Q4 2023 Inseego Corp Earnings Call

Operator: Hello and welcome to Inseego Corporation's fourth quarter 2023 financial results. Please note that today's event, All participants will be If you need any assistance, please signal a call by pressing the star key, followed After today's presentation, there will be an opportunity for analysts to ask questions to us rather than one on your telephone. To withdraw your question, please press star.

Hello, and welcome to in CECO Corporation's fourth quarter 2023 financial results Conference call.

Please note that today's event is being recorded.

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After todays presentation, there will be an opportunity for analysts to ask questions to.

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Unnamed Speaker: On the call today are Phil Brace, Executive Chairman of Inseego, companies, call. Certain non-GAAP financial measures will reconciliation, available, and audio replay of this call will also be available. Please also be advised that today's discussion will contain, are not historical facts but are rather based on the company's history. For a discussion on factors that could cause actual results to differ materially, refer to the risk factors described, K, and other S,

On the call today are Phil brace executive Chairman of <unk> Board of directors and Steven Gate off the company's Chief Financial Officer.

During this call certain 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 website, 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 are rather 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 the company's Form 10-K, 10-Q, and other SEC filings, which are available on the company's website.

Unnamed Speaker: Please also refer to the Cautionary Note regarding forward-looking statements today. And with that, I would now like to turn the call over to Phil Brace, Executive Chairman. Thank you. Pleasure to be with you.

Please also refer to the cautionary note regarding forward looking statements section contained in today's press release.

And with that I would now like to turn the call over to Phil Brace Executive Chairman of <unk>. Please go ahead Sir.

Thank you good afternoon, everyone.

Phil Brace: My prepared remarks will cover three topics. First, I'd like to start by sharing a brief perspective on why I joined the Board of Directors at Inseego some six months ago. Second, I'd like to share some thoughts on the leadership change that was announced today and my focus going forward, and third, I'll provide some high-level views of the current quarter. I'll then turn the call over to Steven, and we'll wrap up with some Q&A. Let me first address why I joined this board. First off, I'm very optimistic about wireless. 5G technology is still in the relatively early stages of deployment, and I see the technology as having the potential to change the way people and machines work. Second, from my time at Sierra Wireless, I was familiar with Inseego and its great product. I was bullish on the opportunity for Inseego to offer leading 5G mobile and fixed wireless access solutions, the strong market relationships that exist, and the investments in FWA to drive future growth.

A pleasure to be with you today.

My prepared remarks will cover three topics first I'd like to start by sharing a brief perspective on why I joined the board of directors and she goes from six months ago.

Second I'd like to share some thoughts on the leadership change that was announced today my focus going forward.

I'll provide some high level view of the current quarter.

I'll, then turn the call over to Steven and we'll wrap up with some Q&A.

Let me first address well I joined the board.

First off I'm very optimistic on the wireless industry <unk> technology is still in the relatively early stages of deployment and I think the technology is having potential to change the way people and machines work.

Second for my time of Sierra Wireless I was familiar with the CECO and its great products.

I was bullish on the opportunity for them to go to offer leading <unk> mobile and fixed wireless access solutions.

Strong market relationships that existed.

And the investments in <unk> to drive future growth.

All of these things remain true today.

Phil Brace: By now, you have seen the news of the change in leadership we just... The board felt that the time was right to make a change to ensure we had the right leadership going forward. With that, I took on the newly created Executive Chairman role to help lead the company through this critical time while we search for a new CEO. We have already engaged a top-tier recruiting firm, and I will be actively involved in the search process. I will also be spending time reviewing and addressing some of the changes that need to be made in our business, our capital structure, and our portfolio of investors. It is important to note that I'm not doing this alone.

By now you have seen the news of the change in leadership, we just announced.

The board felt that the time was right to make a change to ensure we have the right leadership going forward.

With that I took on the newly created executive chairman role to help lead the company through this critical time, while we search for a new CEO.

We have already engaged a top tier recruiting firm and I will be actively involved in the search process.

I will also be spending time, reviewing and addressing some of the changes that need to be made in our business, our capital structure and our portfolio of investments.

It is important to note that I'm not doing this alone.

Phil Brace: We have a very strong and engaged Board of Directors, and we're glad to have added some key leadership in finance and sales to the company recently to complement the strong skills of the Inseego engineering product team. It's on the front line of developing all of our products and, Finally, let me offer some high-level summary of the quarter we just completed. Both the revenue and adjusted EBITDA came in slightly better than we expected. Revenue for Q4 2023 was $42.8 million. For the full year 2023, revenue was $195.7 million.

We have a very strong and engaged board of directors.

And we're glad to have added some key leadership in finance and sales to the company.

Suddenly it to complement the strong skills of the <unk> engineering and product team that's on the frontline of developing all of our products and technology.

Yeah.

Finally, let me offer some high level summary of the quarter, we just completed.

Both the revenue and adjusted EBITDA came in slightly better than we expected.

Revenue for Q4, 2023 was $42 8 million.

Full year 2023 revenue was $195 7 million.

Phil Brace: Suggested EBITDA for Q4 2023 was $4.1 million. Full year 2023 adjusted EBITDA was $16.79. From a reporting perspective, you will notice a change in our financial reporting to clearly break out revenues in our business of mobile and fixed wireless access solutions. Steven will review these changes momentarily.

Adjusted EBITDA for Q4, 2023 U S $4 1 million.

Full year 2023, adjusted EBITDA was $16 7 million.

From a reporting perspective, you will notice a change in our financial reporting clearly break out revenues in our business of mobile and fixed wireless access solutions.

Steven will review these changes momentarily.

Phil Brace: Going forward throughout 2024, we are going to be focused on keeping the momentum on revenue while increasing full year adjusted EBIT. Before taking questions, I'll now turn the call over to Steven, who will review the financials. Thanks, Phil. Good afternoon, everyone.

Going forward throughout 2024, we are going to be focused on keeping the momentum on the revenue side, while increasing our full year adjusted EBITDA.

Before taking questions I'll now turn the call over to Stephen who will review the financials in detail.

Okay.

Thanks, Bill good afternoon, everyone.

Steven H. Gatoff: I look forward to covering three things today. First, I'll share some color on changes that we made, as Phil mentioned, in our reporting of the business in order to drive greater transparency and better align with what we believe is important for creating shareholder value. Second, I'll take you through our Q4 and 2023 financial results. And third, I'll provide some color on the business as we move into 2024 and our financial guidance for Q1. As Phil noted, we'll, of course, wrap up by opening the call to your questions, diving right into things.

Covering three things today first I will share some color on changes that we've made as Phil mentioned in our reporting of the business in order to drive greater transparency and better align with what we believe is important for creating stockholder value.

Take you through our Q4 and 2023 financial results and third I'll provide some color on the business as we move into 2024 and our financial guidance for Q1 as Phil noted, we will of course wrap up by opening the call to your questions.

Diving right into things as you saw in our earnings press release today and as Youll see in our.

