Inseego - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $40.2M, above guidance and consensus; non-GAAP gross margin was 41.2% and adjusted EBITDA was $4.7M, driven by stronger FWA demand, a favorable mix, and disciplined OpEx. Consensus revenue was $38.5M, implying a beat; consensus Primary EPS was 0.0267 vs actual 0.0805, also a beat*.
• Segment mix pivoted: FWA revenue ($14.5M) surpassed mobile hotspot ($13.7M) for only the second time in company history, highlighting FX4100 traction and early mesh node attach.
• Balance sheet improved: cash $13.2M and total debt ~$41M; Inseego paid off remaining $15M converts in May and added a $15M BMO working capital facility (undrawn) to increase operating flexibility.
• Q3 2025 outlook: revenue $40–$43M and adjusted EBITDA $4–$5M, with services steady at ~$12M and gross margins largely consistent; note removal of a >$10M education mobile deal tied to E‑Rate that lacks a path forward in Congress.
• Stock reaction catalysts: FX4100 FWA ramp at T-Mobile for Business, new Tier-1 carrier wins across mobile and FWA, and expanding software/API strategy (Inseego Connect, Subscribe) that should support mix and margin resilience.

What Went Well and What Went Wrong

What Went Well

• FWA leadership: FX4100 launch outpaced prior generations; Q2 was the second time FWA revenue surpassed mobile, validating the enterprise-grade FWA strategy.
• New Tier-1 wins: Renewed MiFi stock positions at two large carriers and won a new Tier-1 for both mobile and FWA, diversifying the customer base.
• Services durability: Services revenue held ~$12M with strong margins, underpinned by Inseego Subscribe; APIs for Inseego Connect broaden TAM and stickiness.

Selected quotes:

• “FWA revenue surpassed mobile hotspot revenue… We see this as an indicator of… successful ramp of our new FX4100 product”.
• “We… renewed our stock MiFi products with our two large Tier one carrier customers… added a new Tier one carrier to stock both our mobile and FWA products”.

What Went Wrong

• Mobile YoY decline: Q2 mobile revenue fell 47% YoY due to prior-year promotional comps and program timing.
• AR and inventory built late in quarter: Accounts receivable rose with late-quarter FX4100 uptake, and inventory investment increased to support second-half product launches, pressuring operating cash flow (-$7.9M in H1).
• E‑Rate risk: A >$10M education mobile hotspot deal was removed from H2 forecast due to Congressional uncertainty, adding variability to the outlook.

Transcript

Speaker 3

Hello, and welcome to Inseego Corp's second quarter 2025 financial results conference call. Please note that today's event is being recorded. All participants today 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 questions and answers. To ask a question, please press star, then one on your telephone keypad. To withdraw your question, please press star, then two. On the call today are Juho Sarvikas, Chief Executive Officer, and Steven Gatoff, Chief Financial Officer. During this call, certain non-GAAP financial measures will be discussed. A reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the Investors section of the company's website. An audio replay of this call will also be archived there.

Please also be advised that 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 the expectations, please refer to the risk factors described in the company's Form 10-K, 10-Q, and other SEC filings, which are available on the company's website. Please also refer to the cautionary note regarding the forward-looking statements section contained in today's press release. With that, I'd like to turn the call over to Juho Sarvikas, Chief Executive Officer. Please go ahead, sir.

Speaker 4

Good afternoon, everyone, and thank you for joining us today. My first full quarter here at Inseego has been both productive and strategically significant as we transformed the company to lead in the next generation of enterprise connectivity through cloud-managed high-performance wireless solutions. There are a lot of exciting elements to this, and on today's call, I'd like to focus on the two most important ones. First, I'll share my perspective on the key highlights in the business for Q2 and the momentum that we're seeing with our products and customer take-home. Second, I'll update you on our execution of the two key strategic growth vectors that I outlined at the beginning of the year around scaling the core and evolving to a solutions company. With that, let's start with the first topic: Q2 results and highlights.

