INSEEGO CORP
For the period ended Dec 31, 2024. Filed Feb 20, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 20, 2025
INSG$3.88-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001022652-24-000001
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-20.
0001022652-25-000005
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 101 previous paragraphs and 100 current paragraphs.
33 unchanged; 32 reworded; 35 added; 35 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report
Inseego is at the forefront of providing high speed broadband through state-of-the-art 5G products and services to keep enterprise and SMB customers seamlessly connected. With multiple first-to-market innovations through several generations of 4G and 5G technologies, Inseego has been advancing wireless WAN technology and driving industry transformations for over 30 years. Our products currently operate on all major cellular networks in the US. Our mobile hotspots, sold under the MiFi ™ brand, have been sold to millions of end users and provide secure and convenient high-speed broadband access to the Internet on the go.
Current report
We operate as one business segment. As of December 31, 2024, the Company’s Chief Operating Decision Maker (“CODM”) was its Executive Chairman. The Company’s Executive Chairman left the Company in February 2025, at which point, the Company’s CODM became its Chief Executive Officer. Neither of these CODMs manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and financial results.
Current report
Recent Developments
Current report
Divestiture of Telematics Business
Current report
As previously noted in Part I. Item 1. Business, on September 16, 2024, the Company and its subsidiary Inseego SA (Pty) Ltd (“Seller”) entered into a Share Purchase Agreement (the “Purchase Agreement”) with Light Sabre SPV Limited (which subsequently novated its benefits and obligations under the Purchase Agreement to Ctrack Holdings (the “Purchaser”)), pursuant to which Inseego agreed to sell to the Purchaser the entire issued share capital of the Company’s Inseego International Holdings Limited subsidiary in exchange for approximately $52 million in cash. Upon completion of the sale, which occurred on November 27, 2024, the Purchaser acquired the Company’s fleet management and telematics solutions business (the “Telematics Business”), which had operations in the United Kingdom, the European Union, Australia and New Zealand. The Purchase Agreement provided for a working capital adjustment, which was determined in December 2024 and funded in January 2025, resulting in an increase to the initial purchase consideration of $0.7 million as a result of changes in closing working capital and net debt.
Current report
The Company’s decision to divest its Telematics Business was based on a review of the strategic fit of the business with the Company’s North American-centric 5G wireless solutions business and the Company’s previously stated goal to continue to significantly de-leverage its capital structure. The sale of the Telematics Business further supports the Company’s streamlining of its focus and resources on the strongest growth opportunities around its core product offerings.
Current report
The results of operations related to the divested Telematics Business have been classified as discontinued operations within the Consolidated Statements of Operations and Comprehensive Income for all periods presented within the consolidated financial statements included in Part IV, Item 15 of this Form 10-K. All discussion below relates to the Company’s continuing operations only, which excludes any results related to the divested Telematics Business, unless noted otherwise.
Current report
Debt Restructurings
Current report
Throughout the year ended December 31, 2024, the Company entered into a series of repurchase and exchange agreements with various holders of the Company’s 2025 Convertible Notes (as defined below), some of whom were considered related parties of the Company. In summary, as a result of these repurchase and exchange agreements, the company exchanged $146.9 million of outstanding principal of the 2025 Convertible Notes in exchange for $33.8 million of cash, $40.9 million of principal of the 2029 Senior Secured Notes (as defined below), 2.9 million shares of the Company’s common stock, and warrants to purchase an aggregate of approximately 2.5 million shares of the Company’s common stock. These exchanges have significantly improved the Company’s liquidity position.
Current report
Results of Operations
Current report
Revenues. Revenues for the year ended December 31, 2024 were $191.2 million, an increase of $24.0 million, or 14.3%, compared to the same period in 2023.
Current report
Mobile solutions. The $18.4 million increase in Mobile solutions revenues is primarily due to increased sales of our premium 5G MiFi at multiple carriers, including a multi-quarter promotional offer at one of our carrier partners.
Current report
Fixed wireless access solutions. The $7.3 million decrease in Fixed wireless access solutions revenues is primarily due to decreased sales with one of our carrier partners, partially offset by increased sales from our channel program.
Current report
Services and other. The $12.8 million increasein Services and other revenues is primarily due to increased Inseego Subscribe revenues related to the terms of a two-year service contract renewal with a major customer that commenced in April 2024.
Current report
Product. The $11.8 million decrease in Product cost of revenues is primarily due to significant inventory reserves and related charges that were reco rded in 2023, described further below, partially offset by the impact of increased product revenues.
Current report
Research and development expenses. Research and development expenses for the year ended December 31, 2024 were $20.6 million, or 10.8% of revenues, compared to $19.7 million, or 11.8% of revenues, for the same period in 2023. The increase in research and development expenses was primarily due to fewer research and development projects that were capitalizable during the year ended December 31, 2024, which resulted in a higher percentage of research and development costs being recorded as operating expenses and increased annual incentive bonus accruals for 2024 performance that were not accrued or paid for in 2023, partially offset by lower personnel-related costs as a result of a decrease in overall research and development headcount and a decrease in consulting and outside services in relation to cost reduction efforts.
Current report
General and administrative expenses. General and administrative expenses for the year ended December 31, 2024 were $17.2 million, or 9.0% of revenues, compared to $15.9 million, or 9.5% of revenues, for the same period in 2023. The increase in general and administrative expense was primarily due to an increase in legal and consulting expenses related to our capital structure management efforts, as well as annual incentive bonus accruals for 2024 performance that were not accrued or paid for in 2023, partially offset by a decrease in share-based compensation expense and temporary employment costs as part of cost reduction efforts.
