KORE(KORE) - 2025 Q2 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements (Unaudited) Unaudited H1 2025 financial statements show slightly lower revenue, a reduced net loss, and positive operating cash flow amidst an increased stockholders' deficit Condensed Consolidated Balance Sheets The balance sheet reflects a decrease in total assets and an increase in total liabilities, leading to a larger stockholders' deficit Balance Sheet Summary (in thousands) | Balance Sheet Items | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $79,223 | $79,963 | | Total Assets | $432,936 | $455,833 | | Total Current Liabilities | $71,624 | $66,090 | | Total Liabilities | $566,430 | $555,433 | | Total Stockholders' Deficit | $(133,494) | $(99,600) | - Total assets decreased from $455.8 million at year-end 2024 to $432.9 million as of June 30, 2025, primarily due to a decrease in intangible assets. Total liabilities increased, driven by higher accrued interest due to an affiliate[11] Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss significantly reduced in H1 2025 due to the absence of a prior year goodwill impairment charge Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $71,250 | $67,868 | $143,392 | $143,843 | | Operating Loss | $(5,224) | $(76,700) | $(7,680) | $(84,081) | | Net Loss | $(16,878) | $(83,633) | $(31,786) | $(101,220) | | Loss Per Share (Basic & Diluted) | $(0.86) | $(4.37) | $(1.63) | $(5.31) | - The significant reduction in net loss for both the three and six-month periods ended June 30, 2025, compared to 2024, is primarily due to the absence of a $65.9 million goodwill impairment charge that was recorded in Q2 2024[13] Condensed Consolidated Statements of Cash Flows Cash flow statement indicates positive net cash from operating activities and an overall net increase in cash for H1 2025 Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,975 | $5,890 | | Net cash used in investing activities | $(4,792) | $(8,784) | | Net cash used in financing activities | $(1,075) | $(1,739) | | Net increase/(decrease) in cash | $1,558 | $(4,878) | Notes to the Condensed Consolidated Financial Statements Notes detail revenue disaggregation, a significant contingent tax liability, and liquidity concerns addressed by deferring preferred dividends Disaggregated Revenue by Category (in thousands) | Revenue Category | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | IoT Connectivity | $53,609 | $54,579 | $106,406 | $111,240 | | IoT Solutions | $2,739 | $2,739 | $5,373 | $5,718 | | Hardware | $14,902 | $10,550 | $31,613 | $26,885 | - As of June 30, 2025, the company has approximately $36.2 million in remaining performance obligations, with 58% expected to be recognized in 2025[30] - The company recorded a contingent liability for potential sales and telecommunications taxes, with an estimated range of loss between $4.4 million and $24.1 million as of June 30, 2025. The company has recorded the low end of the range, $4.4 million, as a liability[72] - The company has identified negative financial trends, including recurring operating losses, and plans to enhance liquidity by continuing the arrearage of preferred dividends, which amounted to approximately $35.4 million as of June 30, 2025[84][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 revenue growth, flat H1 revenue, improved Adjusted EBITDA, and ongoing liquidity management via dividend deferrals Results of Operations Q2 2025 revenue increased 5% driven by product sales, while H1 revenue remained flat, and SG&A expenses decreased due to restructuring Revenue by Type - Q2 YoY Comparison (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Services | $56,348 | $57,318 | $(970) | (2)% | | Products | $14,902 | $10,550 | $4,352 | 41% | | Total Revenue | $71,250 | $67,868 | $3,382 | 5% | Revenue by Type - H1 YoY Comparison (in thousands) | Revenue Type | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Services | $111,779 | $116,958 | $(5,179) | (4)% | | Products | $31,613 | $26,885 | $4,728 | 18% | | Total Revenue | $143,392 | $143,843 | $(451) | —% | - Selling, general, and administrative (SG&A) expenses decreased by $11.6 million (17%) for the six months ended June 30, 2025, compared to the prior year, primarily due to reduced salaries and compensation-related expenses from restructuring events in 2024[117][119] Non-GAAP Financial Measures Adjusted EBITDA and free cash flow improved significantly in H1 2025, while non-GAAP gross margin remained stable Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(16,878) | $(83,633) | $(31,786) | $(101,220) | | EBITDA | $11,257 | $(58,214) | $24,202 | $(49,975) | | Adjusted EBITDA | $16,707 | $11,420 | $31,162 | $26,177 | Free Cash Flow (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,975 | $5,890 | | Free cash flow | $2,183 | $(2,894) | Key Operational Metrics Key operational metrics show increased connections and improved DBNER, but a decline in Average Revenue Per User Key Metrics Summary | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Number of Connections | 20.1 million | 18.5 million (Average) | | DBNER (TTM) | 99% | 92% | | ARPU (Q2) | $0.94 | $1.00 | - Beginning in fiscal year 2025, the company adopted Estimated Annual Recurring Revenue (eARR) as a key performance metric and discontinued the use of Total Contract Value (TCV). As of June 30, 2025, the sales funnel had an eARR of approximately $85 million[155][156][157] Liquidity and Capital Resources The company manages liquidity by deferring preferred dividends and amending commitments, maintaining a cash balance and credit facility availability - The company's ability to meet short-term liquidity needs is dependent on its ability to defer payment of preferred dividends due to Searchlight. The ability to meet longer-term liquidity needs is uncertain[164] - As of June 30, 2025, the company had $21.0 million in cash and full availability of its $25.0 million revolving credit facility[190] - The company amended its Google Cloud Platform (GCP) commitment on April 1, 2025, reducing the total commitment from $22.0 million to $10.9 million, incurring a one-time fee of $1.2 million[189] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk[193] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025. This conclusion is due to the previously reported material weaknesses in internal control over financial reporting. The company is continuing its remediation efforts - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting previously identified in the Annual Report on Form 10-K[196] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[198] Part II - Other Information Item 1. Legal Proceedings The company reports that there are currently no pending legal proceedings that are expected to be material to its business - As of the filing date, the company is not involved in any legal proceedings that are expected to have a material impact[200] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the company's Annual Report on Form 10-K[201] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2025, 52,425 shares of common stock were surrendered by employees to cover tax withholding obligations upon the vesting of Restricted Stock Units (RSUs). These transactions were not part of a publicly announced share repurchase program - In Q2 2025, the company repurchased 52,425 shares of common stock from employees to satisfy tax withholding requirements on vested RSUs. These repurchases were made under the terms of the incentive plan, not a public buyback program[202] Item 3. Defaults Upon Senior Securities The company is in arrears on its Series A-1 preferred stock dividends. As of August 14, 2025, the total amount of unpaid dividends was $38.4 million - The company has an arrearage on its Series A-1 preferred stock dividends, with the unpaid amount totaling $38.4 million as of August 14, 2025[204]