales.
This product launch as a result of walking running discussions with our service provider customers all of which one better management of the devices.
Once they are connected to the network.
We're seeing strong demand these offerings will be making customer announcements on this in the near future.
Moving on to our C track business I'm pleased to report that late unit bookings have returned to pre call. This levels.
As we discussed on the prior calls she truck business model the lives on local offices selling physically installing units onsite something customer problems.
This was not possible in the second quarter and into early Q3, given the government restrictions imposed in all our geographies.
Thanks to the tireless efforts from all our local teams we provide an uninterrupted service during the pandemic.
Well, winning several more municipal fleet customers and returning sales levels to pre called at levels.
I'm going to have Ashish Sharma, who runs our I O T mobile business go into a bit more detail on our initiatives in the enterprise space, our software platform strategy as well as progress, we're making on the fixed wireless.
That said, let me provide some more details on our new growth initiatives. In addition to our service provider business and see an even larger opportunity well, a fixed and mobile solutions and that applies markets.
One of the largest and newly developing enterprise market segments as private networks.
Total addressable market for this segment alone is projected to go from roughly 600 million today to 65 million to 2030, a CAGR of 60% the majority of which will be Fiveg. In addition to the silent in different market segments.
Many of the enterprise opportunities that Fiveg will be a game changer certain position ourselves well in these new developing market.
Now lets take a yield four point fiveg enterprise products that with Gianella connectivity for a wide range of private and public sector enterprise use cases.
Everybody is customers have special requirements, including authentic brand connectivity options enterprise grade security industrial grade liability and low latency applications that fly developing solutions when softening out there that's going to be designed for enterprise customers.
Adding use cases.
Back to launch these products in the first half of 21.
At Inseego, we believe the combination of Fiveg capabilities.
Computing and machine learning software radically change.
This is the business.
It's in mind I'm pleased to announce our participation in the new Fiveg accelerator program that like no no.
Les ignored as a unique seventeens bottom line instead develop and in Orlando, Florida with the Verizon five units up in Albania.
Yes, actually I said, there is bringing new fiveg need us together in the U.S. space living lab create and develop new fiveg use cases.
Commercial and residential tenants.
For the team on the ground working with partners and potential customers and Siegel can help advance American Fiveg leadership.
In sectors, such as healthcare industrial simulation and training well being.
Both.
Moments that I try liable low latency edge computing listen that keep going in the future.
All of these use cases, and I think it's just acquiring usage and rich.
Which means that enterprise Nike organizations need to support new network architectures.
Let's turn to simplify the management of their network and grow optimize performance all of her second Gen. Five few products in support of our new Inseego.
Software stream, so if any good it applications all those on the call themselves.
And she will manage enables service providers and large enterprises to manage and enhance the value of fiveg devices DXJ throughout their lifecycle from activation to the more management icicle.
I'll start that didn't see them subscribe module, which is a next generation cloud SaaS solution, formerly called Dms.
This subscription management system helps service providers large enterprise customers and government agencies, and though the requisition purchasing.
And the borders of connected devices, including smartphones due to significant new enhancements, we have made to the solution.
Subscribe service achieved 65% sequential growth in subscriptions in the third quarter accelerating from the 27%.
So growth next quarter.
We've also announced the commercial availability of our new Inseego connect margin.
<unk> allows the IPO organizations through using reconfigure any number of edge devices.
Our data usage can check their life's held across the enterprise.
Powerflow dash floors launch repos and real time diagnostics.
And Siegel connect is already deployed by key enterprise customers, providing them value, but inside she my management of the Inseego Fourg connections.
You can see the secure margin coming in the first quarter of 21 little light enhance security when Vietnam threat detection and active mitigation of those security incidents last.
Lastly, the Seagull manage software suite, who sell a world class.
You go care dedicated customer support, but full life share knowledge base and device configuration management.
We plan to continue working with our customers. So new software applications that we grow these recurring revenue streams.
And finally on fixed wireless access progress, although my dad than common Fiveg I have for engine, which provides a common hardware platform for all of our Fiveg products is helping streamline and accelerate time to market for this rapidly growing opportunity we have.
Tremendous progress they've done a raft of their portfolio and cries continue with customers in global markets given fiveg. After blue is a new and diverse market, there's not a particular product that fresh that need a bulk customers addresses all use cases.
