INSEEGO CORP. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward Looking Statements This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements. These forward-looking statements include, without limitation, statements that reflect the views of our senior management with respect to our current expectations, assumptions, estimates and projections about Inseego Corp. (the “Company” or “Inseego”) and our industry. These forward-looking statements speak only as of the date of this report. We disclaim any undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Statements that include the words “may,” “could,” “should,” “would,” “estimate,” “anticipate,” “believe,” “expect,” “preliminary,” “intend,” “plan,” “project,” “outlook,” “will” and similar words and phrases identify forward-looking statements (although not all forward-looking statements contain these words). Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified; therefore, our actual results may differ materially from those anticipated in these forward-looking statements as of the date of this report. We believe that these factors include those related to: • our ability to make payments on or to refinance our indebtedness, including our 3.25% convertible senior notes due in May 2025; • our dependence on a small number of customers for a substantial portion of our revenues; • our ability to compete in the market for wireless broadband data access products, wireless modem products, and telematics products and services; • our ability to successfully develop and introduce new products and services; • the pace of 5G wireless network rollouts globally and their adoption by customers; • our dependence on wireless telecommunication operators delivering acceptable wireless services • our ability to meet the price and performance standards of the evolving 5G New Radio (“5G NR”) products and technologies; • our ability to develop sales channels and to onboard channel partners; • our relationships with and the performance of our channel partners; • our ability to introduce and sell new products that comply with current and evolving industry standards and government regulations; • our ability to develop and maintain strategic relationships to expand into new markets; • our ability to properly manage the growth of our business to avoid significant strains on our management and operations and disruptions to our business; • our reliance on third parties to manufacture our products; • our contract manufacturers’ ability to secure necessary supply to build our devices; • increases in costs, disruption of supply and/or the shortage of semiconductors or other key components of our products; • our ability to accurately forecast customer demand and order the manufacture and timely delivery of sufficient product quantities; • our reliance on sole source suppliers for some products and devices used in our solutions; • our ability to be cost competitive while meeting time-to-market requirements for our customers; • our ability to meet the product performance needs of our customers in mobile broadband and fixed wireless access markets; • demand for fleet, vehicle and asset management software-as-a-service (“SaaS”) telematics solutions; • our ability to make successful investments in research and development; 16 • the outcome of any pending or future litigation, including intellectual property litigation; • infringement claims with respect to intellectual property contained in our solutions; • our continued ability to license necessary third-party technology for the development and sale of our solutions; • the introduction of new products that could contain errors or defects; • conducting business abroad, including foreign currency risks; • our ability to hire, retain and manage qualified personnel to maintain and expand our business. • our ability to mitigate the impact of tariffs or other government-imposed sanctions; • the impact of high rates of inflation and rising interest rates; • the continuing impact of uncertain global economic conditions on the demand for our products; and • the impact of geopolitical instability on our business. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with or furnish to the Securities and Exchange Commission (“SEC”), including the information in “Item 1A. Risk Factors” included in Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”). If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. As used in this report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Inseego” refer to Inseego Corp., a Delaware corporation, and its wholly-owned subsidiaries. Trademarks “Inseego”, “Inseego Subscribe”, “Inseego Manage”, “Inseego Secure”, “Inseego Vision”, the Inseego logo, “MiFi”, “MiFi Intelligent Mobile Hotspot”, ”Wavemaker”, “Clarity”, and “Skyus” are trademarks or registered trademarks of Inseego and its subsidiaries. Other trademarks, trade names or service marks used in this report are the property of their respective owners. 