Inseego Corp. Q1 FY2026 Earnings Call

Hello, and welcome to Inseego Corp.'s First Quarter 2026 Financial Results Conference Call. The event is being recorded. On the call today are Juho Sarvikas, Chief Executive Officer; and Steven Gatoff, Chief Financial Officer. During this call, certain non-GAAP financial measures will be discussed. A reconciliation to the most directly comparable GAAP financial measures is included in the earnings release, which is available on the Investors section of the company's website. An audio replay of this call will also be archived there. Please also be advised that today's discussion will contain forward-looking statements. These forward-looking statements are not historical facts, but rather are based on the company's current expectations and beliefs. For a discussion on factors that could cause actual results to differ materially from the expectations, please refer to the risk factors described in the company's Form 10-K, 10-Q and other SEC filings, which are available on the company's website. Please also refer to the cautionary note regarding forward-looking statements section contained in today's press release. With that, I'd like to turn the call over to Juho Sarvikas, Chief Executive Officer. Please go ahead.

Good afternoon, everyone, and thank you for joining us today. This is a very exciting chapter for Inseego and an important step in the company's transformation to diversify revenue and scale. Over the past year, we have been executing a strategy focused on increasing stockholder value by strengthening the foundation of the company, expanding our product portfolio and customer base, broadening our routes to market and solidifying our leading position as the partner of choice across mobile and enterprise fixed wireless access. Last week, we accelerated that strategy in a very significant way with the announcement of a transformational acquisition for Inseego. It is the largest revenue deal in the company's history, and it's one that we structured very thoughtfully to meaningfully derisk the profile of the transaction. We view it as a major milestone and important inflection point for the company for three reasons: First, it will more than double the revenue base of the company and take us from a North America-centric player to the new global leader in wireless broadband in one decisive move as our end markets expand from North America to Asia Pacific and Europe, Middle East and Africa. Second, it gives us one of the broadest portfolios in the industry across consumer and business markets, including fixed wireless access, mobile routers and IoT gateways that we can use to address the expanded total addressable market. And third, it establishes a unique and strategic partnership with Nokia across go-to-market, AI, 6G and the future of the wireless edge. Before I discuss the acquisition in more detail, I want to first cover our Q1 2026 results and provide color on our operational progress and some challenges in the quarter that we're managing through. Q1 revenue grew 8% year-over-year to $34.3 million. Adjusted EBITDA was $1.8 million, and both revenue and adjusted EBITDA were within our guidance. We also delivered healthy gross margins at 48.9%. As we said on our Q4 call in February, 2026 is a year of investment in carrier ramps, product launches and portfolio expansion in the first half, followed by benefits of greater scale, improving operating leverage and stronger profitability as the year progresses. Q1 played out largely as we expected and in line with what we discussed on our Q4 call. One challenge in Q1 was in fixed wireless access. Our large FWA customer overhauled its executive team and changed its approach to enterprise go-to-market, which created disruption for us in the quarter. We are working with them to realign the go-to-market approach and expect to see progress. Meanwhile, we've secured a commitment for our next-generation FWA platform with that same customer, reinforcing both the strength of that relationship and our position at the leading edge of server technology. In addition, our recently added Tier-1 customer is ramping very well in FWA. This underscores the importance of executing on our strategy of diversifying our revenue base. Mobile delivered $16.7 million of revenue. On last quarter's call, we said we had engineering delays in our new mobile hotspot product family, which consists of a model for each of our Tier-1 carriers and would impact Q1. While we have successfully launched two out of three models, the delay in the third is persisting into Q2; we anticipate launching it in late June. I'm happy to share that we've executed on our strategy to broaden the mobile portfolio across multiple value tiers and secured a carrier commitment for a new low-tier MiFi product, which is an important step in expanding the portfolio and positioning the category for broader contribution over time. I've made important changes to address the execution issues I mentioned. I've brought in a new Chief Product Officer and launched a search for Head of Engineering. It's important to note that as part of the Nokia FWA acquisition, I will be integrating people and best practices from Nokia, an industry leader in engineering technology, which will help us scale both our existing business and the newly acquired business. We recently welcomed Koroush Saraf as our new Chief Product Officer. Koroush brings more than 20 years of experience across networking, cybersecurity, hardware, software and edge infrastructure with expertise in AI, SD-WAN, cloud security and 5G. He held product leadership roles at ZPE Systems, Accredo, Palo Alto Networks and Fortinet, where he helped bring products