Our operation on environments, our portfolio was co use cases for both indoor use and I'll go to salacious delivering multi gigabit fibe TV and by five six connectivity to residential and business customers W. Baird.
Southern settings, too hard to reach the lives of patients.
As I mentioned earlier in my comments, we see enterprise oriented a CAGR of 16% majority of such as Fiveg.
Further it is included in that number.
With this in mind portfolio less purposive.
Several different form factors and skews to commentary you the issuance and we look forward to bringing them to market.
But sort of slightly worse in the coming months.
Now back to you.
Thanks Ashish.
We made tremendous progress in the third quarter.
And as we enter the fourth quarter working on many fronts in the U.S. and globally to bring the power of Fiveg users everywhere.
I would like to take a moment to welcome Chris Litle to our board of directors, Chris as valuable expertise to the board in SaaS computing and product strategy.
We also welcomed our new CFO, Craig Foster to the leadership team and I'm very pleased to introduce him to you know Greg.
Good afternoon, everyone. As you likely know this is my first quarter as you go and I just want to take a second to thank everyone in the extended family for making until late at home from day one.
During my career as CFO technology investment banker voice gravitated towards differentiated companies with strong Roadmaps and see goes no section.
And Ashish mentioned earlier, some critical platform developments and I want to emphasize how important they are to the evolution as a problem.
There is little argument that Fiveg is a game changer service providers and enterprises and over the last year R&D energy has been focused on advancing our hardware offerings.
Turning them into a cloud based management platform.
We believe this will provide incredible value to our customers and build long term affinity fluency go buys as we continue to add capabilities to the platform.
Armed with a stronger platform.
Our priorities are very straightforward.
First you continues to diversify and expand our global customer base second Bill performance, leading products to accelerate the adoption of Viking worldwide.
By all measurable knees Ziegel had a great quarter in fact that was the best quarter in seven years, which was well before any of the current management team will be working at the company net.
Net revenue was $90.2 million, an increase of 12% sequentially and 44% year over year.
In addition, we are free cash flow positive in Q3, which is a major milestone event for the company we.
We continue to see robust demand for our flagship Fourg products and work what we are seeing continued traction for our industry, leading Viking portfolio.
As a housekeeping item last quarter. We noted that we are going to be reporting our dms business, which has been rebranded as the CEO subscriber in the Aiotv and mobile solutions lines instead of the enterprise sales.
Sorry.
Three 2012.
All references to prior period or year over year comparisons have been normalized to account for this change.
Turning to our business units third quarter Aiotv and.
Mobile solutions revenue was $77.3 million, an increase of 12% just slipped sequentially and 62% year over here we.
We continue to see demand surge that started in March with the onset of coated demand was uniformly across our portfolio of products in our recently launched second generation Fiveg modify mobile broadband device began selling for a channel.
Our inseego subscriber software continues to grow rapidly with the number of subscriptions, increasing 65% quarter over quarter.
181% year to date.
Third quarter Enterprise solutions revenue was 12.9 million.
Creeps up 13% sequentially and down 14% year on year for the sea truck business, although conditions improve compared to the second quarter coated restrictions continue to hamper our ability to install a customer backlog field.
That's impacting revenue growth.
Types existing customer recurring revenue base remained extremely stable. During this volatile time, while hardware revenues fluctuated with local geographic restrictions around these solutions at.
Additionally, the South African Rand, which is our largest exposure versus the us dollar somewhat stabilized during the quarter at the beginning of the quarter. The dollar wrap exchange rate was 17.3, we ended the quarter with a rate at 16.8. So we did not see the extreme swings that we've seen in prior quarters.
As you may recall in Q to recapitalize the company by refinancing our outstanding convertible notes and paid off the senior term debt always much better interest rates and longer maturity dates.
Our new cash position, coupled with free cash flow generation is providing us with additional opportunities to optimize the balance sheet.
We're working with our key vendors to increase our credit lines finding opportunities to establish direct buying relationships that could lower our component costs in the future.
In addition, we are continue to optimize our inventory on hand and are expecting to see some improvement over the next few quarters, especially as we introduce new products.
We closed the quarter with a healthy cash balance of 42 million.
From this point forward I'll focus on non-GAAP measures.
