Financial Data and Key Metrics Changes - Third quarter revenue increased by 4% year-over-year to $68.6 million compared to $66.1 million in Q3 2022 [12] - Adjusted EBITDA for Q3 2023 was $14.2 million, a decline of approximately 6% year-over-year [30] - Adjusted EBITDA margin decreased by 220 basis points to 20.6% from 22.8% in the prior year [10][30] - The company revised its 2023 revenue guidance down to a range of $280 million to $290 million from the previous range of $300 million to $310 million [24][59] Business Line Data and Key Metrics Changes - IoT Connectivity revenue increased by 27% year-over-year to $55.2 million, including the first full quarter of revenue from the Twilio IoT acquisition [12][22] - IoT Solutions revenue declined by 41% year-over-year to $13.4 million due to customer order deferrals [26] - Gross margin for IoT Solutions decreased by 174 basis points year-over-year to 26.9% [27] Market Data and Key Metrics Changes - Total connections at the end of Q3 2023 reached 18.9 million, an increase of over 300,000 from Q2 2023 [54] - The dollar-based net expansion rate (DBNER) for the 12 months ended September 30, 2023, was 96%, down from 100% in the prior year [14] Company Strategy and Development Direction - The company announced a refinancing of approximately $300 million term loan, reducing the first lien leverage ratio from roughly 5x to 3x estimated adjusted EBITDA [6][31] - KORE is focusing on driving organic top-line and adjusted EBITDA growth while removing debt overhang concerns [7] - The company is reallocating costs based on current priorities, expecting approximately $10 million in operating expense savings in 2024 [34][67] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment is impacting deployments, particularly among larger Connected Health customers [44][97] - Despite order deferrals, the company expects year-over-year revenue growth in Q4 2023 [50] - Management expressed confidence in achieving double-digit revenue growth in 2024, supported by an increasing global sales pipeline [61] Other Important Information - KORE received a 2023 IoT Evolution LPWAN Excellence Award for its innovative LoRaWAN solution, KORE LPHub [21] - The company is collaborating with GrandPad to support seniors with IoT connectivity solutions [8] Q&A Session Summary Question: How is the macro environment affecting business deployments? - Management acknowledged that while the macro environment is slowing some deployments, new business bookings remain strong, particularly among larger Connected Health customers [44] Question: Can you elaborate on the order deferrals? - Management indicated that the order deferrals primarily involve the same larger Connected Health customers, with some pushing deployments into 2024 due to various operational challenges [74] Question: What is the status of the refinancing? - Management confirmed that the refinancing is fully committed and expected to close shortly, with no anticipated conditions remaining [101] Question: How is the Twilio IoT business performing? - Management reported that the Twilio IoT business is performing below initial expectations but is expected to regain momentum as the integration progresses [112]

PART I - FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) KORE reported a $133.4 million net loss for the nine months ended September 30, 2023, primarily due to a $78.3 million goodwill impairment, impacting assets and operating cash flow [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $586.2 million as of September 30, 2023, primarily due to reduced goodwill, while stockholders' equity sharply declined to $71.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $19,767 | $34,645 | | Goodwill | $294,600 | $369,706 | | Total assets | $586,176 | $688,736 | | **Liabilities & Equity** | | | | Total current liabilities | $62,838 | $48,808 | | Long-term debt and other borrowings, net | $412,633 | $413,910 | | Total liabilities | $515,070 | $508,064 | | Total stockholders' equity | $71,106 | $180,672 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q3 2023 revenue slightly increased to $68.6 million, but a $78.3 million goodwill impairment led to a $95.4 million net loss, widening the nine-month net loss to $133.4 million Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $68,633 | $66,137 | $204,144 | $206,036 | | Operating loss | $(87,853) | $(7,996) | $(106,104) | $(21,050) | | Goodwill impairment | $78,255 | $— | $78,255 | $— | | Net loss | $(95,361) | $(14,277) | $(133,350) | $(36,639) | | Basic and diluted EPS | $(1.10) | $(0.19) | $(1.65) | $(0.49) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to $4.5 million for the nine months ended September 30, 2023, leading to a $14.9 million reduction in cash and restricted cash Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,493 | $20,527 | | Net cash used in investing activities | $(15,596) | $(57,974) | | Net cash used in financing activities | $(3,759) | $(3,599) | | Change in cash and restricted cash | $(14,944) | $(43,060) | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Key notes include the June 2023 Twilio IoT acquisition, a $78.3 million goodwill impairment in Q3 2023, and a major post-quarter refinancing with a new $185 million term loan and $150 million preferred stock investment Disaggregated Revenue (in thousands) | Revenue Type | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | IoT Connectivity | $54,217 | $42,949 | $145,161 | $129,816 | | Hardware Sales | $9,541 | $16,266 | $42,484 | $56,747 | | Total | $68,633 | $66,137 | $204,144 | $206,036 | - On June 1, 2023, the company acquired certain assets of Twilio Inc.'s IoT Business, funded by issuing **10,000,000 shares** of KORE common stock valued at **$14.7 million**[36](index=36&type=chunk)[37](index=37&type=chunk)[40](index=40&type=chunk) - In Q3 2023, the company recorded a goodwill impairment loss of approximately **$78.3 million**, triggered by a sustained decline in its share price indicating the carrying value exceeded fair value[81](index=81&type=chunk)[83](index=83&type=chunk) - Subsequent to the quarter end, on November 9, 2023, the company executed a major refinancing, replacing its existing credit facility with a new **$185.0 million** term loan and a **$25.0 million** revolving facility, and agreeing to issue **$150.0 million** of Series A-1 Preferred Stock and warrants[84](index=84&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2023 revenue growth driven by the Twilio IoT acquisition, a 96% DBNER, and a post-quarter refinancing that significantly altered the capital structure [Key Metrics](index=25&type=section&id=Key%20Metrics) Total connections grew to 18.9 million, boosted by the Twilio IoT acquisition, while DBNER decreased to 96%, and sales funnel TCV significantly increased to $740.0 million Total Number of Connections | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Number of Connections at Period End | 18.9 million | 15.0 million | - The increase in connections includes approximately **3.1 million** added from the acquisition of Twilio's IoT Business[124](index=124&type=chunk) - DBNER was **96%** for the twelve months ended September 30, 2023, compared to **100%** for the prior year period, mainly due to a revenue decline from the largest customer after its LTE transition project concluded[130](index=130&type=chunk) - The sales funnel TCV grew to approximately **$740.0 million** as of September 30, 2023, from **$434.0 million** at the end of 2022[133](index=133&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q3 2023 total revenue increased 4% to $68.6 million, driven by Services revenue growth offsetting Product declines, with total gross margin improving to 55% and SG&A expenses rising 13% Revenue by Type (in thousands) | Revenue Type | Q3 2023 | Q3 2022 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Services | $57,046 | $46,448 | $10,598 | 23% | | Products | $11,587 | $19,689 | $(8,102) | (41)% | | **Total Revenue** | **$68,633** | **$66,137** | **$2,496** | **4%** | Gross Margin Rate | Category | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Services | 60% | 64% | 63% | 64% | | Products | 29% | 24% | 27% | 23% | | **Total gross margin** | **55%** | **52%** | **54%** | **51%** | - SG&A expenses increased by **$3.9 million (13%)** in Q3 2023 compared to Q3 2022, primarily driven by increased headcount-related costs from the Twilio IoT acquisition[150](index=150&type=chunk)[151](index=151&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA for Q3 2023 decreased to $14.2 million, with the nine-month period showing $41.7 million, reflecting adjustments for goodwill impairment and other non-cash items Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(95,361) | $(14,277) | $(133,350) | $(36,639) | | EBITDA | $(73,382) | $5,812 | $(62,996) | $19,819 | | Goodwill impairment | $78,255 | $— | $78,255 | $— | | **Adjusted EBITDA** | **$14,159** | **$15,112** | **$41,726** | **$47,178** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Total debt stood at $416.9 million as of September 30, 2023, with cash decreasing, followed by a major post-quarter refinancing on November 9, 2023, significantly altering the capital structure - As of September 30, 2023, the company's financing arrangements included a Senior Secured UBS Term Loan with a drawn amount of **$298.0 million** and Backstop Notes of **$117.8 million**[162](index=162&type=chunk) - On June 1, 2023, the company issued **10,000,000 shares** of common stock to Twilio, Inc. as purchase consideration for its IoT Business[177](index=177&type=chunk) - Net cash provided by operating activities for the nine months ended September 30, 2023, was **$4.5 million**, a significant decrease from **$20.5 million** in the same period of 2022, partly due to a **$9.1 million** increase in interest expense[179](index=179&type=chunk)[181](index=181&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) KORE, as a smaller reporting company, is exempt from providing quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide the information for this item[186](index=186&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to previously reported material weaknesses in internal control over financial reporting - The company's CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to previously reported material weaknesses in internal control over financial reporting[187](index=187&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, its internal control[188](index=188&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material legal proceedings beyond routine litigation incidental to its business - As of the reporting date, the company is not involved in any material legal proceedings outside the ordinary course of business[191](index=191&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Key risk factors include potential stock dilution from new financing, future goodwill impairment charges, interest rate risk on variable debt, and the risk of NYSE delisting due to minimum share price non-compliance - Future issuances of common stock, including from the new Series A-1 Preferred Stock financing and outstanding warrants, could cause market value to decline and result in dilution[193](index=193&type=chunk)[195](index=195&type=chunk) - The company may incur significant impairment charges for goodwill and/or long-lived assets in the future if macroeconomic or market conditions deteriorate, which would adversely affect operating results[196](index=196&type=chunk) - The company is subject to interest rate risk from its variable rate indebtedness, which could significantly increase debt service obligations[197](index=197&type=chunk) - The company is not in compliance with NYSE's minimum average share price requirement as of August 30, 2023, and its common stock may be delisted if compliance is not regained[198](index=198&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities, use of proceeds from registered securities, or issuer purchases of equity securities were reported during Q3 2023 - There were no unregistered sales of equity securities during the quarter ended September 30, 2023[200](index=200&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2023 - During the quarter ended September 30, 2023, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[205](index=205&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files

... .. . . 。 。 。 . . . Because of these limitations, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA, Adjusted EBITDA and Adjusted EBITDA margin on a supplemental basis. You should review the reconciliation of net loss to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin below and not rely on an ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-40856 KORE Group Holdings, Inc. (Exact Name of Registrant as Specified in its Charter) __________________________ Delaw ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________ FORM 10-Q __________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-40856 KORE Group Holdings, Inc. (Exact Name of Regist ...

Economic Environment and Market Conditions - The company emphasizes that fluctuations in quarterly operating results may be pronounced in the current economic environment, advising against reliance on quarter-to-quarter comparisons for future performance [99]. - Revenue, results of operations, and cash flows are highly dependent on overall demand for the company's platforms and solutions, which may be negatively impacted by macroeconomic conditions such as inflation and rising interest rates [100]. - The company is focusing on the growth of the 5G market, which may take longer to materialize than expected, potentially delaying commercial milestones and affecting financial performance [104]. - The deployment of 5G technology is subject to risks such as equipment availability and regulatory delays, which could affect network performance and customer retention [126]. - The ongoing military conflict between Russia and Ukraine may trigger additional economic sanctions, potentially impacting supply chains and financial conditions [156]. Financial Performance and Results - For the year ended December 31, 2022, total revenue increased to $268.4 million, up 8.1% from $248.4 million in 2021 [321]. - The company reported a net loss of $106.2 million for 2022, compared to a net loss of $24.8 million in 2021, reflecting a significant increase in losses [323]. - Operating expenses rose to $224.8 million in 2022, up from $142.6 million in 2021, primarily due to a goodwill impairment of $58.1 million [321]. - Cash and cash equivalents decreased to $34.6 million as of December 31, 2022, down from $86.0 million in 2021 [316]. - The company’s accumulated deficit increased to $248.2 million in 2022 from $142.3 million in 2021, highlighting ongoing financial challenges [319]. - The company incurred net losses of $106.2 million in 2022 and has an accumulated deficit of $248.2 million as of December 31, 2022 [189]. Risks and Challenges - The company is facing challenges in supporting low latency and high throughput IoT use cases, which are critical for revenue growth and profitability [107]. - There are risks associated with the introduction of new products, including potential supply chain disruptions and competition from new entrants in the market [101]. - Cybersecurity threats pose a significant risk, with potential breaches affecting the integrity and availability of the company's systems and customer data [114]. - The company may face litigation that could adversely affect its financial condition and operations, including costs related to intellectual property disputes [120]. - The company faces risks related to rapid technological changes and must adapt to evolving industry standards to remain competitive [124]. - The company faces risks related to compliance with evolving privacy laws, which could require substantial costs to ensure compliance [165]. - Changes in U.S. and foreign tax rules may result in adverse tax consequences, affecting the company's financial condition [167]. - The company faces risks related to increased borrowing costs and liquidity problems if cash flows are insufficient to meet debt service obligations [176]. Customer and Revenue Concentration - The largest customer accounted for approximately 11% of total revenue for the year ended December 31, 2022, while the next largest customer contributed about 8% [121]. - Revenue from connectivity services built on cellular networks provided by the top three carrier relationships accounted for approximately 40% of the business for the year ended December 31, 2022 [154]. - The company actively seeks to sell additional solutions to existing customers, but a significant increase in churn rate could adversely affect revenue growth [127]. Investment and Growth Strategies - Significant investments are being made in 4G and 5G technologies, with the company aiming to develop leading and cost-effective products in these areas [106]. - Investment in new business strategies and acquisitions may lead to operational difficulties and financial risks, impacting overall business performance [132]. - The company made payments for acquisitions totaling $46,002,000 in 2022, indicating ongoing investment in growth through M&A [328]. Operational and Compliance Issues - The company has identified material weaknesses in its internal controls over financial reporting, which could impair its ability to produce accurate financial statements [181]. - The company is subject to examination by tax authorities, which could result in material differences from historical tax provisions and adversely affect financial statements [173]. - The company relies on a limited number of suppliers for critical components, and any disruption in the supply chain could adversely affect revenue and results of operations [155]. - The company is dependent on telecommunications carriers for IoT Connectivity Services, and disruptions in these relationships could significantly impact business [153]. Accounting and Financial Reporting - The company adopted new accounting standards for leases and cash conversion features effective January 1, 2022, which may impact future financial reporting [310][311]. - The Company recognizes revenue primarily from IoT Connectivity and IoT Solutions, with monthly recurring charges and usage charges forming the bulk of its revenue stream [345]. - The Company recognizes stock-based compensation as an expense over the requisite service period using the straight-line attribution method [374]. - The cumulative after-tax effect of adopting ASC 842 resulted in operating lease right-of-use assets of $9.278 million and total operating lease liabilities of $9.604 million as of January 1, 2022 [393].

