KORE(US:KORE)2025-05-15 20:15Part I Financial Statements (Unaudited) Presents KORE Group Holdings, Inc.'s unaudited Q1 2025 financial statements, highlighting a $14.9 million net loss and significant liabilities Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $445.1 million, liabilities increased to $560.0 million, and stockholders' deficit widened to $114.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $445,134 | $455,833 | | Total Current Assets | $80,534 | $79,963 | | Goodwill | $228,844 | $228,844 | | Intangible assets, net | $115,057 | $125,057 | | Total Liabilities | $560,033 | $555,433 | | Long-term debt and other borrowings, net | $295,528 | $295,661 | | Mandatorily redeemable preferred stock due to affiliate, net | $143,058 | $142,776 | | Accrued interest due to affiliate | $29,460 | $23,798 | | Total Stockholders' Deficit | ($114,899) | ($99,600) | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2025 revenue decreased 5% to $72.1 million, operating loss narrowed, and net loss improved to $14.9 million Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $72,142 | $75,975 | | Operating Loss | ($2,456) | ($7,381) | | Net Loss | ($14,908) | ($17,587) | | Loss Per Share (Basic and Diluted) | $(0.77) | $(0.93) | Condensed Consolidated Statements of Cash Flows Q1 2025 net cash from operations increased to $2.9 million, investing activities decreased, and cash ended at $20.0 million Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,874 | $1,904 | | Net cash used in investing activities | ($2,277) | ($4,685) | | Net cash used in financing activities | ($512) | ($1,180) | | Net (de)crease in cash and restricted cash | $249 | ($4,115) | | Cash and restricted cash, end of period | $19,950 | $23,322 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, declining IoT Connectivity revenue, contingent tax liability, liquidity concerns, and a reduced Google Cloud Platform commitment Disaggregated Revenue by Service Line (in thousands) | Service Line | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | IoT Connectivity | $52,797 | $56,661 | | IoT Solutions | $2,634 | $2,979 | | Total Services | $55,431 | $59,640 | - As of March 31, 2025, the company had approximately $37.7 million of remaining performance obligations, with about 70% expected to be recognized in 202528 - The company has identified a probable liability for sales and telecommunications taxes, with an estimated range of loss between $4.2 million and $23.4 million. A contingent loss of $4.2 million has been recorded66 - The company faces liquidity challenges due to recurring operating losses. It plans to continue deferring preferred dividend payments to preserve cash, with approximately $29.5 million in accrued interest due to an affiliate as of March 31, 20257880 - Subsequent to the quarter end, on April 1, 2025, the company amended its Google Cloud Platform (GCP) commitment, reducing the total amount from $22.0 million to $10.9 million. This incurred a $1.2 million fee payable by May 1, 20257285 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% revenue decline, reduced SG&A, flat Adjusted EBITDA, ongoing liquidity challenges, and key operational metrics Results of Operations Q1 2025 total revenue decreased 5% to $72.1 million, driven by a 7% decline in Services revenue, with SG&A expenses falling 22% Revenue by Type - Q1 2025 vs Q1 2024 (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Services | $55,431 | $59,640 | $(4,209) | (7)% | | Products | $16,711 | $16,335 | $376 | 2% | | Total Revenue | $72,142 | $75,975 | $(3,833) | (5)% | - SG&A expenses decreased by approximately $7.7 million (22%) year-over-year, primarily due to reduced salaries and office-related expenses following restructuring events in 2024107108 Non-GAAP Financial Measures Q1 2025 Adjusted EBITDA was $14.5 million, Free Cash Flow improved to $0.6 million, and Non-GAAP Gross Margin slightly decreased Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(14,908) | $(17,587) | | EBITDA | $12,945 | $8,239 | | Adjusted EBITDA | $14,455 | $14,757 | Free Cash Flow (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,874 | $1,904 | | Purchases of property and equipment | $(126) | $(877) | | Additions to intangible assets | $(2,151) | $(3,808) | | Free cash flow | $597 | $(2,781) | Key Operational Metrics Total connections grew to 19.8 million, DBNER improved to 99%, ARPU decreased, and eARR was introduced with a $52 million sales funnel Key Operational Metrics Comparison | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Number of Connections (period end) | 19.8 million | N/A | | Average Connections Count (for the period) | 19.7 million | 18.1 million | | DBNER (TTM) | 99% | 94% | | ARPU (for the quarter) | $0.91 | $1.05 | - The company adopted Estimated Annual Recurring Revenue (eARR) as a new key metric in 2025 and discontinued Total Contract Value (TCV). As of March 31, 2025, the sales funnel had an eARR of over $52 million133134135 Liquidity and Capital Resources Liquidity is constrained, relying on deferred preferred dividend payments, with $19.7 million cash and a reduced GCP commitment - The company acknowledges it cannot meet short-term liquidity needs solely through operational cash flow and relies on its ability to defer preferred dividend payments to an affiliate (Searchlight) to maintain liquidity142 - As of March 31, 2025, the company had $19.7 million in cash and $25.0 million available on its revolving credit facility164 - The company owed approximately $29.5 million in accrued preferred dividends to Searchlight as of March 31, 2025, and plans to continue this arrearage to preserve cash162 - On April 1, 2025, the company amended its Google Cloud Platform (GCP) commitment, reducing it from $22.0 million to $10.9 million, incurring a $1.2 million fee163 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, KORE is not required to provide market risk disclosures - As a smaller reporting company, KORE is not required to provide information for this item167 Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to previously identified material weaknesses - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses in internal control over financial reporting previously identified in the Annual Report on Form 10-K168 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control170 Part II Legal Proceedings The company is subject to ordinary course legal proceedings, none expected to be material to its financial condition - As of the filing date, there are no pending legal proceedings that are expected to be material to the company172 Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K173 Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, 14,049 common shares were repurchased from employees to cover tax withholding on vested RSUs - In Q1 2025, 14,049 shares of common stock were surrendered by employees to pay for tax withholding on vested RSUs. These repurchases were not part of a publicly announced program174 Defaults Upon Senior Securities The company is in arrears on Series A-1 preferred stock dividend payments, totaling $32.4 million as of May 15, 2025 - The company is in arrears on its Series A-1 preferred stock dividends, with the unpaid amount totaling $32.4 million as of May 15, 2025176 Mine Safety Disclosures This item is not applicable to the company - Not applicable177 Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the first quarter of 2025178 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data