Q2 was a pivotal quarter for Inseego as we built meaningful momentum with our products and customer traction, and as a result, we see the company now being well-positioned to drive long-term sustainable growth. Financially, we delivered sequential growth in Q2 in both revenue and adjusted EBITDA, exceeding guidance through a combination of strong FWA demand, a favorable product mix, and disciplined expense management. Steven will walk through the details shortly. Operationally, this was a significant quarter on two fronts. First was the market introduction of our next-generation 5G Advanced Inseego Wavemaker FX4100 FWA solution. It leverages our new Edge Router OS and significantly upgraded Inseego Connect SaaS feature set, and the mid-Q2 launch has greatly exceeded our expectations with strong early demand. I'll go into detail in a bit.

The second big item for the quarter was that we successfully renewed our stocked MiFi products with our two large Tier 1 carrier customers, while at the same time, we also added a new Tier 1 carrier to stock both our mobile and FWA products starting later this year. These wins not only diversify our customer base, but also underscore the market appeal of our combined mobile and fixed wireless broadband portfolio purpose-built for enterprise-grade connectivity. Together, these accomplishments mark a quarter where our strategic plan began to translate into tangible commercial wins, strengthening our Tier 1 relationships and validating the growth opportunity ahead.

Let me now turn to my second topic and talk about the solid progress we've made this past quarter on our growth strategy that is anchored by two vectors: one, scaling the core or execution across our mobile and FWA business, and two, evolving to a solutions company by investing in our software, APIs, and platform intelligence to transition Inseego into a solution-oriented provider, enabling greater value creation and sustainable growth. Let's begin with our first growth vector: scaling our mobile and FWA business. I'll start with mobile broadband, a category Inseego pioneered in 2009 with the launch of the iconic MiFi brand, a trademark that we proudly own.

Since the beginning of the year, we've redefined our mobile product strategy and repositioned our MiFi portfolio to capture greater share with the same enterprise-grade Edge Router OS and Inseego Connect enhancements as the FWA category that uniquely differentiates us and requires little marginal investment. This is a major benefit of now having a platform strategy across our products that all benefit from the same software efforts. This new approach directly enables us to renew our stock positions with our two large existing U.S. carriers, providing stability, growth, and visibility going forward. In addition, as I mentioned a moment ago, in Q2, we won a new major Tier 1 carrier customer with our next-generation mobile solution. This marks an important new carrier relationship for Inseego and diversifies our customer base.

When I joined the company, we aligned on a common goal: to win and consolidate the MiFi market, and the team is executing on it. These renewals and new customer wins reinforce our leadership in mobile broadband, driving scale and operational leverage across our entire portfolio. Let's now look at the FWA aspect of driving scale. As you might remember, in Q1, our FWA revenue declined from a customer transitioning to the latest FWA generation. The new FX4100 launched midway through Q2, and demand has exceeded the expectations we set with our partner, T-Mobile, materially outpacing adoption of our prior two generations. This strong adoption reflects two dynamics: one, the expanding TAM in the enterprise FWA market, and two, our capturing of greater market share with our new enterprise-grade solution.

The FX4100's rapid success reflects a unique combination of performance, ease of deployment, enterprise-grade feature set, and excellent go-to-market execution, together with our partner that differentiates Inseego and positions us as the partner of choice for carriers and enterprise customers. Building on this success, we also entered a new product category in Q2 with the introduction of our X700 WiFi mesh node. When paired with the new FX4100, the X700 creates a single unified network with support for up to three mesh nodes per router. This eliminates the need for traditional switches and multiple access points, giving enterprises and branch locations a cost-efficient plug-and-play solution that simplifies deployment, reduces hardware complexity, and delivers reliable wall-to-wall coverage. Together, the FX4100 and X700 mesh node solution redefine enterprise connectivity, offering the same plug-and-play simplicity and performance advantage that make FWA a compelling replacement for wired broadband.

