FORM 10-Q |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
INSEEGO CORP. (Exact name of registrant as specified in its charter) |
Delaware | 81-3377646 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
9605 Scranton Road, Suite 300 San Diego, California | 92121 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | x |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
March 31, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 6,385 | $ | 9,894 | |||
Accounts receivable, net of allowance for doubtful accounts of $2,015 and $1,660, respectively | 30,633 | 22,203 | |||||
Inventories | 29,389 | 31,142 | |||||
Prepaid expenses and other | 9,028 | 5,208 | |||||
Total current assets | 75,435 | 68,447 | |||||
Property, plant and equipment, net of accumulated depreciation of $25,873 and $25,032, respectively | 8,300 | 8,392 | |||||
Rental assets, net of accumulated depreciation of $5,827 and $4,112, respectively | 6,569 | 7,003 | |||||
Intangible assets, net of accumulated amortization of $19,606 and $17,996, respectively | 40,055 | 40,283 | |||||
Goodwill | 35,039 | 34,428 | |||||
Other assets | 162 | 163 | |||||
Total assets | $ | 165,560 | $ | 158,716 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 44,953 | $ | 31,242 | |||
Accrued expenses and other current liabilities | 36,085 | 27,897 | |||||
DigiCore bank facilities | 3,251 | 3,238 | |||||
Total current liabilities | 84,289 | 62,377 | |||||
Long-term liabilities: | |||||||
Convertible senior notes, net | 89,656 | 90,908 | |||||
Revolving credit facility | 2,750 | — | |||||
Deferred tax liabilities, net | 4,549 | 4,439 | |||||
Other long-term liabilities | 10,548 | 18,719 | |||||
Total liabilities | 191,792 | 176,443 | |||||
Commitments and Contingencies | |||||||
Stockholders’ deficit: | |||||||
Preferred stock, par value $0.001; 2,000,000 shares authorized and none outstanding | — | — | |||||
Common stock, par value $0.001; 150,000,000 shares authorized, 55,955,138 and 54,372,080 shares issued and outstanding, respectively | 56 | 54 | |||||
Additional paid-in capital | 514,157 | 507,616 | |||||
Accumulated other comprehensive loss | (362 | ) | (1,409 | ) | |||
Accumulated deficit | (540,124 | ) | (524,024 | ) | |||
Total stockholders’ deficit attributable to Inseego Corp. | (26,273 | ) | (17,763 | ) | |||
Noncontrolling interests | 41 | 36 | |||||
Total stockholders’ deficit | (26,232 | ) | (17,727 | ) | |||
Total liabilities and stockholders’ deficit | $ | 165,560 | $ | 158,716 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net revenues: | |||||||
Hardware | $ | 41,426 | $ | 54,161 | |||
SaaS, software and services | 13,963 | 12,783 | |||||
Total net revenues | 55,389 | 66,944 | |||||
Cost of net revenues: | |||||||
Hardware | 33,492 | 40,869 | |||||
SaaS, software and services | 5,711 | 4,892 | |||||
Total cost of net revenues | 39,203 | 45,761 | |||||
Gross profit | 16,186 | 21,183 | |||||
Operating costs and expenses: | |||||||
Research and development | 6,289 | 8,025 | |||||
Sales and marketing | 7,157 | 7,753 | |||||
General and administrative | 12,037 | 10,199 | |||||
Amortization of purchased intangible assets | 904 | 928 | |||||
Restructuring charges, net of recoveries | 809 | 622 | |||||
Total operating costs and expenses | 27,196 | 27,527 | |||||
Operating loss | (11,010 | ) | (6,344 | ) | |||
Other income (expense): | |||||||
Interest expense, net | (4,156 | ) | (3,928 | ) | |||
Other expense, net | (643 | ) | (1,296 | ) | |||
Loss before income taxes | (15,809 | ) | (11,568 | ) | |||
Income tax provision | 305 | 331 | |||||
Net loss | (16,114 | ) | (11,899 | ) | |||
Less: Net loss (income) attributable to noncontrolling interests | 14 | (5 | ) | ||||
Net loss attributable to Inseego Corp. | $ | (16,100 | ) | $ | (11,904 | ) | |
Per share data: | |||||||
Net loss per share: | |||||||
Basic and diluted | $ | (0.28 | ) | $ | (0.22 | ) | |
Weighted-average shares used in computation of net loss per share: | |||||||
Basic and diluted | 57,480,210 | 53,250,668 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net loss | $ | (16,114 | ) | $ | (11,899 | ) | |
Foreign currency translation adjustment | 1,047 | 2,278 | |||||
Total comprehensive loss | $ | (15,067 | ) | $ | (9,621 | ) |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (16,114 | ) | $ | (11,899 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 4,079 | 3,598 | |||||
Amortization of acquisition-related inventory step-up | — | 1,829 | |||||
Provision for bad debts, net of recoveries | 101 | (111 | ) | ||||
Provision for excess and obsolete inventory | (29 | ) | 1,311 | ||||
Share-based compensation expense | 1,091 | 1,066 | |||||
Amortization of debt discount and debt issuance costs | 2,348 | 2,112 | |||||
Loss on disposal of assets, net of gain on divestiture and sale of other assets | 130 | 51 | |||||
Deferred income taxes | 21 | 88 | |||||
Unrealized foreign currency transaction loss, net | 37 | 1,171 | |||||
Other | 291 | 394 | |||||
Changes in assets and liabilities, net of effects from divestiture: | |||||||
Accounts receivable | (8,375 | ) | 378 | ||||
Inventories | 397 | 3,649 | |||||
Prepaid expenses and other assets | (3,820 | ) | (922 | ) | |||
Accounts payable | 14,319 | (10,063 | ) | ||||
Accrued expenses, income taxes, and other | 2,347 | 1,010 | |||||
Net cash used in operating activities | (3,177 | ) | (6,338 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (917 | ) | (448 | ) | |||
Proceeds from the sale of property, plant and equipment | 58 | 115 | |||||
Purchases of intangible assets and additions to capitalized software development costs | (855 | ) | (656 | ) | |||
Net cash used in investing activities | (1,714 | ) | (989 | ) | |||
Cash flows from financing activities: | |||||||
Net repayments of DigiCore bank facilities | (84 | ) | (156 | ) | |||
Net borrowings from revolving credit facility | 2,750 | 3,400 | |||||
Principal payments under capital lease obligations | (241 | ) | (273 | ) | |||
Principal payments on mortgage bond | (70 | ) | (54 | ) | |||
Taxes paid on vested restricted stock units, net of proceeds from stock option exercises | (785 | ) | (9 | ) | |||
Net cash provided by financing activities | 1,570 | 2,908 | |||||
Effect of exchange rates on cash and cash equivalents | (188 | ) | 110 | ||||
Net decrease in cash and cash equivalents | (3,509 | ) | (4,309 | ) | |||
Cash and cash equivalents, beginning of period | 9,894 | 12,570 | |||||
Cash and cash equivalents, end of period | $ | 6,385 | $ | 8,261 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the year for: | |||||||
Interest | $ | 149 | $ | 154 | |||
Income taxes | $ | 20 | $ | 18 | |||
Supplemental disclosures of non-cash activities: | |||||||
Transfer of inventories to rental assets | $ | 1,274 | $ | 819 | |||
Issuance of common stock under amended earn-out agreement | $ | 2,638 | $ | — | |||
Additional debt discount on convertible senior notes | $ | 3,600 | $ | — |
March 31, 2017 | December 31, 2016 | ||||||
Finished goods | $ | 21,750 | $ | 19,277 | |||
Raw materials and components | 7,639 | 11,865 | |||||
Total inventories | $ | 29,389 | $ | 31,142 |
March 31, 2017 | December 31, 2016 | ||||||
Royalties | $ | 3,342 | $ | 1,544 | |||
Payroll and related expenses | 5,571 | 5,315 | |||||
Warranty obligations | 480 | 480 | |||||
Market development funds and price protection | 34 | 320 | |||||
Professional fees | 3,894 | 4,793 | |||||
Accrued interest | 1,929 | 275 | |||||
Deferred revenue | 1,361 | 1,656 | |||||
Restructuring | 1,160 | 837 | |||||
Acquisition-related liabilities | 13,186 | 7,912 | |||||
Divestiture-related liabilities | — | 463 | |||||
Other | 5,128 | 4,302 | |||||
Total accrued expenses and other current liabilities | $ | 36,085 | $ | 27,897 |
Accrued warranty obligations at beginning of period | $ | 480 | |
Additions charged to operations | 98 | ||
Deductions from liability | (98 | ) | |
Accrued warranty obligations at end of period | $ | 480 |
Level 1: | Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. |
Level 2: | Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry and economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds. |
Level 3: | Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions. |
Balance as of March 31, 2017 | Level 1 | |||||||
Assets: | ||||||||
Cash equivalents | ||||||||
Money market funds | $ | 35 | $ | 35 | ||||
Total cash equivalents | $ | 35 | $ | 35 |
Balance as of December 31, 2016 | Level 1 | |||||||
Assets: | ||||||||
Cash equivalents | ||||||||
Money market funds | $ | 35 | $ | 35 | ||||
Total cash equivalents | $ | 35 | $ | 35 |
(i) | during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter equals or exceeds 130% of the conversion price on such trading day; |
(ii) | during the five consecutive business day period immediately after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1,000 principal amount of the Inseego Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of the Company’s common stock and the conversion rate on each such trading day; |
