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Edited Transcript of INSG.OQ earnings conference call or presentation 6-Nov-19 10:00pm GMT

Q3 2019 Inseego Corp Earnings Call

SAN DIEGO Nov 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Inseego Corp earnings conference call or presentation Wednesday, November 6, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ashish Sharma

Inseego Corp. - Executive VP of IoT & Mobile Solutions

* Dan Mondor

Inseego Corp. - Chairman & CEO

* John Weldon

Inseego Corp. - SVP of Enterprise SaaS Solutions

* Stephen M. Smith

Inseego Corp. - Executive VP & CFO

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Conference Call Participants

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* Jaeson Allen Min Schmidt

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* Lance William Vitanza

Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst

* Michael James Latimore

Northland Capital Markets, Research Division - MD & Senior Research Analyst

* Nobuyuki Nemoto

Canaccord Genuity Corp., Research Division - Associate

* Scott Wallace Searle

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Hello, and welcome to Inseego Corp's Third Quarter Financial Results Conference Call. Please note that today's event is being recorded. (Operator Instructions)

On the call today are Dan Mondor, Chairman and CEO; Steve Smith, EVP and Chief Financial Officer; Ashish Sharma, Executive Vice President of IoT & Mobile Solutions; Wendy Caceres, Chief Marketing Officer; and John Weldon, Senior Vice President of Enterprise SaaS Solutions.

During this call, 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 expectations, please refer to the risk factors described in our Form 10-K, 10-Q and other SEC filings, which are available on our website. Please also refer to the cautionary note regarding forward-looking statements section contained in today's press release.

I would now like to turn the call over to Dan Mondor, Chairman and CEO. Please go ahead.

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Dan Mondor, Inseego Corp. - Chairman & CEO [2]

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Thank you, and hello, everyone. I'll start my remarks with some important observations. This is an exciting time for Inseego. Our hard work in developing the world's first commercially available mobile broadband 5G products is now bearing fruit. Inseego is a clear global leader with our 5G portfolio, and we made tangible progress towards our strategic goals in the third quarter. We have a lot left to do to fully take advantage of this opportunity but the management team, and our Board of Directors are pleased with our progress so far. Looking ahead, we remain confident in our 5G prospects and are building a strong foundation to provide significant revenue and cash flow generation starting in mid-2020.

We recorded the highest revenue quarter in recent history of $62.7 million, which is up 24% year-over-year and 12% sequentially. Most importantly, we're very pleased that we're ahead of expectations and on track to recognize over $10 million of 5G revenue in calendar 2019 coming from 10 carriers in 9 countries. This underscores our strategy of launching new products, winning new customers and expanding into new geographies. Also, we are continually working to improve our gross margins, where we saw improvements in the third quarter. We expect further progress as we continue to reduce costs in our 4G business, and we begin to shift to higher-margin 5G products starting in mid-2020.

With respect to our goal of strengthening our balance sheet. We have many nondilutive options at our disposal and are currently evaluating the optimal path forward. While our 4G business was very strong for the first 9 months of 2019, we did have one disappointment, which you will see in Q4 as a result of a recent Verizon promotional change in our flagship 4G hotspot to MiFi 8800L. Despite this, demand for our 4G products remains strong. In the third quarter, we launched our FirstNet-certified USB800 modem with AT&T, and our MiFi 8000 mobile hotspot continues to do well in Sprint, evidenced by increasing sell-through. We expect to launch 4G products with other carriers, including Bell Canada in Q1 and Telstra in Australia, where our new IoT tracker will launch next week. These 4G initiatives are strategically important as we now sell to all the major carriers in the U.S., which is important to our revenue growth and customer diversification and has given us the opportunity to showcase our 5G products to these customers.

Now let's take a closer look at our 5G progress that gives us confidence in our revenue expectations of 20% to 25% growth in 2020. Our first-mover advantage, along with our technical and performance capabilities in 5G is opening the door to new engagements with numerous operators worldwide. In the past, we talked about opportunity pipeline, which continues to be strong. What we're going to focus on going forward is the number of active trials with operators who are testing our products in their labs and on their networks.

