Inseego Corp. (INSG) Q3 2014 Earnings Report, Transcript and Summary

Thank you, Emily. We would like to remind all listeners that 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 statements are not historical facts, but rather are based on the company's current expectations and beliefs. For a discussion of factors that could cause actual results to differ, please refer to the Risk Factors described. I would now like to turn the call over to Alex Mashinsky, Chief Executive Officer. Alex Mashinsky Thanks, Michael, and thanks everyone for joining us in today’s call. I’m excited to speak with you today about our successful Q3 and strong outlook in leading Novatel through this transitional phase. We continue to leverage our technology, talent, relationship, as we take direct near term actions to unlock the value identified by our new management team and new investors. On our previous earnings call, I outlined what I believe are three of the key drivers to a successful turnaround at Novatel: bringing the business towards peer level margins, leveraging our strong MiFi brand and reducing customer concentration. We have made significant progress in executing on the first two drivers and we initiate actions to deliver on reducing customer concentration. During the third quarter, we executed against our goal of maintaining improvement via supply chain management, engineering enhancements and better product mix. These drivers should continue to support improved margins as we work towards reaching 30% gross margin by the end of 2015. Historically, the company has not leveraged its MiFi brand which has strong customer recognition worldwide due to its longstanding leading edge technology, top-tiered distribution and global shipments of our 8 million devices. The recent launch of our direct-to-consumer website, getmifi.com, and targeted domestic and international marketing efforts are all aimed at leveraging the strong brand recognition. Improved branding, marketing and direct-to-consumer efforts are also the key to reducing customer concentration. For instance, we have begun to leverage the MiFi brand to create Internet of Things or IoT solutions outside of traditional channels. As these initiatives ramp and we win additional customers we expect to reduce customer concentration through 2015. I was originally appointed as a permanent CEO of Novatel, after becoming aspired by the future potential for the company during my interim phase. I intend to leverage the skills and capabilities of the talented team at Novatel to become the leader in the industry. I look forward to sharing our continued progress on many more earnings calls to come. On that note, looking forward, we are focused on securing defensible high margin opportunities by integrating compelling applications, services and software into our award-winning IoT and MiFi devices. To this end over the past three months, we have added six customers to our pipeline with whom we’re integrating solutions that offer both hardware and services. We went through a rationalization and restructuring period with regarding to our MiFi Mobile Hotspot Broadband business over the past three quarters and believe the transition process is now complete. We are pleased with the early results of our new strategy which involves winning strategic and profitable slots at the domestic carriers and leveraging these design wins into ancillary mobile computing and M2M products. For instance, we now have three IoT products that are based on the MiFi technology. We believe that our direct-to-consumer initiative will also help to capture the long-end of the tail of each MiFi product. Following extensive conversations with domestic and global carriers, I’m confident that our MiFi broadband products are on path towards consistent, more profitable growth. The MiFi 6620 highlights the unparalleled innovation of our engineering team. With data rates of up to 150 megabits per second and the ability to securely connect 15 concurrent clients to the XLTE network for up to 20 hours of use on a single battery charge. And initial global sales momentum shows that customers continue to find value in our MiFis. On the IoT front, we have over 100 active global customers, our solutions pans virtually every identified IoT growth segment, our IoT efforts are focused within five key verticals: security, connected home, consumer telematics, commercial telematics and telemetry. We have a strategy in place to become the leader within each of these verticals. The timing of our progress within each of these verticals will be staggered as the high growth period of each vertical will vary. Our recent restructuring efforts in M2M have focused on, one, ramping new growth products such as MiFi powered SA 2100 for applications such as Fixed Telemetry, Fleet Management, Asset Tracking, and Connected Car. Two, selling integrated solution versus modules. And three, moving from an indirect to direct sales models. The move to a direct sales model supports our integrated solution and enhance customer relationships. It also had a positive benefit of increasing cross-selling between the IoT and MiFi products. For instance, our IoT sales team has identified new MiFi opportunities in Europe, Latin America, Mexico and South America. I’ll turn now to an update on the mobile computing and M2M segment results for the third quarter. MiFi revenue grew 27% sequentially in the third quarter, driven by the successful launch of the new Verizon MiFi in September. Our diversification with this key partner has improved as we currently occupy four slots inside the Verizon ecosystem and are scheduled to launch our fifth slot early next year. This is the most slots the company has ever had with Verizon. The 4G LTE/XLTE MiFi 6620 is our first corrugation [ph] product and was one of the first two devices globally to integrate QUALCOMM MDM9625 chipset, enabling this MiFi to work in over 200 countries. To this point, a derivative of the MiFi 6620 has been selected by international Tier 1 carrier for launch in early 2015, and we are currently working with other global carries on products based of this platform. Our MiFi 5510 continues to ship in volume, and we expect shipments through the end of this year in both direct and indirect channels. During the quarter, the 5510 helped Novatel expand distribution to alternative non-carrier channels. Over the next few quarters, we see strong demand and continued increase in shipments to indirect channel. MiFi added three new customer wins this quarter and three products evaluations are underway with various customers. Turning to our M2M performance in Q3, our non-GAAP gross margin for M2M products improved to 27.3%. Our revenues were flat sequentially due to the end of life legacy low-margin business, however, the quality of our M2M revenues improved quite significantly and a further indication of our turnaround efforts. Despite the substantial margin improvement, we continue to experience below industry average M2M margins due to several products containing legacy 2G chipsets. We believe this portfolio transition will be complete by the early part of next year, which would help improve our 2015 markets. M2M added three new customers during the quarter, including Quindell, Himax and SYNNEX, and nine product evaluations are underway with various customers. During the third quarter, we began to bear the fruits of our focused effort on the Telemetry vertical. With Telemetry, we are working with remote security solutions to provide remote video surveillance for high value assets on location such as Powergrid substations, distribution centers and office buildings. We have partnered with FleetZOOM to integrate remote equipment monitoring solution that utilizes cellular telemetry. We are also working with key partners to enable solutions that prevent security breaches at large retailers. At the end of our quarter – our third quarter, we had a total of 198,000 devices under management, up from 180,000 in Q2. More than 10% of the subscribers are paying for licenses now. We had approximately 64% of our M2M sales go direct to enterprise customers during Q3. I'm extremely proud of our significant improvements in the third quarter, and we have positive momentum heading towards year end. We have made the excellent progress in our MiFi business, while holding down expenses. We believe, we are on the path to positive earnings and our outlook continues to brighten. Behind market tailwinds, we see continued strong demand from our current customers as well as opportunities to expand our customer base in geographical diversification. With encouraging progress we have made in the third quarter, we remain excited about our ability to continue to leverage our robust technologies, and look forward to detailing several exciting new relationships, as we progress through the next few quarters. And with that, I will now turn the call over to Mike Newman, our Chief Financial Officer for a discussion of our financial results.

