Q4 2023 KORE Group Holdings Inc Earnings Call

Operator: Hello and welcome to Kore Grp Hldg's fourth quarter 2023 earnings call and webcast. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to David Freund, Manager of M&A. Please go ahead, David.

Hello, and welcome to the core group Holdings fourth quarter 2023 earnings call and webcast. As a reminder, this conference is being recorded it is now my pleasure to turn the call over to David friend Miniature M&A. Please go ahead David.

David Freund: Thank you all. On today's call, we will refer to the fourth quarter 2023 earnings presentation, which will be helpful to follow along with as well as the press release filed this morning that details the company's fourth quarter 2023 results. Both of these can be found on our investor relations page at ir.corewireless.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 Statement, 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 foregoing statements after this webinar.

David: Thank you operator on today's call you'll people refer to the fourth quarter 2023 earnings presentation, which will be helpful to follow along with as well as the press release filed this morning that details the company's fourth quarter 2023 results.

David: Both of these can be found on our Investor Relations page at IR that core wireless dot com.

David: Finally, a recording of the call will be available in the investors section of the company's website later today.

We encourage you to review the Safe Harbor statements risk factors and other disclaimers contained on this slide in todays press release as well as in the company's filings with Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events.

David: To differ materially from those described in our forward looking statement.

David: 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 the information prepared in accordance with accounting principles generally accepted in the United States, Oregon.

David Freund: The company also notes that it will be discussing non-GAAP financial information on this. The company is providing the information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GATT. 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, the company's President and Chief Executive Officer. Thank you, David. Good morning, everyone.

David: You can find a reconciliation of these metrics to the Companys reported GAAP results and the reconciliation tables provided in today's earnings release and presentation.

Speaker Change: I'll now turn the call over to them, although the company's president and Chief Executive Officer.

Speaker Change: Thank you David and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2023 earnings call.

Romil Bahl: Thank you for joining us for our fourth quarter and full year 2023 earnings call. With me is Paul Holtz, CORE's Chief Financial Officer. As always, I'll start with a brief overview of the key events and announcements for the fourth quarter. Paul will then review our financial results, and then we will review our sales pipeline, key wins, and a summary of how we view the year ahead. We will finish with a Q&A. Slide four presents some key announcements from the fourth quarter. First, we launched a pioneering eSIM-powered medical alert device in collaboration with Medical Guardian. This device is designed to facilitate active aging as defined by the World Health Organization.

Speaker Change: With me is Paul hopes of course, Chief Financial Officer.

Speaker Change: As always I'll start with a brief overview of the key events and announcements for the fourth quarter.

Speaker Change: Paul will then review our financial results and then we will give you our sales pipeline key wins and a summary of how we view the year ahead.

Speaker Change: We will finish with a Q&A session.

Speaker Change: Slide four presents some key announcements from the fourth quarter.

First we launched a pioneering ethan powered medical alert device in collaboration with medical Guardian.

Speaker Change: This device is designed to facilitate active aging as defined by the World Health organization.

Romil Bahl: This revolutionary technology overcomes the challenges of limited carrier flexibility and coverage, enabling Network Switching to Optimize Connectivity Across Different Regions and Operational Phases and Enabling Optimal 24x7 Connectivity. This medical alert device leverages CORE's industry-leading connectivity service. Of course, ESIN optimizes opportunities for health participation and security for aging adults, enabling end-users to age with dignity.

Speaker Change: This revolutionary technology overcomes the challenges of limited carrier flexibility and coverage.

Speaker Change: Enabling network switching to optimize connectivity across different regions and operational phases, and enabling the optimal 24 by seven connectivity.

This medical alert device leverages caused industry, leading productivity services course, eastern optimizes opportunities for health participation and security for aging adults, enabling end users to age with dignity.

Romil Bahl: This innovation shows how revolutionary IoT is in addressing some of society's most daunting obstacles, in this case, an aging global population, and how IoT Can Enable a Better World. IoT for good, as our purpose statement says here at CORE. Second, we continue to receive recognition from numerous industry analysts and publications for our method-class connectivity. For instance, Gartner recognized CORE as a managed IoT connectivity services worldwide leader for the fifth consecutive year. CORE's CAS offerings, including SuperSIM, also received the 2023 IoT Excellence Award from TMC and Crossfire Media.

Speaker Change: This innovation shows how revolutionary I O T is in addressing some of society's most daunting obstacles in this case, an aging global population and how Iot can enable a better world.

Speaker Change: Iot for good as our purpose statement says here at Corp.

Speaker Change: Second we continue to receive recognition from numerous industry analyst and locations for all of them didn't cloud connectivity products.

Speaker Change: For instance, Gartner recognized core as a managed Iot connectivity services worldwide leader for the fifth consecutive year.

Speaker Change: Core's cabins offerings, including Super Sim also received the 'twenty to 'twenty three I O T Excellence award from TMC and Crossfire media.

Romil Bahl: This recognition cements our unwavering reputation for understanding our customers' needs and creating cutting-edge solutions that simplify the complexities of IoT and empower our customers to achieve their goals. The Gardner Magic Quadrant leadership is especially encouraging since we improved our position in the Leaders' Quadrant, even as large, well-known carriers and competitors dropped out. And also, on the vision and strategy dimension, CORE is now firmly among the top three providers globally, as evidence of our industry-leading strategy and specifically with respect to our investments in pre-configured solutions. In the first quarter of 2024, we landed our first major connected health telemetry solution, or CHTS, pre-configured solution. This $26 million TCV achievement will provide core support in global home respiratory therapy to over 65,000 patients. The solution involves managing the capture, secure transmission, and delivery of home ventilator and oxygen concentrator data telemetry to the patient's care team.

Speaker Change: This recognition cements, our unwavering reputation for understanding our customers' needs and creating cutting edge solutions.

Speaker Change: Simply by the complexities of Iot and empower our customers to achieve their goals.

Speaker Change: The Gartner Magic quadrant leadership is especially encouraging since we improved our position in the leaders quadrant, even as large well known carriers and competitors dropped out.

Speaker Change: And also on the vision and strategy dimension core is now firmly among the top three providers globally.

Speaker Change: As evidence of our industry, leading strategy and specifically with respect to our investments and pre configured solutions in the first quarter of 'twenty 'twenty four we landed our first major connected health telemetry solution. Our C. H T S pre configured solution win.

Speaker Change: This $26 million T. C V achievement will have core supporting global home respiratory therapy to over 65000 patients.

Speaker Change: The solution involves managing the capture.

Speaker Change: Your transmission and delivery of home ventilator in the oxygen concentrator data telemetry to the patient's care team.

Romil Bahl: This customer will utilize CORS CHTS gateway, device management and configuration cloud platform, and the CHTS Temporary Data Repository cloud service. The customer will map their existing patient engagement and Support Workflows to CORE's OCS Cloud to enable the care delivery teams to configure, install, and monitor their home respiratory therapy for thousands of ventilators and oxygen concentrators. This win demonstrates CORE's ability to streamline the IoT deployment of a complex medical device with our integrated, secure, and regulatory compliant cellular connectivity and data routing infrastructure. These capabilities enable continuous health care monitoring from the comfort of patients' homes, significantly improving patient outcomes and comfort.

Speaker Change: This customer well utilized Core's C H T S gateway.

Speaker Change: Base management and configuration cloud platform.

And with ph D S temporary data repository cloud service.

The customer will map their existing patient engagement.

Speaker Change: Support workflows to cause T S cloud.

Speaker Change: To enable the care delivery teams to configure and install and monitor their home respiratory therapy for thousands of ventilators and oxygen concentrators.

Speaker Change: This win demonstrates core's ability to streamline the Iot deployment, although complex medical device with our integrated secure and regulatory compliant cellular connectivity and data routing infrastructure.

Speaker Change: These capabilities enable continuous health care monitoring from the comfort of patients homes significantly improving patient outcomes and comfort.

Romil Bahl: Now, let's look at our fourth quarter financial results on slide five. Core's fourth quarter revenue of $72.4 million increased 16% year over year, driven by an acceleration in high-margin IoT connectivity, which was up 27% year over year. A decline in low-margin IoT solutions revenue partially offset this growth in IoT connectivity. While double-digit top-line growth in Q4 is impressive, we should note that these results were below our expectations due to additional unexpected customer order deferrals in Q4, including those from our largest customer. While these deferrals impacted both IOT connectivity and IOT solutions.

Speaker Change: Now, let's look at our fourth quarter financial results on slide five cores fourth quarter revenue of $72 $4 million increased 16% year over year, driven by an acceleration in the high margin Iot connectivity, which was up 27% year over year.

Speaker Change: A decline in low margin Iot solutions revenue, partially offset this growth in Iot connectivity.

Speaker Change: While the double digit topline growth in Q4 is impressive we should note that these results were below our expectations due additional unexpected customer order deferrals in Q4, including those from our largest customer.