Current report
Percentage not meaningful
Current report
Loss on debt restructurings, net The $2.9 million net loss on debt restructurings for the year ended December 31, 2024 is a result of the Company’s 2025 Convertible Notes restructurings entered into during 2024 as part of our overall capital structure management efforts, as described below.
Current report
Loss on extinguishment of revolving credit facility The $0.8 million loss on extinguishment of revolving credit facility for the year ended December 31, 2024 relates to the voluntary early termination of the Company’s Credit Facility (as defined in Note 6 – Debt in the accompanying condensed consolidated financial statements) in April 2024.
Current report
Term Loan (as defined below) received in June 2024, partially offset by reductions in the principal balance of the 2025 Convertible Notes and voluntary early termination of the Company’s Credit Facility in April 2024.
Current report
Other income (expense), net. Other income (expense), net for the years ended December 31, 2024 and 2023 was $0.9 million and $0.1 million, respectively.
Current report
Income (Loss) from discontinued operations, net of tax Income (Loss) from discontinued operations, net of tax for the years ended December 31, 2024 and 2023 was $18.9 million and $(1.2) million, respectively. The increase was primarily due to the gain on sale recorded upon completion of the divestiture of the Telematics business in 2024.
Current report
As of December 31, 2024, the Company had available cash and cash equivalents totaling $39.6 million. Subsequent to the restructuring transactions described below, the 2025 Convertible Notes had a principal balance of $14.9 million as of December 31, 2024 that matures on May 1, 2025. Additionally, the Company’s new 2029 Senior Secured Notes, which bear interest at 9% payable semi-annually in arrears in May and November, had a principal balance of $40.9 million outstanding as of December 31, 2024.
Current report
During 2024, the Company entered into a series of agreements, as part of its overall capital structure management, to reduce its total debt and restructure its outstanding 2025 Convertible Notes. In summary, through various separate transactions executed during 2024, the Company repurchased or exchanged a total of $146.9 million in principal of 2025 Convertible Notes for approximately $33.8 million in cash, $40.9 million in principal amount of the 2029 Senior Secured Notes, 2.9 million shares of the Company’s Common Stock, and warrants to purchase an aggregate of 2.5 million shares of the Company’s Common Stock. See Part IV Item 15 Note 6 – Debt and Note 8 – Stockholders' Equity (Deficit) in the accompanying financial statements for further details regarding the 2029 Senior Secured Notes and related warrants.
Current report
The Company generated positive cash flow from operations for both the years ended December 31, 2024 and 2023. In April 2024, the Company received a $15.0 million upfront payment from a customer in connection with a two-year service contract. Based on the factors above, and to reduce financing costs, the Company voluntarily paid-off and terminated its prior revolving credit facility effective April 18, 2024. Additionally, in November 2024, the Company closed the sale of its Telematics Business, resulting in the receipt of cash proceeds of $52.0 million. These factors have had a positive impact on our liquidity.
Current report
Net cash provided by operating activities for the year ended December 31, 2024 is comprised of cash flows from continuing operations of $26.7 million and cash flows from discontinued operations of $6.9 million. The cash inflows from continuing operations were primarily related to net cash provided by working capital of $15.5 million and a net loss from continuing operations of $14.4 million that was fully offset by non-cash charges, including depreciation and amortization of $12.5 million, amortization of debt discount and debt issuance costs of $4.4 million, share-based compensation expense of $3.8 million, loss on debt restructurings of $2.9 million, non-cash operating lease expense of $1.0 million, capitalized software impairments of $0.9 million, and a loss on extinguishment of our revolving credit facility of $0.8 million.
Current report
Net cash used in financing activities during the year ended December 31, 2024 is primarily comprised of cash outflows of $33.8 million from the repurchases of a portion of our convertible notes, $19.5 million from the full repayment of the Company’s Short-Term Loan and $4.9 million from the voluntary early termination and repayment of our revolving credit facility, partially offset by cash inflows of $19.4 million from the issuance of the Short-Term Loan, net of debt issuance costs.
Current report
Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to capitalization and subsequent valuation of externally marketed software development costs and inventory valuation. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.
Current report
We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting estimates. Accordingly, these are the estimates we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations. Refer to Note 1 – Nature of Business and Significant Accounting Policies to our consolidated financial statements included elsewhere in this report for a summary of each of the related accounting policies.
Current report
Capitalization and Subsequent Valuation of Externally Marketed Software Development Costs
Current report
Estimates in the capitalization and subsequent valuation of externally marketed software development costs involve a significant level of estimation uncertainty include our estimates of what costs are capitalizable and when they’re capitalizable, the proper useful life to amortize capitalized costs over, and the proper valuation of such capitalizable costs at each balance sheet date. These estimates are sensitive to determinations of project progress, expectations of the period over which the software will be sold, as well as forecasts of future demand for the externally marketed software. Any changes to such estimates, for example changes in the expected period over which the software will be sold, impact our consolidated financial results in periods subsequent to determining those estimates.
Current report
Inventory Valuation
Current report
Estimates in the valuation of inventory that involve a significant level of estimation uncertainty include our estimates of excess and obsolete inventory based on forecasts of future demand for our products in inventory. Any changes to such estimates, for example differences in actual sales versus our estimates of demand, or conversely, the ultimate sell-through of fully reserved inventory for which we did not anticipate any future demand, impact our consolidated financial results in periods subsequent to recording those estimates. Other than our forecasts of future demand, there are no assumptions inherent in our estimates in the valuation of inventory that would result in sensitivity of reported amounts to such assumptions.