Thanks, Alex. I'm very excited to conduct my first earnings call as CFO of Novatel Wireless with such improved results. Clearly, we still have lot of work to do to get the company’s performance back to the level that we expect. But we also believe that we turned a significant corner in the third quarter to get back to sustained profitability. In my two plus months with the company, I'm pleased to find so many pieces in place for successful turnaround. Novatel Wireless has great technology, dedicated employees, and longstanding relationships with major partners, suppliers, and customers. Our third quarter performance is the outward manifestation of all the good things going on internally to drive the company forward. As I walk through our financials, note that due to the significant restructuring activities have taken place this year, my discussion will focus on our progression from Q2 to Q3 2014. Comparisons of this third quarter to Q3 year ago are not as meaningful to what we are driving towards. We’re focused on how we perform on a sequential quarterly basis. Now onto the financials. Total revenue grew 19% in Q3 compared to Q2, up to $44.3 million. This growth was driven by revenue from our mobile computing products, which grew 27% in the third quarter to $34.8 million. Our success in mobile computing was led by same sales of our MiFi 5510, as well as strong initial sales from our MiFi 6620 with Verizon that launched towards the end of September. Revenue from our M2M products was relatively flat with $9.5 million in the third quarter as compared to $9.8 million in Q2, but with a significantly higher gross margin as we transition towards a better mix of high margin products. Geographically, North American sales accounted for 90% of our revenues compared to 88% in Q2. In Q1, our North American sales had been 92%, and we will continue to work on the international sales efforts. Looking ahead with respect to revenues, for the fourth quarter, we anticipate continued strength in our mobile computing products, particularly the MiFi 5510 and the MiFi 6620, resulting in a fourth quarter revenue guidance range of $50 million to $55 million, which would be up approximately $6 million from Q3 at the low end of that range. Non-GAAP gross margins improved to 23.9% in Q3, compared to a 11% in Q2. This stronger gross margin performance involved both mobile computing and M2M products. In the third quarter, non-GAAP gross margin for mobile computing products grew to 23.1% from a 11.9% in Q2 and non-GAAP gross margin for M2M products grew to 26.6% from 8.2% in Q2. Margin improvements in the third quarter were driven by an improved mix of higher margin product sales, ongoing cost rationalization efforts, and $2.9 million inventory write-down that occurred in the second quarter. In Q4, we anticipate that this higher margin product mix will continue, so we are guiding to Q4 non-GAAP gross margins of 23% to 25%. Movement within that range will likely be driven more by non-GAAP gross margins for our mobile computing products, rather than by our M2M products, as we believe we have more short-term work to do in the lower margin mobile computing products. Our operating expenses in the third quarter were reflective of a company transitioning to a lower cost operating structure. Non-GAAP operating expenses declined over 15% in just one sequential quarter from Q2 to $12.8 million in the third quarter. The improved cost structure was driven by an 18% decline in non-GAAP research and development expenses and a 21% decline in non-GAAP general and administrative expenses in Q3 compared to Q2. Non-GAAP sales and marketing expenses were flat, despite the 19% top line revenue growth. Overall, expense declines were driven by lower compensation expenses and reduced legal expenses, as a result of our ongoing cost containment activities. While we are definitely pleased to reduce expenses in such a rapid passion, this downward trend cannot continue while we attempt to grow the top line. We believe that our Q3 expense structure is representative of how we expect to manage the business in the near-term, and we are planning for non-GAAP operating expenses in Q4 to be similar to what they were in Q3. Also, I just want to be clear about what we mean when we discuss our non-GAAP P&L. We are excluding some fairly typical non-cash items, as well as restructuring related charges. In the third quarter, we excluded share-based compensation expense of 377,000, amortization of intangibles related to an acquisition of $224,000, and $4.8 million for the change in fair value of the warrants that we issued to HC2, as part of their investment in the company in early September. I’ll describe the HC2 warrants in more detail later on this call. The restructuring related charges in the third quarter netted to $1.1 million and consisted of separation expenses with our