Conference Transcript - INSG 2026-05-27

Lance Vitanza, Analyst — TD Cowan

Oh, hello. I'm Lance Vitanza, Senior Analyst at TD Cowan, and I'm delighted to have the Ensego team with me here. Of course, to my left, Yuho Sarvakis, and to his left, the CEO, Yuho, and to his left, Stephen Gadoff, the CFO. So thank you, gentlemen, both for being here with us today. Great to be here again. I can't believe it's been a year. I know, right? Time flies. So look, we were talking about this before we got started, right? So a month ago, the stock was was at 15. Two things have happened since then. You announced a transformational transaction with Nokia in which revenues are going to double, and Nokia winds up being your number three shareholder. That's good. Then you reported earnings. There was a post-Nokia bump from 15 to 20, and now the stock's at 12. Now we've had war. All kinds of things going on. The reason I'm setting it up this way is I'd like to focus on the earnings first, because I think that that's clearly what is driving the stock in the near term. And then we'll clearly get into Nokia as well. So the quarter was in line. We had 8% year-on-year revenue growth. We had a 300 basis point bump in gross margin to nearly 49%. But the stock reaction suggests investors remain worried. So what do you think is the most underestimated thing here as we think about the setup for the rest of 2026?

Juho Sarvikas, CEO

You know, just to acknowledge first that I think the reaction is somewhat to the Q2 guidance. So we were guiding that to the 40 range midpoint. Perhaps there were expectations higher. are quite frankly our original expectations were hardened that there's two elements that we're working on I'm sure we'll talk about here we had an execution delay on our MiFi portfolio which we're launching now across all three carriers but that's something that is a timing issue more than anything else and then secondly our main FWA partner is still realigning on the go-to-market side but if you look at like the fundaments of the business and the growth that we're set to drive here. The big thing really is that we're going from a one-by-one matrix when it comes to customers and products to now having six products across all three large carriers in the US. And then the next wave of expansion is really with the AMSOs, where there's a huge

Lance Vitanza, Analyst — TD Cowan

opportunity with 5G as well. So you reiterated the 190 million full-year revenue path, right? So 2Q guidance, as you mentioned, right? There's some timing issues that are going on there. What are the two or three highest confidence drivers that give you comfort that you're going to get to the 190 million for the full year? If I look at that

Juho Sarvikas, CEO

1.1, we have the broadest mobile portfolio in the company's history. We actually also announced that we'll expand further from there in the future. But if you look at going into Q3, we're now covering the sweet spot in the portfolio across AT&T, T-Mobile and Verizon which is a great platform to continue to drive mobile and growing mobile quite frankly and then the other two key elements really one is the recovery with our existing large customers so while while we've done a great job in wrapping up a new tier one carrier in FWA the existing large guy continues to falter so what was supposed to be 1 plus 1 equals 2 we're not quite there yet but that's something that we we foresee going into Q3 in addition to adding on MSO customer on top there's been a lot of great work by the team on product solution readiness getting a commercial framework in place to start engaging with the large cable guys here in US so just to sort of

Lance Vitanza, Analyst — TD Cowan

paraphrase and recap a little bit so on FWA you cited the disruption at a large customer that was tied to enterprise go-to-market reset but you also secured a commitment from this customer for next-gen FWA platform what needs to happen to re-accelerate that account and and I guess the timing you're saying is

Juho Sarvikas, CEO

Q3 yeah yeah look the movie that played out late last year was a complete overhaul of the leadership team at this specific carrier particularly on their enterprise team which then of course goes to the next thing that you logically do is to revisit your strategy take a look at like how should we go to market and all of that and that process and realignment has taken longer than we expected we were expecting to see that bounce back already in q2 but i think there's good activity now to uh towards q3 in getting where where we need to be and then to your point i think a strong testimony of the relationship is the new product that we've won an award for and will be launching this year that product will be the fastest FWA in the market, not only in the portfolio of this carrier, but U.S. wide. So that's technology leadership, strong partnership with the customer. So the thing that needs to come back together, like you said, is really the go-to-market motion and making sure that we have the right incentives and programs in plan for their field teams.

Lance Vitanza, Analyst — TD Cowan

So it sounds like then the issues, the delays, to the extent that they're delays, were really on the customer side and not execution-oriented at Enzigo?