Steven H. Gatoff: As you saw in our earnings press release today, and as you'll see, in our 2023 10k that we're filing tonight, we changed the reporting categories for the company's revenues, where we used to bucket revenue into two categories of IoT and mobile and enterprise SaaS. We're providing more visibility to our offerings and are now reporting revenue categories that align with what we're fundamentally delivering to customers, our growth drivers, and the investments that we're making. We're now showing revenue in the two categories of product revenue and services and other revenue.

Our 2023 10-K that we're filing Tonight, we have changed the reporting categories for the company's revenue streams, where we used to fund the revenue into two categories of Iot and mobile and enterprise SaaS, we're providing more visibility to our offerings and are now reporting revenue categories that align with what we are.

Fundamentally delivering to customers our growth drivers and the investments that we're making with.

We're now showing revenue in the two categories of product revenue and services and other revenue.

Steven H. Gatoff: We're further breaking out product revenue into the two core product offerings of mobile hotspot revenue and fixed wireless access, or FWA, revenue, the center point of our growth strategy. In this regard, we believe that you'll be able to clearly see the results of our initiatives and our success in focusing on driving FWA revenue growth, the overall profitability profile of our product business, and the contribution from our SaaS office. In making the change, it was important to us to make sure that you had the needed history and comparative numbers, so we've provided the historical quarterly results for the previous eight quarters under the new reporting construct so that you have the apple-to-apple info on gauging performance. As you'll see in the data, the Hotspot product has sequentially declined in revenue, as we've expected and communicated, primarily as a result of the anticipated runoff of 4G technology products in the market.

We're further breaking out product revenue into the two core product offerings mobile hotspot revenue and fixed wireless access or S. W. A revenue center point for our growth strategy.

In this regard we believe that you'll be able to clearly see the results of our initiatives and success and focusing on driving.

Revenue growth the overall profitability profile of our product business and the contribution from our SaaS offerings.

In making the change it was important to us to make sure that you have the needed history and comparative numbers. So we've provided a historical quarterly results for the previous eight quarters under the new reporting construct so that you have the apples to apples info on gauging performance.

As youll see in the data the hotspot product has sequentially declined in revenue as we had expected and communicated primarily as a result of the anticipated run off of 14 technology products to the market.

Steven H. Gatoff: Our FWA business has shown overall growth in terms of both aggregate dollars and growth rate over the past two years and has grown from essentially nothing three years ago to be a $55 million business in 2023 that grew approximately 26% year over year. And looking at the metrics in the supplemental tables, you'll also see that product growth margin percentage, which is the total product growth margin number that includes both FWA and mobile, has continued to increase over the past two years as our higher-margin FWA products gained traction and became a larger portion of total product revenue. In looking at our services and other revenue, this new category combines our non-core telematics and DMS subscriber management SaaS offering.

W. A business has shown overall growth in terms of both aggregate dollars and growth rate over the past two years and has grown from essentially nothing three years ago to be a 55 million dollar business in 'twenty two 'twenty three that grew approximately 26% year over year.

And looking at the metrics in the supplemental tables, you'll also see there our product gross margin percentage, which is the total product gross margin number that includes both SWA mol that's good.

10 years to increase over the past two years as our higher margin SWA products gained traction and became a larger portion of total product revenue.

And looking at our services and other revenue this new category combines our noncore telematics in Dms subscriber management SaaS offerings.

Steven H. Gatoff: These revenue streams operate fairly independently, and you'll see a pretty consistent aggregate revenue result and a consistent contribution to gross margin, both on a dollar and a percentage basis. The final change we want to flag for you is that we reclassified all depreciation and amortization expense, which has historically been recorded in the OPEX line item of R&D, sales, and marketing, and G&A expenses, into one separate line labeled We believe this provides helpful transparency to the fundamental operating expense amounts, our cash spend, and the trends in the business. All prior periods have been reclassified to conform to this presentation.

These revenue streams operate fairly independently and you'll see a pretty consistent aggregate revenue result, and a consistent contribution at the gross margin both on a dollar and a percentage basis.

The final change we wanted to flag for you is that we reclassified all depreciation and amortization expense that has historically been recorded in the Opex line items of R&D sales and marketing and G&A expenses into one separate line label depreciation and amortization.

We believe this provides helpful transparency to the fundamental operating expense amounts our cash spend and the trends in the business. All prior periods have been reclassified to conform to this presentation.

Steven H. Gatoff: With that, I'd like to turn to the second topic and go through our Q4 2023 results. Overall, for the quarter, Q4 total revenue came in modestly above guidance, as Phil noted, at $42.8 million, and adjusted EBITDA came in at $4.1 million as cost savings initiatives, a favorable product mix, and some one-time benefits resulted in a higher adjusted EBITDA than anticipated. Looking at the revenue dynamics, as we talked about on the previous call in November, Q4 was expected to be a down quarter with nearly all of the revenue decline coming in hotspot product revenues. This was due to the anticipated runoff of legacy 4G-based product revenue from the announced end-of-life of a 4G hotspot product line at a large carrier customer.

With that I'd like to turn to the second topic that goes through our Q4 'twenty 'twenty results overall for the quarter Q4 total revenue came in modestly above guidance as Phil noted at $42 $8 million and adjusted EBITDA came in at $4 $1 million as cost savings initiatives.

Verbal product mix and some one time benefits resulted in a higher adjusted EBITDA than anticipated.

Looking at the revenue dynamics as we talked about on the previous call. In November Q4 was expected to be a down quarter with nearly all of the revenue decline coming in hotspot product revenue.

This was due to the anticipated runoff of legacy <unk> based product revenue from the announced end of life for <unk> hotspot product line at a large carrier customer.

Steven H. Gatoff: On the FWA side, as I noted a moment ago, FWA revenue grew on a sequential basis and now constitutes 29% of total revenue. Looking at our services and other revenue, the telematics business reported modestly lower revenue in Q4 on a booked adjustment that related to the elimination of prior period intercompany revenue. Q4 DMS revenue came in about 2% sequentially lower, reflecting the runoff of prior year COVID-driven sled subscriber increases at our carrier customers and Sephora's Gross Bargain.

On the SWA side as I noted a moment ago S. W. A revenue grew on a sequential basis and now constitutes 29% of total revenue.

Looking at our services and other revenue the telematics business reported modestly lower revenue in Q4 on a booked adjustment that related to the elimination of prior periods intercompany revenue.

For D. M. S revenue came in at about 2% sequentially lower reflecting the run off of prior year Covid driven led subscriber increases at our carrier customer.

And so far as gross margin.

Steven H. Gatoff: Q4 Gross Margin Percentage came in at 39.7% on a non-GAAP basis, or about 650 basis points higher than the prior quarter. This favorable performance was the result of three primary factors. First, there was a favorable product makeshift where our higher-margin FWA offerings made up a greater proportion of revenue in Q4. Second, there was a benefit from some one-time adjustments in the telematics business that I just mentioned, and third, FWA margins returned to the mid-20s in Q4. Spending a moment on GAAP gross margin, we recorded a reserve of $3.4 million in Q4 as a result of our continued rigor and scrubbing of sales forecasts and demand estimates on some of the older finished goods and raw materials in inventory and at our contract manufacturing. These charges are excluded from the calculation of adjusted EBIT.

