Inseego's (INSG) Q4 Loss Wider Than Estimates, Revenues Down

Inseego Corp. (NASDAQ:INSG) reported fourth-quarter 2019 non-GAAP loss of 10 cents per share, which missed the Zacks Consensus Estimate by 25%. The company reported adjusted earnings of 2 cents per share in the year-ago quarter.

Revenues of $52.3 million were almost in line with the consensus mark and declined 6.6% year over year in the fourth quarter.

The year-over-year decline in revenues was caused by a promotional change by Inseego’s largest client, Verizon (NYSE:VZ) , on its MiFi 8800 hotspot.

Inseego Corp. Price, Consensus and EPS Surprise

Segment Details

IoT & mobile solutions revenues (67.8% of total revenues) of $35.5 million declined 11.5% year over year. The downside was due to the aforementioned promotional change at Verizon.

However, robust adoption of Inseego’s 5G products and the company’s expanding international presence bode well for the segment over the long haul.

Enterprise SaaS solutions revenues (32.2% of total revenues) increased 5.7% year over year to $16.9 million, driven by robust adoption of the company’s Ctrack platform.

Notably, Ctrack fleet unit bookings increased approximately 36% year over year during the fourth quarter. Moreover, the DMS subscription management solution continues to exhibit solid performance, up 33% year over year.

Operating Details

Gross margin contracted 660 basis points (bps) year over year to 28.7% in the fourth quarter, due to higher sale of low margin 4G devices, expedited freight costs to deliver on late quarter demand and write-downs of excess inventory.

Sales and marketing expenses increased 34.2% to $8.1 million in the fourth quarter, while research and development expenses surged 59.9% to $8.5 million. Expenses increased due to various 5G growth initiatives pursued by the company across the board.

General and administrative expenses declined 6.9% to $6.2 million in the fourth quarter.

Total operating loss for the quarter was $8.7 million compared with a profit of $800K in the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2019, the company had cash and cash equivalents of approximately $12 million compared with $13.9 million as of Sep 30, 2019.

Net cash outflow from operating activities was $3 million as of Dec 31, 2019 compared with $4.9 million as of Sep 30, 2019.

Guidance

In 2020, the company expects performance in the first half of the year to be flat to the fourth quarter of 2019. However, Inseego expects growth in the second half of the year to be driven by 5G client wins.

Moreover, the recent work-from-home trend due to the coronavirus outbreak could lead to higher demand. As a result, the company did not provide any quarterly guidance.

Zacks Rank & Stocks to Consider

Currently, Inseego carries a Zacks Rank #3 (Hold).

Applied Materials, Inc. (NASDAQ:AMAT) , and Microsoft Corp. (NASDAQ:MSFT) are some better-ranked stocks in the same industry. The two stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Applied Materials and Microsoft is currently pegged at 9.9% and 13.2%, respectively.

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