Hello and welcome to Inseego Corp.'s Fourth Quarter and Full Year 2020 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 analysts to ask questions. [Operator Instructions] On the call today are; Dan Mondor, Chairman and CEO; Craig Foster, Chief Financial Officer; and Ashish Sharma, President of IoT and Mobile Solutions. During this call, non-GAAP financial measures will be discussed. A reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the Investors section of the company's website. An audio replay of this call will be also 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 in the company's current expectations and beliefs. For a discussion on factors that cause actual results to differ materially from expectations, please refer to the Risk Factors described in our Form 10-K, 10-Q and other SEC filings which are available on our website. Please also refer to the cautionary note regarding forward-looking statements section contained in today's press release. I would now like to turn the call over to Dan Mondor, Chairman and CEO. Please go ahead.

Hello, everyone. It is great to be with you today. 2020 was a phenomenal year for Inseego in every respect, as we extended our lead in the 5G market. We launched groundbreaking 5G products with mobile operators in four continents, shipped our first fixed wireless access products, unveiled a suite of powerful Software-as-a-Service cloud solutions and posted record revenues. The launch of our second-generation 5G products and surge in demand for our 4G products played a major role in our outstanding 2020 financial results. Our 5G strategy came to fruition and we recorded significant wins and successful 5G customer launches in North America, EMEA and Asia Pacific, with approximately 12% of our total revenue coming from these products. The most significant win was the groundbreaking deal with T-Mobile, who selected Inseego for their very first and only 5G mobile broadband hotspot and our Inseego Manage cloud portfolio. The un-carrier now has Inseego 5G technology and device management capability to offer to their 100 million-plus consumer and enterprise customers. 2020 was the culmination of the Inseego team accomplishing what we said over three years ago, when we announced the Inseego 2.0. We brought numerous new products to market, added major new customers and established business in new high growth geographies. I cannot tell you how proud I am of our amazing employees. As we sit here today, the four largest mobile operators in the US have all adopted in Inseego products into their lineups. Now every American can experience the fastest, most reliable and secure 4G and 5G mobile technology on the planet. We successfully navigated the numerous challenges of the COVID pandemic, including lockdowns globally. Our team did an outstanding job to fulfill the explosive demand that fueled our impressive revenue and profit growth in 2020. We made tremendous progress…

Thank you, Dan. I'm very pleased with our 5G progress across all geographies, and I'd like to highlight several key areas of strategic focus that will drive our growth this year and into the future. First, our service provider business grew significantly in 2020. The growth was driven by the new 5G launches with several carriers and by the work from home demand for our 4G products. In 2020, we developed and launched our second-generation 5G solutions with customers in North America, Middle East, Japan and Europe, resulting in over 250% year-over-year growth. In Q4, we executed several 5G mobile broadband launches with Verizon, T-Mobile, US Cellular, Sumitomo, Ciscom and Vodafone Qatar. We are proud to have the opportunity to work with these early adopters. In this category, our launch with T-Mobile was pretty significant, given we're the only 5G hotspot in their portfolio, and we also launched our Inseego Manage cloud solution with them. 5G is a generational opportunity and we are at the top of the first inning of the technology cycle. Let me provide some data on that. In January 2020, there were 61 live 5G networks and there over 140 as of January '21. Inseego 5G products now support all network strategies and frequency bands in the low, medium and high band spectrum. Today 5G finally solves a host of last mile access problems with speeds as good and sometimes better than fiber optics and coax cable. 5G can provide high speed connectivity to millions who are outside current broadband network footprints and can do all this at cost lower than traditional wired networks. Over the last two, three years, we've set the company up nicely for long-term success by taking a lead in the development of multiple generations of 5G technology. And we plan to…

Good afternoon, everyone. And thank you for taking the time to join the call today. While preparing for the earnings call, we are provided with an opportunity to reflect on the evolution that Inseego is currently undergoing. It was only a few years ago that we were basically a one product, one customer company. What we lacked as a firm was not initiative or drive, but a comprehensive strategy on how we're going to develop this growing market. From my point of view, our current strategy boils down to four major initiatives, all of which are well underway. First is our geographic expansion and revenue concentration. As noted earlier by Dan, we announced the number of new wins with leading international and domestic carriers. These initial returns come after investing in long sales cycles and will help us diversify our revenue into fast growth markets. Second, is our focus on building industry-leading products. Despite the early nature of the 5G market, Inseego continues to be on the forefront of product development. We recently added a significant number of products to our portfolio, including a suite of fixed wireless access points. We will continue to push the boundaries to better serve our customers' needs. Third is our focus on software platforms. We believe that a great deal of our future success will be driven by our ability to differentiate ourselves within our software platform, Inseego Manage, which was announced during the quarter. We realized a while ago that it was critical to build a cloud-based management and security platform that allowed IT teams to manage our products in a ubiquitous computing environment. Which leads me to our fourth and final point, penetration of the enterprise. With the growth of 5G comes new connectivity needs that require advanced solutions. And we believe…

