KORE Group Holdings, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Highlights: 2024 revenue was $286 million, adjusted EBITDA was $53.1 million. Connection growth driven by new and existing customers, recurring connectivity revenue up $24.5 million or 12%. IoT Solutions non-GAAP margin increased 900 basis points to 40%. Free cash flow in Q4 2024 was $1.6 million.
• AI Initiatives: In the second half of 2024, launched several AI projects including ServiceNow's Now Assist, GitHub's CodeAssist, and Microsoft Copilot for sales to drive efficiency and performance.
• 2025 Plans: Will invest more in AI based on results realized in 2024. Shift from TCV to EARR for better reporting of recurring revenue model.
• Key Wins: Secured wins in healthcare, electronics manufacturing, physical security, and GPS tracking, demonstrating solution strength and customer trust.
• Industry Trends: IoT market expected to grow rapidly, eSIM adoption accelerating, and GSMA's SGP.32 eSIM standard advancing cellular connectivity.

Segment Performance

• IoT Connectivity: Fourth quarter revenue was $56.5 million, accounting for 77% of Q4 revenue, up 2% year-over-year. Full-year IoT connectivity revenue was $226.9 million, representing 79% of total revenue, up 12% year-over-year. Non-GAAP IoT connectivity margin in Q4 2024 was 59.3%, up 300 basis points year-over-year. For the full year, non-GAAP IoT connectivity margin declined 130 basis points compared to the prior year.
• IoT Solutions: Fourth quarter revenue was $16.8 million, accounting for 23% of Q4 revenue, down 2% year-over-year. Full-year IoT Solutions revenue was $59.2 million, representing 21% of total revenue, down 20% year-over-year. Non-GAAP IoT Solutions margin in Q4 2024 was 48.1%, up 1,500 basis points year-over-year. For the full year, non-GAAP IoT Solutions margin was up 920 basis points to 40.2%.
• Connections and ARPU: Total connections at the end of the fourth quarter were $19.7 million, an increase of $1.2 million year-over-year. Average revenue per user per month (ARPU) for the current quarter was $0.97, compared to $0.99 in Q4 2023. DBNER for the 12 months ended December 31, 2024, was 95%, compared with 96% in the prior year.

Guidance

• Revenue for 2025 is expected to be in the range of $288 million to $298 million, representing 2% year-over-year growth.
• Adjusted EBITDA is expected to be in the range of $62 million to $67 million, a 20% year-over-year increase.
• Free cash flow is expected to be in the range of $10 million to $14 million, a significant 443% year-over-year improvement. Focus on profitable growth, gross margin expansion, and efficiency/automation across the business.

Risks

• Tariff Uncertainty: Evolving tariff policies could create uncertainty for customers, potentially impacting order volumes and investment timing.
• 10-K Filing Delay: 10-K filing delay in Q4 2024 due to audit items needing further documentation. Planning to be on time for Q1 2025 filings going forward.

Question and Answer Q: What were the drivers of connections and ARPU, and what should be modeled for Q1 and the rest of the year?

A: Big jump in connections came from low ARPU cases in the last months of Q4, driving down ARPU. Growth from other verticals like connected health, but low ARPU use cases had under $0.50 ARPU. Modeling for Q1 and rest of year should consider growth from other priority verticals but note low ARPU cohort impact.

Q: How to reconcile brisk demand with 2% revenue guidance?

A: Focus on profitable growth and rationalization of unprofitable customers/product lines. Tariff policies and exit of unprofitable contracts factor into guidance. Existing customer base with growing data usage also contributes, but some low ARPU use cases are part of growth.

Q: Cause of 10-K filing delay and future disclosures?

A: Delay due to audit items needing further documentation. Planning to be on time for Q1 2025 filings, no further delays anticipated.

Q: Balance sheet restructuring?

A: Open to conversations but focused on continuing business growth. Focused on making business better daily, open to ideas but currently focused on momentum built.

Q: IoT Solutions margin and OpEx normalization?

A: IoT Solutions margin expected to stay above 40%. OpEx next year expected to be in range of $27 million to $30 million, with reinvestment in profitable areas.

Q: ARR, connection growth, and product evolution with AI?

A: Moving to EARR from TCV. Connection growth mid to low single-digits with uncertainty from tariffs. AI feature sets used with customer data for better decision-making and revenue streams, and eSIM growth and multi-carrier solutions driving demand.

Q: Debt coverage targets?

A: No specific target, focused on current business. Plan to pay down debt with generated free cash flow and explore favorable credit options as credit profile improves.