Hello, and welcome to Inseego Corp’s Fourth Quarter and Full-Year 2018 Financial Results Conference Call. Please note that today’s event is being recorded. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity for analyst to ask questions. [Operator Instructions] On the call today are Dan Mondor, Chairman and CEO; Steve Smith, Executive Vice President and Chief Financial Officer; Ashish Sharma, Chief Marketing Officer and Executive Vice President of IoT & Mobile Solutions; and John Weldon, Senior Vice President of Enterprise SaaS Solutions. During this call, non-GAAP financial measures will be discussed. Reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the Investors section of the company’s website. An audio replay of this call will also be archived there. Please also be advised that today’s discussion will contain forward-looking statements. These forward-looking statements are not historical facts, but rather are based on the company’s current expectations and beliefs. For a discussion on factors that could cause actual results to differ materially from expectations, please refer to the risk factors described in our Form 10-K, 10-Q and other SEC filings, which are available on our website. Please also refer to the cautionary note regarding forward-looking statements in the section contained in today’s press release. I would now like to turn the call over to Dan Mondor, Chairman and CEO of Inseego. Please go ahead.

Thank you. Good afternoon, everyone. It’s great to be speaking with you again, and thanks for joining today’s call. I’ll start with the main headline. We ended 2018 with a very strong fourth quarter performance, including outstanding top and bottom line growth and expanded customer base in North America and worldwide. We believe that the combination of our market-leading gigabit 4G LTE and 5G NR innovation and positive industry dynamics will enable us to further extend our leadership position in 2019 and beyond. I’ll start with a few highlights of our recent progress. First, consolidated Q4 results came in at the top-end of guidance, with very strong revenue growth and record adjusted EBITDA. Q4 revenue grew 11% sequentially and 20% year-over-year. Adjusted EBITDA of $5.8 million easily met our stated objective of exiting the year with an annualized adjusted EBITDA in the $20 million to $25 million range. Adjusted EBITDA was the highest in nearly a decade and took us about 10% EBITDA margins and is a major step towards our objective of further balance sheet deleverage. Second, Inseego was addressing the global 5G market opportunity for mobile hotspots and fixed wireless access, so how is that? Our secret sauce is a universal platform architecture for 4G LTE and 5G millimeter wave and sub-6 gigahertz products. Together with our partners, Inseego has become an industry thought leader by showcasing new 5G use cases in numerous live demonstrations. For example, augmented reality for first responders, virtual reality telemedicine, AI robotics and live streaming of 4K video and others. Inseego has real working devices that show attendees can pick up and operate. They are not glass and case static products like some of our competitors. Our devices meet rigorous low latency and throughput requirements that make these successful public demonstrations illustrate the…

Thanks, Dan, and good afternoon, everyone. I’ll cover the GAAP and non-GAAP results for the year and the fourth quarter and provide some additional details on the performance of IoT & Mobile and Enterprise SaaS Solutions. As Dan highlighted, we’ve made tremendous strides over the past 12 months. We’ve won new businesses with new domestic and international service providers. We’ve distinguished ourselves as a key player in the 5G ecosystem. 5G and 4G LTE advanced products will be the top growth drivers for Inseego over the next several years. Before getting into the details of the quarter and the full-year, I’m going to touch on some key highlights. GAAP operating income for the year inclusive of the R.E.R. settlement was $14 million, a year-over-year swing of $36.2 million and the highest operating income in over a decade. Successive growth in adjusted EBITDA $2.8 million in Q4 2017, $3.3 million in Q1 2018, $3.8 million in Q2, $4.7 million in Q3 and $5.8 million in Q4, the last two quarters of which were sequential record quarters. 2018 full-year EBITDA was $17.6 million, as compared to $2.3 million for full-year 2017. Non-GAAP earnings per share in Q4 was $0.02, the highest achieved since 2011. On a full-year basis, non-GAAP loss per share improved from $0.29 to $0.04. All in all in 2018, we made tremendous progress towards Inseego 2.0. In 2019, our focus will be on growth, mainly in the second-half, planning 4 and 5G flags driving the Aviation Asset Tracking business, expanding into and within new geographies across all product lines and setting the stage for further bottom line growth and deleveraging the balance sheet. Now get into the meat of the quarter and the full-year results. As noted in the press release you received this afternoon, 2018 total year revenue…