Former CEO and other executives, partially offset by an enhanced outlook for our subleased activities on our unused facilities. Taking into account these non-GAAP charges, our non-GAAP adjusted EBITDA improved by $8.9 million in Q3 compared to Q2, with a non-GAAP adjusted EBITDA of negative $600,000 in the third quarter. To put that quarterly performance and perspective remember that the first-half of 2014, our non-GAAP adjusted EBITDA was a combined negative $14.6 million, so negative $600,000 in the third quarter is a very significant improvement. And even more importantly as we look ahead, we believe that Q4 will be a quarter of positive non-GAAP adjusted EBITDA and we’re guiding to a range up to $1 million for this metric in Q4. I don’t anticipate any new restructuring charges in Q4, beyond those we’ve already discussed and the potential for company-wide retention bonus payments to start to accrue if we yield the results that we anticipate. Non-GAAP net loss for the third quarter improved to $2.4 million, or $0.06 per share, compared to a non-GAAP loss of $11.2 million, or $0.33 per share in Q2. Remember that non-GAAP net-loss excludes the same non-cash items and restructuring charges as non-GAAP adjusted EBITDA. For the fourth quarter, we expect continued improvement of our bottom line with a Q4 outlook for non-GAAP net loss per share of $0.03 or better. Now onto the balance sheet, we closed the third quarter, with cash and cash equivalents of $20.2 million compared to $8.9 million in the beginning of the quarter. The increase in cash stemmed from $14.2 million in net proceeds from the strategic investments in the company by HC2 holdings. In other key balance sheet items the cash receivables were up by $2.6 million and accounts payable were up by $3 million in the third quarter, largely due to strong end of quarter sales following our launch of our MiFi 6620. The increase in accounts payable was also due to tactical decision to increase inventory by approximately $2 million to support our growth plans for the fourth quarter. Going forward, we are very comfortable that we have enough cash on hand to support the business for the foreseeable future, particularly since we also obtained $25 million revolving credit facility from our new financing partner, Wells Fargo. Hopefully, you saw that on our news release today, but if not, it’s a five year revolver with interest based on the daily three-month LIBOR rate plus a margin of 250 basis points or 300 basis points, depending on our liquidity level. As of today, that interest rate will be approximately 2.8%. Note that while the revolver will be used for general working capital purposes, we did drive down on the closing date to repay the full $5 million promissory note, we had outstanding as a result of the settlement of our shareholder litigation from earlier this year. Finally, let’s move on to our share count and a bit more on the investment from HC2. Our weighted average shares outstanding are expected to increase in Q4. We expect to have approximately $45 million weighted average shares outstanding in Q4, up from $38.2 million in Q3. The primary reason for increase in weighted average shares is having the common shares issued to HC2 outstanding for the full fourth quarter, as well as the anticipated favorable vote at our November 17, special stockholders’ meeting, which would allow the conversion of HC2’s Series C preferred shares and the full exercise of HC2’s warrants. That leads me to one technical accounting matter that I referenced earlier. With respect to HC2’s warrants, because stockholder approval is needed for the warrants to be fully exercisable, we are required on the GAAP accounting to treat the warrants using liability accounting. This means, that we booked the fair value of the warrants on our balance sheet based on the closing date of the transaction, but then we’ll mark it to market at the end of each quarter until the stockholders approve the full exercise of our warrants. Upon issuance on September 8, the warrants had a fair value of approximately $4.9 million and due to the increase of our stock price by September 30, at quarter-end the warrants had a fair value of approximately $9.7 million. You’ll see the $9.7 million reflected at our balance sheet at September 30, and the increase in fair value of the warrants of approximately $4.8 million, recorded as a charge against earnings on our GAAP income statement. Remember this is a non-cash charge that’s excluded from our non-GAAP financials. In conclusion, let me once again reiterate my enthusiasm for joining Novatel Wireless in helping to drive the company towards sustained success. I look forward to working with Alex, Slim and the rest of the team to restore the company to profitability in Q4 and beyond. With that, operator, we can now take questions from the participants on the call.