to market across connectivity, networking and security. Koroush understands how to build and scale product platforms across hardware and software, and his background is closely aligned with our strategic priorities as we continue expanding the portfolio. So, in summary, Q1 played out as we expected. As we move into Q2, we continue to build our FWA business. In mobile, while we have launched a new product generation with two out of our three Tier-1 carriers, the additional delay with the third one will impact our Q2 outlook. As it won't launch until late June, it therefore won't benefit most of the quarter. Moving to the transformational announcement we made last week, the acquisition of Nokia's FWA business. What makes this transaction compelling is what it means for Inseego strategically for our market position, our global reach, our technology roadmap and our ability to lead the wireless broadband edge as AI, 5G evolution and eventually 6G expand the opportunity in front of us. The simplest way to think about this transaction is that it's transformative for Inseego. We are acquiring Nokia's approximately $200 million revenue run-rate FWA business. That more than doubles our revenue base, gives us immediate global scale in revenue and reach and positions Inseego as one of the leading global players in FWA with what we believe is the broadest platform in the industry across mobile, fixed, enterprise and consumer connectivity. It also establishes a partnership with Nokia across technology, go-to-market collaboration and ownership alignment. From a scale, reach, financial and technology standpoint, this acquisition transforms Inseego and sets us on a greatly accelerated growth trajectory. For Inseego, the strategic logic is very clear. This acquisition materially advances our product roadmap and gives us immediate global presence. It takes what has been a U.S.-centric business and makes Inseego instantly global. It also gives us a strong set of global Tier-1 customers and creates real opportunity to take Inseego products into Nokia's customer base and Nokia FWA products into Inseego's customer base. It gives us a different level of scale from day one and positions us to compete across a much broader set of customer segments, geographies and use cases. This gives us a much stronger position in the FWA market, which is growing rapidly and becoming more important globally. The drivers are clear. Operators are increasingly using FWA to monetize 5G, expand broadband access and serve a broader range of consumer and enterprise use cases. At the same time, AI-driven workloads are increasing uplink demand, lowering latency tolerance and pushing more intelligence to the edge, while 5G evolution, millimeter wave and, over time, 6G continue to expand what wireless broadband networks can support. We believe this transaction gives us exactly the right platform to capitalize on those key trends. This is also a strong fit for both companies. Nokia is sharpening its focus on AI infrastructure and network leadership. Inseego is building a leadership position at the wireless broadband edge. Bringing these two together creates a compelling combination and a strong fit strategically for both sides. On a personal level, this transaction means a great deal to me as well. I spent nearly eight years at Nokia, so I know the teams, the products, the customers and the quality with which they operate the business. I also know the depth of technology and the relevance of this business in the broader wireless broadband ecosystem. This is a business we understand, a market we believe in and an opportunity we are excited to bring into Inseego. I also want to thank Nokia President and CEO, Justin Hotard, and his team for the partnership and the work they've done to get us to this point. We appreciate the relationship and are excited about what we will build together going forward. It has been one week since we announced the deal. While there is obviously a lot of work ahead of us, the response we've seen from partners and customers has been overwhelmingly positive. As I mentioned earlier, an important part of this acquisition for me is the ability to add strong Nokia expertise to our company. I'm driving toward one global engineering team, one product team and one integrated supply chain. Signing the deal only got us to the starting line. I'm laser-focused on making sure we execute along the way, starting with the overall integration of the business. We are approaching integration with a clear focus on customer continuity, employee integration and building the right culture. We have a dedicated and experienced team leading this effort. Importantly, the business and financial attractiveness of this deal is well aligned. In this regard, this is not a bolt-on. It's about bringing two complementary organizations together with a clear set of opportunities for scale, efficiency and cost synergies over time. The transaction structure is designed to give us the flexibility to integrate thoughtfully, continue investing in the roadmap and optimize the business as we execute. Steven will walk through the structure in more detail. From my perspective, that operating framework is an important part of what makes this transaction compelling. At the same time, we remain fully focused on the existing business. We are driving that business forward while preparing to bring these two organizations together as one fully aligned team, serving a much larger global opportunity across mobile, enterprise and consumer wireless broadband. With that, let me turn the call over to Steven to discuss the Q1 financials, Q2 outlook and the Nokia acquisition structure and economics in more detail.

