Inseego Corp.

Thank you. Thank you. Thank you. Good afternoon and welcome to INSEGO Corp's third quarter 2020 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 for analysts to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. On the call today are Dan Mondor, Chairman and CEO, Craig Foster, Chief Financial Officer, and Ashish Sharma, President of IoT and Mobile Solutions. During this call, non-GAAP financial measures will be discussed. A reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the Investors section of the company's 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 Form 10-K, 10-Q, and other SEC filings, which are available on our website. Please also refer to the cautionary note regarding forward-looking statements section contained in today's press release. I would now like to turn the call over to Dan Mondor, Chairman and CEO. Please go ahead.

Hello, everyone. It's great to be with you today, and I hope everyone is staying safe and healthy. I'm proud that NSEGO can play a major role in helping people everywhere stay connected and productive at home. We had a monumental third quarter with $90.2 million in revenue and $7.4 million in adjusted EBITDA, both up strongly on any measure and well ahead of consensus. In particular, I want to draw your attention to one other achievement, and that is achieving positive free cash flow this quarter. All are major milestones and confirm the success of our turnaround strategy, which began in 2017, and point to the company shifting to a growth and cash generation phase. We are seeing strong demand across the board for our mobile broadband, fixed wireless access, IoT, and cloud SaaS solutions, and we're rapidly adding numerous new customers in our target market. Let me touch on a few important developments in each. MSEGO recently introduced the new second-generation 5G mobile broadband hotspot, the MiFi M2000. Verizon launched this new device in September, and as you saw announced last week, the fourth-largest carrier, US Cellular, is now a customer. You should expect to see additional announcements like this as the MiFi M2000 becomes the gold standard 5G hotspot in North America. We're also making great progress internationally, and I'm pleased to announce Swisscom is a new 5G customer for the MiFi M2000. Swisscom is the leading service provider in Switzerland with a nationwide 5G network that covers 90% of their population. And similarly, expect to see further customer announcements in Europe, Middle East, and Asia for the M2000 in the coming months. We are very excited to announce upcoming launches of our fixed wireless access products with customers both in North America and in international markets. These and other upcoming launches are major steps forward in diversifying our customer base and recurring revenue streams as well as continually improving our margins. Winning new domestic and international customers for our 5G products is the first part of our growth strategy. and we're also making good progress in two other important areas. First, we are launching a new 5G product portfolio specifically for enterprise customers, which will increase our addressable market and strengthen gross margins. We are convinced the enterprise adoption of 5G will be unlike anything we have seen before, including the deployment of private networks to manage their businesses. We want Insego 5G technology integrated into each and every enterprise 5G use case. Second is our recently announced SaaS platform called Insigo Manage, a suite of integrated software applications that will add tremendous value to our products and provide monthly recurring revenue on top of the initial hardware sale. This product launch is a result of long-running discussions with our service provider customers all of which want better management of devices once they are connected to the network. We are seeing strong demand for these offerings, and we'll be making customer announcements on this in the near future. Moving on to our C-Track business, I'm pleased to report that fleet unit bookings have returned to pre-COVID levels. As we discussed on the prior calls, the C-Track business model relies on local offices selling and physically installing units on-site at the customer premises. This was not possible in the second quarter and into early Q3, given the government restrictions imposed in all our geographies. Thanks to the tireless efforts from all our local teams, we've provided uninterrupted service during the pandemic, while winning several more municipal fleet customers and returning sales levels to pre-COVID levels. I'm going to have Ashish Sharma, who runs our IoT and mobile business, go into a bit more detail on our initiatives in the enterprise space, our software platform strategy, as well as progress we're making on the fixed wireless front. Thanks, Dan.

Let me provide some more details on our new growth initiatives. In addition to our service provider business, we see an even larger opportunity for our fixed and mobile solutions in enterprise markets. One of the largest and newly developing enterprise market segments is private networks. The total addressable market for this segment alone is projected to grow from roughly $600 billion today to $65 billion in 2030, a CAGR of 60%, the majority of which will be 5G. In addition to this private network market segment, there are many other enterprise opportunities where 5G would be a game changer. So to position ourselves well in these newly developing markets, we're announcing a new portfolio of 5G enterprise products that will deliver connectivity for a wide range of private and public sector enterprise use cases. Atomized customers have special requirements, including alternate WAN connectivity options, enterprise-grade security, industrial-grade reliability, and low-latency applications. That's why we are developing solutions with software and hardware specifically designed for enterprise customers with demanding use cases. We expect to launch these products in the first half of 21. At Insego, we believe the combination of 5G capabilities, edge computing, and machine learning software will radically change the way organizations do business. With this in mind, we're pleased to announce our participation in the new 5G accelerator program at Lake Nona. Lake Nona is a unique 17 square mile real estate development in Orlando, Florida with a Verizon 5G network up and operating. The accelerator there is bringing 5G leaders together in a US-based living lab to create and develop new 5G use cases for commercial and residential tenants. With a team on the ground working with partners and potential customers, Congeal can help advance American 5G leadership in sectors such as healthcare, industrial, simulation and training, well-being, sports, and performance, where ultra-liable, low-latency edge computing will be the key to winning the future. All of these use cases and applications require new solutions, which means that enterprise IT organizations need to support new network architectures. To help them simplify the management of their network and to optimize performance, All of our second-gen 5G products support our new Insego managed software suite, a set of integrated applications, all built on a common software platform. Insego Manage enables service providers and large enterprises to manage and enhance the value of 5G devices at the edge throughout their lifecycle, from activation to remote management and support. I'll start with the Insego subscribe module. which is a next-generation cloud SaaS solution we formally call DMS. This subscription management system helps service providers, large enterprise customers, and government agencies handle the requisition, purchasing, billing, and reporting of connected devices, including smartphones. Due to significant new enhancements we have made to this solution, our subscribe service achieved 65% sequential growth in subscriptions in the third quarter, accelerating from the 27% sequential growth last quarter. We've also announced the commercial availability of our new Inseego Connect module, which allows IT organizations to easily configure any number of edge devices, monitor data usage, and check device health across their enterprise with powerful dashboards, alarms, reports, and real-time diagnostics. Insego Connect is already deployed by key enterprise customers, providing them valuable insights and streamlined management of their Insego 4G LAN connections. Our new Insego Secure Module, coming in the first quarter of 2021, will provide enhanced security with real-time threat detection and active mitigation of those security threats. Lastly, the Insego Managed Software Suite includes our world-class InsegoCare dedicated customer support with phone, live chat, knowledge base, and device configuration management. We plan to continue working with our customers to explore new software applications that will grow these recurring revenue streams. And finally, on fixed wireless access progress, our multi-band common 5G RF engine, which provides a common hardware platform for all of our 5G products, is helping streamline and accelerate time to market for this rapidly growing opportunity. We've made tremendous progress with our FWA portfolio and trials continue with customers in global markets. Given 5G, FWA is a new and diverse market. There is not a single product that fits the need of all customers, addresses all use cases, or operates in all environments. Our portfolio will cover use cases, for both indoor use and outdoor installations, delivering multi-gigabit 5G speeds and Wi-Fi 6 connectivity to residential and business customers everywhere, from dense urban settings to hard-to-reach rural locations. As I mentioned earlier in my comments, we see enterprise going at a category of 60%, majority of which is 5G, and FWA is included in that number. With this in mind, our portfolio was purpose-built to include several different form factors and SKUs to accommodate these variations, and we look forward to bringing them to market with multiple service providers in the coming months.