Thank you. (Operator Instructions) Our first question is from Bryan Prohm of Cowen & Company. Please go ahead. Bryan Prohm – Cowen & Co.: Hey, good afternoon, guys. Congratulations on the solid quarter and guidance.

Thanks. Bryan Prohm – Cowen & Co.: And Alex congrats on (inaudible) as well. Hey, so a couple of questions. It sounds like there’s more elasticity, the main elasticity for 5510 and as much as that’s not a global product and was washing out in the transition to LTE, what’s driving the incremental demand there in your guidance, if I understand that correctly?

Well, so thanks for joining the call, by the way. So if you look at again what we just mentioned in our introduction that we expanded our distribution to several new customers, which actually are driving pretty substantial volume. We also see continued demand from both Verizon and other carriers that carry this product. So I expect this product to still shipping volume through the end of the year, maybe beginning of next year. We don’t know how much life is left on it, but we were very happy that the orders keep on coming. Bryan Prohm – Cowen & Co.:

Well, as you mentioned, this is the first global device at Novatel has had in a while. And we need – we frankly kind of retrenched from international markets several years ago. So it’s a new effort for us to go in and open doors with new partners and new distribution channels worldwide. I think we’ve done pretty good job in North America. You’ll see us announcing few more partnerships in the fourth quarter. But the international carriers are going to take a little bit more time. So, we also initiated direct-to-consumer efforts and this product will be one of the products that we will be offering direct-to-consumer. Bryan Prohm – Cowen & Co.: Great. Hey, so, tell me then a little bit more about the big gross margin expansion M2M, 8% to 27% sequentially, did I write it down the right way?