(iii) | upon the occurrence of certain corporate events specified in the Inseego Indenture; or |
(iv) | if the Company has called the Inseego Notes for redemption. |
March 31, 2017 | December 31, 2016 | ||||||
Liability component: | |||||||
Principal | $ | 120,000 | $ | 120,000 | |||
Less: unamortized debt discount and debt issuance costs | (30,344 | ) | (29,092 | ) | |||
Net carrying amount | $ | 89,656 | $ | 90,908 | |||
Equity component | $ | 41,905 | $ | 38,305 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Contractual interest expense | $ | 1,650 | $ | 1,650 | |||
Amortization of debt discount | 2,217 | 1,980 | |||||
Amortization of debt issuance costs | 131 | 132 | |||||
Total interest expense | $ | 3,998 | $ | 3,762 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Cost of revenues | $ | 54 | $ | 52 | |||
Research and development | 199 | 249 | |||||
Sales and marketing | 129 | 210 | |||||
General and administrative | 709 | 555 | |||||
Total | $ | 1,091 | $ | 1,066 |
Outstanding — December 31, 2015 | 6,084,836 | |
Granted | 1,051,550 | |
Exercised | (78,384 | ) |
Canceled | (701,799 | ) |
Outstanding — December 31, 2016 | 6,356,203 | |
Granted | 100,000 | |
Exercised | — | |
Canceled | (482,827 | ) |
Outstanding — March 31, 2017 | 5,973,376 | |
Exercisable — March 31, 2017 | 2,958,891 |
Non-vested — December 31, 2015 | 960,203 | |
Granted | 2,914,000 | |
Vested | (461,866 | ) |
Forfeited | (436,537 | ) |
Non-vested — December 31, 2016 | 2,975,800 | |
Granted | 22,500 | |
Vested | (886,803 | ) |
Forfeited | (36,805 | ) |
Non-vested — March 31, 2017 | 2,074,692 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net loss attributable to Inseego Corp. | $ | (16,100 | ) | $ | (11,904 | ) | |
Weighted-average common shares outstanding | 57,480,210 | 53,250,668 | |||||
Basic and diluted net loss per share | $ | (0.28 | ) | $ | (0.22 | ) |
Three Months Ended March 31, | |||||
2017 | 2016 | ||||
United States and Canada | 71.1 | % | 76.8 | % | |
South Africa | 17.7 | 13.6 | |||
Other | 11.2 | 9.6 | |||
100.0 | % | 100.0 | % |
Balance at December 31, 2016 | Costs Incurred (Recovered) | Payments | Balance at March 31, 2017 | Cumulative Costs Incurred to Date | ||||||||||||||||
2015 Initiatives | ||||||||||||||||||||
Employee Severance Costs | 455 | — | (142 | ) | 313 | 4,130 | ||||||||||||||
Facility Exit Related Costs | 588 | (35 | ) | — | 553 | 831 | ||||||||||||||
2017 Initiative | ||||||||||||||||||||
Employee Severance Costs | — | 844 | (378 | ) | 466 | 844 | ||||||||||||||
Total | $ | 1,043 | $ | 809 | $ | (520 | ) | $ | 1,332 | $ | 5,805 |
• | our ability to compete in the market for wireless broadband data access products, machine-to-machine (“M2M”) products, and telematics, vehicle tracking and fleet management products; |
• | our ability to develop and timely introduce new products successfully; |
• | our dependence on a small number of customers for a substantial portion of our revenues; |
• | our ability to integrate the operations of R.E.R. Enterprises, Inc. (“RER”) (and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC (which has been renamed Inseego North America, LLC) (“FW”)), DigiCore Holdings Limited (“DigiCore” or “Ctrack”), and any business, products, technologies or personnel that we may acquire in the future, including: (i) our ability to retain key personnel from the acquired company or business; and (ii) our ability to realize the anticipated benefits of the acquisition; |
• | our ability to successfully complete the proposed sale of our mobile broadband business, which includes our MiFi branded hotspot and USB modem product lines (the “MiFi Business”); |
• | our ability to continue as a going concern, including risks related to the repayment of borrowings under the Credit Agreement (as defined below) on our prior to the May 8, 2018 maturity date of the Credit Agreement; |
• | our ability to realize the benefits of recent divestiture and reorganization transactions; |
• | our ability to introduce and sell new products that comply with current and evolving industry standards and government regulations; |
• | our ability to develop and maintain strategic relationships to expand into new markets; |
• | our ability to properly manage the growth of our business to avoid significant strains on our management and operations and disruptions to our business; |
• | our reliance on third parties to manufacture our products; |
• | our ability to accurately forecast customer demand and order the manufacture and timely delivery of sufficient product quantities; |
• | our reliance on sole source suppliers for some products used in our solutions; |
• | the continuing impact of uncertain global economic conditions on the demand for our products; |
• | our ability to be cost competitive while meeting time-to-market requirements for our customers; |
• | our ability to meet the product performance needs of our customers in M2M markets; |
• | demand for fleet and vehicle management software-as-a-service (“SaaS”) telematics solutions; |
• | our dependence on wireless telecommunication operators delivering acceptable wireless services; |
• | the outcome of any pending or future litigation, including intellectual property litigation; |
• | infringement claims with respect to intellectual property contained in our products; |
• | our continued ability to license necessary third-party technology for the development and sale of our products; |
• | the introduction of new products that could contain errors or defects; |
• | doing business abroad, including foreign currency risks; |
• | our ability to make focused investments in research and development; and |
• | our ability to hire, retain and manage additional qualified personnel to maintain and expand our business. |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | economic environment and related market conditions; |
• | increased competition from other fleet and vehicle telematics solutions, as well as suppliers of emerging devices that contain wireless data access or device management features; |
• | rate of change to new products; |
• | product pricing; and |
• | changes in technologies. |
Three Months Ended March 31, | Change | ||||||||||||||
Product Category | 2017 | 2016 | $ | % | |||||||||||
Hardware | $ | 41,426 | $ | 54,161 | $ | (12,735 | ) | (23.5 | )% | ||||||
SaaS, software and services | 13,963 | 12,783 | 1,180 | 9.2 | % | ||||||||||
Total | $ | 55,389 | $ | 66,944 | $ | (11,555 | ) | (17.3 | )% |
Three Months Ended March 31, | Change | ||||||||||||||
Product Category | 2017 | 2016 | $ | % | |||||||||||
Hardware | $ | 33,492 | $ | 40,869 | $ | (7,377 | ) | (18.1 | )% | ||||||
SaaS, software and services | 5,711 | 4,892 | 819 | 16.7 | % | ||||||||||
Total | $ | 39,203 | $ | 45,761 | $ | (6,558 | ) | (14.3 | )% |
Inseego Notes | $ | 119,750 | |
Novatel Wireless Notes | 250 | ||
Total | $ | 120,000 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net cash used in operating activities | $ | (3,177 | ) | $ | (6,338 | ) | |
Net cash used in investing activities | (1,714 | ) | (989 | ) | |||
Net cash provided by financing activities | 1,570 | 2,908 | |||||
Effect of exchange rates on cash and cash equivalents | (188 | ) | 110 | ||||
Net decrease in cash and cash equivalents | (3,509 | ) | (4,309 | ) | |||
Cash and cash equivalents, beginning of period | 9,894 | 12,570 | |||||
Cash and cash equivalents, end of period | $ | 6,385 | $ | 8,261 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings. |
Item 1A. | Risk Factors. |
• | our ability to raise additional capital; |
• | our ability to capitalize on business opportunities and react to competitive pressures; |
• | our ability to attract and retain employees; |
• | our liquidity; |
• | how our business is viewed by investors, lenders, strategic partners or customers; and |
• | our enterprise value. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 3. | Defaults Upon Senior Securities. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Other Information. |
Item 6. | Exhibits. |
Exhibit No. | Description | |
2.1* | Agreement and Plan of Merger, dated March 27, 2015, by and among Novatel Wireless, Inc., Duck Acquisition, Inc., R.E.R. Enterprises, Inc., the stockholders of R.E.R. Enterprises, Inc. and Ethan Ralston, as the representative of the stockholders of R.E.R. Enterprises, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed April 1, 2015). | |
2.2 | Amendment No. 1 to Agreement and Plan of Merger, dated January 5, 2016, by and among Novatel Wireless, Inc., Duck Acquisition, Inc., R.E.R. Enterprises, Inc., certain stockholders of R.E.R. Enterprises, Inc. and Ethan Ralston, as the representative of the R.E.R. stockholders (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed January 11, 2016). | |
2.3* | Transaction Implementation Agreement, dated June 18, 2015, by and between Novatel Wireless, Inc. and DigiCore Holdings Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed June 24, 2015). | |
