Everyone for joining us. I'm Lance Vitanza, Senior Tech Analyst at TD Cowen. I'm delighted to have the Inseego team with us here. It's Juho Sarvikas and Stephen Gatoff. Juho, of course, is CEO; Stephen, the CFO; and the General Manager of Inseego Subscribe, which I want to get into at some point as well. Let's start, actually, maybe just with a little bit of Inseego 101 and talk a little bit about where the company's been, where it is today, and where you see it going in the future.
Excellent. Hey, thanks for having us, first of all. Very happy to be here, and thanks for taking the time with us. Inseego has a long history of industry firsts when it comes to wireless. The company has been pioneering breakthroughs in wireless communication for the past two decades, from connecting the first home pilot with a hand-cradle modem to inventing the MiFi hotspot category. We actually own the MiFi brand, which a lot of people associate with MiFi. Also, when it comes to some of the later technology advancements, like millimeter wave, we were able to commercialize that together with Verizon six months before any OEM. We had some recent announcements as well in Barcelona earlier in the year. I hope we get to that. It would be great to chat as well. Long history of technology innovation.
The company has a long history also dealing with the large carriers in the U.S. If you take Verizon as an example, the partnership spans over two decades. Really strong wireless expertise, amazing engineering team, some of the best modem and antenna engineers in the industry. If you look at where we're focusing today, we still hold MiFi, which is partially a consumer end market close and we're near and dear to our heart. The focus really is on software-defined, next-generation wireless networking solutions for enterprises. If you look at the key building blocks that we have, if you start with the hardware, we operate in MiFi and fixed wireless access. Whether you have a mobile or a fixed use case, we'll have the right hardware platform for you.
Our router OS, which gives you advanced networking functionality, rivaling the best in the industry. Of course, Inseego Connect with our SaaS solution on top. Using that technology platform that the company is known for, that maybe is a successful DNA that explains why the company is here. It has been here for over two decades and now building that to enterprise solutions.
Recently, there's been some changes. I mean, you haven't been at the company that long yourself, but maybe just sort of set the stage in terms of what brought about your joining the company and your background at Qualcomm and how you think you can apply that to.
Maybe you want to start with the great work that we've been doing before my arrival, and then I can go into more specifics.
Yeah, to both of your good points, there was a lot of change that has happened in the last 12 months to 15 months that really started with the board's desire to drive change and drive value in the fall of 2003. It really started with Phil Brace being brought onto the board. I joined about a week later. Phil brought on Steve Harmon, his Chief Revenue Officer from Sierra Wireless. There were a lot of changes that were made, a lot of exits. Exited the CFO, Head of Sales, Head of Operations, Head of Product Management, Head of Finance and Accounting, Head of Channel, and CEO.
The three of us essentially over the next year focused Harmon on a lot of the go-to-market and product fixing and laying foundation, and then myself on capital structure, capitalization, working capital, as well as the portfolio, selling off telematics, raising capital, restructuring the convert. That was the focus for a year to allow us to really be in a position in the fall of 2024, this past fall, to go recruit and engage with Juho and bring in a rock star CEO, which we were just not able to do, obviously, before that.
Like Stephen was saying, I joined at the beginning of the year. I was previously the president for Qualcomm North America for four years. Before that, I spent my career in different OEM companies. My end market always watched large carriers, enterprises, and consumer segments both. The way I was looking at the opportunity is that the team had done an amazing job in recapitalizing the company. I knew Inseego from the technology platform that they have because they were my customer when I was at Qualcomm. I just thought it was a great opportunity to go and create value by refocusing some of the broader market strategy that we had.
Got it. And then just to clarify, so it was 2023 when you came in season, is that right?
That's right.
Okay, great. So fall of 2023, the advanced team comes in, and then fall of 2024, you're in a position to go out, and then you came in early 2025.
Correct.
Okay, got it. All right. Maybe just to get the sort of obligatory questions on the macro environment out of the way, how are you? Maybe just to take a step back, when you think about Inseego historically, and this may be more of a question for you, Stephen, but when you think about how the company has been positioned vis-à-vis different economic cycles, how should we expect Inseego to hold up? Or how would you describe the resiliency or the sensitivity to economic swings from this point forward?