Yes, you got that right. So I mean, there is couple of factors that went on. The most significant to us is the activities that we undertook in the third quarter, which is just our continued focus on the higher margin, newer products that we have. And sort of trying to run off some of the lower margin legacy products, our newer products do a better margin, and that’s the Q3 specific activities we’re engaged in, but part of that difference also were some items that took place in Q2. As you may recall in Q2 we did have a $2.9 million write-down of inventory and we also sold about $2 million worth of inventory at near cost, old inventory at near cost, so those both traded a meaningful drag on gross margins in the second quarter. But Q3 gross margins were as much function of our focus on the newer higher margin products if anything. It comes back to sort of nuts and bolts business we try and sell the ones we make the most money on right now. Bryan Prohm – Cowen & Co.: Understood, so your revenue guidance is up double-digits sequentially, midpoint gross margins are guided 24% midpoint – but I don’t see a…

Sorry about that. One second. Bryan Prohm – Cowen & Co.: No, that’s fine.

Sorry, about that, yes. Unexpected technical… Bryan Prohm – Cowen & Co.: That’s fine. That happens from time to time. I’m glad it wasn’t our mind. Hey, the guidance for revenue, do – are you splitting that out between the two segments or is that more of a general number?

It’s more of a general number that $50 million to $55 million. I mean, we do anticipate more of the growth coming from the M2M side, I’m sorry, from the mobile computing side, then M2M. Obviously, mobile computing is a larger number. We also have the new product that’s just released, and so most of that growth should come from that side of the house, although we’re not giving separate guidance on mobile computing percent there. Bryan Prohm – Cowen & Co.: No, that’s fine. Maybe I asked, because in the beginning of the year, I think that the target was $15 million or $16 million annualized run rate for M2M at the end of the year, so I think we’ll probably exit below that if I am reading between the lines. But maybe, talk a little bit more generally, Alex, about the M2M market generally, is growth where you think it’s – did the growth – is growth coming-in in 2014 where you expect it to be or is it maybe underperforming a little bit and the big inflection is yet to come in 2015 and beyond?

Yes, so we are trying to fix two things. One is fixing the margin; the second, fixing the revenue growth, right? And I think we’ve done substantial progress this quarter on the margin. I’m definitely not ecstatic about the revenue growth if we were pretty much flat. Again, a lot of this is driven by when customers decide to deploy their programs, when they decide to scale their programs and how long it takes to win or integrate certain programs that we have in our pipeline. So we have some product mix issues, which we’re going through, but a lot of this is driven – the revenue growth is all driven by new programs being launched by customers and you’re going to see again a lot of that kind of deployed in 2015. And we’re just anxiously waiting to see all of this hard work that was put in the last two or three years, come to bear with – in the beginning of next year. Bryan Prohm – Cowen & Co.: Great. Thanks for taking my questions. I’ll pass it on.

Thanks.

Our next question is from Kevin Dede of H.C. Wainwright. Please go ahead. Kevin Dede – H.C. Wainwright & Co.: Good afternoon, gentlemen. Congrats on nice job, and on your appointment, Alex.

Thank you, Kevin. Kevin Dede – H.C. Wainwright & Co.: Sure, so I guess, I’m a little curious about the initial read on your direct-to-consumer website. I know you haven’t had it up long, but is there any indication on how you see that going and the progress you’re making.

Well, we just launched it, I think two or three weeks back. So it’s more of a trial phase right now. We still only have I think one product on it. So we need to expand the offering and we’re going to be offering prepaid as well as postpaid programs that come with the product that’s there right now, as well as adding few additional products that currently are not available from Novatel. So, as we kind of complete the portfolio and start scaling that up we hope that our direct-to-consumer will start representing an increasing percentage of our overall sales, so I can’t give you any numbers right now, because they’re not significant, but hopefully when we have our next quarter call we will be able to give you some guidance on how well we’re doing with direct-to-consumer. Kevin Dede – H.C. Wainwright & Co.: Great. Okay. Thanks. On Verizon specifically, you said, you have more products there than you ever had before, obviously, the 5510 and the 6620. Can you talk a little bit more about what else you’ve done with them?