Juho Sarvikas, CEO

We had both. So mobile was internal, let's call it self-inflicted, and something that we've done a lot of work on. I'm sure we'll touch on that later in the conversation. Meanwhile, the FWA performance with the large customer was really external. Yeah, and I was really referring... Outside of our span of control.

Lance Vitanza, Analyst — TD Cowan

Okay, so then to pivot to mobile, so you've launched, obviously we've talked about two of the three tier one carrier hotspot models, and now we have the third expected late July, plus we have a new low-tier MiFi win. And so how should investors think about volume versus margin as we sort of ramp up with the lower tier product?

Steven Gatoff, CFO

Yeah, well, tag team if that's cool. To the conversation we have on mobile specifically, as you always says, it's a fixed pie, essentially. And we're growing because we have the better product and we have new carrier relationships that are coming to fruition. And so we are winning share and growing the business. But the gross margin for mobile that used to be in the 20-something range is now in the teens So there is margin compression on mobile But there's growth in total revenue because you have a unit volume growth So we see a total revenue curve growth was a combination of margin offset by higher volume and so

Juho Sarvikas, CEO

What do you get out of it in the bottom line, right? So how do we drive more marching capture overall and in this case? There is a volume volume ASP margin trade-off. The other thing I'll say on mobile is that if you've got our market share, let's say last year when we were exiting the year, think 25%, exiting this year will be in a much higher market share out of that like Steven was saying, fixed buy. So if we call it 2 million units, our run rate will be around 50% market share at the end of the year before we expand the portfolio further. And there's also opportunity that we're engaged on the premiums here so in addition the customer expansion and getting all three guys like we've done now with the large carriers I also want us to see see us have a good better best lineup in the mobile category so while while that market segment is not growing unlike the FWA the job really is to drive consolidation in that space and so far so what so far we've been training pretty well so it sounds like then it's not just adding customer I mean adding

Lance Vitanza, Analyst — TD Cowan

customers is huge but it's also doing more with the existing customers correct

Juho Sarvikas, CEO

Right. And that's where we have the new value segment when it's one of the existing customers.

Lance Vitanza, Analyst — TD Cowan

And so just to sort of go back to something that Stephen, you said about the margin compression from the mid-30s. I think you said it was from the mid-30s to kind of mid-20s today. I know that this has been happening forever. But for those of us that are less familiar with that trend, is this just sort of the unending price compression on a unit basis that we've seen, at least I feel like I've seen in my entire career? Or is there something specific?

Steven Gatoff, CFO

Yeah, on mobile hotspot, yes. And it's different. It is a little bit kind of tale of two cities where mobile hotspot is what you said. But we see continued strong gross margin on the organic FWA business. That's more enterprise, a little bit of channel. It's higher in the mid to high 20s. And so that's a higher gross margin business by nature.

Lance Vitanza, Analyst — TD Cowan

But on the compression piece, there's nothing, that is not, that's not something you can plan your way around.

Juho Sarvikas, CEO

It's not something that's... I think it goes also with the maturity of the technology cycle, so 5G is now, what, almost at 6G, we're a couple of years out, so what's very typical is that with the technology cycle, you also see an effect on the cross-margin, right, and we have historically done the best when things get really difficult, very complicated, and it's early adoption of new technology, but now the new muscle for the company that we've been building since the beginning of last year is the ability to drive scale, and win at scale in the marketplace.

Lance Vitanza, Analyst — TD Cowan

And then how does the software piece, how does that impact margins and what can we expect, or how much of that was baked into the commentary a minute ago when you said that you think that there's sort of the margin offset?

Steven Gatoff, CFO

Yeah, the software has two pieces to it. It has the Enzigo Connect, which is our, call it device management software for Enzigo devices. And then there's Subscribe, which is the subscriber management across all devices for carriers. that we've taken the ladder from what used to be historically at Nsego as a professional services function for a carrier, and we've really, over the last year, productized that and turned that into a platform that we're having conversations with other carriers about.