Speaker Change: While these deferrals impacted both Iot connectivity and Iot solutions solutions experienced the greater impact due to customer year end inventory levels and further delays in remote patient monitoring and clinical drug trial deployments.

Romil Bahl: Solutions experienced a greater impact due to customers managing year-end inventory levels and further delays in remote patient monitoring and clinical drug trial deployment. Reiterating what we said last quarter, these orders and customers have not been lost. We fully expect to continue to serve these customers in 2024 and beyond. That said, during our 2024 business planning process, and partially in response to the lumpy characteristics of hardware revenue in our maturing IoT solutions business line, we have decided as a company to reduce our exposure to low-margin hardware. Going forward, we will only accept hardware orders that are essential to winning a customer contract.

Speaker Change: Reiterating what we said last quarter. These orders and customers have not been lost we fully expect to continue to serve these customers in 2024 and beyond.

Speaker Change: That said during our 'twenty 'twenty four business planning process and partially in response to the lumpy characteristics of hardware revenue in our maturing Iot solutions business line, we have decided as a company to reduce our exposure to low margin hardware revenue.

Speaker Change: And forward, we will only accept hardware orders that are essential to winning a customer contract.

Romil Bahl: This decision resulted in a reduction in our TCB pipeline and, obviously, a lower projection of IoT solutions revenue in 2024. However, this marginal short-term headwind is more than offset by the increased predictability, visibility, and profitability improvement that shrinking our reliance on hardware will deliver in 2024 and into the future. Further, we expect growing momentum in CORE's IoT connectivity business to more than offset any one-time headwinds resulting from this decision. On this point, before handing the call to Paul to cover the financials in more detail, I wanted to touch on our outlook for 2024.

Speaker Change: This decision resulted in a reduction in our T. C V pipeline, and obviously, a lower projection of Iot solutions revenue in 'twenty to 'twenty four.

Speaker Change: This marginal short term headwind is more than offset by the increased predictability visibility and profitability improvement that's shrinking our reliance on hardware will deliver in 2024 and into the future.

Speaker Change: Further we expect growing momentum and Core's Iot connectivity business to more than offset any one time headwinds, resulting from this decision.

Speaker Change: On this point before handing the call to Paul to cover the financials in more detail I wanted to touch on our outlook for 2024.

Romil Bahl: At a high level, with 2G, and 3G sunsets and the worst of macro uncertainty behind us, we expect a reacceleration in our high-margin IoT connectivity business to be core's primary growth driver in 2024. This growth will offset a decline in low-margin IoT solutions revenue and drive year-over-year revenue growth and, more substantially, exciting double-digit growth in adjusted EBITDA. Overall, we expect 2024 revenue to be between $300 and $305 million, with adjusted EBIT DA between $64 and $66 million. I will provide more color on our 2024 outlook later in the call. But with that said, Paul, over to you.

Paul: At a high level with two G. III sunset some of the worst of macro uncertainty behind us we expect a reacceleration in our high margin Iot connectivity business can be cores primary growth driver in 2024.

Paul: This growth will offset a decline in low margin Iot solutions revenue and drive year over year revenue growth and more substantially exciting double digit growth in adjusted EBITDA.

Paul: Overall, we expect 2020 for revenue to be between 303 hundred and.

Paul: $5 million with adjusted EBITDA between 64, and 66 million.

Paul: I will provide more color on our 2024 outlook later in the call, but with that said well overdue.

Paul Holtz: Thank you, Romil, and good morning, everyone. Turning to our results on slide 6, as Romil highlighted, fourth quarter revenue increased 16% year-over-year to $72.4 million compared to $62.4 million in the fourth quarter of 2020. By segment, IoT connectivity revenue of $55.3 million, which included the Twilio IoT acquisition, increased 27% year-over-year and represented 76% of fourth quarter revenue. Additionally, organically, IoT connectivity grew in the mid-single digits year over year. This growth is despite continued delays in plan upgrades at some customers in the second half of 2023 that have been pushed to the first half of 2020. IoT solutions revenue declined 10% year-over-year to $17.1 million, or 24% of fourth-quarter revenue. As Romil mentioned, the decline in IoT solutions reflects customer deferrals, including from Core's top customers. To show the magnitude of these deferrals, no orders from our top customer were received in the quarter as they continue to manage their inventory from their large LTE transitions.

Hello, and good morning, everyone.

Paul: Turning to our results on slide six as Rommel highlighted fourth quarter revenue increased 15% year over year to $72 4 million compared to $62 4 million in the fourth quarter of 2022.

Paul: By segment Iot connectivity revenue of $55 3 million, which includes the Twilio Iot acquisition increased 27% year over year and represented 76% of fourth quarter revenue.

Paul: Organically Iot connectivity grew in the mid single digit year over year.

Paul: This growth is despite continued delay in plant upgrades at some customers in the second half of 2023 that had been pushed to the first half of 2024.

Paul: Iot solutions revenue declined 10% year over year to $17 1 million or 24% of fourth quarter revenue.

Paul: Normal mentioned decline in Iot solutions reflects customer deferrals, including from course top customers.

To show the magnitude of the deferral no orders from our top customer were received in the quarter as they continue to manage their inventory and their law.

Paul: Orange LTE transition crunch.

Paul Holtz: Total gross margin in Q4 2023 was 52.6%, a decline of 150 basis points compared to the fourth quarter of 2020. By segment, IoT Connectivity's gross margin was down 650 basis points year-over-year to 58.6%, reflecting a full quarter inclusion of the lower-margin Twilio IoT record. Additional year-end revenue provisions were also made in Q4, with some smaller customers struggling to make on

Paul: Total gross margin in Q4, 2023 was 52, 6% decline.

Paul: A decline of 150 basis points compared to the fourth quarter of 2022.

Paul: I segment Iot connectivity gross margin was down 650 basis points year over year to 58, 6%, reflecting a full quarter inclusion of the lower margin Twilio Iot revenue.

Paul: Additional year end revenue provisions were also made in Q4 with some smaller customers struggling to make on time payments.

Paul Holtz: The IoT solutions margin was up 450 basis points to 33.2%, reflecting the lower mix of hardware versus services revenue in the quarter. Total connections at the end of the fourth quarter were $18.5 million, a decline of over $400,000 from the third quarter of 2023 and an increase of $3.5 million year over year. The decline in quarter over quarter SIM count reflects the deactivation of low revenue SIMs from a single CIAS customer that is transitioning their base to be managed in-house.

The Iot solutions margin was up 450 basis points to 33, 2%, reflecting the lower mix of hardware versus services revenue in the quarter.

Paul: Total connections at the end of the fourth quarter were $18 5 million a decline of over 400000 from the third quarter of 2023, and an increase of $3 5 million year over year.

Paul: The decline in quarter over quarter Sim count reflects the deactivation of low revenue stems from a single customer that is transitioning their base to be managed in house.

Paul Holtz: Kore and the customer have been working together during this transition as we informed them in 2023 that the SEADS business was being de-emphasized by the company going forward. With the fourth quarter also being the year-end for many of our customers, some were active in cleaning up their zero-usage sims prior to year-end to save costs heading into 2020. DC activations will not have a material effect on IoT connectivity in 2024 due to their very, very low RPS.

Paul: Or in the customer I've been working together during this transition as we informed them in 2023 that the <unk> business was being de emphasized by the company going forward.

Paul: With the fourth quarter also being a year end for many of our customers that are more active in cleaning up their zero usage since prior to year end to save costs heading into 2024.

Paul: D C activations will not have a material effect on the Iot connectivity in 2024 again due to their very very low RP.

Paul Holtz: The Dollar-based Net Expansion Rate, or DBNER, for the 12 months ended December 31, 2023 was 96% compared to 92% in the prior year. As a reminder, dbnr is like same-source sales as it measures the growth of existing customers in the trailing 12 months compared to the same customer cohort a year ago. This means that customers gained from the Twilio IoT acquisition in June were excluded from the calculation. Our 2023 DBAR was impacted by our largest customer's LTE transition project, which occurred from June 2021 to June 2022 and significantly benefited our top line. As a reminder, we saw revenue from our top customer double during this. Excluding our largest customer, DVNER for the year would be 101% compared to 103% in. Turning to slide 7.

Paul: Dollar based net expansion rate or <unk> for the 12 months ended December 31, 2023 was 96% compared to 92% in the prior year.

As a reminder, DBA in areas like same store sales as it measures the growth of existing customers and the trailing 12 months compared to the same customer cohort in the year ago period.

Paul: This means that customers gained from the Twilio Iot acquisition in June were excluded from the calculation.

Paul: Our 2023 D var was impacted by our largest customers LTE transition project, which occurred from June 2021 to June 2022, and significantly benefited our topline performance as a reminder, we saw revenue from our top customer doubled during this period.