Removed paragraphs (35)
Previous report
We operate as one business segment. Our Chief Executive Officer, who is also our Chief Operating Decision Maker, evaluates the business as a single entity and reviews financial information and makes business decisions based on the overall results of the business. As such, our operations constitute a single operating segment and one reportable segment.
Previous report
Financial Statement Presentation
Previous report
During 2023 the Company reclassified revenues on the Consolidated Statement of Operations in order to align with how management currently reviews revenue results. Historically, the Company classified revenues from products and services into two categories, IoT & Mobile Solutions and Enterprise SaaS Solutions. The Company is now classifying revenues into the following two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. See the Supplemental disclosure of quarterly revenues and cost of revenues section below for a table of revenues and related costs of revenues under the current classification for each of the four quarters during the years ended December 31, 2023 and 2022.
Previous report
Additionally, during 2023 the Company reclassified all depreciation and amortization expense previously recorded in the operating expense line items of research and development, sales and marketing, and general and administrative expenses on the Consolidated Statement of Operations into a separate line labeled Depreciation and amortization. All prior periods have been reclassified to conform to the current period presentation for these changes.
Previous report
•increased competition from other fleet and vehicle telematics solutions, as well as suppliers of emerging devices that contain wireless data access or device management features;
Previous report
Revenues. Revenues for the year ended December 31, 2023 were $195.7 million, a decrease of $49.6 million, or 20.2%, compared to the same period in 2022.
Previous report
Mobile solutions. The $63.0 million decrease in mobile solutions revenues is primarily due to decreases in our carrier offerings and lower sales of LTE gigabit hotspots as we transition from 4G products to 5G product offerings, partially offset by sales of 5G hotspots related to our MiFi business (launched in the second half of 2022).
Previous report
Fixed wireless access solutions. The $11.3 million increase in fixed wireless access solutions revenues is primarily due increased adoption of fixed wireless access products, specifically sales of a 5G Fixed Wireless Access device that we launched in the second quarter of 2023.
Previous report
Product. The $34.8 million decrease in Product cost of revenues is primarily is a result of lower sales of LTE gigabit hotspots, partially offset by an increase in inventory and contract manufacturer reserves as further described below.
Previous report
Services and other. The $0.4 million decrease in Services and other cost of revenues is primarily due to reduced costs associated with providing our telematics services.
Previous report
Supplemental disclosure of quarterly revenues and cost of revenues. As noted above, the Company has elected to classify revenues into two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. The company has reclassified all prior periods to conform to the current period presentation for this change. Below is a supplemental disclosure of revenues and costs of revenues under the current classification for the each quarter in the years ended December 31, 2023 and 2022 (in thousands):
Previous report
Research and development expenses. Research and development expenses for the year ended December 31, 2023 were $21.5 million, or 11.0% of net revenues, compared to $38.3 million, or 15.6% of net revenues, for the same period in 2022. The decrease in research and development expenses was primarily due to a reduction in headcount and lower consulting and outside service fees, in pursuit of cost reduction efforts, compared to the same period in 2022.
Previous report
General and administrative expenses. General and administrative expenses for the year ended December 31, 2023 were $20.7 million, or 10.6% of net revenues, compared to $26.2 million, or 10.7% of net revenues, for the same period in 2022. The decrease in general and administrative expenses was primarily due to a decrease in share-based compensation expense due to lower restricted stock unit (“RSU”) based bonuses during the year ended December 31, 2023 compared to the same period in 2022.
Previous report
Other income (expense), net. The $2.0 million increase in other income, net over the same period in 2022 was primarily due to favorable changes in foreign exchange rates in the current period.
Previous report
Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from operations and a revolving credit facility as discussed further below. As of December 31, 2023, we had available unrestricted cash and cash equivalents totaling $7.5 million and $3.2 million of availability under the Credit Facility compared with cash and cash equivalents of $7.1 million as of December 31, 2022. As of December 31, 2023, we had working capital of $2.3 million compared to working capital as of December 31, 2022 of $21.4 million.
Previous report
The Company’s Credit Facility has a maturity date of December 31, 2024. The Company’s convertible 2025 Notes (as defined below) have a principal balance of $161.9 million and matures on May 1, 2025. The Company’s intention is to restructure or refinance the Credit Facility and the 2025 Notes, however there can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all.
Previous report
Revolving Credit Facility
Previous report
On August 5, 2022, we entered into a Loan and Security Agreement (the “Credit Agreement”) with Siena Lending Group LLC, as lender (“Lender”). The Credit Agreement established a $50.0 million secured asset-backed revolving credit facility (“Credit Facility”) with a final maturity date of December 31, 2024. On February 25, 2023, we entered into an amendment of the Credit Agreement with an effective date of December 15, 2022, which clarified certain terms within the Credit Agreement. On May 2, 2023, we entered into a third amendment of the Credit Agreement which increased the borrowing base under the Credit Facility by $4.0 million, increased the minimum borrowing amount for interest calculations to $8.5 million, and modified certain covenants (as so amended, the “Amended Credit Agreement”). On February 20, 2024, we entered into a fourth amendment (the “Fourth Amendment”) of the Credit Agreement which relaxed the financial covenants under the Credit Agreement by decreasing the minimum liquidity level we are required to maintain from $10 million to $8 million. Availability under the Credit Facility is determined monthly by a Borrowing Base (as defined in the Amended Credit Agreement) comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers. Outstanding amounts exceeding the borrowing base must be repaid immediately.