17 The following information should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included in Part I, Item 1 of this report, as well as the annual consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2023, contained in our Form 10-K. Business Overview Inseego Corp. is a leader in the design and development of cloud-managed wireless broadband and intelligent edge solutions. Our 4G and 5G wireless broadband portfolio is comprised of secure and high-performance mobile broadband and fixed wireless access (“FWA”) solutions with associated cloud solutions for real time WAN visibility, monitoring, automation and control with centralized orchestration of network functions. These solutions are specifically built for the enterprise and small and medium business (“SMB”) market segments with a focus on performance, scalability, quality and enterprise grade security. Our intelligent edge telematics solutions are designed to improve business outcomes for enterprise and SMB market segments. We also provide a wireless subscriber management solution for carriers to manage their government and complex enterprise customer subscriptions. Our 5G products and associated cloud solutions are designed and developed in the U.S. and are used in mission-critical applications requiring the highest levels of security and zero unscheduled downtime. These solutions support applications such as business broadband for both mobile and fixed use cases, enterprise networking and software-defined wide area network (“SD-WAN”) failover management. Inseego is at the forefront of providing high speed broadband through state-of-the-art 4G and 5G solutions to keep enterprise and SMB customers seamlessly connected. With multiple first-to-market innovations through several generations of 4G and 5G technologies, Inseego has been advancing wireless WAN technology and driving industry transformations for over 30 years. Our products currently operate on all major cellular networks in the US. Our mobile hotspots, sold under the MiFi ™ brand, have been sold to millions of end users and provide secure and convenient high-speed broadband access to the Internet on the go. Our Sources of Revenue We classify our revenues from the sale of our products and services into two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. A description of each of the revenue classifications is as follows: Mobile solutions : Our mobile broadband solutions, sold under the MiFi brand, are actively used by millions of end users to provide secure and convenient high-speed access to corporate, public and personal information through the Internet and enterprise networks. Our mobile portfolio is supported by our cloud offerings - Inseego Connect for device management, and 5G SD EDGE for secure networking enabling corporate managed mobile remote workforce. Our Mobile Solutions portfolio also includes 4G VoLTE products and 4G USB modems. Our Mobile Solutions customer base is primarily comprised of mobile operators. These mobile operators include Verizon Wireless, T-Mobile and U.S. Cellular in the United States, Rogers and Telus in Canada, Telstra in Australia, as well as other international wireless operators, distributors and various companies in other vertical markets and geographies. Fixed wireless access solutions : Our fixed wireless access solutions are deployed by enterprise and SMB customers for their distributed sites and employees as a fully secure and corporate managed wireless WWAN solution. The portfolio consists of indoor, outdoor and industrial routers and gateways supported by our cloud solutions – Inseego Connect for device management and 5G SD Edge for secure cloud networking. These solutions, sold under the Wavemaker and Skyus brands, are sold by mobile operators such as T-Mobile, U.S. Cellular and Verizon Wireless along with distribution and channel partners. Services and other : We sell certain other types of SaaS solutions. First is our telematics and asset tracking solution that is deployed across multiple vertical markets in Europe, UK, Australia and New Zealand. This solution provides real time visibility to fleet managers on their deployed vehicles with live maps and data to improve driver safety and performance. We have thousands of enterprise and SMB customers currently subscribed to this service. Second, we provide a wireless subscriber management solution (Inseego Subscribe) for carrier’s management of their government and complex enterprise customer subscriptions. We also categorize non-recurring engineering services we provide to our customers as Service and other revenue. Business Segment Reporting We operate as one business segment. Our principal executive officer, who is also our Chief Operating Decision Maker, evaluates the business as a single entity and reviews financial information and makes business decisions based on the overall results of the business. As such, our operations constitute a single operating segment and one reportable segment. 18 Financial Statement Presentation During the fourth quarter of 2023 the Company reclassified revenues on the in order to align with how management currently reviews revenue results. Historically, the Company classified revenues from products and services into two categories, IoT & Mobile Solutions and Enterprise SaaS Solutions. The Company is now classifying revenues into the following two categories: Product Revenue, which consists of our Mobile Solutions and Fixed Wireless Access Solutions, and Services and Other. Additionally, during 2023 the Company reclassified all depreciation and amortization expense previously recorded in the operating expense line items of research and development, sales and marketing, and general and administrative expenses into a separate line labeled Depreciation and amortization. All prior periods have been reclassified to conform to the