Juho Sarvikas, CEO

The other key push that we have from a product strategy standpoint of view in the hotspot or mobile category is that it now has the same routing capabilities as our FWA. So it's actually very disruptive looking from a capability standpoint of view compared to the previous generations. And with that, what we're targeting also to do to see if we can drive a higher attach also in mobile. Meanwhile, in FWA, when our key customers sell it, it typically becomes bundled with our cloud solution. So that reduces the friction when the end enterprise is taking it to adoption. And quite frankly, if you're doing an enterprise deployment, you need the manageability to begin with.

Lance Vitanza, Analyst — TD Cowan

So as the attach rates go up, though, there should be a natural uplift on margins overall, right?

Juho Sarvikas, CEO

Just as the mix shift. There's definitely an install base. Play here where over time we'll have we'll have growth in in connect and like Steven was saying. I think the Subscribe is like a crown jewel that we likely should be talking more about Okay, and the work that we've done now to make what essentially was a professional services with a single large customer To a true platform and engage in the broader community. We're getting really good feedback

Lance Vitanza, Analyst — TD Cowan

So okay, so let's get to the fun stuff the Nokia P at least for me that is So you've called this a transformational acquisition Obviously, it more than doubles revenue. It makes you global instantly. What do you think, though? There's a lot of different benefits from my standpoint, but what do you think is the most important strategic benefit? And I'm thinking you've got the global customer access, you've got portfolio breadth, platform unification,

Juho Sarvikas, CEO

or is it something else? I think the first thing is the global reach. Second, I would mention synergies, and maybe, Stephen, you can talk into that a bit more in terms of what we expect on that front. but look the big thing here is that CEO of a company of our size might wake up in the morning worry about how to grow the company we won't have to worry about that because now we have these large global anchor customers that we can use as a base to build or reinforce a global go-to-market machine and the associated capabilities and with that we can expand the Nokia FWA business as it is which I expect we'll be able to do but then very importantly cross-sell our mobile products and our enterprise FWA to the global market. Meanwhile we can take the Nokia which is more residential product. It's an excellent portfolio indoor and outdoor but their end market has been more residential so they deployed that with the large customers here in the US where we have excellent relationships. But I really think that this global reach, global anchor customers is something that will be a really valuable strategic asset for us that goes beyond the conversation that we're having here as we look at future

Lance Vitanza, Analyst — TD Cowan

strategy optionality anything dad okay so the um from a cultural standpoint i know you obviously used to work at nokia um how do you think that this is likely to play out how have your conversation or have you had conversations with the team there and if so you know what's how would you describe the you know the energy level excitement level are people please you know the um the big thing

Juho Sarvikas, CEO

for me here is that i know the nokia engineering capability but also the quality of their processes across the board i think there's a lot there where um it's not going to be one where we're going to do the in seago way but we're going to pick the best of both worlds and the way i look at it is that yes we we have a strong robust company as we are today in seago but it's an opportunity to create something new as well by adopting best practices from from both companies The other thing is just like from an employee experience standpoint of view, the capital markets day was in November, where it was announced that there's this portfolio of businesses that will be divested from Nokia, which of course like was a lot of uncertainty for the employee base. So now they have certainty, they know that they have a good home. As a part of the due diligence, we had the chance to meet with the teams globally, at least the key leadership. I'm actually traveling the next two weeks, so it's the event to meet with some of our new european colleagues um so i think i think it's great like the question is that how do you harness this process discipline structure and the capability that they have to operate at a large scale because they are number one globally in fwa but then like i like to think of ourselves as american technology entrepreneurs if you will so like how do you create the benefit plan where you're aggressive you're innovating you're bold you're making moves but then at the same time adopt the best practices from from our new colleagues at Nokia and you know

Lance Vitanza, Analyst — TD Cowan

financial stuff aside like how long of an integration do you expect this will will be is this something that multiple years or is it you know six months and done so so think of it we're targeting October 1 to close so right now we're

Steven Gatoff, CFO

kind of in pre-integration planning and to use good point there's a ton of work and you asked earlier like they're very engaged we meet multiple times a week They have dedicated integration managers and leads a dozen people from the Nokia side or who work with us constantly And so we're doing all the work now to get to closing and then then you'll have integration and Our view is really approaching that as Kind of a one-year time frame to as we've said publicly before to get to break-even And to turn the business and and to the conversation earlier around synergies on the cost side because it is about running the company as a global engineering and a global product management and global supply chain and So it is putting two businesses together that have an unbelievably high amount of overlap and cost and people what I really liked about the discussion with