Previous report
Borrowings under the Credit Facility may take the form of base rate (“Base Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. SOFR loans will bear interest at a rate per annum equal to Term SOFR (as defined in the Amended Credit Agreement as the Term SOFR Reference Rate for a term of one month on the day) plus the Applicable Margin (as defined in the Amended Credit Agreement), with a Term SOFR floor of 1%. Base Rate loans will bear interest at a rate per annum equal to the Applicable Margin plus the greatest of (a) the per annum rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal, (b) the sum of the Federal Funds Rate (as defined in the Amended Credit Agreement) plus 0.5% and (c) 3.50% per annum.
Previous report
The Applicable Margin varies depending on the average outstanding amount for a preceding month. If the average outstanding amount for a preceding month is less than $15 million, the Applicable Margin will be 2.50% for Base Rate loans and 3.50% for SOFR loans. If the average outstanding amount for a preceding month is between $15 million and $25 million, the Applicable Margin will be 3.00% for Base Rate loans and 4.00% for SOFR loans. If the average outstanding amount for a preceding month is greater than $25 million, the Applicable Margin will be 4.5% for Base Rate loans and 5.50% for SOFR loans.
Previous report
On May 2, 2023, in addition to the amendment to the Credit Agreement entered into as described above, South Ocean Funding, LLC and North Sound Ventures, LP (the “Participants”) collectively purchased a $4.0 million last-out subordinated participation interest in the Amended Credit Agreement (the “Participation Interest”) from the Lender pursuant to a Participation Agreement between the Participants and the Lender (the “Participation Agreement”). In connection with the purchase of the Participation Interest, we agreed to pay the Participants an exit fee upon the earlier of (a) the scheduled maturity date of the Amended Credit Agreement, (b) the termination of the Lender’s commitment to make revolving loans prior to the scheduled maturity date of the Amended Credit Agreement, and (c) the early redemption of the Participants’ Participation Interest under the Participation Agreement (the earliest to occur of the foregoing, the “Exit Event”). The aggregate exit fee payable to the Participants is equal to (i) 7.5% of the Participation Interest, if the Exit Event occurs on or before December 31, 2023, (ii) 10.0% of the Participation Interest, if the Exit Event occurs between January 1, 2024 and June 30, 2024 and (iii) 12.5% of the Participation Interest, if the Exit Events occurs after June 30, 2024. Further, the purchase of the Participation Interest granted an option for the Participants to purchase the subject revolving loan or to redeem its Participation Interest under certain circumstances. South Ocean Funding, LLC is an affiliate of Golden Harbor, Ltd. and North Sound Ventures, LP is an affiliate of North Sound Management, Inc. As of the date hereof, each of Golden Harbor, Ltd. and North Sound Management, Inc. hold in excess of 5% of the Company’s outstanding common stock. James Avery, a member of our Board of Directors, currently serves as Senior Managing Director of Tavistock Group, an affiliate of South Ocean Funding, LLC.
Previous report
The Amended Credit Agreement contains a financial covenant whereby the Loan Parties shall not permit the consolidated Liquidity (as defined in the Amended Credit Agreement) to be less than $8 million at any time. The Amended Credit Agreement also contains certain customary covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and places limits on various other payments. We were in compliance with the financial covenants contained in the Amended Credit Agreement as of December 31, 2023.
Previous report
As of December 31, 2023, we had outstanding borrowings under the Credit Agreement of $4.1 million and availability of $3.2 million.
Previous report
2025 Notes
Previous report
After taking into account exchanges and redemptions occurring in prior periods, the outstanding principal balance of the 2025 Notes was $161.9 million as of both December 31, 2023 and December 31, 2022. Assuming no repurchases or conversions of the 2025 Notes prior to May 1, 2025, the entire principal balance of $161.9 million is due on May 1, 2025. The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 3.25%, payable semi-annually in arrears on May 1 and November 1 of each year.
Previous report
Equity Distribution Agreement
Previous report
On January 25, 2021, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which we may offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of our common stock (the “ATM Offering”) pursuant to the Company’s Registration Statement on Form S-3ASR (File No. 333-238057), as filed with the SEC on May 7, 2020 and amended from time to time. During the year end ended December 31, 2023, the Company sold 803,596 shares of common stock, at an average price of $7.50 per share, for net proceeds of $5.9 million, after deducting underwriter fees and discounts. There was no ATM transactions during the year ended December 31, 2022. Effective as of November 2, 2023, the Equity Distribution Agreement was terminated by the Company, and there will be no further sales under the ATM Offering.
Previous report
Net cash provided by financing activities during the year ended December 31, 2022 is primarily comprised of $7.9 million net borrowing of our Credit Facility, partially offset by $1.6 million in principal repayments of financed assets.
Previous report
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. Actual results could differ from these estimates.
Previous report
Software Development Costs for External Use
Previous report
Software development costs for external use are expensed as incurred until technological feasibility has been established, at which time those costs are capitalized as intangible assets until the software is available for general release to customers.
Previous report
The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized computer software development costs requires considerable judgment by us with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries, other direct payroll-related costs and payments to third party vendors.