Our active trials grew significantly in the third quarter and includes 16 service providers who have an aggregate of nearly 600 million wireless subscribers. And just for reference, that's more than 4x the size of Verizon Wireless subscriber base. The vast majority of these trials are with large service providers outside of North America. These trials are encouraging as these service providers are seeing their device perform at speeds between 1 and 2 gigabits per second in both millimeter wave and sub-6 gigahertz bands on real-world networks. Given this, we expect to meet our goals of 8 to 10 design wins by the end of the year.

We're also hard at work designing new products based on second-generation 5G chipsets, which will include mobile broadband and fixed wireless access devices for both millimeter wave and sub-6 bands. This ties to our strategic goal of leveraging our mobile technology expertise for a new generation of 5G-enabled products that will take us far beyond the hotspot category. We're executing on this through our close partnerships with Ericsson, Qualcomm and Verizon. But we've also established new strategic relationships outside of the traditional wireless ecosystem that is giving us unique insights in the emerging 5G use cases.

For example, we recently partnered with NVIDIA in Mobile World Congress Americas for a GPU Edge compute demonstration powered by our 5G MiFi technology. To that end, we've created an advanced technology group under our new CTO, Dan Picker, to work with companies large and small across the industry verticals that are now developing 5G-enabled products. Our goal is to partner with these firms to create 5G solutions. We successfully launched a similar effort to expand our industrial IoT portfolio by leveraging our 4G capabilities and rapidly growing greenfield markets. We have started generating revenue in FirstNet, and we are expanding our footprint in SD WAN, and we're also hard at work on new opportunities in CBRS.

Let's first -- let's start with FirstNet Public Safety Network which serves 9,000 government agencies and other organizations. In the third quarter, we introduced our USB800 modem, which is now generating revenue from AT&T. The market for software-defined wide area network or SD WAN is expanding rapidly. Our Skyus line of industrial IoT products, which provide wireless connectivity are gaining traction. As a result, we now have strategic partnerships with 3 of the leading SD WAN providers: VeloCloud by VMware, Riverbed and Cisco Meraki. And we have pending engagements with 2 other market leaders. Together, these companies hold nearly 60% of the share of the SD WAN market. An additional target market is the newly opened Citizens Band Radio Service or CBRS spectrum, which recently received SEC approval for initial commercial deployment in markets nationwide. Our product includes support for CBRS, and we are working with our customers and partners to develop the market.

Turning to Enterprise SaaS Solutions. We are seeing results and are pleased with the trajectory of the business and expect fleet growth in 2020. As examples, Australian bookings are up 45% year-to-date on a year-over-year basis. And South Africa bookings are up 54% over the same time period. In Europe, recurring revenue growth was strong overall, up double digits year-to-date, with the U.K. and Germany leading. We have developed a new cloud platform called Pegasus, launching in the fourth quarter to accelerate revenue in 2020 and beyond. This platform will enable us to increase customer retention, accelerate sales to new customers and grow our channel -- our partner channel.

In the Aviation vertical, we are working the next phase -- phases of 2 large Tier 1 rollouts. We are staffing for growth and recently announced important executive appointments. To properly execute on the 5G opportunities requires investment in R&D, sales, marketing and engineering. We will continue to make investments in the people we need. A few senior hires worth noting include: Dan Picker, our new CTO, as I mentioned previously; Wendy Caceres, our new CMO, is tasked with increasing awareness in Inseego's brand globally and industry thought leadership. She's also tasked with implementing B2B and B2C demand generation programs. Adam Gould was recently appointed Senior Vice President of Product Management to lead the design and execution of Inseego product road maps.

So with that, I'll turn it over to Steve Smith to discuss Q3 results and guidance.