2.4* | Asset Purchase Agreement, dated April 11, 2016, by and among Novatel Wireless Inc. and Telit Technologies (Cyprus) Limited and Telit Wireless Solutions, Inc. (incorporated by reference to Exhibit 2.5 to the Company’s Quarterly Report on Form 10-Q, filed May 10, 2016). | |
2.5 | Final Resolution Letter Agreement, dated September 29, 2016, by and among Novatel Wireless Inc. and Telit Technologies (Cyprus) Limited and Telit Wireless Solutions, Inc. | |
2.6* | Stock Purchase Agreement, dated September 21, 2016, by and among Novatel Wireless, Inc., Inseego Corp. (formerly Vanilla Technologies, Inc.), T.C.L. Industries Holdings (H.K.) Limited and Jade Ocean Global Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed September 22, 2016). | |
3.1 | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed November 9, 2016). | |
3.2 | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed November 9, 2016). | |
10.1** | Twelfth Amendment to Credit and Security Agreement, dated as of March 20, 2017, by and among Novatel Wireless, Inc., Enfora, Inc. and Feeney Wireless, LLC, as Borrowers, R.E.R. Enterprises, Inc. and Feeney Wireless IC-DISC, Inc., as Guarantors, and Wells Fargo Bank, National Association, as Lender. | |
10.2** | 2017 Inseego Corporate Bonus Plan. | |
31.1** | Certification of our Principal Executive Officer adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2** | Certification of our Principal Financial Officer adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2** | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101** | The following financial statements and footnotes from the Inseego Corp. Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Loss; (iv) Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements. | |
* | Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request. | |
** | Filed herewith |
Date: May 15, 2017 | Inseego Corp. | |||
By: | /s/ SUE SWENSON | |||
Sue Swenson | ||||
Chief Executive Officer |
By: | /s/ MICHAEL NEWMAN | |||
Michael Newman | ||||
Chief Financial Officer |
1. | Amendments to Credit Agreement. |
Minimum Required EBITDA | Test Date and Test Period |
$<2,200,000> | January 31, 2017, for the one month period ending on such date |
$<4,000,000> | February 28, 2017, for the two month period ending on such date |
$<4,900,000> | March 31, 2017, for the three month period ending on such date |
$<5,200,000> | April 30, 2017, for the four month period ending on such date |
$<5,400,000> | May 31, 2017, for the five month period ending on such date |
$<5,600,000> | June 30, 2017, for the six month period ending on such date |
$<5,000,000> | July 31, 2017, for the seven month period ending on such date |
$<4,400,000> | August 31, 2017, for the eight month period ending on such date |
$<3,900,000> | September 30, 2017, for the nine month period ending on such date |
$<3,500,000> | October 31, 2017, for the ten month period ending on such date |
$<3,100,000> | November 30, 2017, for the eleven month period ending on such date |
$<3,400,000> | December 31, 2017, for the twelve month period ending on such date |
BORROWERS: | |
NOVATEL WIRELESS, INC. | |
By: | /s/ Michael Newman |
Name: | Michael Newman |
Title: | Chief Financial Officer |
ENFORA, INC. | |
By: | /s/ Michael Newman |
Name: | Michael Newman |
Title: | Chief Financial Officer |
FEENEY WIRELESS, LLC | |
By: | /s/ Michael Newman |
Name: | Michael Newman |
Title: | Secretary |
GUARANTORS: | |
R.E.R. ENTERPRISES, INC. | |
By: | /s/ Michael Newman |
Name: | Michael Newman |
Title: | Secretary |
FEENEY WIRELESS IC-DISC, INC. | |
By: | /s/ Michael Newman |
Name: | Michael Newman |
Title: | Secretary |
INSEEGO CORP. | |
By: | /s/ Michael Newman |
Name: | Michael Newman |
Title: | Chief Financial Officer |
WELLS FARGO BANK, NATIONAL ASSOCIATION | |
By: | /s/ Robin Van Meter |
Name: | Robin Van Meter |
Title: | Authorized Signatory |
• | Forty percent (40%) will be weighted to the Company’s Revenue objectives. |
• | Forty percent (40%) will be weighted to the Company’s EBITDA objectives. |
• | Twenty percent (20%) will be weighted to the Company’s 2017 Corporate Goals. |
• | 85% performance equating to 50% payout for each Performance Goal. |
• | 100% performance equating to 100% payout for each Performance Goal. |
• | 115% performance equating to 150% payout for each Performance Goal. |
• | Bonus Awards will be pro-rated for achievement between 85% and 115%. |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ SUE SWENSON |
Sue Swenson |
Chief Executive Officer (principal executive officer) |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ MICHAEL NEWMAN |
Michael Newman |
Chief Financial Officer (principal financial officer) |
• | the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
/s/ SUE SWENSON |
Sue Swenson |
Chief Executive Officer (principal executive officer) |
• | the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
/s/ MICHAEL NEWMAN |
Michael Newman |
Chief Financial Officer (principal financial officer) |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2017 |
May 08, 2017 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | INSG | |
Entity Registrant Name | INSEEGO CORP. | |
Entity Central Index Key | 0001022652 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 55,971,423 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 2,015 | $ 1,660 |
Accumulated depreciation, Property, plant and equipment | 25,873 | 25,032 |
Accumulated depreciation, Rental assets | 5,827 | 4,112 |
Accumulated amortization, Intangible assets | $ 19,606 | $ 17,996 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 55,955,138 | 54,372,080 |
Common stock, shares outstanding | 55,955,138 | 54,372,080 |
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2017 |
Mar. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (16,114) | $ (11,899) |
Foreign currency translation adjustment | 1,047 | 2,278 |
Total comprehensive loss | $ (15,067) | $ (9,621) |
Basis of Presentation |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The information contained herein has been prepared by Inseego Corp. (the “Company”) in accordance with the rules of the Securities and Exchange Commission (the “SEC”). The information at March 31, 2017 and the results of the Company’s operations for the three months ended March 31, 2017 and 2016 are unaudited. The condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods presented. These condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements from which they were derived and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Except as set forth below, the accounting policies used in preparing these unaudited condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole. For the three months ended March 31, 2017 and 2016, the Company incurred a net loss of $16.1 million and $11.9 million, respectively. The Company’s ability to transition to attaining profitable operations is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. If events or circumstances occur such that the Company does not meet its operating plan as expected, the Company may be required to reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses which could have an adverse impact on its ability to achieve its intended business objectives. These additional reductions in expenditures, if required, could have an adverse impact on the Company’s ability to achieve certain of its business objectives. The Company’s management believes that its cash and cash equivalents, including proceeds received under the Credit Agreement (as defined below) subsequent to the balance sheet date (see Note 6, Debt), together with anticipated cash flows from operations, may not be sufficient to meet its working capital needs for the next twelve months following the filing date of this report without additional sources of cash due to the maturity date of the Credit Agreement on May 8, 2018. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to mitigate the substantial doubt as to its ability to continue as a going concern through the sale of its MiFi Business (as defined below), and may also evaluate other strategic alternatives including, but not limited to, an alternative sale or other strategic transaction relating to the MiFi Business or the Company as a whole, potential joint ventures or licensing arrangements, or the incurrence of additional debt or issuance of additional equity. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Segment Information Management has determined that the Company has one reportable segment. The Chief Executive Officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and operating results. