Dan Mondor – Chairman and Chief Executive Officer Steve Smith – Chief Financial Officer.

Mike Walkley – Canaccord Genuity Mike Latimore – Northland Capital Markets Jaeson Schmidt – Lake Street Capital Markets Marc Wiesenberger – B. Riley.

Hello, and welcome to Inseego Corp’s Second Quarter 2018 Financial Results Conference Call. Please note that today’s event is being recorded. All will be in a listen-only mode. [Operator Instructions].

On the call today are Dan Mondor, Chairman and Chief Executive Officer; Steve Smith, Chief Financial Officer; Chris Lytle, Chief Strategy Officer and Executive Vice President of Enterprise SaaS Solutions; and Ashish Sharma, Chief Marketing Officer and Executive Vice President of IoT & Mobile 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 our 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 Chief Executive Officer of Inseego. Please go ahead, sir..

Good afternoon, everyone, and thank you for joining today’s call. It’s good to be speaking with you again, this time as Inseego’s Chairman and CEO. I’ll start with the headlines.

First, second quarter results were at the top end of our guidance range, with sequential revenue and adjusted EBITDA growth, and annualized adjusted EBITDA exceeded $15 million. Second, we raised approximately $20 million in new capital to accelerate 5G and IoT market launch. I’ll provide you a progress report on new investments in a few minutes.

And third, we saved the company roughly $17 million by settling a lawsuit brought before I joined as CEO. Frankly, it seems that the market hasn’t yet appreciated the significance of this third accomplishment.

We continue to make great progress in the transformation of the business to Inseego 2.0, as we refer to it, and the execution of our three-year strategic plan is on track as reflected by our results and market momentum.

Since I joined as CEO at the end of the second quarter last year, we increased adjusted EBITDA by $7 million from a loss of $3.2 million in the first quarter of 2017 to a positive $3.8 million this quarter. Demand for our new 5G and IoT cloud products is accelerating.

Yesterday’s financing announcement underscores our objective to be first-to- market and is an affirmation of our strategy. The investment proceeds are an offensive weapon for us to take advantage of multiple new opportunities we are seeing. We continue to see tremendous market momentum in both IoT and Mobile Solutions and Enterprise SaaS Solutions.

Customers are voting for Inseego with their wallets. The outlook for Q3 is very positive. We have launched new industrial IoT products and made great progress with 5G products. Starting with 5G. The total addressable market for our 5G device portfolio is greater than $5 billion in annual revenue in the U.S. market alone.

We are still in early innings of a significant market opportunity and one that we are well positioned to win. We are focused on helping industry sea change by driving 5G innovation. The transformation of broadband network landscape is underway and I believe the change is both real and permanent.

We have been working very closely with our key customers as well as key development partners to design and refine form factors, functionality and feature sets for the very first 5G products. We will be launching three 5G products for fixed and mobile network applications.

We believe 5G represents a $1 billion revenue opportunity for Inseego, and we are laser-focused to be first to market. Now I must mention, because of the ultrasensitivity regarding the timing of 5 G commercial launches, I am unable to comment further until such time as these are publicly announced.

Next, I would like to touch upon our Ctrack asset and fleet management business. First, on a solution level, Ctrack combines value-added use cases, security, system integration and business intelligence. Put together, we have a major competitive advantage.

We saw 9% subscriber growth across all international markets, excluding South Africa where subscriber growth has slowed because of our deemphasis of unprofitable consumer and UBI business there and a weak economy.

The Aviation vertical is progressing with triple digit unit growth, new customer wins and continued expansion of backlog and customer pipeline. We have new Aviation customers in the UK and EMEA, including a global logistics player at the Brussels International Airport.

Once again, I want to remind everyone this is a high growth market, which we believe is another $1 billion revenue opportunity for Inseego. It is in a nascent stage. SaaS subscription businesses with long- term contracts spread the revenue recognition over the life of the contract.

GAAP governs this, so it takes time to translate into sales growth numbers. We are exercising patience while we continue to grow the customer pipeline. Turning to our DMS subscription management SaaS solution business. We signed a three-year contract extension with T-Mobile, establishing another long-term relationship with our largest DMS customer.

So at T-Mobile now at three years and Sprint at five years, we are expanding the size of the subscriber base in the government accounts. And I’m very happy to report a new dimension in this part of the business. We have started adding private enterprise business accounts to the SaaS subscription model.