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Stephen M. Smith, Inseego Corp. - Executive VP & CFO [3]

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Thank you, Dan, and thank you, everyone, for joining today's call. Q3 was a very strong quarter for Inseego. Revenue was $62.7 million, up approximately 24% on a year-over-year basis, and 12% sequentially, feeding the top end of guidance. IoT & Mobile Solutions revenue was $45.9 million, up almost 33% year-over-year and 15% from last quarter on the strength of our 4G LTE portfolio and the first sales of our 5G devices, exceeding the top end of guidance. Enterprise SaaS Solutions revenue was $16.8 million, which was at the top end of guidance, up 5% year-over-year and 5.5% sequentially, reflecting the actions taken to turn around both South African and Australian businesses. In both South African fleet and Australian businesses, we've seen positive leading indicators, as Dan has pointed out. Both geographies currently have strong backlog and robust customer pipelines of new logos and expansions of existing customers.

Turning to the balance sheet. We raised 10 million preferred stock from our 2 largest equity investors during the quarter. At the end of Q3, we had approximately $13.9 million in cash, down approximately $6.4 million quarter-over-quarter due to a working capital increase of $6.9 million, combined with continued investments in support of our 5G initiative.

As pointed out last quarter, due to the June 2020 redemption right included in the convertible debt in the August 2020 maturity of the term loan, both debt instruments appear in current liabilities on our balance sheet. Given that the convert is both trading above par and has more than 2.5 years until maturity, we do not expect that the redemption right will be exercised. As Dan pointed out, we continue to actively work towards addressing the term loan, convertible debt and working capital flexibility. We have multiple options available, and we expect to announce actions we plan to undertake in the coming month. From this point on, my discussion points will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP is detailed in our earnings release.

Last quarter, I said that we expected an increase in gross margins this quarter. Compared to Q2, mobile products gross margin increased 1.9 points from 15.2% to 17.1%. The overall IoT & Mobile Solutions gross margin was 18.2%, up 1.5 points sequentially. We are seeing the benefits from the cost reductions we expected from Foxconn. We expect gross margins will continue to improve in coming quarters as we execute on our cost reduction plan. For enterprise SaaS, gross margins of 65.3% were up 2.7 points sequentially. The total non-GAAP gross margin in the third quarter was 30.8%, up 1.1 points sequentially. Total non-GAAP operating expense was $19.2 million, up $3.2 million sequentially.

For several quarters, we've been investing to upgrade our Ctrack and IoT software platform. Dan mentioned our new cloud platform called Pegasus. We've also been working to fully integrate the entire company onto common ERP and CRM platforms, which will allow us to scale and improve efficiencies. Both are project-based investments, which we expect to complete in early 2020.

Driven by our 5G initiatives, in Q3, our non-GAAP R&D expense of $6.5 million, up $2.2 million sequentially. The other area of investment for Inseego is in global sales and marketing. As Dan pointed out, we grew our investment year-to-date to take advantage of our 5G leadership position as well as 4G and industrial IoT opportunities. In Q3, sales and marketing expenses were $6.8 million, up marginally from Q2. We've been hiring aggressively to meet the goals of our 2020 growth strategy, and we plan to complete the majority of that hiring by the end of Q4.

In Q3, we reported a non-GAAP net loss of $3.1 million. Non-GAAP loss per share of $0.04 and positive adjusted EBITDA of $4.4 million, which was at the top end of guidance. The IoT & Mobile Solutions business had pro forma adjusted EBITDA of about $2.3 million and Enterprise SaaS Solutions had $4.6 million in a pro forma adjusted EBITDA.

Now on to guidance. The Verizon promotional change, Dan mentioned earlier, went into effect in October. So we only have a few weeks of sell-through data. Compound that with typical seasonality, we've decided to take a conservative approach to Q4 guidance. We expect Q4 total revenues to be in the range of $48 million to $55 million, with IoT & Mobile Solutions revenue -- revenues in the range of $33 million to $38 million and Enterprise SaaS Solutions revenues between $15 million and $17 million. Our adjusted EBITDA is expected to be in the range of negative $3 million to positive $1 million. Given the expected growth in 5G coming from expanded geographies, new products and new service providers, specifically in the second half of the year, with Qualcomm Snapdragon X55-based products, we expect full year 2020 revenues to be 20% to 25% higher than full year of 2019. We expect gross margin gains per quarter as we continue to execute on our cost reduction plans. In the second half of 2020, again in Snapdragon X55-based products launch, we expect gross margins to further improve. We have a 30% IoT & Mobile gross margin target by 2020 year-end. We expect enterprise SaaS gross margins to remain in the mid-60s. Thank you. With that, I'll turn the call back over to Dan.

