Inseego Corp. (INSG) Q2 2019 Earnings Call Transcript

Inseego Corp. (INSG 4.31%)
Q2 2019 Earnings Call
Aug 06, 2019, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to Inseego Corp's second-quarter 2019 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, chief marketing officer and executive vice president of IoT and mobile solutions; 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 of Inseego. Please go ahead.

Dan Mondor -- Chairman and Chief Executive Officer

Thank you. Good afternoon, everyone. It's great to be speaking with you again, and thanks for joining today's call. Here's the headlines for the quarter.

The 5G opportunities are accelerating at a much faster pace than anticipated at the beginning of the year. To put this into perspective, at the end of 2018, our global 5G pipeline was in the single digits, growing to over 25 at the end of Q1. And now, we have greater than 40 service providers. As a result, we are increasing investments in product development and sales and marketing to take advantage of the growing number of new opportunities.

While this will have a short-term impact on our EBITDA margin, we believe the ROI warrants the incremental investment and will deliver significant revenue growth. We continue to gain momentum companywide with revenue at the top end of guidance, and we made great progress with 5G in the quarter. We have talked extensively about investing in new 5G products. And in July, we launched the world's first commercially available 5G MiFi mobile broadband hotspot with Verizon.

Our innovations, together with our ecosystem of 5G partners, are transforming our customers' business as they aggressively roll out 5G networks and introduce new 5G services. Second-quarter revenue was driven by our mobile business as our 4G LTE-Advanced gigabit hotspot is doing exceptionally well in the market. The global 5G market is moving at a fast and furious pace, and we're building upon our early lead. If you thought the technology transition from 3G to 4G was fast a decade ago, then buckle up for the ride of a lifetime.

5G technology and the ecosystem value creation is unlike anything the mobile world has ever seen. Add to that the massive spectrum in play for 5G, and you have a market that will create unprecedented opportunities. A quick data point on that. The FCC is considering auctioning nearly 6 gigahertz of new spectrum for 5G.

That much spectrum will drive a massive amount of network capacity, resulting in new innovative services we currently cannot envision. The DOJ approval of the T-Mobile and Sprint merger is very good news for Inseego and the industry in general. The result will be a very strong tier 1 wireless operator that can bring innovative new services to the U.S. market.

For Inseego, this is a great opportunity, as we currently have business with both T-Mobile and Sprint with our DMS platform and our 8,000 series Gigabit LTE hotspot. We anticipate additional business opportunities in these areas, as well as an aggressive push into 5G. In addition, DISH Network becomes a new entrant into the 5G market, which is another plus for Inseego. Worldwide 5G momentum continues to build very rapidly.

There are now 293 operators in nearly 100 countries investing in 5G networks, which is up about 27% from April. Recent announcements include multiple deployments from operators in the U.K., EMEA, and APAC. In Japan, operators are racing to launch 5G in time for the 2020 Olympics. Now I'll cover highlights for our businesses, starting with IoT and mobile solutions and, first, looking at our mobile business.

Early in the third quarter, we delivered on our promise to make 5G real by launching our first commercial 5G mobile broadband hotspot with Verizon. We've been seeing phenomenal and importantly consistent speeds between 1 gigabits per second and 2 gigabits per second in each of the markets. I now must say that achieving this milestone has supercharged the Inseego team. It has also generated an avalanche of press coverage, and I can assure you the international carriers have taken notice with our -- with inbound inquiries we're receiving.

The new 5G MiFi M1000 is the first generally available 5G mobile broadband hotspot in the U.S. and is a major milestone for Inseego. We expect to see volume ramp-up as Verizon expands from the initial five cities at the time of the M1000 launch a couple of weeks ago to 30 cities by year end. Being the frontrunners in both mobile broadband and fixed wireless 5G devices gives us a distinct advantage with operators of any real commercially proven products, and we're leveraging that advantage for many new engagements.

On the last earnings call, I mentioned 30 operators -- 30 opportunities with operators around the globe. And I'm pleased to report that 12 of these operators are conducting tests and live field trials with our 5G mobile broadband hotspots and our fixed wireless home routers. For example, our sub-6 gigahertz home router is being trialed by select customers of Optus, a leading service provider in the Asia Pacific region. The 4G LTE market is strong and growing.

And this quarter, we launched the new gigabit speed 4G LTE Advanced MiFi M8000 hotspot with sprint. Our 8,000 series mobile hotspot is performing very well in both Sprint and Verizon, and we're seeing overall demand ramping up. We're also introducing another new product, an ultra compact 4G LTE Advanced USB modem for enterprise, government, and small business customers. I'll comment on this further in my later remarks.