Yeah, we'll tag team it probably as usual. I mean, historically, the company had strength in MiFi, a mobile hotspot, that was both a blessing and a curse insofar as having a really strong relationship with one large carrier, but then also really dependent upon that on the product side of the business. Had a fairly Nascent software business that has been growing. The amount of recurring revenue that's in the model today is much more significant and meaningful than it was a few years ago, certainly pre-pandemic, for sure. That part of the business is much more stable and predictable.
You know, I think the resiliency comes in two ways. Today, if you look at the customer base, it's still fairly concentrated. Diversifying the customer base to other large customers, but also channel, that's one key part of the equation. The second part really is the investments that we've been making on creating this enterprise-grade solution stack for wireless broadband because the enterprise demand is by far more resilient. One of the key trends that I see in the market is that there is an increased focus on ROI for any given investment, which maybe you can take for granted in an environment like this. If you compare wireless to wired solutions, the deployment cost, ease of deployment, manageability is often in favor of a wireless solution.
If you just look at, take it up all the way up to a macro level, I read a study where the U.S. 5G enterprise market in 2023 was $1 billion. Sounds low to me, but that's what the study claims. In 2032, it will be $12 billion. If you look at the tailwinds in favor of that, which we can dive into, whether you look like the expectations from the U.S. spectrum policy, the CBRS that was already deployed out there, the advancements in 5G, enabling new performance tier, but also better network efficiency, I think there's a lot of really good reasons to be excited about wireless broadband in the enterprise segment.
Okay, so that's helpful context. That all aside, what are you hearing today when you're out talking to buyers and to customers and to channel partners? Are you seeing or sensing any change in patterns? Are people saying, "Hey, we love this, but let's wait six weeks or let's wait six months because we just don't know what the world's looking like by the end of the year?
I think there's a possibility that some of the more future decisions can be postponed as people are waiting for the volatility to settle down, like long-term investments and of that nature. If I look at the short term, with our key partners, we're actually going to make an announcement later this week on our next-generation FWA solution with one of our major customers. I'm actually very excited in terms of broadening the addressable market. We've graduated now from SMB also to enterprise. The partner is looking at accelerating their FWA deployments in the enterprise segment because that's also for if you're here to monetize that in terms of data and ARPU, it's a really rich segment to go after.
Great. I should have mentioned if we do, I would prefer this to be interactive. If anybody out in the audience has a question at any point, just raise your hand or shout and we'll get you in. In the meantime, tariffs. I'm not so much focused about the demand side, which I think you guys already sort of touched on effectively. From a manufacturing standpoint, maybe just give a sense for, I mean, I know it's an outsourced manufacturing model, but could you talk about where the manufacturing is taking place, who the players are, and what kind of exposure you see to potentially rising tariffs?
Yeah, it's very topical, obviously, for many reasons. One of them being that we just came back from our two-week trip meeting our key suppliers earlier last week. The answer to your question is that today we're Taiwan and Vietnam. A lot of our customers have TAA as a requirement, which Taiwan, right? We also created a lot of optionality. The way that we work is that we have our own design and engineering capability in San Diego. We do use joint development with select ODMs, but it's more on mechanics and other not-so-value-added stuff. It's more like a capacity play. We have versatility there in terms of who can we work with to help us scale on engineering side. More importantly, if you look at production, there's two elements. One is the pre-production or SMT, where we have multiple different options.
You have the final assembly, which defines your country of origin. Those are the two which are our primary hubs today. We have optionality to respond if there is some asymmetric shock on a nation or another when the final tariff policy emerges.
Right. When is that going to be?
Yeah, maybe you can tell me.
No, no. Okay, so then how would you contrast that to your principal competitors? Is there any difference, or is everybody more or less set up the same way? Is this going to put you at any kind of disadvantage or advantage relative to your peers?
One of the things that I take very seriously is you need to have tactical solutions here and there, but you really should build on partnerships. You should align yourself with the large-scale players in the industry who have the in-built flexibility. If you have a huge contract manufacturing partner with multiple sites, transferring your line becomes a lot more trivial. Just get the process from point A to point B. I cannot think of what else we could do to make ourselves future-proof when it comes to tariffs. I am not going to make statements about competition, but I feel like we have the optionality that we need to secure business continuity.
Okay.
The other piece of it that you've heard us talk about is that in the near term, we've invested in a lot of inventory ramp. You've seen that in cash flow in Q1, and we messaged in Q2 as well. In the short term, we see it as a non-issue for us. To Juho's good point, longer term, we're probably on par with others.
