Inseego Corp.

Hello and welcome to NSEGO Corp's fourth quarter and full year 2021 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 one on your telephone keypad. To withdraw your question, please press star then two. On the call today are Dan Mondor, Chairman and CEO, Ashish Sharma, President, and Bob Barbieri, Chief Financial Officer, and other members of the management team. 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 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 Maunder, Chairman and CEO. Please go ahead.

Thanks for joining the call today. 2021 proved to be a transformative year for Insego. The investments we have made have resulted in our remarkable year and paved the way for a very bright future. We are better positioned today than we have ever been by nearly every measure. I'd like to touch on the two most important takeaways for this call. First, we had a great quarter with revenue of $72.9 million, up 15% sequentially when adjusting for the sale of SeaTrac South Africa last summer. We improved on almost all our important benchmarks, including 5G revenue, recurring software revenue, and others. We launched new products, won important new customers, both in North America and abroad, and benefited from our supply chain investments over the last three years. You'll hear the details from Ashish and Bob on this and more. The second is the announcement that Ashish will be taking over as CEO, and I will assume the role of Executive Chairman. There are a couple of reasons that the board and I thought this was the right time to make this transition. The company that I joined in 2017 was very different from where we are today. We had essentially one large carrier customer, a single hotspot product based on 4G technology underpinning everything, and a balance sheet that needed fixing. Today, Insego is an entirely different place with an entirely different future than we had five years ago. and it is also not the Insego of just a year ago either. The future of this company will be driven by multiple 5G products, including, importantly, our fixed wireless lineup, sold increasingly into the enterprise, whether alongside carriers or through distribution partners. Insego will be centered around 5G, though 4G is proving to be resilient, and a broad portfolio of software solutions driving recurring revenue. Ashish, who I recruited to join me here in the beginning, has been the architect of our product and go-to-market strategy, including our industry-leading 5G roadmap and global rollout. We see 5G mobile, fixed wireless, and software solutions for enterprise as our future, instead of hardware devices sold to carriers. I am immensely proud of all that we have accomplished at Insego, thanks to the hard work by many dedicated Insego employees. So with our business model clearly validated and our leadership in 5G, this is the right time for Ashish to assume leadership of the company and preside over what I see as the single largest opportunity in Insego's history. With that, let me turn the call over to Ashish.