This, we believe, provides about a 5x to 10x expansion of the prior addressable market. Overall, we are making good progress in growing our subscription base to drive recurring SaaS revenue growth. We expect to see a jump in the subscriber numbers and I’ll report on this in the next earnings call. Now moving to our IoT and Mobile Solutions.

We are seeing an uptick in demand for our 4G LTE hotspot products. This is good news as our legacy MiFi business had softened in the last couple of quarters as customer focus has shifted to 5G. However, 4G to 5G transition plans have been refined and current 4G demand has strengthened as a result.

We recently won 4G products with three new customers, including a U.S. Tier 1 Mobile Service provider, a large Canadian service provider and U.S. cellular, seizing opportunities that resulted from the U.S. administration ban on Chinese competition, and we’re engaging other Tier 1 operators on additional opportunities.

This is great progress in diversifying our customer base, which was a stated goal when I took over as CEO last year. Turning to our Skyus IoT Solutions. We are seeing increased market demand for device-to-cloud IoT solutions and we are positioned to capture these opportunities.

To capitalize, we are focused on building a complete portfolio of IoT products. We launched three new IoT products in June and these provide, amongst other things remote connectivity and monitoring and digital signage over mobile networks. As a reminder, industrial IoT markets in the U.S.

alone are over $1.5 billion annually and a tremendous growth opportunity for us and with robust margins. Last earnings call, I discussed how we restructured global sales to drive top line growth. We added a lot of muscle to the team by appointing Mark Frisch to lead Service Provider Sales, and Rick Harris leading Enterprise Sales for the Americas.

We are making progress in service provider sales, notably broadening our customer base. We are implementing a comprehensive direct – indirect enterprise sales strategy. I should point out the strategy is not new to this management team, we’ve been there and done that.

Channel sales works in push-pull mode, so we’ve reorganized Inseego’s enterprise sales organization into high touch direct sales who in addition to direct service provider sales, generate leads. Indirect, also known as channel sales work with partners to fulfill, capture, support and grow the customer base.

In early September, we will be launching an Inseego channel partner program, consisting of a network of value-added resellers, system integrators, value add and broadline distributors and direct market resellers. Stay tuned for future updates.

We added a high-caliber supply chain leader with the appointment of Jacques Fradet as Senior Vice President of Operations. Jacques has over 25 years of experience building $1 million supply chains and global distribution. Job one for Jacques is to scale Inseego’s global supply chain for projected growth and launch of new 5G products.

He is also responsible for reducing product cost and supply chain overhead on an ongoing basis and to squeeze every penny out of goods and services the company purchasers. Now turning back to 5G. So the plans for commercial deployments have gained momentum in the last few months.

Verizon’s incoming CEO, Hans Vestberg, recently talked about 5G giving them the opportunity to be a much larger broadband provider. In addition to fixed 5G home broadband, he said Verizon would launch mobile 5G services next year and then would look to additional services beyond that, importantly for Verizon’s enterprise customers.

And I quote "the biggest impact will be on businesses as we provide the platform for the fourth industrial revolution." I think that takes a moment for pause. I cannot imagine a more powerful statement than that.

T-Mobile recently said that it will begin deploying 5G in 30 cities later this year, with the first 5G smartphones expected to arrive in early 2019.

AT&T Communications’ CEO, John Donovan, recently said that trials are and I quote "going well and we’re on track to offer commercial service using millimeter wave spectrum in 12 markets by the end of the year." Sprint recently said the first wave of their 5G rollout will now extend to nine cities, and industry analysts are reporting over 31 carriers globally have announced plans for 5G.

The momentum is building and rest assured, Inseego is pursuing it. The cloud market is evolving rapidly with significant new developments from large players such as Google, Microsoft and Amazon. Huge investments by these giant ecosystem players demonstrates how quickly IoT markets are developing and their size.

Inseego's knowledge of IoT device technology and vertical markets, including asset tracking, combined with an impressive customer base, gives us a great opportunity through partnerships with these players.

Inseego has deep expertise in intellectual property across mobile, IoT and cloud, and we plan to continue investing in the latest mobile and cloud platforms. Our goal is to lead the industry with 5G and IoT device-to-cloud solutions.

Now, I'll the turn call over to Steve to provide financial highlights for the quarter and guidance for the third quarter..

Thanks, Dan, and good afternoon, everyone. I'll start by further elaborating on the financing transactions with the Tavistock Group and North Sound Trading, L.P. This financing moves us towards a couple of key initiatives.

Number one, it provides us with the working capital required to accelerate new product development of 5G, cloud and industrial IoT and invest primarily in the areas of new product development and sales. Number two, we move closer to our long-term goal of deleveraging the balance sheet.

