ATLANTA, April 11,
2024 /PRNewswire/ -- KORE Group Holdings,
Inc. (NYSE: KORE) ("KORE" or the "Company"), the global
pure-play Internet of Things ("IoT") hyperscaler and provider of
IoT Connectivity, Solutions, and Analytics, today reported
financial and operational results for the quarter and full year
ended December 31, 2023.
Company Highlights
- The Company is providing 2024 revenue guidance in the range of
$300 to $305
million and Adjusted EBITDA, a non-GAAP metric1,
guidance in a range of $64 to
$66 million, reflecting a
re-acceleration in IoT Connectivity growth. IoT Connectivity is
projected to grow at 20% in 2024. Streamlined operating costs and a
strong start to Q1 bolster KORE's confidence in meeting its 2024
outlook. With its five-year transformation complete, KORE will no
longer be adjusting one-time transformational investments starting
in 2024. On a comparable basis, without these one-time adjustments,
which were made in 2023, the Company anticipates full
year-over-year Adjusted EBITDA growth of approximately 33% at the
midpoint of its guidance range.
- The Company delivered $72.4
million in revenue in the fourth quarter of 2023, which
represented 16% growth year-over-year, powered by a 27% increase in
IoT Connectivity revenue, partially offset by the deferrals in its
IoT Solutions business. Net loss for the fourth quarter was
$33.7 million, a decrease in loss of
52% year-over-year. The Company's Adjusted EBITDA of $13.8 million was down 12% year-over-year.
- The Company generated an incremental closed-won Total Contract
Value (TCV)2 of $28
million in the fourth quarter of 2023, bringing the total
closed-won TCV for the year to $115
million. This represents the fifth straight year of
closed-won TCV growth.
- KORE landed its first major Connected Health pre-configured
solution win. The Connected Health Telemetry Solution (CHTS)
customer is a global healthcare enterprise, and in the first
quarter of 2024, the Company finalized this deal with a TCV of
$26 million. For this engagement, the
Company will be supporting a global home respiratory therapy
program for over 65,000 patients, with the customer utilizing
KORE's CHTS gateway, device management and configuration, cloud
platform and a temporary data repository cloud service.
- KORE has demonstrated its industry leadership and commitment to
innovation by securing its position as a Leader in Gartner's Magic
Quadrant for Managed IoT Connectivity Services Worldwide for the
fifth consecutive time and receiving the 2023 IoT Excellence Award
from TMC and Crossfire Media for its CaaS offerings, including
Super SIM, which guarantees optimal coverage, quality, and cost in
wireless connectivity. Additionally, KORE is one of six managed IoT
connectivity vendors consistently included in Gartner's Peer
Insights across all three regions analyzed.
"Although 2023 was a challenging year characterized by inventory
corrections and fluctuating macroeconomic conditions, I am
incredibly proud of everything KORE accomplished over the year. We
expanded our connectivity portfolio, strengthened our balance
sheet, and streamlined operating costs. While we experienced
additional order deferrals in Q4, including from our largest
customer, KORE has retained these customers, and we are
well-positioned to take advantage of a de-risked 2024. We expect
our core connectivity business to grow by double digits organically
and by over 20% year-over-year. As our organic growth accelerates,
we will remain cost-disciplined, focusing on profitability and
EBITDA. With the 2G/3G sunsets and much macro uncertainty behind
us, KORE has never been better positioned to capture the
opportunity that the decade of IoT brings," said Romil Bahl, President and CEO of KORE.
Financial Performance for the Fourth Quarter of 2023,
Compared to the Same Period of 2022:
- Total revenue increased by 16% to $72.4
million, compared to $62.4
million in the fourth quarter of 2022.
- IoT Connectivity revenue of $55.3
million increased by 27%, compared to $43.7 million in the fourth quarter of 2022. On
an organic basis, IoT Connectivity revenue growth was in the
mid-single digits.
- IoT Solutions revenue declined by 9% to $17.1 million, compared to $18.7 million for the same period one year ago.
The decline in IoT Solutions reflects significant deferrals from
KORE's top customer, with no shipments in the quarter.
- Net loss decreased 52% year-over-year to $33.7 million, compared to $68.8 million for the same period one year
ago.
- Adjusted EBITDA decreased 12% year-over-year to $13.8 million from $15.7
million in the fourth quarter of 2022.
Financial Performance for Fiscal Year Ending December 31, 2023, Compared to the Same Period of
2022:
- Revenue increased by 3% to $276.6
million, compared to $268.4
million.
- IoT Connectivity revenue increased 15% to $202.3 million, compared to $175.9 million.
