Q2 2023 KORE Group Holdings Inc Earnings Call
Greetings and welcome to the core Group Holdings second quarter earnings Conference call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
You require operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to introduce your host Charley Brady Vice President of Investor Relations. Thank you you may begin.
Thank you operator.
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.
Each of which can be found on our Investor relations page at IR Dot core wireless dot com.
Finally.
Any of the call will be available on the investors section of the company's website later today. Please.
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 in this slide in todays press release as well as in the Companys 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.
<unk> does not undertake to publicly update or revise any forward looking statements. After this webcast the.
The company also notes that will be discussing non-GAAP financial information on this call.
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.
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 roll about the company's President and Chief Executive Officer.
Charlie Good afternoon, everyone and thank you for joining us today for our second quarter 2023 earnings call.
With me is Paul Hoelscher cores, Chief Financial Officer.
Before we get started a warm welcome to our newest Io tears, many of whom joined the core with the acquisition of Twilio as 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 1st we closed the acquisition of Trillium as Iot business, marking a key milestone in accelerating our journey to being the world's first Iot hyperscale.
This acquisition apart from providing us a world class Iot connectivity product and Super Syn <unk>.
Expands cores, one stop shop position by adding billed to our deploy manage and scale value proposition.
Needless to say, we remain excited about the additional growth opportunities created by the combination of core and the Twilio Iot business.
In May we announced the launch of our pre configured managed solution to offer retailers restaurants, and other multi sized companies high bandwidth <unk> cellular and connectivity through fixed wireless access or F. W. Eight.
Core's SWA 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 <unk> solutions to support point of sale devices.
Digital ordering and integrating with third party delivery services across multiple locations.
This SWA solution positions core to attack a growing high bandwidth to use case and further expand our addressable market.
And I'm sure you are all aware ESG and sustainability have become important topics for companies and investors.
With Iot increasingly playing a role in supporting ESG initiatives, we are seeing more opportunities where core can play a park aligning with our purpose statement Iot for good.
Along these lines in the second quarter core announced its participation in support of two sustainability initiatives.
We will provide scalable global Iot connectivity to a bio diversity sensor project conducted by AD Tech Company Syngenta.
Syngenta has biodiversity project is digitally connecting farmlands across the globe to provide farmers with analytics to AGM and adapting to climate change and improve and biodiversity to protect crops.
Last year Syngenta connected over 200 hectares of land and has a goal to connect 1 billion hectares over the next three years.
To further support sustainability and waste reduction core has launched an initiative to reduce the amount of plastic used in Sim card bodies by 50%.
In addition to cutting Sim card plastic waste by half this initiative with lower Sim card shipping costs by 50% and reduced course carbon footprint related to Sim cards by 16%.
Now, let's turn to our second quarter financial results and 2023 guidance on slide five.
Our second quarter results continued the momentum established in the first quarter with Q2 revenue of $69 $5 million, increasing sequentially from the first quarter by approximately 5%.
On a year over year basis revenue declined slightly by 2% primarily due to a difficult comparison to the second quarter of 'twenty, two which had revenue from <unk> customers and the LTE transition project at our largest customer.
Absent <unk> and LTE transition project revenue in 2022 second quarter 2023 revenue increased over 2% year over year.
Our 2023 second quarter was the last quarterly year over year comparison impacted by the LTE transition project revenue and the true organic growth of the company will be more evident going forward.
We have experienced some delays in Iot solutions revenue at a few customers. We continue to expect sequential quarterly revenue growth for the remainder of 2023 and <unk>.
Year over year growth beginning in the third quarter.
Gross margin increased 180 basis points year over year to 54, 4% and benefited from continuing carrier cost optimization and a lower mix of hardware revenue.
Second quarter 2023, adjusted EBITDA of $14 2 million.
Increased approximately 7% sequentially from the first quarter and adjusted EBITDA margin improved 30 basis points to 25% from 22%.
Compared to the second quarter of 2022, adjusted EBITDA declined approximately 15%.
We are reiterating our 2023 revenue and adjusted EBITDA guidance.
We expect revenue to grow in the low to mid teens, resulting in revenue in a range of $300 million to $310 million.
This guidance includes absorbing the $24 million in year over year headwinds from the <unk> and <unk> sunsets in the U S and the LTE transition project at our largest customer.