Previous report
Capitalized software development costs are amortized on a straight-line basis over the estimated economic life. Costs incurred to enhance existing software or after the software is available for general release to customers are expensed in the period they are incurred and included in research and development expense in our consolidated statements of operations. The straight-line recognition method approximates the manner in which the expected benefit will be derived. At each balance sheet date, the unamortized capitalized software development costs for external use is compared to the net realizable value of that product by analyzing critical inputs such as expected future lifetime revenue. The amount by which unamortized software costs exceed the net realizable value, if any, is recognized as a charge to amortization expense in the period it is determined.
Previous report
Inventories and Provision for Excess and Obsolete Inventory
Previous report
Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The valuation of inventory requires significant judgment and estimates, including evaluating the need for any adjustments to net realizable value related to excess or obsolete inventory to ensure that the inventory is reported at the lower of cost or net realizable value. The Company reviews the components of its inventory and its inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales. Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances or new product introductions by the Company or its customers that vary from its current expectations.
Reworded paragraphs (32)
Previous wording
Inseego Corp. is a leader in the design and development of cloud-managed wireless wide area network (“WWAN”) and intelligent edge solutions. Our 4G and 5G WAN portfolio is comprised of secure and high-performance mobile broadband and fixed wireless access (“FWA”) solutions with associated cloud solutions for real time WAN visibility, monitoring, automation and control with centralized orchestration of network functions. These solutions are specifically built for the enterprise and small and medium business (“SMB”) market segments with a focus on performance, scalability, quality and enterprise grade security. Our intelligent edge telematics solutions are designed to improve business outcomes for enterprise and SMB market segments. We also provide a wireless subscriber management solution for carrier’s management of their government and complex enterprise customer subscriptions.
Current wording
Inseego Corp. is a leader in the design and development of cloud-managed wireless wide area network (“WAN”) and intelligent edge solutions. Our 5G WAN portfolio is comprised of secure and high-performance mobile broadband and fixed wireless access (“FWA”) solutions with associated cloud solutions for real time WAN visibility, monitoring, automation and control with centralized orchestration of network functions. These devices are specifically built for the carrier, enterprise and small and medium business (“SMB”) market segments with a focus on performance, scalability, quality and enterprise grade security. We also provide a wireless subscriber management SaaS solution for carrier’s management of their government and complex enterprise customer subscriptions.
Previous wording
Our 5G products and associated cloud solutions are designed and developed in the U.S. and are used in mission-critical applications requiring the highest levels of security and zero unscheduled downtime. These solutions support applications such as business broadband for both mobile and fixed use cases, enterprise networking and software-defined wide area network (“SD-WAN”) failover management.
Current wording
Our 5G products and associated cloud solutions are designed and developed in the U.S. and are used in mission-critical applications requiring the highest levels of security and zero unscheduled downtime. These products support applications such as business broadband for both mobile and fixed use cases, enterprise networking and software-defined wide area network (“SD-WAN”) failover management.
Previous wording
Revenues. We classify our revenues from the sale of our products and services into two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. Historically, the Company classified revenues from products and services into two different categories, IoT & Mobile Solutions and Enterprise SaaS Solutions. All prior periods have been reclassified to conform to the current period presentation for this change. A description of each of the current revenue classifications is as follows:
Current wording
Revenues. We classify our revenues from the sale of our products and services into two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. A description of each of the current revenue classifications is as follows:
Previous wording
Mobile solutions: Our mobile broadband solutions, sold under the MiFi brand, are actively used by millions of end users to provide secure and convenient high-speed access to corporate, public and personal information through the Internet and enterprise networks. Our mobile portfolio is supported by our cloud offerings - Inseego Connect for device management, and 5G SD EDGE for secure networking enabling corporate managed mobile remote workforce. Our Mobile Solutions portfolio also includes 4G VoLTE products and 4G USB modems. Our Mobile Solutions customer base is primarily comprised of mobile operators. These mobile operators include Verizon Wireless, T-Mobile and U.S. Cellular in the United States, Rogers and Telus in Canada, Telstra in Australia, as well as other international wireless operators, distributors and various companies in other vertical markets and geographies.
Current wording
Mobile solutions: Our mobile broadband devices, sold under the MiFi brand, are actively used by millions of end users to provide secure and convenient high-speed access to corporate, public and personal information through the Internet and enterprise networks. Our mobile portfolio is supported by our cloud offering, Inseego Connect for device management, whose revenues are included in Services and Other below. Our Mobile Solutions customer base is primarily comprised of mobile operators. These mobile operators include Verizon Wireless, T-Mobile and U.S. Cellular in the United States, Rogers and Telus in Canada, and various companies in other vertical markets.
Previous wording
Fixed wireless access solutions: Our fixed wireless access solutions are deployed by enterprise and SMB customers for their distributed sites and employees as a fully secure and corporate managed wireless WWAN solution. The portfolio consists of indoor, outdoor and industrial routers and gateways supported by our cloud solutions – Inseego Connect for device management and 5G SD Edge for secure cloud networking. These solutions, sold under the Wavemaker and Skyus brands, are sold by mobile operators such as T-Mobile, U.S. Cellular and Verizon Wireless along with distribution and channel partners.
Current wording
Fixed wireless access solutions: Our fixed wireless access solutions are deployed by enterprise and SMB customers for their distributed sites and employees as a fully secure and corporate managed wireless WWAN solution. The portfolio consists of indoor, outdoor and industrial routers and gateways supported by our cloud offering – Inseego Connect – for device management. Revenues related to our cloud offerings of Inseego Connect are included within Services and Other below. These devices, sold under the Wavemaker brands, are sold by mobile operators such as T-Mobile, U.S. Cellular and Verizon Wireless along with distribution and channel partners.
