KORE(US:KORE)2022-08-12 22:04Financial Data and Key Metrics Changes - The second quarter revenue was $70.4 million, up 16% year-over-year from $60.7 million in Q2 2021 [11][38] - IoT solutions revenue increased by 47% year-over-year to $25.7 million [11][39] - The dollar-based net expansion rate (DBNER) for Q2 was 114%, up from 113% in the prior year [42] - Total gross margin was 52%, flat year-over-year, while IoT connectivity gross margin increased by six percentage points to 65% [40] - The net loss for Q2 was $11.1 million compared to $6.9 million in the same period last year [45] Business Line Data and Key Metrics Changes - IoT connectivity revenue increased by 3% year-over-year to $44.7 million despite revenue pressures from foreign exchange and LTE pricing transitions [39] - The fleet vertical currently accounts for approximately $50 million in annual revenue, with a target to grow to $75 million by 2025 and an internal stretch target of $150 million [35][36] Market Data and Key Metrics Changes - The fleet management market is projected to grow to $750 billion by 2030, with video analytics expected to grow at a CAGR of 17% over the next three years [27] - The usage-based insurance market surpassed $30 billion in 2020 and is projected to grow at a 20% CAGR through 2027 [28] Company Strategy and Development Direction - KORE aims to simplify IoT complexities through a one-stop shop approach, focusing on deploying, managing, and scaling IoT solutions [18][19] - The company is increasingly going to market by industry verticals, having launched Connected Health and Fleet as the first two of five target verticals [24][23] - KORE is investing in developing its partner ecosystem, having integrated with over 400 partners [36] Management's Comments on Operating Environment and Future Outlook - Management expects a sequential decline in revenue for Q3 and H2 2022 due to the completion of the LTE transition project with the largest customer [12][38] - Despite anticipated headwinds, the company expects to exceed its two-year public revenue forecast for 2021-2022 by over $50 million [13][50] - Management remains confident about future growth, particularly in IoT connectivity, as the company transitions away from 2G and 3G SIMs [86][88] Other Important Information - KORE generated $14.7 million from operations in Q2 2022, a significant improvement from a cash use of $2 million in the same period last year [46] - Cash and cash equivalents at the end of Q2 were $40.8 million, down from $86 million at the end of 2021, primarily due to financing the BMP and Simon acquisitions [47] Q&A Session Summary Question: Can you break down the revenue beat in terms of contributing factors? - Management indicated that the acquisition contributed mid-high 20s to revenue, with the rest attributed to organic execution, particularly in ARPU stability [61][62] Question: How does the geographic distribution of the 100 million telematics units align with KORE's market access? - Management confirmed that the 100 million telematics units are currently available, with about 15% pre-configured for connectivity, and noted that most accessible markets include North America and Europe [66][67] Question: What is the contribution of the fleet vertical as a percentage of revenue? - The fleet vertical contributes approximately $50 million, which is about 17-18% of total revenue [99] Question: How is inflation and higher gas prices impacting the fleet vertical? - Management noted an uptick in interest for fuel optimization solutions among fleet customers, indicating resilience in demand despite economic pressures [100][101] Question: What are the expectations for gross margins in the second half of the year? - Management expects gross margins for IoT connectivity to remain stable around 65%, while IoT solutions margins are anticipated to improve gradually [103][104]