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ materially from these estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of debt obligations, royalty costs, accruals relating to litigation and restructuring, provision for warranty costs, income taxes and share-based compensation expense. New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”), which are adopted by the Company as of the specified date. Unless otherwise discussed, management believes the impact of recently issued standards, some of which are not yet effective, will not have a material impact on its unaudited condensed consolidated financial statements upon adoption. In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill by eliminating the second step from the goodwill impairment test, which requires the comparison of the implied fair value of goodwill with the current carrying amount of goodwill. Instead, under the amendments in this guidance, an entity shall perform a goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount and an impairment charge is to be recorded for the amount, if any, in which the carrying value exceeds the reporting unit’s fair value. This guidance should be applied prospectively and is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which affects entities that issue share-based payment awards to their employees. The guidance is designed to identify areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The Company implemented this guidance during the first quarter of 2017. This guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in the Company providing a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which provides guidance for revenue recognition. The new standard will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date, which deferred the effective date of adoption of ASU 2014-09 to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies aspects of ASU 2014-09 pertaining to the identification of performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. There are two adoption methods available for implementation of this guidance. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied only to the most current period presented, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. The Company is evaluating the impact of the new standard on its accounting policies, processes and systems. The Company has assigned internal resources, is in the process of engaging a third-party service provider and has a preliminary project plan to finalize the evaluation and complete the implementation. The Company’s decision on the adoption method will be based on various factors including the significance of the impact of the new standard on the Company’s financial results and system capabilities. The Company has not yet completed the evaluation of these impacts and the adoption method has not been determined. |
Acquisitions and Divestitures |
3 Months Ended |
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Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | Acquisitions and Divestitures Acquisitions DigiCore Holdings Limited (DBA Ctrack) On June 18, 2015, the Company entered into a transaction implementation agreement (the “TIA”) with DigiCore Holdings Limited (“DigiCore” or “Ctrack”). Pursuant to the terms of the TIA, the Company acquired 100% of the issued and outstanding ordinary shares of DigiCore (with the exception of certain excluded shares, including treasury shares) for 4.40 South African Rand per ordinary share outstanding on October 5, 2015. Upon consummation of the acquisition, DigiCore became an indirect wholly-owned subsidiary of the Company. R.E.R. Enterprises, Inc. On March 27, 2015, the Company entered into a merger agreement (“RER Merger Agreement”) with R.E.R. Enterprises, Inc. (“RER”) to acquire all of the issued and outstanding shares of RER and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC, an Oregon limited liability company (collectively, “FW”). The total consideration was approximately $24.8 million and included a cash payment at closing of approximately $9.3 million, the Company’s assumption of $0.5 million in certain transaction-related expenses incurred by FW, and the future issuance of shares of the Company’s common stock valued at $15.0 million (the “Deferred Purchase Price”), which would have been payable in March 2016 pursuant to the original terms of the RER Merger Agreement. The total consideration of $24.8 million did not include amounts, if any, payable under an earn-out arrangement pursuant to which the Company may have been required to pay up to an additional $25.0 million to the former stockholders of RER contingent upon FW’s achievement of certain financial targets for the years ending December 31, 2015, 2016, and 2017 (the “Earn-Out Arrangement”). Such payments, if any, under the Earn-Out Arrangement would have been payable in either cash or shares of the Company’s common stock at the discretion of the Company, and would have been recorded as compensation expense during the service period earned. On January 5, 2016, the Company and RER amended certain payment terms of the RER Merger Agreement. Under the amended agreement, the Deferred Purchase Price that was payable in shares of the Company’s common stock in March 2016 would be paid in five cash installments over a four-year period, beginning in March 2016. In addition, the Earn-Out Arrangement was amended as follows: (a) any amount earned under the Earn-Out Arrangement for the achievement of financial targets for the year ended December 31, 2015 would be paid in five cash installments over a four-year period, beginning in March 2016; and (b) in replacement of the potential earn-out contingent upon FW’s achievement of certain financial targets for the years ended December 31, 2016 and 2017 the Company would issue to the former stockholders of RER approximately 2.9 million shares of the Company’s common stock in three equal installments over a three-year period, beginning in March 2017. On March 15, 2017, the Company issued 973,334 shares of its common stock to the former stockholders of RER in satisfaction of the first installment of this obligation. As of the filing date of this report, the March 2017 cash installments have not been paid and the Company is disputing its obligations to make such payments (see Note 10, Commitments and Contingencies). On March 23, 2017, the name of Feeney Wireless, LLC was changed to Inseego North America, LLC. As of March 31, 2017, the total amount of Deferred Purchase Price that remained outstanding was $11.3 million and the total amount outstanding pursuant to the Earn-Out Arrangement was $9.8 million, both of which are included in accrued expenses and other current liabilities and in other long-term liabilities in the unaudited condensed consolidated balance sheets. Divestitures Modules Business On April 11, 2016, the Company signed a definitive asset purchase agreement with Telit Technologies (Cyprus) Limited and Telit Wireless Solutions, Inc. (collectively, “Telit”) pursuant to which the Company sold, and Telit acquired, certain hardware modules and related assets for an initial purchase price of $11.0 million in cash, which included $9.0 million that was paid to the Company on the closing date of the transaction, $1.0 million that would be paid to the Company in equal quarterly installments over a two-year period in connection with the provision by the Company of certain transition services and $1.0 million that would be paid to the Company following the satisfaction of certain conditions by the Company, including the assignment of specified contracts and the delivery of certain certifications and approvals. The Company also had the potential to receive an additional cash payment of approximately $3.8 million from Telit related to their purchase of module product inventory from the Company, $1.0 million of which would be paid to the Company in equal quarterly installments over the two-year period following the closing date in connection with the provision by the Company of certain transition services. In addition to the above, the Company may have been entitled to receive a subsequent earn-out payment following the closing of the transaction if certain conditions were met. On September 29, 2016, the Company entered into a Final Resolution Letter Agreement (the “Final Resolution”) with Telit. Per the Final Resolution, Telit agreed to pay the Company $2.1 million in full satisfaction of their payment obligations under certain sections of the original purchase agreement, including all installment payments, and the Company agreed to ship the remainder of the hardware modules and related assets as soon as practicable. Under the Final Resolution, the aggregate purchase consideration totaled $11.7 million, which consisted of $11.3 million in cash and $0.4 million in net settled Company liabilities. During the three months ended March 31, 2017, the Company shipped the remaining hardware modules and related assets due to Telit under the Final Resolution and recognized a related gain of approximately $45,000, which is included in other expense, net, in the unaudited condensed consolidated statements of operations. MiFi Business On September 21, 2016, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”), by and among Inseego and Novatel Wireless, Inc. (“Novatel Wireless”), on the one hand, and T.C.L. Industries Holdings (H.K.) Limited and Jade Ocean Global Limited (collectively, the “Purchasers”) on the other hand. The Purchase Agreement relates to the pending sale of the Company’s subsidiary, Novatel Wireless, which includes the Company’s MiFi branded hotspots and USB modem product lines (the “MiFi Business”), to the Purchasers for $50.0 million in cash, subject to potential adjustment for Novatel Wireless’s working capital as of the closing date. The sale may not close until all of the closing conditions set forth in the Purchase Agreement have been satisfied. One of the closing conditions is the approval of the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS has identified national security concerns relating to the Company’s sale of the MiFi Business to the Purchasers. In February 2017, the Company and the Purchasers voluntarily withdrew and re-filed their notice to CFIUS in order to obtain additional time to provide further information to CFIUS and explore potential mitigation measures that may allow the transaction to proceed. In April 2017, subsequent to the balance sheet date, the Company and the Purchasers once again voluntarily withdrew and re-filed their notice to CFIUS in order to obtain additional time to continue negotiations between CFIUS and the Purchasers regarding the final terms of a mitigation agreement, which negotiations remain ongoing. |
Balance Sheet Details |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Details | Balance Sheet Details Inventories Inventories consist of the following (in thousands):
Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (in thousands):
Accrued Warranty Obligations Accrued warranty obligations activity during the three months ended March 31, 2017 was as follows (in thousands):
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Goodwill and Other Intangible Assets |
3 Months Ended |
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Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The balances in goodwill and other intangible assets were primarily a result of the Company’s acquisitions of Ctrack and FW. See Note 4, Goodwill and Other Intangible Assets, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of the components of goodwill and additional information regarding other intangible assets. |
Fair Value Measurement of Assets and Liabilities |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement of Assets and Liabilities | Fair Value Measurement of Assets and Liabilities Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows:
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There have been no transfers of assets or liabilities between fair value measurement classifications during the three months ended March 31, 2017. The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of March 31, 2017 (in thousands):
The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of December 31, 2016 (in thousands):
Other Financial Instruments The Company’s financial assets and liabilities are carried at fair value or at amounts that, because of their short-term nature, approximate current fair value, with the exception of its $120.0 million in Convertible Notes (see Note 6, Debt). The Company carries its Convertible Notes at amortized cost. The debt and equity components of the Convertible Notes were measured using Level 3 inputs and are not measured on a recurring basis. The fair value of the liability component of the Convertible Notes, which approximates the carrying value of such notes, was $89.7 million and $90.9 million as of March 31, 2017 and December 31, 2016, respectively. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Revolving Credit Facility On October 31, 2014, the Company entered into a five-year senior secured revolving credit facility in the amount of $25.0 million (the “Revolver”) with Wells Fargo Bank, National Association, as lender. Concurrently with the acquisition of FW, the Company amended the Revolver to include FW as a borrower and Loan Party, as defined by the agreement. On November 17, 2015, the Revolver was amended to increase the maximum borrowing capacity to $48.0 million. On March 20, 2017, at the Company’s request, the financial covenants with respect to liquidity requirements and EBITDA targets, among other things, were amended in order to enable draw-downs by the Company from time to time. In exchange for such accommodations, the aggregate amount available under the Revolver was decreased from $48.0 million to $10.0 million and the applicable margin was increased to 4.00% when interest is based on the daily three-month LIBOR rate and 1.5% when interest is based on the prime rate. The amount of borrowings that could have been made under the Revolver was based on a borrowing base comprised of a specified percentage of eligible receivables. The Revolver included $3.0 million available for letters of credit, $0.7 million of which was available for letters of credit at March 31, 2017. The Revolver was secured by a first priority lien on substantially all of the assets of the Company and certain of its subsidiaries, subject to certain exceptions and permitted liens. The Revolver included customary representations and warranties, as well as customary reporting and financial covenants. There was $2.8 million outstanding under the Revolver at March 31, 2017. There was no balance outstanding under the Revolver at December 31, 2016. The Company terminated the Revolver on May 8, 2017, subsequent to the balance sheet date, in connection with the execution of the Credit Agreement described below. Credit Agreement On May 8, 2017, subsequent to the balance sheet date, the Company and certain of its direct and indirect subsidiaries entered into a credit agreement (the “Credit Agreement”) with Lakestar Semi Inc., a private investment fund managed by Soros Fund Management LLC (the “Lender”). Pursuant to the Credit Agreement, the Lender provided the Company with a single term loan in the principal amount of $20.0 million (the “Loan”) with a maturity date of May 8, 2018 (the “Maturity Date”). The Credit Agreement requires that any proceeds from the pending sale of the MiFi Business be used to repay the Loan. The Company paid a $2.0 million commitment fee in conjunction with the closing of the Loan. The Credit Agreement includes customary representations and warranties, as well as customary reporting and financial covenants. Interest on the Loan will be payable on the last business day of each calendar month and on the Maturity Date. The Loan will bear interest at a rate per annum equal to the three-month LIBOR, but in no event less than 1.00%, plus 10.00%. Convertible Senior Notes Novatel Wireless Notes On June 10, 2015, the Company issued $120.0 million of 5.50% convertible senior notes due 2020 (the “Novatel Wireless Notes”). The Company incurred issuance costs of approximately $3.9 million. The Company used a portion of the proceeds from the offering to finance its acquisition of Ctrack, to pay fees and expenses related to the acquisition, and for general corporate purposes. The Novatel Wireless Notes are governed by the terms of an indenture, dated June 10, 2015 (the “Novatel Wireless Indenture”), among Novatel Wireless, as issuer, the Company and Wilmington Trust, National Association, as trustee. The Novatel Wireless Notes are senior unsecured obligations and bear interest at a rate of 5.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2015. The Novatel Wireless Notes will mature on June 15, 2020, unless earlier repurchased or converted. The Novatel Wireless Notes will be convertible into cash, shares of the Company’s common stock, or a combination thereof, at the election of the Company, at an initial conversion price of $5.00 per share of the Company’s common stock. Following the settlement of the exchange offer and consent solicitation described below, approximately $0.2 million aggregate principal amount of Novatel Wireless Notes remain outstanding. In connection with the exchange offer and consent solicitation, the Novatel Wireless Indenture and the Novatel Wireless Notes were amended to, among other things, eliminate certain events of default and substantially all of the restrictive covenants in the Novatel Wireless Indenture and the Novatel Wireless Notes, including the merger covenant, which sets forth certain requirements that must be met for Novatel Wireless to consolidate, merge or sell all or substantially all of its assets, and the reporting covenant, which requires Novatel Wireless to provide certain periodic reports to noteholders. The Novatel Wireless Indenture, as amended, also provides that the form of settlement of any conversions of the Novatel Wireless Notes will be elected by the Company. Inseego Notes On January 9, 2017, in connection with the settlement of an exchange offer and consent solicitation with respect to the Novatel Wireless Notes, the Company issued approximately $119.8 million of 5.50% convertible senior notes due 2022 (the “Inseego Notes” and collectively with Novatel Wireless Notes, the “Convertible Notes”). The Inseego Notes were issued in exchange for the approximately $119.8 million aggregate principal amount of outstanding Novatel Wireless Notes that were validly tendered and accepted for exchange and subsequently canceled. The Inseego Notes are governed by the terms of an indenture, dated January 9, 2017 (the “Inseego Indenture”), between the Company, as issuer, and Wilmington Trust, National Association, as trustee (the “Trustee”). The Inseego Notes are senior unsecured obligations of the Company and bear interest from, and including, December 15, 2016, at a rate of 5.