KORE (KORE) 19 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to the KORE Group Holdings, Inc.

Third Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to your host, Vik Vijayvergiya, Vice President, Investor Relations and Corporate Development. Vik, please go ahead.

operator. you, Thank

afternoon we found earnings call, along to third at of filed the as quarter company's On results. ir.korewireless.com. our XXXX which will Investor will XXXX Both this release press presentation, as can follow details be quarter the well third be today's these the refer that on helpful with, page to Relations

encourages the today's on information company contained prepared on which this you release differ information a cause recording accounting described the actual as slide review other the materially this later The financial any may Exchange company that call does Investors be and the it statements. the in GAAP. with States not company's non-GAAP Commission, section of Securities results factors available website and and of press filings or or that well The or a to harbor principles risk statements Finally, specific information today. The will to forward-looking accordance identify with United U.S. also after company our as revise supplement in safe publicly this accepted be webcast. The update company is as events that to the factors statements, company's the forward-looking will in from risk undertake to providing generally in notes call. disclaimers those discussing

reported to in company's metrics You today's presentation. these and GAAP in can release the find reconciliation a tables earnings the results reconciliation provided of

company's Officer. the Ron the and President Chief over to turn now call I'll Executive Totton,

XXXX Paul KORE's us good for and Chief Financial me today afternoon, is you Vik, Holtz, joining Thank With for quarter our third call. Thank earnings Officer. you, everyone.

guidance. showing stabilized and results we year our in of issued quarter is growth third on our restructuring, takeaway recurring and are our and tightening in have outlook, are fourth overall The reaffirming Connectivity IoT Based completed performance, our revenue. financial previous we transition, this quarter

showing Adjusted our revenue higher reductions was $XX.X which million, at while growth was IoT the profitable our in quarter there planned Looking IoT third Connectivity results, year, our in than slightly last less period same result year, which were $X.X of the was a the from million down last the performance-based XXXX. largely same in $XX third EBITDA Solutions quarter of compensation business. reversal was of $XX.X quarter million, in million

restructuring flow in into go from update, year-over-year, will but QX on the was year. been QX severance in a result I generating as team. of detail million are same while flow cash flow me cash cash a Cash in flow which onetime completed. IoT the for part And of focused year and discipline we since later $X our included in in of our and performance of payments flat the $X.X Connectivity This leadership improved improvement more our plan, period cash remains management. the business. last on key this fiscal free free generation year-to-date million business priority improvement is of our has This rest

IoT we focus are as big the track X, can strategic on the our Slide look say that On I Connectivity. we right picture, on at with confidently

Our as focus and margin, as known TCV, in results is contract value, total in yielding demonstrated by positive growth otherwise revenue, QX.

continued upsell for connections. growth both well IoT to driven ahead. growth by otherwise bodes top or Connectivity Converting known new revenue as in to led experienced pleased wins IoT connections report for an over of a which as We with priority strong our a sequential QX are customers. IoT which in wins on well best is basis We devices in orders increase looking quarter-over-quarter as XXX,XXX connected growth connections, demonstrated by strong new TCV TCV existing in in us, offerings primarily by for Connectivity and is in logos

quarter, operational excellence and giving user talked customers Last our focus and about experience. on intimate our improved renewed an I

Our that paying metrics. in as dividends is key seeing improvements are we area already focus in

to this continue invest We heavily in area.

streamline As our mentioned path, during situations value in this We These earlier, no we financial completed period. are efficiency, business this continue are to delivering for ability shareholders. in on improved operations, our us people our exceptionally a fact, confident was operational to performance. and improve and our operational customers easy is our enhance and well. plan, our never restructuring performed our but to Overall, had customers and impact we crucial solid with metrics, our and our

quarter IoT third As we Connectivity move of to Slide dive for our highlights into the XXXX. let's X,

now Our acquisition. Twilio the year, quarter delivered of margin number scale. contribution is the year-to-date a the We revenue X% recurring $X key same QX on in to of a IoT previous in the the us increased compared million prior the X% for reflects a solid and to growth last prior as same compared represents the the in we of This focus year growth. month positive ARPU impact year-to-date past economies the and the of period of XX well Connectivity earnings increasing compared year period profitable period as metric IoT indicating XX% for as effects power. the organic the moved our has period in for connections IoT same XXXX while at XX% to growth an year, foundation over