It's important to note that 4G and 5G are complementary technologies as defined by the 3GPP standards body. In other words, they coexist. And for example, with dynamic spectrum sharing, 4G and 5G spectrum can be dynamically shared. As such, we expect continued robust demand for our 4G LTE products as 5G ramps up to reach nationwide coverage.

All of our 5G products support Cat 20 LTE 4G, which provides seamless high-speed connectivity across both networks. Now turning to our industrial IoT portfolio. We established a collaboration with Axis Communications, the global leader in video surveillance, and Solus Energy for our Skyus 300 and 500 routers to enable new video surveillance solutions. The video surveillance industry is growing rapidly and it requires secure, robust, reliable high-speed connectivity of our Skyus products for real-time remote monitoring, theft protection, and work environment safety.

Our SD WAN, wireless connectivity products also continue to be steady performers in our Skyus lineup. And I'm pretty pleased to report that we are collaborating with another new leading SD WAN provider. Now moving to our enterprise SaaS solutions business. As I described in the last two earnings calls, our efforts in the Ctrack business have been focused on ensuring that the South Africa and Australia and New Zealand businesses are back on track.

And I'm pleased to report that the leading indicators for both geographies have turned positive. The continued quarter-over-quarter growth of the sales pipeline, year-over-year bookings improvement and a growing backlog of units to be installed are a few of the leading indicators that fuel our optimism. We're not there yet, but we're heading in the right direction, I believe. And I believe the business is poised for a return to growth.

Outside of South Africa and Australia and New Zealand operations, we continue to see fleet subscription growth in Europe and the U.K. with an increase of 11% during the first half of 2019 as compared to the first half of 2018. In aviation, we're seeing steady customer growth with more design wins in Europe and Asia. Additionally, we launched a phase one deployment with a U.K.

regional-based airline. We continue to refine our commercial offerings to drive growth in this vertical. To summarize, the middle innings stage of Inseego's turnaround is an exciting time. The momentum we're experiencing with opportunities globally places us in a strong position to capitalize on the 5G market, which is ramping faster than any previous generation of 3GPP technology.

We are now shipping the industry's most advanced 5G products with more to follow, and we continue to expand our reach into new markets worldwide. Our technology leadership has put us in a very strong position as service providers deploy 5G worldwide, and we are aggressively engaging new customers. It is an important fact in the history of this industry that if you get left behind, you never catch up. It is precisely that dynamic that drives us forward to stay in the lead.

We continue to have confidence in a strong second half in 2019, and our long-term prospects are very bright. Now I'll turn the call over to Steve who will provide the financial highlights for the second quarter and guidance for the third quarter. Steve?

Steve Smith -- Executive Vice President and Chief Financial Officer

Thank you, Dan, and thank you, everyone, for joining today's call. Revenue for Q2 was $55.9 million, meeting the top end of guidance, which is up 13.9% on a year-over-year basis and up 15.1% sequentially. IoT & mobile solutions revenue was $40 million, up 26% year over year and up 22% from last quarter. This increase in revenue includes an 18% sequential increase in our main 4G LTE-Advanced Pro product.

In Q2, we introduced the MiFI 8000 with Sprint and two new groundbreaking industrial IoT products, the Skyus 300 and 500. Enterprise SaaS solutions' revenue was $15.9 million, down 8.1% year over year and up about 1% sequentially. The planned runoff of the low ARPU South African consumer business, combined with the shift from outright device purchases to a rental model in all geographies and currency fluctuations has impacted our year-over-year revenue comparisons on a U.S. dollar basis.

The results on a constant currency basis are much more favorable, with a 2% decline year over year and an increase of 3% sequentially. With our continued focus on fleet away from the consumer business, we've seen a significant year-over-year increase in bookings to new and existing customers. These positive leading indicators point to revenue growth over the coming quarters. Turning to the balance sheet.

We ended the second quarter with approximately $20.3 million in cash and equivalents, down approximately $11.6 million due to a combination of capital and other investments in product development and sales and marketing in support of our 5G initiatives. During the quarter, we transferred the purchase of raw materials to Foxconn, while increasing our inventory of key 4G and 5G finished goods to meet the increased customer demand. The increase in 5G finished goods was in preparation for the early Q3 product launch and ramp of our new 5G MiFi M1000 which we began shipping in mid-July. At June 30th, we had $29.4 million in inventory, down $3.9 million sequentially, including the offsets of reduced raw materials against the increased finished goods.

The debt on our balance sheet hasn't changed. As a result of the June 2020 redemption rate included in the Inseego debenture, both debt instruments were moved to current. We do not expect that the redemption rate will be exercised, and we continue to actively work toward addressing both the senior and convertible debt. From this point on, my discussion points will focus on non-GAAP numbers.