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Dan Mondor, Inseego Corp. - Chairman & CEO [4]

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Thank you, Steve. And I want to thank everybody for joining us today. We are in an exciting point in Inseego's history. We can now see the 5G future that we've been working towards over the last 2 years. I'm proud of what our teams have accomplished. I don't measure our success by any given quarter. This is about building long-term shareholder value. I have strong conviction in our industry-leading 5G portfolio, and I believe we are well positioned for long-term growth. I want to thank every Inseego employee for their tireless efforts, we are making a big difference in the market. That concludes my prepared remarks, and I'll turn it back to the operator for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from Mike Walkley with Canaccord Genuity.

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Nobuyuki Nemoto, Canaccord Genuity Corp., Research Division - Associate [2]

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This is actually Anthony on for Mike. In terms of the R&D level in Q4 and going forward into 2020, do you foresee the level from this quarter sustained throughout 2020? Or can we see it potentially come back down as you roll out the 5G X55-based product lines?

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Dan Mondor, Inseego Corp. - Chairman & CEO [3]

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Yes, it's Dan. Just -- I'll make a comment or 2 and ask Steve to add it. As we mentioned, we -- relative to our 5G growth strategy, we see the bulk of our hiring and therefore, R&D spend, of course, is proportional to that headcount. We expect to see the majority of that hiring to conclude at the end of the fourth quarter. There may be some additional hiring into the next year. But that should give you a sense of what you should expect from an expense level going forward. Steve?

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Stephen M. Smith, Inseego Corp. - Executive VP & CFO [4]

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Yes, I think that adequately spells it out. I think you've got the targets that we've laid out in the past with Mike. I don't think we'll see any huge increases after the -- at all after fourth quarter.

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Nobuyuki Nemoto, Canaccord Genuity Corp., Research Division - Associate [5]

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Got it. And then on 2020, the 20% to 25% growth just given the $10 million 5G-related revenue expected this year. Can you add a little bit more color on the cadence of that growth in 2020? I know you said back half-weighted, but any additional color on the cadence will be much appreciated.

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Dan Mondor, Inseego Corp. - Chairman & CEO [6]

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Yes. I'll make a -- it's Dan here. I'll make a comment and -- on timing, and I'll ask Ashish to also comment on the next-generation chipsets, which is what our newest product designs are based on. But essentially, what we talked about in the -- in excess of $10 million in revenue this year. That is on the first-generation chipset. And that is not in the market nor model were expected to be the high runner, if you will. So it's a great start, a great, great start is really validated our 5G technology and all the things that we expected to happen have happened: performance, customer acceptance, so forth. And the 16 customer trials I referred to are based on that technology. But the main event is the second-generation chipset that we're working on now. And Ashish, if you would want to add to that?

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Ashish Sharma, Inseego Corp. - Executive VP of IoT & Mobile Solutions [7]

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Thanks, Dan. And yes, as Dan mentioned, during the kickoff development of our next-gen portfolio in 5G, where you'll start to see these products get to the market by sometime in Q2 and mid-next year is when they're going to get launched. And that's when you start to see a lot of the customers start to do more of mass deployments of 5G devices.

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Nobuyuki Nemoto, Canaccord Genuity Corp., Research Division - Associate [8]

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Got it. Great. And just last one for me. I'll pass on queue. I'm sorry, you probably said this in the prepared remarks, I think, but just to confirm, gross margin for Q4, you still see sequentially up on a consolidated blended basis?

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Dan Mondor, Inseego Corp. - Chairman & CEO [9]

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Yes, Steve, do you want to...

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Stephen M. Smith, Inseego Corp. - Executive VP & CFO [10]

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Yes, I would expect them to continue to rise.

