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 June 30, 2023.
KORE: Company Highlights
- Second quarter 2023 revenue of $69.5 million increased 5% sequentially from the first quarter of 2023, marking the Company's second sequential revenue growth quarter. Further, KORE remains on track to return to generating year-over-year growth in the second half of 2023.
- Net loss increased 6% to $19.5 million ($0.24 per share) compared to $18.4 million ($0.24 per share) in the first quarter of 2023. Adjusted EBITDA, a non-GAAP metric1, increased to $14.2 million, a 7% improvement over $13.3 million as delivered in the first quarter of 2023.
- KORE's sales funnel, which the Company defines as opportunities for new business the KORE sales team is actively pursuing, now includes almost 1,500 opportunities with an estimated potential Total Contract Value (TCV)2 of approximately $660 million, a 32% sequential increase from first quarter 2023's estimated potential TCV of $501 million.
- KORE added approximately 500,000 connections in the second quarter, in addition to nearly 2.9 million connections added from the Twilio IoT acquisition. Total Connections, including those gained from the Twilio IoT acquisition, were 18.5 million as of June 30, 2023.
- Despite experiencing order delays at a few IoT Solutions customers and an increased focus on expense management by all our customers, owing to the prevailing economic uncertainty, the Company is maintaining its 2023 revenue guidance of $300 million to $310 million and adjusted EBITDA guidance of $60 million to $62 million.
"We continue to build momentum this year, coming off the 2G/3G sunsets and other transitory factors that have obscured our real organic growth. As we said we would do, we are delivering sequential revenue expansion, which we expect to continue for the remainder of 2023. Further, we are reiterating our projection of year-over-year growth starting in the third quarter." said Romil Bahl, President and CEO of KORE. "On the all-important new business development front, in the second quarter, not only did we deliver the highest quarter of bookings in the history of the Company, but our global sales pipeline also expanded in both number of opportunities and potential TCV dollar value, which positions us well to deliver on our growth commitments over the coming years."
Financial Performance for Second Quarter 2023, Compared to the Same Period of 2022:
- Total revenue decreased by 2% to $69.5 million, compared to $70.9 million in the second quarter of 2022. In Q2 2022, KORE had 2G/3G revenue and LTE transition project revenue from our largest customer, which, as expected, did not repeat in Q2 2023. Excluding the impact of LTE transition project revenue, Non-Core customers3, and the Twilio IoT acquisition, second quarter normalized revenue increased by 2% year-over-year.
- IoT Connectivity revenue of $48.3 million increased by 8%, compared to $44.7 million in the second quarter of 2022. The second quarter of 2022 included 2G/3G revenue from Non-Core customers, largely offset by revenue from Twilio IoT in the second quarter of 2023.
- IoT Solutions revenue declined by 19% to $21.3 million, compared to $26.2 million one year ago, as this segment faced a difficult year-over-year comparison owing to the one-time LTE transition engagement at our largest customer.
- Net loss increased to $19.5 million, or $0.24 per share, compared to $10.8 million, or $0.14 per share, one year ago. The primary drivers for the increase in net loss were increased operating expenses primarily due to the inclusion of Twilio IoT headcount, higher depreciation and amortization expense, increased interest expense, and a lower income tax benefit compared to the year-ago quarter.
- Adjusted EBITDA increased 7% sequentially to $14.2 million from $13.3 million in the first quarter of 2023. On a year-over-year basis, Adjusted EBITDA declined 15% from $16.8 million due to increased costs for headcount to invest in the Company's growth, the addition of Twilio IoT headcount, and costs to enhance public company processes and systems, including SOX compliance.
Financial Performance for Six Months Ending June 30, 2023, Compared to the Same Period of 2022:
- Total revenue decreased by 3% to $135.5 million, compared to $139.9 million.
- IoT Connectivity revenue increased by 3% to $91.9 million, compared to $88.8 million.
- IoT Solutions revenue decreased by 15% to $43.6 million, compared to $51.1 million. The revenue decline in the six-month period was primarily due to the difficult year-over-year comparison, as the first half of 2022 included approximately $11.5 million in LTE transition project revenue from our largest customer. Excluding this transitory revenue, IoT Solutions revenue increased 11% compared to the first six months of 2022.