Reconciliation from GAAP to non-GAAP is detailed in our earnings release.
With the Aiotv and mobile business gross margins were 24.1% for the quarter.
Approximately 110 basis points compared to last quarter, and up 110 basis points versus the same period a year ago.
Last quarter, we noted an increase in freight costs and this phenomenon continued to persist over the quarter.
As of today, we have seen some relief in the cost, but nowhere near pre pandemic levels. The.
The margin increase is also been caused by the substantial growth slightly in CECO subscribed business.
Enterprise SaaS solutions gross margins were 64.4%, which was a 70 basis point improvement from the second quarter on improvements in hardware installations.
The total company gross margins in the third quarter were 29.8% of approximately 110 basis points sequentially. This increase was due to our software subscription sales of our fiveg products, partially offset by our continued sales surge of lower margin 14 products.
Q3, non-GAAP Opex was 24.6 million compared to $22.9 million agency.
As planned R&D expenses of $10.2 million were higher than last quarter due to the product trials in certain patients with multiple service providers around the world.
Sales and marketing expenses increased to $7.9 million and gene expenses were 6.5 billion, both of which were slightly up users increased activities around product launches.
Our Q3, non-GAAP net income was $1.4 million or one penny per share adjusted EBITDA for Q3 was $7.4 million as compared to 4.4 million for Q3, 2019, and 4.3 million last quarter.
It should be noted that we have certainly benefited from a boat movement, but we do not consider ourselves Koeppen response company.
Our connectivity platform is providing solutions for macro trends that are reshaping how people work worldwide.
Nobody has only accelerated a movement towards a distributed workforce in the enterprise adoption of Fiveg provide faster and more secure data, which only increases our potential.
In respect the Q4 guidance, we are comfortable with our ability to meet or exceed current analyst consensus. In addition, we believe that we will see some improvement in our gross margins due to an increase in fiveg sales and continued growth in inseego match. Thanks.
Thanks for listening and with that I'll turn the call back over to Dan.
Thank you Greg.
We're pleased to be hosting a financial analyst day on November 17th.
Which is also our twentyth anniversary on the NASDAQ, we are bringing multiple new products to market sales closely engaged with current customers and winning new customers in domestic and international markets.
This is both tested and demonstrated our resilience during these extraordinary times.
I want to express a sincere. Thank you to in single employees, who continue to work around the clock.
Customer demand for our mobile broadband is fixed wireless access products is very strong which illustrates momentum throughout our fiveg product portfolio.
The upcoming five new launches are a major step forward in diversifying our customer base and revenue streams.
This will make for an exciting 2021 for the company and its investors.
Thanks, everyone for joining todays call stay safe and healthy.
We will now begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone you will need to pick up the handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble the roster.
Thanks.
And our first question comes from Jason Smith of Lake Street. Please go ahead.
Hey, guys. Thanks for taking my questions. Just curious if you could comment on what you're seeing from a supply situation. If there were any constraints in Q3, and how you're thinking about that situation in Q4.
Great Hi, Jason is going to save money again.
Yeah, Let me know the sales.
The overall dynamic in the industry is in.
It's challenging to supply chain.
As I'm sure the board vary widely.
We're working diligently every day.
We did make.
Some some loose, but why would go as far as diversifying and strengthening our our contract manufacturer and basically as we've mentioned before going bust on the other important thing to mention is that we are working directly with the component suppliers specifically those with.
Long lead times to secure the quantities that we need so working with box car and working very closely directly with a component providers. Both together has really helped us.
Let us keep the supply chain flowing quite well as a matter of fact not going to say there are challenges, but we're working we're working with them every day.
Okay. That's helpful. And then just as a follow up curious if you could comment on what you think the inventory situation out there looks like.
Hi Fi hotspot.
You're referring to the inventory held by our customers correct.
Yes, well I'm not going to comment on inventory levels for customers is that.
Actually quite frankly is a strategic decision on their part so I wouldn't I wouldn't want to comment on that Jason.
Okay. Thanks, a lot guys.
Thank you.
The next question comes from Lance Vitanza of Cowen. Please go ahead.
Hi, guys. Thanks sensor, taking the questions guys great quarter, Congratulations I guess I wanted to start with.