Previous wording
Services and other: We sell certain other types of SaaS solutions. First is our telematics and asset tracking solution that is deployed across multiple vertical markets in Europe, UK, Australia and New Zealand. This solution provides real time visibility to fleet managers on their deployed vehicles with live maps and data to improve driver safety and performance. We have thousands of enterprise and SMB customers currently subscribed to this service. Second, we provide a wireless subscriber management solution (Inseego Subscribe) for carrier’s management of their government and complex enterprise customer subscriptions. We also categorize non-recurring engineering services we provide to our customers as Service and other revenue.
Current wording
Services and Other: A substantial majority of our Services and Other revenue comes from providing a SaaS wireless subscriber management solution (Inseego Subscribe) for carrier’s management of their government and complex enterprise customer subscriptions. Services and Other revenue also includes the Company’s above mentioned Inseego Connect offering. We also categorize non-recurring engineering services we provide to our customers as Service and Other revenue.
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We believe that our future revenues will be influenced by a number of factors including:
Current wording
We believe that our future revenues may be influenced by a number of factors including:
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Cost of Revenues. Cost of revenues includes all costs associated with our contract manufacturers, distribution, fulfillment and repair services, delivery of SaaS services, warranty costs, amortization of intangible assets, depreciation of rental assets for telematics services, royalties, operations overhead, costs associated with cancellation of purchase orders and costs related to outside services. Also included in cost of revenues are costs related to inventory adjustments, as well as any write downs for excess and obsolete inventory and abandoned product lines. Inventory adjustments are impacted primarily by demand for our products, which is influenced by the factors discussed above.
Current wording
Cost of Revenues. Cost of revenues includes all costs associated with our contract manufacturers, distribution, fulfillment and repair services, delivery of SaaS services, warranty costs, royalties, operations overhead, costs associated with cancellation of purchase orders and costs related to outside services. Also included in cost of revenues are costs related to inventory adjustments, as well as any write downs for excess and obsolete inventory and abandoned product lines. Inventory adjustments are impacted primarily by demand for our products, which is influenced by the factors discussed above.
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Research and development is at the core of our ability to produce innovative, leading-edge products. These expenses consist primarily of engineers and technicians who design and test our highly complex products and the procurement of testing and certification services.
Current wording
Research and development is at the core of our ability to produce innovative, leading-edge products. These expenses consist primarily of the cost of internal and third-party engineers and technicians who design and test our highly complex products, the procurement of testing and certification services, including prototypes, and other necessary expenditures.
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General and administrative expenses include primarily corporate functions such as accounting, human resources, legal, administrative support, information technology, and professional fees. This category includes the expenses needed to operate as a publicly traded company, including compliance with the Sarbanes-Oxley Act of 2002, as amended, SEC filings, stock exchange fees and investor relations expense. Although general and administrative expenses are not directly related to revenue levels, certain expenses such as legal expenses and provisions for bad debts may cause significant volatility in future general and administrative expenses.
Current wording
General and administrative expenses include primarily corporate functions such as accounting, human resources, legal, administrative support, information technology, and professional fees. This category also includes the expenses needed to operate as a publicly traded company, including compliance with the Sarbanes-Oxley Act of 2002, as amended, SEC filings, stock exchange fees and investor relations expense. Although general and administrative expenses are not directly related to revenue levels, certain expenses such as legal expenses and provisions for bad debts may cause significant volatility in future general and administrative expenses.
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Depreciation and amortization expenses. Our depreciation and amortization expenses primarily include depreciation on our property, plant, and equipment, amortization of capitalized software projects, and amortization of intangibles purchased through acquisitions. Depreciation related to rental assets of our telematics services are included in Cost of Revenuesas noted above.
Current wording
Depreciation and amortization expenses. Our depreciation and amortization expenses primarily include depreciation on our property, plant, and equipment, amortization of capitalized software projects, and amortization of intangibles purchased through acquisitions.
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The following table summarizes net revenues by category (dollars in thousands):
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The following table summarizes revenues by category (dollars in thousands):
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Cost of revenues. Cost of revenues for the year ended December 31, 2023 was $143.2 million, or 73.2% of net revenues, compared to $178.4 million, or 72.7% of net revenues, for the same period in 2022.
Current wording
Cost of revenues. Cost of revenues for the year ended December 31, 2024 was $122.4 million, or 64.0% of revenues, compared to $131.5 million, or 78.6% of revenues, for the same period in 2023.
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Services and other. The $2.1 million increase in services and other net revenues is primarily due to increased telematics subscription revenues.
Current wording
Services and other. The $2.7 million increase in Services and other cost of revenues is primarily due to increased Inseego Subscribe revenues and the related increase in costs incurred to provide these services.
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Gross profit. Gross profit for the year ended December 31, 2023 was $52.5 million, or a gross margin of 26.8%, compared to $66.9 million, or a gross margin of 27.3%, for the same period in 2022. The decrease in gross profit is primarily due to lower revenues. The slight decrease in gross profit margin is due to an increase in inventory and contract manufacturer reserves discussed below, which were partially offset by a higher percentage of high margin service revenues, higher margins in our telematics business, and various initiatives to improve efficiencies in production.
