KORE Group Holdings, Inc. Q4 FY2023 earnings call

Management Statement and Operational Highlights

• Key Announcements: Launched eSIM-powered medical alert device with Medical Guardian, received Gartner recognition as a Managed IoT Connectivity Services Worldwide Leader, and landed a $26 million TCV Connected Health Telemetry Solution win.
• Financial Results: Fourth quarter revenue $72.4 million, up 16% y-o-y. Total connections at end of Q4 were 18.5 million. DBNER for 12 months ended Dec 31, 2023 was 96%.
• Sales Pipeline: As of Dec 31, 2023, over 1,600 opportunities with estimated TCV ~$545 million. Closed won TCV in Q4 was $28 million, YTD $115 million.
• Customer Wins: Grew wallet share with real estate provider, cross-sell with homebuilder, global network choice, and vehicle/asset tracking provider.

Segment Performance

• IoT Connectivity: Fourth quarter revenue was $55.3 million, up 27% year-over-year, representing 76% of total revenue. Organically, it grew in the mid-single digits. Gross margin was 58.6%, down 650 basis points due to inclusion of lower-margin Twilio IoT revenue and year-end revenue provisions.
• IoT Solutions: Fourth quarter revenue was $17.1 million, down 10% year-over-year, representing 24% of total revenue. Gross margin was 33.2%, up 450 basis points due to lower hardware mix. This decline was due to customer deferrals, including from the largest customer.

Guidance

• 2024 Outlook: Revenue expected between $300 million and $305 million, adjusted EBITDA between $64 million and $66 million. Q1 2024 adjusted EBITDA expected ~$1.5 million above Q1 2023. Focus on high-margin IoT connectivity, reduced reliance on low-margin hardware, and improved pipeline quality.

Risks

• Deferrals: Customer order deferrals, including from largest customer, impacted revenue. Delays in remote patient monitoring and clinical drug trial deployments.
• Macro Uncertainty: Impact of macroeconomic conditions on customer spending and inventory management.

Question and Answer

Q: Dive into 2024 outlook, ARPU, TCV to ARR A: 2G/3G sunsets behind, volume growth returning, ARPU stabilized, TCV converting to ARR with higher recurring revenue from connectivity.

Q: Focus on higher-end hardware, IoT market view A: Reduced lower-margin hardware, IoT market accelerating with eSIM growth, edge compute, 5G maturation.

Q: Deferrals, drug trials A: Deferrals due to inventory management, healthcare trials delayed by resource allocation, expected to normalize.