- Net loss increased to $38.0 million, or $0.49 per share, compared to $22.4 million, or $0.30 per share. The primary drivers for the increase in net loss were a significant increase in interest expense and increases in non-cash items, including stock-based compensation, depreciation and amortization, and a lower income tax benefit versus the prior period.
- Adjusted EBITDA declined by 14% to $27.6 million, compared to $32.1 million.
Second Quarter 2023 Key Metrics and Business Successes
- KORE's Total Connections were approximately 18.5 million as of June 30, 2023, including approximately 2.9 million connections added from the Twilio IoT acquisition. Excluding the Twilio IoT connections, KORE added approximately 400,000 Total Connections on a year-over-year basis compared to June 30, 2022, and approximately 500,000 connections compared to March 31, 2023.
- DBNER4 was 99% for the twelve-month period ending June 30, 2023, compared to 114% for the twelve months ending June 30, 2022. Excluding our largest customer, DBNER was 115% vs.109%.
- KORE added $32 million of new business TCV in the second quarter bringing the year-to-date TCV to $60 million. The Company's new business sales funnel now includes almost 1,500 opportunities with an estimated potential TCV of approximately $660 million as of June 30, 2023, compared to $501 million and $475 million as of March 31, 2023, and June 30, 2022, respectively.
- KORE continues to develop its CSP/Retail vertical, and the Company announced new high bandwidth 5G connectivity through fixed wireless access (FWA), including a new pre-configured and managed solution that offers retailers, restaurants, and other multi-site companies a high bandwidth, 5G connection, which provides high-speed internet access and management traditionally available only through wireline solutions.
- To support the Company's purpose statement, "IoT for Good", and related to a biodiversity sensor project for AgTech company Syngenta, KORE is providing scalable global IoT connectivity to digitally connect farmlands across the globe and provide farmers with analytics to adapt to climate change and improve biodiversity.
- KORE had several notable new business wins in the second quarter, including:
- Increasing Share of Wallet: KORE secured three contracts with TCVs of over $9 million, $6 million, and $1.5 million from customers in the fleet, asset tracking, and healthcare markets, respectively, as these customers look to consolidate direct carrier business to a single partner to improve operational efficiency.
- Cross-Selling IoT Solutions to Existing Customers: KORE won a $500,000 TCV engagement to support IoT Managed Services for a usage-based insurer (UBI) seeking to upgrade its logistics.
- Upsell / Land-and-Expand: Expanding on a recent win with a major restaurant chain, KORE has been selected to provide fixed wireless access (FWA) services to 650 of the customer's locations and will upgrade these locations to 5G technology. This contract has a TCV of $850,000.
- International Opportunities / Global Deployments: KORE won contracts from a leader in fleet AI video telematics headquartered in the UK and a leading medical equipment and remote patient connectivity provider based in France to support their entries into the U.S. market. These contracts have a combined TCV of approximately $1.5 million.
Maintaining 2023 Financial Outlook
For the twelve months ending December 31, 2023, the Company expects the following:
- Revenue in the range of $300 million to $310 million; and
- Adjusted EBITDA in the range of $60 million to $62 million, and a margin of approximately 20%.
Bahl concluded, "With the completion of the 2G/3G sunsets in our high-margin IoT CaaS business, we saw an encouraging connections volume uptick in the second quarter. With over 18 million connections now in place, a stabilizing ARPU environment, and our focus on high-bandwidth IoT use cases, we are bullish about our status as an IoT connectivity hyperscaler. As the IoT market continues to grow through the Decade of IoT, we remain steadfast in our commitment to delivering exceptional service to our customers and sustainable value appreciation to our shareholders."
Conference Call Details
KORE management will hold a conference call today (August 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: 13740057
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 may register here. If you have 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 will remain on the investor relations section of the Company's website for 90 days. An audio replay of the conference call may be accessed by calling (877) 660-6853 or (201) 612-7415 using access code 13740057.