Thank you, Dan. I'm honored to be named the next CEO of Insego and appreciate the confidence that Dan and the board have shown in me. I'm very excited for the future of Insego and hope to accomplish as much as a CEO as we did over the last five years. We closed the year with an outstanding fourth quarter. Revenue was $72.9 million, which is sequential growth of 15% after adjusting for the sale of Seatrack South Africa, and 10% on an as-reported basis. The stellar revenue performance reflects strong demand for our 5G and cloud portfolio across carrier and enterprise in our target markets. Our business grew sequentially in each quarter of 2021, driven by 5G and software solutions. For the full year, 5G revenue increased 132% year over year and grew quarter over quarter throughout 2021. And together with cloud solutions, grew 73% in the fourth quarter compared to the first quarter on a pro forma basis. Importantly, we are making solid progress in our transformation into an enterprise company. Our 5G FWA pipeline has grown from 30 enterprise customers in early 2021 to over 200 and continues to grow at a rapid pace. Our success with initial deployments and trials with global Fortune 500 companies points to significant expansion opportunities in 2022. It is important to note that 5G has the unique capability to be adopted as primary WAN connectivity by enterprises. This is in stark contrast to 4G, which was predominantly utilized as temporary backup if wired broadband service failed. This makes a huge difference in how 5G will be deployed and is the fundamental reason the enterprise 5G addressable market is four times as large as our current carrier market. In 2021, we launched a new family of 5G FWA solutions based on our leading high-performing 5G engine and kept expanding on our value-added cloud-delivered software portfolio. Our 5G FWA enterprise solutions have high software attach rates and high gross margins than our carrier hotspot business. We grew our partner ecosystem by adding 79 new channel partners, including 39 internationally. These partners are critical in expanding our go-to-market reach to enterprises. Our products are certified in several regions internationally, and all three Tier 1 carriers in the U.S. have certified our 5G FWA family of products. We expanded our strategic relationship with T-Mobile to encompass 5G enterprise fixed wireless access products on both a sell-width and stock basis. And I'm pleased to say that in 2021, T-Mobile became our largest 5G customer. We continue our expansion internationally, announcing our growing partnership with Vodafone Qatar, which began offering our 5G FWA devices in Q4. And most recently, we announced our first 5G launch in Saudi Arabia with Zain KSA. Zain is a member of one of the largest and most influential group mobile network operators in the Middle East with approximately 50 million subscribers. Australia is another region where we are expanding. In Q4, we launched our 5G FWA outdoor CPE with Telstra, in addition to the launch of our 5G MiFi with Optus at the end of the third quarter. We've also ramped up our activity in Washington, engaging with Congress, cabinet departments, and federal agencies that are shaping legislation, funding, and standards to accelerate security and trustworthy 5G deployments. This includes our engagement with NTIA on its domestic implementation of the broadband portion of the infrastructure bill. as well as partnering with departments and agencies on setting high standards globally that protect critical and emerging technologies and infrastructure, such as through our participation in the U.S. and EU Trade and Technology Council. Moreover, we are working with e-commerce and state departments, USXM Bank, and US International Development Finance Corporation, and US Embassy officials to help level the playing field and promote our products in international markets. Looking ahead to 2022, we see the enterprise 5G opportunity developing further and expect top and bottom line contribution from enterprise fixed wireless access to ramp as the year progresses. This reinforces our robust outlook for 2022 of 25% year-over-year growth and free cash flow positive by year-end. Finally, given how much of a strategic asset it is, I wanted to talk about our current supply chain dynamics. We've built an agile and flexible supply chain that has helped us avoid the major disruptions experienced by many of our competitors. That said, the dramatic cost and lead time increase in components and freight we experienced in 2021 did impact our gross margins this quarter. Although we are starting to see some supply chain stabilization, we expect these conditions to persist throughout the year. And our financial outlook for 2022 takes these challenges into consideration. I'm therefore confident in our ability to execute our plan for the year and believe our supply chain will remain a source of competitive advantage for NCEGO. Over the past year, we built a strong foundation to capitalize on the numerous opportunities enabled by 5G. I'd like to share our view on how these efforts will transform our business. First, we continue to drive ahead with latest enhancements in 5G technology with support for 5G standalone, CBRS, and CBAN technologies, placing Insego at the forefront of enabling the next wave of enterprise applications. These technologies expand the footprint of FWA broadband services and provide carriers with the opportunity to bring out the best of their networks. With standalone, carriers can separate broadband traffic from smartphone traffic to offer new dedicated service plans. With CBRS and CBAN, carriers can offer even more services to their enterprise customers. To that end, we successfully completed Inseego's first 5G standalone test with our devices on live networks in Europe and North America. And I'm proud to say that five of our 5G solutions are now certified over T-Mobile's 5G standalone network. In 2021, we achieved several key performance milestones in that we believe validate our leadership in 5G. Most notably, we helped your seller achieve world record setting long distance millimeter wave performance with a commercially available 5G FWA CPE that is greater than one gigabits per second or seven kilometers range. This is just one example of how we demonstrate outstanding performance with solutions for our global carrier customers. We are delivering on the promise to bring out the best of our customers networks. Although we are still in the early innings of 5G adoption, we are encouraged by the pace at which our products are garnering acceptance across the globe and the ever-expanding list of use cases being tested and deployed. In the Middle East, which is one of the best 5G developed regions in the world with over 9 million 5G users and 900,000 5G FWA users, we expanded our relationship with Vodafone Qatar and they are now selling our 5G solutions. We also recently announced that Zain KSA is now selling our 5G MiFi M2000 in Saudi Arabia. In addition to the Middle East, we also shipped 5G F2A products to Telstra in Australia to support their launch in the fourth quarter. Domestically, our 5G portfolio is now certified for use with all three Tier 1 carriers in the U.S., Perhaps the most important development over the past year was our expanded relationship with T-Mobile for business, which significantly advances our 5G FWA efforts. As we mentioned last quarter, we have a number of additional 5G FWA products certified by T-Mobile, and we are incredibly excited about the pipeline of opportunities we are building with them. Our expanded go-to-market strategy with both channel partners and carriers is opening up numerous opportunities with enterprise customers that are testing our cloud-managed 5G solutions. Our commitment to designing the most robust, high-performance solutions on the markets is paying off. We are outperforming the competition in numerous instances, both in speed and, importantly, sustained 5G connectivity. Early use cases are for primary and failover wireless WAN connectivity. Moreover, they are laying the foundation for future digital transformation efforts and adopting 5G as the enabling technology. And increasingly, we expect these customers to use our cloud management solutions to simplify their IT operations. We are seeing strong demand for our 5G solutions in many verticals. Let me provide a few recent examples of our expanded customer use cases in the retail, logistics, manufacturing, and construction sectors. In the retail sector, we are working with several Fortune 500 retailers, including a leading grocery chain, an apparel and specialty equipment retailer, and a discount fashion and home goods retailer. Each of these companies was searching for a reliable, cloud-managed 5G WAN solution because in many areas, cable and fiber are either too costly, not feasible, or unreliable. Cumulatively, they represent thousands of locations in North America. In the logistics vertical, one of the top 10 food distributors in the US has been testing our 5G cloud-managed solutions. In addition, we are expanding the scope of the DoD smart warehouse project. We've been working closely with JMA Wireless on that initiative, and our partnership is now gaining momentum as we look to provide cloud-managed connectivity to other government private network installations. In manufacturing, customers are testing our 5G FWA solutions to power applications that are essential to their digital transformation strategies. A leading automotive manufacturer in Europe is preparing to test our 5G SA fixed wireless solution for their own industry 4.0 initiatives, which requires highly secure ultra-reliable low-latency connections. Some use cases that they're investigating are wide-scale networking of machines, autonomous transport systems, robot-to-robot communications, and augmented reality applications. In the construction sector, our solutions were recently selected by one of the largest self-storage companies in the United Kingdom as the primary connectivity technology for new locations where 5G proved to be most cost-effective, quick-to-deploy option. In addition to commercial and residential construction, we are looking to bring the power of 5G to the heavy civil construction vertical. We are working with two large construction and engineering companies, One company in the US Pacific Northwest has integrated our 5G solutions to monitor on-site deliveries and inventory. And one of the UK's largest construction and engineering companies is testing our 5G wireless edge solutions to power traffic monitoring and video AI in an effort to make roads safer. Moving forward, our focus is on both growing the number of enterprise trials underway and converting these opportunities to broader deployments. We also expect 5G FWA revenue from carriers to build as the year progresses, as several key partners are in the late stages of deploying new data plan packages and pricing. As our revenues from 5G FWA ramp, we believe our business model will be transformed due to the high margins on our enterprise-grade solutions. We are no longer the incivo of old. We are the leader in enterprise 5G FWA. And with that, I would like to turn the call over to Bob.