KORE Group Holdings, Inc.

Greetings. Welcome to the Core Wireless Group's fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Vik Vijay Vigarya. Thank you. You may begin.

Thank you, operator. On today's call, we will be referring to the fourth quarter and full year 2021 earnings presentation that will be helpful to follow along, as well as the press release filed this afternoon that details the company's fourth quarter and full year 2021 results, both of which can be downloaded from the investor relations page at ir.corewireless.com. Finally, a recording of the call will be available on the investor section of the company's website later today. Please note that this webcast includes forward-looking statements, statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions are forward-looking statements and are based on assumptions and beliefs as of today. The company encourages you to review the safe harbor statements, risk factors, and other disclaimers contained on this slide and today's press release, as well as in the company's filings with the Securities and Exchange Commission. which identifies specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that on this call, it will be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or GAAP GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. I'll now turn the call over to Romel Bell, the company's president and chief executive officer.

Thank you, Vic. Good afternoon, everyone, and thank you for joining us today for our fourth quarter and full year 2021 earnings call. My name is Romel Bell, and with me is Paul Holtz. I am pleased to announce, in case you missed our press release last week, that Paul, who just celebrated his five-year anniversary at Core and has been serving as interim CFO since November, has been named Core's EVP Chief Financial Officer and Treasurer. My congratulations to you, Paul, and I know our entire team looks forward to partnering with you on our exciting journey ahead. On to the objectives of our call today. First and foremost, we will provide an overview of our financial results for Q4 and full year 2021. I will provide a brief summary of our results, and then Paul will take you through additional detail later in the call. Second, we want to continue to help the market understand what we have built here at CORE. it is clear that as the first pure play IoT company in the public markets, we are not well understood. This is why on our last earnings call, I spent some time introducing the company and providing an overview of our services, our market and growth dynamics, our strategy and competitive positioning, and even shared a customer use case example. Today, I will elaborate on how we are well positioned to take advantage of our tremendous opportunity over the course of the next decade and beyond with world-class intellectual property, or IP. The deep dive topic for this quarter is hence our innovative technology stack and how we enable our customers to build the IoT building blocks that are fundamental to their success. We will then hold a Q&A session to round out the call. Let's look at our fourth quarter and full year 2021. And as summarized on slide four, we recorded strong revenue of $64.3 million. These results continue to be aided by a significant project with our largest customer, which will be substantially complete by the end of Q1 2022. Our full year revenue for 2021 was $248.2 million. up roughly 16% over 2020. Our adjusted EBITDA grew over $2 million 2021 over 2020, despite significant public company costs and increased people costs, which Paul will discuss further. And now let's look at our outlook for 2022. Adjusted EBITDA in the range of $63 to $64 million and revenue in the range of $260 to $265 million is the guidance we are providing today. We now confidently expect to exceed $508 million in revenue for the 2021-22 two-year stack period compared to the $457 million we forecast in our GO public model, which was comprised of $219 million in 2021 and $238 million in 2022. I should also note that this increased revenue expectation comes directly in the face of some of the strongest headwinds facing the industry. The sunsets of 2G and 3G networks are well documented and have impacted our business, as have supply chain constraints and some issues unique to core. Despite these challenges, we continue to deliver good growth even as 5G infrastructure is just beginning to take hold, further brightening our growth prospects over the decade of IoT ahead. It is now time to move into the deep dive topic of our earnings call, a quick overview of our powerful IP story. But let me start with a quick reminder of Core's growth strategy. When we say we are the world's only pure play IoT enabler, That means something specific to us. First, we attack the very complexities that have held back IoT. We help our customers deploy, manage, and scale their IoT solutions with a broad range of services spanning connectivity, solutions, and analytics. The enabler part refers to the fact that we do not deliver end solutions or applications to the end customer or end consumer or patient. Rather, we are a pure B2B company and we enable these business and enterprise customers to provide end solutions. So we are not asking our investors to make a particular bet on any one use case and how we will be the best at it against our competition. Instead, we grow with IoT in general and this is a huge growth market. From 12 billion IoT devices at the end of 2020, to $75 billion by 2030. $9 trillion in value by 2030 is the midpoint of McKinsey's analysis on the IoT market, updated just recently, in fact. And as a reminder of why IoT deployments are so complicated, here on slide six is our seven by seven deployment framework. The colors overlaid showcase how we function as the only pure play enabler of IoT, the one-stop shop. I do not intend to take you through this chart in any detail, but just want to point out that what we are doing is taking every step of this deployment lifecycle and making it more efficient, putting more intelligence into our software, into our platforms, making IoT easy to adopt. Not so much the first two steps, which consulting firms might be involved with, But starting at step three, which is connectivity. Steps four, five, six, which are the set of IoT managed services we have been building out more recently. And finally, step seven, which comprises analytics and represents a huge opportunity for our future. Our technology, our IP, is at the very heart of our value proposition. Without our IP, we cannot deliver our promise. For example, the multi, multi, multi IoT CAS offering doesn't get off the ground without a multi-tenant, multi-carrier, device agnostic and technology agnostic IoT platform. And many of our customers' applications and use cases don't get off the ground without our connectivity as a service. It is just too complicated. So in summary, across connectivity solutions and analytics, we continue to simplify IoT adoption by putting more intelligence into our software and platforms, and that is what I will showcase today. Our technology stack enables our customers with an easy way to assemble and configure the IoT building blocks they need to deploy their end solutions. IoT building blocks start with edge devices depicted at the bottom of this slide. and end with the data being delivered to the IoT applications depicted at the top. Each device needs one or multiple SIM cards. We believe these will increasingly be eSIMs and then iSIMs as companies understand the power of the EUICC standards. And our eSIM offering is branded Core OmniSIM in multiple versions, example OmniSIM Reach and OmniSIM Rush. These connectivity management services are delivered through the combination of three key technology stacks. First, our core one platform, which has seven open, modular, and scalable engines. The seven engines uniquely address the biggest IoT challenges, example data aggregation, data streaming and analytics, rating and billing, network intelligence using metadata, north and southbound integrations, and a robust API UI interface. Importantly, the Core One platform enables us to create services for our customers, but also enables our customers to build their own applications and services. These Core One engines help deliver the world's leading multi-multi-multi connectivity proposition. Multiple devices and technologies in multiple regions and countries in the world with multiple protocols. Second, our HyperCore and eSIM tech stack provides the cellular core network capabilities that enable us and our customers to drive connectivity offerings. Without our own core network, we would not be able to offer our creative multi-IMSI and eSIM global offerings. And further, with our core deployed on a licensed basis, our customers can take control of their own networks and global connectivity needs. And finally, our pre-configured solutions offer customers the ability to jumpstart their IoT journeys and reduce their time to market from an average of 18 to 24 months to 18 to 24 weeks, or even less, if they choose to use the core one-stop shop. These technology stacks are designed to comprehensively deliver world-class IoT technology services to our customers so they can create their own IoT solutions. The key IoT services we provide with our IP are depicted on the right side of the page. Our core IoT CAS offering, including our OmniSim offer, security and network intelligence services, which provide unprecedented visibility to edge devices, data management services that range from ensuring that data is coming off each customer device to transporting said data safely and securely, and in some instances, cleansing and transforming said data. And finally, industry-specific tech services for our connected health and fleet management customers, but also in the form of location-based services, which are becoming ubiquitous in their usage across industries. As shown on slide eight, Core simplifies the complexities involved in harnessing the IoT building blocks that enable customer IoT solutions. Indicated first on this slide are the four key IoT building blocks, hardware, connectivity, data processing, and support and manage services. So how do we help our customers harness these IoT building blocks into solutions? First, with the five services I just reviewed on the last slide. But then we go one step beyond in terms of helping our customers consume these services. We provide a developer ecosystem complete with a developer portal, APIs, and analytics. This self-service mode of consumption is critical to building our enterprise customer base of the future. And that leads to the real purpose of the journey, getting data to the customer applications and driving customer outcomes. As a part of enabling customer outcomes, we facilitate easy integration into other ecosystems such as AWS and Azure. We have and are investing in unique integration technologies that we jointly build with these hyperscaler partners. In a nutshell, our focus has been to build an ecosystem for enterprises and their developers to build their IoT solutions which lead to meaningful business outcomes. whether it is building a cloud-based patient monitoring service or a mobile app for pet tracking. Or it could be integrating the data into an ERP or other back office system to drive operational efficiencies. Bottom line, our IP simplifies the process at the edge so that our customers get to outcomes quickly and easily. When our partners at AWS say edge to outcome, this is what they mean. Slide 9 brings our deep dive to an end today by connecting the dots back to the different ways we enable our customers' IoT solutions. With all of our IP focused on making it easy to deploy IoT building blocks, Core is positioned to drive growth through the decade of IoT. In Core, our customers have a flexible, experienced partner, a company that has been involved in over 10,000 use cases over 20 years. a one-stop shop partner that can help with many parts of an IoT deployment. And now we are investing in pre-configured solutions. So not only can our customers get help from us across the seven steps we saw earlier, but in some use cases now, they can leverage pre-configured solutions built to solve the most difficult and most common challenges in those deployment journeys. Our industry-oriented approach to preconfigured solutions will continue to focus on the highest growth use cases in our focus verticals. Healthcare providers, for example, will be able to quickly deploy powerful connected health solutions. Companies in need of fleet management solutions can quickly harness the capabilities of our core fleet offerings. Final comment here. We believe that as we deploy preconfigured solutions at scale, we will improve the profitability of our IoT solutions business line. With that, I will now hand the call over to Paul to cover the financials in more detail.