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2017. The Inseego Notes will mature on June 15, 2022, unless earlier converted, redeemed or repurchased. The Inseego Notes will be convertible into cash, shares of the Company’s common stock, or a combination thereof, at the election of the Company, at an initial conversion rate of 212.7660 shares of common stock per $1,000 principal amount of the Inseego Notes, which corresponds to an initial conversion price of $4.70 per share of the Company’s common stock.The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends. At any time prior to the close of business on the business day immediately preceding December 15, 2021, holders may convert their Inseego Notes at their option only under the following circumstances:
On or after December 15, 2021, the holders may convert any of their Inseego Notes at any time prior to the close of business on the business day immediately preceding the maturity date. The Company may redeem all or a portion of the Inseego Notes at its option on or after June 15, 2018 if the last reported sale price per share of the Company’s common stock equals or exceeds 140% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately prior to the date on which the Company provides written notice of redemption, at a redemption price equal to 100% of the principal amount of the Inseego Notes to be redeemed, plus any accrued and unpaid interest on such Inseego Notes, subject to the right of holders as of the close of business on an interest record date to receive the related interest. In addition, if the Company calls the Inseego Notes for redemption, a “make-whole fundamental change” (as defined in the Inseego Indenture) will be deemed to occur. As a result, the Company will, in certain circumstances, increase the conversion rate for holders who convert their Inseego Notes in connection with such redemption. The Inseego Notes are subject to repurchase by the Company at the option of the holders on June 15, 2020 (the “Optional Repurchase Date”) at a repurchase price in cash equal to 100% of the principal amount of the Inseego Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the Optional Repurchase Date, subject to the right of holders of the Inseego Notes on a record date to receive interest through the corresponding interest payment date. No “sinking fund” is provided for the Inseego Notes, which means that the Company is not required to periodically redeem or retire the Inseego Notes. If the Company undergoes a “fundamental change” (as defined in the Inseego Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Inseego Notes in principal amounts of $1,000, or an integral multiple of $1,000 in excess thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Inseego Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date, subject to the right of holders as of the close of business on an interest record date to receive the related interest. In addition, every fundamental change is a make-whole fundamental change. As a result, the Company will, in certain circumstances, increase the conversion rate for holders who convert their Inseego Notes in connection with such fundamental change. The Inseego Indenture contains certain covenants, effective until June 15, 2020, that limit the amount of debt, including secured debt, that may be incurred by the Company or its subsidiaries, and that limit the ability of the Company to pay dividends, repurchase its equity securities or make other restricted payments. The Inseego Indenture also provides for customary events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee, by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Inseego Notes, by notice to the Company and the Trustee, may declare the principal and accrued and unpaid interest on the outstanding Inseego Notes to be immediately due and payable. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal and accrued and unpaid interest of the Inseego Notes will automatically become immediately due and payable. Notwithstanding the foregoing, the Inseego Indenture provides that, to the extent the Company elects and for up to 60 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants consists exclusively of the right to receive special interest on the Inseego Notes at a rate equal to 0.50% per annum on the principal amount of the outstanding Inseego Notes. Because the exchange of the Novatel Wireless Notes for the Inseego Notes described above was treated as a debt modification in accordance with applicable FASB guidance (it was between a parent and a subsidiary company and for substantially identical notes), the Company did not recognize a gain or loss with respect to the issuance of the Inseego Notes. In accordance with authoritative guidance, the Company recognized $3.6 million as an additional component of debt discount and additional paid-in capital attributed to the increase in the fair value of the embedded conversion feature of the Inseego Notes before and after modification. The Company will amortize the debt discount on the Inseego Notes as a component of interest expense using the effective interest method through June 2020. During the three months ended March 31, 2017, the Company incurred approximately $0.9 million in connection with the issuance of the Inseego Notes, which is included in general and administrative expenses in the unaudited condensed consolidated statements of operations. The Convertible Notes consisted of the following at March 31, 2017 and December 31, 2016 (in thousands):
The effective interest rate on the liability component of the Convertible Notes was 17.84% for the three months ended March 31, 2017. The following table sets forth total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2017 and 2016 (in thousands):
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Share-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | Share-based Compensation The Company included the following amounts for share-based compensation awards in the unaudited condensed consolidated statements of operations (in thousands):
Stock Options The following table summarizes the Company’s stock option activity:
At March 31, 2017, total unrecognized compensation expense related to stock options was $3.3 million, which is expected to be recognized over a weighted-average period of 2.39 years. Restricted Stock Units The following table summarizes the Company’s restricted stock unit (“RSU”) activity:
At March 31, 2017, total unrecognized compensation expense related to RSUs was $2.7 million, which is expected to be recognized over a weighted-average period of 2.63 years. Employee Stock Purchase Plan During the three months ended March 31, 2017 and 2016, the Company recognized $0.1 million and $0.1 million, respectively, of stock-based compensation expense related to the employee stock purchase plan. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income (loss) attributable to Inseego Corp. by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Potentially dilutive securities (consisting of warrants, stock options and RSUs calculated using the treasury stock method) are excluded from the diluted EPS computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive. The calculation of basic and diluted EPS was as follows (in thousands, except share and per share data):
For the three months ended March 31, 2017, the computation of diluted EPS excluded 9,934,698 shares related to warrants, stock options and RSUs as their effect would have been anti-dilutive. For the three months ended March 31, 2016, the computation of diluted EPS excluded 12,181,133 shares related to warrants, stock options and RSUs as their effect would have been anti-dilutive. |
Geographic Information and Concentrations of Risk |
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Geographic Information and Concentrations of Risk | Geographic Information and Concentrations of Risk Geographic Information The following table details the geographic concentration of the Company’s net revenues based on shipping destination:
Concentrations of Risk For the three months ended March 31, 2017 and 2016, one customer accounted for 53.9% and 52.7% of net revenues, respectively. |
