KORE Group Holdings, Inc.

Greetings, and welcome to the Core Group Holdings, Inc. Second Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. There will be a question and answer session following the formal presentation. You may press star one at any time to be placed in the question queue, and we ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Vic Vijay Brigia, Vice President, Investor Relations. Please go ahead, Vic.

Thank you, Kevin. On today's call, we will refer to the second quarter 2024 earnings presentation, which will be helpful to follow along with, as well as the press release filed this morning that details the company's second quarter 2024 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 investor section of the company's website later 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 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 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 to information prepared in accordance with accounting principles generally accepted in the United States or U.S. 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 Ron Totten, the company's president and chief executive officer.

Thank you, Vic. Good morning, everyone. Thank you for joining us for our second quarter 2024 earnings call. With me today is Paul Holtz, CORE's chief financial officer. On slide three, we have laid out our objectives for the call. In addition to reviewing our Q2 results today, which Paul will address further in a moment, I want to first spend a bit of time talking about what I observed in the first 90-plus days in my role, the newly announced restructuring plan we are putting in place, and the update to our financial outlook for 2024. We'll then host a Q&A session. On slide four, I'll share my initial priorities as CEO, the insights gained, and our strategic response. In my first 90 days, I concentrated on these three areas. My first priority was to spend time with multiple stakeholder groups, including key customers and partners, the senior leadership team, employees, and the board to understand how we can better serve our customers. Second, I focused on identifying immediate ways to improve operational efficiency, elevate customer experience, and optimize our costs. And third, was to unlock the full potential of our people by fostering a culture of accountability and empowerment. Following this period of evaluation, I continue to believe that Core is, one, a leading provider of IoT connectivity and solutions serving a wide range of use cases across multiple industry verticals, capitalizing on the vast addressable market, greater than $12 billion, which lies at the intersection of real-time data, cloud, and AI. Two, uniquely positioned with a best-in-class portfolio of mission-critical IoT offerings powered by advanced SIM technology that deliver tangible operational efficiencies, cost reductions, and revenue growth for customers across diverse industries. And three, backed by a deep bench of IoT industry experts committed to driving innovation and delivering exceptional value for our customers. Following my review, it also became apparent to me that, first, we need to realign our cost structure. Over the last three years, the rate of growth in cost has more than doubled the growth rate in revenue. While some cost rationalization has occurred in the past 12 months, more is needed. Second, as an organization, we need to prioritize our high-growth connectivity business and further our investments into this area. And third, our strong, experienced teams needed a more simplified org structure putting the customer first, and a culture that reinforces strong discipline and an unwavering commitment to customer success and satisfaction. Based on these guiding principles, we developed the restructuring plan shown on slide five. Together with the senior leadership team and with the full support of the board, we have announced a restructuring plan focused on improving operational efficiency, enhancing our customer relationships, and strengthening the foundation from which to drive long-term profitable growth. The plan features multiple elements, including one, cost reduction initiatives where we implement measures to reduce operating expenses and streamline processes to optimize operations and customer support. Two, workforce realignment that will see us reduce full-time headcount by approximately 25%, including both employees and contractors, with most of these actions taken before the end of the third quarter. This will better align our resources with current business needs and prospects. Three, a focus on innovation and investment targeting those areas of the business that are experiencing strong demand. This includes investing in related go-to-market strategies in order to increase our stickiness with both new and existing customers, as well as conducting R&D focused on the next generation of market-leading offerings. And four, and enhanced customer focus, allowing us to strengthen relationships through an improved service and support commitment capable of delivering even higher levels of satisfaction and loyalty. This plan, which we expect to execute before the end of the third quarter, is expected to save the company $5 to $6 million in 2024 from its current cash burn rate and $20 to $22 million thereafter before any investment, which I'll discuss in a moment. While some of these decisions were difficult, especially those around workforce reductions, it was clear that prompt and decisive action was required to set the company on a stronger and more focused footing, one that would allow us to prosper over the longer term. A portion of these savings will be used to selectively invest in key areas of the connectivity business where we see the best opportunities for profitable growth. To support these initiatives, I am pleased to welcome Bruce Gordon to CORE as Executive Vice President and Chief Operating Officer, who I have had the privilege to work with previously. Over three decades in the technology sector, Bruce has held senior roles with GeoDigital, ABB Ventex, Infor, and Descartes, and is a highly