Juho Sarvikas, CEO

Justin and the Nokia leadership team was that we were immediately on the same page in terms of how important the business and customer continuity is and and what was important for them now as they're focusing very successfully so on the infrastructure side of the AI super cycle and making sure that there's a good home for the edge and of course like the partnership the whole concept of the deal reflects all of that right so they will benefit from our success like Steven was saying we have that one-year period to make sure that we do a great job with the integration associate TSA so I think we feel we feel about the risk mitigation activities in the plan and the journey ahead any risk

Lance Vitanza, Analyst — TD Cowan

to whether or not this transaction closes not that we see now I yeah yeah

Juho Sarvikas, CEO

I don't we don't believe that there's any regulatory or other major

Lance Vitanza, Analyst — TD Cowan

considerations and so in terms of the economic bridge and I know it's obviously early I'm not going to ask you about you know what to look for on the back end of the merger but you know you do have a one-year 38 million dollars of sort of a guaranteed EBITDA backstop, so to speak, from Nokia, and then there's a profit sharing on the back end of that. I think there may be, in some of the conversations that I've had, there's some confusion about the extent to which the incentives for Nokia are tied to revenue versus tied to profitability. Sure, yeah. So the make-hole, to your point, the first year,

Steven Gatoff, CFO

run the business, deliver the products, transition, put them together, that make hole is based on the EBITDA of the acquired business. So what that business does is, to your point, backstop to get to zero. That's year one. Year two is a profit sharing of the profitability EBITDA from that business with Nokia that is based on the revenue of that business. So if they hit the revenue numbers that we entered the deal into they're very simple like there was management presentations they're awesome you do that and then we'll share the EBITDA with you that they can get upwards of 50% of that EBITDA if it hits the number and if it doesn't it could be zero but it don't be acquired that's

Lance Vitanza, Analyst — TD Cowan

the point it's the EBITDA that's right yeah there's no way for them to to load up on unprofitable consumer FWA and then clawback EBITDA dollars that were

Steven Gatoff, CFO

No, no, no, it's just it's profits generated from the acquired business to the extent they and I get it

Juho Sarvikas, CEO

And look, you know the lead times in the industry So if we close October 1 it will be a year before we're all one joined hardware platform software platform and device roadmap So it's really it's really designed to protect and give us the time to do it properly and Create and create a profitable new business. Is it pop?

Lance Vitanza, Analyst — TD Cowan

I mean, I know it's obviously early you haven't closed the transaction yet, but is it possible to think about which of the synergies you expect you'll get first? I would assume it's go-to-market, you know. Probably, so the two big

Steven Gatoff, CFO

pieces, there's the revenue go-to-market selling, revenue generating synergies, if you will, but then there's also the cost-saving synergies of putting two businesses together. That's likely the first to come to fruition, right? As you close the business and you put together two engineering teams and product management teams, those are probably the two biggest areas.

Juho Sarvikas, CEO

We're not going to go and discontinue committed customer programs day one to be able to drive the synergy, so we need to have that complete and then transition to one team, one platform, and everything else. On the go-to-market side, in the US we have very robust sales teams, or I should say North America, and customer relationships for APAC, Europe, Middle East, Africa, some of the key markets, we're building virtually brand new. There's people and key roles that are coming over from the transaction, but there's also new ones to resource. So the go-to market as in the sales motion, global perspective, less synergistic, like Steven was saying, from a revenue synergy with the cross-sell. We do expect, we're not assuming in the base scenario any of the revenue synergies than the cross-selling, but that's obviously something that we

Lance Vitanza, Analyst — TD Cowan

have a keen eye on. And I know that you mentioned that When Nokia announced that they were going to do something with this business, right? I would imagine that that's certainly put you know put a damper on the revenue growth and maybe even turn the revenue growth to negative revenue growth that the acquired Do you think that is it possible that that gets turned around before you take over or would that be too optimistic?

Juho Sarvikas, CEO

I mean now that people know that our our 200 million number that we put out there is assuming existing run rate So that's not assuming any growth, new customer, existing run rate.