Thank you, Juho. Hi, everyone. I'd like to cover three topics today, as Juho said. First, I'll take you through our Q1 2026 financial results. Second, I'll share some color on the financial profile of the business and provide our guidance for Q2 2026. And third, as Juho mentioned, I'll provide more details on the FWA acquisition structure and economics. To be clear, the discussion of our financial results for Q1 2026 and our outlook and guidance for Q2 and the full year 2026 are for Inseego only and do not include any of the Nokia FWA business. The acquisition is anticipated to close in Q4 2026, and we will provide the relevant financial information in that time frame. As we always do, we'll wrap up today by opening the call to your questions. Starting with our financial results. Q1 played out largely as expected, as Juho mentioned, and reflected the timing and transition dynamics that we discussed on the last call. We delivered year-over-year revenue growth, healthy gross margins and adjusted EBITDA within our guided range. And we did this while we continue to invest in the product, go-to-market and operating capabilities needed to support the larger organic growth opportunities ahead. On the top line, total revenue for Q1 was $34.3 million, up 8% year-over-year and driven by higher FWA volumes relative to the prior year period, along with a consistent contribution from our software services offerings. As expected, mobile was the larger dollar revenue contributor in the quarter at $16.7 million. FWA revenue was $5.3 million for the quarter. While that was a sequential decline from Q4 2025, that reflected the timing and customer-specific dynamics that we highlighted on the last call. FWA revenue was up meaningfully year-over-year, supported by higher carrier volumes and a broader customer footprint. Software services revenue was $12.3 million, continuing to provide a stable high-margin contribution to results. Moving down the P&L, non-GAAP gross margin in Q1 was 48.9%, up about 640 basis points sequentially, primarily as a result of a higher proportion of software services revenue. Non-GAAP operating expenses for Q1 were essentially flat to Q4 2025 at $16.9 million. As we discussed previously, this reflects the planned investment in sales and marketing and R&D in the quarter. These are deliberate investments tied to carrier ramps, portfolio expansion and broader go-to-market readiness for the second half of 2026. Adjusted EBITDA in Q1 2026 was $1.8 million or 5.1% of revenue, which was at the higher end of our guidance. That result reflects what we said on the last call: lower profitability in the first part of the year driven by front-end investment while preserving the setup for stronger scale and profitability in the second half of the year. Turning to the balance sheet, we ended Q1 with a higher-than-anticipated cash balance of $19 million from a large customer clearing their quarter-end accounts payable balances. We drove healthy working capital through the quarter and finished Q1 with a manageable debt balance of approximately $49 million. That is $8 million higher than the year-end balance on our successful elimination of all of the $42 million in outstanding Preferred Stock that we executed in January at a meaningful 38% discount. Let's now turn to Q2 2026 guidance. We continue to view 2026 as a growth year with front-loaded investment in the first half designed to position us for greater scale, stronger operating leverage and improved profitability in the second half of the year. That basic first-half, second-half dynamic remains unchanged and is playing out as communicated. As we said on the Q4 2025 call in February, framing Q1, the first half of the year reflects several dynamics. First, the second half of 2025 benefited from a strong FWA ramp with a Tier-1 customer and elevated mobile volumes tied to carrier promotions and ordering cadence. Second, we are in the early stages of launching several new FWA programs with our Tier-1 carrier customers, and those revenue ramps build over time rather than all at once. And third, our refreshed MiFi portfolio is setting up for contribution in late Q2 and beyond as we work through the delays Juho talked about. Against that backdrop, we remain positive on the outlook for both mobile and FWA in 2026 as we continue expanding our business with our Tier-1 carrier customers and broadening our routes to market. Looking at Q2 2026, we expect revenue to increase about 12% sequentially from Q1, driven by improved contribution from growth in FWA among both our carrier and channel customers, offset somewhat by a lower mobile quarter on MiFi, as Juho discussed. We expect software services revenue to remain consistent at approximately $12 million. From a profitability standpoint, we expect Q2 2026 adjusted EBITDA to be lower sequentially with the anticipated increased spend in sales and marketing and R&D before that spend lowers again and revenue ramps to drive higher profitability levels in the second half of 2026 as we highlighted. Pulling this all together, we're providing the following guidance for Q2 2026. Total revenue in a range of $36.5 million to $43.5 million and adjusted EBITDA in a range of $250,000 to $2 million. We see a higher range to the upside on revenue as we now have multiple new product launches and carrier initiatives in market; the specific timing of those can land on either side of quarter-end. Stepping back to the full year 2026, we continue to expect organic growth and see a path to deliver $190 million of revenue with the year building sequentially and profitability improving meaningfully in the back half as revenue scales. With that, we appreciate your time and support and are glad to open the call for questions. Operator?