Paul: Excluding our largest customer deviating or for the year would be 101% compared to a 103% in 2022.

Paul: Turning to slide seven.

Paul Holtz: Operating expenses, including depreciation and amortization, in the fourth quarter were $47.7 million, a decrease of $50.4 million compared to Q4 2020. The decline in operating expenses reflects the non-cash goodwill impairment charge in Q4 2022 of $58.1 million, which did not exist in the current period. This decline was offset by increases in depreciation and amortization, incremental operating expenses from the Twilio IT acquisition, and one-time professional service fees from our debt refinancing completed in May. Fourth quarter interest expenses, including amortization of deferred financing fees, increased year-over-year to approximately $12 million versus $9.7 million in the fourth quarter of 2020. This increase is due to higher borrowing costs on our prior senior secured term loan. As a reminder, we refinanced our previous $300 million term loan in the fourth quarter with a new $185 million term loan and $150 million preferred stock. We also incurred a $2.6 million loss on the extinguishment of our previous debt. Net loss in the fourth quarter was $33.7 million compared to $69.6 million in the prior year.

Paul: Operating expenses, including depreciation and amortization in the fourth quarter were $47 7 million a decrease of $50 4 million compared to Q4 2022.

Paul: The decline in operating expenses reflects the noncash goodwill impairment charge in Q4, 2022 up $58 1 million, which did not exist in the current quarter.

Paul: This decline was offset by increases in depreciation and amortization incremental operating expenses from the Twilio T acquisition, and one time professional service fees from our debt refinancing completed in November.

Paul: Fourth quarter interest expenses, including amortization of deferred financing fees increased year over year to approximately $12 million versus $9 7 million in.

Paul: In the fourth quarter of 2022.

This increase is due to the higher borrowing costs on our prior senior secured term loan as a reminder, we refinanced our previous 300 million term loan in the fourth quarter with a new 185 million term loan and a 150 million preferred stock placement.

We also incurred a $2 6 million loss on extinguishment of our previous debt.

Paul: Net loss in the fourth quarter was $33 7 million compared to $69 6 million in the prior year.

Paul Holtz: The 35.9% decline in the net loss year-over-year was mainly due to the already mentioned non-cash goodwill impairment charge in Q4 2022 of 58.1%. However, this decline was offset by year-over-year increases or one-time costs relating to the refinancing of our long-term debt, an increase in interest expense, and incremental costs associated with the Twilio IoT acquisition. Adjusted EBITDA in the fourth quarter was $13.8 million, a decline of $1.9 million or approximately 12% compared to last year.

Paul: The $35 nine decline in the net loss year over year was mainly due to the already mentioned noncash goodwill impairment charge in Q4 of 2020 to $58 1 million.

Paul: This decline was offset by year over year increases or onetime costs relating to the refinancing of our long term debt increase in interest expense and incremental costs associated with the Twilio Iot acquisition.

Paul: Adjusted EBITDA in the fourth quarter was $13 8 million a decline of $1 9 million or approximately 12% compared to last year.

Paul Holtz: Our EBITDA margin in the current quarter was 19.1%, down 610 basis points compared to the same period in the prior year. The EBITDA margin decrease is mainly due to the majority of incremental revenue year over year coming from the Twilio IoT acquisition, which, as we previously disclosed, would be at negative EBITDA margins for most of 2020. It should also be noted that our adjusted EBITDA or net loss in the fourth quarter does not include approximately $4 million in funds received as a CARES Act employee retention credit, as the company is taking a conservative approach not to yet recognize the benefit from U.S. GAAP. Moving to cash flow, cash used in operations for the three months ending December 31, 2023 was approximately $10 million. This amount increased year-over-year, mainly due to the additional one-time expenses paid related to our debt refinancing. At the end of the fourth quarter, cash and cash equivalents were $27.1 million, compared to $34.7 million as of December 31, 2020.

Paul: Our adjusted EBITDA margin in the current quarter was 19, 1% down 610 basis points compared to the same period in the prior year.

Paul: The EBITDA margin decrease was mainly due to the majority of the incremental revenue year over year coming from the Twilio Iot acquisition, which as we previously disclosed would be negative EBITDA margins for most of 2023.

Paul: It should also be noted that our adjusted EBITDA or net loss in the fourth quarter does not include approximately $4 million in funds received as the cares Act employee retention credit as the company has taken a conservative approach not yet recognized the benefit from a U S GAAP perspective.

Moving to cash flow cash used in operations for the three months ending December 31, 2023 was approximately $10 million.

This amount increased year over year, mainly due to the additional one time expenses paid related to our debt refinancing.

Paul: At the end of the fourth quarter cash and cash equivalents were $27 1 million compared to $34 7 million as of December 31, 2022.

Paul Holtz: Turning to our full year 2023 results, total revenue of $27.6 million increased 3% from 2021. IoT connectivity revenue increased 15% to $202.3 million, more than offsetting the 25% decline in IoT solutions revenue of $74.3 billion. The full year gross margin of 54% was up 210 basis points from 2020.

Paul: Turning to our full year 2023 results total revenue of $27 6 million increased 3% from 2020 to.

Paul: Iot connectivity revenue increased 15% to $202 million three more than offsetting the 25% decline in Iot solutions revenue of $74 3 million.

Paul: The full year gross margin of 54% was up 210 basis points from 2022.

Paul Holtz: This was driven by a higher mix of connectivity revenue and a 250 basis point improvement in the full year solutions gross margin to 31%. These factors were partially offset by a 180 basis points decline in IoT connectivity loss margins to 62 points. Adjusted EBITDA for the year was $55.6 million, resulting in an adjusted EBITDA margin of 20.1%; this compared to $62.8 million and 23.4% in 2020. The full-year 2023 net loss of $167 million, which includes goodwill impairment charges, increased by $60.8 million relative to 2020. Excluding the goodwill impairment charge of $78.3 million in 2023 and $58.1 million in 2022, our net loss increased by $40.6 million to $88.7 million.

Paul: This was driven by a higher mix of connectivity revenue and a 250 basis point improvement in the full year solutions gross margin to 31%.

Paul: These factors were partially offset by a 180 basis points decline in <unk>.

Paul: Connectivity gross margins to 62, 4%.

Paul: Adjusted EBITDA for the year was $55 6 million, resulting in an adjusted EBITDA margin of 21% this compared to $62 8 million and 23, 4% in 2022.

Paul: The full year full year 2023, net loss of $167 million, which includes goodwill impairment charges increased by $68 million relative to 2022.

Paul: Excluding the goodwill impairment charge of $78 3 million in 2023 and $58. One in 2022, our net loss increased by $40 6 million to $88 7 million.

Romil Bahl: Our annual net loss increased due to higher interest rate expenses, increased costs due to the Twilio IoT acquisition, a change in the fair value of our warrants, and the one-time costs associated with our debt repayment. With that, I'll pass it back to you.

Paul: Our annual net loss increased due to higher interest rates expenses increased costs due to the Twilio Iot acquisition.

Paul: Change in the fair value of our warrants and the onetime costs associated with our debt refinancing.

Speaker Change: With that I'll pass it back to Europe.

Romil Bahl: Thanks, Paul. Slide eight presents a snapshot of our global sales pipeline as of December 31st, 2023. As I mentioned, we have decided to reduce our reliance on low-margin hardware revenue. This decision has obviously reduced our funnel in total size, as has the relatively large number of deals that were closed in Q4, both closed-won and closed-lost, and a larger-than-typical year-end cleaning out of the funnel, led by our new CRO, Jason Dietrich, who joined CORE in the middle of last year.

Europe: Thanks, Paul.

Europe: Eight presents a snapshot of our global sales pipeline as of December 31, 2023.

Europe: As I mentioned, we have decided to reduce our reliance on low margin hardware revenue.

Europe: This decision has obviously reduced our funnel in total size.

Europe: Has the relatively large number of deals that were closed in Q4, both closed one and closed last <unk>.

Europe: And a larger than typical year end cleaning out of the funnel led by our new C. R O, Jason Dietrich, who joined core in the middle of last year.

Romil Bahl: Importantly, the quality of our pipeline has improved due to these actions. Our sales pipeline now includes over 1,600 opportunities with an estimated potential TCV of approximately $545 million. In the fourth quarter, we generated an incremental $28 million of closed-one TCV, bringing the year-to-date total to $115 million as we delivered our fifth consecutive year of TCV growth.

Europe: Importantly, the quality of our pipeline has improved due to these actions.

Europe: Our sales pipeline now includes over 1600 opportunities with an estimated potential T. C V of approximately $545 million.

Europe: In the fourth quarter, we generated an incremental $28 million of closed one tea season, bringing the year to date total to $115 million as we delivered our fifth consecutive year of T. C V growth.

