KORE Group Holdings, Inc. ("KORE" or the "Company"), the global pure-play Internet of Things ("IoT") hyperscaler, and provider of IoT Connectivity, Solutions and Analytics, reported financial and operational results for the quarter ended March 31, 2023.
KORE: Company Highlights
- First quarter 2023 revenue of $66.0 million increased 5.7% sequentially from the fourth quarter of 2022 and was ahead of expectations, primarily due to stronger than expected growth in our Connected Health vertical and sequential growth of 19.7% in IoT Solutions revenue.
- Gross margin in first quarter 2023 increased over 500 basis points to 54.0% versus 48.9% in the first quarter of 2022 and was up slightly on a sequential basis from fourth quarter 2022 due to improved carrier optimization, the absence of LTE transition project revenue from our largest customer, and lower hardware sales.
- KORE's sales funnel, which KORE defines as opportunities the KORE sales team is actively pursuing for new business, now includes over 1,400 opportunities with an estimated potential Total Contract Value (TCV)1 of over $500 million, a 15% sequential increase from fourth quarter 2022 estimated potential TCV of $434 million.
- KORE's eSIM solution, OmniSIM™ SAFE was selected as a winner of the M2M Product of the Year by IoT Breakthrough. OmniSIM SAFE pairs global zero-touch provisioning capabilities with our industry-leading eSIM secured by the GSMA SAFE standards. This allows KORE customers to meet the challenge of global connectivity in a carrier and device agnostic, secure manner for Massive IoT use cases.
- The Company is maintaining its 2023 revenue guidance2 of a range of $300 million to $310 million and maintaining adjusted EBITDA, a non-GAAP metric3, guidance of $60 million to $62 million.
"We are off to a solid start to the year with first quarter revenue increasing sequentially from the fourth quarter and coming in above our expectations. We expect continued quarterly sequential growth through the remainder of 2023 and beyond, and year-over-year revenue growth to begin in the second half of 2023, as we will no longer face difficult comparisons from the one-time transitory items we have previously discussed," said Romil Bahl, President and CEO of KORE. "Our global sales pipeline continues to increase both in the number of opportunities and TCV dollars, and our acquisition of Twilio's IoT business is on track. With this backdrop, we remain confident in our 2023 revenue and adjusted EBITDA guidance."
Financial Performance for First Quarter 2023, Compared to the Same Period of 2022:
- Total revenue decreased by 4.4% to $66.0 million, compared to $69.0 million. In Q1 2022, KORE had a significant amount of 2G/3G revenue and LTE transition project revenue from our largest customer. The LTE project revenue alone was approximately $8.6 million, which, as expected, did not repeat in Q1 2023. Excluding LTE transition project revenue, normalized revenue increased by 9.0%.
- IoT Connectivity revenue of $43.5 million declined by 1.3% compared to $44.1 million in the first quarter of 2022, which was the highest Non-Core customer and 2G/3G revenue quarter in 2022, making for a difficult comparison. Excluding Non-Core customers, IoT Connectivity revenue increased 7.0%.
- IoT Solutions revenue declined by 9.7% to $22.4 million, compared to $24.8 million one year ago as this segment also faced a difficult year-over-year comparison, owing to the one-time LTE transition engagement at our largest customer. Excluding this one-time revenue, IoT Solutions revenue increased approximately 35% year-over-year.
- Net loss increased to $18.5 million, or $0.24 per share, compared to $11.6 million, or $0.16 per share, one year ago. The primary drivers for the increase in net loss were an increase in SG&A, including non-recurring additional audit and accounting costs of approximately $1.0 million, and a $3.6 million increase in interest expense.
- Adjusted EBITDA decreased by 12.8% to $13.3 million, compared to $15.3 million one year ago. The key drivers of the decline were increased headcount costs to invest in the Company's growth and to enhance public company processes and systems, including SOX compliance. Additionally, and as mentioned above, the Company incurred higher-than-normal, non-recurring professional fees associated with the 2022 year-end audit process.
First Quarter 2023 Key Metrics and Business Successes
- KORE's Total Connections were approximately 15.1 million as of March 31, 2023, a sequential increase of approximately 100,000 connections from the fourth quarter of 2022.
- DBNER6 was 107% for the twelve-month period ending March 31, 2023, compared to 122% for the twelve months ending March 31, 2022. Excluding our largest customer, DBNER was 126% vs. 114%.
- KORE added $28 million of new business TCV in the first quarter, and the Company's new business sales funnel now includes over 1,400 opportunities with an estimated potential TCV of $501 million as of March 31, 2023.
- KORE launched MODGo™, a SaaS solution that provides visibility across IoT device deployment and helps manage logistics. In effect, MODGo makes it easy to Manage, Order, and Deploy IoT on the Go, providing organizations with a single solution for managing their entire IoT ecosystem.
- KORE had several notable new business wins in the first quarter including:
- KORE was selected by a leader in the advertising technology market for its OmniSIM technology. KORE's unique eSIM solution resulted in the customer transferring 100% of its North American business to KORE, adding over $10 million in TCV.
- KORE secured an approximately $2 million TCV contract to provide a comprehensive set of hardware, connectivity services, and forward and reverse logistics managed services to a new remote patient monitoring (RPM) customer.
- KORE will provide fixed wireless access services to a major restaurant chain with over 700 locations and will upgrade these locations to 5G technology as part of a contract with a TCV of over $1 million, and KORE has the potential to add an additional approximately $1 million in TCV for IoT Managed Services at the same customer.
Maintaining 2023 Financial Outlook
For the twelve months ending December 31, 2023, assuming that the acquisition of Twilio's IoT business unit closes on June 1, 2023, the Company continues to expect the following:
- Revenue in the range of $300 million to $310 million; and
- Adjusted EBITDA in the range of $60 million to $62 million, representing a margin of approximately 20%.
Bahl concluded, "We have kicked off 2023 by continuing to deliver on our commitments. As I look to the remainder of the year, I am encouraged by our growth story becoming evident and our innovative product introductions such as OmniSIM and, most recently, MODGo, continuing to differentiate KORE from our competitors. I am also excited by the prospect of having Twilio's IoT business become a part of KORE. As a global pure play provider of IoT connectivity, solutions, and analytics with over 80% recurring revenue and a robust and growing sales pipeline against a backdrop of increasing IoT adoption, KORE is well-positioned to grow through this decade of IoT."
Conference Call Details
KORE management will hold a conference call today (May 9, 2023) at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its financial results, business highlights, and outlook. President and CEO Romil Bahl and CFO Paul Holtz will host the call, followed by a question-and-answer session.
Webcast: Link
U.S. dial-in: (877) 407-3039
International dial-in: (215) 268-9922
Conference ID: 13732888
The conference call and a supplemental slide presentation to accompany management's prepared remarks will be available via the webcast link and for download via the investor relations section of the Company's website, ir.korewireless.com.
For the conference call, please dial-in 5-10 minutes prior to the start time, and an operator will register your name and organization, or you can register here. If you have any difficulty with the conference call, please contact KORE investor relations at (678) 392-2386. A replay of the conference call will be available approximately three hours after the conference call end time and may be accessed by calling (877) 660-6853 or (201) 612-7415 using access code 13732888.
