KORE(KORE) - 2024 Q1 - Quarterly Report

Revenue Performance - Total revenue for the three months ended March 31, 2024, was $75.975 million, representing a 15% increase from$ 65.975 million in the same period of 2023[93]. - Revenue from IoT Connectivity services increased by approximately $14.3 million, or 33%, driven primarily by the acquisition of Twilio's IoT business[95]. - Revenue from IoT Solutions declined by approximately$ 4.3 million, or 19%, primarily due to reduced demand from major customers[96]. - Services revenue growth of approximately $12.1 million was driven by new customer business and increased connectivity utilization[93]. Cost Analysis - Cost of services increased by$ 7.4 million, or 44.8%, primarily due to additional carrier costs related to the Twilio acquisition[98]. - Cost of products decreased by $3.5 million, or 25.5%, due to lower hardware sales volume from existing IoT Solutions customers[100]. - Overall blended cost of revenue as a percentage of revenue was 55.0% for the three months ended March 31, 2024, compared to 54.0% in the same period of 2023[99]. - The cost of IoT Connectivity increased by$ 7.5 million, or 49.6%, primarily due to additional carrier costs and increased connectivity consumption[100]. - The cost of IoT Solutions decreased by $3.6 million, or 23.9%, primarily due to lower costs associated with reduced revenue from existing customers[102]. Operating Expenses - Selling, general, and administrative (SG&A) expenses increased by$ 5,526 thousand, or 18%, from $30,011 thousand in Q1 2023 to$ 35,537 thousand in Q1 2024, primarily due to higher salaries, benefits, and increased license and subscription costs[104]. - There were no SG&A expenses incurred with affiliates in Q1 2024, a decrease of 100% from $189 thousand in Q1 2023, following the termination of a technical assistance services agreement[105]. Financial Performance - EBITDA for Q1 2024 was$ 8,239 thousand, an increase from $5,461 thousand in Q1 2023, while Adjusted EBITDA rose to$ 14,757 thousand from $13,328 thousand[110]. - The Dollar-Based Net Expansion Rate (DBNER) decreased to 94% for the twelve months ended March 31, 2024, down from 107% for the same period in 2023, primarily due to reduced IoT solutions revenue from certain customers[120]. Debt and Financing - As of March 31, 2024, total long-term debt and other borrowings, net, amounted to$ 295,984 thousand, a slight decrease from $296,109 thousand as of December 31, 2023[125]. - The Company entered into a credit agreement with WhiteHorse Capital Management, consisting of a senior secured term loan of$ 185 million and a revolving credit facility of $25 million, effective November 15, 2023[126]. - Principal payments of approximately$ 0.5 million are due on the last business day of each quarter, with the maturity date of the Credit Facilities set for November 15, 2028[127]. - The Credit Facilities are secured by substantially all of the Company's subsidiaries' assets and are subject to customary financial covenants, including Total Net Leverage Ratio and First Lien Net Leverage Ratio[129]. - The Total Net Leverage Ratio is set at 6.25:1.00 for the quarterly periods ending March 31, 2024, and June 30, 2024, decreasing to 5.25:1.00 for periods ending December 31, 2025, and thereafter[131]. - The Backstop Notes consist of $95.1 million in senior unsecured exchangeable notes due 2028, with a second tranche of$ 24.9 million issued later[132]. - The Backstop Notes bear interest at a rate of 5.50% per annum, with the potential to exchange into approximately 9.6 million shares of common stock at a Base Exchange Rate of $12.50 per share[133]. - The Company has authorized 35,000,000 shares of preferred stock, with 152,857 shares of Series A-1 preferred stock issued, mandatorily redeemable for cash on November 15, 2033[136]. - The Series A-1 preferred stock accrues dividends at a rate of 13% per year, compounded and payable quarterly, with approximately$ 7.6 million in interest liability currently owed[139][144]. Cash Flow - Cash provided by operating activities for the three months ended March 31, 2024, was $1.904 million, a slight decrease from$ 1.915 million in 2023[140]. - Cash used in investing activities for the three months ended March 31, 2024, was $4.685 million, primarily for investments in internally developed software and property and equipment[142]. - Cash used in financing activities for the three months ended March 31, 2024, was$ 1.180 million, mainly due to scheduled principal payments on the Term Loan[143]. - The Company had a total of $46.3 million in purchase commitments payable that were not recorded as liabilities on the balance sheet as of March 31, 2024[145]. - The Company plans to defer cash payment of interest on the Series A-1 preferred stock to preserve cash for other purposes[144]. Market Environment - The overall macroeconomic environment remains challenging, with high interest rates and persistent inflation impacting business demand for IoT solutions[88]. - The sales funnel as of March 31, 2024, included over 1,190 opportunities with an estimated potential Total Contract Value (TCV) of over$ 422 million, compared to over 1,400 opportunities with a TCV of over $500 million as of March 31, 2023[122].