Thank you, Romul, and good afternoon, everyone. Per slide 10, we finished a great year with a strong fourth quarter that again exceeded our internal projections and guidance. I'm extremely proud of our results and the hard work from our team. Total revenue for the fourth quarter 2021 was $64.3 million, an increase of $6.8 million, or 12%, compared to the same period last year. Revenue for the quarter was comprised of the following. IoT connectivity revenue of $43.2 million, representing 67% of total revenue, decreased $0.4 million, or 1%, compared to the same period last year. The fourth quarter of IoT connectivity revenue in 2020 was aided by an abnormally strong quarter for SIM revenue and benefited from revenue provision releases that were taken earlier in 2020 when the effects of COVID-19 on our business and customers was unknown. Removing these two factors, IoT connectivity revenue would have increased 0.6 million or 1% year over year. The remaining 21.1 million of our total revenue came from IoT solutions. representing 33% of total revenue and increased $7.2 million or 52% compared to the same period last year. As mentioned earlier, the increase in IoT solutions revenue was aided by the timing acceleration of a significant LTE transition project from our largest customers. For the full year, we delivered $248.2 million in total revenue, an increase of $34.5 million or 16% compared to the prior year. IoT connectivity revenue was $168.8 million representing 68% of total revenue and increased $10.1 million or 6% compared to the prior year. IoT solutions revenue was $79.4 million representing 32% of total revenue and increased $24.4 million or 44% compared to the prior year. Overall gross margin percentage in the fourth quarter was 48%. compared to 52% in the same period last year. This percentage decrease was primarily due to the accelerated growth from IoT solutions revenue, which comes at a lower gross margin compared to IoT connectivity revenue. Note that IoT solutions gross margins will also fluctuate from quarter to quarter depending on the mix of hardware and services in that particular quarter. We also continue to see margin pressure within IoT solutions due to a variety of reasons, which included growth at our largest customer, which has lower than average gross margin, increased hardware costs due to supply chain constraints, and higher shipping and labor costs. IoT connectivity gross margins remain relatively stable in the fourth quarter year over year at 59% in 2021 and 61% in 2020. For the full year, gross margin percentage was 51% compared to 54% in the prior year. The percentage decrease year over year was due to the same reasons that led to the decrease in gross margin percentage in the fourth quarter. Again, IoT connectivity margins year over year were stable at approximately 60%. Total connections at the end of fourth quarter was 14.6 million, an increase of 2.8 million or 24% compared to the same period last year. Dollar based net expansion rate or DBNER for the 12 months ended December 31st, 2021 was 122% compared to 106% in the prior year. We are pleased with this result, which indicates our continued success in customer retention and growth. As a reminder, we do not expect the growth of this ratio to be linear. In fact, the past two quarters results have been aided by the significant LTE transition project with our largest customer. As this project concludes in early 2022, we do expect DB and ER to decrease. Our goal and expectation, however, is to maintain this ratio above 100% and to continue to grow this metric over the long term. Moving to slide 11, operating expenses in the fourth quarter were $37.7 million, an increase of $1.1 million, or 3%, compared to the same period last year. The increase was driven by GoPublic company costs. For the full year, operating expenses were $142.1 million, an increase of $16.8 million, or 13% compared to the prior year. The key factors in the increase of operating expenses were higher sales commissions and bonuses due to exceeding internal targets, increase in salary and benefit-related items due to the constrained job market, and materially higher than expected go public company costs. Finally, as reported operating expense, was also affected by adverse foreign currency movements with certain countries where we have global or regional shared services experiencing currency appreciation. Net loss in the fourth quarter was $12.0 million, an improvement compared to the $15.7 million net loss in the prior year. For the full year, our net loss was $24.5 million compared to $35.2 million in the prior year. Adjusted EBITDA in the fourth quarter was $12.9 million, a decrease of $0.4 million, or 3% compared to the same period last year. The decrease was primarily due to the increase in operating costs from going public. For the full year, we delivered adjusted EBITDA of $59.9 million, an increase of $2.0 million, or 4% compared to the prior year. Our adjusted EBITDA margin profile is 24%, which is in line with the 27% in the prior year after taking into account the material increases and operating costs from going public in 2021. Moving to cash flow. The business used $14.8 million from operations in the 12 months ending December 31st, 2021. This compared to the business generating $26.5 million of cash for the same period in the prior year. Cash flow from operations will vary quarter to quarter based on the timing of payments, receipts of accounts receivable, as well as prepayment of inventory. In 2021, cash flow from operations was negatively affected primarily due to the large amount of inventory that required prepayment for the previously mentioned significant LTE transition project at our largest customer. In 2022 and beyond, we expect to return to generating positive cash flow from operations. At the end of fiscal 2021, Cash and cash equivalents stood at 86.3 million compared to 10.7 million at the end of fiscal 2020. This change is primarily a result of the net proceeds from the business combination and backstop financing offset by cash flow from operations and capital expenditures. Lastly, on slide 12, we are reaffirming our financial policy going forward. We are targeting to de-lever from a total senior net leverage of 3.7 times as of December 31st, 2021, to approximately three times within the next 24 months. We will do this with the free cash flow the business is expected to generate as it grows and with no shareholder distributions expected in the near term. M&A, like the recent business mobility partners and Simon IoT acquisition, is targeted to be accretive and deleveraging. We continue to look at potential targets with an emphasis on tuck-in opportunities to expand geographically, build out capabilities and use cases in industry verticals, and enhance our technical and analytical know-how. Thank you, and with that, I'll pass it back to Romo.