Maybe a key data point here, which is in favor of our business mix today. If you look at the large guys, namely the carriers in the ecosystem, they've made public statements that should tariffs happen, they will pass it to the end customer, whether it's consumer or enterprise. The discussions that I've had with our key partners, key customers on leadership level is that we're aligned with that view. Of course, what that could translate into is a weakness on the demand side if the prices go up. I don't expect that our, if you look at the unit profitability or any of that, given that we're not exposed to China as a country from a country of origin perspective.
Super helpful. Okay, so now let's get to the good stuff. We'll talk about your products. I know on your last earnings call, you talked about the new Qualcomm FWA Fixed Wireless platform. Could you maybe talk a little bit more in detail about what that means for the company, how that's rolling out, whether or not that is that something that actually shows up in the numbers in the back half, or is it more of a 2026?
I'll geek out a little bit, and then I'll get back to more like the relevant business impact of it. There is a 5G advances in releases, 3GPP defined releases. That's a new release, release 18, that has been ratified. The first modem that we'll ship will be a Qualcomm modem. We're getting the final engineering sample in later this year, and we'll be launching products first of 2026. Why it's super exciting is that it's three things. If you look at wireless broadband from a performance standpoint of view, downlink has typically not been an issue, but that gets a lot better. The uplink has been a constraint. Now you get multiple carrier aggregation on the uplink side, which will dramatically improve the performance.
In my simplistic view, you have a set of use cases, and you're having your typical innovator's dilemma happening where this wireless technology that came from mobile, came from IoT sensors, is now overtaking fixed connectivity. This is a very meaningful milestone in how wireless broadband can replace wired broadband. You can already today see the trend of going from failed back to the primary source of connectivity. Performance is one thing. Second, you'll be able to deploy 20%-30% more of FWA with the same network resource. Now your scale of deployment improves. The third one really is that advanced features like network slicing, where you have the first instances are kind of happening today. Once we roll out the new generation, you'll be able to create a virtual private network for an enterprise.
We'll have that integrated already by the end of this year in our both device and cloud software. You can imagine what kind of new monetization opportunities that represents for our customers.
It sounds like a really big deal. Again, is there a sense that these things move at a glacial pace, though, in terms of the deployment, or do you think that we get to more of a radical shift in the volumes that you might be able to shift?
The carrier business is like, I was telling, we were talking about this with Stephen earlier. We have two distinctly different businesses, but it's the same product, same platform strategy. It's the carrier, and it's our two-tier distribution. Let's call it channel. In carrier, we're right now in the middle of closing our portfolio expansion for late this year, early next year. The whole of 2026, those decisions will happen over the span of the next six months. It really is a light switch. If we're now entering a new customer, whether it's MiFi or FWA, it's a fairly predictable run rate business. The mission for us really is to use the technology leadership, the fact that we're unique in that we can offer a single solution that can cater for both consumer, but also enterprise-grade customers.
We have this dual go-to-market where we will work with the carrier sales teams, training, enabling, getting them to stock a core product, if you will, a baseline. We also have value-added resellers. If you're a sales guy at a T-Mobile, AT&T, or Verizon, if the thing that you have on the shelf is not what the end customer needs, they need an outdoor unit or something with more ports or whatever that might be, you can call your buddy who's a value-added reseller, Inseego certified, and they can come and help you close. If you look at all of that mix, it gives us confidence that we'll be able to drive fairly dramatic material expansion when it comes to just the large customers, whether it's the carriers or the MSOs.
It sounds like an inflection point could be at hand.
Yeah, so at least I expect that we'll have the ability to drive durable top-line growth in that timeframe.
Okay. And then maybe just to sort of shift to the strategic vectors that you've talked about, we could get into that in a little bit more detail. Execution and scaling Fixed Wireless Access versus MiFi. You've described your, and just a minute ago, I think you described the customer base as too concentrated. Could you elaborate on what the base looks like today versus what you'd like it to look like? I don't know if this is the right timeframe, but I'm just going to pick three years.
Yeah, so I'll start with MiFi. If you look at us today, it's publicly available information that we're with the two large guys. There is a third one. Obviously, we have opportunity to grow in MiFi, even though MiFi I would view as a captive, fairly stagnant market. Our volume share gives us opportunity to grow. That's some of the enablers that we've been doing on both product and supply chain side to enable that growth. It's going to be a mix of consumer and enterprise end markets. If you look at FWA, that's really twofold. How do we drive more co-sell motion with the large carriers and MSOs?
