Now down around 90% from its COVID-induced highs, I will be removing INSG from my interest list at the end of the quarter.
Is there much room to go lower and is bankruptcy a possibility? Absolutely. Heavily dilutive convertible financings are par for the course with these folks, and the company’s 2025 notes are no exception. Having gone through all this in the past, why they didn’t just do a massive secondary when their stock was trading in the 20’s and get rid of all the idiotic capital structure distractions is just beyond me. Yet here they are, cash balances dwindling, payables on the rise, revenues trailing estimates, losses mounting, and that huge surge of buying in the past, they now find themselves in an unenviable position. With the stock now in the $2’s and the cash burn not abating as planned, they are sure to get nervous and go for financing that is even worse than what they currently have. Just pathetic. A few highlights from the quarter:
Remember the customer diversification strategy? 2 customers now make up 77.2% of all revenues. If you take the SaaS revenues out of it, these 2 customers are responsible for around 90% of all their hardware revenues.
Verizon revenues are at a 4-year low.
On the bright side, T-Mobile has now surpassed Verizon as their largest source of revenues. On the down side, without T-Mobile, revenues would be back to 2016 levels.
Despite chatter of opportunities with European carriers, European revenues were down year over year.
Inventories remained elevated despite a $12M decline in hardware revenues. Inventory write-downs are not unknown for these folks.
5G revenues as a percentage of total revenues was 44%, down from 58% in Q4.
Hardware gross margins declined to 21.3%, from 21.7%, from 23.5%, from 23.3%, from 22.2%, so at the low point for the year and actually going back to the start of COVID.
Receivables declined by $5M, which is good, but it was all from their top 2 customers plus $2M. So the rest of their customer base is actually doing much worse on paying their bills.
Analysts on the call were concerned with the cash burn and when they were going to be able to achieve at least neutral free cash flow. Even they appear to notice the pushing out of the timeline.
I have followed this company around through name and management changes for close to 20 years now. What is happening to them now is not unique in their history, nor is it unique to any single-product consumer electronics product manufacturer. I hope they survive and maybe, come 6G, we’ll all have another chance.