Thank you, Paul, and that's an impressive set of results. Let me wrap up our prepared comments with a reminder on slide 13. that we have crystal clarity on our five-year strategic plan. We are executing to a three-phase transformation plan overall. And as we move forward in 2022, we feel confident in bringing phase one to an end. I described successes earlier in the call related to OmniSim and the Core Developer Portal as just a couple of examples. But we now have a tremendous technical foundation from which to launch our industry go-to-market and eSIM leadership objectives, and then lead with 5G and analytics, which are effectively phases two and three of our overall transformation. Phase two kicked off last year with the launch of our first two industry practices, connected health and fleet management. And we have started to see encouraging results from these two launches already in terms of attracting and serving large enterprise customers and identifying opportunities to build pre-configured solutions. As an example, we launched CHTS, our connected health telemetry solution, at Mobile World Congress Americas 2021. After we build out our focus industries, and even as we continue to build on our leadership position with eSIM and iSIM, we will focus on 5G leadership and leading with analytics. As 5G matures, the promise of edge computing and AIoT, where artificial intelligence meets IoT, will come alive and we are well positioned at core to help our customers unlock this promise. We are focused on executing our growth strategy. We have ambitious goals in place and many headwinds are coming to an end as we get the technology sunsets behind us and the supply chain opens up. I am confident that we are well positioned for future growth and value creation and as slide 14 shows, we are starting to show what we can do. You heard our guidance already for 2022, and I know there were many questions about the impact of the timing acceleration of our largest customer's LTE transition project. Despite that approximately $15 million pull forward, we are confident we will organically meet our original forecast of $238 million. And we have pulled off our first tuck-in acquisition since our public listings. In BMP Simon, we found a great strategic fit representing a double down in connected health, specifically in life sciences. And with this new team part of core, our total guidance is 260 to 265 million in revenue. Importantly, given we listed on October 1, and given the moving pieces of timing, acceleration, et cetera, we talk about the 2021-2022 two-year revenue stack. And it is with delight that I sum up our call today by saying again that we will beat our go public two-year forecast by over $50 million. I want to take a moment to thank our entire global team of IoTers, as we call them, for their hard work and commitment to core. And with that, we'll take your questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please note, we ask that you limit yourselves to two questions each. If you have further questions, you may rejoin the question queue. One moment please while we poll for questions. Our first question is from Matt Nicknam of Deutsche Bank. Please proceed with your question.