Current wording
Gross profit. Gross profit for the year ended December 31, 2024 was $68.8 million, or a gross margin of 36.0%, compared to $35.8 million, or a gross margin of 21.4%, for the same period in 2023. The increase in gross profit is primarily due to higher revenues in 2024 and significant inventory reserves that were recorded in 2023. The increase in gross profit margin is primarily due to the inventory reserves recorded in 2023 and a larger proportion of higher margin service revenues as a percentage of total revenues and increased margins on the Company’s premium 5G MiFi offerings in 2024 in comparison to the lower margin products offered in the prior year.
Previous wording
As discussed in Part IV Item 15 Note 2 – Financial Statement Details, in the year ended December 31, 2023, the Company recorded awrite-down of $9.6 million to reflect inventories at net realizable value, in addition to a $1.3 million write-off of capitalized inventory order fees. Further, management accrued an additional $6.8 million in net charges for contract manufacturing liabilities (whose remaining balance is accrued in the Accrued Expenses and Other Current Liabilities) related to excess materials at the contract manufacturers’ sites. All $17.7 million of these charges were recorded in cost of product revenues during the year ended December 31, 2023 and thereby negatively impacted Gross Profit. Management’s analysis was based on new information that became available during the year, updated sales projections and other dynamics in the market.
Current wording
In the year ended December 31, 2023, the Company recorded awrite-down of $9.6 million to reflect inventories at net realizable value, in addition to a $1.3 million write-off of capitalized inventory order fees. Further, management accrued an additional $6.8 million in net charges for contract manufacturing liabilities (whose remaining balance is accrued in the Accrued Expenses and Other Current Liabilities) related to excess materials at the contract manufacturers’ sites. All $17.7 million of these charges were recorded in cost of product revenues during the year ended December 31, 2023 and thereby negatively impacted gross profit. Management’s analysis was based on new information that became available during 2023, updated sales projections and other dynamics in the market.
Previous wording
Sales and marketing expenses. Sales and marketing expenses for the year ended December 31, 2023 were $21.5 million, or 11.0% of net revenues, compared to $32.8 million, or 13.4% of net revenues, for the same period in 2022. The decrease in sales and marketing expenseswas primarily due to lower professional fees and reduction in sales headcount compared to the same period in 2022.
Current wording
Sales and marketing expenses. Sales and marketing expenses for the year ended December 31, 2024 were $16.0 million, or 8.3% of revenues, compared to $16.6 million, or 9.9% of revenues, for the same period in 2023. The decrease in sales and marketing expenses was primarily due to lower overall sales headcount, partially offset by higher commission expenses as a result of higher revenues.
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Depreciation and amortization expenses. Depreciation and amortization expenses for the years ended December 31, 2023 was $19.8 million, or 10.1% of net revenues, compared to $24.5 million, or 10.0% of net revenues, for the same period in 2022. The decrease in depreciation and amortization expenses was primarily due to lower amortization related to capitalized software projects during the year ended December 31, 2023 compared to the same period in 2022.
Current wording
Depreciation and amortization expenses. Depreciation and amortization expenses for the years ended December 31, 2024 was $12.4 million, or 6.5% of revenues, compared to $18.4 million, or 11.0% of revenues, for the same period in 2023. The decrease in depreciation and amortization expenses was primarily due to lower balances of capitalized software projects and property, plant and equipment during the year ended December 31, 2024 compared to the same period in 2023.
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Impairment of capitalized software. For the years ended December 31, 2023 and 2022, we recorded impairments of $5.2 million and $3.0 million, respectively. The impairments during 2023 were primarily related to the decision to discontinue a software project related to our telematics business in the fourth quarter of 2023.
Current wording
Impairment of capitalized software. For the years ended December 31, 2024 and 2023, we recorded impairments of $0.9 million and $1.1 million, respectively.
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Interest expense, net. The $0.5 million increase in interest expense, net for the year ended December 31, 2023 over the same period in 2022 was primarily due higher interest rates in 2023 and the Credit Agreement which commenced in the second half of 2022.
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Interest expense, net. The $1.8 million increase in interest expense, net for the year ended December 31, 2024 over the same period in 2023 was primarily a result of the non-cash amortization of the debt discount and coupon interest on the Short-
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Income tax provision (benefit). Income tax provision for the years ended December 31, 2023 and 2022 was a provision of $0.9 million and a benefit of $0.5 million, respectively. This $1.4 million increase in income tax expense was driven by an increase in pre-tax profits at certain foreign subsidiaries for the current year period compared to a loss in the prior year period.
Current wording
Income tax provision. Income tax provision for the years ended December 31, 2024 and 2023 was a provision of $0.7 million and $0.0 million, respectively.
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Series E Preferred Stock dividends and deemed dividend from the preferred stock exchange. During the years ended December 31, 2023 and 2022, we recorded dividends of $3.0 million and $2.7 million, respectively, on our Series E Preferred Stock.
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Preferred stock dividends. During the years ended December 31, 2024 and 2023, we recorded dividends of $3.3 million and $3.0 million, respectively, on our Preferred Stock.
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The Company has a history of operating and net losses and overall usage of cash from operating and investing activities. The Company’s management believes that its cash and cash equivalents on-hand, together with anticipated cash flows from operations, expected availability under its secured asset-backed Credit Facility, and anticipated savings from ongoing cost reduction efforts, will be sufficient to meet its cash flow needs for the next twelve months from the filing date of this report. The Company’s ability to attain profitable operations and generate positive cash flow is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. If events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of potential litigation or otherwise, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses and capital expenditures, which could have an adverse impact on the Company’s ability to achieve its intended business objectives.
