KORE

Greetings, and welcome to the KORE Group Holdings, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Vik Vijayvergiya, Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you, operator. On today's call, we will refer to the third quarter 2025 earnings presentation which will be helpful to follow along with as well as the press release filed this afternoon that details the company's third quarter 2025 results. Both of these can be found on our Investor Relations page at ir.korewireless.com. Finally, a recording of the call will be available in the Investors section of the company's website later today. The company encourages you to review the safe harbor statements, risk factors and other disclaimers contained on this slide and today's press release as well as in the company's filings with the Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that it will be discussing non-GAAP financial information on this call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results and the reconciliation tables provided in today's earnings release and presentation. I'll now turn the call over to Ron Totton, the company's President and Chief Executive Officer.

Thank you, Vik, and good afternoon, everyone. For today's call, I'll provide an update on the company's business highlights for the third quarter and then turn the call over to Anthony Bellomo, the company's CFO, to go through the financial results. As we look at our results for the third quarter, we delivered steadily improving operating performance with solid growth and profitability, while revenue held steady. Our revenue for the quarter was $68.7 million. Notably, our connectivity revenue increased 1.7% over Q2 2025, our second consecutive quarter of strong connectivity sequential growth. Adjusted EBITDA rose by 12% or $1.5 million to $14.5 million from Q3 2024, as we stay focused on operational excellence and profitability. Net loss also improved by $6.7 million due to the improved adjusted EBITDA, along with the tax benefit from recently enacted U.S. legislation. Now let's turn to a critical measure of our financial health and operational discipline, our cash flow. In the third quarter, we generated $1.1 million in cash from operations while our free cash flow improved $1.1 million over the same period last year. The steady improvement in our free cash flow profile is a direct result of our disciplined execution and our commitment to building a resilient and profitable business. Our strategy is centered on our 5-pillar value creation plan, and this quarter's results demonstrate that plan in action. On Slide 7, you can see clear tangible proof points on how our focused execution is translating into progress across the entire business. At the heart of our strategy is profitable growth and this quarter, we delivered driving a 12% increase in adjusted EBITDA. This financial discipline is complemented by strong commercial momentum as we secured $11.3 million in new and expansion eARR and grew our total connections to over 20.5 million. This growth is fueled by our commitment to both product innovation and customer intimacy. This quarter, we launched KORE One, our unified customer platform and we completed a limited release of a new connectivity offering, providing proprietary automated switching and enhanced network resilience. With investments in our products, platform and infrastructure and with the launch of a new AI assistant KORE we've seen a greater than 50% reduction in support tickets while continuing to improve our customer E-score. It is this combination of superior products and deep partnership that differentiates us in the market and fuels our sales momentum. Underpinning all of this is our relentless drive for operational excellence powered by our winning team. We're becoming a leaner, more agile company by executing on our facility rationalization plan and aggressively deploying AI tools to boost productivity. Simultaneously, we are investing in our people, launching our internal AI evangelist program and new development tools to build a culture of accountability and continuous improvement. Now let's dive deeper into our KORE IoT Connectivity business on Slide 8. The foundational metric for our recurring revenue model is our connection base, which continued its strong, steady growth. This quarter, we grew our total connections by 9% year-over-year to surpass 20.5 million. This is a direct result of our ability to win new logos and expand our share of wallet with existing customers. Turning now to Slide 9, which illustrates our sales momentum in the forward-looking health of our business. We closed $11.3 million in new eARR this quarter. This is a direct result of our sales team's success in converting opportunities in the committed recurring revenue. This success is well balanced, coming from both winning new logos and expanding our relationship with existing customers and validates our land-and-expand strategy. And looking at our total pipeline, we closed at a healthy $80.3 million in eARR which, as a reminder, is purely connectivity-related opportunities. Our solid eARR closed one and healthy pipeline gives us strong visibility and a growing degree of confidence in our ability to deliver sustained, predictable revenue growth into the future. As we have done previously, here are just four examples from the quarter that showcase how we are winning in the marketplace, highlighting our unique value proposition. First, a major win in fleet management with a leading provider who needed true multi-carrier capabilities and superior economics with our Super SIM technology. But just as importantly, they chose us because we acted as a true strategic partner, building a strong, responsive relationship at both the executive and technical levels. Next, we secured an exciting innovator in the anti-theft space. For their solution to work, connectivity must be flawless. They chose our Super SIM for its resilience and reliability enabling them to remotely access devices for GPS tracking and video transmission across different networks. This is a mission-critical application where good enough connectivity simply isn't an option. Our third win highlights our leadership in the heavy regulated connected health space, a global health care leader selected KORE for their medical technologies initiative. They chose us for our deep expertise our proven compliance framework, including HIPAA and ISO certifications and our ability to provide a complete single vendor solution for hardware, logistics and global connectivity. Finally, I mentioned a win with a fast-growing AI-powered telematics company where they required high reliability for a video telematics and in-cabin sensing platform. While competitors offered lower cost, we demonstrated that the superior reliability, performance and long-term quality of our native SIM technology provided far greater value. They understood that for a mission-critical application, total cost of ownership and reliability are what truly matter. The common thread connecting these diverse wins is clear. These market leaders required more than just connectivity. They needed a global and strategic partner to solve complex IoT challenges at scale. Our ability to deliver resilient technology navigate highly regulated industries and provide a complete end-to-end service are our differentiators. This is why we continue to win marquee customers and it is the engine behind our sustained growth. And now I'll turn the call over to Anthony to cover the financials in more detail.

