Hello, and welcome to Inseego Corp's third quarter 2023 financial results conference call. Please note that today's event is being recorded. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. On the call today are Ashish Sharma, CEO, Steven Gatoff, Chief Financial Officer. 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 Investor Section of the company's website. An audio replay of this call will also be archived there. Please also be advised that today's 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 Forms 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 would now like to turn the call over to Ashish Sharma, CEO. Please go ahead. Thank you, operator. Hello, everyone. Thanks for joining us today. Q3 was a mixed quarter for us. We continue to see the effects of our supply chain challenges, in addition to legacy product declines, which impacted our revenue in Q3 and will extend into Q4. As you will see in our results, we are managing our operations tightly. We will continue to be laser-focused on profitability and cash, while continuing to invest in areas that will drive growth. During the past several weeks, we made three meaningful additions to the Inseego team. Phil Brace joined our Board of Directors and brings a terrific background as a seasoned CEO and wireless industry expert. Steven Gatoff joined as a CFO and brings a terrific profile and skill set of driving growth and managing operations. Steve Harmon joined this week in our newly created role of Chief Revenue Officer. I'm excited about the incremental leadership around the table and what it's helping us do as we finish out 2023. With that, I'd like to cover three topics with you today on the call. First, I'll give a quick summary of our Q3 business results. Second, I'd like to provide an update on the progress of our transformation to a full solution FWA company. And third, I'd like to provide some insights into the current Q4 as we close out the year. First, let's talk about our Q3 results. We reported Q3 revenue of $48.6 million and Adjusted EBITDA of $4 million. The results were below our expectations, mainly due to supply chain challenges that impacted several large customers and the runoff of legacy 4G product revenues. This quarter, demand was better than expected for our new 5G products and worse than expected for our legacy products. Earlier in the year, we moved to a build-to-order model to be disciplined with our cash, and the downside of this model is limited ability to respond to increases in demand that are shorter than our lead time. Given we underestimated the demand for our new 5G products, we could not fulfill several million dollars of sales. While we missed this perishable demand, a positive note is that we came back and delivered the product in the second half of the quarter to realize some of the missed revenue opportunity. Because we were late to respond to the demand, we shipped more at the end of the quarter, which will be consumed in Q4, suppressing our results as customers digest that inventory. In summary, the demand for both our 5G hotspots as well as 5G FWA products was good this quarter, but due to supply chain challenges and a delayed FWA launch with a large customer, we couldn't hit our targets this quarter. For my second discussion topic, I'd like to update you on our progress towards migrating to become a full solution FWA company, both in terms of the market and our product portfolio. Today, Inseego has a comprehensive portfolio of 5G hotspots, 5G FWA, and cloud solutions that enable several types of deployment use cases, including mobile, indoor, and outdoor scenarios. As 5G networks have evolved over the last couple of years with a lot more network capacity, driven by new mid-band spectrum investments by the carriers, there is a new FWA market evolving for enterprises to adopt 5G as a primary broadband solution for distributed locations and on-the-go use cases. While we have seen good traction with early customers, the market is taking time to develop, mainly due to carriers, network coverage, and capacity on their new spectrum. The most pronounced aspect of this dynamic is the anticipated but rapid decline in legacy 4G and hotspot revenue. To address the challenge of growing our new 5G FWA products and disruptive revenue streams against the backdrop of this declining legacy technology revenue streams, we have been working through a focused two-part plan for multiple quarters, and we have made good progress. First, we wanted to make sure our cost structure was sized appropriately, and so we worked diligently over the last 18 months to significantly reduce our spend. We've removed over $50 million of annual run rate costs from the company. Our goal is to continue operating with increasing levels of efficiency, with a cost structure that will enable us to stay profitable, as measured by Adjusted EBITDA, and generate free cash flow. We are going to build on this progress