The reconciliation of GAAP to non-GAAP is detailed in our earnings release. Last quarter, I said that I expected a small increase in gross margins this quarter. Compared to last quarter, mobile products gross margins increased from 16.5% to 18.2%. This was offset by a combination of mix of products sold and an unplanned increase in production costs.

The net IoT and mobile solutions gross margins was 16.7%, basically flat with last quarter. For the enterprise SaaS business, gross margins of 62.6% were down almost one point quarter over quarter due to an increased investment in the product configuration organization to support future revenue growth. The total non-GAAP gross margins in the second quarter of 2019 was 29.8%, which is down 7 points year over year and 2 points sequentially. Thanks to actions by our operations team, the earlier material component shortages, expedited shipping and factory transition costs are behind us.

Obviously, we need to improve our gross margins. For our mobile portfolio, we continue to work aggressively with our bill of materials or BOM, component suppliers, and Foxconn to reduce the cost of goods. We have qualified second sources for a majority of the BOM, which provides further leverage for component cost negotiations and has the added benefit of preventing supply challenges. We are seeing meaningful results from these actions that will become visible in our Q3 and Q4 financial results.

For products in development, we have established a very -- we have established very aggressive cost targets and are challenging our engineering and operations teams to meet those targets with zero compromised product features and quality. Finally, we are expecting increased volume of our higher-margin industrial IoT portfolio, including the newly released Skyus 300 and 500 routers. Inseego is investing in products for high-growth markets, notably the global 5G market. And we expect results to start showing in the second half of 2019 with further expansion into 2020.

Of course, R&D investment remains critical to the future success of all of our businesses, and we will continue to invest in product development and sales and marketing. Starting in 2019, we began increasing capitalization of certain costs associated with software development and product certifications in order to align expenses with the product revenues. In Q2, our non-GAAP R&D expense was $4.2 million or 7.6% of revenue, as compared to 6.8% in Q1 '19 and 9.7% in Q2 '18. However, to put this in perspective, when combined with capitalized software development, gross R&D was 14.8% of revenue in Q2 '19, as compared to 13.6% of revenue in Q1 '19 and 10.8% of revenue in Q2 '18.

The other area of investment for Inseego is in global sales and marketing. As Dan pointed out, we are growing our investment to take advantage of the rapid growth in the 5G opportunity pipeline, as well as 4G and industrial IoT opportunities. In Q2, sales and marketing expenses were $6.4 million or 11.5% of revenue, up $200,000 from Q1 '19 and up $900,000 from Q2 '18. Total non-GAAP operating expense was $16 million, which is down slightly year over year and up 4% sequentially.

We reported a non-GAAP net loss of $2.5 million, non-GAAP loss per share of $0.03 and positive adjusted EBITDA of $3 million. IoT and mobile solutions had adjusted EBITDA of about $850,000, reflecting our increased investment in 5G. And enterprise SaaS solutions had $4.1 million of adjusted EBITDA, leaving about $1.9 million of unallocated corporate expenses. Our mobile and fixed wireless products are gaining traction.

Accordingly, we will continue to increase our R&D and go-to-market spend to plant new 5G flags and certify multiple millimeter wave and sub-6 networks globally. This is a very exciting time for Inseego. With this as a backdrop, our guidance for the third quarter is as follows. Consistent with our expectations that 5G and industrial IoT products will deliver material improvements in the second half of the year, we expect Q3 total revenues to be in the range of $58 million to $62 million, the midpoint of which represents a year-over-year growth of approximately 20%.

This growth is coming largely from IoT and mobile solutions with a Q3 revenue expectation of between $43 million and $45 million, the midpoint of which represents growth of 27% year over year. Revenue in Q3 will be driven by 5G and IoT revenue as we expand the go-to-market capabilities. Enterprise SaaS solutions revenues are expected to be between $15 million and $17 million, flat at the midpoint sequentially and year over year. Continued consumer runoff and uncertainty in the South African rand will be offset by further deployments within the fleet and aviation verticals.

We do expect that gross margins will improve throughout the balance of the year as we execute on our operational imperatives and as our product mix includes a greater percentage of higher-margin 5G and industrial IoT products. And with that, I'll turn the call back over to Dan.

Dan Mondor -- Chairman and Chief Executive Officer

Thanks, Steve. In my opening remarks, I said that our global 5G pipeline has grown substantially since our last earnings call, now exceeding 40 mobile operators, and we remain on track for eight to ten 5G design wins this year. And before I close, there are a couple more things. I'm delighted to report that we're preparing to introduce a new product for AT&T enterprise, government and small business customers.