Somewhat offset by the partial year contribution of the Twilio Iot business acquisition.
Our reiterated guidance assumes that much of the Iot solutions revenue pushback that we started to see in the second quarter and we'll see in the third quarter will be made up in Q4.
We remain confident in our adjusted EBITDA guidance range of $60 million to $62 million and margin of approximately 20% as margins in the Twilio Iot business are improving slightly faster than we initially projected which should offset any potential impact from the revenue delays I mentioned.
With that I will now hand, the call over to Paul to cover the financials in more detail.
Paul Thanks, Paul 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 $79 million in the second quarter of 2022 and did increased 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 <unk> sunset in the U S.
Iot connectivity revenue is forecasted to grow year over year and sequentially for 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 comparisons.
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 <unk> went public in the third quarter of 2020.
Iot connectivity gross margin of 65, 2% was down slightly year over year.
Iot connectivity gross margins for the last four corners 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 on the Twilio Iot acquisition.
The good news is that as Rami mentioned margins from the Twilio Iot business are expected to improve slightly quicker than we thought throughout the rest of 2023.
Iot solutions gross margin declined approximately 90 basis points year over year. The decline was mainly just due to the mix of hardware versus service.
Total connections at the end of the second quarter were $18 5 million, including approximately $2 9 million connections from the acquisition of the Twilio Iot.
Excluding the Twilio Iot connections course organic connections increased by 400000 in the second quarter of 2020.
Dollar based net expansion rate or DBM here for the 12 months ended June 32023 was 99% compared to 114% in the prior year.
As a reminder, <unk> measures the growth from existing customers in the trailing 12 months compared to the same customer cohort in the year ago period, much like same store sales growth rate.
As I said on our last quarterly call with the anniversary of the DMT Diamond acquisition in the first quarter of this year. These customers are now included in the calculation.
The new customers on the Twilio Iot acquisition or not.
He began here year over year continues to be impacted by the LTE transition project revenue from our largest customer that began in June 2021.
In June 2022.
During this time period, our largest customers revenue more than doubled on this one time product.
If we exclude total revenue from our largest customer because of this significant nonrecurring events.
<unk> at the end of the quarter would have been 115% compared to 109% at the end of the second quarter of 2020.
Operating expenses, including depreciation and amortization in the second quarter were $47 4 million, an increase of $4 2 million or 10% compared to the same period last year.
The increase is attributed to an increase in head count related costs. The inclusion of the truly loyalty business stock based compensation and higher depreciation and amortization expense compared to Q2 2022 due to the DMT acquisition in the prior year.
Second quarter interest expense, including amortization of deferred financing fees increased year over year to $10 4 million versus $7 3 million in Q2 2022 due to the increased borrowing costs on our senior secured term loan.
Net loss in the second quarter was $19 5 million compared to $10 8 million in the same period in the prior year.
The year over year increase in net loss was due to increased operating expenses, which were partially attributed to the inclusion of the Twilio Iot head count.
Depreciation and amortization expense increased interest expense and a lower income tax benefit compared to the year ago.
Adjusted EBITDA in the second quarter was $14 2 million decline of $2 6 million or approximately 15% compared to the same period last year.
Our adjusted EBITDA margin in the second quarter was 25% down 320 basis points compared to the same period in the prior year. However.
However, we did experienced a 7% sequential improvement in adjusted EBITDA and a 30 basis point improvement in adjusted EBITDA margin from the first quarter of this year.
The year over year decline in adjusted EBITDA and adjusted EBITDA margin were impacted by increased cost for head count to invest in the Companys growth.
The additional Twilio Iot head count and cost to enhance public company processes and systems, including Sox compliant.
Moving to cash flow cash used in operations for the three months ended June 32023 was approximately zero point $7 million.
<unk> to cash provided by operations of $14 7 million for the same period in the prior year.
The change was mainly due to abnormally high collections from our largest customer in Q2 2022 related to their LTE transition products.
This compares to incremental cash outflows in Q2 2023 related to the Twilio Iot acquisition.
Is there incremental head count costs paid in the quarter.
These incremental cash outflows from the <unk> acquisition were not offset by any real revenue collections as these won't begin until Q3 2023.