The first question will come from Tyler Burmeister with Lake Street Capital Markets.

Steven, maybe first on the Nokia acquisition you guys announced last week. I'm wondering if you're able at this point, or if it's something we have to wait closer to closing, to provide a little more detail on exactly what that year two, year three profit sharing looks like, what some of the metrics are that you would hit for Nokia to participate in that?

Yes. We'll do both of those. We will provide more details in our filings, and we're happy to share that the basic structure of the profit share is based on the revenue performance of the acquired business. The way it works is that Nokia will be able to participate somewhere between 0% and 50% of the positive EBITDA that's generated from the business based on where the revenue of that business comes in.

Great. Maybe pivoting to the core Inseego business here in the quarter. Gross margins, as we look through the year, obviously there's going to be some mix headwind as your product revenue ramps in Q2 and the second half of the year. Wondering if you could give some thoughts on gross margins for the remainder of this year.

Yes. We'll tag-team on that as usual. I think you summarized it well. In the reported quarter, the margin was quite high, mostly on mix and a higher proportion of software because of the lower print in mobile and in certain FWA programs. As we roll out more products, this is really the first period in the company's history where we have multiple product launches across multiple carriers. The good news is we're looking to grow revenue and compete well, and that does bring some gross margin pressure insofar as rate. So that is the dynamic at play.

Yes. If you look at our revenue engines today compared to a year ago when there were really three products across two carriers, now we're ramping up three mobile products across all three carriers. These mobile products are positioned to capture a much larger share of the market at a lower price point, which will put some pressure on gross margin that you'll see reflected. Meanwhile, on FWA, we're encouraged by the ramp with our new Tier-1 carrier partner while we continue to realign the go-to-market with our existing large partner. Another major element is our targeted expansion to the MSO market. With these revenue drivers, we expect more diversified and expanded contribution. Additionally, in channel we're in the middle of the FX4200 product introduction to the market, and I expect to see a rebound effect there in Q2 and ongoing growth in addition to mobile, which has always been a strong driver for channel revenue.