- IoT Solutions revenue decreased by 25% to $74.3 million, compared to $92.5 million. The revenue decline in the year
was driven by a large deferral in the fourth quarter from KORE's
top customer and the LTE transition project completed in the second
quarter of 2022.
- Net loss increased to $167.0
million, compared to $106.2
million in 2022. The Company's annual net loss increased due
to higher interest expenses, increased costs due to the acquisition
of the Twilio IoT business, a mark-to-market charge on the fair
value of certain of the Company's warrants, and one-time costs
associated with the Company's debt refinancing.
- Adjusted EBITDA declined by 11% to $55.6
million, compared to $62.8
million in the comparable period. The decline was due to
increases in headcount-related costs, including those from the
acquired Twilio IoT business, and higher professional services fees
associated with the Company's audit.
The tables below summarize the Company's revenue and specific
key metrics.
|
Three Months Ended
December 31,
|
($ in
thousands)
|
2023
|
|
2022
|
IoT
Connectivity
|
$55.3
|
|
76 %
|
|
$43.7
|
|
70 %
|
IoT
Solutions
|
$17.1
|
|
24 %
|
|
$18.7
|
|
30 %
|
Total
Revenue
|
$72.4
|
|
100 %
|
|
$62.4
|
|
100 %
|
Period End Total
Connections
|
18.5
million
|
|
15.0
million
|
Average Total
Connections for the Period
|
18.7
million
|
|
14.2
million
|
|
|
|
|
|
Twelve Months Ended
December 31
|
($ in
thousands)
|
2023
|
|
2022
|
IoT
Connectivity
|
$202.3
|
|
73 %
|
|
$175.9
|
|
68 %
|
IoT
Solutions
|
$74.3
|
|
27 %
|
|
$92.5
|
|
32 %
|
Total
Revenue
|
$276.6
|
|
100 %
|
|
$286.4
|
|
100 %
|
Period End Total
Connections
|
18.5
million
|
|
15.0
million
|
Average Total
Connections for the Period
|
17.2
million
|
|
14.2
million
|
|
|
|
|
Fourth Quarter 2023 Key Metrics and Business
Successes
- KORE's Total Connections3 were approximately 18.5
million as of December 31, 2023, a
decline of over 400,000 from the third quarter of 2023 and an
increase of 3.5 million from the same period in 2022. The decline
in the quarter-over-quarter Total Connections reflects the
deactivation of low-revenue SIMs from a single Connectivity
Enablement as a Service (CEaaS) customer that was acquired and is
being integrated into the acquiring company's in-house platform.
KORE is assisting that customer with the transition. CEaaS is a
line of business the Company is de-emphasizing going forward.
- DBNER4 was 96% for the twelve months ending
December 31, 2023, compared to 92%
for the twelve months ending December 31,
2022. Excluding the Company's largest customer, DBNER was
101% vs. 103%.
- KORE's new business sales funnel now includes almost 1,600
opportunities, with an estimated potential TCV of approximately
$545 million as of December 31, 2023, compared to $740 million and $434
million as of September 30,
2023 and December 31, 2022,
respectively. This funnel has been de-risked by removing most deals
that include low-margin hardware and has further refinements at the
end of the year to ensure the Company is focused on the highest
quality, highest probability potential deals.
- KORE and Medical Guardian collaborated on a pioneering
eSIM-Powered Medical Alert Device. This revolutionary technology is
designed to overcome the challenges of limited carrier flexibility
and coverage, enabling network switching to optimize connectivity
across different regions and operational phases and enabling
optimal 24/7 connectivity.
- KORE had several notable new business wins in the fourth
quarter, including:
- Cross-selling IoT Solutions with the KORE One-Stop-Shop:
KORE won a contract with one of the largest privately held
homebuilders in the U.S. to cross-sell Pre-Configured Solutions
with Managed Services alongside Connectivity. KORE achieved this
after demonstrating how its high-bandwidth Pre-Configured Solutions
could enhance operations, quicken the time-to-market, and improve
the customer experience, which, along with Connectivity, optimized
the customer's entire connectivity system.
- Increasing Share of Wallet: A leading high-performance
software and solutions provider for the real estate industry is
adding 15,000 units to its single-and-multi-family home portfolio,
signaling confidence in KORE's one API approach and top-tier
customer support, as well as generating an estimated $2 million in TCV.
- International Opportunities / Global Deployments: A
leader in IoT asset tracking and vehicle telematics is launching a
new Buy-Here Pay-Here product leveraging KORE OmniSIM. This product
will target the subprime vehicle loan market and is worth
$1.6 million of TCV.