Sure, I’ll let Slim take that, since he’s – credit goes to him for winning all of these accounts. So go ahead.

Certainly. Thank you, Alex, and thank you, Kevin. So we had the product which is the fixed mobile convergence product within Verizon. That’s basically a wire-line replacement where you can support 4G broadband within the home. This is a product that we launched with Verizon last year. And we’re doing well with that space, and we’re working on the evolution of that product to go beyond connecting the home to broadband, but also to looking at home automation and others. There’s also another product inside Verizon that we’ve been shipping for a couple of years, which is our USB 4G products, that’s selling into the enterprise, into M2M channels within Verizon and also into consumer channels. So those are the main products in addition to the two MiFi products we have in the channels today. And there’s another win we had with Verizon that I cannot talk more about it, but it adds to the number five that Alex mentioned. Kevin Dede – H.C. Wainwright & Co.: Got it. Okay. Right, Alex, can we go through the M2M portfolio. Again, I understand that you got to push some legacy 2G product out and you hope – do you hope to have most of that done through the course of what’s left of this year or do you think that takes you into 2015?

We will continue having sales in 2015 of this product. I mean, the margin impact relates to one specific product and that product will be done, we’ll finish the inventory that we have by beginning of 2015. So you won’t see that dragging on our margins but also again those revenues will be – need to be replaced with new sales. So we’re kind of going through this transition, where we are recycling some of the old products with low margin and replacing them with new products with our margin, but we want to – obviously, we want to show our overall growth as well, which as I mentioned will happen more in 2015 than 2014. Kevin Dede – H.C. Wainwright & Co.: Okay. Again in M2M you mentioned five verticals that you’re addressing. Is that so we’re talking about providing a fully integrated service? I’m wondering if you can add some detail on the progress you’re making there and whether or not you’re able or had been able to build the service provision aspect of that solution? Where you think your first revenues will come from out of those five sectors that you mentioned? And specifically, how well you think customers are receiving this fully integrated solution that you are proposing?

Well, as I mentioned six customers already are using what we call the two circles, the hardware device and the cloud. And there we have one customer that was launched in the fourth quarter that’s using all three circles which include the airtime. And we are offering really a solution that’s supposed to make the lives of our customers’ easier, right? Some of them are experts of managing a relationship with carriers and having their own SIM-cards and running their cloud applications and some of them don’t want to deal with at all. So our job is really to accommodate and be able to provide either just the hardware or all three circles to the customer as they need them. So we’ve just started that initiative few months ago and again, we have some adoption. I would love to have more, but it just takes some time both for us to launch these things, and for our customers to start adopting and decide on which programs they are deploying and what speed they are moving at. All these are incremental revenues – the two circles that are not hardware are recurring revenues, so we’re seeing that as a huge benefit for the company. Historically, we were based on hardware sales only. So as we going to start reporting in future the mix of recurring revenues versus hardware sales you can gauge the adoption that we have across all the different verticals. Kevin Dede – H.C. Wainwright & Co.: Okay. Can you give us some insight on how, I guess, how you’re progressing in developing the airtime side of that equation, given that it would necessitate having to secure relationships with carriers globally? I mean, is there any sense. I mean, granted you have been at it very long Alex and I appreciate that. But I think this is an important aspect how you differentiate yourself – your hardware competitors?

Well, if you know, my history, I have worked with over 2,000 carries around the world with my days in Arbinet. So that’s definitely not something that I'm – as we look at and shiver, right? I mean, again, if a customer of ours wants to deploy something that works worldwide, they should be able to come to our – come to one of our sales guys, or come to our website and enable a device and it should work – in every country, we say, it should work out. So this is not just the North America offering. I mean, our plan is to offer something that works in over 200 countries, and we should be able to take a device who have the same functionality across different geographies. So it’s a big challenge, it’s a big undertaking. But I think, if you look at IoT and the evolution of IoT, it’s a – many more customers are going to be looking for global offerings rather than just something that works in North America, or works in some neighborhood. So it’s a big program internally. It’s something we’re putting a lot of effort on, and you are going to see announcements from us on that in the next few quarters. Kevin Dede – H.C. Wainwright & Co.: So when you talk about it going forward, will you talk specifically to the carries that you are working with, or just the solutions that you are offering?