by driving profitable growth with 5G FWA. I'm very happy to have Steven join the team as our new CFO to help drive our profitability and growth profile as we manage the transition. The second component of our transition plan is to maximize initial customer opportunities for 5G FWA, so we can stay ahead in the market. To accomplish this, we align ourselves with the leading carriers who are driving the initial 5G FWA market. We are able to leverage our long-standing carrier relationships to get to the end customers. As the enterprise FWA market is expanding, we are looking to strengthen our go-to-market approach so we can create scale. To that end, I'm very happy to have Steve Harmon join our team as the new CRO, to drive a strategic change in our go-to-market and growth profile. He comes from a great Sales and Marketing background, most recently as a Global Head of Sales at Sierra Wireless, and has helped companies ramp up sales in major markets. I'm looking forward to partnering with him to significantly evolve our go-to-market efforts, so we can accelerate our business, especially in enterprise. As a final thought on our evolution to a full- stack 5G FWA provider, I'd like to share some positive news of what we are seeing in terms of early customer engagements and some of the deliverables of the business. Our 5G FWA customer base continues to build nicely within several enterprise and SMB market segments. We have onboarded over 56,000 new enterprise and SMB customers over the last four quarters on our primary 5G WAN solutions. The majority of these customers are also using our cloud to manage the 5G connections, which is part of our strategy and provides a high margin, high growth revenue stream to our portfolio. Some examples of the latest deployments include real estate companies, nationwide retailers, U.S. government agencies, and insurance companies, utilizing our indoor and outdoor FWA solutions to connect their distributed sites and employees to reduce costs and enhance productivity. We believe the market will continue to build as more and more mid-band network coverage and capacity comes online. However, until these early customer engagements turn into large deployments, the revenue being generated from these customers will be modest. With that, I'd like to move on to my third topic on the call today and provide some insights on Q4 and some of the challenges that we are facing. We are seeing bullish signs on 5G FWA customer engagement, but in the near term, we are facing some headwinds in Q4 revenue, driven by the following three factors. First, the 4G hotspot revenue is declining meaningfully in Q4. We knew this was going to happen for quite some time now, and we've been working hard to backfill it with 5G revenue. However, the 5G revenue, while strong, hasn't been able to fully cover the full dollar impact of the decline. Second, there was a delay in launching a new 5G FWA product with a large customer in Q3, resulting in later revenue ramp than we expected. The delay is caused by new customer requirements that came in very late as we prepared for the launch. The product was soft-launched a couple of weeks ago after we got through the Apple iPhone frozen launch window of latter part of September. So while this impacts our sales in Q4, we feel confident we will be back on track in Q1 in terms of our 5G revenue, as the initial feedback from the customers on the new product is quite positive. The third friction point on Q4 is that due to shipments in late Q3, some large customers are starting Q4 with higher inventories that need to be sold before they will reorder. So with these challenges, Q4 looks to be meaningfully below our expectations. This is obviously disappointing, but we continue to be responsive and have taken additional cost reduction actions this past month to ensure we keep the company profitable while the business comes back up by early next year. Steven will provide some more insights on this in a moment. Despite these near-term challenges, I'm optimistic about the growth of our 5G FWA solutions business, which we believe is still in the infancy. We have signed up a lot of enterprise and SMB customers over the last four quarters on our 5G FWA and cloud platforms. We have gone through a lot of learning with our carrier customers to get 5G FWA prepared for primary WAN deployments in many enterprise segments, as we are at the forefront of creating this market. I will now turn it over to Steven. Thanks, Ashish. Good afternoon, everyone. I'd like to cover four things with you today. I'd like to start by sharing a brief perspective on my positive view of the opportunity here at Inseego, and what I'm focused on to help ensure that we capitalize on it. I'll then cover three core aspects of the business. First, the financial details and insights on our Q3 results. Second, share with you what we're doing right now to protect shareholder value. And third, provide guidance