Q4 gross margin percentage came in at 39, 7% on a non-GAAP basis or about 650 basis points higher than the prior quarter. This favorable performance was the result of three primary factors first there was a favorable product mix shift where our higher margin SWA offer.

<unk> made up a greater proportion of revenue in Q4.

There was a benefit from some onetime adjustments at a telematics business that I just mentioned.

And third F. W way margins returned to the mid twenties and Q4.

Spending a moment on GAAP gross margin, we recorded a reserve of $3 $4 million in Q4 as a result of our continued rigor and scrubbing with sales forecasts and demand estimates on some of the older finished goods and raw materials and inventory and that of our contract manufacturers.

Okay.

These charges are excluded from the calculation of adjusted EBITDA.

Steven H. Gatoff: As I mentioned on my first earnings call at Inseego in November, as we manage the revenue dynamics of the business and the evolution of our product portfolio, we're taking a very disciplined approach to managing our spend across the organization. The outcome of this focus was that Q4-adjusted EBITDA came in at $4.1 million, higher than anticipated and at a margin of nearly 10%. Even considering that some of the positive performance was due to one-time items, the outcome was still that we generated $17 million in positive adjusted EBITDA for 2023. That was versus a loss of $10 million in adjusted EBITDA in 2022. Let me turn to the GAAP accounts for a moment, as there were a few additional charges in the quarter that are excluded in the definition and calculation of just EBITDA and that we wanted to give you visibility on. In Q4, we recorded a charge of approximately $1.5 million for the correction of a functional currency designation in the telematics business. The charge was recorded in other income with an offset to other comprehensive income on the balance sheet.

As I mentioned on my first earnings call and so you go in November as we manage the revenue dynamics of the business and the evolution of our product portfolio. We're taking a very disciplined approach to managing our spend across the organization. The outcome of this focus was that Q4 adjusted EBITDA came in at $4 $1 million higher than anticipated and at a mall.

And up nearly 10%.

Even considering the some of the positive performance was due to one time items the outcome, but still that we generate a $17 billion and positive adjusted EBITDA for 2023 that.

That was versus a loss of $10 million of adjusted EBITDA in 2022.

Let me turn to the GAAP accounts for a moment as there were a few additional charges in the quarter that are excluded in the definition and calculation of adjusted EBITDA that we wanted to give you visibility to it.

In Q4, we recorded a charge of approximately $1.5 million for the correction of a functional currency designation in the telematics business.

The charge was recorded in other income with an offset to other comprehensive income on the balance sheet. It was noncash and did not impact any of our key metrics such as revenue gross margin adjusted EBITDA for cash.

Steven H. Gatoff: It was non-cash and did not impact any of our key metrics such as revenue, gross margin, adjusted EBITDA, or cash. In Q4, we also booked a reserve associated with our telematics business of approximately $4.1 million against the capitalized software development costs of the past several years in building what was originally designed to be a next-gen platform for the telematics software. We came to the conclusion that it made sense to reserve against this historical spend after conducting an intensive review of our telematics business over the past several months.

In Q4, we also booked a reserve associated with our telematics business of approximately $4 $1 million against the capitalized software development costs from the past several years and building on what was originally designed to be a nexgen platform for the telematics offering.

We came to the conclusion that it made sense to reserve against the historical spend after conducting an intensive review of our telematics business in the past several months. This included evaluating the product and service needs of our customers and an assessment of the likelihood that the development would be included in future product releases.

Steven H. Gatoff: This included evaluating the product and service needs of our customers and an assessment of the likelihood that the development would be included in future products. Wrapping up our Q4 results with the balance sheet, cash was fairly consistent year over year, coming in at $7.5 million, and we had a modest amount drawn on our credit facility of $4.1 million at year end. I'll talk more about capital structure in a moment. Now, let's turn to the third topic insofar as our trajectory into 2024 that we're focused on and what we think Q1 looks like. As Phil highlighted, we've begun a strategic assessment and evaluation of our product portfolio and focus going forward, how that translates to growth in our core FWA business, and how that drives continued increases in profitability.

Wrapping up our Q4 results with the balance sheet cash was fairly consistent year over year coming in at $7.5 billion, and we had a modest amount drawn on our credit facility of $4 $1 million, a year and I'll talk more about capital structure and all that.

Let's turn to the third topic and so far as our trajectory into 2024 that we're focused on and what we think Q1 looks like it's Phil highlighted we've begun a strategic assessment and evaluation of our product portfolio and focus going forward, how that translates to growth in our core <unk> business.

And how that drives continued increases in profitability.

Steven H. Gatoff: Another important focus for us now as we head into 2024 is rights, highs, and our capital structure. As I mentioned on the last call and we spoke about, we have a small group of bondholders of our convertible notes. We are engaged with the right parties, and we anticipate that it can take several months to work this through and develop an optimal capital structure solution.

Another important focus for US now as we head into 'twenty 'twenty four is right sizing our capital structure.

As I mentioned on our last call I spoke about we have a small group of bondholders of our convertible notes were engaged with the right parties and we anticipate that it can take several months to work this through and develop an optimal capital structure solution.

Steven H. Gatoff: In the near term, we've been improving our short-term borrowing dynamics. As you may have seen in today's filings, we amended our ABL facility to ease the covenants and improve our liquidity and borrowing capacity, all done by our lender at no cost to the company and based upon the improving execution and relationship that we've had with them over the past few months. Similar to our bondholder discussions, we're engaged with them in various ways that they might be helpful in our overall capital structure.

In the near term, we've been improving our short term borrowings dynamics as you may have seen in today's filings, we amended our ABL facility to ease the covenants and improve our liquidity and borrowing capacity.

All done by our lender at no cost to the company and based upon the improving execution and relationship that we've had with them over the past few months.

Similar to our bondholder discussions, we're engaged with them and the various ways that they might be helpful. In our overall capital structure solution.

Steven H. Gatoff: Moving on to provide some color on Q1 2024, we expect total product revenue to be roughly flat with Q4 2023, with anticipated growth in FWA offset by a decline in mobile hotspots. For services and other revenue, we expect reasonably consistent revenue contribution for Q1 over Q4. On Q1 Gross Margin, you saw that there were some one-time items that resulted in the relatively higher non-GAAP gross margin percentage in Q4 2023. For Q1 2024, we expect the non-GAAP total gross margin percentage to be in the mid-30% area. And so, considering all this, we'd like to provide the following financial guidance for the first quarter of 2024: total revenue in a range of $40 million to $42 million, and adjusted EBITDA in a range of $2.5 million to $3 million.

Moving on to provide some color on Q1 2024, we expect total product revenue to be roughly flat with Q4 2023 with anticipated growth in SWA offset by a decline in mobile hotspot.

For services and other revenue, we expect reasonably consistent revenue contribution for Q1 over Q4.