I appreciate all that color. Maybe last one, if I can sneak one more in. I was wondering about your software business, Inseego Subscribe, which is the majority of that business with one carrier customer today. How might you think about the opportunity to expand that with Nokia's international carrier customer base post-close? Do you think there could be a likely opportunity for inroads with some of those customers?

Absolutely, the global footprint opens up more market opportunity for Subscribe as well. We've done heavy investment on the platform over the past year plus, and the immediate priority has been expanding customer engagement with other large Tier-1 carriers in the U.S. I'm very encouraged by how well the solution has been received. To recap, Subscribe is a full subscriber lifecycle management and business support solution, and it specializes in the most difficult part of the market, which would be our federal and SLED segments. That specialty is where we see differentiation and value continuing to be delivered. Under Steven's leadership, we have hired two new senior leaders for the business, Head of Engineering and Head of Product, and I'm happy with the traction those new leaders are driving to the platform.

The next question will come from Lance Vitanza with TD Cowen.

Two questions. The first is on the Nokia deal, which looks like there's a lot of potential upside. How should we think about the gross margin potential once you integrate that business? Is it a low-teens gross margin business or something in the 20% range? Just trying to think about what it could look like in a couple of years' time.

That's a good question, and there are two aspects: what the margin looks like at closing and what it looks like over time. A good portion of the customer base today is a high-velocity consumer residential model. The product is diverse and can go into business segments as well. The current margin profile of that business is more in the mid-teens on gross margin than in the 20s today, but we expect to be able to drive that higher over time once we close and realize synergies.

There won't be a single gross margin percentage for that business in practice. If you look at the book of business we're acquiring, you have everything from a very advanced millimeter-wave deployment in Australia with a significantly higher-margin contract to emerging markets and everything in between. I'm excited that, with Inseego becoming a global wireless broadband leader, we're viewed as a strong candidate to take that asset into residential deployments with our existing large Tier-1 carriers in the U.S. So there's significant growth opportunity for cross-selling Inseego's portfolio into Nokia's customer base and vice versa. That both grows revenue and can improve overall margin profile over time.

Just to follow up on that, regarding the go-to-market and distribution capabilities that Nokia can bring, is there a way to get that started before closing or at least position it so that when the deal closes you can hit the ground running? How should we think about the ramp in terms of their ability to add value from a distribution standpoint?

That's an excellent question. One of the key things we've discussed with Justin Hotard from the beginning was aligning on the market opportunity. As part of that, the notion of strategic go-to-market collaboration with Nokia continues beyond the close. We will establish joint account management and pipeline management processes and incentivize Nokia's global sales teams to continue hunting for opportunities for us. So on the go-to-market side, that is a very valuable asset. It's also worth noting that in the U.S. we already have the sales structure to capitalize on the opportunity.

Switching gears to regulatory and Washington policy: I've seen headlines over the past couple of months about FCC activity around supply chain and equipment. Are you getting any potential tailwinds from FCC actions regarding what can or cannot go into the supply chain these days?

Yes. The FCC ruling is focused on residential routers where the primary intended use case is residential deployment. Our solutions for FWA and our hotspots are primarily intended for enterprise use. They include manageability and security and enterprise feature sets. Our mobile products also cross-sell into the consumer segment. As the situation progresses, I see this as a potential upside for us because we can cater to both segments with products primarily intended for enterprise deployment. Another important point is the FCC criteria around 'produced in the U.S.'—which includes designed, developed and manufactured. We are unique in that we design and develop here in the U.S., and we have optionality for manufacturing. Our position as an American company with design and development in San Diego gives us a strong opportunity to capitalize on developments in this area.

The next question will come from Scott Searle with ROTH Capital.

I got on the call a little late, so I apologize. I'll stay away from supply chain issues because I can take that offline. Juho, looking at the second half of this year, you kind of back more revenue into the second half. How confident are you in the number of operators and programs you expect to be launching? Do you feel comfortable about the operator cadence of launches performing in the mid to second half of this year?