current period presentation for these changes. Critical Accounting Estimates We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of these condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates discussed in the Form 10-K. Results of Operations Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Revenues . Revenues for the three months ended March 31, 2024 were $45.0 million, compared to $50.8 million for the same period in 2023. The following table summarizes net revenues by our two product categories (in thousands): Three Months Ended March 31, Change Product Category 2024 2023 $ % Mobile solutions $ 15,270 $ 23,040 $ (7,770) (33.7) % Fixed wireless access solutions 14,182 11,870 2,312 19.5 Product revenues 29,452 34,910 (5,458) (15.6) Services and other 15,557 15,884 (327) (2.1) Total revenues $ 45,009 $ 50,794 $ (5,785) (11.4) Mobile solutions. The $7.8 million decrease in mobile solutions revenues is primarily a result of investing more of our resources in the premium 5G MiFi category as opposed to developing a low-end, lower margin 5G MiFi, which resulted in lower sales during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. Fixed wireless access solutions. The $2.3 million increase in fixed wireless access solutions revenue s is primarily due to the increased adoption of fixed wireless access products by our customers, specifically sales of a 5G fixed wireless access device that we launched in the second quarter of 2023. Services and other The $0.3 million decrease in services and other net revenues is primarily due to decreased Inseego Subscribe revenues, partially offset by increased telematics subscription revenues. Based on the terms of a two-year service contract for Inseego Subscribe that was renewed in April 2024, we expect Inseego Subscribe revenues to increase in future periods. Cost of revenues. Cost of revenues for the three months ended March 31, 2024 was $27.6 million, or 61.4% of revenues, compared to $32.6 million, or 64.2% of revenues, for the same period in 2023. The following table summarizes cost of revenues by category (in thousands): 19 Three Months Ended March 31, Change Product Category 2024 2023 $ % Product $ 22,713 $ 27,967 $ (5,254) (18.8) % Services and other 4,904 4,640 264 5.7 Total cost of revenues $ 27,617 $ 32,607 $ (4,990) (15.3) Product. The $5.3 million decrease in Product cost of revenues is primarily is a result of lower sales of 4G hotspots, partially offset by increased sales of fixed wireless access solutions. Services and other. The $0.3 million increase in Services and other cost of revenues is primarily due to product mix as higher cost telematics services increased in comparison to the prior period, both in total and as a percentage of total Services and other revenues. Gross profit. Gross profit for the three months ended March 31, 2024 was $17.4 million, or a gross margin of 38.6%, compared to $18.2 million, or a gross margin of 35.8%, for the same period in 2023. The decrease in gross profit is primarily due to lower reven ues. The increase in gross profit margin is due to a larger proportion of higher margin service revenues as a percentage of total revenues. Operating costs and expenses. The following table summarizes operating costs and expenses (in thousands): Three Months Ended March 31, Change Operating costs and expenses 2024 2023 $ % Research and development $ 5,043 $ 3,775 $ 1,268 33.6 % Sales and marketing 4,995 6,466 (1,471) (22.7) General and administrative 4,983 5,724 (741) (12.9) Depreciation and amortization 3,635 5,309 (1,674) (31.5) Impairment of capitalized software 420 504 (84) (16.7) Total $ 19,076 $ 21,778 $ (2,702) (12.4) Research and development expenses. Research and development expenses for the three months ended March 31, 2024 were $5.0 million, or 11.2% of net revenues, compared to $3.8 million , or 7.4% of net revenues, for the same period in 2023. The increase in research and development expenses was primarily due to fewer research and development projects that were capitalizable during the three months ended March 31, 2024, which resulted in a higher percentage of research and development costs being recorded as operating expenses, partially offset by lower personnel related costs. Sales and marketing expenses. Sales and marketing expenses for the three months ended March 31, 2024 were $5.0 million, or 11.1% of net revenues, compared to $6.5 million, or 12.7% of net revenues, for the same period in 2023. The decrease in sales and marketing expenses was primarily due to lower sales personnel-related costs as a result of the decrease in overall sales headcount compared to the same period in 2023. General and administrative expenses. General and administrative expenses for the three months ended March 31, 2024 were $5.0 million, or 11.1% of net revenues, compared to $5.7 million, or 11.3% of net revenues, for the same period in 2023. The decrease in general and administrative expense was primarily due to a decrease in share-based compensation expense. Depreciation and amortization expenses . Depreciation and amortization expenses for the three months ended March 31, 2024 were $3.6 million , or 8.1% of net revenues, compared to $5.3 million , or 10.5% of net revenues, for the same period in 2023 . The decrease in depreciation and amortization expenses was primarily due to lower amortization related to capitalized software projects during the three months ended March 31, 2024 compared to the same period in 2023 . Impairment of capitalized software. For the three months ended March 31, 2024 and 2023, we recorded impairments of $0.4 million and $0.5 million, respectively. 