Thanks, and welcome to the KORE Group Holdings second quarter earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Charley Brady, Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator. On today's call, we'll be referring to the second quarter 2023 earnings presentation that will be helpful to follow along with, as well as the press release filed this afternoon that details the company's second quarter 2023 results, both of which can be found on our Investor Relations page at ir.korewireless.com. Finally, our requiring of the call will be available on the Investors section of the company's website later today. Please note that this webcast includes forward-looking statements, statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate and similar expressions are forward-looking statements and are based on assumptions and beliefs as of 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 identifies 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 we'll 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 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 Romil Bahl, Kore's President and Chief Executive Officer.

Thank you, Charley. Good afternoon, everyone, and thank you for joining us today for our second quarter 2023 earnings call. With me is Paul Holtz, Kore's Chief Financial Officer. Before we get started, a warm welcome to our newest IoTers team, many of whom joined the Kore with the acquisition of Twilio's IoT business, and now let's get to the meat of our earnings call. As always, I'll start with a brief overview of the key events and announcements from the second quarter, and I will be followed by Paul, who will discuss our financial results. We will finish with a Q&A session. Slide four presents some key announcements from the second quarter. On June 1, we closed the acquisition of Twilio's IoT business, marking a key milestone in accelerating our journey to being the world's first IoT hyper-scaler. This acquisition, apart from providing us a world-class IoT connectivity product in Super SIM expands Kore's one-stop shop position by adding build to our deploy, manage and scale value proposition. Needless to say, we remain excited about the additional growth opportunities created by the combination of Kore and the Twilio IoT business. In May, we announced the launch of our preconfigured managed solution to offer retailers, restaurants and other multisite companies, high-bandwidth 5G cellular connectivity through fixed wireless access or FWA. Kore's FWA solution will allow customers to access high-speed Internet that has traditionally been available only through wireline applications. Retailers, restaurants and other consumer-facing companies are increasingly seeing the benefits of 5G solutions to support point-of-sale devices, digital ordering and integrating with third-party delivery services across multiple locations. This FWA solution positions Kore to attack a growing high-bandwidth use case and further expand our addressable market. As I'm sure you are all aware, ESG and sustainability have become important topics…

Thanks, Romil, and good afternoon, everyone. Turning to our results on slide six, second quarter revenue declined 2% year-over-year to $69.5 million, compared to $70.9 million in the second quarter of 2022 and did increase 5% sequentially from the first quarter of 2023. By segment, IoT connectivity revenue of $48.3 million, including one month of revenue from the Twilio IoT acquisition increased 8% year-over-year. Q2 2023 marked the first quarter sequentially in many years that IoT connectivity revenue was not affected by the 2G, 3G sunsets in the U.S. IoT connectivity revenue is forecasted to grow year-over-year and sequentially to the rest of 2023. Moving to IoT solutions, revenue declined 19% year-over-year to $21.3 million. The decline was again driven by the difficult year-over-year comparison, due to the LTE transition project revenue at our largest customer in the prior year. The LTE transition project concluded in the second quarter of 2022. So going forward, this will not impact the year-over-year quarterly comparison. Total gross margin in Q2 2023 was 54.4%, an increase of 180 basis points year-over-year. The second quarter marks the highest gross margin since Kore went public in the third quarter of 2021. IoT connectivity gross margin of 65.2% was down slightly year-over-year. IoT Connectivity gross margins for the last four quarters have remained stable in the 65% range, but will decline overall in the second-half of 2023, with the addition of the lower-margin IoT connectivity revenue from the Twilio IoT acquisition. The good news, is that, as Romil mentioned, margins from the Twilio IoT business are expected to improve slightly quicker than we thought throughout the rest of 2023. IoT solutions gross margins declined approximately 90 basis points year-over-year. The decline was mainly just due to the mix of hardware versus service rate. Total connections at the…