At the end of the second quarter cash excluding restricted cash was $22 9 million compared to $34 7 million as of December 31, 2022.
This change was primarily related to cash outflows from the <unk> acquisition annual bonus payments and increase in interest and income tax payments.
Before passing it back to Rommel I would like to make a couple comments on our 2023 annual guidance that we are maintaining for both revenue and adjusted EBITDA.
For revenue, we had a strong first half of the year with no headwinds from the <unk> Sunset in U S. A.
<unk> organic growth in Iot connectivity and the completion of the Twilio Iot acquisition.
In the second half of the year Iot connectivity revenue is expected to continue its positive momentum and we will have a full six months of revenue on the Twilio Iot business.
However, more cautious regarding the Iot solutions revenue as some of these customers have indicated they are pushing orders to the fourth quarter, which increases the risk that these orders could be even further meaning into 2024.
At this point, we see Q4 being the largest corner of the year for Iot solutions. When it has typically been our lowest score.
We are much more confident about adjusted EBITDA because of the strong momentum in Iot connectivity and a faster improving twilio Iot market on the Opex side, we had built in incremental sales headcount to our guidance in the second half of 2023, which we could delay if needed.
And with that I'll pass it back to Robert.
Thanks, Paul as you have 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 32023.
Our sales pipeline now includes almost 1500 opportunities with an estimated potential total contract value or <unk> of approximately $660 million.
In the second quarter, we generated an incremental $32 million of closed one PCV, bringing the year to date total to $60 million.
We continue to progress towards exceeding the $102 million closed one PCB in 2022, and delivering a fifth consecutive year of T CV growth.
As a reminder, the majority of sold PCB is recognized as revenue over four years and it is important to note that the closed T. C. V 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 pin can go out beyond the four years, we use for PCB 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 one PCV of $32 million.
These recent contract wins highlight the success of our growth strategy and demonstrates the expansion of new use cases for our products.
Core has continued to have success in increasing its wallet share at existing customers in.
In the second quarter, we secured three contracts with T. C d's of over 9 million $6 million and $1 $5 million from customers in the fleet asset tracking and health care markets respectively.
These customers are seeking to improve operational efficiency and effectiveness by consolidating Iot connectivity to a single platform single partner in core.
We continue to see customers, taking advantage of course full range of capabilities and product offerings to support their growth.
For example, core recently won a $500000 TCE engagement to support Iot managed services for our usage based insurance company seeking to upgrade and improve their logistics.
As an example of effective land and expand to execution.
Core followed on a recent win at a major restaurant chain with another engagement whereby core will provide fixed wireless access services to 650 of the customers' locations and will upgrade these locations to <unk> technology.
This contract is a TCE of $850000.
We also continue to win customers outside the U S into two core one contracts from a leader in fleet AI video telematics headquartered in the U K and a leading medical equipment and remote patient monitoring provider based in France to support their entries into the U S market.
These contracts have a combined <unk> of approximately $1 5 million.
Onto the final slide slide 10.
As I said at the beginning of this call. We started the year with good momentum, which continued through the second quarter.
We organically grew connections by half a million Sims, we added $32 million in TCE and delivered sequential quarterly growth.
As we move into the second half of the year, we expect revenue to continue to increase sequentially each quarter, and importantly generate year over year growth beginning in the third quarter.
As covered on our funnel chart, our global sales pipeline is approaching 1500 opportunities with a potential new business T. C V of approximately approximately $660 million, which provides a solid backdrop for growth over the coming years.
This sales pipeline, coupled with our approximately 80% recurring revenue gives us confidence that we can achieve our medium term goal of generating top line revenue growth of at least 20% with an EBITDA margin of 20% or better that's becoming a rule of 40 comes.
<unk>.
As always creating value for our shareholders remains a top priority and we believe we are well positioned to do that.
In closing I wish to thank all of our global employees the core Io tiers for working hard everyday to drive growth and serve our customers with.
With that let's start the Q&A.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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Please while we poll for your questions.
Our first questions come from the line of Michael Latimore with Northland Capital markets. Please proceed with your questions.
Great. Thanks, so much.
<unk>.
PCV funnel 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, one is actually a healthy business for a month in Q2 as you know and so.
So far we're just going off even 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 hopefully when we're speaking to you in mid November about Q3, we will have that done.
And.