Commitments and Contingencies |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. For example, the Company is currently named as a defendant or co-defendant in some patent infringement lawsuits in the U.S. and is indirectly participating in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters and discussions with the Company’s intellectual property litigation counsel, the Company currently believes that liabilities arising from or sums paid in settlement of these existing matters, if any, would not have a material adverse effect on its consolidated results of operations or financial condition. On May 27, 2015, a patent infringement action was brought against Novatel Wireless by Carucel Investments, L.P. (“Carucel”), a non-practicing entity (Carucel Investments, L.P. v. Novatel Wireless, Inc., et al., U.S.D.C. S.D. Florida, Civil Action No. 0:15-cv-61116-BB). The complaint alleged that certain MiFi mobile hotspots manufactured by Novatel Wireless infringed claims of patents owned by Carucel. On April 10, 2017, subsequent to the balance sheet date, judgment was entered in favor of Novatel Wireless. Carucel has indicated that it intends to appeal this verdict. The Company does not believe there is merit to an appeal by Carucel and intends to vigorously defend any appeal. However, there can be no assurance as to the ultimate outcome of any appeal or other future judgment in this case, and an adverse judgment could have a material adverse effect on the Company’s its consolidated results of operations or financial condition. On May 11, 2017, subsequent to the balance sheet date, the Company initiated a lawsuit against the former stockholders of RER in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty. The Company has suspended payments due to the former stockholders of RER pursuant to the Earn-out Arrangement and the Deferred Purchase Price pending the outcome of this litigation. Indemnification In the normal course of business, the Company periodically enters into agreements that require the Company to indemnify and defend its customers for, among other things, claims alleging that the Company’s products infringe third-party patents or other intellectual property rights. The Company’s maximum exposure under these indemnification provisions cannot be estimated but the Company does not believe that there are any matters individually or collectively that would have a material adverse effect on its consolidated results of operations or financial condition. |
Income Taxes |
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Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s effective income tax rate was 1.9% and 2.9% for the three months ended March 31, 2017 and 2016, respectively. The Company’s effective income tax rates are significantly lower than the statutory tax rate primarily due to an increase in the Company’s valuation allowance related to its U.S.-based deferred tax amounts, resulting from carryforward net operating losses generated during the three months ended March 31, 2017 and 2016. Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. |
Restructuring |
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Restructuring | Restructuring In August 2015, the Company approved a restructuring initiative to better position the Company to operate in current market conditions and more closely align operating expenses with revenues, which included employee severance costs and facility exit related costs. In the fourth quarter of 2015, the Company commenced certain initiatives relating to the reorganization of executive level management, which included, among other actions, the replacement of the former Chief Executive Officer (collectively, the “2015 Initiatives”). The Company continued these initiatives in 2016 with a reduction-in-force and the completion of the closure of its facility in Richardson, TX. The 2015 Initiatives are expected to cost a total of approximately $5.0 million and be completed when the Richardson, TX lease expires in June 2020. In February 2017, the Company commenced certain restructuring initiatives intended to continue to improve its strategic focus on its most profitable business lines and consolidate operations of its subsidiaries with those of the Company, including a reduction-in-force (the “2017 Initiative”). The 2017 Initiative is expected to cost a total of approximately $0.8 million and be completed in September 2017. The following table sets forth activity in the restructuring liability for the three months ended March 31, 2017 (in thousands):
The balance of the restructuring liability at March 31, 2017 consists of approximately $1.2 million in current liabilities and $0.1 million in long-term liabilities. |
Basis of Presentation (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | The information contained herein has been prepared by Inseego Corp. (the “Company”) in accordance with the rules of the Securities and Exchange Commission (the “SEC”). The information at March 31, 2017 and the results of the Company’s operations for the three months ended March 31, 2017 and 2016 are unaudited. The condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods presented. These condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements from which they were derived and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Except as set forth below, the accounting policies used in preparing these unaudited condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole. |
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Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. |
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Segment Information | Segment Information Management has determined that the Company has one reportable segment. The Chief Executive Officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and operating results. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ materially from these estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of debt obligations, royalty costs, accruals relating to litigation and restructuring, provision for warranty costs, income taxes and share-based compensation expense. |
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New Accounting Pronouncements | New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”), which are adopted by the Company as of the specified date. Unless otherwise discussed, management believes the impact of recently issued standards, some of which are not yet effective, will not have a material impact on its unaudited condensed consolidated financial statements upon adoption. In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill by eliminating the second step from the goodwill impairment test, which requires the comparison of the implied fair value of goodwill with the current carrying amount of goodwill. Instead, under the amendments in this guidance, an entity shall perform a goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount and an impairment charge is to be recorded for the amount, if any, in which the carrying value exceeds the reporting unit’s fair value. This guidance should be applied prospectively and is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which affects entities that issue share-based payment awards to their employees. The guidance is designed to identify areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The Company implemented this guidance during the first quarter of 2017. This guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in the Company providing a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which provides guidance for revenue recognition. The new standard will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date, which deferred the effective date of adoption of ASU 2014-09 to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies aspects of ASU 2014-09 pertaining to the identification of performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. There are two adoption methods available for implementation of this guidance. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied only to the most current period presented, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. The Company is evaluating the impact of the new standard on its accounting policies, processes and systems. The Company has assigned internal resources, is in the process of engaging a third-party service provider and has a preliminary project plan to finalize the evaluation and complete the implementation. The Company’s decision on the adoption method will be based on various factors including the significance of the impact of the new standard on the Company’s financial results and system capabilities. The Company has not yet completed the evaluation of these impacts and the adoption method has not been determined. |
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Fair Value Measurement | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows:
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. |
Balance Sheet Details (Tables) |
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Summary of Inventories | Inventories consist of the following (in thousands):