Thanks, Ron, and thanks for those joining us this evening for our third quarter results. Total revenue for the third quarter was approximately flat year-over-year to $68.7 million. Breaking revenue down by business lines, IoT Connectivity revenue was flat at $56.7 million. Most notably, IoT Connectivity revenue showed sequential quarter-over-quarter growth of 1.7%, which followed the second quarter sequential growth of 3.2%. This sequential growth is a clear indication that our transformation is producing results. IoT Solutions revenue was down slightly to the prior year at $11.9 million, driven primarily by timing of orders from customers. Overall, non-GAAP gross margin in Q3 2025 was 55.2%, down 147 basis points from the same quarter of the prior year. By business line, IoT Connectivity non-GAAP gross margin was down to 59.6% from 60.9% and IoT Solutions non-GAAP gross margin was down to 34.3% from 37% due to revenue mix. Average revenue per user per month or ARPU for the current quarter was $0.94 compared to $1.01 in Q3 2024. The decrease in ARPU year-over-year was due to the recent additions to total connections coming from lower ARPU use cases. On a sequential basis, ARPU was unchanged from Q2 2025. Operating expenses in the third quarter were $42.2 million, a decrease of $1.7 million compared to Q3 2024 due to cost savings from restructuring actions taken over the last 12 months. Adjusted EBITDA in the third quarter was $14.5 million, an increase of $1.5 million or 12% compared to the prior year. The $1.5 million increase in adjusted EBITDA was primarily attributable to lower operating expenses as discussed. Net loss in the third quarter was $12.7 million compared to $19.4 million in the prior year. The decrease in our net loss was due to a tax recovery as the result of recent U.S. tax legislation as well as the same factors that drove the improvement in adjusted EBITDA as described above. Finally, moving to cash flows. Cash provided by operations in the third quarter was $1.1 million, approximately flat with the prior year period. Free cash flow, measured by cash provided by operations, less cash used in investing activities improved by $1.1 million to negative $1.1 million in Q3 2025 compared to the prior year quarter due to our lower level of capitalized expenditures. As of September 30, 2025, cash and restricted cash was $19.6 million. In closing, our solid third quarter performance is evidence that the company's transformation has begun to take hold. And with that, I'll pass it back to you, Ron.

