KORE Group Holdings, Inc.

and welcome to Core Group Holdings Incorporated First Quarter 2025 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 that this conference is being recorded. I will now turn the conference over to your host, Vic Vijayverghia. Vice President of Investor Relations and Corporate Development. Thank you. You may begin.

Thank you, Operator. On today's call, we will refer to the first quarter 2025 earnings presentation, which will be helpful to follow along with, as well as the press release filed this afternoon that details the company's first quarter 2025 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 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 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 GAAP results and 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, and good afternoon, everyone. Thank you for joining us for our first quarter 2025 earnings call. With me today is Paul Holtz, CORE's chief financial officer. On today's call, I will provide an update on the company's business highlights for the first quarter and then turn the call over to Paul to go through the financial results, after which I will share our view on the financial guidance for 2025 before turning the call over to the operator for Q&A. Looking at the first quarter, you will see improvement in our operating performance across the business. We have delivered two consecutive quarters of positive free cash flow, and our connections continue to grow as we approach 20 million total connections at the end of the first quarter. We can also show progress on our focus on profitable growth as our IoT solutions non-GAAP margin shows significant improvement. We are showing the full benefit of our restructuring efforts announced late summer 2024 with a $7.6 million decrease in operating expenses in the quarter as compared to the same period a year ago. With our transformation successfully in the rear view mirror, Our top priority is growth as part of our value creation plan, which I will share later in the presentation. On slide six, as we look at the headlines, our first quarter revenue was $72 million, which was $4 million lower, and adjusted EBITDA $14.5 million, a slight decline. This is a tough comparative quarter based on some one-time usage spikes with a handful of customers in Q1 2024. We also elected to exit low margin products as we spoke about during our last call. That said, our adjusted EBITDA margin improved by 60 basis points to 20%, and we anticipate this to continue to improve. Although we are only six weeks into Q2, we are encouraged by our financial results thus far, having had a strong April driven by connectivity revenue with no impact of tariff policies on our performance thus far. In Q1, we generated $2.9 million in cash flow from operations, up $1 million from the same period last year. That resulted in free cash flow of $0.6 million for the first quarter of 2025. Generating cash is a top priority, and we're pleased to have a second consecutive quarter of positive free cash flow. We expect this trend to continue and improve as the year progresses. Moving on to slide seven, let's delve into our IoT connectivity highlights for the first quarter. Total connections have increased by 8% nearing the 20 million mark. We are beginning to see the positive impact of connections ramping up from sales in 2024, which will lead to revenue growth and contribute positively to ARPUs. On slide eight, as we mentioned on our last call, we have shifted to estimated annual recurring revenue, or EARR. to share our expected growth of recurring revenue in place of the previous metric of TCV or total contract value. EARR better illustrates our recurring revenue business model because it shows steady state recurring revenue as customers increase their device count or usage pattern. EARR multiplies the estimated monthly recurring revenue in the 12th month of the contract by 12 to estimate the annual recurring revenue. We believe that this key performance metric is useful to management and investors for forecasting purposes and also for understanding the financial health of our subscription-based business. This change is part of our ongoing effort to simplify and improve our reported metrics. We are confident EAR will be more effective for predicting future earnings and demonstrating steady free cash flow. Turning to our pipeline, we have broken out our total connectivity pipeline into new opportunities, which totaled nearly 52 million in EARR, and opportunities with existing customers, which totaled nearly 30 million in EARR for the quarter. We are seeing growth in this measurement, especially with new logos. On the right-hand side is the closed one, EARR, which totaled over 6 million for new and existing opportunities in the quarter. We expect these numbers to grow as we embark upon our multifaceted strategy for growth, which includes growing our existing customer base, which is nearing 20 million total connections, prioritizing our new business focus on key verticals and select geographies, leveraging our indirect channels and strategic partnerships, and increasing our use of agentic AI tools to drive digital marketing growth initiatives. Going to slide nine. We highlight several wins that continue to demonstrate our value proposition, which is resonating for customers in a variety of industries and use cases. First, in the cloud communication space, Core was chosen for its streamlined, all-in-one approach to hardware and connectivity, which simplified procurement and deployment. Competitive pricing on connected devices and data plans added further value, while the ability to scale quickly with additional units supported their growth plan. In the global HVAC manufacturing space, core one due to its compelling commercial proposition, robust connectivity features, and proven track record within other divisions of that organization. The offering included ruggedized laptops with high bandwidth connectivity and multi-IMSI capabilities to ensure reliable coverage across regions enhanced by eSIM flexibility. Multinational IoT alliances is another area where CORE is making an impact. CORE was chosen for its ability to deliver reliable, high-performance global connectivity, an essential requirement for their international customer base. Supporting EV charging stations in local markets like Turkey, the solution leverages a strong local network to ensure stable connectivity for critical functions like remote monitoring and payment processing. Lastly, we expanded our footprint in remote patient monitoring. The client selected Core for its ability to deliver seamless multi-carrier connectivity combined with preconfigured tablets and mobile device management for its remote patient monitoring needs. A key differentiator was the integration with a strategic device partner, which reinforced the value of a unified end-to-end offering. These wins alone are expected to deliver a combined 2.1 million in estimated annual recurring revenue. I would like to draw your attention to a press release that was issued earlier this week with Winnebago in which we are a technology enabler for their next generation RV platform, Winnebago Connect. This is a market leader that is revolutionizing its industry and will support customers as they explore the world in a more connected, secure,