Romil Bahl: For those who may be new to our story, the majority of sold PCV is recognized as revenue over four years. And it is important to note that the closed TCV figure is aggregated across all of our services, which have different durations of revenue recognition. Slide nine shows our customer wins in the fourth quarter. These wins include, number one.

Europe: For those who may be new to our story. The majority of sold PCB is recognized as revenue over four years and it is important to note that the close T. C. V figure is aggregated across all of our services, which have different durations of revenue recognition.

Europe: Slide nine shows our customer wins in the fourth quarter.

These wins include number one.

Romil Bahl: Kore is growing WalletShare with a leading provider of high-performance software and solutions for the real estate industry. This customer is adding 15,000 units to its multi- and single-family home portfolio and reaffirmed its commitment to CORE by signing new contracts representing approximately $2 million of incremental TCV. Core's OneAPI approach and top-tier customer support helped give the customer confidence to scale its IoT deployments. Two, we had a cross-sell win with one of the largest privately held homebuilders in the United States. This customer was overpaying for some substandard connectivity services with next to no customer support.

Europe: <unk> is growing wallet share with a leading provider of high performance software and solutions for the real estate industry.

Europe: This customer is adding 15000 units towards multi and single family home portfolio and reaffirmed its commitment to core by signing new contracts, representing approximately $2 million of incremental P. C.

Europe: Cores, one API approach and top tier customer support helped give the customer confidence to scale its Iot deployments.

Europe: Two we had a cross sell win with one of the largest privately held homebuilders in the United States.

Europe: This customer was overpaying for some substandard connectivity services with next to no customer support.

Romil Bahl: Kore's connectivity products opened the conversation, and the company optimized the customer's entire connectivity. Then, after demonstrating that CORE's high-bandwidth, pre-configured solutions could enhance operations, quicken time-to-market, and improve the end-customer experience, Kore grew its wallet share with this customer.

Europe: Core's connectivity products open to the conversation and the company optimize the customer's entire connectivity system.

Europe: Then after demonstrating the cores high bandwidth pre configured solutions for them.

Europe: Operations quicker time to market and improve the end customer experience core grew our wallet share with this customer.

Europe: Three a global fast growing specialized management network chose core for its primary in favor of our solutions in the U S.

Romil Bahl: A global, fast-growing, specialized management network chose Core for its primary and failover solutions in the U.S. There are significant opportunities for European expansion with this customer, as well as further avenues for growth from new product introductions. Finally, a provider of vehicle and asset tracking IoT solutions with operations spanning three continents chose Core OmniSyn as its connectivity solution for its new product. This customer's new products will contain buy here, pay here features and target the subprime vehicle loan market. This contract is worth an estimated $1.6 million in DCD.

Europe: There are significant opportunities for European expansion with this customer as well as further avenues for growth from new product introductions.

Europe: Finally, a provider of vehicle and asset tracking Iot solutions with operations spanning three continents chose core omni sin as its connectivity solution for its new products.

Europe: This customer is new products will contain buy here pay here features and target the subprime vehicle loan market. This contract is worth an estimated one $6 million in PCB.

Romil Bahl: As you can see, our sales and growth momentum continues to build. Our independent multi-multi-multi offering is resonating with the market, and our connectivity position has never been stronger. Coors Connectivity products, including OmniSIM and SuperSIM, are uniquely suited to our customers' needs and simplify the complexities of IoT deployment.

Europe: As you can see our sales and growth momentum continues to build.

Europe: Our independent multi multi multi offering is resonating with the market and our connectivity position has never been stronger.

Europe: Of course connectivity products, including all makes them and super sudden.

Europe: Our uniquely suited to our customer's needs and simplify the complexities of Iot deployments.

Romil Bahl: Our products provide customers with a single unified solution that enhances their operational flexibility by ensuring cost-effective, uninterrupted network across borders. These are critical factors for success for individual customer deployments and the IoT ecosystem as a whole. Combined, a strong foundation with stabilizing our poos, and 2024 will be a great year for organic connectivity growth.

Europe: Our products provide customers with a single unified solution that enhances our customers' operational flexibility by ensuring cost effective uninterrupted network across borders.

Europe: These are critical factors for success for individual customer deployments and the Iot ecosystem as a whole.

Europe: Combined core strong foundation with stabilizing our Pud and 'twenty 'twenty four will be a great year for organic connectivity growth.

Speaker Change: So what does this mean what is the end result.

Romil Bahl: As I said earlier, we expect revenue in the range of $300 to $305 million, with adjusted EBITDA between $64 and $66 million in 2024. To help contextualize our guidance, let me walk you through the chart on slide 10. The first thing to note is that CORES 2023 Adjusted EBITDA adjusts out one-time transformation investments needed to establish CORE as a leader in IoT and capitalize on the explosive growth of connected devices. 2023 was the last year of these transformational investments, and they will not occur in 2024.

Speaker Change: As I said earlier, we expect revenue in the range of $300 million to $305 million with adjusted EBITDA between 64 and $66 million in 2024.

Speaker Change: To help contextualize our guidance, let me walk you through the chart on slide 10.

Speaker Change: The first thing to notice that of course 2023, adjusted EBITDA adjusts out one time transformation investments needed to establish core as a leader in Iot and capitalize on the explosive growth of connected devices.

Speaker Change: 2023 was the last year of these transformational investments and they will not occur in 'twenty to 'twenty four.

Romil Bahl: After taking these one-time expenses into account, our 2023 adjusted EBITDA is approximately $49 million, meaning that we expect 2024 EBITDA to grow approximately 33% year-over-year on an apples-to-apples comparison basis. As a reminder, these investments involve doubling down on CORE's CORE IoT connectivity business. Launching Industry Specific Business Lines and Focusing on Eastern Leadership. We have been adjusting out these one-time transformation expenses to show a clearer picture of CORE's financial health and operating performance.

Speaker Change: After taking these one time expenses into account our 'twenty to 'twenty three adjusted EBITDA is approximately $49 million, meaning that we expect 2020 for EBITDA to grow approximately 33% year over year on an apples to apples comparison basis.

As a reminder, these investments involved doubling down on Core's core Iot connectivity business.

Speaker Change: Launching industry specific business lines and focusing on Houston leadership.

Speaker Change: We have been adjusting out these onetime transformation expenses to show a clearer picture of course financial health and operating performance.

Romil Bahl: Given the volatile market backdrop in 2023, it is worth stepping back and talking about what gives us confidence in this IP. First, 2024 revenue growth will be driven by high visibility, high margin IoT connectivity, which is re-accelerating following the end of the 2G and 3G sunsets and customer deferrals, a rebound in core's key end markets, and stabilizing our This high-quality revenue growth is offsetting a decline in lumpy and low-margin hardware revenue, which gives us better visibility into our top-line performance throughout the year and increases Secondly, we streamlined our operating costs and improved our economies of scale, as evidenced by our start in 2024. We expect this performance to gain momentum throughout the year. But before I continue to talk about this start to 2024, I should specify that we will not be providing ongoing quarterly guidance.

Given the volatile market backdrop in 2023, it is worth stepping back and talking about what gives us confidence in this outlook first 2020 for revenue growth will be driven by our high visibility high margin Iot connectivity, which is re accelerating following the end of the two D <unk> sunset.

Speaker Change: And customer deferrals of rebound in quarters key end markets and stabilizing our push.

Speaker Change: This high quality revenue growth is offsetting a decline in lumpy and low margin hardware revenue, which gives us better visibility into our top line performance throughout the year and increases our profitability overall due to Iot connectivity superior margin profile relative to solutions.

Speaker Change: Secondly, we streamlined our operating costs and improved our economies of scale as evidenced by our start in 2024, and we expect this performance to gain momentum throughout the year.

Speaker Change: But before I continue to talk about the start to 2024 I should specify that we will not be providing ongoing quarterly guidance.

Romil Bahl: That said, given that we are in April and Q1 is over, we feel confident in saying that our adjusted EBIT DA for Q1 2024 will be approximately $1.5 million above Q1 2023. This would mean that the first quarter adjusted EBIT DA would be higher than every single quarter of 2023, despite Q1 historically being CORE's highest expense quarter of the year. This strong start to 2024, combined with our refined operating model and connectivity-led growth, gives us confidence in our 2024 outlook and demonstrates our solid operating record. Slide 11 is our last prepared slide and summarizes the key points of our prepared remarks. First, CORE's 2023 revenue growth will be driven by IoT connectivity, which will be supported by stable ARPUs and connected device growth from existing customers. Additionally, we are conservatively planning for IoT solutions to be down year-over-year, reflecting our decision to de-emphasize low-quality revenue. Launching our next generation ESIN product will only accelerate our momentum.

Speaker Change: That said given that we are in April and Q1 is over we feel confident in saying that our adjusted EBITDA for Q1, 2024 will be approximately $1.5 million above Q1 2023.