Current wording
While the Company’s liquidity and financial results have had several positive developments recently, as noted above, the Company has a history of operating and net losses and overall usage of cash from operating and investing activities. The Company’s ability to maintain profitable operations and continue to generate positive cash flows is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. In order to effect the restructuring or refinancing of the Company’s obligations, or if events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses and capital expenditures, which could have an adverse impact on the Company’s ability to achieve its intended business objectives.
Previous wording
Our liquidity could be compromised if there is any interruption in our business operations, a material failure to satisfy our contractual commitments or a failure to generate revenue from new or existing products. If additional funds are raised by the issuance of equity securities, Company stockholders could experience dilution of their ownership interests and securities issued may have rights senior to those of the holders of the Company’s common stock.
Current wording
Our liquidity could be compromised if there is any interruption in our business operations, a material failure to satisfy our contractual commitments, retention of our key existing customers or a failure to generate revenue from new or existing products. If additional funds are raised by the issuance of equity securities, or in connection with any additional debt restructurings or refinancing, Company’s stockholders could experience significant dilution of their ownership interests and securities issued may have rights senior to those of the holders of the Company’s common stock.
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•To mitigate the risk of material shortages and price increases, we enter into non-cancellable purchase obligations with certain key contract manufacturers for the purchase of goods and services in the three to four quarters following the balance sheet date. Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2023, our future payments under these noncancellable purchase obligations were approximately $33.9 million.
Current wording
•To mitigate the risk of material shortages and price increases, we enter into non-cancellable purchase obligations with certain key contract manufacturers for the purchase of goods and services in the three to four quarters following the balance sheet date. Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2024, our future payments under these noncancellable purchase obligations were approximately $44.9 million.
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•$161.9 million in outstanding principal amount of 2025 Notes with required interest payments; see Part IV Item 15 Note 5 – Debt;
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•$14.9 million in outstanding principal amount of 2025 Convertible Notes with required interest payments; see Part IV Item 15 Note 6 – Debt;
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•$4.1 million in outstanding borrowings under the Credit Facility; see Part IV Item 15 Note 5 – Debt;
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•$40.9 million in outstanding borrowings under the 2029 Senior Secured Notes; see Part IV Item 15 Note 6 – Debt; and
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•Operating lease liabilities that are included on our consolidated balance sheet; see Part IV Item 15 Note 11 – Leases; and
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•Operating lease liabilities that are included on our consolidated balance sheet; see Part IV Item 15 Note 12 – Leases.
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Net cash used in operating activities for the year ended December 31, 2022 is primarily comprised of a $68.0 million net loss and $17.8 million of net cash used by working capital, partially offset by non-cash charges, including depreciation and amortization of $27.2 million, share-based compensation expense of $17.9 million, of amortization of debt issuance and discount costs of $3.0 million, capitalized software impairments of $3.0 million, and excess and obsolete inventory provisions of $2.6 million .
Current wording
Net cash provided by operating activities for the year ended December 31, 2023 is comprised of cash flows from continuing operations of $3.8 million and cash flows from discontinued operations of $2.2 million. The cash inflows from continuing operations were primarily related to net cash provided by working capital of $8.7 million, partially offset by a net loss from continuing operations of $45.0 million that was offset by non-cash charges, including depreciation and amortization of $18.7 million, excess and obsolete inventory provisions of $9.5 million, share-based compensation expense of $7.0 million, amortization of debt discount and issuance costs of $2.0 million, write-offs of capitalized inventory fees of $1.3 million, and capitalized software impairments of $1.1 million.
Previous wording
Net cash used in investing activities during the year ended December 31, 2022 was primarily comprised of $11.8 million of cash outflows related to the developmentof software in support of our products and services and$1.5 million ofproperty, plant and equipment and rental asset purchases.
Current wording
Net cash provided by investing activities during the year ended December 31, 2024 is primarily comprised of cash flows from discontinued operations of $48.1 million related to the divestiture of the Telematics Business, partially offset by $5.0 million in of cash outflows related to the development of software in support of our products and services and $0.1 million of property, plant and equipment purchases.
Previous wording
Net cash used in investing activities during the year ended December 31, 2023 is primarily comprised of$9.5 million in of cash outflows related to the development of software in support of our products and services and$0.7 million ofproperty, plant and equipment and rental asset purchases.
Current wording
Net cash used in investing activities during the year ended December 31, 2023 was primarily comprised of $8.1 million of cash outflows related to the development of software in support of our products and services, $0.2 million of property, plant and equipment purchases, and cash outflows from discontinued operations of $1.8 million.
Previous wording
Net cash provided by financing activities during the year ended December 31, 2023 is primarily comprised of $6.1 million in proceeds from the public offering, partially offset by $3.8 million of cash outflow related to net repayments of our Credit Facility.
Current wording
Net cash provided by financing activities during the year ended December 31, 2023 is primarily comprised of $6.1 million in proceeds from public offerings, partially offset by $3.8 million of cash outflow related to net repayments of our now-terminated revolving credit facility.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net cash provided by operating activities for the year ended December 31, 2023 is primarily comprised of a $46.2 million net loss incurred during the period, partially offset by non-cash charges, including depreciation and amortization of $22.5 million, excess and obsolete inventory provisions of $9.6 million, share-based compensation expense of $7.4 million, capitalized software impairments of $5.2 million, and amortization of debt discount and debt issuance costs of $2.0 million.