Company Overview - KORE is building the world's first pure-play IoT enabler[18] - KORE has over 3,600 customers and 153 million connections[11, 60] - KORE's revenue visibility through 2022 is approximately 95%[11] Financial Performance - KORE's 2021 revenue was $248 million[152] - Q3 2022 revenue was $666 million, a decrease of 2% compared to September 30, 2021[72, 152] - KORE expects to exceed its $457 million revenue forecast for 2021-22 by $56 million+[61] - Adjusted EBITDA for the nine months ended September 30 was $471 million in 2022 and $470 million in 2021[5] Revenue Streams - IoT Connectivity accounted for 65% of revenue in both Q3 2022 and the nine months ended September 30, 2022[24, 72] - IoT Solutions accounted for 35% of revenue in Q3 2022 and the nine months ended September 30, 2022[24, 72] Market Positioning - KORE is positioned for growth in the IoT market, with a focus on industries representing over 80% of IoT spending[14, 63] - KORE's five focus industry sectors are growing fast[50]

Financial Data and Key Metrics Changes - Fourth quarter revenue was $62.4 million, a decline of 3% year-over-year, primarily due to significant revenue from the LTE transition project in the previous year and the impact of 2G/3G sunsets in the U.S. [5][10][12] - Adjusted EBITDA for the fourth quarter was $15.7 million, an increase of approximately 20% compared to the same period last year, with an adjusted EBITDA margin of 25.1% [9][101]. - Full year 2022 net loss was $105.4 million, which includes a goodwill impairment charge of $56.9 million [10][119]. Business Line Data and Key Metrics Changes - IoT connectivity revenue for the full year increased 4% to $175.9 million, while IoT solutions revenue increased 16.5% to $92.5 million [12][103]. - In the fourth quarter, IoT solutions revenue declined 11% year-over-year to $18.7 million, largely due to the previous year's LTE transition project revenue [103]. - Dollar-based net expansion rate (DBNER) for the 12 months ended December 31, 2022, was 92%, down from 122% in the prior year [8]. Market Data and Key Metrics Changes - The company noted that approximately 60% of total revenue is derived from connected health, which is the largest industry vertical [15]. - The company expects to expand its presence in other targeted industry verticals to increase total addressable market (TAM) and drive further growth [15]. Company Strategy and Development Direction - The acquisition of Twilio's IoT business is expected to enhance KORE's eSIM leadership position and expand its deploy, manage, and scale value proposition [97][112]. - The company aims to be one of the few large IoT hyperscalers following market consolidation, leveraging Twilio's capabilities to optimize customer acquisition costs [112][114]. - KORE is focusing on building preconfigured solutions and expanding its offerings in analytics and massive IoT edge computing [86][112]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue and adjusted EBITDA guidance for 2023, projecting revenue in the range of $300 million to $310 million despite headwinds from 2G/3G sunsets and the LTE transition project [116]. - The company anticipates that the worst is behind them and expects organic growth in the mid to high single digits for 2023 [48][116]. - Management acknowledged the impact of macroeconomic conditions on sales cycles, noting a shift towards cost optimization and efficiency-oriented opportunities [18]. Other Important Information - The company reported a significant increase in operating expenses due to a non-cash goodwill impairment charge and other operational costs associated with being a public company [10][104]. - Cash and cash equivalents at the end of Q4 2022 were $35 million, down from $86.3 million at the end of Q4 2021, primarily due to slower collections [105]. Q&A Session Summary Question: Could you give some color on the sales cycle? - Management noted a shift in customer focus from top-line growth to cost optimization and efficiency due to macroeconomic concerns, but expressed confidence in their business model's resilience [18]. Question: How could the supply chain loosening help gross margin and revenue growth this year? - Management indicated that while there are signs of supply chain improvement, challenges remain, and they expect gradual recovery over the next 12 to 18 months [19]. Question: Are there metrics to discuss regarding gross margins and customer installations within the Twilio base? - Management highlighted the strategic fit of the Twilio acquisition and its potential to enhance KORE's offerings, but refrained from disclosing specific metrics until the deal closes [22]. Question: What is the outlook for 2023 revenue guidance? - Management provided guidance of $300 million to $310 million for 2023, factoring in the expected contributions from the Twilio acquisition [116]. Question: How do you feel about the overall trajectory in the pace of IoT deployment? - Management expressed optimism about normalized growth rates and the potential for market share gains, despite the challenges faced [52].