Our renewed relationship with AT&T will give us access to a very large new market of subscribers, and we look forward to growing our presence there. This is closely tied to another big win for us which will be achieving certification for our USB 800 modem series on the FirstNet network. This rapidly growing public-private network designed specifically for first responders and other government users now serves over 7,000 public agencies. Once again, I want to thank every Inseego employee for their tremendous efforts in this dynamic fast-paced market.

Our employees' enthusiasm and 24/7 work ethic directly correlate to the momentum we are building. The energy level and our shared will to win continue to be one of the most important factors behind my confidence in our long-term success. I am bullish on the future. The global 5G market opportunity is a game changer for Inseego and the leading indicators in other parts of the business are all pointing up.

That concludes my prepared remarks. I'll turn it back over to the operator to start the Q&A.

Questions & Answers:

Operator

[Operator instructions] The first question today comes from Scott Searle with ROTH Capital. Please go ahead.

Scott Searle -- ROTH Capital Partners -- Analyst

Hey, good afternoon. Thanks for taking my question. Nice to see the momentum building across the product portfolio especially in the 5G front. Maybe for starters, just to get some clarification, in terms of the immediate outlook, you've got good top-line growth, EBITDA is moving up, but kind of trying to understand the balance in the improvement in gross margins versus some of the incremental spending that you've got from an opex standpoint to support the multiple carriers that you're continuing to engage with from gigabit LTE and 5G standpoint.

Could you kind of give us an idea? And looking out to the third quarter, what sort of improvement you expect in mobile and IoT and mobile gross margins and kind of what the absolute increase in non-GAAP opex looks like?

Dan Mondor -- Chairman and Chief Executive Officer

Well, as you know, we provide guidance on EBITDA. We don't provide specific guidance on gross margins, but we are undertaking a number of initiatives. We did encounter a few unexpected cost elements moving in factories, some new products and new contract manufacturing process, but we have a very focused cost reduction, cost down program, we call it, efforts across our mobile solution products. And we do, as we've commented, see an uptick in gross margins in Q3 and Q4 move sequentially.

I won't get into the specific numbers, but we see the trend is up.

Scott Searle -- ROTH Capital Partners -- Analyst

OK. And maybe just a quick follow-up in terms of up to 40 operators now from 30. I think last call, you talked about it representing about two billion-plus subs. I wonder if there's an updated number on that front.

And then looking at those eight to ten carriers who are live by the end of this year, could you give us an idea? Is that a fixed wireless access? Is it mobile hotspot? Is it millimeter wave? Is it 6 gig? I'm sure it's a combination of those, but any color that you can provide on that front would be helpful? Thanks.

Dan Mondor -- Chairman and Chief Executive Officer

Yes. So I'll -- thanks, Scott, I'll answer the last part first. So in terms of the 5G design wins, we were referring -- we are referring to product line design wins. So in other words, our two principal markets thus far are our mobile broadband hotspot and our fixed wireless home router.

A design win is a product design win. And so that's what that represents. And it could be any one of those, a combination of those, and it certainly represents, as a particular operator is interested in sub-6 gigahertz product offering or millimeter wave, those fundamentally represent a different award. It ultimately boils down to customer awards.

You can think of it that way. I'm sorry, could you repeat the first part of your question?

Scott Searle -- ROTH Capital Partners -- Analyst

Oh, I just -- just in terms of the number of subscribers represented by the various operator engagements.

Dan Mondor -- Chairman and Chief Executive Officer

Yeah.

Scott Searle -- ROTH Capital Partners -- Analyst

Thank you.

Dan Mondor -- Chairman and Chief Executive Officer

Well, yeah, the total that we referenced last time, as you pointed out, was 30 operators representing around two billion subscribers. It is obviously higher than that. But we kind of think, at this point, it's rather academic to start counting that. We were trying to get across the point that it really, from an addressable market and the number of service providers, importantly internationally, it is a big leap from where Inseego was, which is really principally addressing Verizon as a customer base with the 135 million, 140 million mobile subscribers.

So suffice to say, it's north of two billion, but we're not really keeping count anymore. It's there. It's out in front of us. And it starts to become a little redundant to continue to report on that.

But yes, it is continuing to move north.

Scott Searle -- ROTH Capital Partners -- Analyst

Fair enough. Thank you.

Dan Mondor -- Chairman and Chief Executive Officer

OK, Scott.

Operator

Your next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Mike Walkley -- Canaccord Genuity -- Analyst

Great. Thanks. And also it's great to hear the pipeline for 5G growing. Maybe just building on momentum of the business, you talked about very favorable press from the Verizon launch, and how it's increasing customer engagement.

