Inseego Continues Debt Reduction and Capital Structure Improvements

Rhea-AI Summary

Inseego Corp. (Nasdaq: INSG) has announced significant steps to improve its capital structure and reduce debt. The company has:

• Paid down $9.5 million (49%) of its short-term loan
• Entered an agreement to exchange $5 million of 3.25% convertible notes due 2025 into long-term debt and equity
• Reduced the outstanding amount under the Loan Agreement to $10 million
• Repurchased or agreed to exchange approximately 91% of the 2025 Convertible Notes

These actions demonstrate Inseego's commitment to strengthening its financial position and generating strong cash flow. The remaining balance of 2025 Convertible Notes is about $14.9 million, which the company plans to repay or refinance by May 2025.

Positive

• Paid down $9.5 million (49%) of short-term loan
• Reduced outstanding Loan Agreement amount to $10 million
• Exchanged $5 million of 2025 Convertible Notes into long-term debt and equity
• Repurchased or agreed to exchange 91% of 2025 Convertible Notes
• Strong cash flow generation reported

Negative

• Remaining balance of $14.9 million in 2025 Convertible Notes to be addressed

Insights

Financial Analyst

Inseego's latest financial maneuvers demonstrate a strategic focus on debt reduction and capital structure improvement. The company has made significant strides by paying down $9.5 million, or 49%, of its short-term loan, reducing the outstanding amount to $10 million. This move, coupled with the agreement to exchange $5 million of convertible notes, shows a proactive approach to balance sheet optimization.

The exchange of convertible notes for long-term debt and equity warrants is particularly noteworthy. It effectively extends the debt maturity profile and potentially reduces future cash outflows. The company has now addressed 91% of its 2025 Convertible Notes, leaving only $14.9 million to be refinanced or repaid by May 2025. This restructuring should improve financial flexibility and potentially lower interest expenses, positively impacting future earnings.

Market Research Analyst

Inseego's debt reduction strategy aligns with current market trends where investors are increasingly scrutinizing company balance sheets in the face of economic uncertainties. The company's ability to generate strong cash flow to fund these debt repayments is a positive signal, potentially indicating improved operational efficiency or market position in the 5G technology sector.

The issuance of warrants as part of the debt exchange could lead to future dilution for existing shareholders if exercised. However, the $13.77 exercise price suggests management's confidence in future stock appreciation. This move may be viewed favorably by the market as it demonstrates management's commitment to aligning their interests with shareholders while addressing near-term debt obligations.

Tech Expert

As a leader in 5G mobile and fixed wireless solutions, Inseego's financial restructuring could have positive implications for its competitive position. By reducing debt and improving its capital structure, the company may be better positioned to invest in R&D and product development, important factors in the fast-evolving 5G market.

The tech sector, especially in 5G, requires significant ongoing investment to maintain a competitive edge. Inseego's improved financial flexibility could allow it to pursue strategic initiatives or partnerships more aggressively, potentially enhancing its offerings to mobile network operators and enterprise clients. This financial maneuvering, if coupled with strong technological advancements, could strengthen Inseego's market position in the highly competitive 5G solutions space.

Company pays-down $9.5 million, or 49%, of short-term loan to further reduce debt and improve Balance Sheet; Company also signs agreement to exchange additional $5 million of Convertible Notes into long-term debt and equity

SAN DIEGO--(BUSINESS WIRE)-- Inseego Corp. (Nasdaq: INSG) (the “Company” or “Inseego”), a technology leader in 5G mobile and fixed wireless solutions for mobile network operators, Fortune 500 enterprises, and SMBs, is continuing to improve its capital structure and reduce its total debt. Today, Inseego announced that it has (i) voluntarily paid-down an aggregate of $9.5 million, or approximately 49%, of the Company’s outstanding short-term loan, and (ii) entered into a binding agreement (the “Exchange Term Sheet”) with another holder of $5 million in principal amount of the Company’s outstanding 3.25% convertible notes due 2025 (the “2025 Convertible Notes”) to exchange the 2025 Convertible Notes into long-term debt and equity.

“We’re executing on our commitment to reduce our total debt and improve our capital structure,” said Inseego Chief Financial Officer, Steven Gatoff. “The business is generating strong cash flow and with the improved liquidity, we’re glad to be able to pay down total debt. The Company continues to engage with convertible bondholders and right-size the capital structure through these exchanges.”

The Company has also voluntarily prepaid, at no premium, an aggregate of $9.5 million to-date of the Company’s obligations under the Loan and Security Agreement, dated June 28, 2024 (the “Loan Agreement”), among the Company, South Ocean Funding, LLC (“South Ocean,” an affiliate of Tavistock Group), certain participant lenders (the “Participating Lenders”) and certain subsidiaries of the Company. As a result of these repayments, the amount outstanding under the Loan Agreement has been reduced to $10 million.

Pursuant to the Exchange Term Sheet, the convertible note holder agreed to exchange its 2025 Convertible Notes for (i) $4.25 million in principal amount of new long-term senior secured notes (the “New Notes”), and (ii) warrants (the “Exchange Warrants”) to purchase an aggregate of 370,000 shares of the Company’s common stock.

The New Notes and the Exchange Warrants to be issued pursuant to the Exchange Term Sheet will be the same as the new long-term senior secured notes and warrants, respectively, to be issued pursuant to the separate binding exchange term sheets previously entered into between the Company and certain other holders of 2025 Convertible Notes, as described in the current report filed by the Company on July 1, 2024, except that the exercise price of the Exchange Warrants will be $13.77. The Exchange Term Sheet expires on December 31, 2024, and it is anticipated that the transactions contemplated by the Exchange Term Sheet will be consummated by that time.