Hey guys, thanks for taking the question. So I have two. I'm going to start with one on the CAS business and then I have one on the margin outlook. So on the CAS side, obviously I know beginning of this year we've seen or will see some shutdowns of legacy 2G, 3G networks. I'm just wondering how we should think about the revenue trajectory for uh connectivity um in 1q and 2q as some of these revenues begin to roll off with these shutdowns and then secondly on margins so the guide for next year calls for 24 margins which would be flat year on year yet obviously exiting uh last in 2021 we've seen margins declined about 20 percent in 4q so i'm just wondering you know what gives you the confidence that uh you know the annual outlook for next year of uh 24 percent um is sort of achievable given the lower exit rate in 21. Thanks.

Yeah, thanks, Matt. Look, on the second question on margins, I'm going to let Paul take the lead on that one, but I'll just say, I mean, our confidence stems from the fact that there's a bunch of one-time things, including this one-time large engagement at our largest customer that is the least profitable part of our portfolio customers. So, you know, it's, yeah, it's with reasonable confidence that we say what we say. But let me spend some time on the CAS, the first question myself. Look, so, you know, I understand the concern about these sunsets coming up. But, you know, I would really continue to reiterate what I've been saying for a while. We have been dealing with these technology sunsets for four, five years, right? From the time I got here, one of the first NRA is, as we call them, a core. No regret actions that we took even before we had a strategy for what Core 3.0 would look like was to get after these transitions, to get our customers moving on their migration plans, because even though there was a negative ARPU effect to us and our business, it was the right thing for them to do and so on. And so we have been dealing with these. We have been dealing with those headwinds coming from 2G and 3G devices being shut off and 4G devices coming on in their place that significantly lower ARPUs, literally for four and five years. So even as the market sits back and says, oh, my gosh, what's going to happen when these sunsets happen? We're celebrating because we're almost through this. So that's sort of overall comment number one. Overall comment number two is for the very first time in 2022, in the four plus years I've been with the company, in the five years Paul's been with the company, we have seen a rather different set of dynamics around, let's say, P times Q, which is how our CAS business runs. right? The price times the volume, right? Every year we have been growing on average over 20% on volume. And then we've been given up most all of that in price. In fact, if you looked at our average ARPU Q4 20 over Q4 21, it's almost exactly a 20% decline, right? The average ARPU for the month. However, going into 2022, we're gonna see something closer to the 10 or 12% range in terms of volume increases. And the primary reason for that is the supply chain constraints that have hit our customers and therefore indirectly, but in a very real fashion, hit us, right? Now what's saving us this year is what I've long been predicting in this business, which is that ARPUs will finally start to stabilize and maybe, just maybe, even start to grow as higher bandwidth plans Higher prices come out, and certainly with 5G, we're going to see more of that. It's just that 5G isn't particularly real and mature yet for our CAS business today. And so those are some of the things I would talk about in answering the CAS part of your question. Let me stop there for a second, and before Paul hits margin, just make sure we've hit question one.

Yep. No, you did. You did. And any commentary on margins would be great as well.

Yeah, so I'll take that one. So on the margin side and where we are from a timing perspective already in March here in 2022, we're already seeing the increase or improvement in margins on both the connectivity and IoT solution side. So firstly, on the IoT solution side, as Romo mentioned, the one-time LTE transition project with our largest customer had pretty significantly lower margins that is now going to be trailing off at the end of Q1. So we'll see a lot more of the healthier business come in for the rest of the year, and we're already seeing that in Q1. Then on the connectivity side of things, same thing. We're optimizing better. We're getting better pricing from our carriers. Overage is increasing, more usage that has higher margins. So we are seeing margins already improve in Q1, and we expect that to continue throughout 2022. So I'd say Q4 was basically kind of a low point just because of the volume of the LTE transition project. And then just with year-end and doing final crewels and everything on the connectivity side, it just ended up being a lower margin quarter.

Got it. Yeah, my follow-up is just going to be your comments of improvement in 1Q or sequential or year-on-year. But it sounds like it's off of the lower 4Q base. So I appreciate it. Yeah, off Q4. Thanks, both. Thank you.

Our next question is from Meta Marshall of Morgan Stanley. Please proceed with your question.

Great, thanks. A couple for me. Maybe first, if you could just kind of walk us through maybe the seasonality of the year and just anything we should be mindful of, whether it be a supply chain or just project-based network turnoff base that we should just be mindful of as we look at the year. And then maybe the second question is just, you know, is there any, kind of material revenue contribution we should be thinking of from Simon IoT or business mobility partner acquisitions throughout 22. Thanks.