on Q4. As the operator noted, we'll of course wrap up by opening the call to your questions. First off, I'm really glad to have joined Ashish and the team here at Inseego. After six weeks or so on the job, I'm bullish on the opportunity that sits in front of us. I see a clear path and the ability to help make an impact in monetizing it.... Inseego has a very strong technology prowess and unique product-related capabilities, where I've already seen industry leaders seek out our engineering input and advice. This is one of the assets that uniquely positions Inseego to penetrate a $50 billion TAM that's starting to unfold and that should translate into meaningful stockholder value. As we move forward to execute on this, I'm focusing my time and efforts on three areas across the company. One, our overall capital structure management in addressing our near-term stock price level and the reverse stock split, working through our convert overhang, and evaluating our portfolio of businesses. Second, I'm focused on our business strategy in driving our profitable growth profile and roadmap from our Q4 execution to our 2024 and intermediate-term plan. And third, I'm focused on our operational execution and driving a metrics and performance management construct for results. I'm particularly looking forward to working with Steve Harmon and having him as a strong partner to now drive the evolution of our sales execution. It's a metrics and inspection cadence that we're fiercely focusing on together as we look to drive improvements in our FWA ramp, and that I think will make a big difference going forward. With that, let's look at Q3 results. Q3 total revenue came in at $48.6 million, with 2/3 of the year-over-year decline from 2022 being driven by the legacy 4G runoff. While there were some positive dynamics on the top line with our 5G products increasing to 54% of total revenue in the quarter and 5G FWA growing 29% year-over-year, Q3 was a challenging quarter for the bulk of our revenue portfolio. A positive is that other than the record FWA revenue in the prior Q2, our FWA business generated the most revenue in Q3 since its inception nearly two years ago. Unfortunately, it was just not enough to offset the supply chain and inventory issues and the impact of the declines in 4G. Beyond the core mobile hotspot and FWA business, our telematics business delivered steady revenue growth and gross margin in Q3, up 11% year-over-year and coming in at a non-GAAP gross margin of 46% on an organic basis, respectively. Our mobile solutions software revenue was down modestly in Q3, as one of our carrier partners had a customer loss that reduced the number of subscriptions for us. This had a small revenue effect, but a larger impact on gross margin that I'll get to in a moment. Our VAR channel business, unfortunately, continued at a tepid level in Q3 and has not scaled this year. As Ashish discussed, this intended growth driver will benefit meaningfully from a rebalancing of resources and from Steve Harmon's leadership. We believe our VAR business should be multiples of what it is now from a revenue perspective and in relatively short order. Moving on to gross margin. In prior earnings calls, we've highlighted that gross margin percentage may move around from quarter- to- quarter, but that the low- to mid-30% area on a non-GAAP basis should be the new higher baseline in 2023 versus 2022. The trajectory is expected to be higher longer term. For Q3, while there was a decline sequentially from the mid-30s in the first half of the year due to Q3 product mix, the Q3 33% non-GAAP gross margin was a respectable improvement from the prior year's 26%. At a macro level, as a result of the reduced low-margin 4G revenue, we see non-GAAP gross margin percentage lifting again in the current Q4 quarter. Spending a moment on GAAP gross margin, we wanted to talk to the large inventory reserve that we booked in Q3. In total, we recorded a $14.9 million reserve in Q3 as a result of updated estimates and sales forecasts for some of the older products in our portfolio and related to the Q4 2023 end of life of our 4G mobile hotspot product by our largest carrier customer. The reserve was based on a combination of the carrying values of inventories and capitalized costs on finished goods, raw materials on hand, and materials at our contract manufacturer partners. The dollar amounts of these elements are discussed in our 10-Q that's being filed tonight, and these charges are excluded from the calculation of Q3 Adjusted EBITDA. As we continue to manage revenue dynamics of the business, we're also taking a disciplined approach to managing our spend. With that perspective, looking at our Q3 non-GAAP operating expenses, total spend in Q3 was at the lowest aggregate dollar amount in more than two years. The actions that the company took in the first part of 2023 drove lower aggregate and relative spend across all cost areas in Q3, from