Thank you, Craig. COVID turned the world upside down in 2020, which both tested and demonstrated our resilience during these extraordinary times. Despite the numerous challenges, we're on an incredible pace of bringing new 5G products to market and winning new customers. I want to express a sincere thank you to every Inseego employee who did an amazing job in 2020 despite unprecedented circumstances. The carrier and enterprise 5G addressable market combined is over $50 billion. With best-in-class performance, security and reliability of our products, we are confident in our goal to become the global 5G technology partner of choice for carriers and enterprise. 2020 was a monumental year, and we expect 2021 to be even more exciting for the company and investors.

Thank you, Mr. Mondor. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Scott Searles with ROTH Capital. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. Hey, just a quick clarification, Craig. I want to make sure I understood the 12% 5G number, was that for the fourth quarter? Or was that for the year? And also to clarify on the R&D front? Is there a - do you have some more granularity as it relates to certification costs, which tend to be lumpier versus anything that's started to flow through related to software capitalization?

Sure, so let me start with the first question you had, which was sorry.

Scott you said 12%. 12% was the year - for the year?

Yeah.

Okay.

Yes, that was for the year, sorry. And then regarding the capitalization of software and stuff, so we've - for Q4, we've definitely seen a peak of our costs as it relates to the capitalization and amortization relating to software development costs, internal and external. And I think that you're going to see that took down substantially going forward, more normalizing towards where we were in Q3 of this year.

Got you, helpful. And just digging in on the Ctrack finally, I want to clarify. So the intention at this point is to retain the remaining Ctrack businesses that are not South African based, and ultimately kind of fold that into the enterprise business that you're developing. Is that correct?

Yeah, yeah. Scott, it's the - it's sort of the rest of world assets that we're keeping, are, UK, Western Europe, Australia, New Zealand, which importantly line up with our target markets in 5G, and our expectation of our enterprise strategy will align there as well. So, those are strong markets, have great growth trajectories and we think it's a good alignment. You know, as we look across our total you know cloud subscription business, they align very well with our 5G strategy and with our cloud strategy.

Got you. And lastly, if I could, you mentioned some initial orders coming from some of the new customers that were announced during the fourth quarter, I was wondering if you could put some more color around the magnitude, the size of that. And so far, you know, we're two months into the first quarter, you know, what are you seeing so far from a linearity perspective? Any color you could give us on kind of the sequential growth of the course here would be helpful. Thank you.

Sure, yeah. Well, you know, it's a continued ramp through the year, every quarter last year was higher than the previous. And we expect that to start that pattern. I'm asked all the time, when are you going to start to see another customer that has a higher business potential or profile than Verizon? And I'm pleased to report it's early in the year, six weeks, eight weeks in data and sell through, but our 5G hotspot device is the sell through data from T-Mobile is roughly 50%, actually 54% per week higher than Verizon. So we're seeing very strong demand there and that's a very important customer. So, you know, we expect to see steady run rates with - through the operator channel that has to settle down. We're onboarding new operators that - that's additive. So, you know, we see an uptick to the right profile this year. And quite frankly, we should see in the second half, 5G revenue crossing over with 4G, in other words, higher. So very, very strong uptick, very strong demand, great reception and the enterprise activities just getting going.

Great. Thank you.

Thank you.

Our next question will come from John Marchetti with Stifel. Please go ahead.

Thanks very much. Dan or Craig, I was wondering if you talk a little bit more about your expectations for the enterprise contribution here in '21. You know, where are we, you know, Dan you mentioned some work that still needs to be done on the go-to-market side and some things along those lines, just how do we think of that as a contributor for '21?

Pardon me, speaker, your line might be muted.

Sorry. I wanted to say that our principal focus on 5G until roughly the middle of last year has been on carriers, that's where we were pursuing this putting our energy investment. Naturally, we saw the enterprise market in fact the 5G enterprise market is about 3 times larger than carrier. So the way my words, enterprise is a front row seat now in Inseego's strategy. We are launching a number of new 5G products this half and we are adding muscle to our channel, if you will, in high touch sales, but importantly, channel partners, system integrators, that sort of thing, is what we're now in the process of recruiting master sales agents, et cetera. So we're bulking up, muscling up on our 5G portfolio. At the same time, we're investing and adding resources to recruit and onboard channel partners for the enterprise market. So that's the power of and there that we expect a nice uptick in the enterprise business. And that's certainly a fundamental part of our strategy now.