Our unique approach and success in enterprise FWA has opened new opportunities with the broader customer base. I'm happy to share that we've won a new stocked FWA product with a new Tier 1 carrier customer. This landmark win validates our strategy and strengthens our position as carriers increasingly look for a high-performance, enterprise-ready FWA solution. We are now hard at work in scaling the traction in enterprise FWA across the broader carrier base, while accelerating engagement with MSOs, MSPs, VARs, and strategic partners. The FX4100's strong early adoption, combined with the X700 mesh launch and new Tier 1 win, positions FWA as a key growth driver for Inseego in the second half of 2025 and beyond. With the carrier momentum accelerating, we also secured notable wins with enterprise customers and channel partners, demonstrating the scalability of our combined hardware and software solutions.

We closed a multimillion-dollar enterprise agreement with an industrial S&P 500 company, facilitated through one of our Inseego Ignite channel partners for a deployment that combines our high-performance hardware with Inseego Connect software, reinforcing our value as a trusted enterprise connectivity partner. We also expanded our outdoor FWA presence through a strategic agreement supporting rural connectivity for one of the nation's leading poultry producers. Powered by Inseego Connect, this deployment delivers centralized device management and enterprise-grade connectivity across distributed farming locations. With that, I'll turn to the second part of our growth strategy: transforming Inseego into a solution-driven company through software, APIs, and platform intelligence. By deepening the software and services layer around our hardware, we're creating recurring value for our customers and a stronger competitive moat for the long term. Inseego Connect, our cloud-based device management platform, is at the center of this strategy.

Our immediate priority has been seamless API integration into carriers, MSOs, and MSPs' existing business systems to expand our addressable market. With the critical APIs now released, we've also significantly expanded the Inseego Connect feature set based on the valuable feedback from our customers and partners. When paired with our new Edge Router OS, these enhanced capabilities are elevating Inseego from a hardware provider to a high-value connectivity solutions partner, driving recurring revenue opportunities, deeper customer engagement, and a strong position in enterprise networking. Along these lines, let me also spend a moment on Inseego Subscribe, our enterprise and government subscriber management SaaS platform. As I mentioned on the last earnings call, I am particularly excited about the future for this offering, and we're now investing in expanded functionality, market reach, and scalability.

I've been pleased with the reception from the market, and I look forward to updating you as we close out the year and head out to 2026. As we enter the back half of 2025, our focus remains on bringing new products to market and expanding our customer base, building a sustainable path to long-term growth. Importantly, I am focused on exiting the year with a strong run-rate business to support this sustainable growth. We expect sequential revenue growth for each of the next two quarters as we move forward. Steven will share more details on this in his remarks.

One bittersweet data point to share with you that we see as a strong endorsement of our market presence and ability to garner large deals with new customers is a $10 million-plus educational mobile deal that we were awarded for the second half of 2025, but that was contingent upon congressional eRate funding for hotspots. However, hotspots' inclusion in the eRate program continues to sit in limbo in the House with no established path forward. Based on this, we have removed the deal from our forecast. At the end of the day, it all comes down to great people executing well, and on that front, I'm really pleased to share the announcement you probably saw earlier in the week. We recently welcomed two accomplished leaders to the Inseego executive team.

Lawrence Howe joined as Chief Supply Chain Officer, bringing 20-plus years of experience in global procurement and operational excellence to enhance supply chain resilience and cost structure. Zach Kowalski joined as Senior Vice President of Business Development, leading our expansion into indirect channels, including VARs, MSPs, and strategic partners. These additions reinforce our focus on operational discipline and scalable go-to-market execution, consistent with our goal of exiting the year on a strong run-rate basis. With that, I'll turn the call over to Steven.

Speaker 0

Thank you, Juho. Hi, everyone. Thank you for joining us. I'd like to cover three topics today. First, I'll take you through the Q2 2025 financial results. Second, I'll provide a brief update on the further strengthening of our capital structure around the convert pay down and our new working capital facility. Third, I'll share some color on the financial profile of the business and provide guidance for Q3 2025 as we head into the second half of the year. As we always do, we'll, of course, wrap up by opening the call to your questions. Let's start with the Q2 financial results. We delivered sequential growth in both revenue and adjusted EBITDA in Q2 2025, and that performance was paired with strong gross margins and disciplined spend to continue meaningful operating leverage and the favorable results.