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Operator [11]

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The next question will be from Scott Searle with Roth Capital.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [12]

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Just to follow-up, in terms of the EBITDA guidance, for the December quarter. Could you help us calibrate on the OpEx front? I just want to dig in on that a little bit. Non-GAAP OpEx was a little over $19 million. Where is that going to start to top out in the December quarter? And then I just want to dive in a little bit more from a gross margin standpoint, you're saying gross margins in IoT will be up sequentially into the fourth quarter, and then they will continue up towards the 30% range exiting 2020, is that correct? Just to be calibrated.

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Dan Mondor, Inseego Corp. - Chairman & CEO [13]

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Yes. I think you basically have it, Scott. But Steve, do you want to...

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Stephen M. Smith, Inseego Corp. - Executive VP & CFO [14]

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Yes, I think you've got it adequately, Scott. So as far as OpEx, it should be up modestly in Q4, but we do expect gross margins to continue upward.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [15]

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Okay. And then just kind of given the cadence of product introductions, Ashish, right, tying it to the X55 and general availability looking like it's in the second quarter. I'm wondering if you could help us understand how big of an inflection that's going to be. I think in the past as well, you've talked about 5G also being a lead product that is pulling another 4G solutions on the mobile hotspot front, so gigabit LTE, et cetera. So if you could kind of help us understand what that hockey stick start to [look] like? And also, maybe to give us some ballpark range of what 5G contribution looks like in 2020.

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Dan Mondor, Inseego Corp. - Chairman & CEO [16]

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Yes, I'll ask Ashish to comment in a second. But I think it's kind of a 2-way arrangement. Some of our 4G initiatives in establishing positions and customers is introduced in the 5G conversations, it actually is also happening in the reverse direction, importantly, for brand-new customers that are looking, evaluating 5G or extending their interest to 4G. So it's kind of a -- if you call a push-pull effect, I guess, for both. But yes, the major point of inflection is the second half. And that's really the design cycle, the second-generation chip set.

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Ashish Sharma, Inseego Corp. - Executive VP of IoT & Mobile Solutions [17]

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Yes. And Scott, as Dan mentioned, the --we provided -- in Dan's earlier remarks, he mentioned 22% to 25% increase in top line revenue next year, which is -- it's driven by those deployments. So it's the devices, the next-gen devices in the market. In addition to the operators rolling out more coverage on their networks, right, which is what they're working on right now. As you can see, there is a lot of activity every week, every month, there are new markets going up with 5G coverage. And that is what we are tracking towards that in second half of next year is you'll start to see some decent coverage in mass market devices, and that's when the inflection point happens to what Dan mentioned.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [18]

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Maybe just to quickly follow-up. In terms of the 16 active service provider trials, could you give us an idea how many are toying with, playing with multiple products, both in gigabit LTE and 5G fixed wireless and mobile hotspot front?

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Dan Mondor, Inseego Corp. - Chairman & CEO [19]

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Well, just to clarify, the reference to the 16 trials, those are all 5G trials and it's with a mixture of our mobile broadband products as well as our fixed wireless products, some are one, a number are testing both products, in fact. So it's kind of a product line strategy, but those are 5G trials, Scott.

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Operator [20]

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The next question comes from Lance Vitanza with Cowen.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [21]

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I know you don't want to put too much importance on any one quarter, but congratulations. This is a good one. Turning to the Q4 guide, could we talk a little bit more about the puts and takes on the top line. I mean on the 4G side, any thoughts on why Verizon decided to be less promotional? And do we -- might we anticipate a more promotional environment in Q1? I mean is this -- or is it -- with the holidays come and gone, this was the one shot that we had at it. We're not going to get it?

