Inseego Reports, and My Question Is: What Was I Thinking?!
Here’s how I’m handling this holding after a dismal report … and why I’m adding to another name that has the right ‘ingredients.’
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Thankfully, Inseego Corp (INSG) is the portfolio’s smallest, by far, equity exposure at just 2.4% of the book. Having said that, I’m sorry I ever got the portfolio involved in this one.
The designer of cloud-managed wireless networks released the second-quarter financial results last night, and I cannot say that I am impressed. Not at all. Inseego posted an adjusted loss per share of $0.18 on revenue of $43.984 million. While that top-line print was good enough for year-over-year growth of 9.5% and beat the Wall Street’s expectations, the adjusted bottom-line number missed badly.
Wall Street had been looking for something closer to a $0.12 loss. Making matters worse, unadjusted loss per share landed at a loss of $0.52 with Wall Street expecting something more like a $0.23 loss. Yikes. Gross margin for the period dropped all the way from 41% to 33.6%. Unadjusted operating income/loss dropped from $1.28 million a year ago to -$7.236 million. Yet, somehow… share-based compensation increased 84.3% from the year ago comp to $3.049 million. Yeah, right. I need to be invested in a company managed like this like I need a hole in the head.
It gets worse. For the period, Inseego generated an operating cash flow of -$22.062 million for the first six months of the fiscal year, down from -$7.055 million. Capital spending, though still small, more than doubled. The balance sheet fails to impress as well as the firm has been unable to pull its current ratio above the more or less required 1.0 mark. I thought that with improved margin, and improved cash flows, the firm could strengthen this balance sheet. I was wrong on all counts.
Guidance? The guidance was awful. Current quarter total revenue is seen in a range spanning form $28 million to $35 million vs. expectations for something like $53.7 million. For the full year, Inseego is projecting total revenue of approximately $155 million vs. the consensus for close to $189 million. Thankfully, as mentioned above, the position is small. The portfolio will be exiting this position later Thursday, after this article is published and you wonderful people get a chance to read it.
Alto Also Reported
Portfolio holding Alto Ingredients (ALTO) also reported last night. The situation there is much better, which we’ll get into in tomorrow’s piece. Alto beat Wall Street’s expectations on both the top and bottom lines. The balance sheet is at least better than the one above.
Upcoming Portfolio Earnings
– Rocket Lab (RKLB) – After the closing bell on Monday, Aug. 10. Expected: Adjusted EPS of -$0.05 on revenue of $231 million.
– Evolv Technologies (EVLV) – After the closing bell on Tuesday, Aug. 11. Expected: Adjusted EPS of -$0.02 on revenue of $41.81 million.
– Velo3D (VELO) – After the closing bell on Tuesday, Aug. 11. Expected: Adjusted EPS of -$0.27 on revenue of $13.5 million.
– Ondas Inc (ONDS) – Ahead of the opening bell on Thursday, Aug. 13. Expected: Adjusted EPS of -$0.07 on revenue of $68 million.
Wednesday’s Intention vs. Actual Trade
– Purchase two shares of RKLB at or close to the last sale of $74.66.
– Bought two shares of RKLB at $74.71.
Thursday’s Intentions
– Sell 40 shares of INSG at or close to the last sale of $6.37.
– Purchase 25 shares of ALTO at or close to the last sale of $5.03
Current Positions
Long 225 shares of ALTO at $5.2821. Target Price: $8. Last sale: $5.03.
Long 80 shares of EVLV at $5.8959. Target Price: $8.50. Last sale: $6.05.
Long 40 shares of INSG at $7.7563. Target Price: $11. Last sale: $6.37.
Long 115 shares of OCUL at $8.3545. Target Price: $11. Last sale: $7.75.
Short one OCUL $11 Sep 18th call at $1.65, Last sale: $0.55.
Long 250 shares of ONDS at $8.4266. Target Price: $14. Last sale: $8.76.
Long 50 shares of PL at $24.4758. Target Price $46. Last sale: $22.25.
Long 6 shares of RKLB at $69.24. Target Price $98. Last sale: $73.59.
Long 100 shares of SOFI at $15.7153. Target Price: $24. Last sale: $18.02.
Long 40 shares of SWBI at $15.5143. Target Price: $19. Last sale: $14.70.
Long 115 shares of VELO at $12.1201. Target Price: $18. Last sale: $12.64.
Cash: $488.26.
Portfolio Value: $10.779.99, +7.8% from inception on March 24.
At the time of publication, Guilfoyle was long ALTO, EVLV, INSG, OCUL, ONDS, PL, RKLB, SOFI, SWBI, VELO; Short OCUL.
