Release Date: May 15, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kore Group Holdings Inc (KORE, Financial) reported two consecutive quarters of positive free cash flow, indicating improved financial health.
- The company achieved an 8% increase in total connections, nearing 20 million, which is expected to drive future revenue growth.
- KORE's restructuring efforts resulted in a $7.6 million decrease in operating expenses compared to the same period last year.
- The company has shifted to using estimated annual recurring revenue (eARR) as a key performance metric, which better illustrates the recurring revenue business model.
- KORE secured several significant new contracts, including a partnership with Winnebago for their next-generation RV platform, which is expected to generate substantial recurring revenue.
Negative Points
- First quarter revenue decreased by $3.9 million, or approximately 5% year-over-year, to $72.1 million.
- IoT Connectivity revenue declined by approximately 7% year-over-year, primarily due to a tough comparison with the previous year.
- Average revenue per user (ARPU) decreased from $1.05 in Q1 2024 to $0.91 in Q1 2025, partly due to the addition of lower ARPU use cases.
- Net loss for the first quarter was $14.9 million, although this was an improvement from the previous year's loss of $17.6 million.
- The company exited low-margin products, which contributed to a decline in revenue, although this was part of a strategy to improve overall profitability.
Q & A Highlights
Q: Can you provide historical numbers and comparisons for eARR, and how are sales cycles affected by the current macroeconomic climate?
A: We don't have historical comps for eARR as it focuses solely on connectivity and recurring revenue, unlike TCV, which included hardware. Sales cycles have not elongated; in fact, some have compressed due to tariff uncertainties, leading to accelerated buying from customers. – Ronald Totton, CEO
Q: What is the normalized OpEx number we should consider, and is the 40% product gross margin a new norm?
A: The normalized OpEx is around $25 million after adjustments. The 40% gross margin for solutions is expected to continue, driven by exiting lower-margin hardware business. – Paul Holtz, CFO
Q: With ARPU decreasing, will this trend continue, and how do you feel about achieving double-digit growth in 2026?
A: ARPU may see pressure due to lower ARPU use cases, but we aim to maintain around $0.91. For 2026, while it's early, we are optimistic about heading towards double-digit growth, driven by growing connections and recurring revenue. – Ronald Totton, CEO
Q: How did KORE win the Winnebago business, and when will it turn into revenue?
A: Winnebago was a competitive win through a partner, with a sales cycle of about 9 months. It includes a minimum revenue commitment, with growth expected as vehicles are sold and used. – Ronald Totton, CEO
Q: How is the demand environment in healthcare, and does Medicare/Medicaid funding impact your business?
A: The funding changes do not affect us. We see strong growth in Connected Health, with new customer wins and increased penetration in existing accounts, making it a larger revenue and margin contributor. – Ronald Totton, CEO
Q: Are the four wins on slide 9 all new logos, and what is the balance between new and existing customer demand?
A: Three are new logos, and one is a new division within an existing customer. We estimate about 75% of demand comes from new logos, with existing customers expanding their footprint. – Ronald Totton, CEO
Q: What drives growth from existing customers, and how does it impact your pipeline?
A: Growth from existing customers often comes from consolidating vendors or new divisions, contributing to our pipeline. This complements our strategy of adding new logos to drive growth. – Paul Holtz, CFO
Q: How do you view the potential for growth in the Connected Health sector?
A: We see Connected Health as a significant growth area, with strong retention and new customer wins. The sector's innovative nature aligns well with our offerings, driving positive results despite macro challenges. – Ronald Totton, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