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Dan Mondor, Inseego Corp. - Chairman & CEO [22]

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Yes. I think -- so thanks, Lance. Promotions change, they do come and they do go in both directions. This was a change that happened very recently. In fact, it was at the beginning of October. So we've had very few weeks of sell-through information to really understand where it ought to be. But obviously, it was a promotional change we see -- we're seeing a downtick in at least the very near-term sell-through data, sell-through information. Also, there is the year-end inventory management, that's a fourth quarter phenomenon since the beginning of time. So don't know where it will go into the future, that's obviously not in our hands. But that's really the scenario that played out. So having said that, we just wanted to be super conservative in our Q4 guidance. And it's also -- there's quite a range in there. So we're going to learn a lot more in the coming weeks.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [23]

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And it sounds like, meanwhile, you have some good momentum on the 5G side, and I apologize if I missed this in the prepared remarks, but did you give sort of a revenue guide number for 5G in the fourth quarter?

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Dan Mondor, Inseego Corp. - Chairman & CEO [24]

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No, we've not done that. I guess firstly, back to the prior guide down in the Q4 is that, that is entirely a 4G phenomenon. That's one thing. All we said in 5G is, we're going to be in excess of $10 million in calendar year 2019. So that's really -- that was from a kind of a mid-year -- actually, July's point onward. So that's all we said. We haven't done anything on a quarterly basis there, Lance.

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Lance William Vitanza, Cowen and Company, LLC, Research Division - MD & Cross-Cap Structure Analyst [25]

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Okay. My last question is just on the balance sheet. I'm a little surprised that you haven't redone the bank debt yet, just given that it is now a current liability. And I would think that there'd be an opportunity there to really reduce your interest expense on that tranche? I know it's not going to make or break you, but it would seem to be a no-brainer. I'm wondering if I'm missing something there. And then related to that, you did mention strengthening the balance sheet via nondilutive options. That would seem to include things other than just a refinancing, like, for example, asset sales, and I'm wondering if I'm thinking about that correctly?

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Stephen M. Smith, Inseego Corp. - Executive VP & CFO [26]

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So Lance, on the balance sheet side, this is Steve. You know who our backers are. And we've got some significant investors, and you can look at their bios on our website. We're working with them and looking at all the options we have available to us to -- as far as options with the debt and as well as getting additional flexibility in our working capital. So all I can say is stay tuned, and we'll be providing further guidance on that.

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Operator [27]

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The next question comes from Mike Latimore with Northland Capital Markets.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [28]

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On the $10 million of 5G revenue, is that all with one customer or across a couple?

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Dan Mondor, Inseego Corp. - Chairman & CEO [29]

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No, Mike. That's actually across 10 customers, as a matter of fact, in 9 countries. So there's various mix of revenue sources. But the great thing about it is it's well diversified domestically and internationally. And in fact, the bulk of those customer, the 10 are international.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [30]

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Right. And then to the extent there's a pretty big push for the new products in the second quarter and beyond. Do you expect maybe some of your carriers to maybe pause a little bit ahead of that? Or how do they balance kind of the understanding of those products are coming versus say selling 4G products?

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Dan Mondor, Inseego Corp. - Chairman & CEO [31]

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Well, I think -- I mean it relates to our design wins and the target that we reiterated here. And those are really making decisions for future deployment. That's what that's about. So the cycle of decision-making and then the deployment will basically lead to the 2020 guidance we provided. So they'll make the decisions. We're in the hunt there on a lot of them, that's part of the 16 trials. They're going to build out their infrastructure. They're clearly -- those have to go hand-in-hand and the availability of the products on the second-generation chipsets, then leads to product launch second quarter and then revenue uptick beginning mid-year onward. And that's what we've been consistently saying. Ashish, do you have anything to add?

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Ashish Sharma, Inseego Corp. - Executive VP of IoT & Mobile Solutions [32]

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I fully agree with Dan. I think it's -- we're not seeing anybody -- I think if you meant to ask, Mike, if 4G is going to slow down, we're not seeing 4G getting slowed down. In fact, the 4G build-outs on advanced LTEs still continue, but needless to say, there's a lot of momentum in building out the 5G networks. And it's all happening globally and it's pretty much in every major market you can name.