experienced business operator. Bruce will play a critical role in transforming customer support, implementing the restructuring plan, helping to enhance operational efficiencies, foster innovation and drive sustainable growth, all working to solidify CORE's reputation as an IoT leader. In another significant organizational change, the company has appointed Jared Deeth, Executive Vice President, Connected Health. Jared was the co-founder of BMP and Simon IoT, which were acquired in February 2022, and recently led the indirect channel for CORE with great success. His appointment further strengthens the executive leadership team with deep IoT and telco experience and a strong track record for driving sustainable growth in the global connected health sector. On slide six, looking at our Q2 numbers at a high level, revenue was 67.9 million, adjusted EBITDA was 11.4 million, and cash from operations was 4 million, resulting in essentially break-even free cash flow. I'll let Paul speak to the Q2 results in more detail, but before turning over the call to him, I wanted to point out that despite our flattish top line results, the connectivity business delivered growth of 16% in the quarter, along with continued TCV growth. The connectivity business is our primary focus with its more stable and profitable revenue. This is where we are seeing real strength in the business and where we intend to focus our investments. Slide 7 presents a snapshot of our global sales pipeline as of June 30, 2024. As we previously mentioned, we have decided to reduce our focus on low-profit hardware revenue. While this decision reduces the total size of the funnel, as has the relatively large number of deals that were closed in the first half, it's important to note that the quality of our pipeline has continued to improve. Our sales pipeline includes more than 1,100 opportunities with an estimated potential TCV of approximately $437 million. In the second quarter, we generated an incremental $44 million of TCV1, up $12 million from $32 million in the same period last year. For the first six months of 2024, we have added a total of $96 million in TCV versus $60 million in the same period a year ago. As a reminder, the majority of sold TCV is recognized as revenue over four years And it is important to note that the closed TCV figure is aggregated across all our services, which recognize revenue on different schedules. As mentioned, we believe that the continued growth in TCV is compelling and indicative of the longer-term potential of the connectivity business in particular. As we did on our last earnings call, slide 8 highlights some key customer wins from the second quarter. First, I'd like to start with a win that opens a new market for an AI-driven use case. This customer provides an AI-driven analytics software platform focused on asset management across the construction, energy, marine, and logistics industries. This client leverages Core's best-in-class SuperSim to help their customers manage costs, improve utilization, and deliver better safety and sustainability by enabling them to track emissions, monitor fuel usage, and benchmark equipment. This deal represents 3.6 million in estimated TCV. Secondly, we are highlighting an enterprise win with one of the world's largest food and beverage companies. Core will be providing global IoT connectivity to support their next generation solutions that provide tailored digital content to their consumers. Core has already begun the rollout for multiple products as the customer seeks to consolidate their global IoT business. The estimated TCV of this win is approximately 1.1 million. Third is an exciting win for a cloud-based worker safety platform. This client chose our SuperSim to support rollouts of their personal emergency response system across Latin America and Europe. The platform will be supporting their customers in a wide range of industries, including hotels, golf courses, and other large venues. This is another example of how our solutions are used to improve safety for our clients and their customers and will deliver an estimated TCV of 4 million. And finally, I want to mention a win that highlights our full lifecycle management capabilities with a leading North American manufacturer of outdoor lifestyle products such as RVs. Core solution includes connectivity, hardware, managed services, and advanced hardware support that will enable in-vehicle diagnostics and proactive maintenance that will drive revenue growth for this manufacturer. We expect this win to deliver 3.4 million in TCV. CORE continues to demonstrate its market leadership in IoT connectivity solutions as evidenced by these recent wins. Our ability to deliver tailored end-to-end IoT solutions across diverse industries is driving growth in our connectivity business and solidifying our position as a trusted partner. I would now like to address our guidance for 2024 on slide 9. The positive momentum from our sales wins bodes well for the medium and longer-term future of the business. However, largely based on the timing of a key customer implementation slipping into early 2025, increasingly cost-conscious customer behavior, and slower purchasing cycles, we are electing to revise our 2024 financial guidance downwards. Regarding the customer implementation, I'd like to reiterate that this is largely a timing issue and doesn't reflect an anticipated loss of business. On this basis, we are lowering our full-year revenue guidance to $275 to $285 million from $300 to $305 million previously, and now expect adjusted EBITDA to come in at between $54 and $56 million versus $64 to $66 million for 2024. Going forward, we fully expect that the changes we are making under our restructuring plan, including both the associated savings and the reinvestment in the business, will contribute meaningfully to improve financial performance in 2025 and beyond, and provide the solid foundation from which to drive profitable growth over the longer term. With that, I'm now going to turn over the call to Paul to review our Q2 and year-to-date performance in greater detail. Paul.