COGS to sales and marketing to R&D. That helped us deliver another quarter of positive Adjusted EBITDA, coming in at $4 million. With that, I'd like to move on to my second topic today, and so far as what we're doing now to protect stockholder value. As we're addressing our go-to-market and growth needs, we're continuing to take costs out of the business to make sure we head into 2024 from a position of strength, so that we continue delivering profitability in the form of Adjusted EBITDA and free cash flow. In addition to the previous cost structure actions that the company made in 2022 and the first part of 2023... In the last 30 days, we've further reduced spend and have further aligned investments with near-term customer focus and revenue generation. You'll see this going forward across the board, but predominantly in improved efficiencies in R&D spend, where we have a strong team and production capability, and we were able to trim a combination of outside program and internal costs. In total, we just removed about $2 million of quarterly spend. While this will be only marginally helpful in the current Q4, given the timing of the implementation, it will very much shore up our profitability and cash generation profile going into 2024. With that, let's turn to our third topic, and so far as the current path in Q4, that is presenting some financial challenges. As we've talked about today, one of our largest carrier customers transitioned off buying 4G mobile hotspots effective this quarter, and so that product line is now essentially end- of- life. While we have known about the legacy 4G decline and have been planning around it, our new 5G FWA product revenue has been growing nicely the past few quarters, but it's just not large enough dollars yet to offset the legacy 4G decline in aggregate. This is seen squarely in the mobile hotspot portfolio, where our revenue in the not so distant past was in excess of $40 million per quarter. It is now a fraction of that in Q4. And so considering all this, Q4 looks to be meaningfully below our internal expectations. As such, and wanting to drive transparency with our investors around what we're seeing, we'd like to provide some guidance for the current fourth quarter. Starting with the top line, Q4 2023 total revenue is anticipated to be in the range of $40 million-$42 million, with this being the first quarter of no 4G hotspot revenue and managing through inventory restocking issues. For Q4 2023 Adjusted EBITDA, we see our recent cost savings initiative helping alleviate some of the revenue pressure so that we can maintain profitability, albeit in the $1.5 million-$2 million range for the quarter. In closing, we're focused on addressing our go-to-market execution performance quickly and effectively as we plan for 2024. We're oriented around driving the business and managing our spend responsibly to deliver profitability, and we continue to have confidence in monetizing the 5G opportunity in progress. 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. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Lance Vitanza with Cowen. Please go ahead. Thank you. Thanks, gentlemen. Let me start with... I guess I just want to try to understand a couple of things, Steven, that I think you said. Did you say that you expect zero 4G hotspot revenue in the fourth quarter? A very de minimis amount, Or a de minimis amount, yeah. Yeah. Close enough. Okay, so then the—I guess the—so the runoff that's been ongoing, I get, is that—does that suggest then that that's we've come to an end, or is there—was there sort of like a glitch, and then maybe we get, you know, a couple more quarters in 2024 of additional 4G hotspot contribution? No, Lance, this is it. This is it for the 4G. Well, okay, so then we can just focus on the 5G business. So, I guess the question there is, you know, and I don't know, Steven, if you, I know you've only been there six weeks, so, I get it. But do you have a sense yet for really kind of like what the fixed costs are associated with the 5G kind of platform, and then as you get beyond those fixed costs, what kind of variable cost contribution, you know, contribution margin from the incremental revenues do you expect? I'm just trying to get a sense for the basic kind of economic proposition as we look ahead. Yeah, it's a great question, and it is one of the exact things that we've been spending time on, and I have as I've been onboarding. The good news is that the crux of what you're saying should pan out. In other words, there's a decent amount of variable costs and controllable costs that we have in that part of the business. So that, for example, when we were facing revenue pressure now, we can reduce spend fairly immediately. So there's labor costs that are variable, there's outside contractor and programmatic costs that we have such that we can control the near-term profitability of that product, A and B, to your second point, from a