Thanks, Steve. We can all agree that 2018 was a year of tremendous progress across all areas of the business. 2019 is the year we gain much more momentum as we enter the middle innings of Inseego’s transformation. With innovative new products, a much stronger sales force and operations capabilities, Inseego is now in the strongest position in the history of the company. The company is firing on all cylinders and continues to get stronger everyday. Most importantly, our customers and strategic partners are voting for Inseego with their wallets. I want to once again thank all of our employees for their tireless efforts. The strides we’re making is the direct result of their skill and dedication. We have phenomenal teamwork, a cultural – a culture of personal accountability and relentless execution. We’re succeeding, and I can tell you the energy levels in the company are sky high. It was famously said and I quote great moments are born out of great opportunity. Inseego has a great opportunity, and I believe one that comes along once in a lifetime. 5G has been rightfully called general purpose technology, which sounds kind of bland. What that means is, 5G is foundational to the fourth industrial revolution, as was the steam engine, electricity and computing in prior generations. It is now clear that this is the greatest opportunity for Inseego in our history and it’s unfolding right now. The Consumer Electronics Show was amazing and Mobile World Congress last week was even better. We met with 24 global operators last week, representing combined mobile subscriber base of over 1 billion subscribers. To put a 1 billion mobile subscribers into perspective, AT&T, Verizon, T-Mobile and Sprint combined have about 430 million subscribers. I’m confident that our pipeline measured by the aggregate number of mobile…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Great. Thanks for taking my questions. Congratulations on reaching your adjusted EBITDA targets exiting 2018.

Thanks, Mike.

Dan, I just wanted to start with how you ended the call, just can you help us think about the pipeline with the carriers you’re meeting with? What’s the feedback of your position relative to the competition? And how do you see kind of 5G developing and what that means for Inseego revenue as 2019 plays out with the second-half versus the first-half? Thank you.

Yes. So thanks, Mike. Well, I think, first and foremost, the meetings and the number of meetings that came about themselves were from the ability to demonstrate actual live working products. It may sound rather obvious, but it is such that our competitors are there with products and their glass stages. So it is the – it is that. It is some of our current customers being excellent reference accounts speaking with these. It is also a function of our expanding our international sales force and pure outreach into EMEA and Asia-Pac So those are new geographies with new customers. So I think it’s a combination of things. But I think, first and foremost, once we spend time with these customers and go through our product portfolios and sell them where we are, where we’re going, they come away extremely impressed. And literally, from that point on, there’s follow-ups and engagement, such as MOUs, et cetera, et cetera, to begin testing and trials in early stage of deployment.

Okay. And just building on that, just how we think about the model. How should we think, Steve, just about your OpEx levels exiting the year maybe from where you enter – where you’re entering the year, given the investments going on? And how should gross margins trend maybe in your business as new hardware ships on the better platform at Foxconn?

Great question, Mike. So I expect that we’ll see some increase, especially in the second-half, as we start shipping more of the higher-end like 5G products and so on, we’ll see an uptick in the gross margin. As far as OpEx, we’ll eventually see it asymptote. We haven’t provided much guidance in terms of exact OpEx numbers. But as I stated, we are keeping in line with the stated goal of the $10 million in fourth quarter or leaving the year at a $40 million annualized run rate. So you can form your opinion from that.

Okay, that’s helpful. And then last question for me, and I’ll pass the line. Just any color on – can you tell us what component was short timing of how it’s ramping now? And is there an impact also to Q2 for the short component, or Q2 should be a nice step up from Q1 consistent more, I guess, with consensus numbers back maybe in the $55 million range? Thank you.

Yes, Mike, it’s Dan here, and I’ll make the comment and ask Steve to chime in. But it’s interesting how you can run into situations and what would consider to be very relatively minor tech – low-tech components that you can get a worldwide shortage. And in that instance, it was the situation and literally was an LED driver part that is less than a dollar. So there’s the irony of it. But nonetheless, so what can you do about it. Well, you can dual source with your design, and so that’s what we’ve done and rectify that particular issue. I will say, it happens in this tech market. It does. Of course, you can never see it coming. But that is exactly what happens. So it’s what you do to mitigate it and get around it. And in that instance then, what happened in January regards slow out of the gate and being able to supply to demand on our new gigabit hotspot, as well as the same component was a common component used in some of our new product launches, so they moved from Q1 to Q2. So, it’s definitely a bump on the road, one that we’ve overcome. And now we’re moving forth and our design, in fact, is now dual source. So should we run into again with one? We’ve got another supplier in place.