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Summary of Accrued Expenses | Accrued expenses and other current liabilities consist of the following (in thousands):
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Summary of Accrued Warranty Obligations | Accrued warranty obligations activity during the three months ended March 31, 2017 was as follows (in thousands):
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Fair Value Measurement of Assets and Liabilities (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Company's Financial Instruments, Fair Value on a Recurring Basis | The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of March 31, 2017 (in thousands):
The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of December 31, 2016 (in thousands):
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debt | The Convertible Notes consisted of the following at March 31, 2017 and December 31, 2016 (in thousands):
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Interest Expense Summary | The following table sets forth total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2017 and 2016 (in thousands):
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Share-based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | The Company included the following amounts for share-based compensation awards in the unaudited condensed consolidated statements of operations (in thousands):
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Summary of Stock Option Activity | The following table summarizes the Company’s stock option activity:
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Summary of Restricted Stock Unit Activity | The following table summarizes the Company’s restricted stock unit (“RSU”) activity:
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The calculation of basic and diluted EPS was as follows (in thousands, except share and per share data):
|
Geographic Information and Concentrations of Risk (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Geographic Concentration of Net Revenues |
|
Restructuring (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restructuring Liability | The following table sets forth activity in the restructuring liability for the three months ended March 31, 2017 (in thousands):
|
Basis of Presentation Narrative (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
Segments
|
Mar. 31, 2016
USD ($)
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net loss attributable to Inseego Corp. | $ | $ (16,100) | $ (11,904) |
Number of reportable segments | Segments | 1 |
Balance Sheet Details - Summary of Inventories (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Finished goods | $ 21,750 | $ 19,277 |
Raw materials and components | 7,639 | 11,865 |
Total inventories | $ 29,389 | $ 31,142 |
Balance Sheet Details - Summary of Accrued Expenses (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Royalties | $ 3,342 | $ 1,544 |
Payroll and related expenses | 5,571 | 5,315 |
Warranty obligations | 480 | 480 |
Market development funds and price protection | 34 | 320 |
Professional fees | 3,894 | 4,793 |
Accrued interest | 1,929 | 275 |
Deferred revenue | 1,361 | 1,656 |
Restructuring | 1,160 | 837 |
Acquisition-related liabilities | 13,186 | 7,912 |
Divestiture-related liabilities | 0 | 463 |
Other | 5,128 | 4,302 |
Total accrued expenses and other current liabilities | $ 36,085 | $ 27,897 |
Balance Sheet Details - Summary of Accrued Warranty Obligations (Detail) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Movement in Standard Product Warranty Accrual [Roll Forward] | |
Accrued warranty obligations at beginning of period | $ 480 |
Additions charged to operations | 98 |
Deductions from liability | (98) |
Accrued warranty obligations at end of period | $ 480 |
Fair Value Measurement of Assets and Liabilities - Summary of Company's Financial Instruments, Fair Value on a Recurring Basis (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Convertible Debt | ||
Cash equivalents | ||
Principal | $ 120,000 | $ 120,000 |
Fair Value, Measurements, Recurring | ||
Cash equivalents | ||
Cash equivalents | 35 | 35 |
Fair Value, Measurements, Recurring | Money market funds | ||
Cash equivalents | ||
Cash equivalents | 35 | 35 |
Fair Value, Measurements, Recurring | Level 1 | ||
Cash equivalents | ||
Cash equivalents | 35 | 35 |
Fair Value, Measurements, Recurring | Level 1 | Money market funds | ||
Cash equivalents | ||
Cash equivalents | 35 | 35 |
Fair Value, Measurements, Nonrecurring | Level 3 | ||
Cash equivalents | ||
Fair value of debt | $ 89,700 | $ 90,900 |
Debt - Components (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Equity component | $ 41,905 | $ 38,305 |
Convertible Debt | ||
Debt Instrument [Line Items] | ||
Principal | 120,000 | 120,000 |
Less: unamortized debt discount and debt issuance costs | (30,344) | (29,092) |
Net carrying amount | $ 89,656 | $ 90,908 |
Debt - Interest Expense (Details) - Convertible Debt - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Debt Instrument [Line Items] | ||
Contractual interest expense | $ 1,650 | $ 1,650 |
Amortization of debt discount | 2,217 | 1,980 |
Amortization of debt issuance costs | 131 | 132 |
Total interest expense | $ 3,998 | $ 3,762 |
Share-based Compensation - Tables (Details) - shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding — beginning balance | 6,356,203 | 6,084,836 |
Granted | 100,000 | 1,051,550 |
Exercised | 0 | (78,384) |
Canceled | (482,827) | (701,799) |
Outstanding — ending balance | 5,973,376 | 6,356,203 |
Exercisable — March 31, 2017 | 2,958,891 | |
Restricted Stock Units (RSUs) | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Non-vested — beginning balance | 2,975,800 | 960,203 |
Granted | 22,500 | 2,914,000 |
Vested | (886,803) | (461,866) |
Forfeited | (36,805) | (436,537) |
Non-vested — ending balance | 2,074,692 | 2,975,800 |
Earnings Per Share - Earnings Per Basic and Diluted Share Table (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Numerator | ||
Net loss attributable to Inseego Corp. | $ (16,100) | $ (11,904) |
Weighted-average shares used in computation of net loss per share: | ||
Weighted-average common shares outstanding (in shares) | 57,480,210 | 53,250,668 |
Basic and diluted net loss per share (dollars per share) | $ (0.28) | $ (0.22) |
Earnings Per Share - Narrative (Detail) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Earnings Per Share [Abstract] | ||
Anti-dilutive shares | 9,934,698 | 12,181,133 |
Geographic Information and Concentrations of Risk - Schedule of Geographic Concentration of Net Revenues (Detail) - Net Revenues - Geographic Concentration |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Concentration percentage | 100.00% | 100.00% |
United States and Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Concentration percentage | 71.10% | 76.80% |
South Africa | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Concentration percentage | 17.70% | 13.60% |
Other | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Concentration percentage | 11.20% | 9.60% |
Geographic Information and Concentrations of Risk - Additional Information (Detail) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Net Revenues | Customer Concentration | Customer One | ||
Segment Reporting Information [Line Items] | ||
Concentration percentage | 53.90% | 52.70% |
Income Taxes - Additional Information (Detail) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 1.90% | 2.90% |
Restructuring - Summary of Restructuring Liability (Detail) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Balance at December 31, 2016 | $ 1,043 |
Costs Incurred | 809 |
Payments | (520) |
Balance at March 31, 2017 | 1,332 |
Cumulative Costs Incurred to Date | 5,805 |
2015 Initiatives | Employee Severance Costs | |
Restructuring Reserve [Roll Forward] | |
Balance at December 31, 2016 | 455 |
Costs Incurred | 0 |
Payments | (142) |
Balance at March 31, 2017 | 313 |
Cumulative Costs Incurred to Date | 4,130 |
2015 Initiatives | Facility Exit Related Costs | |
Restructuring Reserve [Roll Forward] | |
Balance at December 31, 2016 | 588 |
Costs Incurred | (35) |
Payments | 0 |
Balance at March 31, 2017 | 553 |
Cumulative Costs Incurred to Date | 831 |
2017 Initiative | Employee Severance Costs | |
Restructuring Reserve [Roll Forward] | |
Balance at December 31, 2016 | 0 |
Costs Incurred | 844 |
Payments | (378) |
Balance at March 31, 2017 | 466 |
Cumulative Costs Incurred to Date | $ 844 |
Restructuring - Additional Information (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Restructuring Cost and Reserve [Line Items] | ||
Restructuring reserve, current | $ 1,160 | $ 837 |
Restructuring reserve, noncurrent | 100 | |
2015 Initiatives | ||
Restructuring Cost and Reserve [Line Items] | ||
Total expected cost | 5,000 | |
2017 Initiative | ||
Restructuring Cost and Reserve [Line Items] | ||
Total expected cost | $ 800 |
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