How do we create dedicated products for channel, which you'll see us deploy by the end of this year and create a scalable motion when it comes to go-to-market, activating the value-added resellers, the distribution to drive the FWA growth? At the highest level, that's the playbook that we have for MiFi and FWA expansion. Like I already noted, the FWA growth in the enterprise segment is going to be very material. It is a growing market. If you look at us from a share standpoint of view, there is plenty of room to also compete and win share. I expect that is going to be a great accelerator for the company. The second part I would like to dwell on a little bit more is this transformation. I look at us as an emerging solution company. Today, we have two SaaS solutions.
I'll let Stephen cover the second one, which is Inseego Subscribe. If you look at Inseego Connect, our device management solution that's attached to whether it's MiFi or FWA, it's a must-have requirement for even SMB, let alone an enterprise, to be able to consume wireless broadband. They need to have visibility, manageability. We've just recently rolled out APIs, so now partners can integrate our solution into their single pane of glass, which is very valuable not only for the large customers, but also for MSPs. We continue to invest. You'll see us roll out more and more differentiated features. There is also this notion of going from SMB to full large enterprise qualified when it comes to feature set, and then moving on from there to IoT and industrial.
When it comes to Subscribe, that's another area where we see opportunity to continue to drive growth.
I'm sorry, but before we get, could you just sort of differentiate for us Connect versus Subscribe? I think, go ahead.
Sure, yeah, yeah. As you said, think of Connect as a superset of MDM for Inseego products, extending all the way through the edge and then some as far as next generation.
Device management.
Device management, and then soon to be edge-based software and services related to that. Think of Subscribe as a wireless provider platform for all devices. For all subscribers and devices, whether it's a handset or a tablet or a SIM card or an IoT device. It spans the lifecycle of functionality from subscriber acquisition and activation all the way through billing, reporting, analytics, portal, user provisioning, carrier provider provisioning, as well as customer access. It is all of the attributes of almost an ERP system around subscriber management.
Okay. Subscribe seems to be an earlier stage, but how do you see that sort of progressing, both where you started, where you are today, and then how you think about that?
The company has been in the space for a decade plus, 12 years, and has really developed a nice competency around running this.
Platform.
Platform, yeah. It really is a very typical SaaS cloud-based delivery platform, super scalable, operates at scale, millions of users type of functionality and quality, if you will. There is a nice opportunity where we tend to be somewhat carrier-centric today that you can glean from the discussions, that there is much greater opportunity to grow and invest in that business, which we are doing around other carriers as well as other MSOs, other people in the space who have a profile of offering subscriber services, IoT services, devices, as well as other devices who offer mobile phones, who want more robust functionality.
Maybe talk about the uniqueness when it comes to public sector.
Yeah, that's a great point.
Management, because that's really like the uniqueness of the platform.
Yeah, that's a really great point. One of the special sauce things that we've developed over time that's really relevant to a mobile provider in the federal space is all these federal agencies and government entities have budgets, have GSA contracts. That's a limited number. As a provider, you want to be keenly aware of how much that cap is and where the customer is on their journey and how much they've spent. If the U.S. Navy shows up and wants 10,000 phones or 15,000 IoT devices, what's their current spend? What is that spend going to be? Does that put them over the cap? If they're over their GSA allotment, then the carrier loses millions of dollars. They want to be right.
We have a competency real-time ability to track that and provide that at the time of order so that the carrier provider has no exposure to funding loss.
That's really the unique aspect of Subscribe. That's why you fall in love with the platform. It's also great for your broader enterprise space.
It sounds like a very large TAM in the U.S. And what are you doing with this overseas? Is this also big in other markets as well at this stage, or is that to come?
If you look at our overall business today, North America by itself represents a huge single addressable market. That's very homogeneous. If you look at our investment priorities, we look at U.S., Canada as an area where we want to scale, whether it's Subscribe or our device business and associated cloud. Not to say that there wouldn't be international opportunities as well, but that's like step two or step three.
You have a lot of headroom.
A lot of headroom.
Exactly.
Exactly. Yeah, well said.
Okay, that's helpful. It sounds like the sales cycle, the lead time on these types of platforms would be very long, I would imagine. This is not something where you go in with a couple of meetings and you make the sale.