Bottom line, Tavistock and North Sound are here to invest for the long haul. On top of the financing, we settled the legal matter with the former shareholders of R.E.R. Enterprises. As Dan pointed out in his remarks, the settlement removes approximately $17 million in aggregate liabilities from the balance sheet.

More importantly, it reduces the cash liability from about $15.8 million to as low as $1 million. Detailed accounting will be completed in the third quarter. These two initiatives taken together add almost $35 million in additional liquidity.

With our Q2 annualized adjusted EBITDA run rate of over $15 million, this deleverages the balance sheet by approximately 23%. Now on to the results of the second quarter. As noted in our press release this afternoon, we continue to see positive forward progress, improvements on both adjusted EBITDA and our strategic initiatives.

Q2 revenues of $49.1 million were up $2.3 million or 5% from Q1 and down 18% from the same quarter last year. This was at the top end of guidance we provided during the May conference call.

GAAP gross margin was 36% for the second quarter, an increase of 2.7% from last quarter and 7.2% points higher than the same period a year ago, due to a combination of cost reductions and a relentless focus on operational efficiency.

Our Q2 GAAP OpEx was $18.5 million including approximately $600,000 of restructuring, approximately $900,000 of amortization of purchased intangibles and approximately $800,000 in share based comp.

GAAP operating loss was $800,000 in Q2, an improvement of 69% from last quarter's loss of $2.6 million and a year-over-year improvement of 85% from the $5.6 million loss last year.

Our GAAP net loss and net loss per share for the quarter was $6.7 million and $0.11 respectively, compared to a net loss of $8.1 million or $0.13 per share in Q1 2018 and a net loss of $12 million or $0.21 in Q2 2017. Turning to our non-GAAP metrics.

Consolidated non-GAAP gross margin for the quarter – for the current quarter was 36.7%, up sequentially from 35.9% in Q1 2018 and from 32% a year ago. In each case, we've excluded the impact of both any impairment or recovery associated with discontinued product lines.

With respect to operating expenses, our non-GAAP OpEx increased to $16.1 million for the quarter, an increase of $300,000 from last quarter and lowered by 20% year-over-year.

G&A decreased about $100,000 from last quarter and sales and marketing increased about $400,000, reflecting the additions of key resources to both the service provider and enterprise direct and channel sales in North America, consistent with expectations.

As we frequently pointed out, our three-year strategic plan entails additional investments in new products and associated technologies and systems. We currently have many new products in various stages of development, spending a collection of technologies from 5G to 4G LTE from industrial IoT to hotspots to gateway routers.

Expect our development cost to increase as we bring these new products to market and fund carrier-specific certifications for these devices. Our non-GAAP operating profit was $1.9 million, an increase of $1 million from last quarter and an improvement of $2.9 million from the same period last year.

On a first half 2018 to first 2017 basis, non-GAAP operating profit has improved to $2.8 million from a loss of $6.3 million in 2017, an increase of more than $9 million. Our adjusted EBITDA for the second quarter of 2018 was $3.8 million as compared to $3.3 million for Q1 2018 and $1.1 million in Q2 2017.

I would like to note that this is the highest quarterly adjusted EBITDA achieved by the company since 2009, almost a full decade. Our non-GAAP net loss per share in Q2 was $0.02, an improvement of a $0.01 from last quarter and an improvement of $0.06 from the same period last year, due primarily to lowered operating expenses.

A full reconciliation of our GAAP to non-GAAP financials is contained in our press release. Now, I'll provide a breakdown of IoT & Mobile and Enterprise SaaS Solutions. IoT & Mobile Solutions revenue was $31.7 million, up 10% from Q1, largely due to recoveries and the legacy MiFi business we began to see in Q1.

Versus the same period in 2017, revenues are down 27%. We believe new products and partnerships will continue to improve this business. Non-GAAP gross margin for IoT & Mobile Solutions was 22.8% as compared to 18.3% in Q1 2018, an increase of 4.8 points year-over-year from Q2 2017.

On a pro forma basis, adjusted EBITDA for IoT & Mobile Solutions was $1.9 million in Q2 or 6% of revenues, up $1.5 million or four points from Q1 as a result of higher revenue and improved gross margins, and up $1.2 million or four points from the same period last year.

While we are showing improvements, there is still a lot of groundwork to cover to hit our target margin. This pro forma information is strictly a non-GAAP estimate intended to illustrate the businesses as standalone entities. These pro forma figures are based on allocations of shared services costs and are subject to change.