Can you just update us on what your customers are telling you in terms of the competitive environment for your products? And what's helping you increase that pipeline? And can you get more of your customers either winning into product designs or into at least trials? Thank you.

Dan Mondor -- Chairman and Chief Executive Officer

Yeah. Thank you, Mike. Well, I think, first and foremost, it's having real working products and, importantly, a very strong reference account. The product is solid.

It works, speeds are high, it's stable, performing very well, and it's being rapidly rolled out into additional markets. And with that, I'm referring to Verizon, of course. And you've seen, at the time we launched the M1000, it was five cities. You've seen the subsequent announcements with additional cities.

Those are all launching very rapid pace. And the product, importantly, is working on the three predominant infrastructure providers uniformly and really well. By that, I mean Ericsson, Nokia and Samsung. So it's basically turnkey now.

It's rolling. International customers are obviously seeing the news. I don't know how many press interviews we had post that. It was by the dozens.

But I'm getting pinged on LinkedIn by various country regions of Vodafone people saying, I would like to buy a lot of these. Who do I talk to? So you know when something is happening like that, it really means the market is buzzing. But I think, first and foremost, our products work, they're stable, they're real, they're shipping. You can go online, you can go to one of the retail stores for Verizon and certainly through their enterprise sales force, you can buy them.

They exist. You can actually buy them. They're real. I just think, with that point, it kind of differentiates primarily what we're seeing from our competitors, which is lots of announcements, haven't been able to touch the products.

So that's the differentiator right there. We're making 5G real, to coin the phrase that we've used for quite a while. There's a reference account that more than happy to tell customers from around the world how we're doing with them, and the news is spreading. So that's what's creating the opportunity.

You got to have product.

Mike Walkley -- Canaccord Genuity -- Analyst

Great, thanks. And just within that, I know you're not giving specific P&L guidance, but maybe just longer term, you talked about 5G having a higher margin overall to your portfolio as it ramps. As we see these new operators ramp and you get scale and the business is growing over 20% in terms of your guidance, is there any longer-term targets you could share on gross margins where you think they should hit as 5G becomes more of a mix, maybe exiting 2020 or longer term? Any kind of targets that you guys are targeting internally that we should think about?

Steve Smith -- Executive Vice President and Chief Financial Officer

Yeah, Mike. I think we need to be up in the 30s.

Mike Walkley -- Canaccord Genuity -- Analyst

OK. Great, thanks. And then just on the -- you've shared some adjusted EBITDA targets, but it sounds like in the shorter term, you're going to push those out a little bit because you see such a ramp in 5G. Is that a good way to think about it? You're going to invest now and then harvest those investments as you launch more potential customers with these 40 operators over the next two to three years.

Is that a good way to think about just the trajectory of the business?

Dan Mondor -- Chairman and Chief Executive Officer

Yeah. I mean, I think you hit the nail in the head, Mike. As we commented, the pipeline we referenced a quarter ago was 30. Well, 12 of those is turned into live field trials, active testing of our products.

So there's a pretty good conversion. It's not all done. So that's 40% of the 30 with more to follow from that standpoint. But the way I see the 5G market now, it's a land grab.

It's a land grab, and so when the market window is there, you got to grab it. And what that means is investing in product development. As customers get their hands on the products, they want some additional features, functionalities, that sort of thing. You have to kind of tweak and tune it.

And the other is our sales and marketing efforts, importantly, internationally. So we are investing to capture the opportunity. It's the right thing to do. It's the best thing from a long-term value creation for our shareholders.

And the time is now. So we have to invest now. It's a conscious decision we've made in order to seize the opportunity. And we've seen enough proof points that we're confident we have the ability to do it.

We're not doing it recklessly. So yes, that's what we're doing.

Mike Walkley -- Canaccord Genuity -- Analyst

OK, thanks. That makes total sense. And last question for me and I'll pass it on. Just going back to the Ctrack SaaS business.

It sounds like the consumers you're starting to roll off. Steve, can you just help us maybe think about how much of the subs base is left there? And you talked about maybe that business stabilizing and starting to grow. How should we think maybe about longer-term growth in that business once the lower-end consumers are done rolling off? Thank you.

Dan Mondor -- Chairman and Chief Executive Officer

Yeah. I'll make a comment. I'll just -- John Weldon is here, who runs that business, as you know, so I'll just make a quick comment. Just a backdrop for those that may not be aware, we made a conscious decision to roll off -- run off the book, if you will.

The consumer business, it was principally South Africa. Why is that? Low ARPU, high churn, just had very poor returns in that business. It was just not really a good book of business. And so therefore, what we did was, we focused our efforts on fleet, and we focused our efforts on the aviation, higher ARPU, better return, longer-term contracts and, frankly, less cash burden.