To date, the Company has repurchased or entered into binding agreements to repurchase and/or exchange approximately $147 million, or 91%, of face value of the outstanding 2025 Convertible Notes. As a result, the remaining balance of the 2025 Convertible Notes that are not subject to an exchange agreement is approximately $14.9 million, which the Company expects to repay or refinance by May 2025.

As previously disclosed, affiliates of South Ocean and North Sound Ventures, LP, one of the Participating Lenders, may be deemed to beneficially own more than 5% of the Company’s outstanding Common Stock, and Philip Brace, the Company’s Executive Chairman, is the other Participating Lender. James B. Avery, a member of the Company’s Board of Directors, currently serves as Senior Managing Director of Tavistock Group, an affiliate of Lender.

About Inseego Corp.

Inseego Corp. (Nasdaq: INSG) is the industry leader in 5G Enterprise cloud WAN solutions, with millions of end customers and thousands of enterprise and SMB customers on its 4G, 5G, and cloud platforms. Inseego's 5G Edge Cloud combines the industry's best 5G technology, rich cloud networking features, and intelligent edge applications. Inseego powers new business experiences by connecting distributed sites and workforces, securing enterprise data, and improving business outcomes with intelligent operational visibility---all over a 5G network. For more information on Inseego, visit www.inseego.com #Putting5GtoWork

Cautionary Note Regarding Forward-Looking Statements

Some of the information presented in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address expected future business and financial performance and often contain words such as “may,” “estimate,” “anticipate,” “believe,” “expect,” “intend,” “plan,” “project,” “will” and similar words and phrases indicating future results. The information presented in this news release related to the planned exchange of a portion of our 2025 Convertible Notes and other statements that are not purely historical facts are forward-looking. These forward-looking statements are based on management’s current expectations, assumptions, estimates, and projections. They are subject to significant risks and uncertainties that could cause results to differ materially from those anticipated in such forward-looking statements. We, therefore, cannot guarantee future results, performance, or achievements. Actual results could differ materially from our expectations.

Factors that could cause actual results to differ materially from the Company’s expectations include: (1) the Company’s ability to negotiate, execute and complete exchange transactions with respect to its convertible notes, (2) the Company’s ability to make payments on or to refinance its indebtedness; (3) the Company’s dependence on a small number of customers for a substantial portion of our revenues; (4) the future demand for wireless broadband access to data and asset management software and services and our ability to accurately forecast; (5) the growth of wireless wide-area networking and asset management software and services; (6) customer and end-user acceptance of the Company’s current product and service offerings and market demand for the Company’s anticipated new product and service offerings; (7) our ability to develop sales channels and to onboard channel partners; (8) increased competition and pricing pressure from participants in the markets in which the Company is engaged; (9) dependence on third-party manufacturers and key component suppliers worldwide; (10) the impact of fluctuations of foreign currency exchange rates; (11) the impact of supply chain challenges on our ability to source components and manufacture our products; (12) unexpected liabilities or expenses; (13) the Company’s ability to introduce new products and services in a timely manner, including the ability to develop and launch 5G products at the speed and functionality required by our customers; (14) litigation, regulatory and IP developments related to our products or components of our products; (15) the Company’s ability to raise additional financing when the Company requires capital for operations or to satisfy corporate obligations; (16) the Company’s plans and expectations relating to acquisitions, divestitures, strategic relationships, international expansion, software and hardware developments, personnel matters, and cost containment initiatives, including restructuring activities and the timing of their implementations; (17) the global semiconductor shortage and any related price increases or supply chain disruptions, (18) the potential impact of COVID-19 or other global public health emergencies on the business, (19) the impact of high rates of inflation and rising interest rates, and (20) the impact of geopolitical instability on our business.

These factors, as well as other factors set forth as risk factors or otherwise described in the reports filed by the Company with the SEC (available at www.sec.gov), could cause results to differ materially from those expressed in the Company’s forward-looking statements. The Company assumes no obligation to update publicly any forward-looking statements, even if new information becomes available or other events occur in the future, except as otherwise required under applicable law and our ongoing reporting obligations under the Securities Exchange Act of 1934, as amended.

©2024. Inseego Corp. All rights reserved. Inseego is a trademark of Inseego Corp. Other Company, product, or service names mentioned herein are the trademarks of their respective owners.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240911809046/en/

Inseego Corp.

Jodi Ellis

pr@inseego.com

Source: Inseego Corp.

FAQ

How much of its short-term loan has Inseego (INSG) paid down?

Inseego has paid down $9.5 million, or approximately 49%, of its outstanding short-term loan.

What is the current outstanding amount under Inseego's (INSG) Loan Agreement?

After recent repayments, the outstanding amount under Inseego's Loan Agreement has been reduced to $10 million.

How much of Inseego's (INSG) 2025 Convertible Notes have been repurchased or exchanged?

Inseego has repurchased or entered into agreements to repurchase and/or exchange approximately $147 million, or 91%, of the face value of the outstanding 2025 Convertible Notes.

What is Inseego's (INSG) plan for the remaining 2025 Convertible Notes?

Inseego expects to repay or refinance the remaining balance of approximately $14.9 million in 2025 Convertible Notes by May 2025.