Thank you, Anthony. As you may know, we recently announced that KORE received a letter from two existing investors in the company, Searchlight Capital Partners and Abry Partners on behalf of each of their affiliated funds. The letter indicated an interest in entering discussions to acquire all of KORE's common stock, not already held by Searchlight and Abry. In addition, KORE's Board of Directors has formed a special committee to review, evaluate and negotiate a potential strategic transaction and any alternative. The potential range and timing of outcomes from the strategic review process, make it difficult to continue to provide an outlook that would meaningfully represent the range of expected outcomes. As a result, the company is suspending guidance for the remainder of fiscal year 2025. With that said, I want to emphasize we continue with business as usual with full attention on delivering innovation and service to our customers and working closely with our partners. I would like to express my deep appreciation and gratitude for our global KORE team. You've demonstrated an incredible focus on execution and innovation, not only by securing key wins but by doing so with a discipline that strengthens our entire business. I'm proud of the work you do every day to serve our customers and move our company forward. In closing, overall, we had a solid quarter. We improved our profitability, produced the second sequential quarter of strong connectivity revenue growth and continue to stay focused on managing operating expenses. Thank you, everyone, for joining today's earnings call. We look forward to updating you next quarter on our progress in the fourth quarter of 2025 and our full year results. Have a good evening. Thank you.

This concludes today's conference. You may disconnect your lines at this time.

Greetings, and welcome to the KORE Group Holdings Second Quarter 2025 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, Vik Vijayvergiya, Vice President, Investor Relations and Corporate Development. Thank you. You may begin.

Thank you, operator. On today's call, we will refer to the second quarter 2025 earnings presentation, which will be helpful to follow along with as well as the press release filed this afternoon that details the company's second quarter 2025 results. Both of these can be found on our Investor Relations page at ir.korewireless.com. Finally, a recording of the call will be available in the Investors section of the company's website later today. The company encourages you to review the safe harbor statements, risk factors and other disclaimers contained on this slide and today's press release as well as in the company's filings with the Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that it will be discussing non-GAAP financial information on this call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or U.S. GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. I'll now turn the call over to Ron Totton, the company's President and Chief Executive Officer.