Financial Performance - Q3 2022 - Total revenue decreased by 2% to $66.6 million compared to $67.9 million in Q3 2021[16] - IoT Connectivity revenue increased by 4% to $43.4 million compared to $41.5 million in Q3 2021[16] - IoT Solutions revenue decreased by 12% to $23.3 million compared to $26.3 million in Q3 2021[16] - Gross margin increased by 500 bps to 53% compared to 48% in Q3 2021[16] - Net loss was $13.0 million, or $0.17 per share, compared to a net loss of $4.5 million, or $0.26 per share in Q3 2021[16] - Adjusted EBITDA decreased by 2% to $15.6 million compared to $15.9 million in Q3 2021[16] - Adjusted EBITDA margin was flat at 23.4% compared to Q3 2021[16] Financial Outlook - 2022 - The company increased its 2022 revenue outlook to $265-$267 million, despite a $5 million F/X headwind[16] - The company's two-year stack revenue for 2021-22 is forecast at $513-$515 million compared to the forecast of $457 million provided in the 'go public' model[16] - Adjusted EBITDA for 2022 is projected to be $63-$64 million, representing approximately a 24% margin[16] Business Highlights - KORE formed a strategic partnership with Ericsson to provide connectivity in the U S for over 8,500 Ericsson enterprise customers[14] - KORE launched KORE Connected Hub for Connected Health to streamline the integration of medical devices and sensors[14] - KORE was named a 2022 Competitive Strategy Leader by Frost & Sullivan[14]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section details KORE Group Holdings, Inc.'s Form 10-Q filing for Q3 2022, including registrant identification and securities status [Registrant Information](index=1&type=section&id=Registrant%20Information) Provides KORE Group Holdings, Inc.'s identification details for its Q3 2022 Form 10-Q, including incorporation, address, and contact - KORE Group Holdings, Inc. filed its Quarterly Report on Form 10-Q for the period ended September 30, 2022[2](index=2&type=chunk) - The registrant is incorporated in Delaware with IRS Employer Identification No. 86-3078783[2](index=2&type=chunk) - The principal executive offices are located at 3 Ravinia Drive NE, Suite 500, Atlanta, Georgia 30346[3](index=3&type=chunk) [Securities and Filer Status](index=1&type=section&id=Securities%20and%20Filer%20Status) KORE Group Holdings, Inc.'s common stock and warrants are listed on NYSE, classified as a non-accelerated and emerging growth company Title of each class | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------------------ | :---------------- | :---------------------------------------- | | Common stock, $0.0001 par value | KORE | The New York Stock Exchange | | Warrants to purchase common stock | KORE WS | The New York Stock Exchange | - The registrant has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days[4](index=4&type=chunk) - The registrant is classified as a **Non-accelerated filer** and an **Emerging growth company**[7](index=7&type=chunk) - As of November 11, 2022, there were **76,289,741 shares** of common stock, par value $0.0001 per share, issued and outstanding[7](index=7&type=chunk) [Table of Contents](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized list of all major sections and their corresponding page numbers within the Form 10-Q report [Forward-Looking Statements](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature and cautionary aspects of forward-looking statements contained within the Form 10-Q report [Scope and Nature of Forward-Looking Statements](index=4&type=section&id=Scope%20and%20Nature%20of%20Forward-Looking%20Statements) Clarifies that the Form 10-Q includes forward-looking statements covered by safe harbor provisions, based on current expectations and projections - Forward-looking statements in this report are covered by safe harbor provisions of the Securities Act and Exchange Act[10](index=10&type=chunk) - These statements include future results of operations, financial position, industry and business trends, equity compensation, business strategy, plans, market growth, and objectives[10](index=10&type=chunk) - Forward-looking statements are current expectations and predictions, based on current projections about future events and financial trends, but involve known and unknown risks and uncertainties that may cause actual results to differ materially[11](index=11&type=chunk) [Cautionary Note](index=4&type=section&id=Cautionary%20Note) Warns investors against undue reliance on forward-looking statements, as actual results may differ, and the company does not commit to updates - Investors are cautioned not to unduly rely upon these statements as actual future results, levels of activity, performance, and achievements may be materially different from expectations[12](index=12&type=chunk) - The company does not plan to publicly update or revise any forward-looking statements, except as required by applicable law[12](index=12&type=chunk) [PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents KORE Group Holdings, Inc.'s unaudited condensed consolidated financial statements for the periods ended September 30, 2022 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of KORE Group Holdings, Inc.'s financial position, detailing assets, liabilities, and equity as of September 30, 2022 | Assets (in thousands USD) | Sep 30, 2022 | Dec 31, 2021 | | :------------------------ | :----------- | :----------- | | Cash | $42,925 | $85,976 | | Total current assets | $106,461 | $161,152 | | Goodwill | $425,604 | $381,962 | | Total assets | $757,473 | $759,602 | | Total current liabilities | $47,075 | $48,188 | | Total liabilities | $506,012 | $487,459 | | Total stockholders' equity| $251,461 | $272,143 | - Cash decreased by **$43,051 thousand** from December 31, 2021, to September 30, 2022[14](index=14&type=chunk) - Goodwill increased by **$43,642 thousand**, primarily due to acquisitions[14](index=14&type=chunk) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Details KORE Group Holdings, Inc.'s revenues, expenses, and net loss for the three and nine months ended September 30, 2022 | (in thousands USD) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $66,640 | $67,878 | $205,934 | $183,919 | | Operating loss | $(7,479) | $(5,527) | $(21,043) | $(9,228) | | Net loss | $(13,025) | $(4,508) | $(35,073) | $(12,474) | | Basic Loss per share | $(0.17) | $(0.26) | $(0.46) | $(0.98) | - Total revenue decreased by **2%** for the three months ended September 30, 2022, but increased by **12%** for the nine months ended September 30, 2022, compared to the prior year periods[16](index=16&type=chunk) - Net loss increased significantly for both the three-month and nine-month periods ended September 30, 2022, compared to the prior year[16](index=16&type=chunk) [Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Presents KORE Group Holdings, Inc.'s net loss and other comprehensive income/loss components for the periods ended September 30, 2022 | (in thousands USD) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(13,025) | $(4,508) | $(35,073) | $(12,474) | | Foreign currency translation adjustment | $(2,417) | $(1,322) | $(5,160) | $(1,479) | | Comprehensive loss | $(15,442) | $(5,830) | $(40,233) | $(13,953) | - Comprehensive loss for the nine months ended September 30, 2022, was **$40,233 thousand**, a substantial increase from **$13,953 thousand** in the prior year, primarily driven by increased net loss and foreign currency translation adjustments[18](index=18&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in KORE Group Holdings, Inc.'s stockholders' equity, including net loss and stock-based compensation, for the reporting period | (in thousands USD) | Dec 31, 2021 | Sep 30, 2022 | | :----------------- | :----------- | :----------- | | Total Stockholders' Equity | $272,143 | $251,461 | | Accumulated Deficit| $(138,179) | $(172,953) | | Additional Paid-in Capital | $413,646 | $432,897 | - Total stockholders' equity decreased from **$272,143 thousand** at December 31, 2021, to **$251,461 thousand** at September 30, 2022, mainly due to net losses and