Now on to Enterprise SaaS Solutions. Revenue was $17.3 million in Q2, down slightly from the prior quarter. Year-over-year, Enterprise SaaS Solutions revenues increased 4%. Revenue was impacted by roughly $500,000 quarter-over-quarter as currencies fell across all of our international regions versus the U.S. dollar.

The South African rand in particular fell 16% from the end of Q1 to the end of Q2. Non-GAAP gross margins for Enterprise SaaS Solutions was 62.2% as compared to 64.3% in Q1 2018, and 68.6% in the same period last year.

The bulk of which was due to a combination of quarter-over-quarter foreign currency exchange fluctuations, increases in the service costs and reductions in DMS prices associated with the new contracts.

On a pro forma basis, adjusted EBITDA for Enterprise SaaS Solutions in Q2 was $4.1 million or about 24% of revenue, down $1 million from last quarter and up $1.1 million from the same period last year.

To round things out, this leaves us with approximately $2.2 million in unallocated corporate expenses, largely G&A, to tie to the overall adjusted EBITDA. Again, the pro forma numbers are strictly non-GAAP estimates intended to illustrate the businesses as standalone entities. Now turning to the balance sheet.

Cash and cash equivalents inclusive of restricted cash was $19 million at the end of Q1, increasing $2.7 million from Q1. Compared to the same period last year, cash and cash equivalents is up $7.5 million. Operating cash flow was $5.3 million in Q2.

As we’ve stated previously, we see cash balances moving up and down due to inter- and intra-quarter working capital swings as we balance the performance of payables, receivables and inventories. Inventories decreased about $2.1 million in Q2 from already low numbers. Expect that inventories will grow going forward.

You'll also note that we had substantial increases in accounts payable in Q2, which generally run on a 60-day cycle and receivables which run a 30-day cycle, helping to improve our cash position. Finally, our weighted average shares outstanding for Q2 was $51.5 million, an increase of about 750,000 shares from the first quarter.

In Q2 2017, our weighted average shares outstanding was approximately $58 million. Finally, moving to guidance. We're extremely pleased that the company came in at the top end of guidance in Q2.

We are continuing to develop headroom within our existing budgets to allow us to make key investment in 5G and bring new – other new products to market, while at the same time, providing success and increases to the bottom line.

Accordingly, as for third quarter guidance, we expect total revenues to be in the range of $49 million to $56 million and our consolidated adjusted EBITDA to be in the range of $3.8 million to $4.8 million.

Our IoT & Mobile Solutions revenues are expected to be in the range of $32 million to $38 million and Enterprise SaaS Solutions revenues are expected to be in the range of $17 million to $18 million. That ends my prepared remarks. At this point, I’ll turn the call back to Dan for his closing remarks. Thank you..

the mission of the management team, the Board and every single employee is to make Inseego a billion-dollar company. The collective attitude is set to aggressive goals and get the job done through relentless execution.

Finally in closing, we’ll be presenting at the Canaccord Genuity Growth Conference in Boston this Thursday, the 9th, and I hope to see you there. So that concludes my prepared remarks and let’s go to Q&A..

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Mike Walkley of Canaccord Genuity..

Great. Thanks for taking my questions and congratulations on the strong results and guidance.

Just as we look out to your opportunities with the recent funding, how should we think about the cadence now of OpEx? Are you going to be ramping OpEx to drive those opportunities in the short term or can you help us with some OpEx targets over the next couple of quarters?.

The guidance that we provide is on the top line and our adjusted EBITDA. We don’t provide specific guidance on OpEx but obviously, within that envelope, it speaks our – to our contribution and our spending levels. But, yes, I mean, the new opportunities are there. We are going to invest to pursue them, as we said.

We remain very judicious on how we spend every penny, quite frankly. And I think that, that result is showing up quite well.

As opportunities come along, importantly in 5G and cloud IoT, we’re going to field them and address them as we have with some of the opportunities that came about quite suddenly from the ban on the Chinese vendors, so the suppliers that we took – we seized the opportunity with.

So it’s a measured approach, Mike, and I think we’ll just leave it at that..

Okay, that’s fair. And just talking about some of the strategic wins for 4G, that certainly puts you in a good position with those carriers as they upgrade to 5G.

You have when you [ph] win those deals, is there a cost in winning those deals in terms of maybe lower gross margin to get that footprint with that customer as you then transition maybe longer term with them? Or is it just accretive to your overall business model on the gross margin just by getting a fresh chance to reprice those deals?.

