KORE(KORE) - 2024 Q1 - Quarterly Results

Executive Summary & Q1 2024 Highlights Company Overview and Strategic Focus KORE, a global pure-play Internet of Things (IoT) hyperscaler, reported solid first quarter 2024 results, driven by strategic investments in IoT Connectivity and organic growth. The interim CEO emphasized a dual focus on prioritizing growth opportunities and optimizing operational performance to enhance stockholder value - KORE Group Holdings, Inc. is a global pure-play Internet of Things (IoT) hyperscaler and provider of IoT Connectivity, Solutions, and Analytics[2] - Interim President and CEO Ron Totton highlighted solid Q1 results, attributing them to investments in IoT Connectivity and organic growth, and stated a priority to optimize operational performance and pursue growth opportunities to increase stockholder value[4] First Quarter 2024 Financial and Operational Highlights KORE achieved a 15.2% year-over-year revenue increase in Q1 2024, reaching $76.0 million, primarily fueled by a 33% surge in IoT Connectivity revenue. The company also saw a reduction in net loss and an increase in Adjusted EBITDA, alongside a strong sales quarter with $52 million in closed-won Total Contract Value (TCV) Q1 2024 Financial and Operational Highlights | Metric | Q1 2024 | Q1 2023 | Change (%) | | :-------------------------- | :---------- | :---------- | :--------- | | Revenue | $76.0 million | $66.0 million | 15.2% | | IoT Connectivity Revenue | $57.9 million | $43.5 million | 33% | | IoT Solutions Revenue | $18.1 million | $22.4 million | -19% | | Net Loss | $(17.6) million | $(18.5) million | -4.9% | | Adjusted EBITDA | $14.8 million | $13.3 million | 10.7% | | Closed-won Total Contract Value (TCV) | $52 million | $28 million | 85.7% | - IoT Solutions revenue decline was attributed to the timing of shipments to top customers and a strategic decision to reduce lower-margin hardware deals to improve working capital[5] - Closed-won Total Contract Value (TCV) included a $26 million Connected Health contract[5] 2024 Financial Outlook KORE reaffirms its full-year 2024 financial guidance, projecting revenue between $300M and $305M and Adjusted EBITDA between $64M and $66M, anticipating a re-acceleration in IoT Connectivity growth to high-teens percentage rates Full Year 2024 Financial Guidance | Metric | Guidance Range | | :---------------- | :------------- | | Revenue | $300M - $305M | | Adjusted EBITDA | $64M - $66M | - IoT Connectivity revenue is projected to grow at a percentage rate in the high teens in 2024[5] Detailed Financial Results Revenue and Key Metrics Summary For Q1 2024, KORE's total revenue was $76.0 million, with IoT Connectivity accounting for 76% ($57.9 million) and IoT Solutions for 24% ($18.1 million). The company reported 18.3 million total connections at period end and a Dollar-Based Net Expansion Rate (DBNER) of 94% Three Months Ended March 31, 2024 vs. 2023 | ($ in millions) | 2024 | % of Total | 2023 | % of Total | | :-------------------------- | :--- | :--------- | :--- | :--------- | | IoT Connectivity | $57.9 | 76% | $43.5 | 66% | | IoT Solutions | $18.1 | 24% | $22.4 | 34% | | Total Revenue | $76.0 | 100% | $66.0 | 100% | | Period End Total Connections | 18.3 million | | 15.1 million | | | Average Total Connections for the Period | 18.1 million | | 15.1 million | | | DBNER | 94% | | 107% | | Company Information About KORE KORE positions itself as a pioneer, leader, and trusted advisor in delivering mission-critical IoT solutions and services. The company aims to simplify the complexity of IoT, enabling organizations to improve operational and business results through its deep expertise, global reach, purpose-built solutions, and agile deployment - KORE is a pioneer, leader, and trusted advisor delivering mission-critical IoT solutions and services[12] - The company empowers organizations to improve operational and business results by simplifying the complexity of IoT through its deep knowledge, global reach, purpose-built solutions, and deployment agility[12] Non-GAAP Financial Measures & Key Metric Definitions Non-GAAP Financial Measures KORE utilizes non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, as supplemental tools to evaluate operational performance and for internal planning. While useful for assessing trends and comparing with peers, these measures are not GAAP-compliant and should not be considered in isolation, especially given the difficulty in providing forward-looking GAAP reconciliations - EBITDA is defined as net income (loss) before other non-operating expenses or income, income tax expense or benefit, and depreciation and amortization[14] - Adjusted EBITDA further adjusts EBITDA for unusual and significant items such as stock-based compensation, integration and acquisition-related charges, and foreign currency transaction gains and losses, which management views as distorting operating results[14] - Non-GAAP measures are supplemental and should not be considered in isolation or as a substitute for GAAP results; forward-looking GAAP equivalents and reconciliations are not provided due to uncertainty and potential variability of reconciling items[15][16] Key Metric Definitions KORE employs specific key metrics—Number of Customer Connections, DBNER, and Total Contract Value (TCV)—to gauge business performance, identify trends, alleviate financial projections, and inform strategic decisions. The company