Lance Vitanza, Analyst — TD Cowan

At closing, $200 million? Or no? Now. Okay, now.

Steven Gatoff, CFO

$200 based on the Q1 run rate.

Lance Vitanza, Analyst — TD Cowan

Yeah, Q1 times more, 200. But you're not making any statement as to whether or not that number will be higher, lower, or the same in October when you close? That's right.

Juho Sarvikas, CEO

Yeah, so the key thing here really is that we also know which customers walked away. So, of course, it would be a great idea to go and have an intro discussion. those customers and say like hey we're here here's what we do here's the partnership with nokia and here's how much more we can do for you now on the pack of the broader portfolio broader engagement let's talk so that that has been that has been key and of course we'll wait for october 1 before we operate the business or do any of that but these initial introductions i think really really favorable reception western player known plant brand known technology leader no reason to stop

Lance Vitanza, Analyst — TD Cowan

to wait to have those conversations. It sounds like those are already ongoing.

Juho Sarvikas, CEO

Yeah, we've definitely done the introductions.

Lance Vitanza, Analyst — TD Cowan

And so just when you say walk away, I had the sense that it wasn't so much that people were walking away as it was just saying, hey, we're going to take a pause here and we're going to just wait to see how things shake out. Is that sort of more accurate or no? Is it really the case that people sort of said like, hey, I'm moving away from Nokia and now you've got to go get them and bring them back? Well, some deals that were getting done

Steven Gatoff, CFO

in the December, January, February time frame that were in process got paused and got done away. Okay, I see. And so, because they needed to fulfill a deal in January and they were like, hmm, I don't know what's going to happen.

Lance Vitanza, Analyst — TD Cowan

So it wasn't just pushing stuff to the right necessarily. Combination. Okay, I got you. Okay, so maybe just in terms of some additional upside drivers looking ahead here, software services, we talked about that just a little bit, but I want to kind of come back to that. You know, you highlighted Nokia's global footprint, and that obviously has the ability to really expand that with strong reception so far. But, you know, what's the plan to broaden software and services beyond the existing customer base? And, you know, how should we be thinking about how relevant that might ultimately be to the broader story?

Juho Sarvikas, CEO

I think twofold. One, so our Insego Connect, and subscribe for that matter, centers around the carrier. and now we have all of a sudden access to all of the large carriers globally so I think it will be very nice to develop a broader strategy from wherever today with Insigo Connect which is device and network management for our own enterprise products but now we'll be participating in residential and we could do something broader with that same carrier audience when it comes to device network management I'm sure you can name multiple consumer facing features whether it's content filtering or other elements so there's there's a lot there's a rich domain that we can now look at with a much broader lens than we've done previously so that's uh that's something that we're exploring and then on on subscribe um now that we've done the investment and made it a true platform in in the sense um we're getting really good feedback in segments where you have the most complicated customers large enterprises with difficult customization requirements, unique billing requirements, and then anything really that has to do with government or federal sled categories, where we have a lot of unique IP in understanding how the contracting works, how the spend management works, and everything else. So those discussions we've already started some time ago in the U.S. to identify areas where we can have value to new partners with that solution.

Lance Vitanza, Analyst — TD Cowan

So what about the sort of, you know, the impact potentially of tariffs and or, you know, kind of by American, you know, increasing sentiment that that's something that's a strategic priority, at least for the administration that's in the White House these days. And I'm thinking about that as more of a potential positive for your base business than anything else. But are you seeing any positive or negatives from either the tariffs or the, you know?

Juho Sarvikas, CEO

Look, I think the FCC ruling that started with presidential routers. So if you have a router that's intended for residential use case It's a primary primary end market needs to be designed develop and manufactured in the u.s. I Think you might already know this but this limited manufacturing u.s. Today But we are unique in that we have design and development resources in the u.s. So to create that yes and then and then manufacturing I'm not gonna say it's super easy but it's easy the industry just needs to agree that now we're going to increase the manufacturing value add and everybody needs to accept that fact we're already doing the difficult stuff we can easily move our production to US but let's see how that environment develops the way it works today is that if you already have FCC approval you don't need to do anything so it's only a new products that you plan to take to US so it's going to catch potential future competition devices trying to enter us that do not tick those three boxes which none of them would no one in the industry does today so i think that's that's a really interesting thing that we're watching super closely the other thing i'll mention is that today our end market is enterprise if you look at our mobile over 60 sales tends to an enterprise end customer our fwa is exclusively enterprise so as we approach fcc with filings which we've done since all of this came to effect We have our literature. We have our end market. We have everything pointed towards enterprise So we have we have not had any reason to engage on this of course now with Nokia residential products When the time comes we'll we'll engage on that discussion, but we have very flexible resourcing strategy We can choose to work do the work in us and we'll continue to closely monitor how the manufacturing ecosystem develops