Our Q1 gross margin you saw that there were some one time items that resulted in a relatively higher non-GAAP gross margin percentage in Q4 of 2023 for Q1 2024, we expect non-GAAP total gross margin percentage to be in the mid 30% area.

And so considering all of this we'd like to provide the following financial guidance for the first quarter of 2020 for total revenue in a range of $40 million of $42 million and adjusted EBITDA in a range of $2 $5 million to $3 million.

Yeah.

Steven H. Gatoff: In closing, we're thrilled that Phil has taken on the executive chairman role, and we're already benefiting from his involvement, deep product knowledge, and focus on addressing our go-to-market execution and performance quickly and effectively as we move into 2024. With that, we appreciate your time and support, and we're glad to open the call for any questions. Operator, I will now begin the question. To ask a question, you may press star, then 1 on your telephone. Please pick up your head, and draw a question. You may press star. At this time, we will take our first question, Vitanza with Cowan.

In closing, we're thrilled that Phil has taken on the executive chairman role and we're already benefiting from his involvement deep product knowledge and focus on addressing our go to market execution and performance quickly and effectively as they move into 'twenty four.

With that we appreciate your time and support and we're glad to open the call for any questions.

Operator.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

And if youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw question you May Press Star then two.

At this time, we will take our first question, which will come from Lance Vitanza with Cowen. Please go ahead.

Lance Vitanza: Thanks, guys, and congratulations on a nice quarter. Phil, before I get into the details of the quarter, you mentioned that you were impressed with the products, I think, back when you were at Sierra. And I'm just wondering if you could maybe elaborate on that a little bit more, whether it was... you know what you saw then or maybe more importantly where you see the opportunity, day, what are the offerings that you find most exciting today? That's a good question. Look, one of the things that is different, if you look at where Inseego's products are today, they really cover a different segment of the market than what Sierra does, right? And their channels are different.

Thanks, guys and congratulations on the nice quarter.

So before I get into the details of the quarter you'd mentioned that you were impressed with the products I think back when you were at Sierra and I'm just wondering if you could.

Could maybe elaborate on that a little bit more whether it was you know what you saw then or maybe more importantly, where you see the opportunity today what are the offerings that you find most exciting today.

Yeah, It's a good question.

You know one of the things that was different if you look at where you can see those products start today, they really kind of a different segment of the market then and what's the average is right there in their channels or different that very good good relationships with some of the big carriers and they really kind of at the more we'll call them value end of the spectrum and I think that there's opportunities in Chico two really.

Phil Brace: They have very good relationships with some of the big carriers, and they're really kind of at the more, we'll call them the value end of the spectrum. And I think that there are opportunities for Inseego to really start adding some more software content, to broadening out the distribution channels. And I just think they're, I mean, I have one that I use quite frequently, actually.

Start, adding some more software content to broadening broadening out the distribution channels and I. Just think there may have one that I that I use quite frequently actually they grew their great little products.

Phil Brace: They're great little products, and I think, particularly as some of the carriers and some of the technology providers try and really start ramping up their fixed wireless access solutions, which really enable things like broadband to remote places where there aren't any cables down, remote offices, branch offices, schools, mobile solutions, right? I just think that 5G really opens up a range of solutions in that space, and I think Inseego's got a pretty good position as to where it is and how to expand that from here. So that's what I think. Okay, thanks.

I think particularly in some of the carriers and some of the technology.

[noise] providers try and really start ramping up their fixed wireless access solutions, which really enabled things like you know.

Broadband to remote places, where there aren't any cables down remote offices branch offices.

<unk> mobile solutions right I, just think that <unk> really opens up a range of solutions not space and I think she goes we've got a pretty good position on where it is and how to expand that from there. So that's what that's what I think about that.

Okay. Thanks.

Steven H. Gatoff: Maybe just in terms of the revenue beat is a nice beat in the quarter. As we think about the first quarter, I'm just wondering if perhaps, given that the guide, you know, it's sort of flat, maybe down a little bit, I think. But was there perhaps some revenue from the first quarter that maybe was pulled into the fourth quarter? Does that sort of explain a little bit of the beat and also maybe the, you know, the guidance in the first quarter? Yeah, a good question. Sorry, sir. I'll tag team with Bill.

Maybe just in terms of the revenue beat was nice beat in the quarter as we think about the first quarter.

Just wondering if perhaps given that the guide you know, it's sort of flat, maybe even down a little bit I think really but was there perhaps some revenue from the first quarter that maybe was pulled into the fourth quarter does that sort of both.

Explain a little bit of a beat and and also maybe the you know the guidance in the first quarter.

Yeah. Good question.

Hello, I'm sorry, Sir.

Well tag team with with Bill Oh towards not not meaningfully. We you know we had a solid close to the quarter. There are always some deals that get pulled forward, but there was no. There was no meaningful large contracts or contracts en masse that got pulled into the quarter.

Steven H. Gatoff: Not meaningfully. We had a solid close to the quarter. There are always some deals that get pulled forward, but there were no meaningful large contracts or contracts en masse that got pulled into the quarter. Okay, I didn't see any mention of software revenue in the release. I think that was about 30% of revenue. Corridor.

Okay I didn't see any mention of software revenue in the release I think that was about 30% of revenue in the third quarter I'm wondering how it looked in the fourth quarter and maybe if you could talk about the trend going forward.

Steven H. Gatoff: I'm wondering how it looked in the fourth quarter and maybe if you could talk about the trend going forward. Yeah, again. We'll happily tag team on this. So there's really two parts to that, if you will. There's the bucket that we now provide the category of services, and another that has the telematics and DMS business, as well as some NRE products in there. But that's really the SAS revenue. And then we have a growing problem.

Yeah, the again, well hopefully tag team on this so there's really two parts to that if you will there's the.

Bucket that we now provide the category of services and other that have the telematics and our Dms business as well as some in our REIT product in there, but that's really the SaaS revenue and then well we have a growing software business also SaaS are around and so you go connect.

Steven H. Gatoff: Connect, that is currently included up in the product revenue. It's not material, candidly, to break out into its own category or have it down below, in the Services Bucket, but as it does, we will break that out. But it's been on a kind of consistent trajectory. And so there's

That is currently included in the product revenue, it's not material candidly to break out into its own category or the or.

Down below it.

And the services bucket, but as it does we will we will break that out but it's it's been on a kind of consistent trajectory and so there's a.

Steven H. Gatoff: There's continued growth in that piece, albeit a small dollar number. Okay, and then just last one for me, you know, gross margin, and I appreciate the color that you provided in the prepared remarks. I'm just wondering, and I think you kind of touched on this with respect to fixed wireless access kind of reverting, but if we were to look more closely sort of on a product-by-product or service-by-service, you know, basis at gross margin, what would we see there, or sort of is that the price-cost relationship, has that been sort of flat sequentially, and I'm really thinking more sequentially than I am, you know, kind of year on year on year, but is there any upside here, are you getting any ability to sort of catch up to some of the cost increases that you may have seen through the inflationary period, and how would you describe that dynamic? Yeah, sure. There's probably two vectors to look at that, in our view.