Thanks for joining. If you look at the revenue engines for the second half, we're in a unique position with three new hotspots launching and ramping by the end of the first half. On this call today, we announced we've secured a new value-tier win in hotspots with a large Tier-1 carrier. There's more work to be done to expand business, but the mobile portfolio going into the second half is in excellent shape despite the timing delays reflected in Q1 and the Q2 guide. On FWA, we're very encouraged by the performance and the partnership with our new large Tier-1 FWA customer while we realign go-to-market with our existing large partner. We also see great opportunity in the MSO space. We've done significant product and cloud work to become an ideal partner for MSOs for failover and other use cases. I view all of that as encouraging, and we see visibility to the $190 million target we set for the year.

Very helpful. On MSO customers, is that likely in the second half of this year? Also, in terms of the competitive landscape—given regulatory dynamics and security concerns—are competitors starting to dwindle and opening up share gains for you as you move from the high tier into mid and low tiers?

On the MSO engagement pipeline, it's very strong. The work left is final conversion, but we have readiness, pipeline and visibility. Regarding regulation, the SEC-type ruling right now is specific to residential routers and then was later identified to cover hotspots as a category. A couple of things work in our favor. First, our products are primarily intended for enterprise use and include manageability and security. Second, in terms of being 'produced in the U.S.,' we design and develop here in the U.S., which is a unique position. As carriers transition their portfolios, I would expect developments to be favorable for us. In the mobile market, we've consolidated the MiFi market with our mid- and mid-high tier portfolio launching across all three carriers, and we now position for higher volume capture where we previously had higher price points. The value-tier win we secured further strengthens our position and should enable increased share gains.

Got you. Very helpful. If I could, just two quick ones on Nokia. I imagine you've had some inbound engagement with customers on both sides of the acquisition. What's the operator response been with you taking over? Is there a long-term roadmap and direction to solidify existing relationships and enable cross-sell opportunities to bring higher-end mobile hotspots and other products into that carrier customer base? Also, on the gross margin front, I know it's early, but have you had a look at the BOM breakdown and do you have a roadmap to enhance the gross margin profile as you approach close and integration?

As part of due diligence, we met with top customers and since then we've had meetings with global customers, both existing and targeted for expansion with the Nokia FWA business. Feedback has been overwhelmingly positive. We're a known technology leader in the wireless broadband landscape. While we've been primarily North America-focused, our reputation, commitment and focus in wireless broadband are acknowledged. The strategic partnership with Nokia is a confidence builder for customers. We're well positioned to continue and expand the customer footprint for the acquired business. In discussions, we've also socialized the Inseego portfolio—enterprise FWA and mobile—and we've uncovered cooperation opportunities with international customers where they have business needs we can address. Translating that into ARR on the cloud side is a strong value proposition: managing an entire fleet—residential, enterprise or mobile—on a single platform. All of this makes me confident we can be the right home for the business, grow it and integrate it into a unified technology and product platform for our global customers.

On gross margin: as we said earlier, overall margin today varies across the customer base. A portion of the business is a very large high-velocity model with tremendous market share and volumes in the millions of units, which results in mid-teens gross margins. The Nokia engineering and product quality has enabled them to add higher-margin customers with contracts in the 20s. Our plan is to build off the strong, efficient foundation and add higher-margin business to drive the overall margin profile higher over time. That trajectory is similar to what we've done domestically and hope to replicate globally.

The key point is product and market complementarity. On the engineering and product side, some companies make their own connectivity modules, software platforms and device roadmaps. Now we have the opportunity to create one platform across all levels and drive significant synergies in device roadmap and development with a unified team. That's one of the key elements we believe will contribute to success with the acquisition.

This concludes our question-and-answer session and conference call. Thank you all for attending today's presentation. You may now disconnect.