20 Other (expense) income. The following table summarizes other (expense) income (in thousands): Three Months Ended March 31, Change Other (expense) income 2024 2023 $ % Interest expense, net $ (2,174) $ (1,997) $ (177) 8.9 Other (expense) income, net (360) 795 (1,155) (145.3) Total $ (2,534) $ (1,202) $ (1,332) 110.8 Interest expense, net. The $0.2 million increase in interest expense, net for the three months ended March 31, 2024 over the same period in 2023 was primarily a result of interest expense associated with the Company’s Credit Facility. Other (expense) income, net. The $1.2 million decrease in other (expense) income, net for the three months ended March 31, 2024 over the same period in 2023 is primarily due to foreign currency exchange gains in the prior period. Income tax provision. Income tax provision for the three months ended March 31, 2024 and 2023 was a provision of $0.2 million and $0.3 million, respectively. Series E preferred stock dividends. During the three months ended March 31, 2024 and 2023, we recorded dividends of $0.8 million and $0.7 million, respectively, on our Series E Preferred Stock. Reverse Stock Split On January 24, 2024, the Company completed a 1-for-10 reverse stock split of its issued and outstanding common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each share of common stock issued and outstanding immediately prior to January 24, 2024 were automatically converted into one-tenth (1/10) of a share of common stock. The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock. All outstanding convertible notes, stock options and RSUs entitling their holders to purchase or obtain or convert into shares of our common stock were adjusted, as required by the terms of these securities. All applicable common share and per share amounts have been retrospectively restated to show the effect of the reverse split. Liquidity and Capital Resources As of March 31, 2024, the Company had available cash and cash equivalents totaling $12.3 million and working capital of $3.6 million. The Company’s Credit Facility (as defined in Note 4 – Debt in the accompanying condensed consolidated financial statements), which had an outstanding balance of $4.7 million as of March 31, 2024, was voluntarily paid-off and terminated by the Company effective April 18, 2024. The Company generated positive cash flow from operations both for the year ended December 31, 2023 and in the three months ended March 31, 2024. In April 2024, the Company received a $15.0 million upfront payment from a customer in connection with a two-year service contract. Based on the factors above, and to reduce financing costs, the Company voluntarily paid-off and terminated the Credit Facility effective April 18, 2024. These factors have had a positive impact on our liquidity. The Company’s 2025 Notes have a principal balance of $161.9 million and mature on May 1, 2025. The Company’s intention is to restructure or refinance the 2025 Notes, and the Company is in active negotiations to do so, however there can be no assurance that any required or desired restructuring or financing will be available on terms favorable to the Company, or at all. As the refinancing of the 2025 Notes cannot be assured, accounting guidance requires disclosure that this raises substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance of these financial statements. While the Company’s liquidity has had several positive developments recently, as noted above, the Company has a history of operating and net losses and overall usage of cash from operating and investing activities. The Company’s ability to attain profitable operations and continue to generate positive cash flows is dependent upon achieving a level and mix of revenues adequate to support its evolving cost structure. In order to effect a restructuring or refinancing of the 2025 Notes, or if events or circumstances occur such that the Company does not meet its operating plan as expected, or if the Company becomes obligated to pay unforeseen expenditures as a result of potential litigation or otherwise, the Company may be required to raise capital, reduce planned research and development activities, incur additional restructuring charges or reduce other operating expenses and capital expenditures, which could have an adverse impact on the Company’s ability to achieve its intended business objectives. 21 Our liquidity could be compromised if there is any interruption in our business operations, a material failure to satisfy our contractual commitments or a failure to generate revenue from new or existing products. If additional funds are raised by the issuance of equity securities, or in connection with any restructuring or refinancing of the 2025 Notes, Company stockholders could experience significant dilution of their ownership interests and securities issued may have rights senior to those of the holders of the Company’s common stock. Revolving Credit Facility On August 5, 2022, we entered into a Loan and Security Agreement (the “Credit Agreement”) with Siena Lending Group LLC, as lender (“Lender”). The Credit Agreement established a $50.0 million secured asset-backed revolving credit facility (“Credit