So that was the strategy behind it. And we've deliberately, therefore, run off the consumer book. It was part of our fundamental strategy. And it's moving along, and we are getting our wish.

The book is running off as we expected, some slight variations in the trend line, but it's basically doing what we thought we would do. I don't know, John, if you want to add to that.

John Weldon -- Senior Vice President of Enterprise SaaS Solutions

Yeah. I think, Dan, you've nailed it. The only thing is we should still expect to see revenue from that throughout 2020, as well. So it is declining quarter over quarter.

But at the rate it's declining, there'll still be people on the book for the back half of this year and the remainder in 2020.

Dan Mondor -- Chairman and Chief Executive Officer

Yes. I suppose the nuance there also, I should mention, is that the poor returns was really about capturing new customers. But once the device is paid for and you're actually in the run-rate business, in other words, you're along in this subscription revenue, it does generate a modest profit contribution. So we are not acquiring new customers.

However, existing customers that wish to renew, we are renewing them because that is a positive contributor.

Mike Walkley -- Canaccord Genuity -- Analyst

Got it. Thank you.

Operator

Your next question comes from Jaeson Schmidt with Lake Street. Please go ahead.

Jaeson Schmidt -- Lake Street Capital -- Analyst

Hey, guys. Thanks for taking my questions. Just looking at the industrial IoT business, just curious if you could comment on if there's any particular end markets you're seeing particular strength from that's been a surprise for you guys?

Dan Mondor -- Chairman and Chief Executive Officer

Well, I'll make a comment on -- actually, I'll ask Ashish to jump in, as well. But -- so firstly, the SD WAN market is very, very big for us, a very big market. And you can debate whether that's a vertical or a horizontal solution that goes into a variety of verticals. I think it's more of the latter.

But that's been a very strong market for us. And we've developed an ecosystem of partners who are -- all of the leading SD WAN providers. And I think after you get through the Top 4, it kind of really rolls off. But I think you can see the names.

We announced one new one that we signed a partnership with. We weren't able to name names, but it's right at the top. So I think the SD WAN market is very important for us. I will say this, as far as some of the new things we're doing on creating solution bundles, I talked about video surveillance as one area.

And when we think about video surveillance, we're thinking about some really good opportunities in a couple. One is oil and gas, and the other is financial services vertical where those are -- there's a big demand for video, complete turnkey video surveillance solution.

Ashish Sharma -- Chief Marketing Officer and Executive Vice President of IoT and Mobile Solutions

And Jaeson, in addition to what Dan said, these products are really designed to improve both primary, as well as backup connectivity. And there are a lot of applications out there from video surveillance to connected infrastructure, connected transportation. Obviously, the first responder application, there are plenty of those applications in the market. Connected retail.

So we are seeing interest from multiple different markets that we can enable with a gigabit router, which is much more than any other solution in the market has had in the past. So just having that big pipe out there, being able to connect these remote assets and infrastructure and vehicles -- that's the market we are going after right now.

Dan Mondor -- Chairman and Chief Executive Officer

Yeah. And I think as you will see us moving forward, what we're doing now is working with a number of partners to create what we refer to as solution bundles. And what the solution bundles are really to have a turnkey offering for a particular segment or customer type of vertical. So oil and gas and financial services are actually two that we're engaged with initially.

But -- so I would say stay tuned for more on our solution bundle offering with an ecosystem of partners. And that's really how we plan to approach the various vertical markets.

Jaeson Schmidt -- Lake Street Capital -- Analyst

OK, that's helpful. And then finally, on opex, I know you guys have a numerous opportunities here where that you will continue to invest in sales and marketing. But should we think about this elevated spend being the new norm as we progress through 2020? Or is this more of a second half situation with adding sales and marketing, certifications, etc, and if that moderates to a more historical level throughout next year?

Dan Mondor -- Chairman and Chief Executive Officer

Well, yeah. I mean, it's a great question. The answer is certainly derived from opportunity and all the things we're doing are opportunity-driven. And it includes both product development.

We are developing additional 5G products. We're not yet announcing them, but there are more products in our -- more products coming in our 5G pipeline, as well as sales and marketing resources. You must appreciate that the company had not really had any kind of international presence. And if you're looking at 40 operators, I think you can do the math that after you drop down below eight, that's pretty well it for North America.

And so the rest are international. And that's really what that's about. So that demands investment in front-end sales and biz dev, in field application engineers, account managers, all of that, as well as product management. So we are investing around the opportunities.