notes that its calculation methods for these metrics may differ from those used by other entities - KORE reviews a number of metrics to measure performance, identify trends, prepare financial projections, and make strategic decisions, acknowledging that their calculation may differ from other companies[17] Number of Customer Connections The 'Total Number of Connections at Period End' encompasses all IoT Connectivity services connections, including eSIMs, but excludes certain mobile carrier licensed platform connections. This metric, along with 'Average Connections Count for the Period,' serves as a primary indicator for management and investors to assess business growth on a SIM and/or device basis - The 'Total Number of Connections at Period End' includes all IoT Connectivity services connections, including eSIMs, but excludes certain connections where mobile carriers license KORE's subscription management platform[18] - These metrics are the principal measures used by management and investors to assess the growth of the business on a periodic, SIM, and/or device-based perspective[19] DBNER (Dollar-Based Net Expansion Rate) DBNER measures the combined impact of cross-sales, customer retention, and growth from KORE's existing 'go-forward' customers. It is calculated by dividing current period revenue from this cohort by their revenue from one year prior, specifically excluding revenue from new customers and 'non-go-forward' customers to focus on 'same store' growth and retention - DBNER tracks the combined effect of cross-sales of IoT Solutions to existing customers, customer retention, and the growth of existing business[20] - It is calculated by dividing revenue for a given period from existing go-forward customers by the revenue from the same customers for the same period one year prior[20] - DBNER is used by management as a measure of growth of existing customers ('same store' growth) and customer retention, explicitly excluding new customer wins and declines from non-go-forward customers[23][24] Total Contract Value (TCV) Total Contract Value (TCV) represents KORE's estimated value of a revenue opportunity. For IoT Connectivity, TCV is calculated as forty times the estimated revenue for the twelfth month of production. For IoT Solutions, it is either the actual total expected revenue or, for longer-term programmatic recurring revenue, the calculated value for the first 36 months of the delivery period - Total Contract Value (TCV) represents KORE's estimated value of a revenue opportunity[25] - TCV for IoT Connectivity is calculated by multiplying by forty the estimated revenue expected to be generated during the twelfth month of production[25] - TCV for IoT Solutions is either the actual total expected revenue opportunity or, for longer-term 'programmatically recurring revenue' programs, calculated for the first 36 months of the delivery period[25] Legal & Investor Information Cautionary Note on Forward-Looking Statements This section serves as a cautionary note regarding forward-looking statements within the press release, highlighting that they are subject to various risks and uncertainties, including economic conditions, integration challenges, and competitive pressures. Actual events may differ materially from these statements, and KORE explicitly disclaims any obligation to update them - The press release includes forward-looking statements subject to risks and uncertainties, provided for illustrative purposes only and not as guarantees of future events[26] - Risks include general economic, financial, legal, political, and business conditions, potential effects of COVID-19, risks related to business rollout and milestones, integration of acquired companies, and the ability to realize TCV as revenue[26] - KORE specifically disclaims any obligation to update these forward-looking statements, and undue reliance should not be placed upon them[26][27] Investor Contact This section provides the contact details for KORE's Vice President of Investor Relations, Corporate Development and Strategy, Vik Vijayvergiya, for investor inquiries - Investor contact is Vik Vijayvergiya, Vice President, IR, Corporate Development and Strategy, reachable at vvijayvergiya@korewireless.com or (770) 280-0324[28] Financial Reconciliations Reconciliation of Net Loss to Adjusted EBITDA This unaudited table presents the reconciliation of KORE's net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2024, and 2023, detailing adjustments for items such as income tax benefit, interest expense, depreciation, stock-based compensation, and integration-related restructuring costs Reconciliation of Net Loss to Adjusted EBITDA (Unaudited) | (in thousands) | 2024 | 2023 | | :---------------------------------- | :--------- | :--------- | | Net loss | $(17,587) | $(18,490) | | Income tax benefit | $(420) | $(369) | | Interest expense, net | $12,640 | $10,195 | | Depreciation and amortization | $13,606 | $14,125 | | EBITDA | $8,239 | $5,461 | | Change in fair value of warrant liability | $(2,321) | $(3) | | Transformation expenses | — | $1,864 | | Acquisition costs | — | $3,207 | | Integration-related restructuring costs | $4,573 | — | | Stock-based compensation | $2,708 | $2,570 | | Foreign currency loss | $1,344 | $112 | | Other (1) | $214 | $117 | | Adjusted EBITDA | $14,757 | $13,328 | (1) "Other" adjustments are comprised of adjustments for certain indirect or non-income based taxes