Got it. And then on the software side of the business, you know, I guess how should we think about that growing through this year and into next? Do we expect to see more of these sort of joint sales similar to what we saw with T-Mobile, where that becomes a bigger piece of the initial agreement with the service provider? Is there a specific software module that comes out to support the enterprise group as well, just curious to think about that enterprise contri - excuse me, the software contribution as we go through '21 as well?

Yeah, well we're very bullish on our cloud subscription business. You know, from a growth perspective, coming off of last year, Inseego Manage, the subscribed component of that software stack was triple-digits. And as we look at the growth profile of the Ctrack's assets in UK, Western Europe, Australia, New Zealand, that is strong double-digits. So we see overall, our subscription business growth in strong double-digits this year putting those two together. As far as the attach, if you will, your question, you know, T-Mobile is very strong Inseego subscribed customer, they - they've adopted Inseego Connect. And that's going gangbusters. We're starting to see adoption into other carriers. And we're starting to see adoption into enterprise customers. This is our pre-5G products, guys. So we see it as a very strong component of our growth strategy and our margin expansion strategy.

Got it. And then maybe I can just get one last one. And Craig, you mentioned some of the initial loads of 5G products that you saw with a number of new customers in the fourth quarter. Are those largely completed now for those customers? Should we be thinking about, you know, the 1Q quarter here is has more you know sort of sell through related? Or are we still getting a bit of that uplift as you're adding some of the new product into the channel?

Yeah, I think, thanks for the question. I think there was a lot of push by the carriers to get their stuff launched in Q4. So that meant we were shipping pretty sizable volumes to the new partners that we had. And now we're in the middle of getting kind of the run rate reports, which would translate into second orders over the quarter. So I think we're still in the wait and see mode in terms of how the inventory is going to move through based on those initial loads.

Yeah, thank you -

Yeah, I would add going back to the weekly sell through numbers that we're monitoring very closely. So that's what we're staying on top of.

Thank you.

Yeah.

Our next question will come from Mike Walkley with Canaccord Genuity. Please go ahead.

Great. Thanks for taking my question. Hope everybody's doing well on the call. I guess, yeah and congrats on all you guys accomplished in 2020. And you look forward to all these new 5G products then coming to customers. Just a question on modeling maybe for, Craig, just on the Ctrack South Africa business. Can you help us just with the run rate is of the business sold so we can maybe remove that from models as we think about that business for comps going forward?

Sure. As you think about Ctrack, roughly for what we were modeling for the 2021 is the Ctrack South Africa is roughly half of our business in the Ctrack line.

Okay, great. Thanks. And then just on Q1, I know it's an interesting quarter after you fill up channel for 5G, you're waiting for orders for sell through and then we had the surge demand. But anything we should think of for Q1, is there any of these well-known component shortages that might be impacting your business in the first half of the year? How do you guys feel about your ability to supply and any thoughts on just seasonal trends as we start off the year?

Yeah, I can say, my comments, it's Dan here. You know, thus far we have not seen an impact on the component shortage dynamic, if you will, done a lot of work and planning ahead and ordering frankly, these long lead time components. The market is tight. There's lot of constraints, everyone knows that. But thus far, we're not seeing any impact, at least in the near-term. Having said that, we are working very hard on that exact thing.

And I'll just add one piece of information is that, while we believe that we have raw materials and inventory covered, what we are seeing from our key suppliers is, longer lead times. So something that might have been three quarters now moving out to four quarters. So really the onus on us is to make sure that we have a steady supply as we move into the second half of the year. And I mentioned in my comments that you should expect to see some increased inventory, I would think a bunch of that would be in raw materials to make sure that we secure the supply that we need.

Got you. That's helpful. Thanks. And maybe a question on the product roadmap. You know can you talk about just any early feedback on the private network business with customers. And the partnership was Celona that you guys put out a press release? Maybe a little color on that and do you have a kind of opportunity you see with them?

Yeah. Ashish, do you want to take that one?

Yeah, sure, Dan. Yeah, I mean look, early days, the private network market is, you know, just beginning and there's lot of activity, there's you know lot of new players coming in, we've mapped out the ecosystem. And we are working, you know, from infrastructure to end customers to system integrators, you know software partners, we're working with a whole slew of different technology ecosystem partners. It is a very exciting market, Mike, and we believe our solutions are very well suited for the market. And early days, but, you know, just phenomenal use cases, number of different use cases that are popping up here. So you know, we, you know, you're going to hear more from us as we move forward and make progress in this market.

Right. Last question for me to whoever wants to take and I'll pass the line. Just, you know, you're investing in a lot of new products, as you highlighted 5Gs in the early innings. Do you feel like you guys have, you know, the cash on hand, the balance sheet in place to support the growth objectives over the course of 2021?