foreign currency translation adjustments, partially offset by stock-based compensation and common stock issued pursuant to acquisition[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes KORE Group Holdings, Inc.'s cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 | (in thousands USD) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $20,527 | $(9,439) | | Net cash used in investing activities | $(57,974) | $(9,782) | | Net cash (used in) provided by financing activities | $(3,599) | $81,772 | | Cash and restricted cash, end of period | $43,283 | $73,056 | - Net cash provided by operating activities significantly improved to **$20,527 thousand** for the nine months ended September 30, 2022, compared to cash used of **$9,439 thousand** in the prior year[24](index=24&type=chunk) - Cash used in investing activities increased substantially to **$57,974 thousand**, primarily due to payments for acquisitions[24](index=24&type=chunk) [Notes to the Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements for KORE Group Holdings, Inc [NOTE 1 – Summary of Significant Accounting Policies](index=12&type=section&id=NOTE%201%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the key accounting principles and policies applied in preparing KORE Group Holdings, Inc.'s condensed consolidated financial statements - The financial statements are prepared in accordance with U.S. GAAP and SEC interim financial reporting rules, using the same accounting policies as annual statements[28](index=28&type=chunk)[29](index=29&type=chunk) - The Company adopted new lease accounting standards (ASC 842) on January 1, 2022, recognizing right-of-use assets and lease liabilities on the balance sheet[32](index=32&type=chunk)[40](index=40&type=chunk) - The Company early adopted ASU 2020-06 on January 1, 2022, simplifying accounting for convertible debt by eliminating the separation of beneficial conversion and cash conversion features[44](index=44&type=chunk)[45](index=45&type=chunk) [NOTE 2 – Revenue Recognition](index=15&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION) Details KORE Group Holdings, Inc.'s policies and disaggregated information regarding revenue recognition from various IoT categories - Deferred revenue primarily relates to IoT Connectivity monthly recurring charges and goods in-transit[54](index=54&type=chunk) Disaggregated Revenue Information (in thousands USD) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | IoT Connectivity | $42,911 | $40,738 | $129,714 | $122,444 | | Hardware Sales | $16,807 | $19,221 | $56,747 | $40,602 | | Deployment services, professional services, and other | $3,499 | $7,690 | $11,980 | $17,422 | - One customer represented **6.5%** and **28.0%** of total revenue for the three months ended September 30, 2022 and 2021, respectively, and **12.0%** and **21.0%** for the nine months ended September 30, 2022 and 2021, respectively[57](index=57&type=chunk) [NOTE 3 – Right-of-Use Assets and Lease Liabilities](index=16&type=section&id=NOTE%203%20%E2%80%93%20RIGHT-OF%20USE%20ASSETS%20AND%20LEASE%20LIABILITIES) Describes KORE Group Holdings, Inc.'s accounting for lease arrangements, including right-of-use assets and corresponding lease liabilities - The Company leases real estate, computer hardware, and vehicles under operating and finance leases with terms ranging from **1 to 10 years**[58](index=58&type=chunk) Lease Costs (in thousands USD) | Lease Type | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--------- | :------------------------------ | :----------------------------- | | Operating lease cost | $951 | $2,669 | | Finance lease cost | $97 | $303 | | Total lease cost | $1,048 | $2,972 | Weighted-Average Lease Terms and Discount Rates (as of Sep 30, 2022) | Lease Type | Remaining Lease Term (years) | Discount Rate | | :--------- | :--------------------------- | :------------ | | Operating leases | 7.80 | 7.5 % | | Finance leases | 2.29 | 5.4 % | [NOTE 4 – Acquisitions and Divestitures](index=17&type=section&id=NOTE%204%20%E2%80%93%20ACQUISITIONS%20AND%20DIVESTITURES) Provides details on KORE Group Holdings, Inc.'s acquisition activities, including the Business Mobility Partners, Inc. acquisition and its financial impact - On February 16, 2022, KORE acquired Business Mobility Partners, Inc. and Simon IoT (BMP Acquisition) for **$46.0 million cash** and **4,212,246 shares** of common stock valued at **$23.3 million**, totaling **$69.3 million** in consideration[61](index=61&type=chunk)[65](index=65&type=chunk) - The BMP Acquisition expanded KORE's services in healthcare and life sciences, adding **$14.6 million** in revenue and **$3.9 million** in net income for the three months ended September 30, 2022[61](index=61&type=chunk)[67](index=67&type=chunk) - Goodwill of **$44,859 thousand** was recognized from the BMP Acquisition, representing expected future economic benefits[65](index=65&type=chunk)[66](index=66&type=chunk) [NOTE 5 – Goodwill](index=19&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL) Explains the changes in KORE Group Holdings, Inc.'s goodwill balance, primarily due to acquisitions and currency translation adjustments Goodwill (in thousands USD) | Period | Amount | | :----------------- | :---------- | | At December 31, 2021 | $381,962 | | Acquisitions | $44,859 | | Currency translation | $(1,217) | | At September 30, 2022 | $425,604 | - Goodwill increased by **$43,642 thousand** from December 31, 2021, to September 30, 2022, primarily due to the BMP Acquisition[73](index=73&type=chunk) [NOTE 6 – Short-Term and Long-Term Debt](index=19&type=section&id=NOTE%206%20%E2%80%93%20SHORT-TERM%20AND%20LONG-TERM%20DEBT) Details KORE Group Holdings, Inc.'s debt obligations, including term loans, revolving credit facilities, and unsecured exchangeable notes - The Company's principal outstanding balance on the Senior Secured UBS Term Loan was **$303.4 million** as of September 30, 2022, down from **$305.8 million** at December 31, 2021[76](index=76&type=chunk) - No amounts were drawn on the **$30.0 million** senior secured revolving credit facility with UBS or the **€250,000** bank overdraft facility with BNP Paribas Fortis as of September 30, 2022[77](index=77&type=chunk)[79](index=79&type=chunk) - KORE Wireless Group Inc. issued **$120.0 million** in senior unsecured exchangeable notes (Backstop Notes and Additional Notes) to Fortress, with a net carrying amount of **$117.4 million** as of September 30, 2022, after adopting ASU 2020-06[80](index=80&type=chunk)[83](index=83&type=chunk) - A Premium Finance Agreement for **$3.6 million** was entered into on August 3, 2022, to purchase a two-year directors and officers insurance policy, with an outstanding balance of **$3.3 million** as of September 30, 2022[85](index=85&type=chunk)[86](index=86&type=chunk) [NOTE 7 – Income Taxes](index=20&type=section&id=NOTE%207%20%E2%80%93%20INCOME%20TAXES) Discusses KORE Group Holdings, Inc.'s income tax provisions, effective tax rates, and factors influencing tax benefits for the periods Effective Income Tax Rate | Period | 2022 | 2021 | | :----------------- | :---- | :---- | | Three Months Ended Sep 30 | 16.3% | 45.1% | | Nine Months Ended Sep 30 | 18.3% | 38.0% | Income Tax Benefit (in thousands USD) | Period | 2022 | 2021 | | :----------------- | :------ | :------ | | Three Months Ended Sep 30 | $(2,540) | $(3,710) | | Nine Months Ended Sep 30 | $(7,844) | $(7,628) | - The effective income tax rate for both periods differed from the federal statutory rate primarily due to the geographical mix of earnings, foreign tax rate differentials, permanent differences, R&D tax credits, and valuation allowances[88](index=88&type=chunk) [NOTE 8 – Reverse Recapitalization](index=21&type=section&id=NOTE%208%20%E2%80%93%20REVERSE%20RECAPITALIZATION) Explains the accounting treatment and financial impact of the business combination between pre-combination KORE and CTAC - The Business Combination between pre-combination KORE and CTAC on September 30, 2021, was accounted for as a reverse recapitalization, with pre-combination KORE