On the top line, total revenue for Q2 was $40.2 million and was driven by better-than-expected FWA volumes, a large channel deal, and continued execution in our services offerings. For only the second time in the company's history, Q2 2025 marked a notable dynamic where FWA revenue surpassed mobile hotspot revenue. We see this as an indicator of the execution of our growth strategy and the ongoing shift in our product mix with the tangible data point around the successful ramp of our new Inseego Wavemaker FX4100 product that Juho talked about. As expected, mobile revenue came in lower year-over-year on the record promotional activity in 2024 and the timing of new program launches that are expected to occur later in 2025. Our strong services revenue remained consistent at $12 million for the quarter, providing stable, high-margin contribution to results.

Non-GAAP gross margin was a solid 41.2% in Q2, reflecting a favorable product mix and the strong FWA results. Looking at non-GAAP operating expenses, Q2 2025 was another quarter of disciplined execution. We managed the business to lower dollar spend year-over-year on both a P&L and cash spend basis. Pulling this all together, Q2 2025 adjusted EBITDA came in at $4.7 million, up 29% sequentially, and at an 11.7% margin, our second highest in a decade. Finishing the section with the balance sheet, we ended Q2 with $13.2 million in cash and healthy working capital and leverage metrics. This provides us flexibility as we execute our growth initiatives in the back half of the year and is a good segue into my second discussion topic: our meaningfully improved capital structure.

Our healthy cash position of $13 million at June 30 reflects the payoff of the $15 million remaining balance on the convertible notes that matured on May 1. Over the past year, we've materially reduced the company's total debt, and with this payoff, our total debt now stands at $41 million, or a very manageable two-times LTM adjusted EBITDA. To provide additional operational flexibility and liquidity, earlier this week, we set up a $15 million working capital facility with BMO Bank. The terms are attractive, and we don't currently need or plan to draw on the facility. Altogether, these actions further strengthen our balance sheet, provide additional flexibility to invest in product when and where needed to drive growth, and support the value to common stockholders. With that, let's finish with the third topic today: the financial profile that we're seeing in the business and guidance for Q3 2025.

As Juho talked through, 2025 is a foundational year as we invest in and scale new products and our software platforms and bring on new carrier and MSO relationships. We're starting to see the business evolve along the strategic lines that Juho has set out, and for Q3 and from those initiatives, we expect to see continued sequential revenue growth. In terms of revenue, FWA is showing nice momentum as we continue through Q3, supported by the ramp of our new FX4100 product. Mobile revenue is also expected to show sequential growth in Q3, with volumes picking up at our carrier customers. Our attractive services revenue should remain consistent at roughly $12 million. Non-GAAP gross margins are expected to remain fairly consistent on a percentage basis in Q3, and total operating expense is expected to increase on a dollar basis as we invest in sales and marketing to drive growth.

Importantly, we're also investing in the new products we talked about, and that is expected to drive increases in capitalized spend in the second half of 2025. On OpEx, we're driving more company-wide efficiencies and expect improvement in G&A on a percentage of revenue basis going forward. Pulling this all together, we're providing the following guidance for Q3 2025: total revenue in a range of $40 million to $43 million, and adjusted EBITDA in a range of $4 million to $5 million. With that, we appreciate your time and support and are glad to open the call for questions. Operator?

Speaker 3

Thank you. 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. Your first question today will come from Lance Vitanza with TD Cowen. Please go ahead.

Speaker 1

Hi, thanks, Scott. Can you hear me?

Speaker 0

Yeah, I'm on.

Speaker 1

Yeah, great. Congrats on the quarter. A couple of questions, if I could. The first is, could you talk a little bit more about this multimillion-dollar enterprise agreement with the industrial S&P 500 company? It would appear that that validates the channel partner model, but I'm just wondering how close or how far does this leave you with the end user, with the client? If you could just maybe talk about why you won there, you know, price versus quality versus service versus I'm Made in America versus the breadth of the portfolio, and you know, how quickly, slowly do you expect wins like this to sort of unfold going forward?