Slide momentum which to X, on the occurring Connectivity. our IoT of largely sales is in third quarter let's move in XXXX, On

that to in report related to QX million with $XX XXXX closed pleased in XX% we Connectivity. TCV IoT are We

million same million Connectivity. $XX This builds on $XXX and the coming in from the showing the year prior that of from TCV prior IoT of quarter's performance year-to-date quarters, period $XX up closed million, in

in in with share focusing highlight our market devices, or fueling position profitability meet the investing customers, effectiveness strong growing our of either by connected sales their improving of our are they're IoT I results which These both on As Connectivity. and strategies. market growth

to drive focus our revenue continue off, will is confident paying Our quarters. on coming Connectivity the momentum we that growth are IoT in and this

on The Solutions but growth focus and represents a strategic in We very to margins the have nature, a is choppy key our in improving with business By business our of Connectivity. part our this linkage best way is of our terms its some IoT their also where Connected enhanced for discipline fuels offerings. cohorts example, see needs. differentiation IoT as growth a connectivity seen Solutions Health, it customer competitive for KORE and IoT shop all they in to of as think global for one-stop Connectivity

of As quarter, of we multiple our some underscores this KORE's have previous Slide highlights from impact done across key wins calls, customer earnings breadth in the and which solutions X industries. the

large maintenance support equipment of solutions agreement KORE like First, U.S., the competitive XX into new which in after and countries, was asset is its company revenue another enhance secured customer to including and China, streams. win to this global IoT global $X.X European this I'm KORE over the in proud especially industrial in contract a global will space, connectivity monitoring provide enable Brazil. for selected service a device TCV high-value in markets This team predictive highly of million. process. RFP unlock and and management thorough our

million. KORE facilities also market we against this health business failover IoT includes had selected large Connectivity remote a kiosk win the health systems. hospitals. to This $X.X provider competitors secure several urgent a in major Next, care for was with support TCV care and care in where systems been a patient with to of able we've

this while infrastructure for self-service is experience, manpower and agriculture, with overall our customer cutting capabilities. required a The helping to including glass livestock yields million. $X reduce significant costs. pane global improve IoT TCV a In we secured improving the manage Connectivity contract smart single providing to agreement, and KORE of customer is

leading they in full Lastly, chose KORE win the provide in we monitoring, IoT this customer U.S. a company for provide partnering TCV These experience. to space IoT Connectivity. for reflect globally our redundancy, ability variety security, The is $X to of for a a patient had ability ensuring industries, network a to reliable remote The the connectivity with growing demand our and win across across wins KORE's patient specifically demonstrate execute this million. and

would programs, million contributed from rationalization processes restructuring on I expenses, $XX We expensed completed XXXX in to share our been gross with the are cost initiated like now This and and details onetime X, customer, more cash to in of has target costs program all operating savings. began rate restructuring cost on Slide rationalization our which a you organization. results run QX our and to program of be streamline XXXX. reduce involved which and the sharpen will our concluded focus the across which approximately and million, On $X

decision aspect strongest, profitable our is improved eliminate synergies, projects to of and evaluating our major we to reduce where made align workforce areas portfolio stop initiative reorganization introduced in company. across by our We're also our offerings. growth eSIM structure, customer realign difficult This to and the headcount not gain the around our undergoing alignment rationalization, connectivity that better efficiency, XX% next-gen particularly realignment A our and focus flattened where product we a are redundancies resources do and and IoT Connectivity. to this

this intimacy remains Throughout priority. top a customer process,

for but time, goal milestone to automating areas approximately run us capitalize positions savings lead processes. enhances KORE. efficiency gross a net relationships time, to XXXX. million marks product also Our for response in on road plan better our $X market by further to resolution of will this cash development $XX accelerate and is and a only these annual as completion improving The It areas strengthen such invest savings and actions operational opportunities high-growth million cash map. key results The in customer with our of in not rate significant

Paul financial more hand it me let now And over our detail. through performance go in to to

third thanks and to Thanks, quarter Ron, joining us our evening this results. for those

and revenue, calculation restate for to so impairment quarter by found goodwill a to were we in from EBITDA, restatement. Unfortunately, emphasize prior It unaffected we periods second flows this important results. adjusted is decided the error our all quarter, our cash calculation

X% Connectivity and revenue million the X% have quarter XXX and revenue quarter by of was X.X% in to $XX.X for basis third million. revenue an the third third year-over-year revenue. to compared down $XX.X to on decline increased IoT of Total $XX.X over million XX.X%, a decision represented the Breaking revenue, year. revenue turn up down quarter third XX% the quarter our that the points Hardware financial $X margins lines, deals year-over-year to look non-GAAP QX IoT quarter Now third hardware was previously percentage The in to Solutions third both Slide let's was prior year-over-year XX% capital. in increase in working year-over-year. year. XX% disclosed the XXXX of to quarter business results margin X. at improve prior low-profit due million declined or Overall, away from increased year-over-year of