as the accounting acquirer[90](index=90&type=chunk)[91](index=91&type=chunk) - The merger resulted in a **$63.2 million** increase in cash, net of transaction costs, funded by PIPE proceeds, CTAC proceeds, and Backstop Notes, and used to repay preferred shareholders and debt[92](index=92&type=chunk) - Transaction costs of **$24.2 million** related to the Business Combination were incurred, with **$24.1 million** recorded against additional paid-in capital[93](index=93&type=chunk) [NOTE 9 – Stock-Based Compensation](index=21&type=section&id=NOTE%209%20%E2%80%93%20STOCK-BASED%20COMPENSATION) Details KORE Group Holdings, Inc.'s stock-based compensation plans, RSU activity, and related expenses for the reporting periods - The 2021 Long-Term Stock Incentive Plan allows for grants of share-based payment awards (RSUs) to employees, directors, and consultants, with vesting typically over **2-4 years**[96](index=96&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) RSU Activity (in thousands) | Category | Number of awards outstanding | Aggregate intrinsic value | | :------------------------ | :--------------------------- | :------------------------ | | Unvested RSUs at Dec 31, 2021 | — | — | | Granted | 5,789 | $36,101 | | Vested | (50) | $(342) | | Forfeited and canceled | (158) | $(1,104) | | Unvested RSUs at Sep 30, 2022 | 5,580 | $34,655 | - Total stock compensation expense related to RSUs was **$3,019 thousand** for the three months and **$7,570 thousand** for the nine months ended September 30, 2022[105](index=105&type=chunk) - The Pre-Combination Kore 2014 Equity Incentive Plan for stock options was terminated on September 30, 2021, with no outstanding options or unrecognized compensation costs as of that date[106](index=106&type=chunk)[107](index=107&type=chunk) [NOTE 10 – Warrants on Common Stock](index=23&type=section&id=NOTE%2010%20%E2%80%93%20WARRANTS%20ON%20COMMON%20STOCK) Provides information on KORE Group Holdings, Inc.'s outstanding public and private placement warrants and their fair value measurement - As of September 30, 2022, **8,638,966 Public Warrants** and **272,779 Private Placement Warrants** remained outstanding, each entitling the holder to purchase one share of common stock at **$11.50 per share**[108](index=108&type=chunk)[109](index=109&type=chunk) - The Private Placement Warrants are measured quarterly at fair value, with an aggregate value of **$32.7 thousand** as of September 30, 2022, based on a closing price of **$0.12 per KORE.WS**[110](index=110&type=chunk) [NOTE 11 – Net Loss Per Share](index=24&type=section&id=NOTE%2011%20%E2%80%93%20NET%20LOSS%20PER%20SHARE) Presents KORE Group Holdings, Inc.'s basic and diluted net loss per share calculations for the three and nine months ended September 30, 2022 Net Loss Per Share (in thousands USD, except share and per share amounts) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(13,025) | $(8,331) | $(35,073) | $(31,222) | | Basic EPS | $(0.17) | $(0.26) | $(0.46) | $(0.98) | | Diluted EPS | $(0.17) | $(0.26) | $(0.46) | $(0.98) | - Basic and diluted loss per share for the three months ended September 30, 2022, was **$(0.17)**, an improvement from **$(0.26)** in the prior year, despite an increased net loss attributable to common stockholders[112](index=112&type=chunk) - For the nine months ended September 30, 2022, basic and diluted loss per share was **$(0.46)**, an improvement from **$(0.98)** in the prior year[112](index=112&type=chunk) [NOTE 12 – Prepaid and Other Current Assets](index=24&type=section&id=NOTE%2012%20%E2%80%93%20PREPAID%20AND%20OTHER%20CURRENT%20ASSETS) Details the composition and changes in KORE Group Holdings, Inc.'s prepaid expenses and other current assets for the reporting period Prepaid Expenses and Other Current Assets (in thousands USD) | Category | Sep 30, 2022 | Dec 31, 2021 | | :-------------- | :----------- | :----------- | | Prepaid expenses | $11,515 | $6,418 | | Prepaid deposits | $1,801 | $1,030 | | Total | $13,316 | $7,448 | - Total prepaid expenses and other current assets increased by **$5,868 thousand** from December 31, 2021, to September 30, 2022[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on KORE Group Holdings, Inc.'s financial performance, liquidity, and operational results for the reporting periods [Overview](index=25&type=section&id=Overview) Provides a high-level summary of KORE Group Holdings, Inc.'s financial performance, including revenue growth and cash flow improvements - Revenue increased by **12%** or **$22.0 million** for the nine months ended September 30, 2022, due to organic and inorganic growth[121](index=121&type=chunk) - Cash flows provided by operating activities were **$20.5 million** for the nine months ended September 30, 2022, a significant improvement from cash flows used of **$9.4 million** in the prior year[121](index=121&type=chunk) - The phase-out of 2G and 3G networks in the U.S. may lead to lower revenue per unit due to typically lower LTE platform rate plans, despite expected customer retention[117](index=117&type=chunk) [Operating Segments](index=25&type=section&id=Operating%20Segments) Confirms that KORE Group Holdings, Inc. operates and reports its financial results as a single operating segment - The Company operates in a **single operating and reportable segment**[118](index=118&type=chunk) [Key Metrics](index=25&type=section&id=Key%20Metrics) Defines and explains the principal performance measures used by KORE Group Holdings, Inc.'s management, including Total Connections and DBNER - Total Connections, including eSIMs, is the principal measure used by management to assess business performance[120](index=120&type=chunk)[122](index=122&type=chunk) - DBNER (Dollar Based Net Expansion Rate) tracks the combined effect of cross-sales, customer retention, and existing business growth, calculated by dividing current period revenue from existing go-forward customers by prior year revenue from the same cohort[123](index=123&type=chunk)[124](index=124&type=chunk) - Non-Core Customers are a subset of non-go-forward customers expected to fully churn by the end of 2022 due to 2G/3G network sunsets[125](index=125&type=chunk) [Results of Operations for the three and nine months ended September 30, 2022, and 2021](index=26&type=section&id=Results%20of%20Operations%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202022%2C%20and%202021) Analyzes KORE Group Holdings, Inc.'s financial performance, including revenue, costs, and expenses, for the specified three and nine-month periods [Revenue](index=26&type=section&id=Revenue) Details KORE Group Holdings, Inc.'s revenue performance, disaggregated by services, products, and IoT categories, for the reporting periods Total Revenue (in thousands USD) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Services | $46,410 | $48,428 | $(2,018) | (4)% | | Products | $20,230 | $19,450 | $780 | 4% | | Total | $66,640 | $67,878 | $(1,238) | (2)% | Total Revenue (in thousands USD) | Category | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Services | $141,694 | $139,866 | $1,828 | 1% | | Products | $64,240 | $44,053 | $20,187 | 46% | | Total | $205,934 | $183,919 | $22,015 | 12% | - Services revenue decreased for the three months ended September 30, 2022, due to foreign exchange effects, Non-Core Customer declines, and LTE migration, partially offset by organic growth and the BMP Acquisition[129](index=129&type=chunk) - Products revenue increased for both periods, significantly boosted by **$12.1 million** (3 months) and **$29.7 million** (9 months) from the BMP Acquisition, despite declines from existing IoT Solutions customers[130](index=130&type=chunk)[132](index=132&type=chunk)[138](index=138&type=chunk) Revenue by IoT Category (in thousands USD) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | IoT Connectivity | $43,377 | $41,542 | $1,835 | 4% | | IoT Solutions | $23,263 | $26,336 | $(3,073) | (12)% | | Total | $66,640 | $67,878 | $(1,238) | (2)% | - Total connections grew from **13.6 million** to **15.3 million** year-over-year for the nine