Thanks, Paul. As you've heard and to reiterate, with the second quarter complete, the difficult year-over-year revenue growth comparison from the LTE transition project at our largest customer is now behind us. As a result, we expect to generate year-over-year growth beginning in the third quarter, and further, we are on track to achieve double-digit revenue growth in 2024 as evidenced by our increasing global sales pipeline. Slide eight presents a snapshot of our global sales pipeline as of June 30, 2023. Our sales pipeline now includes almost 1,500 opportunities with an estimated potential total contract value, or TCV, of approximately $660 million. In the second quarter, we generated an incremental $32 million of closed one TCV, bringing the year to dig total to $60 million. We continue to progress towards exceeding the $102 million closed one TCV in 2022 and delivering a fifth consecutive year of TCV growth. As a reminder, the majority of sold TCV is recognized as revenue over four years, and it is important to note that the closed TCV figure is aggregated across all of our business lines, which have different durations of revenue recognition. For instance, IoT connectivity revenue tends to have a slower ramp and can go out beyond the four years we use for TCV calculations. While IoT managed services include both one-time revenue projects that are generally recognized in one to two years and recurring revenue usually recognized over three years. Slide nine showcases a few examples of our wins in the second quarter that contributed to the closed on one TCV of $32 million. These recent contract wins highlight the success of our growth strategy and demonstrate the expansion of new use cases for our products. Kore has continued to have success in increasing its wallet share at existing customers.…

We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is come from the line of Michael Latimore with Northland Capital Markets.

Hi, great. Thanks very much. The TCV funnel is very large, grew nicely. Does that include the Twilio business? Or is that organic?

That's actually organic, Mike. We really only kind of, I'll say, owned Twilio IoT business for a month in Q2, as you know, and so far, we're just going off even revenue recognition and so forth, so provided by the Twilio back office and so forth. So we haven't quite had a chance to consolidate everything. But hopefully, when we're speaking to you in mid-November about Q3, we'll have that done.

And what sort of use cases or applications are most pronounced in that funnel?

We're continuing to see just sort of an inexorable lift, Mike, in some of these high bandwidth use cases, a lot of fleet. We've seen the momentum since really the beginning of the year in fleet, and in fact, right at about 60% of the $32 million we closed in Q2 with fleet. So there's a lot of video telematics and higher bandwidth as people are continuing to look at more of that more AI at the edge, those kinds of things. But there's others, right? I mean you saw -- I suspect you saw a press release we put out on a large restaurant chain, and in fact, we had a follow-up win at that chain here that we announced in Q2. So there is a good momentum in FWA and the dollars add up quicker there, hence, the TCV sort of funnel growing.

Yes. Great, and obviously, you're going to -- you're expecting good year-over-year growth in the second-half. In the third quarter, do you think you will get back to year-over-year organic growth, kind of, ex- Twilio?

Yes, we certainly believe that to be the case despite what both Paul and I talked about around the pushbacks we're seeing from IoT managed services, net solutions that customers. But depending where all that falls out, we're still fairly confident this organic growth there, yes.

Great. Thanks a lot.

Thank you. Our next questions come from the line of Scott Searle with ROTH MKM. Please proceed with your questions.

Hey, good afternoon. Thanks for taking my question. Maybe to follow-up quickly on Mike's question. In terms of returning to organic growth in the third quarter, I'm not sure I heard a Twilio contribution number in the second quarter. I'm wondering if you could calibrate us on that front? Remind us how many employees also are coming on board as part of the transaction?

Yes, so Scott, we haven't disclosed any of all of that. It's so small and sort of generally kind of not material, but we did disclose this time, because we could, because we got account from them of their connection at the end of June, and of course, we had our own connections count. So you could see kind of a $2.9 million number there. Their ARPUs are right around ours. So I guess you could get a general idea of size from there, but it's just not something we've disclosed per se.

And then, Scott on the people we have to disclose, it's just a little bit over 50 people electing over. That will be in the Q2.

Right. Okay, great, and Romil, maybe to go back to the FWA opportunity. I'm wondering if you could dig into that a little bit more in detail. I'd like to understand if you guys are just doing the device management of it or are you doing the full managed service capability for that fixed wireless access? And I was wondering if you could also frame the opportunity there as well. I imagine it comes with much higher ARPUs. So I'd love to kind of get my hands around that and what's your broad-based expectations for that type of an end market or use case would be as we get into ’24, ‘25?