I don't disagree it's exciting to hear about this new partner portfolio products focused our private networks I know, it's not going to launch until next year, but I think he said the first half of next year.
So I was wondering could you talk a little bit more about what those products and services look like do you have any flagship customers involved im trying to get a sense for whether this is kind of a you know you're looking at this huge 60% came occur and is kind of like a build it and they will come up or are you working closely with customers to make sure that these launches go.
Well in that the products and services are well received.
Yes, I'll ask Ashish. Thank you personally thanking last time.
We see tremendous opportunity fiveg adoption in enterprise and private networks is.
I need to take hold.
We want to leverage our fiveg expertise naturally and that's that's a huge market with a fairly high growth. So very very important though we'll be launching these products coming up.
Early part of next year. So it's really an exciting time as a complement to our carrier strategy quite frankly.
You could comment further please thanks, Adam lens, so as Dan said.
It's a new market in the making.
You know, it's one of the lot of the growth markets, they're looking at and as you know that is.
That could be happening in many countries on the private Fiveg polje net.
Licensing on the balance of the so you can see that is I mean.
That was at least in Austin and in the us.
Snag, causing us on CBS, all access and so those are easy.
He is a new opportunity that is an ecosystem lending. So there absolutely working with some key partners and and customers to how good that bar and it's a brand new market.
It's not a big Savage talks about the market and.
And we feel very good about the money.
Okay. Thanks, Thats helpful can I shift gears ask another question actually about on the.
On the margin performance other than revenue blew me away.
I was actually surprised to see gross margin I would see mobility somewhat constrained and I'm wondering if that is to some extent timing related I mean, it occurs to me you might be scrambling somewhat to deal with the surging demand and if that's the case I mean, assuming that the demand continues to remain strong with which we.
Well, how should we think about will there be any kind of land in margins.
And how should we think about the cadence of that clinical care if its going.
Great all right.
Great question Lance.
I think there's a lot of things happening in the margin side, but I think the short answer is there is.
Ample opportunity for accretion for margins.
A couple of points at all comment on is one were very sensitive to product mix.
Company and so we continue to sell very fast as much of our lower margin products as our Fiveg portfolio continues to ramp up.
And another point is.
As our volumes decrease with our new products, obviously, the prices that were paid for.
Finished goods through our contract manufacturers will continue to go down.
And then we have a number of.
Initiatives internally on how your cost down the building materials and some things that we can do their innovative around our shipping.
Other cost reduction initiatives.
And as we think about margins. We also just announced our software products and we will continue to see margins increase as the adoption of software a coupled with a heart selling into ecosystem.
It's sort of channel.
Got it thanks, Greg I appreciate that.
If I could slip one more in I just wanted to ask about R&D said, it's running about double what we spent last year and I know, obviously, you talked a little bit about that Dan in your remarks is that sort of kind of doubled what we did last year is that a good baseline for Q4 and do you expect should we think that number is going to continue to grow maybe maybe.
Not quite double but will that continue to grow 2021, now that the balance sheet arguably is being freed up you're sitting there with the big net getting a lot of cash its entry and no bank debt.
Another great question or two for two.
As Rick with regards to R&D, we will continue to see I think there will be some.
Increased R&D spend but primarily with jump for us is going out and getting the certifications.
So that we can watch with different carriers around the world. So I think it's a healthy sign you should ask it decreased cost for us is not due to.
Hi, norm is growth.
New headcount or things like that.
I think that probably Q4 for us will be ability to Pete for us in terms of our spending and then maybe overaggressive little bit over the first half of last year.
Thanks, just to add to that Lance we commented last quarter, we were.
You know pursuing certifications on white fraud, and there are separate certifications in North America.
He knew in parts of Asia Pac So all of those are being pursued in parallel.
Virtually that's a phenomenon thats that's gone through the latter part of thought.
Third quarter and early in the fourth quarter and there's some some information that you might have seen out there. So.
To Echo Craig's comment there's a there's a real.
Really aggressive.
Appreciate the certifications as we speak and that of course course involves.
The non hit telco other related expenditures.
Thanks, I will pass the baton and congratulations again.
Thanks again less.
Okay.
The next question comes from Scott Hassle of Stifel. Please go ahead.
Hey, guys congrats on the quarter and thank you for taking my question I was wondering if you could talk to your outlook for the demand environment around my five for 2021.