There was continued growth in that piece, albeit small small dollar numbers.

Okay and then just last one for me you know gross margin and I. Appreciate the color that you provided in the prepared remarks.

I'm, just wondering and I think you kind of touched on this with respect to fixed wireless access kind of reverting.

But if we were to look more closely sort of on a product by product or or service by service basis at gross margin. What would we see there are sort of is that the price cost relationship is that been sort of flat sequentially and I'm really thinking more sequentially than I am.

Year on year on year, but is there is there any upside.

Here are you getting any ability to just sort of catch up to some of the costs are.

Increases that you may have seen through the inflationary period, and how would you describe that dynamic. Thanks.

Yeah sure, there's probably two vectors to look at that in our view you know one is as you said within product there's the SWA versus mobile hotspot that is a fairly different economic profile, a and then b. The other factor would be the traditional carrier slotted market versus the channel.

Steven H. Gatoff: You know, one is, as you said, within product, there's the FWA versus mobile hotspots that have a fairly different economic profile, A. And then B, the other vector, would be the traditional carrier slotted market versus the channel market. So let me just take those two.

So let me just take those two.

Steven H. Gatoff: Our whole focus on growth and profitability, as you heard from us at nauseam and with a lot of vigor, is that the FWA product is just a higher margin, higher price, and greater contribution to value creation. And so if you go back in time, and you'll see this in the numbers we provided in the supplemental data, you'll see that as FWA becomes a greater part of the profile, you see revenue lift, which is good, but you see gross margin take-up. And so the FWA business obviously depends upon the proliferation of 5G. The more that 5G becomes more proliferated in suburban and rural markets, the more adoption as FWA as the primary connection device, you see more rollout of that, and you see greater marginal contribution to profit. And so that's something that we will continue to focus on and which is one of the reasons why we wanted to break up FWA.

Our whole focus on growth and profitability as you heard from us at the Aussie and kind of with a lot of bigger.

Is that the SWA product, it's just a higher margin higher priced a greater contribution to the value creation and so what if you go back in time and you'll see this in the numbers we provided in the supplemental data you'll see as F. W. A becomes a greater part of the profile you see revenue lift.

Good, but you see gross margin tick up and so that's W. A business, obviously dependent upon the proliferation of five G. The more than five G becomes greater proliferated in suburban and rural markets. The more adoption as SWA <expletive> as primary connection.

Device.

Do you see more rollout of that you'll see greater marginal contribution to profit and so that's something that we will continue to focus on and which is one of the reasons why we wanted to breakout F. W. A so you see that you see the revenue contribution to grow. So that's one dynamic that you are the more you scale that there's a step function in core.

Steven H. Gatoff: So you see that, you see the revenue contribution growth. That's one dynamic that the more you scale that, there's a step functioning cost, so you're able to extract higher marginal revenues from FWA getting added over time, and you're seeing that just starting to work its way through the financials. The second dynamic is our go-to-market and our route-to-market insofar as, you know, our legacy history around being a slotted carrier company that's, you know, worked out fine in the past. The one part of the business model and route-to-market that has been less successful has been around our channel, both our execution and presence in the channel and how we have grown that revenue. And so Steve Horman joining right when I did essentially, he's already made phenomenal progress in bringing over the team that he's worked with in the past, Phil has worked with, and running the channel, running sales operations.

So you are able to extract higher marginal revenues from SWM getting added overtime and you said youre seeing are just starting to work its way through the financials.

The second dynamic is our go to market and our route to market and so far as you know our legacy history around being a slotted carrier a company that's worked out fine in the in the past the one part of the business model and route to market that there's been less successful was.

Around our channel our both our execution and presence in the channel and how we have grown that revenue and so Steve Hartman, joining right. When I did essentially he's already made phenomenal progress in bringing over the the the team that he's worked with in the past fill his work with.

And running channel running sales operations and so our presence in the channel.

Steven H. Gatoff: And so our presence in the channel, A, is meaningfully improved and getting better, and B, is exactly what you asked about, which is a source of driving higher marginal revenue going forward that you'd see drive greater margin. Thanks, guys.

He has meaningfully improved and getting better and B is exactly what you asked about which is a source of driving higher marginal revenue going forward that you would see drive greater margin contribution.

Thanks, guys.

Operator: You bet. Thank you. And our next question will come from Tordes von Berg with... Yes, good afternoon. This is Jeremy calling for Tori.

You bet.

Thank you.

And our next question will come from tore Svanberg with Stifel. Please go ahead.

Yeah.

Yes. Good afternoon. This is Jeremy calling for 'twenty I.

Jeremy: I guess maybe the first question on, in terms of your liquidity, it looks like you have $7 and a half million in cash, 4.1 million drawn on your revolver. How much of that, how much remittance do you have in your revolver? And, you know, can you talk about cash burn in terms of a fee cash flow instead of just adjusted EBITDA? Yeah, so we feel good and better about where we are with our liquidity, both from a standpoint of having a small amount, a relatively small amount, 4.1, outstanding. The reduction also, Jeremy, you saw the fine print where our lender worked with us and offered up a reduction in the covenant. That freed up another $2 million of liability, sorry, of Revolver.

I guess.

Maybe the first question on insurance.

Liquidity it looks like you have seven 5 million in cash a $4 1 million drawn.

Drawing on your revolver.

How much of that how much it will be having a revolver and.

Talking about <unk>.

Cash burden in terms of free cash flow and adjusted EBITDA.

Yeah.

Yeah. So we we feel are good and better and better about where we are with our liquidity both from a standpoint of having a small amount relatively fallen off for one one outstanding.

The reduction also Jeremy if you saw the fine print, where our lender worked with us and.

And offered up a reduction in our covenants, so that freed up another $2 million of liability Oh, sorry.

Oliver and and so.

Steven H. Gatoff: And so, we were EBITDA positive this quarter. We guided them, obviously, for the positive. We... We're looking at continuing to grow EBITDA over each quarter, and so we're looking to be in a cash generation mode going forward, and so I think the past where you've seen cash burn, that's something that is behind us, and we continue to look forward to generating modest amounts of cash, increasing going forward, now with more liquidity available on the revolver. Having said that, our draws on the revolver are pretty low, and so if we're drawing $2 to $3 million at a time and paying that down, that's kind of working capital management between carrier payments and some payroll and other expenses, but that becomes less and less significant for us as we move through the year. Great That's, that's good.

Being EBITDA positive this quarter, we guided obviously for positive we yeah, we're looking at continuing to grow EBITDA with a quarter over each quarter and so you know we're looking to be in a cash generation mode going forward and so I think the past where you've seen cash burn does.

And that is behind us and we continue to look forward to generating modest amounts of cash increasing going forward now with more liquidity available on a revolver and having said that our draws on the revolver are pretty low.

So you know if we're if we're drawing you know $2 million to $3 million at a time and paying that down that's that's kind of our working capital.

Management between you know carrier payments and payroll and other expenses.