Yes, it's a great question, Scott, so the first thing I'll say is we're now gosh, about four years since we first started to sort of prioritize the general use case in this area. In those days, though, it was back up. Remember, it was like failover, right? It was like all right, when power fails, Wi-Fi fails, whatever, you can go to a cellular backup. Well, just in the scent four years or three years since we put our first kind of solution out there, we've grown by leaps and bounds in terms of just the bandwidth and the technology and what's possible and now people are talking about cellular as primary, right? We need to dig holes in the ground and put fixed lines and fiber into places when we can get the kind of speed we're getting on cellular as a primary. This particular solution that we talked about in the press release and then talked about -- highlighted here on the call [Technical Difficulty] easy consumption for those customers, and to your point, it includes hardware and connectivity, right? So it's a fully managed solution, a true definition of sort of as a service, and by the way, specifically supports 5G, right, and just basically enables businesses to cut the cord entirely just like we're cutting the cord on landlines into our homes, and it's -- yes, I mean it's got solid partnerships on the hardware side that we're going to market with.

Okay. Great, and lastly, if I could, looking out to 2024, it sounds like ending this year, there are some big opportunities that look like they're going to catalyze in the fourth quarter around some device deployments and product sales. It sounds like it's setting you up for a nice return to organic growth ex-Twilio going into the 2024 time period. So we're back to a 15%-plus kind of organic growth on IoT connectivity in '24? Or is it still a little bit early to be making that call? Thanks.

Yes, again, Scott, we will -- to the question that was just asked earlier on this call here, right? We are back to organic growth year-over-year in Q3. Obviously, the Twilio contribution, while smaller than we had hoped for a year ago, 1.5 years ago, when we first saw their forecasts and so on, will also contribute, right? And then some of this imbalance between Q3 and Q4, as Paul said, is customers that normally would have placed POs in sort of the May, June time frame for Q3, so said to us hey 90-day delay 120-day delay. So in theory, if all those come back in, that's moving revenue effectively from Q3 into Q4, right? And that's -- but if you looked at it regardless, even with that move, we should eat out organic growth in Q3, certainly Q4 should be sort of very, very good growth, and then yes, and hopefully, that continues and the sequential quarter streak continues and end. Now on the question of is next year, are we ready to talk about sort of 15% on connectivity. I'll stop short of saying that, I mean, again, we're bullish. You just saw an 8% type growth Q2 over Q1 on connectivity, which is very encouraging. So yes, are the 8s and 10s possible for sure how do we creep higher than that? How do we get to 15s and 20s. We need the economy and the macro to settle down, we need the supply chain issues to settle down. We need to see upward movement on ARPU, all of which we think will happen. We certainly think we can get there. I'll just stop short of promising it in 2024.

Great. Thank you, nice to see a return to growth.

Yes, thank you.

Thank you. Our next questions come from the line of Meta Marshall with Morgan Stanley. Please proceed with your questions.

Great, thanks. Maybe first question just on Twilio, it sounds -- I just wanted to get a sense of how is it different now that you've actually been able to get your hands on it and kind of see the organization and were you able to kind of hold on to some of key engineering talent that comes over that you're most excited about?

Yes. Thanks, Meta. Look, I think the first thing I'll say is the strategic rationale for the deal absolutely remains in place in terms of how excited we're all about the engineering talent that you mentioned. Much of the Kore network team is actually in Germany, was able to visit with them, have a really productive visit -- and so very much looking forward to as early here as this quarter is seeing sort of a combined next-generation product road map to seeing an accelerated plan of building out that digital front end, which clearly these guys just born digital, we're easily the best digital consumption of IoT, sort of, business model in the market, and we're looking forward to having them help us build this year at lower cost, obviously, with cost savings that we talked about when we did the acquisition. So I would say all of those sort of strategic rationale points stay very much in place. The cultural fit point is also very encouraged. I mean, as I alluded to in Germany, but also in the U.K., here in the United States. We've had excellent meetings with them. In some respects, the integration is going sort of better and faster than we could have hoped including, by the way, on the gross margin line, which is kind of nice to get really confident that we can get to breakeven here even this year sort of in the fourth quarter, and obviously, our promise of being accretive next year, therefore, becomes completely de-risked, right? So the only thing that I would say that if you had to scratch for kind of a negative is that, again, alluding to my comment 18 months ago when we saw the plan and what they were supposed to be at, they're obviously sort of far off that smaller entity in terms of revenue today and even the growth rate is tampered than we were hoping and sort of getting to what the plan said. Some of that, look, it's just -- it's 12 and 18 months of distraction for this team when obviously, they sort of have heard rumors first and then confirmation that they were not strategic to the future of Twilio, people start looking for jobs. They've had attrition, especially in their sales force, really, very hard to sell with our sales force. So yes, they've come in smaller, but we've embraced the challenge. Our new CRO is all over working with the Twilio leaders on, I'll say, rebuilding the momentum that we know they can have and can be accretive to our growth.