Speaker Change: This would mean that first quarter adjusted EBITDA would be higher in every single quarter of 2023, Despite Q1, historically being cores highest expense quarter off for you.

Speaker Change: This strong start to 2024 combined with our refined operating model and connectivity led growth gives us confidence in our 2020 for outlook and demonstrates our solid operating leverage.

Speaker Change: Slide 11.

Speaker Change: Last prepared slide and summarizes the key points of our prepared remarks.

Speaker Change: Of course, 2023 revenue growth will be driven by Iot connectivity, which will be supported by stable, our booth and connected device growth from existing customers.

Speaker Change: We are conservatively planning for Iot solutions to be down year over year, reflecting our decision to deemphasize low quality revenue.

Speaker Change: Launching our next generation <unk> product will only accelerate our momentum.

Romil Bahl: Our next-generation products present customers with best-in-class global IoT connectivity with compliant local access, seamless digital consumption, and white-glove customer service. Secondly, in addition to these exciting product developments, Core delivered closed-one TCV of $115 million in 2023 while identifying several improvements in our direct and indirect sales efforts, which we expect to bear fruit in 2024. On the direct sales side of things, we hired seasoned sales executives with many years of experience who are becoming trusted partners and advisors to their customers.

Speaker Change: Our next generation products present customers with best in class Global Iot connectivity with compliant local access seamless digital consumption and white glove customer service.

Speaker Change: Secondly in addition to these exciting product developments.

Speaker Change: <unk> delivered closed one T C V F $150 million in 2023, while identifying several improvements in our direct and indirect sales efforts, which we expect to bear fruit in 2024.

Speaker Change: On the direct sales side of things, we hired seasoned sales executives with many years of experience, who are becoming trusted partners and advisors with their customers.

Romil Bahl: At the same time, we have developed relationships with GCP, that's Google, and other major companies that give core distribution to an extensive range of companies across industries, sizes, and geographies. This helps CORE meet customers where they are, enabling successful IoT deployments and advancing the IoT ecosystem. Taking a more holistic view, we are cautiously optimistic that 2023 was the high watermark for macroeconomic uncertainty among our most prominent end markets. While customers remain cost-focused, the inventory correction at our customers is largely behind us, and we have de-risked our exposure to lumpy hardware revenue and customer inventory. Crucially, as CORE grows, we will remain focused on profitability and operating efficiency and will leverage the economies of scale that result from IoT connectivity growth.

Speaker Change: At the same time, we have developed relationships with GGP, that's Google and other major companies that give them core distribution to an extensive range of companies across industries and sizes and geographies.

Speaker Change: This helps core meet customers, where they are enabling successful Iot deployments and advancing the Iot ecosystem.

Speaker Change: Taking a more holistic view, we are cautiously optimistic that 2023 was the high watermark for macroeconomic uncertainty among our most prominent and markets.

While our customers remain cost focused the inventory correction at our customers is largely behind us and we have derisked, our exposure to lumpy hardware revenue and customer inventories.

Speaker Change: Crucially as core grows we will remain focused on profitability and operating efficiency and will leverage the economies of scale that result from Iot connectivity growth.

Romil Bahl: As a result, we have a clear line of sight into exciting double-digit adjusted EBITDA growth in 2024, driven by increased sales and greater profitability. They're happy to revisit any of these key points during the Q&A. But before turning the call over to the operator, I want to thank CORE's IOTers around the world for their tremendous work this past year. I am excited about where we are going this year and in the future.

Speaker Change: As a result, we have a clear line of sight into exciting double digit adjusted EBITDA growth in 2024, driven by increased sales and greater profitability.

Speaker Change: They're happy to revisit any of these key points during the Q&A, but before turning the call over to the operator I want to thank cores I O tears around the world for their tremendous work this past year.

Speaker Change: I am excited about where we are going this year.

Speaker Change: And in the future.

Operator: Our connectivity portfolio, financial positioning, and sales momentum have never been stronger, and we are well placed to capture the opportunity that the decade of IoT brings. With that, let's start the Q&A. Thank you.

Speaker Change: Our connectivity portfolio financial positioning and sales motion have never been stronger and we are well placed to capture the opportunity that the decade of Iot brings.

Speaker Change: With that let's start the Q&A.

Speaker Change: Thank you ladies and gentlemen, the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment it may be necessary.

Operator: Ladies and gentlemen, the floor is now open to questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Scott Wallace Searle: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. Again, that's star 1 to register a question at this time. Today's first question is coming from Scott Searle of Roth MKM. Please go ahead.

Speaker Change: To pick up the handset before pressing the star keys.

Then Thats Star one to register a question at this time.

Today's first question is coming from Scott Scott Charlie.

Scott: Ralph M. Kam. Please go ahead.

Scott Wallace Searle: Hey, good morning. Thanks for taking the questions. Hey, Romil, maybe just to dive in on the 2024 outlook, you know, looks like you're looking for double-digit growth on the connectivity side of the equation. I'm wondering if you could give us a little bit of color as well as connected units and how you're thinking about our booths.

Scott: Hey, good morning, Thanks for taking the questions Hey, Ronald maybe just to dive in on the 'twenty 'twenty four outlook you know it looks like it sounds like Youre looking for double digit growth on the connectivity side of the equation I'm wondering if you could give us a little bit of color as well is connected units and how youre thinking about ARPA you were bottoming out it seems like there were some low end end of life.

Romil Bahl: We're bottoming out. It seems like there's some low end in life. Aditya Dagaonkar, Romil Bahl, James Reynolds, Kore Grp Hldg. Okay, thanks, Scott. I'm going to struggle to remember all of those, so let's just come back and remind me as we go.

Scott: Our connections that are now gone so should we start to see an upward trajectory and as an extension of that looking at the T. C. V pipeline I'm wondering if you could give us an idea of what the annual recurring revenue component looks like I think of back of the napkin math would say something like 15% or so of that funnel would be a or I'm just trying to get my hands around that and the T. C D wins that.

Romil Bahl: Yeah, look, the fundamental thing is what you nailed absolutely correctly at the front end of your questions, which is, you know, the 2G and 3G behind us in a simple P2Q business, price times volume type business, when you had both forced churn of devices coming off 2G and 3G networks and our PUDA clients that were averaging about 20% a year for every one of the first four years I was here. It When I joined the business, it was in the neighborhood of 6 million SIMs. You know, we've more than tripled that, and we obviously haven't tripled revenue. So yeah, a lot of that was given back to the fundamental price differences of an LTE 4G, 5G type environment over 2G, and 3G. When that goes away, and as the volume growth gets back to, I'll say, pre-COVID type levels, anywhere close to the 25-26% CAGR we've grown volume at, connectivity becomes a very exciting business. And we're certainly starting to show that here in 2024, which will actually be 20% approximately top line growth. Not all of that is organic.

Scott: You've got in 2023 in the fourth quarter.

Speaker Change: [laughter], Okay. Thanks, Scott.

Speaker Change: I'm kind of struggling to remember all of those so let's let's just come back and remind me as we as we go.

Speaker Change: Yeah look the the fundamental thing is is what you mailed it absolutely correctly at the front end of your questions.

Speaker Change: Which as you know with <unk> behind us.

Speaker Change: And a simple pizza business price times volume type business.

Speaker Change: When you had both forced churn of devices coming off two G. Intrigued me that works.

Speaker Change: And our product lines that were averaging about 20% a year for every one of the first floor for 40 years I was here.

Speaker Change: Yeah, it's it's tough to do that kind of business right. When I joined the business. It was in the neighborhood of 6 billion Sims.

Speaker Change: Triple that and we obviously havent triple revenue. So yeah, a lot of that was given back to the fundamental differences of our LTE or <unk> type of environment and what was your tissue when that goes away.

Speaker Change: And as the volume growth gets back to I'll say pre COVID-19 type levels anywhere close to the 25, 26% CAGR, we've grown volume at connectivity becomes a very exciting business and we're certainly starting to show that here in 'twenty, 'twenty, four which would actually be 20% approximately topline growth not all of them that is ROE guy.

Speaker Change: And as I said, we're still growing red or our volume growth was stable and back on the P side of the equation.

Romil Bahl: And as I said, we're still growing, right? Our volume growth is still coming back. On the P side of the equation, we have seen stabilization, which we talked about last year, after a sort of low point in ARPUs, average ARPUs for a quarter. I think it was Q3.

Speaker Change: We have seen the stabilization, which we talked about last year. After a sort of low point of our booze average arpus for a quarter I think it was Q3.

Speaker Change: He serves me correctly.

Speaker Change: 95 cents, we saw stabilization to slight increase last year.

Speaker Change: Just sort of the 90, 899% level at the end of the year and actually Q1's coming in at a buckle.

Speaker Change: And that that may not sound like a lot, but for us it's it's like Nirvana.