Speaker 4

Hey, Lance. Excellent question. Thanks for joining us. I'll take that. You're right. It's a multimillion-dollar FWA deal with an industrial S&P 500 company. The way we ended up discovering and closing the deal was through our Inseego Ignite channel partner program. We have broad channeling that we deploy in many places. The value proposition that we had was unique in that we partnered very strongly together with the partner to make sure that we had sufficient support and the technical validation. It really came down to both the hardware and the software. The partner was very keen in having manageability and visibility to the entire fleet.

Speaker 1

Hi, thanks. If I could just, on the guidance, I guess, how much of the Q3 revenue and how much Q3 revenue and EBITDA was, if any, associated with that business that you mentioned you pulled out of the forecast due to the congressional lockdown?

Speaker 0

Thank you for clarifying. Our guidance and our forecast has what we could have no assumptions of that deal coming back. We are not including any of it in our forecast or guidance.

Speaker 1

My question, though, I guess, was like, if that had been in, what would that have, presumably, the guidance would have been higher?

Speaker 0

Gotcha. Yes, the deal was north of $10 million. Whether the deal closed in Q3 or part Q4 or both, to the point for the back half of the year, there would have been $10 million plus more revenue on the product side of the business.

Speaker 1

Great. What are the puts and takes, if any, on the $40 to $43 million? Is any of that range related to potential macro factors, or does it all sort of assume a kind of benign macro environment and just hinges on what the particular customers' sell-through might be, or are there other factors you play in?

Speaker 4

Hey, Lance, maybe to use this as an opportunity to complete my answer to your first question. You were also inquiring on the role of channel for us and what to expect from that go-to-market motion. As I said, our immediate priority is to scale with big carriers, big MSOs, and then continue to invest in this VAR, S&P, or channel program. The part of Q3 variability, of course, is how much business and opportunity we will close each channel.

Speaker 0

To add on to a good point, Lance, to pick up the rest, the view for Q3 is really based on basic blocking and tackling in the business. There are no silver bullets or Herculean assumptions. We're seeing some modest volume growth with the mobile side. As you heard a lot about, we're seeing nice traction on the carrier side with the new FWA product. We have pretty good visibility into that for the current quarter, for sure. It's really based on what we're seeing at the carrier. We're not really getting out over our skis on anything on that front.

Speaker 1

Great, thanks. It's a welcome change from before the current leadership team took over. Thank you for that.

Speaker 0

Sure.

Speaker 3

Your next question today will come from Tory Svandberg with Stifel Nicolaus. Please go ahead.

Speaker 2

Yes, good afternoon. This is Jeremy Kwan for Tory. Let me add our congrats on the solid FWA results and the new product launch. Maybe a quick follow-up on the enterprise win. Can you provide any details on the mechanics of it? What type of revenue recognition goes into that? Is this kind of, how long the agreement might last? Is there anything we can track in terms of new potential customer wins in this enterprise segment?

Speaker 4

Thanks, Jeremy, for joining. A quick question. This specific deal that we mentioned as a part of the prepared remarks was specific to Q2. We're, of course, working on a pipeline for Q3 and beyond.

Speaker 2

Got it. Thank you. I guess, maybe looking at the cash flows, it looks like accounts receivable is up a lot. I understand it's probably from channel fill, like the new product launch. Can we expect some improvement on that cash flow front? As the ramp continues and you increase the collections, how should we think about cash flows in this respect?

Speaker 0

Yeah, sure. The short answer is our goal is consistently to drive cash, for sure. Obviously, as a profitable business, that affords us that ability. What we're also balancing is investing in product and building inventory to supply the demand that we're starting to see tick up little by little. We would rather invest and build a little bit more, particularly as we're launching a pretty robust product portfolio in the second half of the year, more so candidly than the company has ever done in probably five or ten years. We're pushing out a whole bunch of new products in the second half. It's going, as you said, into good investment.