Great, thanks. And maybe just a follow-up question. If you could just kind of remind us of how much of the solutions business is kind of what you would deem more recurring versus project base?

Yes, it is rough 60-40. Again, it depends it will vary each quarter, but that 60% has been pretty consistent on customers, who either order annually, so one PO or order on a quarterly basis. But yes, it’s 60-40.

Sort of, programmatically recurring, as we call it, yes.

Got it, okay, perfect, thanks so much guys.

Thank you, Meta. [Indiscernible] operator?

Yes, I’m here. I apologize, mike. Computer froze. Thank you. Our next line comes from the line of Matt Niknam with Deutsche Bank. Please proceed with your questions.

Hey, guys. Thanks for taking the question. So maybe first on adjusted EBITDA, so I think year-to-date, you've generated a little under $28 million. You're reaffirming the guide for 60% to 62% for the year. I'm just wondering, as we think about just -- initially, I think the expectation was the Twilio deal would be somewhat dilutive upfront, so I'm just wondering, you mentioned maybe a little bit more optimism there around the profitability prospects, so if you can maybe help us think about the bridge in the second-half of the year to hitting the adjusted EBITDA target? And maybe secondarily, as you think about the IoT Solutions business, I'm just wondering if you can maybe help quantify the headwind from the pushout of orders, and is the assumption then that 3Q still remains challenged and the deferred orders show up in 4Q? Thanks.

Okay, so I'll take the profitability one. So yes, year-to-date, we've done around 27%, so 13%-ish in the first quarter and 14.2%. Just remember, Matt, that the first-half of the year is really front-end loaded from a cost perspective, and going back to Q1, we did have additional costs from the audit and so forth there, so you -- we typically do see EBITDA grow throughout the year as we are growing. But to your point, we originally had Twilio to be accretive right out of the get-go, which for June, they were negative, but we're seeing that improvement, and as Romil mentioned by Q4, we have a good chance of them being breakeven and then obviously then positive into 2024, but really, the bridge to get to the 60%, 62% is where we are from a revenue perspective and growth with a lot of the growth coming from the connectivity business at the higher margins in Q4 being where we expect all the additional solutions revenue come back in, which will make it the biggest quarter of the year will get us to that 60% to 62% range. We had also built in like I had mentioned some incremental headcount in the back end for growth and so forth. And right now, we'll take a look at that and monitor that as we see what goes on with the solution pushback, but again, that was a little bit of a buffer that we can use if needed. Sorry, and I forget.

Then there was a question about just the confidence around the push -- well, quantifying the amount of pushback and then how much should back up in Q4?

Yes, so we saw about $1 million starting in Q2 at the end mainly in June here at the end, so for the back half of the year, the number between Q3 and Q4, we estimate between $5 million and $10 million, so again, depending on timing, where that is, we do expect most of that to be in the back end in Q4.

Right, so to be clear between $5 million and $10 million we’ll move, we hope only from Q3 to Q4.

So we're assuming -- just to be clear, Romil fall, so June was about $1 million. You're assuming that this kind of accumulation in 3Q and falls into 4Q. That gets you to that $50 million?

Yes. Correct. That's right.

Okay, great. Thank you.

Thank you.

Thank you. [Operator Instructions] I'm showing no further questions at this time. I would like to turn the floor back over to Romil Bahl for closing comments.

Thank you very much for your attention here today on our second quarter call, we certainly appreciate you taking the time to listen in and to ask your questions. We look forward to updating you in mid-November with our third quarter results. Good-bye.

Thanks.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and enjoy the rest of your evening.