Well, yes. I mean, it’s a great question and it’s spot on. So, I mean, these are opportunities, as I said, and what you typically find with using our 4G products that are fundamentally current products, there are certification costs associated with different carrier bands as the case may be. There’s that type of cost relative to certification.

It’s not really, shall we say, development cost per se. But I tell you what, what is really happening is it’s an opportunity, these are new customers and amongst some others, it has really opened the conversation to a broader base of business.

And quite frankly, through that opening, we’re now having conversations about 5G that we would not have had before. So there’s goodness in seizing those opportunities with 4G and there is a lot of goodness in now being involved in the bid and selection and evaluation process and strategies associated with 5G..

Great. Thanks. And then just building on that, I know you won’t talk about specific customer plans, but as you look at kind of your 5G roadmap on there, there’s some big carrier spending starting the second half of this year on the network rollout.

When do you think you’ll see your first meaningful 5G revenue for Inseego?.

Well, I think it’s fairly well understood that there are plans for commercial launches later this year. So I think there will be some of that later this year, modest, because of the deployments will be limited in scope, we believe.

We see a transition in the first half of 2019 to the beginning of, shall we say, broader scale deployment and a ramp in the first half of 2019 and exiting and onward from there. I am being very careful and I mentioned in my remarks, the customers we were working with are – have very closely held plans beyond what they’ve announced publicly.

And so when we talk to product introductions and launches and timelines, we’re directly announcing the news quite frankly on the behalf of the customer, which we’re not going to do. So we’re being very guarded about talking exactly shipped, supplied, those sorts of words, because we’re being cautious with that.

And when those are announced, it will be very, very exciting but we need to let it be the customer’s news, not ours, and we’ll be part of it naturally at that point..

Great. Last housekeeping question for me and I’ll pass it on. Steve, just with the company getting closer and closer to flipping to positive non-GAAP EPS, can you help us just with the updated fully diluted share count when your earnings does turn positive? Thank you and congratulations on the strong result..

Thanks a lot, Mike. So our – what we provided the number of shares, just our fully – our weighted average outstanding shares, they’re $61.5 million that will obviously change the new financing. And you can grab those numbers off of the 8-K, what to add to the figures..

Thanks that’s all the questions I had..

Our next question will come from Mike Latimore of Northland Capital Markets..

Great. Thanks. Excellent quarter. I guess on the – can you just elaborate a little bit? You said that the patterns around your legacy MiFi business have improved a little bit.

Can you just explain that why that be might be occurring, elaborate a little bit?.

Yes.

So what we’ve seen fairly recently is that from the shift to focus to 5G, there has been now flushing out or really a more details, I guess you’d say, in the planning of the transition from 4G LTE to 5G and how it’ll be positioned and how some of our newer technology and the higher capacity broadband area of 4G, such as gigabit LTE 4G have come into focus.

So customers have flushed out their transition plans and have identified use cases that they want to enable, frankly starting with 4G, and we're starting to see that sort of transformation going. So a broader understanding, I think, and the flushing out of transition plans and use cases that they're looking to provide applications for today pre 5G..

Great. And then I think you had indicated maybe we could see Enterprise SaaS subscriber level improve in the September quarter.

I guess, is that tied to Aviation or what would your confidence level might be there?.

Mike, I actually broke up a little bit. I wonder if you could [indiscernible] question again, please..

I think you had indicated that your confidence level and improvement in subscriber growth rate in the September quarter, your confidence is up.

I guess, is that tied to Aviation deployment or what causes that confidence?.

Well, yes, so the con enabler was regarding Enterprise SaaS in general, which covers, if you will, the Ctrack the three verticals, SMB, fleet and aviation, and then the DMS SaaS subscription business. So there's a couple of factors going on there.

First is the growth in Ctrack verticals and subscriber growth and the second area that I made a comment on was related to DMS and these two long-term contracts now, Sprint for five years, T-Mobile 3. And they've opened up past the kind of the government account area to business enterprises, of which, of course, they have many.

And so we will be deploying the capability in adding subscribers in the Enterprise side of both of their businesses, and that creates a nice uplift in our subscription base. So both of those factors playing together, Ctrack and DMS are the drivers..

Okay, great.

And then, I guess, given the work you've done to improve the supply chain and some of these new products that are coming out, I mean, what – where should we think about sort of the hardware gross margins trending over the next year?.