- Upsell / Land and Expand: A rapidly growing management
network increased its spending with KORE after choosing the Company
for its primary and failover solutions in the U.S., with further
potential significant European expansion opportunities.
2024 Financial Outlook
For the twelve months ending December 31,
2024, the Company expects the following:
- Revenue in the range of $300
million to $305 million;
and
- Adjusted EBITDA in the range of $64
million to $66 million, and an
Adjusted EBITDA margin of approximately 22% at the midpoint of
revenue and Adjusted EBITDA guidance.
Bahl concluded, "KORE is entering 2024 in a position of
strength. Our sales momentum continues to grow, having delivered a
fifth straight year of TCV growth, and our ecosystem partnerships
have never been stronger, as evidenced by our Cradlepoint
announcement. We expect to grow higher margin IoT Connectivity
business by approximately 20% in 2024, driven by our largest
end-markets rebounding, the end of the 2G and 3G sunsets, and
stabilizing ARPU. As we grow our top line in 2024 and beyond, KORE
will remain focused on profitability, as evidenced by our decision
to de-emphasize low-margin hardware revenue. Our goal is to build
back to 25% EBITDA margins."
Conference Call Details
KORE management will hold a conference call today at 8:00
a.m. Eastern time (5:00 a.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: 13744718
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 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
13744718.
About KORE
KORE is a pioneer, leader, and trusted advisor delivering
mission-critical IoT solutions and services. We empower
organizations of all sizes to improve operational and business
results by simplifying the complexity of IoT. Our deep IoT
knowledge and experience, global reach, purpose-built solutions,
and deployment agility accelerate and materially impact our
customers' business outcomes. For more information, visit
www.korewireless.com.
Non-GAAP Financial Measures
In addition to our results as determined in accordance with
GAAP, we believe the following non-GAAP measures are useful in
evaluating our operational performance. We use the following
non-GAAP financial information to evaluate our ongoing operations
and for internal planning and forecasting purposes. We believe that
non-GAAP financial information, when taken collectively, may be
helpful to investors in assessing our operating performance.
EBITDA and Adjusted EBITDA
"EBITDA" is defined as net income (loss) before other
non-operating expenses or income, income tax expense or benefit,
and depreciation and amortization. "Adjusted EBITDA" is defined as
EBITDA adjusted for unusual and other significant items that
management views as distorting the operating results from period to
period. Such adjustments may include stock-based compensation,
integration and acquisition-related charges, tangible and
intangible asset impairment charges, certain contingent liability
reversals, transformation, and foreign currency transaction gains
and losses. EBITDA and Adjusted EBITDA are intended as supplemental
measures of our performance that are neither required by nor
presented in accordance with GAAP. We believe that the use of
EBITDA and Adjusted EBITDA provides an additional tool for
investors to use in evaluating ongoing operating results and trends
and in comparing the Company's financial measures with those of
comparable companies, which may present similar non-GAAP financial
measures to investors. However, you should be aware that when
evaluating EBITDA and Adjusted EBITDA, we may incur future expenses
similar to those excluded when calculating these measures. In
addition, our presentation of these measures should not be
construed as an inference that our future results will be
unaffected by unusual or non-recurring items. Our computation of
Adjusted EBITDA may not be comparable to other similarly titled
measures computed by other companies because all companies may not
calculate Adjusted EBITDA in the same fashion.
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered in isolation or as a substitute for performance
measures calculated in accordance with GAAP. We compensate for
these limitations by relying primarily on our GAAP results and
using EBITDA and Adjusted EBITDA on a supplemental basis. You
should review the reconciliation of net loss to EBITDA and Adjusted
EBITDA below and not rely on any single financial measure to
evaluate our business.
We have not provided the forward-looking GAAP equivalents for
the forward-looking non-GAAP financial measures Adjusted EBITDA and
Adjusted EBITDA margin or a GAAP reconciliation as a result of the
uncertainty regarding, and the potential variability of,
reconciling items including but not limited to stock-based
compensation expense, foreign currency loss or gain and acquisition
and integration-related expenses. Accordingly, a reconciliation of
these non-GAAP guidance metrics to their corresponding GAAP
equivalents is not available without unreasonable effort. However,
it is important to note that material changes to reconciling items
could have a significant effect on future GAAP results, and, as
such, we also believe that any reconciliations provided would imply
a degree of precision that could be confusing or misleading to
investors.
Key Metrics
KORE reviews a number of metrics to measure our performance,
identify trends affecting our business, prepare financial
projections, and make strategic decisions. The calculation of the
key metrics and other measures discussed below may differ from
other similarly titled metrics used by other companies, securities
analysts, or investors.