What sort of use cases, where applications are.
Most pronounced in that.
Hello.
We're continuing to see just sort of inexorable lift Mike in.
Some of these high bandwidth use cases, a lot 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 was sleep. So there's a lot of video telematics and higher bandwidth as people are continuing to.
Look at look at more of that more and more AI at the edge those kinds of things, but there's others rather than theirs.
So I suspect you saw.
Press release, we put out on a on a large.
Restaurant chain and in fact, we had a follow up with that chain here that we announced in Q2. So there is there's good momentum in SWA and the dollars add up quicker there <unk> sort of growing.
Yes.
Great.
Obviously, youre going to Youre expecting good year over year growth in the second half.
In the third.
Third quarter do you think you will get back to year over year organic growth kind of ex twilio.
Yeah, Yeah, we certainly believe that to be the case despite.
You know what both Paul and I talked about around the push backs. We are seeing from Iot managed services solutions that customers, but pending where all of that falls out we're still fairly confident there's organic growth area.
Great. Thanks, a lot.
Okay.
Thank you our next questions come from the line of Scott Searle with Roth. Please proceed with your questions.
Hey, good afternoon, thanks for taking my questions.
And 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 reminds us.
How many employees also are coming onboard as part of the transaction.
Yeah. So Scott we haven't disclosed any of all of that it's it's so small and sort of generally.
Kind of not not material, but.
We did disclose this this time because we could because we got account from them of their connections at the end of June and of course, we had our own connections counts. So you could see.
Kind of a $2 9 million number there there are boos or right around there. 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 on the people we have disclose its just a little bit over 50 people that came over.
It'll be in the queue.
Yeah.
Okay, great. Thank you and.
Robert maybe to go back to the SWA opportunity I'm wondering if you could dig into that a little bit more detail on what 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 the fixed wireless access and I was wondering if you can also frame the opportunity there as well I imagine it comes with much higher rpms.
So I'd love to kind of get my hands around that what's your broad based expectations for that type of an end market or use case would be as we get into 'twenty four 'twenty five.
Yes, it's a great question Scott. So you know so far 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.
Those days, though it was backup I remember it was like fail over any of those big alright.
<unk> fails why five fails whatever you can go to a cellular backup well just in a scant.
Four years or three years since we put our first get a 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 oops.
Need to dig holes in the ground and put fixed lines and pioneer into places when you can get the kinds of speed, we're getting on cellular as a primary this particular solution that we.
Talked about as a press release, and then talked about highlighted here on the call.
Our easy consumption for those customers and to your point that includes hardware and connectivity right. So it's a fully managed solution. The true definition of sort of as a service and by the way specifically supports five.
Right and just basically enables businesses to cut the cord entirely just like we are cutting the cord on landlines into our homes.
And it's Oh, it's got solid partnerships on the hardware side that we're going to market with.
Okay, Great and then lastly, if I could looking out to 2024, it sounds like ending this year. There are some big opportunities that look like we're going to capitalize 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 2024 countries to re back to 15% plus kind of organic growth on the Iot connectivity in 'twenty four or is it still a little bit early to be making that call. Thanks.
Yeah, No again, Scott we will.
The question that was just asked earlier on this call here.
Back to organic growth.
Year over year in Q3, obviously, the twilio contribution while smaller than we had hoped for a year ago year and a half ago. We first saw there their forecasts and so on.
We will also contribute right and then and then some of this imbalance between Q3 and Q4 as Paul said is customers that normally would've placed pose in sort of the May June timeframe for Q3 is sort of set towards Hey, 90 day delay on a 20 day delay so in theory, if all of those come back in that's moving revenue.
Effectively from Q3 into Q4 right.
But if you looked at it.
Regardless, even even with that move we should eke out organic growth in Q3, certainly Q4 should be sort of very very good growth and then yes, and hopefully that continues in the sequential quarter streak continues and at now on the <unk>.
On the question of is next year I'll be 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, the eights and tens possible for sure.
How do we creep higher than that how do we get the fifteens and <unk>.
The economy and the macro to settle down we need to supply chain issues to settle down we need to see upward movement on <unk> all of which we think will happen.
And we certainly think we can get there I'll just stop short of promising it in 2024.
Great. Thank you might 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 key engineering talent that comes over that you are most excited about.