Thanks, Betta. Let me take a crack at those two questions and then I'll glance over at Paul and see if he wants to clean up my act any. So the first one is, look, the seasonality question. So we have relatively little seasonality in our business, right? I mean, relatively speaking, the first quarter, because it's a shorter quarter with fewer weeks in February and the like, you know, tends to be a little bit lighter on connectivity. And relatively, again, to the other quarters, the fourth quarter tends to be a little bit light in the IoT solutions business, largely because between the Thanksgiving and Christmas holidays and warehouses being closed and the like, there's less shipments going up. both of those relatively minor seasonality points are sort of being overcome, if you will, by these larger movements that are happening, including the timing acceleration of our customer's largest project. So that's going to have more effect here. So what we should be looking at for this, let me talk about what we should be looking at for this year. For this year, obviously, as we've said clearly now, The one-time pull forward of our largest customer's LTE transition project largely comes to an end by Q2, sorry, by the end of Q1, and there might be a smidge of revenue in Q2, but much, much less. Equally, the little bit of contribution coming out of BMP Simon will have a full quarter in Q2, while it was obviously a partial quarter in Q1. You know, Q1 and Q2 will look sort of similar-ish, and there shouldn't be any surprises. The big question, then, is the second half of the year. Does the supply chain start to open up? Do we beat our 10% to 12% estimates of volume? And can we get more revenue from there as the rest of the business grows and as the one-time noise, if you will, comes out of our system? Those are the questions we're looking at. We'd certainly like to think that our business... is strong and the growth in the business organically will fill these holes from the one-time project coming off and that H2 will be equivalent or maybe even a bit stronger than H1. But if there's any uncertainty in the year, that's where I would point. And then, I'm sorry, I've forgotten now what your second question was. It was revenue from... Yeah, so look, so we're obviously not disclosing... you know, specifically the revenue from Simon and BMP, but equivalently you can see it, you know, I mean, we're saying we're confidently going to beat the 238 original forecast, so you want to put a number on that, and, you know, I'm not, these are not my numbers, but if your number was 240, 245, whatever that number was, you know, the rest of that 260, 265 guidance is obviously Simon and BMP.

Great.

Thank you so much.

And then the only thing I, sorry, would add to Romo's comments on the seasonality part, and it's not really seasonality, but from quarter to quarter, obviously depending on the supply constraints and things like that, or the mix of hardware shipments versus services and IoT solutions can have an effect on the revenue and, in particular, on the margins that quarter for IoT solutions. So, again, depending on how the supply chain reacts for the rest of the year, you could have some lumpy quarters in solutions.

Got it. Thank you. Thanks, Medha.

Thank you.

Our next question is from Lance Vitanza of Cowan. Please proceed with your question.

Hi, guys. I think you may have just answered this question, but the first question I have is on the revenue guide. The increase in the two-year revenue stack, 11 to 12 percent higher than at the time of your SEC filings when you were going public last year, And could you bridge that delta for us? I mean, it sounded like if I heard you right, that it's almost entirely just the acquisition of Simon BMP, but maybe I misheard that. And if there are other factors, I'm wondering if you could just sort of discuss that in terms of connectivity versus IoT services or how concentrated the upside is between verticals or amongst customers. and any negative impact from the supply chain that maybe you're offsetting with other growth, et cetera, if you could just maybe help me think through that, that would be helpful.

Gotcha, and I'm rapidly gonna forget all of the factors you mentioned there, lads, so I appreciate you confuzzling me here on this call, but let me get going. It's an interesting way to think about it. I hadn't thought about it this way about the $50 million beat, hopefully more than 50 by the time we're done, on the original sort of forecast when we were coming public. So the first thing you said is it's mostly BNP Simon, and I would say that's not true, right? So let's just, for example, look at 2021. 2021 ended up at a little over 248 million. We had said 219. Rapid math would say that's about $29 million worth of beat. We said about half of that, roughly 15, was from the one-time timing acceleration. Obviously, the rest of it, because this was 21, BNP7 wasn't even done, was our business just performing better and the UPOD model that Paul and I believe in, right? And so that's sort of an example of where it is. Obviously, I can't do that math for 22. It's all ahead of us yet. But I would just, again, reiterate that we believe that organically we will beat the original 238 by how much remains to be seen. And so I think that starts to bridge that gap for you. Now, the next level question you asked was, where is it sort of, where is the beat coming from? I will just say that in 2021, just to keep it in terms of what we've already talked about and put numbers out there on, most of the beat came from connectivity, right? Because really, while we grew in solutions, I think we would largely attribute that to the one-time LTE transition engagement with our largest customer. And so I think that provides some level of insight. And then I don't know if Paul wants to add anything.

Yeah, I think just going forward from a split, like this year we were 68-32 on the connectivity versus solutions. Next year, looking closer to 67-33. So it goes down a little bit. But because of that, LTE transition project being such a big part of this year, we are growing there to make up for that amount, but connectivity, as Romo said, is also growing. So hopefully that's... Okay, thanks.

That's super helpful, guys. My second question is just, could you talk a little bit more about the Simon BNP acquisitions? I'm wondering if you could walk us through a little bit more exactly what you acquired, the strategic rationale for doing so, And I think in the slide deck, you kind of explained this, but it looks like that is indicative of the kind of deals we should expect going forward. I'm wondering if we could also perhaps see something a bit more dramatic in terms of size and or scope going forward. Thanks.