Speaker Change: Mike This is what we've been saying what happened between the higher bandwidth that all costs.

Romil Bahl: [inaudible] and just the stopping of this notion of high-priced ARPU devices coming off and low-priced ARPU devices coming on. So that's really the fundamental driver is IoT connectivity. In terms of the outlook and the confidence, and yeah, I would also say that our high bandwidth product set and pre-configured solution set have gotten off to a really great start. So let me take a pause there, see if that makes sense. And then I think you asked a question about TCV, and I forget what else, Scott. Yeah, that was perfect.

Speaker Change: And just the right stopping off this notion of high priced harpoon devices coming off in full price sell through of devices coming on so.

Speaker Change: So that's really the fundamental driver is Iot connectivity.

Speaker Change: And in terms of the outlook.

Speaker Change: And yeah, I would say also that our high bandwidth products set and pre configured solutions that has gotten off to a really great start.

So let me take a pause let's see if that makes sense and then I think you asked a question about PCB and I forget what else Scott.

Romil Bahl: It's nice to hear the increase in the ARPU, but it just needs to translate the TCV then into what an ARR opportunity looks like. So the annual recurring revenue component. Yeah. So look, the first thing I'll tell you is that since sort of the middle of last year, Q3, when Paul and I spent a lot of time with our teams analyzing what was going on with the deferrals, and you're well-known, Scott, as obviously a very good IoT analyst, and you know all the inventory and modules and all these problems that were out there, people were using up those inventories that they had stocked And so we said, "What?

Yeah that was perfect nice to hear the increase in New York, who but do you just to translate the T. C. V. Then into what an E. R. R opportunity looks like so the annual recurring revenue Yeah Oh.

Speaker Change: You know.

Scott: Yeah. So look so so the first thing I'll tell you is that since sort of the middle of last year Q3, when when Paul and I spent a bunch of time with our teams analyzing what was going on with the deferrals and.

Scott: Scott is a oh.

Scott: Obviously a very.

Scott: We've got a good Iot analyst and you know all the inventory of modules and all of these problems that were out there are people who are using up those inventories whether it's in COVID-19 driven supply chain constraints. So there were deferrals across the board and we were impacted as well and so we said yeah. It just doesn't make a lot sense to have a you know so much.

Scott: Volatility forest, if you will into our numbers, because we're not really well on the business.

Scott: We already are and so as we've as we've increased our focus on connectivity in Q4, we were near 87%.

Romil Bahl: Yeah, it just doesn't make a lot of sense to have, you know, so much volatility forced, if you will, into our numbers, because we're not a really volatile business. We are an ARR business. And so as we increased our focus on connectivity in Q4, we were near 87%. [inaudible] you know, we get from our solutions customers. So, if anything, that 87% should be stable and maybe even increasing, which is a really cool part of our business. Great, perfect. And last one, if I could, the respiratory telemetry win is very interesting.

Recurring revenue right.

Scott: Just connectivity at Gip.

Is that level this year Scott in 'twenty 'twenty four.

Scott: The strike will be you know almost between 78 and 80% is budgeted at least these solutions. So you're overcoming revenue starts with a base of 70 and 80% of when you add all of the program.

Scott: You know, we got from our solutions customers.

Scott: So if anything that 87% should be stable that maybe even increasing which is a really cool part of our business model.

Speaker Change: Great perfect and last one if I could.

Speaker Change: On the respiratory telemetry when he's very interesting you guys have historically been very strong I think in cardiac telemetry, how big is the respiratory telemetry market and Ah Theres some bigger opportunities behind this as we look into our current year and beyond thanks.

Romil Bahl: You guys have historically been very strong, I think, in cardiac telemetry. How big is the respiratory telemetry market? And are there some bigger opportunities behind this as we look into the current year and beyond? Yeah, no, you know; we are excited about that win.

Yeah no.

Speaker Change: How.

About that win and by the way we've had a really good reputation with that customer over a long time.

Romil Bahl: And by the way, we've had a really good reputation with that customer for a long time. And this was finally where it started to come together. I mean, my head of health would say he's been chasing this opportunity for several years, not just a one or two year enterprise-type sales cycle. And obviously, when they went through their sort of versus bill decision, you know, decades worth of experience and engagement. And, you know, the IoT managed services model was a key differentiator reason why we won that deal. Now, to the size of the market specific question, respiratory therapies are, in general, today smaller still than cardiac rhythm monitoring, which is, of course, dominated by the big three.

Speaker Change: And this was finally, where it's starting to come together I mean, my my head to help lets say he's been he's been chasing this opportunity for several years not just a one or two the enterprise type sales cycle.

Speaker Change: And obviously when they went through their own sort of buy versus build decision.

Speaker Change: Decades, now worth of experience and engagement and.

Speaker Change: The Iot managed services model, where key differentiator is the reason why we won that deal now.

Speaker Change: The size of the market specific question respiratory therapies are in general today smaller still then cardiac rhythm on it right, which is of course dominated by the big three but it is growing significantly faster Scott and so there's actually a and in fact last night I was meeting with our European.

Romil Bahl: But it's growing significantly faster, Scott, and so there's actually an impact. Last night, I was meeting with our European connected health sales team. And they're looking at about 50 opportunities in the connected health clinical trial space that are very exciting. And a good chunk of those, I'd say about 20% of those TCV dollars are actually focused in and around this respiratory area. There's, there's one opportunity with a phenomenal 5 million customer number. Now, you know, how long does that take?

Speaker Change: <unk> connected health sales team and Theyre looking at about 50 opportunities in the connected health clinical trials, but it's a very exciting and a good chunk of those about I'd say about 20% of those D. C. V dollars are actually focused in and around this respiratory area. There's there's one opportunity with a nominal 5 million customer number and now you know how long does that take us.

Scott Wallace Searle: Yeah, take us to actually when we win and all that I'm not I'm not committing that, right? All I'm saying is, it's an exciting little segment of connected health, not the whole thing, and growing fast. Great, thanks so much. I'll get back to you.

Speaker Change: So actually when do we went and all that I'm not I'm not committing that right Oh, what I'm, saying is it's a it's an exciting little segment of connected health and growing fast.

Speaker Change: Great. Thanks, so much ill get back in the queue.

Scott Wallace Searle: And that's about it. Thank you. The next question is coming from Michael Latimore of Northland Capital Markets. Please go ahead. All right, great. Good morning.

Speaker Change: Right.

Speaker Change: Yeah.

Speaker Change: Thank you. The next question is coming from Michael Latimore of Northland Capital markets. Please go ahead.

Michael James Latimore: Hey, great. Good morning, Thanks very much.

Michael James Latimore: Thanks very much. Yeah, we're all on the decision to focus more on higher-end hardware and reduce the lower-margin hardware business. Can you just elaborate on that a little bit? You know, historically, I don't know what percent of the pipeline has been this lower-margin hardware; is it in different verticals? Maybe just elaborate a little bit more on that. Yeah, no, look, I mean, so let me just start with some basics that you are well familiar with, Mike, and then, you know, Paul may want to jump in at the end to sort of clean up my story here if I miss anything.

Yes.

Michael James Latimore: This decision too.

Michael James Latimore: Focus more on higher end hardware reduce the lower margin hardware business can you just elaborate on that a little bit historically I don't know what percentage of the pipeline has been this lower margin hardware.

Michael James Latimore: Current vertical I'm, just maybe just elaborate a little bit more on that.

Speaker Change: Yeah, No look I mean, so let me just start with some basics that you are well familiar with Mike and then you know Paul May want to jump in on the end to sort of clean up my story here, if I Miss anything, but so the first thing of course as you know, we're not a manufacturing shop or not a device or a hardware manufacturer and so we won't be there.

Romil Bahl: But so the first thing, of course, is that we're not a manufacturing shop; we're not a device or hardware manufacturer. And so we've only resold other parties' devices if it was, simplifying the complexities for the customer, right? That's our tagline: simplifying the complexities for our team. So it was just easier for us to get the container of whatever was coming from Taiwan or wherever and then configure those devices and get them out into the field, right, with our pick, pack, configure, ship type services and management services and then the reverse supply chain type services. And we were happy to do it, right? Now on the hardware piece stand alone, you obviously didn't make particularly good margins. In some cases, it was embarrassing to go single-handedly to get margins.

Speaker Change: We sold.

Speaker Change: No other parties devices if it was.

Speaker Change: Simplifying the complexity for the customer that's her tagline simplifying the complexity by a piece of it.

Speaker Change: It was just easier for us to get the can pay or whatever it was coming from Taiwan or whatever and then configure those devices.

Speaker Change: And to the.

Speaker Change: Right with our pick pack configuration type service management services and then the reverse supply chain type services, we were happy to do it right now on the hardware piece stand alone you, obviously didn't make particularly good margins in some cases it was embarrassing the low single digit margins.

