Industry Summary Articles

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 three and six months ended June 30, 2024.

Q2 Highlights

• Second quarter 2024 revenue was $67.9 million, a 2% decrease from $69.5 million in the same period last year.
• IoT Connectivity revenue of $55.8 million, a 16% increase from $48.3 million in the same period last year, was driven by investments and organic growth. Organically, IoT Connectivity grew approximately 2% year-over-year.
• IoT Solutions revenue of $12.1 million, a 43% decrease from $21.3 million in the same period last year, was due to the timing of orders from certain customers and a strategic decision to reduce lower margin hardware deals.
• Net loss was $64.3 million for the second quarter of 2024, a 230% increase from a net loss of $19.5 million for the same period a year ago. This amount includes a non-cash goodwill impairment charge of $45.4 million related primarily to the Company's share price decline in the second quarter of 2024.
• Adjusted EBITDA was $11.4 million for the second quarter of 2024, a 20% decrease from $14.2 million for the same period a year ago due to increases in operating expenses and a decline in revenue.
• The Company had a strong sales quarter with a closed-won Total Contract Value (TCV)* of $44 million, a 38% increase from $32 million in the same period a year ago with the majority of the sales being for IoT Connectivity. For the first six months of 2024, closed-won TCV was $96 million versus $60 million in 2023.
• Free Cash Flow was negative $0.1 million, a $5.9 million improvement from the same period last year.

Appointment of President and CEO

The Company today also announced the appointment of Ron Totton to the role of President and CEO, after a successful period of leading the Company on an interim basis.

"Ron is a skilled and experienced TMT executive with a history of building strong and disciplined teams that deliver profitable growth," said Timothy M. Donahue, Chairman of the Board of Directors of KORE. "Since his arrival he has worked diligently to understand the business and the specific needs of our customers, as well as KORE's team and culture. Ron has displayed decisive leadership since day one, working to better position the entire organization for long-term success, and the Board strongly feels that he is the ideal candidate to lead KORE's next phase of growth."

Other Key Executive Appointments

• On July 8, 2024, the company appointed senior technology executive Bruce Gordon to the role of Executive Vice President and Chief Operating Officer. Gordon has held senior roles with GeoDigital, ABB Ventyx, Infor and Descartes and is a highly experienced business operator. Gordon will play a critical role in implementing the restructuring plan, helping to enhance operational efficiencies, foster innovation and drive sustainable growth.
• On August 15, 2024, the company appointed Jared Deith, Executive Vice President, Connected Health. Deith was the co-founder of Business Mobility Partners and Simon IoT which were acquired by KORE in February 2022 and prior to this appointment was leading the Indirect Channel for KORE with great success. His appointment further strengthens the Executive Leadership Team with deep IoT expertise and a strong track record for driving substantial growth in the global Connected Health sector.

"While our second quarter top line performance was essentially flat, TCV growth, for both the quarter and year-to-date periods, reflects continued strong demand for our higher-margin core connectivity solutions and is testament to the hard work and execution of our team," said Ron Totton, President and CEO of KORE. "While IoT Connectivity revenue continues to grow, looking at the business wholistically, our costs have risen disproportionately to overall revenue growth, and this has weighed on margins and cash flow. Following a comprehensive review during my first few months on the job, we are acting decisively to optimize operations and reduce expenses, while re-investing a portion of the savings in the higher growth and higher margin areas of the business."

The tables below summarize the Company's revenue and specific key metrics.

Restructuring Plan

To improve operational efficiency and strengthen the foundation from which to drive long-term profitable growth, KORE is initiating a comprehensive restructuring plan that is expected to result in gross cash savings of $5 million to $6 million in 2024, and $20 million to $22 million annually thereafter, prior to any reinvestment in higher-growth and higher-margin areas of our business. This cost alignment will be funded with a one-time restructuring cost of $4 million to $5 million. The plan includes:

1. Cost Reduction Initiatives: Implementing measures to reduce operating expenses by streamlining processes and reducing discretionary spending.
2. Workforce Realignment: Rationalizing the workforce to better align with current business needs, resulting in a full-time headcount reduction of approximately 25%, including both employees and individual contractor staff.
3. Innovation and Investment: Increasing investment in products that are experiencing strong market adoption, including related go-to-market strategies; improving support services, such as device management, with a focus on helping customers migrate to KORE platforms; and increasing R&D to drive innovation and bring new, market-leading offerings to customers.
4. Enhanced Customer Focus: Strengthening customer relationships through improved service and support initiatives to drive improved satisfaction and loyalty. Customer relationships are key, and much of the investment will focus on further differentiating the KORE offering and experience. 

"KORE offers best-in-class solutions for mission-critical use cases to a growing customer base that is looking for ever-greater value from their IoT providers," added Totton. "Through this lens, we are undertaking a restructuring to simplify our operating model, reduce our cost base, focus our investments and realize significant cash savings. The total addressable market for IoT remains very large, and this restructuring will ensure KORE is in the best position possible to capitalize profitably on the growing opportunities in the space."

2024 Financial Outlook

For the 12 months ending December 31, 2024, the Company now expects the following:

• Revenue in the range of $275 million to $285 million, compared to the prior estimated range of $300 million to $305 million; and
• Adjusted EBITDA in the range of $54 million to $56 million, compared to the prior estimated range of $64 million to $66 million.

Totton added, "Our updated guidance reflects increasingly cost-conscious customer behavior and a cyclical trend within our IoT Solutions business, which includes the delay in launching a large contract with a Connected Health customer, now scheduled to begin implementation in 2025. We expect the changes we have made to the Executive Leadership team, including Jared Deith's appointment, will yield improved results in our Connected Health business. Moreover, we fully expect the changes we are undertaking in our restructuring plan, and the associated savings and re-investment in the growth of the business, will contribute to improved financial performance in 2025 and beyond."

Conference Call Details

KORE management will hold a conference call today at 8:30 a.m. Eastern time (5:30 a.m. Pacific time) to discuss its financial results, business highlights and outlook. President and CEO Ron Totton 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: 13747164

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 (770) 280-0324. A replay of the conference call will be available approximately three hours after the conference call ends. It 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 13747164.

To view the original press release, please click here.

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