It could be incremental as well. It is not a full-blown all or nothing. There are aspects where there are providers who say, "Hey, we have a specific need." Maybe it is around government or federal. Maybe it is around some new product that they are rolling out. You do, it is almost like another software platform sale where you can get in with a specific need and they are like, "Oh, this is great." You are in and you talk to them about that use case and then there is an expansion, excuse me, a classic land and expand.
That's a good point. Are most of the customers in this segment, I assume, customers that you've been working with for years in other capacities, or?
Obviously, if you look at company DNA, where I come from, Stephen, by the way, has a very robust, extensive SaaS background. It's kind of natural that if we're talking with the business or enterprise units at these large customers, whether it's carriers or MSOs, they are also the same consumers for the Subscribe platform. That's a natural flow of like, "Hey, we have a great partnership here. We're doing so much on device, device cloud. Did you know that we can help you guys on public sector or whatever you might have to need when it comes to subscriber management?
It is also, sorry, it is also, I mean, the risk of sounding gratuitously flattering. It is also a new dynamic and muscle in the company where it is something new for us, but it is also something that you have brought in and opened doors and relationships where we just, a year ago, we were not having those conversations and now we are.
That actually brings me to one thing I wanted to get across. If you look at the uniqueness of Inseego, one of the elements is that people like myself, our engineering team, a lot of other leadership, very strong carrier OEM domain knowledge, competence, relationships. We have also done excellent hiring of top talent like Steve Harmon, our Chief Revenue Officer, comes from Sierra Wireless. Now you're in the channel enterprise router space. David Markland, our Chief Product Officer, used to be in the same domain as well. What I really want to accomplish is that we have a team and a business that can travel the whole spectrum from carrier all the way to channel and leverage the synergy not only in product and solution investment, but also when it comes to go-to-market.
Like I described, the value-added reseller might find the customer or the carrier might want the customer, but the other guy might close it for reasons of needing value-added services or other.
That's helpful color. Let's talk a little bit about the balance sheet. We just have another couple of minutes left. I know full well the restructure, I do not know what you want to call it, the transformation that you have implemented since you arrived, Stephen. Where are we today in terms of cash flow, in terms of what you would like to see with respect to your interest expense, preferred, etc.? What are the opportunities from here?
Yeah, I mean, to your good point, we feel infinitely more comfortable and confident in where we are today than when we got here and it was different. Meaning that we had $170 million of debt, $4 million of cash, and we were burning cash. The restructuring of the balance sheet of the convertible, as well as putting in place capital, working capital facilities so we have flexibility. We are generating cash over the course of the year. We still feel good about that. We talked about in the conversation a moment ago, we were investing in inventory in the first half of the year. There will be some working capital outflow in the beginning of the year. We expect cash generation in the back half of the year to offset that. The model is cash generation.
We feel good about where we are both in flows as well as aggregate position of kind of our orders of magnitude, kind of a $20 million cash bogey over the intermediate term.
Oh, and I think we have a question from the audience.
Sure. Historically, the company had just a few hardware SKUs that dominated the revenue.
Correct.
Could you talk about what the hardware is, what the hardware mix looks like and how you see it evolving over the next few quarters? How much is FWA? I cannot recall who your FWA carrier is, forgive me. Is it Verizon still?
Excellent question. If you look at today, and we said it publicly, 70% of our revenue comes from two customers. It is online available information with FWA, like the large customer that we have today is the Magenta in Northwest. If you look at MiFi, we have two of the large carriers. The cycle, both from a product development, but also from a commercial buying behavior standpoint of view, is typically 12 months. I'm very excited with some of the new proposals that we've made to these large partners, including the MSOs for the latter part of this year and first half of 2026.
Yeah, Jonathan, it's a good question. We've been fairly centric with one carrier historically, and you've seen that expand over the past year, and you're continuing to see that expand insofar as both sets of hardware.
How many MiFi SKUs are there today? Because I remember periods where it went between two and five and looking at some notes from 15 years ago.
We have one breadwinner for each of the large customers. Then we have also smaller when it comes to MiFi. It is also important to understand that there has been rationalization of the portfolio. Historically, you might have had five MiFi slots, and today you have three. We would be one of the three in that.
We're going to have to leave it there. We're out of time, but maybe you can follow up afterwards.
Yeah, sure.
Thank you so much, gentlemen, for being here with us.
Thank you, Lance. Appreciate it.
Pleasure.
Take care.