Thank you, Vik, and good afternoon, everyone. Before we begin, I'd like to take a moment to introduce our new Chief Financial Officer, Anthony Bellomo. He is a seasoned financial leader with an understanding of our industry and a successful track record of finance operations, strategic financial planning and capital allocation. We are confident that his expertise will be invaluable as we continue to execute on our growth strategy and deliver long-term value for our shareholders. I'm excited to have him as part of our leadership team as he has hit the ground running, and I look forward to the contributions he will make. For today's call, I'll provide an update on the company's business highlights for the second quarter and then turn the call over to Anthony to go through the financial results, after which I will share our current view on the financial guidance for 2025 before turning over the call to the operator for Q&A. I'm excited to share our results for the second quarter. First, we delivered steadily improving operating performance with solid growth in both revenue and profitability. This is the result of our relentless focus on execution and our commitment to driving profitable growth. Our total revenue for the quarter grew to $71.3 million, an increase of $3.4 million over the same period last year. This upward trend is a direct result of our growing number of connections and key customer wins. Next and just as important is our profitability. And while we had a substantial improvement in net profit, more importantly, our adjusted EBITDA rose by $5.3 million to reach $16.7 million. This demonstrates that we are not just growing, but we are growing profitably and our focus on operational excellence is paying off. Next, I want to highlight what I believe is one of the most important indicators of our company's health, our improvement in cash flow and in particular, our free cash flow. This quarter, we generated $1.6 million in positive free cash flow, marking our third consecutive quarter of doing so. This sustained cash generation strengthens our balance sheet, reduces our reliance on external capital and gives us the financial flexibility to strategically reinvest in our business to accelerate our leadership position. In summary, the financial narrative of this quarter is clear. We are delivering consistent revenue growth, improvements in profitability and generating sustainable free cash flow. As I mentioned previously, our execution is guided by our 5-pillar value creation plan. This is our blueprint for building a world-class company. And on this slide, you can see tangible proof of the progress we're making across every pillar. Let's start with profitable growth. We've delivered 3 straight quarters of positive cash flow, crossed the 20 million connection milestone while improving our IoT Solutions gross margin. This is the core of our strategy to grow in a smart, sustainable and profitable way. That growth is fueled by product innovation. In a fast-moving industry like ours, standing still is not an option. We're leading the way with our Super SIM offerings and preparing our customers for the future with SGP.32 readiness. Our wins in the highly regulated connected health space are a direct result of this forward-thinking approach, proving that our innovation is solving real-world challenges for our customers. And this all comes together in service of our most important pillar, customer intimacy. Our goal is to be loved by our customers and to be the easiest company to work with in the IoT industry. We're unifying the customer experience on our KORE One platform and have introduced KOREY, an AI-powered live assistant to provide instant customer support. We are constantly listening to our customers and launching enhancements to make managing their IoT deployments simpler and more intuitive. In our pillar of operational excellence, we're continuously strengthening our KORE operations to support our scale. This quarter, we've made key infrastructure and technology upgrades and launched an enhanced customer support process to serve our customers better and faster. Furthermore, we are embracing the future by deploying 8 distinct AI initiatives across the company aimed at enhancing everything from customer experience, revenue growth as well as our own internal efficiency. Of course, none of this would be possible without a winning team. We're making strategic investments in our people, the heart of KORE. Through initiatives like our values relaunch and new learning and development and recognition programs, we're building a culture of excellence and empowering our team to do their best work. As you can see, our progress is balanced and comprehensive. This is the KORE value creation plan in action, and it is the engine that will continue to drive our success. Diving a bit deeper into our KORE business, this slide clearly illustrates steady foundational growth in our IoT Connectivity segment. The key metric here is our total connections, which grew by a robust 8% year-over-year to surpass $20.1 million. This is the engine of our recurring revenue model and its growth is a testament to our ability to both win new customers and expand the share of wallet within our existing customer base. Naturally, this healthy growth in connections translates directly to our top line, driving the steady increase in our IoT Connectivity revenue. While our results are strong, our sales momentum is what gives us such confidence in our future. It shows the health of our sales engine, which we measure in estimated annual recurring revenue or eARR. This is our forward-looking metric for new expected recurring revenue. There are 2 key stories here. First, our total pipeline of opportunities grew to $84.6 million this quarter. This is the fuel for our future growth. And critically, this increase is being driven by new logos, which tells us that our value proposition is resonating in the market, and we are successfully capturing new demand. Second, we converted $10.2 million of that pipeline into closed won eARR. This is brand-new committed annual recurring revenue that will layer into our financials over the coming year. What's more, this success is balanced. We are winning new logos while also successfully expanding our relationships with existing customers, which validates our account penetration strategy. This gives us visibility and a growing degree of confidence in our ability to deliver sustained, predictable revenue growth well into the future. The numbers and graphs we just reviewed are important, but this slide shows how we are achieving them. This is the story behind the numbers. These 4 recent wins are excellent examples of our strategy in action and why customers are choosing KORE. First, with a leading AI-driven security provider. We won by acting as a true strategic partner and leveraged our deep OEM relationships and technical expertise to help them navigate a complex competitive environment and accelerate their time to market. This is a perfect example of how we provide value far beyond our connectivity. Next, a win with a major telematics hardware provider. This is a story of technological leadership. We solved their critical coverage challenges with our multi-carrier Super SIM, provided advanced VPN capabilities to secure their data and position them for the future with our SGP.32 solutions. According to this customer, we won because our technology is simply more powerful and more flexible than the competition. The win with a global virtual fence provider came down to product reliability. Our OmniSIM reach delivered performance so reliable that the customer described it as it just works under all circumstances, which is the highest praise you can get in the world of IoT. It demonstrates the power of our global roaming capabilities and strong carrier partnerships. And finally, I want to highlight another win in the Connected Health space for a remote patient monitoring customer. For this customer, we helped eliminate the complexity of managing multiple carriers through our single SIM, multi-carrier solution. Our unified approach was critical given the work requirements with major health care systems. Customers aren't just buying connectivity. They're choosing KORE for our strategic expertise, our superior technology, our global reliability and our IoT managed services. This is how we are winning, and this is why our pipeline continues to grow. And now I will turn the call over to Anthony to cover the financials in more detail.