The revision question.
Yes sure.
I was wondering if you could talk to your outlook for the demand environment. There on my side for 2021.
Well, yes, so as as we've talked in the past we have.
Multiple products coming to market as well as our existing products.
And our new products or fiveg across mobile.
Mobile broadband and fixed wireless so when we think of my Fi, we kind of refer to the hospital I suppose a much wider range and number of skews coming to market in Fiveg and as far as you know the the cold and dynamic and the demand we continue to see.
Very high demand for current generation Fourg products.
We're beginning to ramp our fiveg products nicely and.
And that will go into 2021, so you know as we broaden the product portfolio as we broaden the number of launches.
You know, we're going to see a wide range of of of our five new product ramp up and in terms of the new paradigm, which we said before we referred to a surge as opposed to Spike. We believe we can forecast the future, but we believe that levels of demand for.
Current generation products will be as higher will plateau at a higher level than critical that remains to be determined.
How that plays out, but as we see demand as we get weekly updates on demand we still see.
Continued strong demand.
All right great. Thank you appreciate it.
You bet.
The next question comes from Scott Cyril of Roth Capital. Please go ahead.
Good afternoon, Thanks for taking my questions nice job in a difficult operating environment, especially on the top line.
I apologize I got on the call little bit late I was wondering did you provide any color related to fiveg mix in the quarter.
Top customers or the number of carriers that you're expecting to ship five g. this year or in certification process any any numbers around that front.
We didnt break out specific no.
Numbers now stabilized.
You know, we're seeing five you wrap up quite nicely.
As we had expected we continue to see a great demand a great level of interest.
Carriers around the World, we indicated Swiss com is a new fiveg.
Fiveg customer for us, there's certainly more in the works in.
In both our mobile broadband and our fixed wireless.
So what's.
What's happening Wassa demand and we see as we expected fiveg ramping in the second half of this year, which is doing and continuing throughout 2021.
Gotcha, and maybe just to follow up on the outlook for the fourth quarter I think you said your comp.
Comfortable to to to meet or beat the current fourth quarter estimates I'm wondering what you're seeing specifically in some of the line items, there you're expecting see track growth. It sounds like things have bottomed there is that starting to recover sequentially and what are your I guess expectations in terms of fixed wireless access going into the fourth quarter does that start to become a big contributor and ran.
Bob now and otherwise Fiveg kind of how you're seeing that sequentially progress on those line items.
Yes, well the last part first Scott.
Is we expect to see fixed wireless revenue wrapping up at the end of this year. If it's in the fourth quarter now and we are actually but.
Perry for four.
Fixed wireless customer launches and will make announcements as those occur naturally as you know in cost to the carriers.
The announcements occurred jointly if we're going to name names. So we have to we have to work with them on the timing of the those announcements, but thanks.
Fixed wireless is pressed progressing along very nicely, we will have revenue in the fourth quarter from fixed wireless.
And again as we move into 2021, I think relative to C. track, we commented that the the bookings the level of activity is returned to pre call. Good levels. The modulating factor is always see foreign exchange.
And again, the large fairly large swings that we see signs of the South African Rand, but.
We see a resumption.
In terms of growth.
The C. truck business.
Gotcha, and lastly, if I could on the gross margins Craig you know some some progress this quarter given the scale, but you're still facing some basically covert headwinds related to freight and other wise and component availability, but it sounds like certainly fiveg is going to going to help gross margin to the upside wanted just confirm that in terms of how the new products are.
Coming in are they coming in that target level of 30% kind of gross margins and then what is the timeline and is 30% still the target on the hardware front to get to 30% what kind of timeframe, we should be thinking about you guys reaching that thanks.
Great question. Thanks for the question.
I think that as we introduce has introduced new products. There is obviously a initial builds and then there is volume based markets and I think when we think when we start building our products initial base is they are below targets.
And as we feel two pathway real time.
Channel build plus volumes then we think that we can get to target margins and I think that timeline will be very very sensitive to.
Channel build dynamics, which are happening a little bit in Q4. So in Q1, something you do I think it's more of a second half would be here and be on event for us.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Dan Mandar for any closing remarks.
Great. Thank you operator, well I just want to close by saying, Thanks again, everyone for joining todays call. Please stay safe and healthy. Thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.