Yes, Mike, as Dan said, there was a – it was a very inexpensive part and they kind of sell off guard. What happened is the vendor had a problem at their fab and they basically lost the recipe on it. So it impacted more than just us, and we obviously had to spend extra money to buy parts on the open market to fulfill demand. But since that time, we – as Dan said, we brought on the second source and we’re scouring all our bombs [ph] to make sure we don’t get caught with other single sourced products anymore. And as a matter of fact, Doug coming online is pushing that mantra forward as well.

Okay. Thanks for taking my questions and best wishes for planting more flags in 2019.

Thank you, Mike.

Thank you, Mike.

The next question comes from Scott Searle with ROTH Capital. Please go ahead.

Hey, guys, thanks for taking my question, and I appreciate all the color and the detail in terms of the outlook. Maybe just to follow-up on that point and some of Mike’s questions. I’m not sure I heard a quantification of the component impact in terms of dollar sales in the first quarter, kind of curious on that front. And then the gross margin impact near-term and before it sounds like we start to see that ramp or that continued trajectory right on the gross margin front on the product side over the course of this year with new products, especially on the 5G front? And then I had a couple follow-ups.

So on the component issue, Mike – Scott, sorry, the -- suffice it to say, we would have been in a position to meet or beat first quarter consensus easily if we hadn’t had this problem. I’m not going to give you exact quantification of it, but that’s pretty much where we would have been. We’ve given you the guidance $45 million to $50 million. As far as the size of it, you can run your own math on that. As far as the second question, can you repeat that?

Gross margin impact related to that and how we should think about the first-half before some of the new products start to kick in and give you a better blended mix?

Yes. So probably, there will be a little bit of a compression in the gross margin in Q1, obviously, because we had the shortages and had gone on the open market to find the parts and paying more than we would have otherwise.

I think there’s other aspects, if you want to use the term work around and expedited shipments in alternate ways to distribute the product, because we were compressed in the first part of the quarter and needed to make up with volume after we got this resolved later in the quarter. So I think, there’s a couple of factors in there that led to – that will lead to margin compression in Q1.

Okay, great. Thanks. And Dan, maybe to follow-up on the excitement level related to design activity engagement with new carriers, because it’s – it sounds like it’s multiple fronts. It’s gigabit LTE. It’s 5G on both mobile hotspot and fixed products. I think you threw out a number of over 20 carriers that are currently looking or in an evaluation stage. Can you give us an idea how many you’ve won maybe at this point in time, or once we get into the second-half of this year, what are your current expectations in terms of the number of carriers that are going to ramp? I would assume most of that is probably hotspot focus. But as fixed wireless really starting to come in and contribute later this year, can you give us a little bit more color on that front? Thanks.

Yes, I think – yes, thanks, Scott. So, going back previously, we, of course, talked about the Verizon home gateway product, the R1000. We previously announced Verizon 5G hotspot selection. Last quarter, we announced Telstra, and we discussed Optus on the call today. So that’s – you can think about that as in terms of where we are under our belt, so to speak. Going forward, it’s very interesting. There is interest across the board, it depends on the service provider. But there are – there is interest in the 5G hotspot. There’s interested by some in leading with the 5G home gateway and there is interest in doing both from the get-go. So it’s a mix, but it’s well distributed, it’s very good balance. The other thing I would say in our engagements, there is a ton of interest in the gateway product, quite frankly, to serve SMB markets. It’s a very economical broadband access for SMB and up the stack with enterprise. So – and so much as we describe it in the home gateway context, it has purposes we are seeing in other parts of the the end customer market. So, it’s really exciting. It’s a very broad front and there’s a great distribution between engaging on our 5G hotspot and the home gateway. And as you go around different markets, there are millimeter wave markets and there are sub-6 gigahertz markets depending on the carrier bands. So we took the choice – we took the – made the decision to build both of those in, so we could be flexible in addressing the opportunities since you couldn’t fully predict what was going to unfold over the past 12 months. So I think we’re in a great position. The outcome of Mobile World Congress was way beyond anyone’s expectation. We were super busy. And I think, having live product on the Ericsson booth, on the Verizon booth and these other demos with robotics and augmented reality did really create a whirlwind of interest and customers coming through the door. I would say, additionally, as we’re having those discussions, we have everything on display. We have our industrial gateways. We have our trackers. We have other products there. So it’s actually the entry point then is leading to broader conversations on our product line, which, of course, is great.