Yes, I think, we will be announcing partnerships with carriers. As you know, our – many of our devices are already certified with both domestic and international carriers. And what you will see is more of the certifications, as well as more of a partnership announcements, where we help the carriers sell this to the IoT segments, and obviously the carriers help us sell services to our existing customer base, it’s a real partnership. Kevin Dede – H.C. Wainwright & Co.: Yes. Well, thanks for the added detail, Alex, and congrats, again.

Thank you.

Our next question is from Cobb Sadler of Catamount. Please go ahead. Cobb Sadler – Catamount Strategic Advisors LLC: Hey, guys, thanks a lot for taking the question, and just want to say congrats on the cost cutting. So who knew the answer is cut revenue half to get profitable, but great job there.

Thanks. Cobb Sadler – Catamount Strategic Advisors LLC: My question on – let me make sure I get this right, did you say that you guys have secured a MiFi win with a Tier 1 carrier outside the U.S. or within the U.S.?

It’s outside the United States, yes. Cobb Sadler – Catamount Strategic Advisors LLC: Okay, great. And that – okay, great. Within North America, or I guess you mentioned, it’s going to take a while to run down some of these international opportunity to me, how are you able to take this one up quickly and get some others follow almost as quickly?

Well, again, different carriers move at different speed, I don’t want to preannounce something that will make our partners kind of a – let them make then also when they are ready, and I'm sure you will be excited about it. We’re – we identified opportunities in Europe, we identified opportunities in the Middle East, waiting for orders to come in. And hopefully, when those things launch, we’ll be able to announce them as well. So we think that 6620 has – again has a global appeal and has unique functionality beyond just acting as a hotspot. And we’re going to leverage those capabilities for both the consumer and the corporate markets, because we believe, if you look at the security function, if you look at the – some of the mobility functions, the share screening functions and other things that are not necessarily pushed by the domestic carriers or the domestic customers we have now that we are kind of pushing this ourselves. You’re going to start seeing us both enhance the product and diversify the targeting that we’re doing with partnerships with other brands. Cobb Sadler – Catamount Strategic Advisors LLC: Got it. Okay, sounds good. And then just on the M2M business, the competitive environment, I mean, I think you talked about it in last quarter’s conference call you just kind of arrived that you picked up three competitive wins versus the competitor. Do you think that – and it does sound like you are in the right spot, heavily focused on the UBI. But when do you think you will start to see the fruits of some of these wins, and can you tell us if you have taken market share or what the current situation is there? Thanks.

Also, specifically at the UBI, I mean, we grew 15% quarter-over-quarter, which I think is impressive, since our last quarter had also high double-digit growth. So we continued to win in this category. We also in the security business, we have several very impressive wins, again, we will be announcing them when our customers are ready to announce them. But we’re in a trajectory to take the number one spot in several verticals. And as I mentioned in my introductory call, my – taking the role as CEO here was not to keep it at bay, was basically to win and become the number one player in the verticals we elect to play in. So we have several targets in mind and we’re going very aggressively after them, and I have to give a lot of credit to the team for both executing and winning our market share from our competitors. So let’s leave it at that. Cobb Sadler – Catamount Strategic Advisors LLC: Got it. And then could you talk a little bit about your acquisition strategy, if you might try to do some small tuck-in acquisitions? What’s the appetite there? Would you likely look at deals that are accretive? Is that an avenue to grow? It sounds like you got with (inaudible) you got your hands full and then almost one opportunity that you can chase, but if the right acquisition came along, there would be surely growth would you take a look at it? And then, one more question after that.

Cobb Sadler – Catamount Strategic Advisors LLC: Sounds good. And then just – I’ll finish it up, but congrats on the cost cutting. It’s very refreshing and you look like you kind of got the company reporting in the right direction with some operating leverage. And I’d tell you, you did it in a very short amount of time. So congrats, looking forward to – looking for more results. Thanks a lot.