The one thing that you called out properly is that on the balance sheet, there's a little bit of an uptick in AR, which is, for all the right reasons, there's really big uptake at the end of the quarter in our new FX product and FWA product. We're thrilled with that. Everything else was kind of business as usual.

Speaker 2

Great. That's very helpful. Maybe one final question on the new Inseego Wavemaker FX4100 launch. Are there any potential catalysts that we can look out for? Maybe promotions, and maybe even looking out 12 to 18 months, where do you see FWA in terms of proportional to mobile? Do you expect this 50/50 to continue or maybe FWA kind of more consistently exceeds mobile revenue over time? Thank you.

Speaker 4

Thanks, Jeremy. I'll take the first part. If you look at the Inseego Wavemaker FX4100, our unique formula really is, if I start from the solution side, performance, I would actually add technology leadership there. So, 5G Advanced, device performance, but then even maybe more importantly, ease of deployment, as well as enterprise-grade feature set. That makes a pretty unique combination if you just look at what the solution stands for and what it enables for our partners to do. The second key catalyst, to your point, less so on promotion, although we do have a great promotional framework, but I'm very pleased with the excellent go-to-market collaboration that we've had together with our partner, marketing, field sales, overall enablement.

If I compare this to the engagement and also solution maturity with the previous generation product, which was also very successful, this third-generation FWA definitely is driving for a much larger impact in the marketplace.

Speaker 0

Yeah, good question on the revenue mix. You know, if the strategy kind of comes into fruition, right, where the FWA market, we're beginning to win more and more share, consolidate that market on the mobile side. That's kind of a nice market that will continue with some modest growth quarter over quarter. We're pretty bullish, as you can hear and tell and see, and go sanity check in the market on the FWA trajectory. We see that continuing to be a positive dynamic as far as revenue mix and the presence of FWA in the model.

Speaker 4

If you look at the overall macro picture, what I would say is that FWA is only the start of the journey. The adaptation curve, we're nowhere near the peak. Maybe even more importantly, if you look at FWA for enterprise end market, that has not advanced as fast as the consumer side. We're, of course, participating in enterprise. I view the TAM growth as something that's highly appealing in addition to our ability to participate.

Speaker 2

Great. Thank you very much. One last question, I'm sorry. It sounds like your software and services feature set is really expanding and one of the key focal points. Is there maybe a path to maybe directly monetizing that to see potential expansion in the services line of your revenue?

Speaker 0

It's a good question. The short answer is yes. The software functionality, both MDM-like Inseego Connect, is really a growing investment and growing uptake from customers on the value prop with the product side of the business, as well as the subscribe, you know, BSS, TAM-like functionality that we provide to carriers and the investments we're making there on everything from, you know, subscriber management, order management, contract management, is something that we look to continue to grow and invest in and yield higher revenue as we move forward, for sure.

Speaker 4

To double-click on the device cloud or Inseego Connect with the MDM functionality, the immediate focus this year has been to enable a broader TAM for our product business by enabling partner integration through API library. I'm actually very pleased how fast the team has been able to act and move in doing that enablement. The feedback from our partners who are now right now working on the integration has been excellent. Once this work is complete, and also in parallel, we've released multiple new hero features. What you should expect to see us do is on the device cloud side, continue to develop more value-added features. Of course, with that, we would target a higher value capture as well.

Speaker 2

Perfect. Thank you very much.

Speaker 0

Right on. Thanks.

Speaker 3

This will conclude our question-and-answer session. I would like to turn the call back over to management for any closing remarks.

Speaker 4

Thank you for the thoughtful questions. To close, Q2 was an important strategic quarter for Inseego. We launched the Inseego Wavemaker FX4100 to strong demand, we renewed our key MiFi relationships, and we secured a major new Tier 1 carrier win across both mobile and FWA. These milestones are the data points that validate our strategy as we're building the foundation for sustainable growth and profitability. I want to acknowledge our exceptional engineering team along with the broader Inseego organization, whose dedication and teamwork continue to drive our success. Thank you for joining us today, and we look forward to updating you on our continued progress.

Speaker 3

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.