Okay, thanks so much. Great color. Just lastly, and I’ll get back the queue. Industrial IoT and the industrial gateway, I think, that was one of the stores in general at Mobile World Congress and you guys have been talking more about it. It sounds like there’s a lot of engagement on that level with some of the new products. I’m just kind of curious when you expect to see first meaningful revenue from that, right? You just really launched the product kind of big debut, I think, and push it at the show. Kind of what are the broad-based thoughts in terms of how that contributes in 2019? Thanks, and nice quarter.

Yes, thanks very much. Scott. So yes, on the industrial gateway, it was one of those aforementioned product that this particular component impacted us. So what was to have been a kind of in Q1 launch for those, it’s now kind of early Q2. So I think that answers the question relative to start of revenue. And it’s a ramp thereafter from our direct sales efforts, as well as our channel distribution efforts. So at any rate, that’s when we expect to see – that’s when the beginning will happen and then we’ll ramp from there. But I think as…

Great. Thank so much.

Yes, Steve generally positioned, the story is one of the second-half will look quite a bit different than the first-half. I think, we’ve kind of underline that point fairly well, and there’s a number of contributing factors we discussed 5G IoT, Aviation, et cetera. So that’s the target we’re going after and that’s where we headed down – heads down executing.

Okay, thanks.

The next question comes from Mike Latimore with Northland Capital Markets. Please go ahead.

Hi, Mike.

Yes. Congratulations on the quarter. That looks great.

Thanks, Mike.

Thanks, Mike.

In terms of the kind of growth drivers in the second-half of the year, should we still think about sort of 4G LTE being the majority of the revenue with kind of 5G building. Just trying to get a sense of a mix of, kind of 4G LTE versus 5G kind of exiting the year?

Yes. Thanks, Mike. So, 5G is still in the early innings, we’re beginning deployments now. They will build up through the year, as we would -- as we’ve stated and everyone, I think, would expect. Early days, the mix is tilted toward 4G LTE is the dominant, if you will, technology format. We’re very happy that we’ve come out with a kind of a world beater gigabit LTE 4G products. So it’s not running the mill and there is a ton of interest. And we mentioned the six Tier 1 operators that we’ve expanded into. It’s really a function of – with design wins, it’s really a function of the capabilities of that 4G product. So that will occur through the year. In fact, as a matter of fact, what we will see because of the broadening of our customer base with 4G, plus 5G kicking in, it’s a combinational effect. It’s not a substitution or swap effect. So again, we’re pointing to a much more promising looking second-half of the year, because all of these things are coming together in combination.

Yes. That makes sense. Is the thought that your Enterprise SaaS business will kind of be growing in the second-half of the year – year-over-year?

Yes, yes. We’ve – we – if you look back taking cost out and you see the year-over-year EBITDA improvements there, it was a function of that. And so, that was sort of Phase 1. Phase 2 is, we’ve talked about some of the restructuring of South Africa and Australia. I will say this putting those aside for a second, Europe is performing very well. We’re overhauling, if you will, sales leadership in South Africa, that’s been put in place. And new leadership is just in the – then in pointed in Australia, that’s been put in place. So again, put those in combination, there’s nothing fundamentally wrong with the business. I would say, we have the FX impact and we have some execution issues in a couple of the geographies that we’ve taken corrective action on. So that’s a really long way to answer. It will build up for the year. We expect a much better looking second-half than first-half.

Got it. And then just last on product development. Do the network – in the past, you’ve talked about sort of network certifications for your products and the costs associated therewith, does that go through product development or is some of that capitalized?

I’m going to let Steve fill that question. Product certifications as far as the accounting of expense versus capitalization.

How that will be expensed and it will be running about $1 million a piece.

Per carrier, sir. The good news is, we’re not having to redo the products. It’s literally certification, because the bands are on the universal platform.

Got it. And that goes – that would go through the product development line?

Yes.

Okay, great. Thank you.

Thank you, Mike.

This concludes our question-and-answer session. I would like to turn the conference back over to Dan Mondor, Chairman and CEO, for any closing remarks.

Thank you, operator. So thank you all for joining us today. I greatly appreciate your attention and questions. And before we wrap up the call, I just want to let you know a couple of things. We’ll be at the 31st Annual ROTH Conference in a couple of weeks, and at the Cowen 47th Annual Media & Telecom Conference in May. Also, you’ll see us at the Big 5G Conference in Denver in May, followed by the 5G World Conference in London in June. I look forward to seeing many of you at these events and continuing the conversation on Inseego’s transformation. Thanks, again.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.