To try to predict at this point in time what the dynamic will be on opex as we move out in the next year. Really hard to predict, and we're not going to provide that kind of guidance. So -- but what we are doing is opportunities are in front of us. My test is always is it real? Is it worth it? Is it winnable? And the answer to the 5G opportunities for those three is yes, yes, yes.

So we're going to seize the opportunity. And it would -- the business for that has a tremendous ROI. And that's what we're doing. So I think we'll have to stay tuned for guidance in the future before we can really triangulate to answer the opex question.

Jaeson Schmidt -- Lake Street Capital -- Analyst

No, that makes sense. Thanks a lot, guys.

Dan Mondor -- Chairman and Chief Executive Officer

Thank you.

Steve Smith -- Executive Vice President and Chief Financial Officer

Thanks, Jaeson.

Operator

Your next question comes from Lance Vitanza with Cowen. Please go ahead.

Lance Vitanza -- Cowen and Company -- Analyst

Hi. Thanks for taking the questions, guys. And congratulations.

Dan Mondor -- Chairman and Chief Executive Officer

Hey, Lance. Thank you.

Lance Vitanza -- Cowen and Company -- Analyst

So first, on the spectrum front, you mentioned -- I think you mentioned the 6 gigs of 5G spectrum coming to market to support the end market demand which, obviously, we think, is going to be pretty massive here. Specifically, my question is, the FCC is expecting -- they've said that they expect regulatory resolution on the C-band spectrum this fall with presumably spectrum would be then brought into use over the course of 2020. And I'm wondering how relevant if -- or to what extent is that -- is the rollout and the usage of the C-band relevant to your prospects for 2020 revenue growth, in particular? Or is it more of a 2021 story there?

Dan Mondor -- Chairman and Chief Executive Officer

It's a great question. On the timing aspect, there's a lot of factors involved. Just a couple of comments. I would ask -- Ashish is our spectrum expert, so I'll just ask him to comment in a second.

But there's a dependency on a lot of factors there. The timing, the entry, the types of solutions and how quickly networks have rolled off. So the timing of revenue from the spectrum availability is a trick where there's Qualcomm chipsets, there's our infrastructure ecosystem partners. There's the -- all the devices.

But typically, where we are paced by, you can think of it like, we call it, Qualcomm plus four months. So the availability of new chipset to address a particular market sub-6, millimeter wave is really that availability. And then our products come out typically that kind of interval after. So specific timing, Lance, tough to predict, but I'll ask our spectrum expert here, Ashish, to comment.

Ashish Sharma -- Chief Marketing Officer and Executive Vice President of IoT and Mobile Solutions

Thanks, Dan. And so Lance, in addition to what Dan said, the deployment -- the 6 gigahertz of new spectrum that FCC is looking at is in reference to the long term play, not for next year in the sense there's enough spectrum available to roll out massive network by next year and the operators are moving forward in doing so. The C-band spectrum, obviously, as you mentioned, is being looked at, that would be very valuable at some point in the future, but I don't believe that changes the -- kind of the operator plans as they move forward in rolling out networks on the frequencies that are already available on 28 gigahertz, 39 gigahertz. There's some 24 gigahertz auctions that took place earlier in the year.

And then obviously, the spectrum that's available, both 4G spectrum, as well as some of the 72.5 gigahertz spectrum that's available for Sprint to deploy 5G. So there's plenty of spectrum already implied that they can roll out a very nice-sized network by next year.

Lance Vitanza -- Cowen and Company -- Analyst

So then if I understand you correctly, so C-band will be nice but it certainly won't be a bottleneck for you guys if it takes longer than expected?

Ashish Sharma -- Chief Marketing Officer and Executive Vice President of IoT and Mobile Solutions

That's correct.

Lance Vitanza -- Cowen and Company -- Analyst

OK.

Dan Mondor -- Chairman and Chief Executive Officer

No. I would see it -- to build on, Ashish, I would see it as an additive to near-term plans. And I think on that that's, wow. That's a massive amount of spectrum.

So the number -- the kinds of use cases bandwidth -- hungry use cases that can enable are extraordinary. And I think as I said in my remarks, we can't even envision what they could be, but there's plenty of opportunity there.

Lance Vitanza -- Cowen and Company -- Analyst

OK. I wanted to ask you on the M&A impact on your business, and you mentioned a couple of things. DISH Network as a new 5G entrant, I think you called it a big plus for Inseego. And I was wondering if you could elaborate on the potential there? And then also, you'd mentioned 4G mobile hotspots with Sprint.

So of course, I'm wondering what happens if and when T-Mobile-Sprint closes, does that business go away or what happens there?