Facility”) with a final maturity date of December 31, 2024. On February 25, 2023, we entered into an amendment of the Credit Agreement with an effective date of December 15, 2022, which clarified certain terms within the Credit Agreement. On May 2, 2023, we entered into a third amendment of the Credit Agreement which increased the borrowing base under the Credit Facility by $4.0 million, increased the minimum borrowing amount for interest calculations to $8.5 million, and modified certain covenants (as so amended, the “Amended Credit Agreement”). On February 20, 2024, we entered into a fourth amendment (the “Fourth Amendment”) of the Credit Agreement which relaxed the financial covenants under the Credit Agreement by decreasing the minimum liquidity level we are required to maintain from $10 million to $8 million. Availability under the Credit Facility was determined monthly by a Borrowing Base (as defined in the Amended Credit Agreement) comprised of a percentage of eligible accounts receivable and eligible inventory of the Borrowers. Outstanding amounts exceeding the borrowing base must be repaid immediately. Effective April 18, 2024, the Company exercised its right to voluntarily pay-off and terminate its Credit Facility with Siena Lending Group LLC. As a result of the termination, the Company paid the outstanding balance and related termination fees on the Credit Facility of approximately $3.0 million. The Company has also paid an exit fee in the aggregate amount of $0.4 million to South Ocean Funding, LLC and North Sound Ventures, LP (collectively, the “Participants”) as a result of the early redemption of the Participants’ $4.0 million last-out subordinated participation interest in the Loan and Security Agreement pursuant to a Participation Agreement between the Participants and Siena Lending Group. South Ocean Funding, LLC is an affiliate of Golden Harbor, Ltd. and North Sound Ventures, LP is an affiliate of North Sound Management, Inc. As of April 18, 2024, each of Golden Harbor, Ltd. and North Sound Management, Inc. were beneficial owners of in excess of 5% of the Company’s outstanding common stock. Borrowings under the Credit Facility could take the form of base rate (“Base Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. SOFR loans bore interest at a rate per annum equal to Term SOFR (as defined in the Amended Credit Agreement as the Term SOFR Reference Rate for a term of one month on the day) plus the Applicable Margin (as defined in the Amended Credit Agreement), with a Term SOFR floor of 1%. Base Rate loans bore interest at a rate per annum equal to the Applicable Margin plus the greatest of (a) the per annum rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal, (b) the sum of the Federal Funds Rate (as defined in the Amended Credit Agreement) plus 0.5% and (c) 3.50% per annum. The Applicable Margin varied depending on the average outstanding amount for a preceding month. If the average outstanding amount for a preceding month was less than $15 million, the Applicable Margin would be 2.50% for Base Rate loans and 3.50% for SOFR loans. If the average outstanding amount for a preceding month was between $15 million and $25 million, the Applicable Margin would be 3.00% for Base Rate loans and 4.00% for SOFR loans. If the average outstanding amount for a preceding month was greater than $25 million, the Applicable Margin would be 4.5% for Base Rate loans and 5.50% for SOFR loans. On May 2, 2023, in addition to the amendment to the Credit Agreement entered into as described above, South Ocean Funding, LLC and North Sound Ventures, LP (the “Participants”) collectively purchased a $4.0 million last-out subordinated participation interest in the Amended Credit Agreement (the “Participation Interest”) from the Lender pursuant to a Participation Agreement between the Participants and the Lender (the “Participation Agreement”). In connection with the purchase of the Participation Interest, we agreed to pay the Participants an exit fee upon the earlier of (a) the scheduled maturity date of the Amended Credit Agreement, (b) the termination of the Lender’s commitment to make revolving loans prior to the scheduled maturity date of the Amended Credit Agreement, and (c) the early redemption of the Participants’ Participation Interest under the Participation Agreement (the earliest to occur of the foregoing, the “Exit Event”). The aggregate exit fee payable to the Participants is equal to (i) 7.5% of the Participation Interest, if the Exit Event occurs on or before December 31, 2023, (ii) 10.0% of the Participation Interest, if the Exit Event occurs between January 1, 2024 and June 30, 2024 and (iii) 12.5% of the Participation Interest, if the Exit Events occurs after June 30, 2024. Further, the purchase of the Participation Interest granted an option for the Participants to purchase the subject revolving loan or to redeem its Participation Interest under certain circumstances. South Ocean Funding, LLC is an affiliate of Golden Harbor, Ltd. and North Sound Ventures, LP is an affiliate of North Sound Management, Inc. As of the date hereof, each of Golden Harbor, Ltd. and North Sound Management, 22 Inc. hold in excess of 5% of the Company’s outstanding common stock. James Avery, a member of our Board of Directors, currently serves as Senior Managing Director of Tavistock Group, an affiliate of South Ocean Funding, LLC. The Amended Credit Agreement contained a financial covenant whereby the Loan Parties shall not permit the consolidated Liquidity (as defined in the Amended Credit Agreement) to be less than $8 million at any time. The Amended Credit Agreement also contained certain customary covenants, including restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and placed limits on various other payments. We were in compliance with the financial covenants contained in the Amended Credit Agreement as of March 31, 2024. As of March 31, 2024, we had outstanding borrowings under the Credit Agreement of $4.7 million. The Company voluntarily paid-off and terminated the Credit Facility effective April 18, 2024. 