Thanks, Ron, and thanks to those joining us this evening for our second quarter results. Total revenue for the second quarter increased $3.4 million or approximately 5% year-over-year to $71.3 million. Breaking revenue down by business lines, IoT Connectivity revenue increased 1% to $56.1 million due to our increased number of connections. IoT Solutions revenue increased 25% to $15.2 million, driven by strong sales of connectivity-enabling hardware and services. Overall, non-GAAP gross margin in Q2 2025 was 56.9% with the second quarter of the prior year. By business line, non-GAAP IoT Connectivity gross margin was down slightly to 60% from 60.9% in the prior year due to the mix of revenue. Non-GAAP IoT Solutions gross margin was up 682 basis points year-over-year to 45.3%, primarily due to certain high-margin sales in the second quarter of 2025. We expect non-GAAP IoT Solutions gross margin percentage to return to historical averages in the future. Total connections at the end of the second quarter were 20.1 million, an increase of 1.5 million year-over-year. Average revenue per user per month, or ARPU, for the current quarter was $0.94 compared to $1 in Q2 2024. The decrease in ARPU year-over-year was due to the recent additions to connections coming from lower ARPU use cases. DBNER for the 12 months ended June 30, 2025, was 99% compared with 92% in the prior year. The increase in DBNER was mainly due to the stabilization of revenue over the past 12 months versus the previous year. As a reminder, DBNER is similar to same-store sales as it measures the growth of existing customers in the trailing 12 months compared to the same customer cohort in the year ago period. Operating expenses in the second quarter were $44.6 million, a decrease of $70.8 million compared to Q2 2024. Included in the second quarter of 2024 is a noncash goodwill impairment charge of $65.9 million. Excluding this charge, operating expenses decreased by $4.9 million, largely due to a foreign exchange gain of $3.5 million in the second quarter of 2025 and savings from restructuring actions taken in the last 12 months. This was partially offset by a $2 million decrease in the capitalization of internal labor. Net loss in the second quarter was $16.9 million compared to $83.6 million in the prior year. The decrease in our net loss of $66.7 million year-over-year was primarily attributable to the $65.9 million goodwill impairment in Q2 2024, along with the other factors previously discussed. In addition, we recorded other income of $3.8 million in Q2 2025, primarily due to other income from an employer tax credit related to prior years. Adjusted EBITDA in the second quarter was $16.7 million, an increase of $5.3 million or 46% compared to the prior year. The $5.3 million increase in adjusted EBITDA was primarily attributable to lower operating expenses due to stronger expense management, increase in other income as well as stronger gross profit due to higher revenue levels as discussed above. Finally, moving to cash flows. Cash provided by operations in the second quarter was $4.1 million as compared to cash provided by operations of $4 million in Q2 2024. Free cash flow, measured by cash provided by operations less cash used in investing activities was positive $1.6 million in Q2 2025 compared to negative $0.1 million in the prior year quarter. Free cash flow was positive for the third consecutive quarter and is expected to continue to be positive for the rest of 2025. As of June 30, 2025, cash and restricted cash was $21.3 million (sic) [ $21 million ] compared to $22.6 million (sic) [ $22.3 million ] as of June 30, 2024. And with that, I'll pass it back to you, Ron.