Upward. Well clearly, we've got more work to be done. You've seen some modest improvement in IoT gross margins. I think we've got up to around 23, a little shy of 23 this last quarter, not even close. I mean, it's not where it needs to be.

The benchmarks quite frankly, in that industry, and I probably don't need to tell you this, are much, much higher, like two times that number. So we got a long way to go, as Steve said. We've got a lot of work to do.

From built-in design the day one margins, which is really how you get fundamental gross margin capabilities, you got to design it in from day one, but also, we're taking cost out.

So a combination of launching higher margin products, IoT, Industrial IoT and certainly, 5G and then taking cost out of the building materials and supply chain, manufacturing costs in general is the journey we're on. So we have a much, much more aggressive target than you might be thinking.

And in my books, good hardware appliance margins are in the 45% to 50%. Now we're a long way off, but we clearly have our sights to really strengthening and improving there..

Yes. Okay, great. And I guess just last on the recent investment here.

Is that specifically for 4G or 5G and IoT hardware or is some of that kind of – can some of that be directed to the SaaS business?.

No, it's actually both.

And what we've said is 5G and IoT cloud, I'll try to capture as a single statement, but we are investing in software platforms, cloud solutions for our Enterprise SaaS business, evolving current platforms with new cloud platforms that we are looking to leverage, to source, to find a means by which we can do that and there is technology out there.

So yes, short answer, it's both hardware and it certainly is in cloud software capability..

Okay, great..

You’re welcome. Thanks..

The next question comes from Jaeson Schmidt of Lake Street Capital Markets..

Hey guys, thanks for taking my questions. Most of my questions have been answered, but just two quick ones for me. Wondering if you could comment on if you're seeing anything out of the ordinary from a competitive and pricing standpoint in the Ctrack business.

And then wondering if you would be willing to disclose how much the MiFi business currently comprises of the IoT and Mobile segment..

Okay. So first question is competitive pressure kind of in the Ctrack area. Well, I guess the broad answer is nothing profoundly so. It's a very competitive market, the bases are – it's very dependent on which vertical. There are different competitors in different verticals, SMB from fleet from aviation.

We're well established in SMB and fleet and oftentimes, it's the existing customer renewal and it's new logo. So there is a big basis of run rate revenue as a function of those being well established and our renewal rates, which is reflective of price take out, is high 90s, so there's stickiness through there.

Aviation is a slightly different story because we feel we're in quite a unique position there in our value proposition. And how long our pricing levels will stay there will be dependent on competitive responses, but that's a very bullish outlook that we have for aviation and where we are.

And what we're doing now is as I commented on is it's a land grab. We are in a land grab of customers, acquisition and pipeline, and time will tell. But, yes, in general, there's nothing extraordinary coming out of left field. And I think if you're commenting relative to the gross margins, those are other factors involved with those.

Transition of hardware, FX effects, there's other factors, from hardware to rental model upfront. So there's different factors associated, but not pricing pressure..

Okay, that’s helpful..

The next question comes from Marc Wiesenberger of B. Riley..

Thank you very much. A couple earning calls ago, the idea of monetizing non-core assets was discussed.

With the recent financing transactions, is that still on the table? And if so, what assets are non-core and potentially ripe for monetization?.

Yes. So thanks for the question. Yes, we did say that and that is still on our plate to look at. I won't comment on specific areas that we might look to monetize. But as I said before and will repeat, we know which assets are core and fundamental to the business and which assets aren't.

And so we may choose to monetize those at some future date, but I can't really make any more specific comments on that..

Understood.

Are there other non-fleet verticals that you might be interested in pursuing such as rail?.

Well, it's interesting, yes. So great question. And within fleet, it's interesting because we lump a couple of things in there. For instance, there's mining and construction, heavy equipment, which is not necessarily what you might think of as freighters running around the countryside and that sort of thing.

So there are subverticals kind of within what we refer to as fleet. We've not pursued rail in any big way so far. Your point is not lost on me, that's been some of the things we've been thinking about. Nothing really definitive to say there but I just would – I would want you to recognize there's more subtly unused nuances within the fleet category.

There are other forms of asset tracking in there..

Okay. And one more for me and then I'll hop back in the queue.

Could you provide a timeline for when the company might be able to achieve the 25% target EBITDA margins?.

We are only at this point providing the following guidance. So you got the last – the next quarter, we are still saying we're going to be coming out of 2019 with an EBITDA run rate of $40 million, exiting this year at $20 million to $25 EBITDA – annualized EBITDA run rate.

Did that answer your question?.

Yes, thanks..

And this concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..