KORE Group Holdings, Inc.

Hello, and welcome to the Core Group Holdings third quarter 2023 earnings call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Charlie Brady, Vice President, Investment Relations. Please go ahead, Charlie.

Thank you, Operator. On today's call, we'll be referring to the third quarter 2023 earnings presentation. That will be helpful to follow along with, as well as the press release filed this afternoon that details the company's third quarter 2023 results, both of which can be found on our investor relations page at ir.corewireless.com. Finally, a recording of the call will be available on the investors section of the company's website later today. Please note that this webcast includes forward-looking statements, statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions are forward-looking statements and are based on assumptions and beliefs as of today. The company encourages you to review the safe harbor statements, risk factors, and other disclaimers contained on this slide and today's press release, as well as in the company's filings with the Securities and Exchange Commission which identifies specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that it will be discussing non-GAAP financial information on its call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to the company's reported gap results in the reconciliation tables provided in today's earnings release and presentation. I'll now turn the call over to Romo Bale, the company's president and chief executive officer. Thank you, Charlie.

Good afternoon, everyone, and thank you for joining us today for our third quarter 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 third quarter, and I will be followed by Paul, who will discuss our financial results. We will then look at our sales results and finish, as always, with a Q&A session. First, and by far the most important of our key announcements today, I am very pleased to announce that we have signed agreements to refinance our approximately $300 million term loan with the issuance of a new $185 million term loan and a strategic investment of $150 million of 13% preferred stock. The final closing of these transactions is expected to occur in the next week or two. Slide four provides an overview of the transactions, which Paul will detail later in the call. But make no mistake about it, this refinancing is a very important milestone for CORE. With these transactions, we have reduced our overall debt level and lowered our first lien leverage ratio from roughly five times to roughly three times our 2023 estimated adjusted EBITDA. We have extended the term loan maturity to 2028, matching the maturity of our $120 million convertible note and added approximately $15 million in cash to our balance sheet. Importantly, we have also increased cash flow flexibility as the preferred stock dividend has a payment in kind or PIC feature, allowing the company the option to defer cash dividend payments. This payment optionality allows Core to increase our free cash flow as we accelerate revenue and EBITDA growth over the next few years and further de-lever our balance sheet. We believe this near-term debt overhang has been the single overriding concern of public company investors. And we are happy to remove this obstacle to shareholder value creation. We can now direct all of our attention to driving organic top line and adjusted EBITDA growth. Turning to slide five, we present some additional key announcements from the third quarter. Expanding our presence with distributed enterprise customers, Core announced that we would collaborate with a national US retailer to enable its digital transformation with 5G connectivity. This marks a turning point for the industry as 5G connectivity is driving a nationwide shift towards digital-first retail. Core is well positioned to support retailers transitioning to 5G connectivity by providing critical 5G services and solutions complete with backup options, thereby enabling retailers to innovate in areas like inventory control, daily operations, and consumer engagement. In September, Core was honored to receive a 2023 IoT Evolution LPWAN Excellence Award from IoT Evolution World for Core LP Hub, which is Core's innovative LoRaWAN solution. Core LP Hub is a SaaS-based service delivery platform, or SDP, which deploys, manages, and connects LoRaWAN devices over a cost-effective, low-power, wide-area, or LPWA network ensuring device longevity and supporting expansion into the massive IoT market segment. This award is a testament to Core's ability to bring new products to market and remain an IoT innovation leader, which in turn drives top-line growth. Finally, building on Core's IoT for Good initiative, we announced an alliance with GrandPad to support their mission of helping seniors age in place with IoT. Powered by CORE's robust IoT connectivity solutions, GrandPad provides an easy-to-use communication device that allows seniors to connect to vital caregivers and family members by making video calls, sending voice messages, and viewing media. Over the next three decades, the number of adults over 60 years of age who will require long-term care is expected to more than triple. Partnerships such as this position core with an early presence in long-term secular growth markets, enhancing core's ability to capture market share. Now let's turn to our third quarter financial results and updated 2023 guidance on slide six. Our third quarter results came in at $68.6 million of revenue, increasing year over year from the third quarter of 2022 by approximately 4%. driven by strong growth in our high margin IoT connectivity business, which increased 27% year over year and in the high single digits organically. Excluding the forced churn of non-core customers due to the 2G, 3G sunsets, IoT connectivity grew in the mid-teens organically, showing clearly how IoT connectivity can be a strong top-line growth business at high gross margins. This growth in IoT connectivity was partially offset by the expected decline in IoT solutions due to the customer order deferrals we discussed on our last quarterly earnings call. Despite experiencing additional delays in IoT solutions orders from a few customers, we expect to generate year-over-year quarterly revenue growth again in the fourth quarter of 2023. Gross margin increased 257 basis points year-over-year to 54.8%, a new quarterly record, and benefited from continuing carrier cost optimization and a lower mix of IoT solutions revenue. Third quarter 2023 adjusted EBITDA of $14.2 million declined approximately 6% year-over-year due to increased operating expenses, including SOX compliance. Adjusted EBITDA margin declined approximately 220 basis points to 20.6% from 22.8%, but did experience a slight improvement from the second quarter of this year. The IoT solutions order delays we experienced in the third quarter have extended in the fourth quarter, pushing additional revenue into 2024. To be clear, this is not lost revenue. but is primarily a function of certain IoT solutions customers managing year-end inventory levels and delays in remote patient monitoring deployments and clinical drug trials that use IoT devices. We fully expect to recognize these orders in 2024 and continue to serve these customers as they grow back to normal business volumes. Given all of this, our full year 2023 revenue is expected to be lower than our previously guided range of $300 to $310 million. As such, we are revising our 2023 revenue guidance to a range of $280 to $290 million. On a positive note, this does give us a slight tailwind for 2024 revenue, and we will provide more guidance for next year on our fourth quarter earnings call. Despite the reduced revenue outlook, we are maintaining our 2023 adjusted EBITDA guidance of $60 to $62 million due to improved profitability on the acquired Twilio IoT business and reduced operating expenses as we flexed to reflect current IoT solutions revenue levels, both of which helped offset the reduced profitability from deferred revenue. The restructuring activity we began in the fourth quarter is expected to result in approximately $10 million in cost savings in 2024, reducing potential margin impacts from ongoing macroeconomic events. And with that, I will now hand the call over to Paul to cover the financials in more detail.