long-term perspective, it should be more of a step function in cost structure, so that as you start to scale out and grow revenues more exponentially, you'll see a steeper curve in revenue than you will in cost structure, so you should get an expansion in profitability. And then I guess for Ashish... Thank you, Steven. And I guess for Ashish, you know, do the delays, you know, one of the things that we routinely hear is that the product technology is very high and very good. But I guess, you know, do the product delays that you discussed, you know, the unfortunate as they are, do they sort of create a situation where your customers are kind of forced to make other plans? Or, you know, or how does that sort of, I guess, just from a competitive standpoint, how stable would you see and what kind of relationships, how would you describe the level of the relationships you have with some of your key customers? Yeah, good question, Lance. So I would say that you know, our product is really preferred in the slots we are in. During this quarter, I would say we are facing two different dynamics. One was the inability to supply the product due to supply chain challenges because the demand went up very quickly in late June, so we couldn't supply a lot of product in the first half of the quarter. And then we shipped a lot of product between from mid- to- late in the quarter, and that's creating some headwinds for the next quarter, which is Q4. So that's one dynamic. There's you know, some perishable demand there because especially on hotspots, you know, when we could ship the product, I mean, there are other products that the customers have. The second dynamic is the delayed launch with one customer, and that again is impacting Q4, and that got delayed because some new requirements came in at the eleventh hour. We're working through diligently with the customer, and in fact, we have soft-launched it. I mean, the initial feedback from the end customers is very positive. So I would say to sum it up, we are the preferred product in the slots we are in, but like, you know, the demand is perishable. But I guess then, really what I'm trying to get at is, it doesn't sound like you are losing market share as a result of this. It sounds like some of the delays are actually driven by the customers, and then the other ones, the customers are, they are hanging with you. They're not, you know, saying like, "Oh, you're three weeks late, so we're going to another supplier. That's correct. Okay, and then just maybe my last question before I'll, I'll hand over the baton here. But just to touch on the balance sheet, and I don't know if the 10-Q is out yet, but I'm wondering, I guess, a couple of things. Number one, you know, will there be any sort of warning around, you know, possible liquidity shortfalls over the coming twelve months, you know, either in the liquidity section of the MD&A, or do we have to worry about anything along those lines? And then just sort of thinking about the debt obligations, the ABL, you know, it doesn't expire until next December, but that does mean that you'll have to start recording the balances as current liabilities, you know, early next year, unless you extend that maturity. I'm wondering if you have a prognosis for that. And then, you know, and I know you mentioned this briefly, Steven, but then the converts obviously mature, you know, not until May 2025, which gives you at least some time. So is the plan with respect to the converts to kind of wait until spring when presumably, you know, the momentum, the operating momentum is a little bit better, or, you know, how should we think about that? Thanks. Yeah, really good questions, and we're glad you asked because it's obviously meaningfully important and material to equity value. So thank you. The short answer on your last question is we are not waiting till spring to manage the situation. We are on the convert. We have a relatively small group of holders on the convert. Some of them are on our board, some have been, and it's a group with whom we're engaged, and we're actively looking to manage that through. So we are not waiting. We are taking care of that now, and it is an important aspect of the cap structure. To your earlier points, which are really good around liquidity, and the short-term facility, we... I guess the nutshell is we have ample capacity, so we do not feel a constraint on our ability to borrow. It really is a true working capital facility. We have very large carrier customers that sometimes they pay really awesome, like they did this quarter. We have lots of cash. Sometimes they take longer, and so that's where that working capital facility comes in place really well. I think our review is that that facility is not really an issue for the company, either short term or longer term. The bigger nut to focus on is the convert, which we are focused on, and we are not waiting for that. Thanks so much. Yeah, it