Inseego Faces Major Setback After Q3 Earnings Miss Expectations
Inseego INSG shares experienced a sharp decline of 40.36%, finishing at $10.83 on Wednesday following unsatisfactory third-quarter 2024 financial results.
Disappointing Earnings Report
During the reported quarter, INSG reported a loss of 7 cents per share, falling short of the Zacks Consensus Estimate that predicted earnings of 9 cents per share. This is a stark contrast to the loss of $1.95 reported in the same quarter last year.
Total revenues reached $54 million, marking a 30.6% increase compared to the previous year, but still missing the expected revenue of $56 million by 4.03%.
Year-to-date, Inseego’s stock has soared by 393.6%, significantly outpacing the Zacks Computer and Technology sector, which saw a rise of 30% over the same period.
Inseego Price, Consensus, and EPS Surprise
Inseego price-consensus-eps-surprise-chart | Inseego Quote
Revenue Growth in Q3
Inseego reported that total revenues from continuing operations rose 30.6% year over year to $54 million in the third quarter of 2024. This increase was largely driven by the success of mobile hotspot products and a rise in Software as a Service (SaaS) subscriptions from contract renewals.
Product revenues, which includes Mobile and Fixed Wireless Access solutions, climbed 25% year over year to $42 million. Additionally, services and other revenues grew by 56%, reaching $12 million, compared to $7.7 million in the previous year.
In a strategic move, INSG is planning to shut down its Telematics business, which is expected to generate $52 million in cash. This decision aims to boost the company’s liquidity and financial flexibility, with the deal anticipated to finalize in the fourth quarter of 2024.
With this added liquidity, Inseego is set to focus on expanding its 5G product pipeline, including the recent launch of the multi-carrier-certified 5G indoor router, FX3110, as part of the Inseego Ignite channel program.
Key Operating Metrics
Inseego’s gross profit for the third quarter of 2024 was reported at $18.8 million, improving from a gross loss of $2.2 million in the same period last year. Adjusted EBITDA for continuing operations stood at $6.7 million, reflecting a margin of 12.4%, also an improvement from the $2 million and 4.8% margin reported in the previous year.
Financial Position and Cash Flow
As of September 30, 2024, INSG held cash and cash equivalents totaling $12 million, down from $49 million as of June 30, 2024. Operating cash flow in the reported quarter was recorded at $12.1 million, decreasing from $28.8 million in the prior quarter.
The company has restructured 91% of its outstanding convertible notes, markedly reducing its debt and improving its capital structure.
Outlook for Q4
Inseego anticipates total revenues from continuing operations to range between $43 million and $47 million, which suggests a growth of 25% year-over-year at the mid-point. Adjusted EBITDA is projected to fall between $3 million and $4 million, indicating over 50% year-over-year growth at the mid-point.
Market Position and Alternatives
Inseego currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks within the Zacks Computer & Technology sector include Tuya TUYA, NVIDIA NVDA, and NetApp NTAP. Tuya has a Zacks Rank #1 (Strong Buy), while both Palo Alto and NVIDIA hold a Zacks Rank #2 (Buy).
Tuya’s shares have decreased by 35.7% year-to-date and is expected to report third-quarter 2024 results on November 18. Meanwhile, NVIDIA has seen a remarkable increase of 195.9% year-to-date, with third-quarter fiscal 2025 results due on November 20. NetApp shares have risen 35.8% year-to-date, with second-quarter fiscal 2025 results set for November 21.
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