Thank you.

Our next question is from Ed Shadek of Pioneer Investments. Please go ahead. Edward Shadek – Pioneer Investment Management, Inc.: Hey, how are you doing, guys? Unfortunately, Cobb took some of the questions I had, but again, I’ll join the chorus. And first of all, we’re happy, Alex, that you signed on as a permanent CEO. I know, it’s not easy up being a native New York, or having to travel out there and spend all that time away from your family. But we truly appreciate it. Again, I will editorialize a little bit as a long suffering shareholder, it is awfully nice to have a conference call, where questions are actually answered. Again, the competency, the team you have right now, is it market upgrade. And again, for those of us who had suffered in the past, it’s – as Cobb said, it’s very refreshing. I can remember wasn’t that long ago where the company would report revenues north of $100 million for each quarter, and we were losing substantial amount of money. So, again, I would reiterate what Karp said, and we congratulate you on cutting the cost so dramatically. But as you know, in this business, Alex, so what have you done for me lately? And we’ve done a good job cutting costs, but I think we all feel like we need to grow the top line. Again, how do you feel about, I know you can’t talk about specific numbers, but as we look out, hey, if we’re currently doing $50 million a quarter. What is the potential of this company? Again, as you’ve said, hey, you’re not there to be a caretaker. What do you think and where but still, Falcone, think this could be two, three, four years down the road?

So I think, Mike, did give – we didn’t give guidance last quarter. And the reason we decided to give guidance this quarter is, because we feel confident that we can reach the goals that we outlined, the guidance that we provided. Where can we grow it from there? But we have a lot of drivers, but still we have a pretty high concentration both on the M2M and on the MiFi side. So any variation from any large customer causes tidal waves inside the company, right? So we have a bunch of new programs that already launched. And the question is just how quickly are they going to scale? And we also as you’ve been – so this quarter we continued to scale with our large customers in North America. But I think a key to our success – the future success is our ability to show global diversification. So we want to go from basically 90% of our sales in North America to something less than 70% of sales. So and to get there, we really need to have some substantial wins in both Europe and South America and other markets. So we’re making some good progress there. These things take a little bit longer both to win and to deploy. But I’m confident that, you’ll see us reporting, both growth and sales, as well as diversification of our customer base. Edward Shadek – Pioneer Investment Management, Inc.: That’s great. And clearly, again, as evidenced by the people you introduced upfront in the call, you’ve made a significant change in the management team, which again I think we all believed with necessary. How do you feel about the team you have, do we need any more people in particular and how is morale out there is San Diego, relative to where it was when you took over.

It’s always sunny in San Diego. So morale is very good, I think we’ve done a – the team as whole have done a great job, and kind of pivoting on a dime. And as you can see both second quarter and the third quarter have shown drastic improvements in a very short period of time. I can’t take credit for that. I mean, all of this was done by the 270 people who work here and who decided to double down their commitments to the company, and work hard and deliver if it’s a Verizon or for many of other customers. And again our – showing the largest number of slots with overhead, it’s a demonstration of our ability to execute and our commitment to our customers. So I think, we still have some holes in the team. We definitely need to hire more great people and we’re interviewing people every day. We did hire over a dozen new employees in the third quarter and we hope to continue doing so. It’s really – the hiring here right now is directly correlated to our wins and to specific project and the success and the scaling of these projects. So we are very focused. We have a very – laser focus P&L responsibility for each group of people, which I think the company didn’t have in the past. And at the same time we gave a lot of independence to the team leaders to go and execute. So a lot of the execution you are seeing right now is, because we pushed the authority down to the ranks and we’ll let people run with things that they own love. So, I believe that will continue and we’ll scale, and you’ll see more great things coming out of Novatel. Edward Shadek – Pioneer Investment Management, Inc.: Great. Again, thanks for taking this heavy task on, where we appreciate the job you’ve done, and we’re looking forward to hear more positive things from here. And, again, good luck, guys.

Thanks. Thank you.

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