basis per month, by our driven was up percentage The line, connections margin points XXXX. low-ARPU IoT of higher has increase current of was consumption margin IoT Solutions IoT profitable revenue to primarily ARPU, Total connections By user Solutions current per are the XXX,XXX at strong continued planned. percentage its ARPU over quarter points subscribers the business were XXX XX.X in well down cases non-GAAP quarter. compared year-over-year XX%. XX quarter more end was XXX,XXX increased in quarter to total Connectivity growth is attributed increase CaaS the XX.X%. deactivations an $X.XX basis Non-GAAP use is or The revenue. to to as increase million the of and increase already high-bandwidth importantly, year-over-year, million, the third previously from in Average the of connections. more but The last as year-over-year into XX QX we momentum year-over-year data from $X.XX for

for DBNER XX% XX was months in XX, to XX% ended prior the the year. September XXXX, compared

ago DBNER the reminder, to compared growth similar sales of measures same the cohort customers as it to year XX period. trailing the in same-store a in is the months As existing

to impacted from current Our XX continues by Solutions the customers revenue our of be months. declines calculation some over DBNER in IoT past the

decrease the Slide quarter. $XX.X expenses Turning year XXXX. compared third and prior Operating XX% charge or of was the due primarily $XX.X the to million depreciation The were a amortization of in noncash $XX.X quarter goodwill to decline in to million QX XX. included million, impairment

Note of million in in and Third amortization expense of recently quarter to higher that million to on third year-over-year quarter rate the versus preferred $XX.X refinanced XXXX. XXXX. to borrowing fees, due the the including expect stock This XXXX. announced interest $XX.X financing decline cash completed in cuts, increase is placement interest our deferred increased we costs expenses, QX debt

million $XX.X Net to loss prior $XX.X net quarter million attributable The million impairment to third charge our in $XX compared quarter. year. in of in of the in the $XX.X the noncash goodwill decrease million prior is was year loss year-over-year the

year. expenses. The restructuring approximately to in prior or headcount-related $X.X in have in accrued in a timing savings benefits, incurred in the QX same were prior from quarter in EBITDA adjusted $XX the current an to performance-based variable period Adjusted the increase will year. third the on million the EBITDA QX these include the quarter These decline contractor beyond. EBITDA the million, and results compared X% from or decrease increases expenses of was These compared Offsetting adjusted of compensation, XXXX. impact more initiated of would late program XXXX and our is

year in after XXXX. period to ended XX, operations $X.X September severance-related the the XXXX, operations QX investing this cash provided was operations less $X.X from million by million approximately measured onetime months compared ended cash $X.X Free provided the flow. Cash moving September was million, even million flow, cash period. million in prior activities, Finally, XX, for but in negative in $X XXXX, provided up cash months X used improved the prior for paying approximately $X.X costs by X by by to

cash cash XX, million of of September to equivalents September of were as XXXX. million as As XX, $XX.X XXXX, and million December compared XXXX, $XX.X and $XX.X XX,

said, even us profitable we of as Ron in priority growth. cash for flow is As a all management key invest

really made have the feel in our both we good progress I metrics. operational and back, Stepping about financial

are we and laying going forward. reoccurring for More cash importantly, performance the improved groundwork margin flow

with that, it Ron. pass to back And I'll

Thank you, Paul.

wrap for up, want XXXX. the our we as near-term outlook XX, priorities Slide to On share I and

centered Our profitable growth, operational pillars: long-term around excellence. customer strategy key remains and intimacy, creation value X

intimacy. First, customer

tailored their solutions value. drive very relationship attract help with committed and are us retain intimate tangible customers delivering that improvements needs experiencing. understanding we are with We and new pleased our will deepening This existing customers approach ones. our by I'm the to already

to achieve high-margin Connectivity our and by market We IoT Next, structure. presence leveraging not and range pricing global of and only a includes optimizing our our focusing sustainable on growth in profitable but cases. aim This profitable strengths growth. across expanding discipline cost opportunities use

excellence. operational Lastly,

we enhancing in This processes, a to XXXX fostering for deliver dedicated our create areas, operational strong performance in to improvement. technology, culture prioritizing confident effectiveness. long-term are investing all efficiency and and By are value and our ability We stakeholders in of and beyond. continuous involves these streamlining our

at year. on guidance look am performance As that market our remain commitments. the tightened our and profitability we for with and I the revenue we track to pleased share prior full we conditions, our

delivering and We IoT across strong demand strategic as continue our to expected. our see offerings, Connectivity initiatives are

to narrowing We to and $XXX for the range $XX $XX million we $XXX on revenue our million to are million, outlook are our range million. narrowing outlook adjusted EBITDA to

about good feel QX is I out. far, playing So how

market and to In in summary, would and plenty that solid do the growth very IoT expected we business near the we shows looks an large continue the QX bright what and in future we for said Connectivity came doing room see and remains as longer growth are IoT term. that as of both over we with

at offering scale. a operates that great have new are product ones, We have and customers, attracting differentiated

like So where I we are.