But that becomes less and less significant for us as we move through the year.

Great. That's that's good.

Steven H. Gatoff: And I guess maybe if we look at, yeah, moving throughout the year, can you talk about, you know, what kind of, without, I know you don't guide more than one quarter out, but is there anything that can give you some confidence in terms of, you know, business potentially bottoming out, or, you know, the second half potentially being stronger than the first half? And are there any, you know, trends you can point to, maybe in terms of bookings or reduced cancellations, things of that nature? That'd be great.

Maybe if we look at our yeah moving throughout the year can you talk about you know what kind of without I know you don't guide more than one quarter out but is there anything that can give you some confidence in terms of loved business potentially bottoming or second half potentially being stronger than the first half.

And are there any trends you can point to that even truth bookings or.

Calculation.

That's great.

Steven H. Gatoff: Sure. And Phil, obviously, feel free to chime in on any or all of it. You know, we feel like there's a pronounced effort without Jeremy, to your appreciated caveat of not giving guidance for the year or for each quarter out. But we are looking to meaningfully grow the business. And the biggest driver of our growth is the FWA, you know, product and business. And so that's something that we're investing in Harman and the team, you know, meaningfully around channels, but then also optimizing our carrier slots and relationships and adding new carriers and other routes to market by large folks in the telecom space, if you will, kind of generally speaking. And so, you know, as we manage the business, and particularly now, it would probably be premature to say this, but with Phil joining in all of the work that we have started to look at products and how we go to market with our slotted products and what our chip set designs are and how we look at everything as far as our go-to-market strategy and our products, you know, we're all pretty bullish on this. So coming short of offering guidance, Great, and if I could just squeeze one more question in on the gross margin side, can you help us, you know, maybe just characterize the differences between the three segments and also, I guess, within. Thanks, Wireless. Is there a difference between the channel margins and the carrier margins?

Sure.

Phil obviously feel free to chime in on any or all of it.

Yeah. We you know we feel like there is a pronounced effort without a germany or appreciated caveat of not giving guidance for the year for each quarter out, but what we are looking to meaningfully grow the business and the biggest driver of our growth is the SWA products.

And the business and.

And so that's something that we're investing in a harman and team you know meaningfully around channel, but then also optimizing our carrier slots and relationships and adding new carriers and other routes to market by large a large folks in the telecom space. If you will kind of generally speaking.

And so you know as we manage the business and particularly now.

That would be probably a bunch or a premature to say this but.

With coal joining and all of the work that we have are starting to look at products and how we go to market with our slotted products and what our chipset designs are and how we look at everything.

As far as our go to market and our product Ah Yeah, we're all pretty bullish on this.

So coming short of offering guidance, where you know we're looking favorably at the year.

Great and if I could just squeeze one more question on the gross margin side can you help us.

Maybe just characterize the differences between segments.

Also I guess within.

Wireless is there a difference between the channel.

Margins in the carrier market.

Yeah. So the last question, yes definitely.

Steven H. Gatoff: Yeah, so the last question: yes, definitely. The channel margins are higher, full stop. Think of those really as enterprise, mid-market, but enterprise sales, where the carriers are selling through VARs and other third parties to enterprises, and so there's generally larger, higher dollar sales that have higher margin contribution as well, whereas the stocked carrier business tends to be more competitive, more price-pressured, and different base level functionality that carriers buy and sell to their customers.

Channel margins are think of as a higher for full stop I think of those it really adds enterprise.

Mid market enterprise sales, where the carriers are selling through vars and other third parties to enterprises and so there's a generally larger higher dollar sales.

Sales that have higher margin contribution as well, whereas the stopped carrier business tends to be more competitive or price pressure different base level of functionality are that the carriers themselves and their customers.

Steven H. Gatoff: So yes, there's definitely a different margin profile, so that expansion of the channel has a higher marginal contribution to gross margin. And then I think on your first question, you were a little garbled, I apologize, but I think you were asking about what the dynamic of the impact of the gross margin change was. Was that for Q4, you were asking, Jeremy?

Yes, it's definitely a different margin profile. So that the expansion of channel has a higher marginal contribution to gross margin.

And then I think on your first question you were a little garbled I apologize, but I think you were asking about what was the dynamic of the.

The impact of the gross margin change was.

Is that for Q4, you were asking Jeremy.

Steven H. Gatoff: Oh I'm just meaning the relative contribution from each segment, I guess fixed wireless as a whole versus fall market for us, versus the mobile, versus the software, I guess the services. Yeah, so you can, I'm happy to say that is all in the supplemental information data and as well on the face of the statement because what we've done is we've broken out gross margin now, you can, it's calculated for you by those delineations so you can see product gross margin and you'll see services and others so you can understand the contribution of those two because the gross margin is meaningfully different between the product side of the business and also on a gap and non-gap basis, right, than on the services and others.

Oh.

The relative contribution from each segment, I guess fixed wireless as a whole versus.

Ballpark it for us versus the mobile versus Oh, I guess it services.

Yeah. So you you can I'm happy to say that is all in the supplemental information data and as well on the face of the statement because what we've done is we've broken out gross margin now you can count it's calculated for you buy those delineation. So you can see.

Product gross margin and you'll see services. Other so you could understand the contribution of those two cause cause. The gross margin is is meaningfully different between the product side of the business are.

Also on a GAAP and non-GAAP basis, right and then on the services and other services and others is very high.

Steven H. Gatoff: The services and others are a very high, you know, non-core but high gross margin business. I'm sorry, I meant the margin differences, the three drivers of the margin for the current quarter. I think partially some of it was a one-time benefit, some of it was, you know, the fixed wireless access returning to the mid-20s. Is there a way to kind of maybe just rank order those?

Encore, but high gross margin business.

I'm, sorry, I, I mean and that's.

The margin differences are the three drivers of the margin for the current quarter I think partially some of the one time benefit.

Some of it was.

You know the fixed wireless access to trained to mid 'twenty is there a way to kind of.

Rank order those.

Steven H. Gatoff: Yeah, sure. So, one of the larger, kind of quarter over quarter, one of the largest changes, almost 200 basis points of change, was the telematics business that I mentioned. It was an adjustment for a prior period, intercompany revenue that needed to be eliminated. And so, that was probably the largest, almost 200, 190 basis points of impact. And then, the next biggest bucket was around fixed wireless, which you just said last, the fixed wireless margins, kind of, you know, quote, returning to the mid-20s. They were lower in Q3, because in Q3 there was an adjustment for a prior period that was taken of over a million dollars, so that depressed the FWA margins in Q3, which is why you saw a rise in Q4.

Yeah sure.

So one of the larger kind of quarter over quarter.

One of the largest changes almost 200 basis points of change was the telematics business that I mentioned was a and adjustment for a prior period.

Intercompany revenue that are needed to be eliminated and so that was probably the largest almost almost 190 basis points of impact and then the next biggest bucket was around the fixed wireless, but you're just that last that fixed wireless.