Well, I'm going to give a short answer, Mike. Yes, we do. No, we feel very good about where we're at. I mean, we did a lot of work last year, a lot of work to strengthen the balance sheet as you know, early in the year, and then subsequently, and of course, now most recently, the sale of Ctrack South Africa. So we're in a good spot. We like where we are.

Right, look forward to following a progress this year and thanks for taking my questions.

Thanks, Mike.

Our next question will come from Jaeson Schmidt with Lake Street. Please go ahead.

Hey, guys, thanks for taking my questions. Just curious if you've seen anything out of the ordinary from a pricing standpoint, within the Ctrack business outside the South African operations?

Well, I think, yeah, hey, Jaeson. You know, one of the things with South Africa's challenging business environment, but it also had a fairly low on average, ARPU and the reason for that is legacy consumer market. Some of the insurance business, some of the government business, so that was - that frankly was a low ARPU type of market, and a challenging environment. So you know, long and short of some of the factors behind deciding to divest that asset. We're in a much better place in UK, Western Europe and Australia, New Zealand then that, plus, we've got a new product platform called Clarity. We're building a software stack of applications on top of that, so in fact, our profile is going up in aggregate, rather than down.

Okay, that's helpful. And then just curious, looking at the Ctrack business, how you think the North American market fits into the future plans?

Yeah, so great question. You know, looking at the overall remaining assets, rest of world, we're taking along look at the North American market that's a function of that. And are going to be looking at some strategic planning around our growth opportunities, in addition to, as I said, Western Europe, UK, Australia. So we're assessing it, there is opportunity there. We'll update as we move forward.

Okay, thanks a lot, guys.

Thank you.

Thank you.

Our next question will come from Lance Vitanza with Cowen. Please go ahead.

Thanks, guys. Thanks for taking the questions and congrats on the quarter. I wanted to ask you about the Inseego Manage cloud subscriptions over 3.5 million. Just the first question is, how many did you have? How many subscriptions did you have at the end of the third quarter and how many did you have a year ago? And then if we could talk a little bit about what impact these subscriptions are having on the company's revenue and margin profile? In other words, are we you know, are prices really frontloading in those subscriptions? Or is it the opposite? Are we kind of creating a headwind because maybe we're replacing point-in-time sales with a subscription tail, so to speak? But any color on that would be appreciated.

Yeah. Hey, Lance. Well, the first part of your question, we entered 2020 with 1 million subscriptions and we exited 2020 with 3.5 million. So there's your growth profile through the year. You know, T-Mo was a great customer. And they placed their confidence in us, and this is managing subscriptions for principally as enterprise and their government sector. And, you know, as Magenta and Yellow came together last year, it was really a boost in the demand for that capability with us. And as well, now, you know, they're having Inseego Connect. So, I mean, that was the principal driver, it was the demand from the markets for subscriptions to make - for devices. And that's what we provide as a service. So overall, triple-digit growth last year, you know, we're going to moderate our view this year, we think it's going to be very, very strong double-digit, but in the subscribed portion that is, but we still see very strong growth opportunity in 2021.

Thanks. And then and what kind of, can you talk at all about the impact that this growth is - has had and I guess is likely to have going forward on the margin profile? Thanks.

Well, yeah, highly accretive from a margin perspective, as you can probably imagine. It's a very important growth driver. And as I said before, you know, our strategy this year is to expand the carriers with more 5G slots, and our enterprise and for our cloud subscription business. So Inseego Manage under which this subscription module falls is really that and we are driving for very, very strong double-digit growth overall. As I said as well, Ctrack rest of world has that profile. So we feel very bullish on our subscription business this year in terms of revenue growth, and, of course, margin expansion.

Thanks, guys. Appreciate it.

Our next question will come from Mike Latimore with Northland Capital. Please go ahead.

Hi, this is Aditya on behalf of Mike Latimore. Could you guys tell me what percentage of the sales were international in the 4Q?

Sorry, that was international sales in fourth quarter?

Yes. Yeah.

That's not really something that we break out. But Craig lets you feel that one.

Just give me a second, I'm calculating because we are - why don't you ask the second question and I'll come back to it.

All right. My other question to you would be like, do you guys have a number on how many 10 percentage customers did you have in 4Q?

Craig, that was also over to you as you're calculating.

Yeah. So for the rest of the world - for rest of world revenue regarding your first question, you know, sub 10% for total revenue for the company, not including the Ctrack components. And sorry, your second question, I was focused on getting your answer for the first.

Second question was like how many 10 percentage customers did you have in 4Q?

It really falls. It's - we could disclose the breakout, but I believe we had two as our top - as our 10 percenters.

All right, all right, fine. That's it. I'll pass the line. Thank you.

Thank you.

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

Well, I just wanted to say to everyone, thanks again for joining today's call. We greatly appreciate it and stay safe and healthy, everyone. Thank you again.

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