Thanks, Lance. I think you should say dramatic a few more times for Paul to hear. But look, let me just say a couple of things on BMP, Simon, right? So You know, the way you should think, first of all, these are sister companies and kind of joint ownership and that sort of thing. There was a third investor slash founder that came in when they started Simon IoT. But it's really, it's one acquisition. I know it looks confusing because legally we had to put an and in between those two units, okay? But think of it as one company. Now, the BMP part of that company, Business Mobility Partners, does exactly what we would call IoT solutions. And Simon IoT is their connectivity business. So if you think about our business from a horizontal capability perspective, SAM and IoT goes right into our CAS, right into IoT connectivity. BMP goes right into IoT solutions. So A, we're buying more of what we know how to do. We're learning from them already in some respects. They're obviously adopting some of our best practices, certainly all of our eSIM and great technologies that they did not have access to, et cetera. We expect some synergies out of that. But here's where it gets really quite exciting. As you know, and we have said to the market, we see enough growth in connected health and fleet, and we have enough investments and work to do across our dramatic transformation and broadening of our portfolio of services that we did not want to organically invest a bunch of dollars, OPEX dollars, EBITDA dollars, into launching the three new industries that we already are targeting, and maybe there'll be others over time. So we're doubling down in that sense into connected health and fleet. And this particular acquisition represents a specific double down in connected health, and even more specifically than that, into life sciences, right, where this explosion in decentralized clinical trials, right, remote clinical trials, not just drug trials, by the way, all kinds of clinical trials, is absolutely exploding. And a very, very big part of the BMP Simons, I mean, overall small revenue, but a big part of that comes from the life sciences sector specifically. To give you a sense, about 85% to 90% of their business is from Connected Health, and 90% of that is from life sciences. And so this really filled a gap, brought some capabilities there, brought some anchored customers there, brought some great talent. And so, anyway, we're very excited about it. And as I have said to everybody who would care to listen, I couldn't think of a better first acquisition after going public. Oh, and then the last part of your question was, should we expect more of the same? You know, in keeping with what I just said about how happy we are with this acquisition, if we could find five more of these, we should just do them. We should just close our eyes and just do them. But that's unlikely, number one. And you are correct that one should be bolder, but a lot of things go into that, right? I mean, you've got to find the opportunity. You've got to win that opportunity. The private equity markets are so much more aggressive in terms of how they value businesses like ours than this public market is right now. It's not even funny. And so we have to deal with all of these dynamics. But hopefully we're going to start building our way out of all of that with this call today and get a better multiple so we can put better multiples to work out there in our M&A strategy.

Well, thanks and congratulations on a great quarter, really a great culmination of the year. So thank you.

Appreciate that, Lance. Thank you. Thank you, Lance.

Our next question is from Scott Searle of Roth Capital. Please proceed with your question.

Hey, good afternoon. Thanks for taking the questions. Nice job on the quarter, and Paul, congratulations on the official appointment. Hey, maybe quickly to follow up on some of the earlier questions. You know, as it relates to the legacy contribution, I know that's been winding down with 3G end of life, and we had some of those milestones hit in the second quarter. I'm wondering if you could frame where we are today. I think we're getting close to a million connections probably as of year end out of 14.6 million connections, so becoming more de minimis in terms of its impact. Could you just kind of frame how we exited the year, how you're thinking about that winds down over the next couple of quarters? And as part of that with the supply chain, you're still constrained in this environment. You're talking about 10% to 12% growth in terms of unit volume this year. I'm wondering what the demand profile looks like right now. In an unconstrained environment, what could you guys ship against? What is that pipeline looking like?

Yes, so that's actually, yeah, remarkably accurate depiction of where we ended the year or the beginning of this year on the number of SIMs to sort of absorb through this change. Obviously, since 2-22-22, right, that was AT&T's 3G sunset date. We're starting to wean that off. It hasn't been a dramatic all of them going off one time. Obviously, AT&T is one of our largest carriers. I think it's a relatively well-known fact that a large number of that million-odd SIMs that you just talked about are there. But then there are some with, you know, sort of the old Sprint TMO network and Verizon that have to come through. I would just say, you know, Scott, largely that's going as planned. No real major surprises. You know, it really helps that, Core is experienced at these transitions. We're one of the few companies that have actually handled this stuff before. When AT&T transitioned its 2G network a few years ago, we took our customers through that. We applied a lot of learnings from that. We've been helping our customers transition, as I said earlier today, over the last four years now. So it's been a relatively smooth process and no customers kind of pulling their hair out and that sort of thing, right? So that's that part of it. Net of that, we're still saying 10 and 12%, right? If we didn't have that drag on us, we'd be saying a bigger number, and certainly if the supply chain was more open, we'd be saying an even bigger number, right? Now, I can't really put a number out there of what that looks like, because remember, the majority of our impact are sort of indirect, right? Because it's the customer who can't get their device, they can't deploy it, and therefore, you know, we aren't getting the orders or we aren't getting the shipments and that sort of stuff. What we can control largely, you know, we have controlled relatively well. And again, I'm not in the prediction game of when supply chains open up and the like. In fact, you guys are in some ways as familiar about this because you're covering public companies and the device manufacturing space that are telling you about, you know, when they expect them to open up. But, you know, We're thinking things look better towards the end of this year, and certainly we're hoping that 2023 and 2024 is open and maybe even has some pent-up demand to get caught up on. So that's kind of where we are.

Okay, very helpful. Thanks. Oh, sorry.