months ended September 30, 2022, primarily from existing customers[137](index=137&type=chunk) - DBNER decreased from **114%** to **100%** for the twelve months ended September 30, 2022, mainly due to a decline in revenue from the largest customer after their LTE transition project concluded[139](index=139&type=chunk) [Costs of revenue, exclusive of depreciation and amortization](index=28&type=section&id=Costs%20of%20revenue%2C%20exclusive%20of%20depreciation%20and%20amortization) Analyzes KORE Group Holdings, Inc.'s cost of revenue for services and products, and their impact on gross margins, for the reporting periods Total Cost of Revenue (in thousands USD) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Services | $16,609 | $17,379 | $(770) | (4)% | | Products | $14,960 | $17,585 | $(2,625) | (15)% | | Total | $31,569 | $34,964 | $(3,395) | (10)% | Total Cost of Revenue (in thousands USD) | Category | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Services | $50,714 | $51,417 | $(703) | (1)% | | Products | $49,701 | $37,258 | $12,443 | 33% | | Total | $100,415 | $88,675 | $11,740 | 13% | Gross Margin Rate | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Services | 64% | 64% | 64% | 63% | | Products | 26% | 10% | 23% | 15% | | Total gross margins | 53% | 48% | 51% | 52% | - Cost of services decreased for both periods, driven by lower deployment revenue and foreign exchange rates, partially offset by increased carrier costs from the BMP Acquisition[140](index=140&type=chunk)[143](index=143&type=chunk) - Cost of products decreased for the three months but increased for the nine months, primarily due to the BMP Acquisition's impact on costs, partially offset by lower sales volume from existing IoT Solutions customers[142](index=142&type=chunk)[144](index=144&type=chunk) Cost of Revenue by IoT Category (in thousands USD) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | IoT Connectivity | $15,350 | $16,111 | $(761) | (5)% | | IoT Solutions | $16,219 | $18,853 | $(2,634) | (14)% | | Total | $31,569 | $34,964 | $(3,395) | (10)% | Gross Margin Rate by IoT Category | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | IoT Connectivity | 65% | 61% | 64% | 61% | | IoT Solutions | 30% | 28% | 27% | 32% | | Total gross margins | 53% | 48% | 51% | 52% | [Selling, general and administrative expenses](index=30&type=section&id=Selling%2C%20general%20and%20administrative%20expenses) Examines the changes in KORE Group Holdings, Inc.'s selling, general, and administrative expenses and their contributing factors SG&A Expenses (in thousands USD) | Period | 2022 | 2021 | Change ($) | Change (%) | | :----------------- | :------ | :------ | :--------- | :--------- | | Three Months Ended Sep 30 | $28,841 | $26,001 | $2,840 | 11% | | Nine Months Ended Sep 30 | $85,883 | $66,525 | $19,358 | 29% | - SG&A expenses increased by **11%** for the three months and **29%** for the nine months ended September 30, 2022, driven by foreign exchange, headcount, channel commissions, travel, professional services, and D&O insurance, partially offset by decreased stock-based compensation in the three-month period[151](index=151&type=chunk)[152](index=152&type=chunk) [Depreciation and amortization](index=30&type=section&id=Depreciation%20and%20amortization) Discusses the changes in KORE Group Holdings, Inc.'s depreciation and amortization expenses, primarily due to acquired intangibles Depreciation and Amortization (in thousands USD) | Period | 2022 | 2021 | Change ($) | Change (%) | | :----------------- | :------ | :------ | :--------- | :--------- | | Three Months Ended Sep 30 | $13,709 | $12,440 | $1,269 | 10% | | Nine Months Ended Sep 30 | $40,679 | $37,947 | $2,732 | 7% | - Depreciation and amortization expense increased by **10%** for the three months and **7%** for the nine months ended September 30, 2022, primarily due to amortization of acquired intangibles from the BMP acquisition[153](index=153&type=chunk) [Other (income) expense](index=30&type=section&id=Other%20(income)%20expense) Details KORE Group Holdings, Inc.'s other income and expenses, including interest expense and changes in warrant liability fair value Total Other Expense (in thousands USD) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Interest expense | $8,206 | $5,589 | $2,617 | 47% | | Change in fair value of warrant liability | $(120) | $(2,898) | $2,778 | (96)% | | Total other expense | $8,086 | $2,691 | $5,395 | 200% | Total Other Expense (in thousands USD) | Category | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Interest expense | $22,127 | $16,155 | $5,972 | 37% | | Change in fair value of warrant liability | $(253) | $(5,281) | $5,028 | (95)% | | Total other expense | $21,874 | $10,874 | $11,000 | 101% | - Total other expense increased significantly for both periods, driven by higher interest expenses due to increased rates and the addition of Backstop Notes, and a decrease in the gain on warrant liability[155](index=155&type=chunk) [Income taxes](index=31&type=section&id=Income%20taxes) Analyzes KORE Group Holdings, Inc.'s income tax benefit and effective tax rates, considering jurisdictional earnings mix and non-taxable items Income Tax Benefit (in thousands USD) | Period | 2022 | 2021 | Change ($) | Change (%) | | :----------------- | :------ | :------ | :--------- | :--------- | | Three Months Ended Sep 30 | $(2,540) | $(3,710) | $1,170 | (32)% |\ | Nine Months Ended Sep 30 | $(7,844) | $(7,628) | $(216) | 3% | - The decrease in income tax benefit for the three months ended September 30, 2022, and the increase for the nine months, were primarily due to changes in the jurisdictional mix of earnings and the non-taxable impact of the change in fair value of warrant liability[156](index=156&type=chunk)[157](index=157&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses KORE Group Holdings, Inc.'s financial liquidity, capital structure, cash flow activities, and future funding requirements [Overview](index=31&type=section&id=Overview) Provides a summary of KORE Group Holdings, Inc.'s current liquidity position, including cash, equity, and available credit facilities - As of September 30, 2022, KORE had total equity of **$251.5 million**, cash of **$42.9 million**, and a fully available **$30.0 million** Revolving Credit Facility[159](index=159&type=chunk) - Management believes current liquidity is sufficient to cover working capital, debt service, and capital expenditures for the next twelve months[159](index=159&type=chunk) - The Company is evaluating the impact of the LIBOR phase-out on its debt facilities and commercial contracts[160](index=160&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) Details KORE Group Holdings, Inc.'s cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 - Net cash provided by operating activities for the nine months ended September 30, 2022, was **$20.5 million**, primarily due to changes in working capital from decreased inventory and accounts receivable[161](index=161&type=chunk) - Cash used in investing activities was **$58.0 million**, mainly for the **$46.0 million** BMP Acquisition and investments in technology equipment and software[162](index=162&type=chunk)[163](index=163&type=chunk) - Cash used in financing activities was **$3.6 million**, primarily for term loan principal repayments and deferred financing costs related to the business combination[164](index=164&type=chunk) [Future Liquidity and Capital Resource Requirements](index=32&type=section&id=Future%20Liquidity%20and%20Capital%20Resource%20Requirements) Outlines KORE Group Holdings, Inc.'s future capital commitments, debt obligations, and potential needs for additional financing - As of September 30, 2022, the Company has **$19.4 million** in purchase commitments for the remainder of fiscal year 2022 and **$47.5 million** for fiscal years 2023-2026[165](index=165&type=chunk)[166](index=166&type=chunk) - Scheduled principal payments include **$0.8 million** for the UBS term loan in Q4 2022, **$3.2 million** for 2023-2024 (with full outstanding principal due