Romil Bahl: But we did it again in the context of simplifying it for the customer, for winning everything else, for having connectivity in every device that went out there, and all the other good reasons. You know, IoT solutions exist as a strategy for us, right? So, you know, what we then found was since it was, you know, relatively easy dollars to add up, and it tends to be front-ended in these three, five-year-type contract cycles, so meaning hardware revenue, right? That in some cases, I mean, it was probably between 25 and 30 percent of our funnel, actually, right? When we looked at it hard towards the end of Q3 last year, we said, boy, this is, You know, this is starting to be too much.

Speaker Change: And but we did it again in the in the <unk>.

Speaker Change: So simplifying it for the customer for living everything else, we're having activity in every device that went out there and all the other good reasons.

Speaker Change: Iot solutions exist as a strategy for us right.

Speaker Change: So you know what we then found was since it was so it's relatively easy to add up and it tends to be front ended in the three five year type contract cycles.

Speaker Change: So meaning hardware revenue right that in some cases I mean, it was and it was probably between 25 and 30% of our funnel actually right. When we looked at it hard towards the end of Q3, Austria, and we say boy. This is.

Speaker Change: This this is starting to be too much. It's it's introducing volatility and lumpiness into a business, that's solid and sort of maybe could be public you know recurring in nature or 80, 587% recurring in nature. It is as I said earlier to Scott's question.

Romil Bahl: It's, it's introducing volatility and lumpiness into a business that's solid and sort of made to be public, you know, recurring in nature, 85-87% recurring in nature, as I said earlier to Scott's question. And so we, you know, and by the way, at the end of all of that, we get, you know, fives and sevens and tens of percent margin on that business. Why are we doing this?

Speaker Change: When you go in and and by the way at the end of all of that we get you know fives and sevens and tens of percent margin on that business. What why why are we doing this.

Romil Bahl: So again, we'll do it if the customer insists. We'll do it when a customer says, I don't want to spend all this CapEx, Romil, I want to, you know, let you guys buy it for us and lease it out to me over 36 months or 24 months or whatever. In those cases, of course, we'll continue to do it, but we just won't, we won't let it be such a drag on our overall margins. By the way, IoT solutions are already showing a real uptick. Remember how IoT solutions were even as low as 27, 28%, 30% when it was very hardware-driven? We're already kind of creeping into the mid-30s. And as I've long said, our goal is to get to 40%, and there were two or three drivers of that, including pre-configured solutions, which are by definition higher-margin, and including hardware becoming a smaller portion of our total revenue base. So those are the reasons, but let me just give Paul the opportunity to add anything. Yeah, yeah, the only thing I would add, Mike, was, during, Unknown Speaker We're in a full fiscal year for IoT solutions. We were 92 million ish.

Speaker Change: So again, we'll do it if the customer insists we'll do it when a customer says I don't want to spend all this capex, where all my life.

Speaker Change: You know that you guys buy it for us in Opex that Jimmy over 36 months or 24 months or whatever but in those cases of course, we'll continue to do it but.

Speaker Change: But we just won't we won't let it be such a drag on our overall margins.

Speaker Change: By the way Iot solutions is already showing a real uptick you remember how Iot solutions was even as low as 27 and 28%, 30% when it was really a hardware driven.

Speaker Change: We're already kind of creeping into the mid Thirty's as I've long said, our goal is to get to 40% and they were two or three drivers of that including pre configured solutions, which are by definition the higher margin and then putting hardware, becoming a smaller portion of our total revenue base. So those are the set of reasons, but let me just give paul will be opportunity to add anything.

Paul: Yeah, Yeah, the only thing I would add Mike was like so during the full fiscal year or Iot solutions. We were 92 million ish and then we in 2022 dropping down to about 74 million. So you have a say roughly 20 million dropped this year now some of that as we talked about.

Paul Holtz: And then we will drop down to about 74 million in 2022. So you have a roughly 20 million drop this year. Now some of that, as we talked about, was from the deferrals and so forth. But as we go into next year, and as we indicated that we're forecasting that solutions will decline more, that is because we're taking out this lower-margin business. So you're talking about 20 to 25 million of lower margin hardware that we're going to currently let go or not forecast in, like Romil said, if we need to take it and a customer is insisting that we'll do it. But from a forecast perspective, and guidance perspective, we're assuming it's not there. Yeah, yeah. Okay, I got it. That's very helpful.

It was from the deferrals and so forth, but as we go into next year and as we indicated that where we're forecasting that solutions declined more batteries because we're taking of this lower margin business. So you're talking about 2020 to 25 million of lower margin hardware that we're gonna.

Speaker Change: Right right now currently let go or not forecasting like almost static if we need to take it then that customers insisting that will do it but from a from a forecast perspective and guidance perspective, where we're assuming it's not there.

Speaker Change: Yeah, Yeah, Okay got it that's very helpful.

Speaker Change: I guess just on the.

Michael James Latimore: And then I guess just on the macro here, you know, can you talk just a little bit about your different views and, you know, a wide and diverse view of the IoT market? And what's your thought on the IoT market broadly this year? Is it accelerating?

Speaker Change: The macro here can.

Speaker Change: Can you talk just you guys have a pretty diverse view and why did the diversity you're into the Iot market.

Speaker Change: What's your thought on the Iot market is just kind of broadly this year or is it accelerating is it stable or declining a little bit and any kind of big picture yourself that'd be helpful.

Romil Bahl: Dave will define a little bit about any kind of big picture stuff that would be helpful. Yeah, no; I appreciate the big picture question. You know, we've never been sort of more bullish on this market growing than we are right around now. We've long sort of said that the trends were all in our favor, right? The world wants more connected devices and wants more data. You know, we can hype AI all we want, but AI without data sort of doesn't do much.

Speaker Change: Yeah, No I appreciate the the Big picture question.

Speaker Change: You know, we've we've never been sort of a more bullish on this market growing than we are right around now and we've long sort of sad.

Speaker Change: That the trends were all in our favor right.

Speaker Change: The world wants more connected devices once more data you know we can high Bay I, all we want but without data sort of doesn't do much [laughter]. The first step of all of this AI stuff working out is our guys like us connecting devices and getting data back to you. So you can apply your algorithms right.

Romil Bahl: The first step of all of this AI stuff working out is guys like us connecting devices and getting data back to you so you can apply your algorithms, right? So that was a big trend. All of this edge, edge compute, edge to cloud type movement is a helpful trend, obviously, higher bandwidth things as 5G matures. One of my key talking points at the Embedded World Conference in Nuremberg yesterday was about the convergence that's coming, including with satellite. And then, of course, the closest to our hearts at the core is Ether, right? And depending on who you believe, somewhere between three and five billion ETH will be shipped between now and the end of the decade, right? And we certainly think we have the leading proposition there, OmniSIM with its downloadable characteristics, SuperSIM from the old Twilio SuperSIM, which is probably one of the most stable, dependable, reliable products out there.

So that was a big trend all of this edge compute.

Speaker Change: Edge to cloud type movement as it is a helpful trend, obviously higher bandwidth thing there's five due matures one of my key talking points at the embedded World Conference in Nuremberg yesterday. It was was about the convergence that's coming including the satellite.

Speaker Change: And then of course, you know the closest to our hearts of quarters visa right.

Speaker Change: And depending on who you believe somewhere between three and 5 billion. These things get shipped between now and then ended the decade right and we certainly think we have the leading.

Speaker Change: Proposition there omni San with its downloadable oh characteristics Super setting from the old Twilio Super said, which is probably one of the most stable.

Speaker Change: Now you know dependable reliable products out there in our next generation is going to combine the best of those most of those two and if we can get sort of more than our share or if that could be duty and say well more than our fair of the of that Esim shipping. That's gonna go on as the World goes into more global deployment takes regional P. O season says.

Romil Bahl: Our next generation is gonna combine the best of those two. And if we can get sort of more than our share, if I could be greedy and say, well more than our share of that ECIM shipping that's gonna go on as the world goes into more global deployments, takes regional POCs and says, all right, let's go global. We've never been more bullish about this sort of volume growth and our positioning. At the end of the five years of investment, our position will take advantage of those trends. Okay, great. And then just a real quick one.

Speaker Change: Alright, let's go global.

Speaker Change: You know, we've never been more bullish about sort of volume growth and and our positioning at the end of the five years of investments are positioning us to take advantage of those trends.

Speaker Change: Okay, Great and then just a real quick one.

Michael James Latimore: Should we assume the first quarter is sort of the low point of the year, and you get some sequential growth from there, or how should we think about the pattern throughout the year? Yeah, I mean, you're absolutely right. But that's, that's, that's pretty much always our pattern. So it's, it's a great question. We do fully expect Q1 EBITDA, even though it'll be the largest quarter we've had in the last five or six, to be our lowest. And by the way, Mike, I mean, just to make sure you noted that, you know, that's with no one-time cost being invested. Significant step up in our profitability across the board, but we do expect Q1 to be our lowest. I mean, obviously, all of our payroll expenses, taxes, that sort of thing, you know, will start to go down.