Number of Customer Connections
"Total Customer Connections" or "Total Connections" constitutes
the total of all KORE Connectivity services connections, including
both CaaS and CEaaS connections, but excluding certain connections
where mobile carriers license KORE's subscription management
platform from KORE. Total Connections include the contribution of
eSIMs and is the principal measure used by management to assess the
performance of the business on a periodic basis.
DBNER
DBNER (Dollar Based Net Expansion Rate) tracks the combined
effect of cross-sales of IoT Solutions to KORE's existing
customers, its customer retention and the growth of its existing
business. KORE calculates DBNER by dividing the revenue for a given
period ("given period") from existing go-forward customers by the
revenue from the same customers for the same period measured one
year prior ("base period"). The revenue included in the current
period excludes revenue from (i) customers that are non go-forward
customers, meaning customers that have either communicated to KORE
before the last day of the current period their intention not to
provide future business to KORE or customers that KORE has
determined are transitioning away from KORE based on a sustained
multi-year time period of declines in revenue and (ii) new
customers that started generating revenue after the end of the base
period. For example, to calculate our DBNER for the trailing 12
months ended December 31, 2023, we
divide (i) revenue, for the trailing 12 months ended December 31, 2023, from go-forward customers that
started generating revenue on or before December 31, 2022, by (ii) revenue, for the
trailing 12 months ended December 31,
2022, from the same cohort of customers. For the purposes of
calculating DBNER, if KORE acquires a company during the given
period or the base period, then the revenue of a customer before
the acquisition but during either the given period or the base
period is included in the calculation. Further, it is often
difficult to ascertain which customers should be deemed not to be
go-forward customers for purposes of calculating DBNER. Customers
are not required to give notice of their intention to transition
off of the KORE platform, and a customer's exit from the KORE
platform can take months or longer, and total connections of any
particular customer can at any time increase or decrease for any
number of reasons, including pricing, customer satisfaction or
product fit – accordingly, a decrease in total connections may not
indicate that a customer is intending to exit the KORE platform,
particularly if that decrease is not sustained over a period of
several quarters. DBNER would be lower if it were calculated using
revenue from non go-forward customers.
DBNER for the twelve-month periods ending December 31, 2023, and December 31, 2022, excludes connections from
non-go-forward customers, the vast majority of which are
connections from Non-Core Customers. KORE defines "Non-Core
Customers" to be customers that management has judged to be lost as
a result of the integration of Raco Wireless, Wyless, and other
acquisitions completed in the 2014-2017 period, but which continue
to have some connections (and account for some revenue) each year
with KORE. Non-Core Customers are a subset of non-go-forward
customers.
DBNER is used by management as a measure of growth at KORE's
existing customers (i.e., "same store" growth). It is not intended
to capture the effect of either new customer wins or the declines
from non go-forward customers on KORE's total revenue growth. This
is because DBNER excludes new customers which started generating
revenue after the base period, and also excludes any customers
which are non go-forward customers on the last day of the current
period. Revenue increases from new customer wins, and a decline in
revenue from non go-forward customers are also important factors in
assessing KORE's revenue growth, but these factors are independent
of DBNER.
Total Contract Value (TCV)
Total Contract Value (TCV) represents KORE's estimated value of
a revenue opportunity. TCV for an IoT Connectivity opportunity is
calculated by multiplying by forty the estimated revenue expected
to be generated during the twelfth month of production. TCV for an
IoT Solutions opportunity is either the actual total expected
revenue opportunity, or if it is a longer-term "programmatically
recurring revenue" program, calculated for the first 36 months of
the delivery period.
Cautionary Note on Forward-Looking Statements
This press release includes certain statements that are not
historical facts but are forward-looking statements for purposes of
the safe harbor provisions under the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as "believe,"
"guidance," "project," "momentum," "may," "will," "estimate,"
"continue," "anticipate," "intend," "expect," "goal," "should,"
"would," "plan," "predict," "potential," "seem," "seek," "future,"
"outlook," "target" and similar expressions that predict or
indicate future events or trends or that are not statements of
historical matters. These forward-looking statements include, but
are not limited to, statements regarding statements regarding
expected financial and other risks, statements regarding the
benefits of the acquisition of Twilio's IoT business, estimates and
forecasts of revenue, cash position, interest expense, Adjusted
EBITDA and other financial and performance metrics, future capital
availability, debt maturity, projections regarding recent customer
engagements, projections of market opportunity and conditions, the
total contract value (TCV) of signed contracts and potential
revenue opportunities in KORE's sales funnel, statements regarding
expected success of alliance relationships with third parties and
related expectations. These statements are based on various
assumptions and on the current expectations of KORE's management.