December 24, 2024), and semi-annual interest payments on **$120.0 million** Backstop Notes (principal due September 2028)[165](index=165&type=chunk)[166](index=166&type=chunk) - The Company may seek additional financing for liquidity, acquisitions, or strategic activities, acknowledging potential dilution from equity or restrictions from debt[167](index=167&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) Explains KORE Group Holdings, Inc.'s non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, and their reconciliation to GAAP net loss - EBITDA is defined as net income (loss) before interest, taxes, depreciation, and amortization. Adjusted EBITDA further adjusts for unusual and significant items like stock-based compensation, acquisition-related charges, and foreign currency gains/losses[169](index=169&type=chunk) - These non-GAAP measures are used by management for evaluating operational performance, internal planning, and comparison with comparable companies, but should not substitute GAAP results[168](index=168&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk) Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (in thousands USD) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(13,025) | $(4,508) | $(35,073) | $(12,474) | | EBITDA | $6,350 | $9,811 | $19,889 | $34,000 | | Adjusted EBITDA | $15,571 | $15,896 | $47,101 | $46,974 | - Adjusted EBITDA for the nine months ended September 30, 2022, was **$47.1 million**, slightly up from **$47.0 million** in the prior year[172](index=172&type=chunk) [Concentration of Credit Risk and Off-Balance Sheet Arrangements](index=33&type=section&id=Concentration%20of%20Credit%20Risk%20and%20Off-Balance%20Sheet%20Arrangements) Discusses KORE Group Holdings, Inc.'s exposure to credit risk and details its off-balance sheet arrangements and purchase commitments - Cash is subject to credit risk, with amounts potentially exceeding federally insured limits, but the Company believes it is not exposed to significant risk due to the financial strength of depository institutions[175](index=175&type=chunk) - As of September 30, 2022, the Company has **$66.9 million** in purchase commitments not recorded as liabilities and a **$0.4 million** standby letter of credit and bank guarantees[176](index=176&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Confirms no material changes to KORE Group Holdings, Inc.'s critical accounting policies and its election as an emerging growth company - No material changes to critical accounting policies and estimates have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021[178](index=178&type=chunk) - As an emerging growth company (EGC), KORE has elected to use the extended transition period for new accounting pronouncements applicable to public companies[179](index=179&type=chunk) [Goodwill](index=34&type=section&id=Goodwill) Describes KORE Group Holdings, Inc.'s goodwill impairment testing, including the quantitative test performed and its conclusion of no impairment - Goodwill is tested for impairment annually on October 1st and when circumstances indicate potential impairment[181](index=181&type=chunk) - A quantitative goodwill impairment test was performed due to a substantial and sustained decline in stock price and market capitalization[181](index=181&type=chunk) - The estimated fair value of the reporting unit exceeded its carrying value by **23.8%**, concluding that goodwill was not impaired[181](index=181&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the Company's market risk disclosures since its Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to the Company's market risk occurred during the first nine months of 2022[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the Company's disclosure controls and procedures and outlines identified material weaknesses in internal control over financial reporting, along with remediation efforts [Evaluation of disclosure controls and procedures](index=34&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) Reports that KORE Group Holdings, Inc.'s disclosure controls were ineffective due to material weaknesses in internal control over financial reporting - The Company's disclosure controls and procedures were not effective as of September 30, 2022, due to material weaknesses in internal control over financial reporting previously reported in the 2021 Annual Report on Form 10-K[183](index=183&type=chunk) [Changes in internal control over financial reporting](index=34&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) Details identified material weaknesses in a subsidiary's internal controls and ongoing remediation efforts to integrate ERP systems - Material weaknesses were identified at a subsidiary related to procure-to-pay, inventory and production management, and order-to-cash business processes, which are not fully integrated or automated[184](index=184&type=chunk) - Management is in the process of replacing the subsidiary's historical ERP and manufacturing execution systems with KORE's ERP systems to address these weaknesses[186](index=186&type=chunk) [PART II — OTHER INFORMATION](index=36&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part includes additional information not covered in the financial statements, such as legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings.](index=36&type=section&id=Item%201.%20Legal%20Proceedings.) Confirms that KORE Group Holdings, Inc. is not involved in any material legal proceedings beyond routine business litigation - The Company is not a party to any material legal proceedings other than ordinary routine litigation incidental to its business[189](index=189&type=chunk) [Item 1A. Risk Factors.](index=36&type=section&id=Item%201A.%20Risk%20Factors.) States no material changes to KORE Group Holdings, Inc.'s previously disclosed risk factors, with potential future updates in SEC filings - No material changes to previously disclosed risk factors have occurred as of the date of this Quarterly Report[190](index=190&type=chunk) - The Company may disclose changes or additional factors in future SEC filings, as any such factors could significantly impact results or financial condition[190](index=190&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) Reports that KORE Group Holdings, Inc. had no unregistered sales of equity securities or use of proceeds to disclose for the period - There were no unregistered sales of equity securities and use of proceeds to report[191](index=191&type=chunk) [Item 5. Other Information.](index=36&type=section&id=Item%205.%20Other%20Information.) States that there is no other information to report for KORE Group Holdings, Inc. in this section of the Form 10-Q - There is no other information to report[191](index=191&type=chunk) [Item 6. Exhibits.](index=36&type=section&id=Item%206.%20Exhibits.) Lists all exhibits filed or furnished with KORE Group Holdings, Inc.'s Form 10-Q, including certifications and XBRL documents Exhibits List | Exhibit Number | Exhibit Description | | :------------- | :--------------------------------------------------------------------------------------------------------------------------------------------- | | 31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) | | 31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) | | 32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | | 32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | [Signatures](index=37&type=section&id=SIGNATURES) Confirms the official signing of the Form 10-Q report by KORE Group Holdings, Inc.'s principal executive and financial officers [Authorized Signatories](index=37&type=section&id=Authorized%20Signatories) Identifies the KORE Group Holdings, Inc. executives who officially signed the Form 10-Q report and the date of signing - The report was signed by Romil Bahl, President and Chief Executive Officer (Principal Executive Officer), and Paul Holtz, Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)[196](index=196&type=chunk) - The signing date for the report was **November 14, 2022**[196](index=196&type=chunk)