Yeah. Thanks Nathan.
Look I think the first thing I'll say is the <unk>.
Strategic rationale for the deal absolutely remains in place in terms of how excited we are about the engineering talent that you mentioned.
Are the core network team is actually in Germany.
With them.
We're really productive visit.
And so we're.
Very much looking forward to his early here as this quarter.
And sort of a.
Combined next generation product road map.
<unk> seen a accelerated plan of building out that digital front end, which clearly you know these guys. These guys just born digital easily the best digital consumption of Iot So our business model in the market and we're looking forward to having them help us though this year at lower cost obviously, a good cost savings that we talked about when we did the acquisition.
<unk> so.
I would say all of those sort of strategic rationale points.
Stay very much in place the cultural fit.
It's 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 and in some respects the integrations going sort of better and faster than we could have hoped including by the way on the on the gross margin line, which is kind of nice to.
Really confident that we can get to breakeven here. Even this this year sort of in the fourth quarter and obviously, our promise of being accretive next year, therefore becomes completely de risked threat.
So the only thing that I would say that you know if you.
If you if you had to scratch for kind of the.
Uh huh.
Negative is that.
Again, alluding to my comment 18 months ago, when we saw the plan and what they were supposed to be out there, obviously sort of far off of that smaller entity in terms of revenue today.
And even the growth rate is damper than we were hoping and sort of again, what the plan said.
Some of that look it's just.
It's it's.
12, and 18 months of distraction for this team.
Obviously, they they sort of had heard rumors first and then confirmation that they were not strategic to the future of Twilio people start looking for jobs. They have had attrition, especially in their sales force really very hard to sell without salesforce.
So yes, they've come in <unk>.
Mauler, but we've embraced the challenge our new CRO has all over we're working with.
Well, what Vittorio leaders.
I will say rebuilding the momentum.
We know they can 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.
Yeah.
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 P O or order on a quarterly basis, but yes. Its 60 40 sort of programmatically recurring as we call. It yes.
Got it okay perfect. Thanks, so much guys.
Thank you you may not think of it.
Yeah.
We still have the operator.
Yes, I'm here I apologize Mike.
Computer froze.
Okay.
Our next corollary comes from the line of Matt Mcconnell with Deutsche Bank. Please proceed with your questions.
Hey, guys. Thanks for taking my 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 mills 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 and the <unk>.
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 help maybe help quantify the headwind from the pushout of orders and is the assumption then that <unk> still remains challenged and the deferred orders.
Show up in <unk>.
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 in 2014 too.
Just remember mass at the first half of the year is really front end loaded from a cost perspective.
Going back to Q1, we did have additional costs from the audience 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 a twilio to be accretive right out of the get go which for.
June they were negative but we're.
We're seeing that improvement as normal mentioned by Q4, we have a good chance of them being breakeven and then obviously then positive into 2024, but really to the bridge to get to the $60 62 is that where we are from a revenue perspective in growth with a lot of the growth coming from the connectivity.
Is this at the higher margins in Q4, being where we expect all the the additional solutions revenue come back in which will make it the bigger biggest quarter of the year will get us to that 60 to 62 range. We had also built in.
I had mentioned some incremental head count in the Bakken for growth and so forth and right now we will we'll take a look at that and Montney are that as we see what goes on with the solution pushed back, but again that was a little bit of a buffer that we can use the if needed.
Sorry, I know I forget when there was a question about just the confidence around the push well quantifying the amount of pushback and then how much shows back up in Q4, yes. So we saw about a $1 million ish starting in Q2.
At the end so mainly in June here at the end so for the back half of the year. It's a the number between Q3 and Q4, we estimate between five and $10 million. So again, depending on timing and where that is we do expect most of that to be in the backend in Q4.
Alright, so to be clear between yeah.
Yeah between five and 10 will move.
We hope only from Q3 to Google.
So.
We're assuming just just to be clear Romo and Paul. So June was about a million you're assuming that this kind of accumulates and three Q and falls into <unk> that gets you about 5% mill.
Correct that's right.
Okay, great. Thank you.
Okay. Thank you.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
I am showing no further questions at this time I would like to turn the floor back over to Ron <unk> 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 and ask your questions. We look forward to updating you.
In mid November with our third quarter results Goodbye.
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.