Go ahead, Paul. Yeah, Scott, I was just going to add to kind of your numbers there. So you're correct around a million 2G, 3G at the end of 2021. Then at the end of Q1 with the AT&T shutdown at the end of February and then Sprint shutting off their CDMA at the end of Q1, a rough estimate or so, you can say half of those a million then are gone. So we're left with another 500,000 that will trail off or convert for the rest of 2022. Very good.

Very helpful. And lastly, if I could, Rommel, could you frame some of the end market demand in terms of verticals that you're seeing? Obviously, you're you're strong in connected health and have a strong presence there. But, you know, how the demand is shaping up there, and then also in the fleet market, particularly in an environment where you start to see cost constraints as it relates to gas and thinking about fuel optimization, et cetera, is that market starting to accelerate now? And last, if I could throw one in at the end there as well, the developer portal that you're talking about, I wonder if you could kind of give us a better idea about, you know, how many applications and otherwise how developed that is, how big that is, how important that is as we start to go forward. Thanks so much.

Yeah. So, yeah, look, I'll talk about demand signals. I mean, certainly, you know, the impacts now of gas pricing and so forth are going to hit, and we should see an increase in fuel optimization. I know we've received some requests in that neighborhood, but let me try and keep the conversation to 2021, the year we're talking about, the quarter we're talking about, you know, as opposed to getting all the way caught up on Q1 data. I would point to relatively healthy demand. Again, from a CAS, more horizontal service business, which goes across industries more naturally. We're very pleased with the progress we made in our sales and marketing effort in 2021. And then, of course, in connected health and fleet, again, those two industries we've built out, we feel really good about at least the conversations that are beginning today around doing more for our larger connectivity-only customers and kind of that cross-sell conversation beginning, and certainly some cross-sell wins and so forth as well. Let me put some metrics to the total picture to just give us a feel for it. But our total created opportunities, this is when a lead, if you will, is qualified and accepted and becomes an opportunity in our Salesforce CRM system. those created opportunities up about 26% 2021 over 2020. I could give you an actual number, it would be less meaningful, but I think in the sense of momentum, 26% increase gives you that. Inbound demand is up 43%, and this was largely before we went public, although you could argue we announced the intent, et cetera, in 21, but I think as visibility increases from going public, we should see more of that inbound demand. And then finally, I'll point to our one opportunities in 2021, where just in terms of deal count, we were up almost 30%, about 29% 2021 over 2020. So the demand's there. Our win rates are staying steady. Well, demand's there. Demand's getting better, actually, and our funnel's getting bigger. Our win rates are staying steady. Always improvement to be had. Five years from now, I'll be sitting here talking to you about improvements to be had on all this, but good progress. And if these customers can be successful with their IoT solutions deployments, can get their devices through their supply chains, you know, we should see this revenue coming out and helping us beat what the street thinks we can do in 23 and 24 as well. Okay, great.

Thanks so much. Nice job.

Thank you.

Our next question is from Mike Latimore of Northland Capital Markets. Please proceed with your question.

Great, thanks. Congratulations on the year here. In terms of the solutions gross margin, how should we think about that kind of trending this year?

Yeah, so I'll take that one, Paul. So as we mentioned earlier, that at the end of the year, we probably hit a low point there. And mainly in 2021, the large project with our largest customer that has lower gross margins kind of drag that down. So as we go into Q1, which we've already seen and for the rest of the year, we should see improvement on that as that large customer gets back to business as usual, back to their regular margins, and then we see more solutions-based revenue which comes at a higher margin going forward. But again, we mentioned that Quarters could be choppy depending on how much hardware is actually delivered or shipped in that particular quarter, but we do and we are already seeing margin improvements in Q1.

Great. And then just on the transition to LTE and also you called out sort of legacy acquisition churn in the past. I mean, are we basically through both of those elements exiting this year? Is that the way to think about it?

yes absolutely so by the end of this year 100% those will both be done and going forward that core will be zero great thank you thank you awesome thanks Mike our next question is from Walter pitchek of light shed

I love the dramatic pause before the botch job. I want to go back to the, I think it was the first question or maybe it was in your comments where you were talking about 20% volume increases and then, you know, kind of matching the 20% declines. And then this year because of the supply chain, obviously volumes were decreasing. Was it, Was the lack of 20% price declines a function of the lack of supply, meaning that you were basically going back to the customers and leaning on them saying like, look, supply is tight, pay a little bit more. Or was it just kind of a fortuitous coincidence that as the supply chain was limiting your volume growth at the same time, you weren't seeing as much price pressure?

Yeah, so it's certainly less of the former, right? Because any price dynamics, I'll say, on the hardware type side would kind of go into solutions anyway, not really into the connectivity ARPU, right, Walt? But I think the, but to your point, I mean, I'll take the fortuitous, right? I mean, every now and then, you know, you need a break, right? But, you know, but I'd say more than just fortuitous, it's been it's been something we've been calling for now for several years, right? Which is this notion that once you're in LTE, the long-term evolution 4G to 5G to 6G, sure, you'll see some reduction on the per megabyte price of connectivity itself and the raw connectivity we get. But largely, we should start to see that getting made up by the fact that people are using more bandwidth. And so, the total price, you know, the total revenue per unit per month kind of thing really should start to stabilize. And I think in 2022, we're starting to see that. Now, I want to stress, I'm saying I think it's early and I'm not ready to, you know, trumpet from the roof yet that, you know, ARPUs are going to go up now in 23 and 24. But, you know, I for one wouldn't be surprised if we start to see ARPU actually helping us in our revenue growth going forward.