Margins kind of you know quote returning to mid twenties. They were lower in Q3, because in Q3, there was an adjustment for prior periods that was taken out of over $1 billion. So that depressed the half W. A margins in Q3, which is why you saw a rise in Q4, so that was the number two item.

Steven H. Gatoff: So, that was the number two item. And then, the third driver of growth, which was, you know, up there also around 170 basis points, was a product mix and just having fewer mobile solutions in the making. Perfect, thank you very much.

And then the third driver of level, which was up there also around 170 basis points was.

Our product mix and just having a.

Less mobile solutions and.

And and IMAX.

Perfect. Thank you very much.

Scott Searle: Yeah, sure. Happy to. And our next question will come from Scott Searle with RothMKM. Please go ahead. Hey, good afternoon.

Yeah sure happy to.

Yes.

And our next question will come from Scott Searle with Roth I'm Kim. Please go ahead.

Hey, good afternoon. Thanks for taking my questions nice to see the stability in the business still very exciting to see you on board and more deeply integrate in day to day operations with the company. So congratulations.

Scott Searle: Thanks for taking my questions. It's nice to see the stability in the business, Phil. It's very exciting to see you on board and more deeply integrated in day to day operations with the company. So congratulations.

Scott Searle: And Steve, I really appreciate the new financial category. Right on. Thank you.

And she really appreciate the new financial categories.

Right on budget.

Yeah.

Scott Searle: Hey, maybe just to follow up on a couple of the other questions, from a gross margin standpoint, Steve, just wondering if there were any one-time benefits that you saw from previously written-off inventory or anything of that nature. And then Phil, fixed wireless access seems like it's becoming more of the centerpiece going forward. Just kind of wondering how you're thinking about it in different channels, go-to-market, where that expansion occurs. Is that within the existing carrier relationships? Is that just some other channels, or are you starting to think about more expansion beyond North America? Yeah, good question, Scott.

Can you maybe just to follow up on a couple of the other questions from a gross margin standpoint, Steve just wondering if there were any one time benefits that you saw from previously written off inventory or anything of that nature, and then Phil fix for us actually it seems like it's becoming more of a centerpiece going forward.

Just kind of wondering how you're thinking about it in different channels go to markets, where that expansion occurs is that within the existing carrier relationships isn't that there's some other channels, where you're starting to think about more expansion beyond North America.

Yeah. Good question, Scott I, you know I think that I think our initial focus I think we have lots of opportunity primarily in North America to start with so I would look to us to continue to try and build and expand our strong carrier relationships, but then frankly go out and do a little bit more as he was talking about enterprise like sales via a more robust channel.

Phil Brace: I think our initial focus, I think we have lots of opportunity, primarily in North America to start with. So I would look for us to continue to try and build and expand our strong carrier relationships. But then frankly, go out and do a little bit more, as you talked about enterprise-like sales via a more robust channel that has, I guess, higher-end solutions and focuses on small businesses, medium enterprises, those kinds of things. So I would say an expansion within our existing carrier distribution channel, I guess, if you will, and then an expansion into more of the channel side. I think I would look at it that way too.

That.

I guess higher end solutions focuses on small businesses medium enterprises those kinds of things. So I would say the expansion within our existing you know our carrier distribution channel I guess, if you will and then expansion into more of the channel side I think I would look at it that way.

Steven H. Gatoff: And I expect we're going to get, if things go our way, we're going to get double growth, right? Because we'll have overall growth in the six wireless access market. Plus, we'll kind of continue to work to expand our channels. So that's kind of how we're looking at it. Gotcha. And Steve, was there any benefit from previously written-off inventory, or are we clean at this point? Yeah, good question. There was no benefit from the previous reserves, the large one, obviously, we took last quarter.

I expect we're going to get.

Things go our way, we're going to get the double growth rate because we'll have overall growth in the fixed wireless access market.

What kind of.

We need to work to expand our channels. So that's kind of how we're looking at it.

Gotcha, and then Steve any was there any benefit from previously written off inventory or we clean at this point in time.

Yeah. Good question, there was no benefit from the previous reserves.

Large when obviously, we spoke last quarter. There are some older inventory that we would look to sell or if we can but obviously, we think the value is zero and so there was no benefit.

Steven H. Gatoff: There's some older inventory that we would look to, you know, sell if we can, but obviously, we think the value is zero. And so there is no benefit. Gotcha. And Steve, I just want to clarify as well. I thought I heard positive cash flow generation in the first quarter, and it sounds like you're expecting that for calendar 24 as well as as we start to hit the bottom and get even with getting a little bit into growth mode. You're expecting to be cash flow positive. Is that correct? That's right, and Phil, I know this is probably unfair, but since you are a wireless veteran, I'm wondering, as you look at the business today, you've talked about some of the things that you find exciting about the company, but there are a lot of dynamics that are ongoing. Mobile hotspots have been basically in a sequential decline for an extended period of time, and I guess if you remove the pandemic, it's been over a decade since there's been headwinds related to mobile hotspots.

Gotcha.

Steve I just wanted to clarify school I thought I heard positive cash flow generation in the first quarter and it sounds like youre expecting that for calendar 'twenty four as well as we started to hit the bottom and get even with we're getting a little bit into growth mode. You expect them to be cash flow positive is that correct.

That's right.

Okay, and then Phil I know this is probably unfair.

But since you are a wireless veteran I'm wondering as you look at the business today you've.

You've talked about some of the things that you found exciting about the company, but there are a lot of dynamics that are ongoing are mobile hotspots had been basically in a sequential decline for an extended period of time and I guess, if you remove the pandemic, it's been over a decade, where theres been headwinds related to mobile hotspots.

Phil Brace: Does that go away in terms of the business as you start to think about things strategically over the next two to three years? And as you look out over that time period, what is Inseego two, three years from now? Is 70% of its sales from a recurring nature? Are you converting a lot of that fixed wireless access more to a recurring kind of cradle point model? How are you kind of at a high level thinking about it with the understanding that I know it's day one, so my apologies. So, yeah, I guess I'm going to caveat my answer by saying I deserve the right to change my answer. But I guess the way I think about it, Scott, is when I kind of zoom out, and when I think about Inseego, I think it's providing 5G wireless connectivity solutions for both mobile and fixed. Facebook coffee The Echo Voice Chat Scientific Team The chat is held in a virtual environment.

Does that go away in terms of the business as you start to think about things strategically over the next two to three years and as you look out over the time period.

What is intriguing is you know two or three years from now is in Chicago.

70% of its sales from a recurring nature, you're converting a lot of the fixed wireless access more to a recurring kind of cradle quaint model. How are you kind of at a high level thinking about it with your understanding I know, which day one so my apologies.

So yeah, I guess I'm going to caveat my answer by.

But you have the right to change my answer.

But I guess the way I think about it Scott is like when I kind of zoom out and when I think about it see go I think it is providing.

Five G wireless connectivity solutions for both mobile and fixed capabilities certainly the fixed wireless access is the area of growth now because as you pointed out the mobile or mobile hotspot I would say.