Speaker Change: Should we assume that first quarter is sort of in the low point of the year and you get some sequential growth from there or how should we think about the split pattern throughout the year.

Speaker Change: Yeah.

Speaker Change: But that's that's pretty much always our powder and so it's a it's a great question. We do fully expect Q1, EBITDA, even though it'll be the largest corridor.

Speaker Change: Halved in the last five or six.

Speaker Change: To be all of a sudden and Mike I mean, just to make sure. You noted that you know that's with no one time cost to be invested.

Speaker Change: So I think that's it.

Significant step up in our profitability.

Across the board, but we do expect that the Q1 to be our lowest I mean, obviously all of our payroll expenses taxes that sort of thing you know start to go down and of course, we anticipated growth on the top line. So if Q1 is going to be in that call. It 70 $576 million range and hopefully close to 20.

Romil Bahl: And of course, we anticipate growth on the top line. So if Q1 is going to be in that, you know, call it 75, 76 million range, and hopefully close to 20% of that's EBITDA, and you're getting closer, right, you're increasing that 75, 76 top line going forward, and your OPEX is actually going down, right, we expect that to increase. But Paul, would you add anything, or did I steal all the thunder?

Speaker Change: That's EBITDA are in Europe, and you're getting closer right, you'll get your increasing about 70 576 topline going forward.

Speaker Change: Opex is actually going down and we expect that to increase but Paul would you add anything or did I steal your thunder.

Paul: Yeah, Yeah, No How're you you you got it.

Paul Holtz: Yeah, no, you got it. All right. Awesome. Thanks very much.

Paul: [laughter] alright.

Speaker Change: Thanks, very much good luck this year.

Michael James Latimore: Good luck. Thanks Mike. Thank you. The next question is coming from Meta Marshall of Mork & Stanley. Please go ahead.

Thanks, Mike.

Speaker Change: Thanks, Mike.

Speaker Change: Thank you. The next question is coming from meta Marshall of Morgan Stanley. Please go ahead.

Mary: Hi, this is Mary on Formida. Thanks for taking our question. I want to ask you a question and the deferrals. Do you have a YouTube account? Yeah, no. Thanks, Mary, and we'll do our best to meet up.

Speaker Change: Hi, This is Mary on for meta Thanks for taking our question I wanted to ask you about the deferrals do you have a sense of when those projects regime and then.

Mary: What have been some of the hang ups to some of those drug trials. Thanks.

Mary: Yes, it's Marianne our best to meet out hopefully, we'll talk to her soon but look.

Romil Bahl: Hopefully, we'll talk to her soon. But look, first of all, you know, this is, as I was saying, I think, in my response to Scott or Mike earlier, even on this call. This has been a phenomenon. I mean, if you look at Sierra, I know that's now, I guess, just a line in the Semtex business, or really anybody out there, right? When there was a bit of panic around supply chain issues in 2022, for sure, people piled up inventory. Our number one customer, our largest customer. But we were doing the math the other day, about five and a half years' worth of stuff in a year, right?

Marianne: First of all you know this is as I was saying I think in my response to for Scott or Mike earlier, even this on this call.

Ben: This is Ben.

Ben: Nominal.

Ben: If if you could get that.

Seattle right now that's now I guess, just a line in centex business or really anybody out there right. When there was a bit of panic around supply chain issues in the 'twenty one 'twenty two for sure.

Ben: People powered up our inventory our number one customer our largest customer.

Ben: But we were doing the math the other day about five and a half year's worth of stuff and again right.

Romil Bahl: So that's stuff that's just sitting out there, whether that's healthcare devices, food devices, whatever devices they are, everything else that comes with them, the modules and so forth, has to be used so that customers can keep order. And who, by the way, introduced them to a risk-off environment in the market, more focus on expenses than ever, people watching their inventory levels at the end of the year, on and on and on. And, and we actually saw sort of a reverse, right, the pendulum going all the way to the other direction, of people really thinning out their inventory before they ordered. Most are, for the most part, related to what the industry has seen in the inventory levels needed to be used up. I mean, it's quite remarkable.

Ben: So that's stuff that's sitting out there whether that's health care devices devices whatever devices. They are one of the thing else that comes with it the modules and so forth has to be unique.

Ben: Perspective.

Ben: Customers can keep order.

Ben: And Oh by the way introduce them, a kind of a risk off environment the market more Chris on expenses than ever people watching their inventory levels at the end of the year off and on and on and and we we actually saw a sort of a reverse right. The pendulum going all the way or the other direction.

Ben: If people really sitting out.

Their inventory before they order so the sort of deferrals.

Ben: Our.

Ben: Most for the most part related to what sort of industry and his team and the inventory levels needed to be used up I mean, it's quite remarkable I I'll give you. One example, with our largest absolutely largest customer we have a P O.

Romil Bahl: I'll give you one example: with our largest, absolutely largest customer, we had a PO that we thought we were going to fill and deliver in Q3. And we pushed it back into Q4, and then we would have to push it back into Q1, right? I mean, this is amazing. We didn't ship anything to our largest customers since about June last year. And that's sort of an extreme example.

Ben: That we thought we were going to.

Ben: Phil It delivered in Q3.

Pushed it back into Q4, and then we will have to push it back into Q1 right. I mean, so there's amazing didn't ship anything to our largest customers since about June last year, and that's that's sort of an extreme example, but in other cases, because it depends on the deal and said you know what we're going to get our inventory levels down to the targets that are triple it.

Romil Bahl: In other cases, they just didn't send us the deal and said, you know what? We're going to get our inventory levels down to the targets that our CFO has set for us or our CPO has set for us, we're just going to defer ordering. All of that will come back over the next few quarters as those customers get back to business as usual with the new inventory levels, right? With the new target levels, so that's sort of not worrying. The last part of what you asked, though, Barry, is sort of interesting, and certainly in the healthcare space, the growth of resources, the resources being reallocated to problems like pandemics and those kinds of situations. So the availability of those knowledgeable resources to drive the digital transformation, which is IoT enabling clinical trials or technology enabling clinical trials or data capture more generally. Those resources just weren't there. Some clinical trials were delayed because they didn't have enough resources, nurses, and the like to actually run the trials.

Ben: C P. A a sub for us where we're just going to defer wondering how all of that will come back over the next few quarters as those customers get back to the business as usual with the new inventory levels right with the new private label. So that's that's sort of not worth it.

Ben: Last part of what you all still there is sort of interesting is.

Ben: Certainly in the healthcare space.

Ben: Both of these sources the resources being reallocated.

Ben: Okay.

Ben: That makes them.

Ben: A couple of situations so.

Ben: So the availability of those knowledgeable tech resources to drive the digital transformation, which is.

Ben: Iot, enabling clinical trials are red technology, enabling clinical trials are garnering data captured more generally.

Ben: But those resources just weren't there some clinical trials will be delayed because they didn't have enough resources nurses and the like so actually running falls right. So those things again, the industry is addressing a well balanced well balanced out over time and we'll pick up none of these are worrying trends there that you know I've been known to say that.

Ben:

Ben: As we wind our.

Ben: Hands in America I've been watching destroyed after 30 years of Oh, My God, There's a 10% 15% of GDP, it's like Oh, My gosh, 20% of it.

Mary: So those things, again, the industry is addressing, will balance out over time, and will pick up. None of these are worrying trends, but I've been known to say that as we wring our hands in America, I've been watching this story now for 30 years of, oh, my God, 10 percent, 15 percent of GDP is gone, oh, my gosh, 20 percent is, I think we're going to 40 And so all of this is going to come back, and Connected Health was, you know, really the single best bet we've made outside of recent. Great. Thank you. Thank you. At this time, I'd like to turn the floor back over to Mr. Bahl for closing comments. Well, I really want to say thank you to everyone for your interest in attending our call here. I look forward to updating you with our first quarter results in, what, the next five, six weeks.

Ben: I think we're going to 40, and 50% right and so all of this is going to come back in and connected health as you know.

Ben: Single Best bet, we've made outside of Houston.

Speaker Change: Great. Thanks.

Speaker Change: Thank you.

Speaker Change: Thank you at this time I'd like to turn the floor back over to Mr Ball for closing comments.

Mr Ball: Outstanding well I really wanted to say thank you to everyone for your interest are attending our call here I will look forward to updating you with our first quarter results and what the next five six weeks. Thank you very much.

Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines have log off the webcast at this time and enjoy the rest of your day.

Speaker Change: Okay.

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Romil Bahl: Thank you very much. Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day. [inaudible] , , , , , , , , , , , , , ,

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