Lance Vitanza, Analyst — TD Cowan

So it's amazing that we, I mean, two years ago, we could not have gotten 25 minutes into a conversation about Ensego without talking about balance sheet and liquidity. And so now it's easy to ignore. But I do want to just ask you, as we think about liquidity, sources of working capital and so forth over the balance of the year, obviously we're not worried, but what should investors expect to see, if anything, in terms of sources of liquidity, whether or not there's credit facilities that get drawn to support the pending merger or capital raising and so forth?

Steven Gatoff, CFO

Yeah, you just named them all. That's spot on. So those two pieces, one, when the acquisition closes, we in Sego receive a $10 million investment from Nokia. So that's helpful. That's incoming cash. We also are making investment in inventory and in the launch of new products and to drive the growth that we see in the back half of the year. So that is a use of capital. And we are funding that and would expect to start drawing on credit facilities. We have a $20 million revolver that was put in place many months ago. And so that is part of the capitalization over the next six months. GARY GENSLER- Gotcha.

Juho Sarvikas, CEO

The other key thing to note is with the memory dynamic. I keep saying that I'm actually very happy with what the team has done in terms of creating a buffer. So that's also informing the cash conversation, of course, like, how do you strike the perfect balance? We'll see what the prices are first half of next year.

Lance Vitanza, Analyst — TD Cowan

Not sure if they will be coming down yet. So actually, you got me thinking about Nokia now, right? They're at 11% shareholder, I think you've said, right? On the back end of this transaction. So what does that mean in terms of their involvement, corporate governance? Are they on the board? Are they, you know, how? No, they're not, no board seat. No, they're a common

Steven Gatoff, CFO

stockholder, so there's no preference on their shares or super voting rights. They're a passive commercial partner, but passive shareholder. Passive shareholder. And also from a strategic

Juho Sarvikas, CEO

standpoint of view, two important things. One is this go-to-market collaboration, which we announced, so we'll have a joint sales pipeline incentive training program where we'll continue to leverage is the big Nokia machine. They're super deep across all of the global carrier accounts. So that's going to be helpful for us. And then secondly, technological operations. So as we get towards the AI-ran, distributed AI, computing infrastructure, 6G, all of that, the CPE will become more of an integrated part of the network. Because if you look at today, the network and the CPE kind of know what one another are doing. But it's not a part of the same management stack. It's not pervasive. But that world, there's a lot of opportunity for us to lead and also differentiate together with Nokia.

Lance Vitanza, Analyst — TD Cowan

So we just have another couple of seconds. But before we finish, I do want to ask you, what is, if there's just one thing that you want to leave in the mind of the investor that's maybe taking a fresh look or a new look at Ensego, how would you kind of characterize the opportunity?

Juho Sarvikas, CEO

Look, I think we've done a great job in what we said a year ago, which is to diversify the revenue base and take a very predominant role. at the enterprise wireless edge here in US and now what we're doing on top of that is that we're unlocking this global opportunity with strong anchor customers that we can build that will fund the investment and build the required global infrastructure as a huge benefit doubling the company revenue and enabling the cross-sell so if you look at from addressable market that we have now than what we've been talking about just like a couple of months ago completely different picture. There's a good path to further expansion with what I would consider our organic business but then this new global opportunity that will materialize first of October really changes the company from addressable market growth trajectory everything else standpoint of views. I think we're super excited on the journey ahead and now it's really all we need to

Lance Vitanza, Analyst — TD Cowan

do is to execute. Thank you very much for being here we're gonna have to leave it here but I really look forward to continuing to follow the progress of the

Juho Sarvikas, CEO

company. Thanks so much, Lance. Thank you.