Phil Brace: For more information, please visit www.echovoicechat.com. I mean, maybe if you open your aperture a little bit and think about mobile solutions, I'm not entirely sure it's gonna go to zero. I do think, and I'm not sure we want it to either, because I think there is a market for connectivity of this nature that moves around. I mean, I think of the mobile workforce and things like that.

It is going away I'm, not sure or at least decline I'm not sure in the way that we've thought about mobile hotspot before US is I mean, maybe if you open your aperture a little bit and think about mobile solutions since I'm not entirely sure. It's going to go to zero I do think and I'm not sure. We wanted to either because I think there is a market for connectivity.

This nature of that moves around I think mobile work force and things like that but I'm not sure. It's going to go to zero, but I do think the focus of the company is going to be on the fixed wireless access and I think it's just it's the higher end solution. That's more targeted enterprise, there's more opportunities to add some value there I.

Phil Brace: But I'm not sure it's gonna go to zero, but I do think the focus of the company is going to be on fixed wireless access. I think it's just, it's a higher end solution, it's more targeted enterprise, there's more opportunities to add some value there. And I think the other thing that we've just barely started is the idea to actually drive some software monetization and some software solutions above where we are now, whether it's just a few. Gotcha. Very helpful. And if I could, Steve, just to quickly follow up on the recapitalization, it sounds like you're in multiple dialogues. I'm not sure if you could provide any additional color.

I think the other thing that we frankly, just barely started on it is the idea to actually drive some software monetization from software solutions above where we are now whether it's.

Just simple like device management and management are not a lot of things you need to do to manage and operate the devices and so we're definitely going to be moving in that direction. You know, it's hard to say what that will look like you know in the outer years, but I mean, you're on right track in that area.

Got you very helpful and if I could sneak just a quickly follow up on the recapitalization. It sounds like you're in multiple dialogues I'm not sure. If you could provide any additional color. It sounds like the timeline of the process here, it's going to take a bit I think the convert doesn't go our current until may.

Steven H. Gatoff: It sounds like the timeline of the process here is going to take a bit. I think the conversion doesn't go current until May. You know, but it sounds like you guys are trying to get out in front of it. Is there anything else you can kind of provide in terms of what you think is the optimal capital structure or otherwise kind of going forward? It's obviously a big impediment that's kind of hanging over the company, but once you were able to deal with that, it seems like there's a lot of opportunity for investors here to come back and revisit the name. I just kind of wonder if there are any additional thoughts that you could provide on that.

You know, but it sounds like you guys are trying to get out ahead of it is there anything else you can.

Kind of provide in terms of what you think is the optimal capital structure or otherwise kind of going forward. It's obviously, a big impediment, that's kind of hanging over the company, but once you were able to deal with that it seems like there's a lot of opportunity for investors, who could come back and revisit the name just kind of wondering if there's any additional thoughts that you could provide on that front.

Steven H. Gatoff: Yeah, it's a great question, and it's obviously a huge focus for all of us. But we are, know, as you said, Scott, you hit all the right dates and kind of highlights of what we're looking at. And looking to figure out what the right construct is because we're obviously bullish on the enterprise value and then how that, you know, filters through on a go-forward basis, looking at recapitalizing the debt, how much debt, right, when we look forward, we'll have some amount of debt. If you think about it conceptually, we will have some amount of debt that you would presume would convert to equity, some amount of debt that would continue on.

Yeah, It's a great question and it's obviously a huge focus for for all of us.

But we are not.

You said you saw you hit all the right dates and kind of the highlights of what we're looking at and <unk>.

Looking to figure out what the right construct is because we're obviously bullish on the enterprise value and then how that.

Filters through on a go forward basis looking at recapitalizing the debt how much debt, but when we look forward, we will have some amount of debt.

If you think about conceptually would have the upsell amount of debt that you would presume would convert to equity some amount of that that would continue at a.

Steven H. Gatoff: So when we look at our EBITDA profile, what cash and liquidity we have available to us to pay down certain amounts of debt, and so those would be the combinations that we're talking with folks about now and figuring out what it looks like and what are the tradeoffs, and then how much of that enterprise value obviously accrues to the equity holders, which is obviously an important focus of our research. Okay, great. Thanks so much for taking the questions. Congratulations on the quarter. And Phil, congrats on coming on board. Thanks, guys. Thank you.

So when we looked at our EBITDA profile, what cash and liquidity, we have available to us to pay down certain amounts of debt and so that would be the combinations that we're talking with folks about now and figuring out what you know what that looks like and what are the tradeoffs and then how much of that enterprise value, obviously, our crews down to the equity holder.

<unk>, which is obviously an important focus of ours.

Okay, great. Thanks, so much for taking the questions congrats on the quarter and Phil Congrats now coming on board. Thanks, guys.

Thank you thanks Scott.

Scott Searle: Thanks, Scott. I think we have a follow-up question about Rosenberg's life.

And it looks like we have a follow up question from tore Svanberg with Stifel. Please go ahead with your follow up.

Operator: Please go ahead with your question. Yes, just a question in terms of OPEX. Is the Q4 run rate, you know, that $18.7 million, is that what we can expect going forward? And just, you know, thinking about your investments that you may need to make going after the channel market and maybe how much you're reinvesting in terms of R&D on the mobile side. Just bouncing all that together, you know, can give us some high-level views. Yeah, good. It's a good question, Jeremy. Thanks. Someone's got to do the model, right?

Yes, just a question on in terms of the Opex.

Is the Q4 run rate that $18 7 million yeah, what we can expect going forward and thinking about your investments that you're making to make going.

Going after the channel market.

And then maybe how much you're reinvesting in terms of R&D.

Mobile side I'm talking all of that together.

Can you give us some high level view of Opex.

Yeah. Good so good question, Jeremy Thanks, someone's Gotta do them all right.

Jeremy: So, the short answer is, yeah, that's probably not an unreasonable benchmark to use, certainly for Q1 and so far as figuring out what the run rate could, should, would, might be for the short term. In the longer term, you know, for the kind of, as we move through the year, it's a combination of increases in spend but with a higher marginal contribution. So, we expect to spend less than we generate revenue. So, dollars might go up, but at an increasing contribution. But for the near term, you know, that is probably a good spend level to use for the model. Great, thank you very much.

So so in the short answer is yeah, that's probably a nod.

Not an unreasonable bench.

Benchmark to use certainly for Q1, and so far as figuring out what the run rate you know could should well it might be for the short term and the longer term for the kind of as we move through the year. It's a combination of increases in spend but with a higher marginal contribution. So we expect to increase.

Spend less than we generate revenue so dollars might go up but editing increasing contribution a buffer to the near term you know that is probably a good spend level to use model with.

Great. Thank you very much.

Steven H. Gatoff: Yeah, likewise. Thanks, Jeremy, our question will also conclude today. Thank you very much for attending the presentation. You may now disconnect.

Yeah Likewise.

Thanks, Jeremy.

And this concludes our question and answer session and will also conclude today's call.

Thank you very much for attending the presentation today and you may now disconnect your lines.

Yeah.