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Michael James Latimore, Northland Capital Markets, Research Division - MD & Senior Research Analyst [33]

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Okay. And then just last on the Enterprise SaaS business. South African bookings were up significantly. I guess one, when you talk about bookings, does that include not just new logos and upsells, but renewals? And then two, what's sort of the main area of interest or sort of use case there?

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Dan Mondor, Inseego Corp. - Chairman & CEO [34]

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Yes, thanks. John Weldon is here with me. So John, why don't you tackle that one?

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John Weldon, Inseego Corp. - SVP of Enterprise SaaS Solutions [35]

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So -- and the answer to the first question, yes, it includes new logos, it includes expansion to existing clients, it includes renewals. In terms of the second, it's just better sales efficiency. We've got better product market fit, and we've upgraded the staff and the team, and we're seeing it in our core businesses, just whether it's construction, mining, things like that, but it's traditional service fleets and heavy-duty fleets, and it's our core customer base down there. So we're very pleased with the progress.

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Operator [36]

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The next question will be from Jaeson Schmidt with Lake Street.

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Jaeson Allen Min Schmidt, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [37]

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Wondering if you could comment on your industrial IoT gateway business, if there's any particular end markets, you're seeing strength in. And how that pipeline has expanded over this past quarter.

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Dan Mondor, Inseego Corp. - Chairman & CEO [38]

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Well, yes. Thanks, Jaeson. So we talked about SD WAN is one major kind of horizontal market and the partnerships we're developing there. There are a number of verticals that we're actively selling into and together with -- together with our SD WAN providers, there's a complementary solution set that are being marketed into a number of industry vertical markets. So maybe Ashish, you could comment on the end markets we're targeting.

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Ashish Sharma, Inseego Corp. - Executive VP of IoT & Mobile Solutions [39]

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Yes. To add to what Dan said, Jaeson, I mean, there's a lot of vertical markets, such as connected transportation, connected infrastructure, remote monitoring management from connecting vehicular applications to connecting corporate branches out into remote locations. I mean there are many applications where LTE continues to gain more and more prominence, SD WAN is one of those markets that I know. But then again, connected infrastructure is another one. So we are building a portfolio, which is going after that market of industrial IoT LTE connectivity, and we're seeing progress in SD WAN. We're seeing progress in FirstNet, we talked about. CBRS, as you know, is a brand-new greenfield opportunity, and we've got support for CBRS spectrum built into our devices, and we're working with our key service provider as well as other type of solution providers in that market to build that market. So we see that this market is going to grow with over 20% CAGR year-over-year for many years. And so it's a good opportunity for us.

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Jaeson Allen Min Schmidt, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [40]

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Okay. And then lastly, on the Ctrack business? I know the decision to roll off the consumer portion of that. You guys still expected to see some tail there. But is the revenue decline progressing as expected?

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Dan Mondor, Inseego Corp. - Chairman & CEO [41]

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But yes, I'll ask John. But then obviously, as you know, it was a deliberate decision to roll off that very low margin, low return, high-churn rate business. So that is built into the net results on Ctrack enterprise SaaS. So it is, I guess, you'd call it a headwind, but it's a known planned expected headwind.

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John Weldon, Inseego Corp. - SVP of Enterprise SaaS Solutions [42]

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Yes, I agree with Dan. In terms of the runoff rate, it's nearly what we projected. So there's no material impact that's not been known or quantified to this point.

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Operator [43]

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Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dan Mondor for any closing remarks.

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Dan Mondor, Inseego Corp. - Chairman & CEO [44]

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Okay. So thank you very much. I want to start with just making an announcement here, and I'm pleased to announce that Wendy Caceres, who has joined us as CMO will be heading up Investor Relations. So Wendy, welcome to the Investor Relations role. She certainly looks forward to meeting you and working with you going forward. Another comment I want to make is to remind everyone of some upcoming events we'll be attending. We'll be at the ROTH Technology Conference next week on November 13 in New York City, and at the Needham Growth Conference on January 14, 15, also in New York City. And we're already gearing up for CES in 2020 Mobile World Congress in Barcelona. So I hope to see you in all of these events. Thanks again, everyone.

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Operator [45]

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And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.