Dan Mondor -- Chairman and Chief Executive Officer

OK. Well, so on DISH and, as you know, it's a very interesting play as far as the DOJ stipulations for the merger. DISH has access to the T-Mobile network, so they can operate it as an MVNO for a number of years. They have, I think, a unique ability in my mind to build quite a unique 5G network.

They are required to have a majority of the nation coverage on 5G by 2023. So they'll be building and moving pretty fast. We have started engagement, I'll just leave it at that. And we think our product solutions lines up fairly well with what we're learning about their needs.

So we do think it's a big plus for Inseego from where we're positioned and what we understand they plan to do. On the T-Mobile-Sprint getting together and the current base of business there, as you know, we launched the gigabit, the 8,000 series gigabit hotspot with Sprint. And we do see that, if you will, there being synergies with that offering and that moving forward into the combined entity. We have DMS, which is our TIMs business, principally with T-Mobile, a little bit with Sprint, mainly government, but now moving in enterprise.

And we see in the two companies coming together, the DMS platform will be more ubiquitously applied across both of their enterprise and government business. So I think it's a one plus one equals three. And those are kind of two of the areas that we're excited about. In addition, they're going to really get way more of in their front foot into 5G -- in 5G now.

That's really a big part of the merger justification, if you will, and we're engaging on that front, as well.

Lance Vitanza -- Cowen and Company -- Analyst

Just one last one for me. On the Foxconn relationship, are you comfortable with how that's rolling out and working? And their ability to fulfill is needed given the expected product ramps that you're looking at?

Dan Mondor -- Chairman and Chief Executive Officer

The partnership is phenomenal. We're very happy with how that's turned out. And they're really a great partner. They are helping us on our go-forward cost initiatives.

As you know, they -- as we mentioned, they took over all of the purchase of raw materials, which -- there's a large volume from Qualcomm. They are really helping us. They're very responsive and really supporting us well. Good quality, on-time deliveries, all kinds of support that we -- beyond what we can even ask for.

So I couldn't be happier about that relationship.

Lance Vitanza -- Cowen and Company -- Analyst

Thanks again, guys.

Dan Mondor -- Chairman and Chief Executive Officer

Thanks, Lance.

Operator

Your next question comes from Michael Latimore with Northland Capital Markets. Please go ahead.

Unknown speaker

This is [Inaudible] for Mike Latimore. A couple of questions on Verizon. Did you report how much was Verizon's contribution during the quarter?

Dan Mondor -- Chairman and Chief Executive Officer

No, we don't break out individual customer contributions.

Steve Smith -- Executive Vice President and Chief Financial Officer

No, You can pick that up from the Q on Friday.

Unknown speaker

OK. And so did Sprint add a couple of millions during the quarter?

Dan Mondor -- Chairman and Chief Executive Officer

We don't report on individual customer contributions.

Unknown speaker

All right. OK. Sorry.

Dan Mondor -- Chairman and Chief Executive Officer

Unless it's a required reporting, that is they're over a 10% or...

Unknown speaker

Now given that the component shortage issue is behind, are there any challenges from the new tariffs from nonchannel?

Steve Smith -- Executive Vice President and Chief Financial Officer

If I understood you correctly, no, the component shortages are behind us as are the start-up with Foxconn. So we don't expect any going further, is that your question?

Unknown speaker

OK, yeah. Got it. Thank you.

Operator

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

Dan Mondor -- Chairman and Chief Executive Officer

OK. Thank you. Before we wrap up the call, I want to mention a few events that we'll be participating in this quarter. We'll be participating in the Canaccord Conference in Boston this Thursday.

I will say there's an important customer opportunity that came up which conflicts with the Canaccord schedule, and Steve Smith will be presenting in my place. We're also exhibiting at a major event in Denver this week, which is hosted by our global channel partner, Arrow. And in September, we'll be showcasing our IoT solutions at the Qualcomm Smart Cities events right here in San Diego. So I look forward to seeing many of you at these upcoming events and continuing the dialogue on Inseego 2.0.

Thanks again everyone.

Operator

[Operator signoff]

Duration: 59 minutes

Call participants:

Dan Mondor -- Chairman and Chief Executive Officer

Steve Smith -- Executive Vice President and Chief Financial Officer

Scott Searle -- ROTH Capital Partners -- Analyst

Mike Walkley -- Canaccord Genuity -- Analyst

John Weldon -- Senior Vice President of Enterprise SaaS Solutions

Jaeson Schmidt -- Lake Street Capital -- Analyst

Ashish Sharma -- Chief Marketing Officer and Executive Vice President of IoT and Mobile Solutions

Lance Vitanza -- Cowen and Company -- Analyst

Unknown speaker

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