These forward-looking statements are provided for illustrative
purposes only and are not intended to serve as and must not be
relied on by any investor or other person as, a guarantee, an
assurance, a prediction or a definitive statement of fact or
probability. Actual events and circumstances are difficult or
impossible to predict and will differ from assumptions. Many actual
events and circumstances are beyond the control of KORE. These
forward-looking statements are subject to a number of risks and
uncertainties, including general economic, financial, legal,
political and business conditions and changes in domestic and
foreign markets; the potential effects of COVID-19; risks related
to the rollout of KORE's business and the timing of expected
business milestones; risks relating to the integration of KORE's
acquired companies, including the acquisition of Twilio's IoT
business, changes in the assumptions underlying KORE's expectations
regarding its future business; our ability to negotiate and sign a
definitive contract with a customer in our sales funnel; our
ability to realize some or all of the TCV of customer contracts as
revenue, including any contractual options available to customers
or contractual periods that are subject to termination for
convenience provisions; the effects of competition on KORE's future
business; and the outcome of judicial proceedings to which KORE is,
or may become a party. If the risks materialize or assumptions
prove incorrect, actual results could differ materially from the
results implied by these forward-looking statements. There may be
additional risks that KORE presently does not know or that KORE
currently believes are immaterial that could also cause actual
results to differ materially from those contained in the
forward-looking statements. In addition, forward-looking statements
reflect KORE's expectations, plans or forecasts of future events
and views as of the date of this press release. KORE anticipates
that subsequent events and developments will cause these
assessments to change. However, while KORE may elect to update
these forward-looking statements at some point in the future, KORE
specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as
representing KORE's assessments as of any date subsequent to the
date of this press release. Accordingly, undue reliance should not
be placed upon the forward-looking statements.
1 See "Non-GAAP Financial
Measures" and "Reconciliation of Net Loss to EBITDA to Adjusted
EBITDA" below for more information.
|
2 See "Key Metrics" below
for definitions.
|
3 See "Key Metrics" below
for definitions.
|
4 See "Key Metrics" below
for definitions.
|
|
KORE Media Contact:
Carla
Deisenroth
Vice President, Strategy &Marketing
cdeisenroth@korewireless.com
(248) 982-2759
KORE Investor Contact:
David
Freund
Manager, M&A
dfreund@korewireless.com
(210) 254-2470
KORE GROUP HOLDINGS,
INC. RECONCILIATION OF NET LOSS TO ADJUSTED
EBITDA UNAUDITED
|
|
|
For the Quarter
Ended
|
|
For the Year
Ended
|
(in
thousands)
|
December 31,
2023
|
|
December 31,
2022
|
|
December 31,
2023
|
|
December 31,
2022
|
Net
loss
|
$(33,692)
|
|
$(69,561)
|
|
$(167,042)
|
|
$(106,200)
|
Income tax
benefit
|
(201)
|
|
(4,133)
|
|
(4,158)
|
|
(10,417)
|
Interest expense,
net
|
11,463
|
|
9,243
|
|
42,680
|
|
31,371
|
Depreciation and
amortization
|
15,269
|
|
13,883
|
|
58,363
|
|
54,499
|
EBITDA
|
$(7,161)
|
|
$(50,568)
|
|
$(70,157)
|
|
$(30,747)
|
Goodwill impairment
loss
|
—
|
|
58,074
|
|
78,257
|
|
58,074
|
Change in fair value
of warrant liability
|
2,598
|
|
—
|
|
2,584
|
|
(254)
|
Loss on debt
extinguishment
|
6,436
|
|
—
|
|
6,436
|
|
—
|
Transformation
expenses
|
1,190
|
|
2,376
|
|
6,624
|
|
8,302
|
Acquisition
costs
|
—
|
|
—
|
|
1,776
|
|
1,400
|
Integration-related
restructuring costs
|
9,786
|
|
4,526
|
|
16,532
|
|
14,815
|
Stock-based
compensation
|
2,241
|
|
2,725
|
|
11,251
|
|
10,296
|
Foreign currency
(gain) loss
|
(1,197)
|
|
(1,549)
|
|
(182)
|
|
4
|
Other
(1)
|
1,518
|
|
73
|
|
2,429
|
|
946
|
Adjusted
EBITDA
|
$15,411
|
|
$15,657
|
|
$55,550
|
|
$62,835
|
|
(1) "Other" adjustments are
comprised of adjustments for certain indirect or non-income based
taxes.
|
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