does. And, thanks very much, and best of luck. Awesome. Thank you, Lance. Thanks, Lance. As a reminder, if you wish to ask a question, please press Star then one to enter the question queue. The next question comes from Tore Svanberg from Stifel. Please go ahead. Hi. Yes, good afternoon. This is Jeremy calling for Tor. I guess, maybe the first question, just digging in a little bit more deeply into the delay on the fixed wireless access side. You know, the new requirements for the product, is there any indication that it's a change in strategy on behalf of the carrier, you know, whether to the upside, to the, you know, maybe the smaller or larger potential SAM for you guys? Are there any? I'm just trying to get a clearer picture into, you know, any shift in possible SAM because of this delay. Yeah, Jeremy, no, it's not the case. I mean, it's a very specific requirement as it relates to the network of this particular customer. So, it's very pointed in that fashion. It doesn't really change the broader market for us. Great. And I guess maybe moving to the just the financials. I know, you know, you mentioned on GAAP gross margins of 33%, but it's, you know, so this is the inventory adjustment that you mentioned in the $1 million write-off of inventory order fees. So if we take that out, we get the 33% non-GAAP. Is there any reason why this isn't, you know, this won't show up in the non-GAAP net income? Because it looks like these costs are excluded from... They're not added back, I guess, when you show the non-GAAP net income. We made a point of pulling it out of EBITDA for that purpose. And as you said, it'll come out of the COGS line, specifically the mobile solutions, to get to the 34.6. And that's how we recorded it. Got it. Okay. And is there, you know, any, I guess, impact going forward, you know, from these charges? Or is there a potential for any kind of, I guess, benefit on the back end of it? I couldn't hear the first part. Is there any benefit on board? Is that what... What was the- Sorry, on the back end, I guess, you know, if you can take a charge now, is there some chance that some of this could be recovered? Yeah, yeah, absolutely. I mean, the charge is a P&L charge. It's not a disposition of inventory. It's not a disruption of inventory. It's just based on how much inventory and raw materials we have today and what we sold in the last 12 months and what the sales forecast is now going forward. And so you say, okay, looks like we will not be able to clear that amount, so you take a reserve. And to your good point, if something happens and there's a blue bird or things break really well and positively, then we'll see some upside. But we're obviously not planning on making things with a blue bird or upside, and that's essentially why there's a reserve. Got it. Great. And then maybe two more quick questions. One would be on the, you know, the $2 million OpEx that's coming out. You know, is... Can we see that fully realized then in Q1 of next year? And maybe, you know, would it be fair to say something like, you know, just a, a fraction of that in Q4? Yes, that's exactly right. Okay. A part of it will be in Q4, just based on the fact that it's, you know, early November, and then the full benefit in Q1. Spot on. Got it. The last question would be on just looking at the, you know, your working capital went down quite a bit, which is nice on the cash flow side. I was surprised to see, you know, accounts receivable drop $8 million. You know, how may you reconcile that with, you know, late shipments in the quarter? Were you able to collect really quickly, you know, on those shipments? Is that, is that kind of what happened there? That's exactly what happened. We, as we said before, on the other side of the table, we have large carrier customers that we sell to and through, and this quarter we had one or two that paid very quickly on a lot of stuff. And so our DSOs improved tremendously. We had very large cash collections. Awesome, right? We'd much rather have cash earlier. It's a, it's a nice dynamic to have, but it, it's obviously not. It's a bit of a, an anomaly to have that improvement in a short period of time, and so there's you see a huge pop in cash. Got it. And sorry, one last question, if I could squeeze it in. Do you have, you know, new breakeven targets, whether for, you know, Adjusted EBITDA or on a free cash flow basis? Well, our commitment and our focus is on maintaining profitability in the form of Adjusted EBITDA, so that's an important metric for us, to you know, be Adjusted EBITDA positive. We're also focused on the cash burn, and particularly as we exit this quarter and head into next year, of generating free cash flow. So that's a target for us as we plan out and set ourselves up for Q1. Very good. Thank you very much. Yeah, right on. Good questions. Thank you. Thank you, Jeremy. This concludes our question and answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.