But I suppose that if it's the latter and it's, you know, again, maybe not a fortuitous coincidence, but a function of where we are in kind of the curve, then as the supply chain frees up, which it ultimately will, that you're going to have the double benefit of accelerated unit growth as well as lower, at a minimum, lower ARPU pressure, if not stabilization or growth. Is that a fair way of looking at it?

You just earned your paycheck, just to use that term that was just used. No, look, I think that's absolutely the right way to think about it. Well, that's why we've been saying that the 14% type CAGR we put out there for IoT connectivity was, if anything, a little bit conservative because we feel like we can grow volumes higher than that, and we feel like doesn't have to be this sort of negative 6% drag, which is how we modeled that. Again, back to the U-Pod, you know, under promise, over deliver sense. So, yeah. So, look, I mean, I think with a little bit of luck, you know, we're going to start to show better than what, you know, what we put out there in the GoPublic documentation.

My second question is, or I guess it would be my third, but my second topic is eSIMs. I believe that in the release you mentioned shipping issues. a million eSIMs in 2021, where are we? A, in terms of the industry and kind of that evolution, do we need, and I realize that an iPhone is not necessarily the products that you're shipping to customers, but certainly in terms of developing the ecosystem, that could be a big turning point for eSIMs. So A, where are we in the industry? And then B, where are you in being ready for that transition with your customers and benefiting from that.

Yes, on the one hand, you know, we feel really good about eSIM. We launched OmniSIM Reach, which literally connects you in 190 countries with over 600 carriers. And then OmniSIM Rush, which is our high bandwidth offer, you know, formally in October at Mobile World Congress Americas. And so we continue to feel good about our leadership stance in eSIM and driving it, right? The market continues to be a little bit sluggish in its adoption, not helped by all of this supply chain and other distractions that otherwise we might have used this time to be moving our customers more aggressively towards eSIM, and that just hasn't happened. And that's reflected also, frankly, in the fact that we didn't grow our eSIM shipments that much, 21 over 20, as we would have liked. And then the last thing I'll just point to is that the facts are that, you know, it's sort of okay that our larger customers are still warming up, if you will, with eSIM, are still doing proof of concepts and tests and that kind of thing with eSIM because, frankly, our more recent eSIM deployments or configurations, I mean... That's caught up in the supply chain. Now, I've got wait times, right? I mean, the stuff I could get ahead of because I could order a bunch of USIMs and be ahead of and be prepared, we did. But the newer stuff that we're ordering now has some wait times associated with it. And so, again, it's one of these things where we know ESIM's coming. It just makes too much industrial logic and sense for a customer to not deploy on ESIM. It's delayed, and COVID and supply chain hasn't helped.

So do you think 2022 can be the inflection point? And if so, what would the seminal moment look like in terms of the inflection point where eSIM just takes off?

Yeah, look, I don't know that there's a one seminal external moment. We think in terms of 50% of our total SIM shipments being eSIMs is kind of a seminal moment. And I actually don't think that's 2022 because of all these supply chain type issues and so on. And anyway, so look, I mean, I think we're over time and I know we've got at least one analyst that hasn't had a chance to ask a question. So I'll look up to, yeah, I look forward to catching up with you on our one-to-one debrief. Yeah. Okay. Hilary, are we going to do the last person who was in queue?

Yes. Our next question is from Aman Gulani of B Riley Securities. Please proceed with your question.

Hey, gentlemen. Thanks for taking my question here. I'll be quick. Can you just talk about integration timeline for your acquisition of business mobility partners and Simon IoT? What does that sort of look like? Do you expect that to largely be complete over the next two or three quarters?

Yeah, no, thanks, Alan. Look, you know, we take slightly different approaches to integrations depending on you know, the kind of business and a number of factors, you know, cultural fit and that kind of thing. And in this instance, we're actually relatively comfortable because they're pretty much, you know, along the lines of what we do and have, you know, we're going with an aggressive integration plan. That said, we will hold the BMP entity separate sort of, you know, at least I think through the end of this year. for a myriad of reasons from customer and supplier relationships and all these kinds of things is just the sensible and right thing to do. But the leader of BMP, Jared, for example, sits already on my executive leadership team. He's on two calls a week with me, which is at least one more than he really wants to be on. And we're integrating away fast. Now, it'll take Paul and the finance team a couple of three quarters to get to the point of integration from a financials type perspective. But This just feels sort of like Integron was, very comfortable, great cultural fit, great people, and they do what we do, and so it makes for a great conversation.

Got it. And this is one more from me. So, I mean, it looks like you're doubling down on connected health. So how should we think about the cadence of connected health revenue as a percentage of total revenue as we progress through 2022?

Yes, it looks so. I mean, obviously, it got close to 40% in 2021, given that one-time engagement. That engagement petering off here, certainly in Q2, will have a reducing effect to it. But on the other hand, we expect other parts of our business to grow, right? But I mean, I do not expect it to be 40% of our revenue in 2022. I also don't expect it to go back to being a third of our business like it was in 2020. You know, somewhere, you know, split the difference in there, and I think you're in the ballpark.

Got it. Thank you, gentlemen, and congratulations on a strong year.

Thanks so much, Aman. Appreciate it. Appreciate the interest.

We have reached the end of the question and answer session. I will now turn the call back over to Rommel Bale for closing remarks.

Hey, thank you, Hillary, and I appreciate everyone taking the time to listen in to our earnings call. We hope you're all staying safe, enjoying the beginning of spring. We look forward to speaking with you really just in a few weeks, I guess, when we report Q1 results. Have a great evening and take care. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.