2025 Notes After taking into account exchanges and redemptions occurring in prior periods, the outstanding principal balance of the Company’s 3.5% convertible senior notes due in May 2025 (the “2025 Notes”) was $161.9 million as of both March 31, 2024 and December 31, 2023. Assuming no repurchases or conversions of the 2025 Notes prior to May 1, 2025, the entire principal balance of $161.9 million is due on May 1, 2025. The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 3.25%, payable semi-annually in arrears on May 1 and November 1 of each year. Equity Distribution Agreement On January 25, 2021, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Agent”), pursuant to which we could offer and sell, from time to time, through or to the Agent, up to $40.0 million of shares of our common stock (the “ATM Offering”) pursuant to the Company’s Registration Statement on Form S-3ASR (File No. 333-238057), as filed with the SEC on May 7, 2020 and amended from time to time. D uring the three months ended March 31, 2023, the Company sold 85,810 shares of common stock, at an average price of $6.17 per share, for net proceeds of $0.5 million, after deducting underwriter fees and discounts. Effective as of November 2, 2023 , the Equity Distribution Agreement was terminated by the Company, and there will be no further sales under the ATM Offering . Contractual Obligations and Commitments As of March 31, 2024, our material contractual obligations consisted of the following: • To mitigate the risk of material shortages and price increases, we enter into non-cancellable purchase obligations with certain key contract manufacturers for the purchase of goods and services in the three to four quarters following the balance sheet date. Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. As of March 31, 2024, our future payments under these noncancellable purchase obligations were approximately $60.1 million. • $161.9 million in outstanding principal amount of 2025 Notes with required interest payments; see Note 5 – Debt in the accompanying condensed consolidated financial statements; • $4.7 million in outstanding borrowings under the Credit Facility; see Note 4 – Debt in the accompanying condensed consolidated financial statements; and • Operating lease liabilities that are included on our consolidated balance sheet. There were no material changes in our other contractual obligations during the three months ended March 31, 2024. 23 Historical Cash Flows The following table summarizes our unaudited condensed consolidated statements of cash flows for the periods indicated (in thousands): Three Months Ended March 31, 2024 2023 Net cash provided by operating activities $ 4,546 $ 7,659 Net cash used in investing activities (577) (2,504) Net cash provided by (used in) financing activities 583 (3,340) Effect of exchange rates on cash 226 (272) Net increase in cash and cash equivalents 4,778 1,543 Cash and cash equivalents, beginning of period 7,519 7,143 Cash, cash equivalents, and restricted cash, end of period $ 12,297 $ 8,686 Operating activities. Net cash provided by operating activities for the three months ended March 31, 2024 is comprised of a $4.5 million net loss incurred during the period, which was offset by net cash provided by working capital of $2.9 million and total non-cash charges, including depreciation and amortization of $4.4 million and share-based compensation expense of $0.7 million. Net cash provided by operating activities for three months ended March 31, 2023 is comprised of a $5.1 million net loss incurred during the period, which was offset by cash provided by working capital of $4.2 million and total non-cash charges, including depreciation and amortization of $5.4 million and share-based compensation expense of $1.8 million. Investing activities. Net cash used in investing activities during the three months ended March 31, 2024 is comprised of $0.6 million of c ash outflows related to the development of software in support of our products and services. Net cash used in investing activities during the same period in 2023 is primarily comprised of $2.4 million of c ash outflows related to the development of software in support of our products and services and $0.1 million of property, plant and equipment purchases. Financing activities. Net cash provided by financing activities during the three months ended March 31, 2024 is comprised of $0.6 million of cash inflow related to net borrowings on our revolving credit facility. Net cash used in financing activities for the same period in 2023 is primarily comprised of $3.4 million of cash outflow related to net repayments of our revolving credit facility, partially offset by $0.5 million in proceeds from the ATM offering .