call the I hard of for thank and around commitment shown globe also want Before this we through Q&A, they the the year KORE to to team transition. have open work the

traction working engagement see We been gaining to is are and have the we hard it good together. and

you, forward your I Thank look to and questions.

first [Operator coming Instructions] Lance from question today from TD Our Vitanza is Cowen.

from how the important, changed impression follow-up, talk Connectivity. Solutions has have strategy forward? say, significantly I a growth to, my please. going And Could deemphasized suggests the and the why away business what been about let's to Solutions, is pivot Ron, and year a then outlook that that you this that's for relative relative ago, has

Sure. Lance. Thanks,

to deemphasized. the way Solutions at say I think look it the guess -- I is I is, wouldn't

And prior we've certainly is hardware a I -- think think margin away also moved us. from. and was certainly for priority around pricing low-margin commitments I

Solutions. that moving So outside I away hardware Connectivity we're on still lower-margin very would where say from contribution, of was minimal some or there focused

I As can drive solution. that's that Connectivity revenue a of those me, to part commented earlier, the for -- Solutions

hardware maybe Connectivity. from much that So deemphasizing I it but on we're wouldn't say low-margin really contribute didn't deemphasizing that to

Paul you the guessing about Could $XX Q I'm not yet Fair balance the sheet on for the little about in enough. or but have have you just liquidity, then info into And sheet. I'm the of cash could do the how restrictions there a that Are that? any talk on million maybe or seeing come months? access hand. you do full $XX release, any bit million -- covenant And balance the revolver? borrowing over out more Do to you feel about picture you base play? next XX generally, liquidity

you picking itself, -- company million XX%. proportion load And debt a of out with the EBITDA. on $XXX are of it including which about my then around for million, preferreds, just model the have at And $XX feels is

if the that it we're preferreds? grow Or company conversations please. And sort with we stakeholders debt any I'm we reposition no, for can think thoughts sort is or into just accelerating of of are any you So on topics, restructuring hey, there that have of around and to wondering balance the this just a those like, the sheet. growth going

Thanks, Lance.

So on first, significantly. we flow particular, about or cash as is in improve mentioned to going that talked had here

we had we a So into see nice don't going will that sheet going in lead year, say to into balance lie will the debt have lot not on a the to help next which cash the I'm improvement of flow, indicated. you as balance sheet. free

should option the continuing we get now come with we're As right see available, whether the down preferred the you use use or be expecting to we a things of comfort rates are and PIK so forth. as now, to look in or But the you'll or positive pay will free level acquisitions chance out higher XXXX. if year, there's for sort refinancing know, shares million the on we those where and Q is we But so cash sheet to at have which much $XX.X starting balance of next it with to down hopefully, are and now not options, flow going especially see that us part give things. The we it. for

is from Our Instructions] Meta Marshall Morgan from next Stanley. [Operator question coming

the question for trends trends Mary what between seen What the is or just a verticals on that is you're purchasing quarter? throughout did you on customers macro there terms customers? This like And from like And in difference had you're Meta. I of of any seeing. seeing? look that trends types have

Thanks, Yes. Mary.

us, trends, RFP on for we're macro I type having what more large-scale probably a seeing finding we're I for think of terms -- opportunities. In situations mean, is customers we're newer

I say. think that's probably one, would I

looking I also demand, think, so question people spending, happy strong getting wherever good referenced can, around verticals, of we're to obviously terms X, focusing are what the verticals TCV is is to numbers. I'm with in tell you that optimize your on, we're seeing they that the value. And they're in which

on I those our in the towards, connected more where think the connections, increasing. showing I'd growth network, growth that definitely devices you point that's there's of are

So little I landscape a cautious. the is macro know

and For what customers more. with us, we're with buying healthy seeing growth probably say. would new I That's existing say I strong would business growth

if But add? Paul, you maybe to anything have

No.

it's is like the it to us. that environment think improving -- I seems

We consolidation are seeing customers of stuff. come us, talk, about sort business to of transferring their that and some

we're are opportunity again, there. lead a robust opportunities them so forth. But to the close the definitely So time and pipeline. It's seeing just,

our I'd or like We've question-and-answer end closing for comments. reached the further the turn to floor back over session. any of

And appreciate you your time. and to earnings today's early our on have you, a with XXXX, everyone, results year-end thank day. and you, updating forward progress We call. look joining for good our Thank in

Thank today's webcast. teleconference you. and That does conclude

thank your You and wonderful have line this may a for participation disconnect time, today. day. at you We your