Thank you, Anthony. Let's now look forward. On this slide, you'll see we are reiterating our full year guidance for 2025. Before I walk through the numbers, I want to frame them within the context of the broader market environment. The macro landscape is indeed complex. We're seeing some economic uncertainty globally and new tariffs are impacting the supply chains of some of our customers. However, KORE's business model is resilient, and we have very limited direct impact from these tariffs. Our focus remains on helping our clients navigate this environment with robust mission-critical connectivity and in some cases, the ability to source devices or components from alternative suppliers, helping them navigate several supply chain constraints. More broadly, the outlook for our industry remains incredibly strong. Independent analysts are consistently forecasting strong growth for the IoT market with CAGRs ranging from 9% to over 10.5% for the foreseeable future. It is a powerful secular growth trend, and KORE is perfectly positioned to capture this demand. Finally, we recognize the significant shifts happening in the tech landscape around AI adoption and workforce changes. Our approach is strategic and deliberate. As you saw in our value creation plan, we are proactively implementing AI to drive efficiency for our teams and accelerate business growth while simultaneously investing in our winning team pillar. We are building a company for the long term with a strong culture that embraces innovation. So it is with this full understanding of the opportunities and challenges that we reiterate our 2025 guidance. We expect revenue in the range of $288 million to $298 million. We expect adjusted EBITDA between $62 million and $67 million, representing a powerful 19% year-over-year growth at the midpoint. And underscoring our commitment to financial discipline, we project free cash flow between $10 million and $14 million. Our guidance is a direct reflection of the momentum you've seen today, the strength of our pipeline and the disciplined execution of our value creation plan. We are confident in our ability to deliver on these commitments and create significant value for our shareholders. Before we open the line for questions, I want to build on a point I made last quarter about our team's determination. It's been very rewarding to see that same focus translate directly into the strong, consistent results we've shared with you today. The progress we're making is a direct reflection of our employees' hard work and their clear commitment to serving our customers. So to the entire KORE team, thank you. Your contributions are the foundation of our success, and they are genuinely appreciated. With that, we will now open the line for questions.

[Operator Instructions] and our first question comes from Jonnathan Navarrete with TD Cowen.

Good job on the quarter, guys. You mentioned that while you're not facing any tariff-related or very limited tariff-related headwinds that some of your clients are. And I'm just wondering, how are you guys gauging the possibility of some of your clients potentially pushing back some of the projects they're working on with you guys into 2026?

Yes. Thanks, Jonnathan. Yes, the -- I mean, I guess I would say that it's not a perfect science here. I think what we're finding is the demand from the customers isn't changing. In fact, I think if we look at where we were the same time last year, we're up definitely double digits in terms of SIM demand, for example. I think what we're seeing is they're coming to us with our expertise in the solutions business on helping them source alternative suppliers or, again, just looking into the supply chain and some of the challenges they're having. At this point, we're not seeing any projects canceled. And I think that in terms of our customers, the orders of new connections are strong. So we're really not seeing any customers or certainly any kind of trend that's evolving whereby projects are being canceled or certain verticals, there's softness. We haven't seen that as of yet. But again, it's still early days. I think our larger global customers are the ones that are -- that it's impacting most, which would be very obvious to everybody, right? And we're not seeing products being canceled or project delays and so forth. But thanks for the question.

Sure. And just one more on my end is any particular milestones that you guys are working in the back half of 2025 that are most critical to set up a stronger growth trajectory into 2026?

Yes, sure. Yes. I think for us, we talk in our value creation plan sort of our 5 pillars. And so I would say that our milestones and priorities are sort of directly kind of laid out there. To me, maybe just in terms of the ones that are top of mind for me, growth is, I would say, #1 priority in this case. So pipeline growth, growth and closed won eARR. We'd like to see connections pushing up past $21 million before the end of the year. And I'd say that would probably be the primary -- sort of primary where the focus is. I think we also have 3 fairly significant, what I'll call, tech-related projects that we want to conclude in the second half of the year, both in terms of product, but also infrastructure that are really important to support our growth. So those would probably be the ones that are top of mind.

And that's the end of the question-and-answer session. I'll now hand it back to Ron Totton for closing remarks.

Well, thank you, everyone, for joining today's earnings call. We look forward to updating you next quarter on our progress in the third quarter of 2025. Have a great night, and thank you for your time. Good night.

Thank you. And this concludes today's conference. All parties may disconnect. Have a good evening.