KORE Group Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 8 speakers on the call.

Operator

Welcome to the Core Group Holdings Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Charlie Brady, Vice President of Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Thank you, operator. On today's call, we'll be referring to the Q2 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 Q2 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 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.

Speaker 1

The company encourages you to review the Safe Harbor statements, risk factors and other disclaimers contained in 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 we 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 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 Roel Baugh, the company's President and Chief Executive Officer.

Speaker 2

Thank you, Charlie. Good afternoon, everyone, and thank you for joining us today for our Q2 2023 earnings call. With me is Paul Holtz, Core's Chief Financial Officer. Before we get started, a warm welcome to our newest IO tiers, Many of whom joined the call with the acquisition of Twilio's IoT business. And now let's get to the meat of our earnings call.

Speaker 2

As always, I'll start with a brief overview of the key events and announcements from the Q2, and I will be followed by Paul, who will discuss our financial results. We will finish with a Q and A session. Slide 4 presents some key announcements From the Q2, on June 1, we closed the acquisition of Twilio's IoT business, marking a key milestone in accelerating our journey to being the world's first IoT hyperscaler. This acquisition, Apart from providing us a world class IoT connectivity product in Super SIM, Expanse Core's one stop shop position by adding build to our deploy, manage and scale value proposition. Needless to say, we remain excited about the additional growth opportunities created by the combination of Core and the Twilio IoT Business.

Speaker 2

In May, we announced the launch of our pre configured managed solution to offer retailers, restaurants and other multisite companies High Bandwidth 5 gs Cellular Connectivity Through Fixed Wireless Access or FWA. Core's FWA solution will allow customers to access high speed Internet that has traditionally been available only through wireline Retailers, restaurants and other consumer facing companies are increasingly seeing the benefits of 5 gs solutions To support point of sale devices, digital ordering and integrating with 3rd party delivery services across multiple locations. This FWA solution positions Core to attack a growing high bandwidth use case and further expand As I'm sure you are all aware, ESG and sustainability Have become important topics for companies and investors. With IoT increasingly playing a role in supporting ESG initiatives, We are seeing more opportunities where Core can play a part aligning with our purpose statement IoT for good. Along these lines, in the Q2, Core announced its participation and support of 2 sustainability initiatives.

Speaker 2

We will provide scalable global IoT connectivity to a biodiversity sensor project conducted by AgTech Company Syngenta. Syngenta's biodiversity project is digitally connecting farmlands across the globe to provide farmers with analytics To aid them in adapting to climate change and improving biodiversity to protect crops. Last year, Syngenta connected over 200 hectares of land and has a goal to connect 1,000,000,000 hectares over the next 3 years. To further support sustainability and waste reduction, Core has launched an initiative to reduce the amount of plastic Used in SIM card bodies by 50%. In addition to cutting SIM card plastic waste by half, This initiative will lower SIM card shipping costs by 50% and reduce Core's carbon footprint related to SIM cards by 16%.

Speaker 2

Now let's turn to our 2nd quarter financial results and 2023 guidance on Slide 5. Our 2nd quarter results continued the momentum established in the Q1 with Q2 revenue of $69,500,000 increasing sequentially from the Q1 by approximately 5%. On a year over year basis, Revenue declined slightly by 2%, primarily due to a difficult comparison to the Q2 of 2022, which had revenue from 2 gs, 3 gs customers and the LTE transition project at our largest customer. Absent the 2 gs, 3 gs and LTE transition Project revenue in 2022, Q2 2023 revenue increased over 2% year over year. Our 2023 Q2 was the last quarterly year over year comparison impacted by the LTE transition project revenue and the true organic growth of the company will be more evident going forward.

Speaker 2

While we have experienced some delays in IoT Solutions revenue At a few customers, we continue to expect sequential quarterly revenue growth for the remainder of 2023 and year over year growth beginning in the Q3. Gross margin increased 180 basis points year over year to 54.4 percent and benefited from continuing carrier cost optimization and a lower mix of hardware revenue. 2nd quarter 2023 adjusted EBITDA of $14,200,000 Increased approximately 7% sequentially from the Q1 and adjusted EBITDA margin improved 30 basis points to 20.5% from 20.2%. Compared to the Q2 of 2022, Adjusted EBITDA declined approximately 15%. We are reiterating our 2023 revenue and adjusted EBITDA guidance.

Speaker 2

We expect revenue to grow in the low to mid teens, resulting in revenue in a range of $300,000,000 to $310,000,000 This guidance includes absorbing the $24,000,000 in year over year headwinds from the 2 gs and 3 gs sunsets in the U. S. And the LTE transition project at our largest customer somewhat offset by the partial year contribution of the Twilio IoT Business acquisition. Our reiterated guidance assumes that much of the IoT Solutions revenue pushback that we started to see in the second quarter and we'll see in the Q3 will be made up in Q4. We remain confident in our adjusted EBITDA guidance range of $60,000,000 to $62,000,000 and margin of approximately 20% as margins in the Twilio IoT business With that, I will now hand the call over to Paul to cover the financials in more detail.

Speaker 2

Paul?

Speaker 3

Thanks, Rommel, and good afternoon, everyone. Turning to our results on Slide 6. 2nd quarter revenue declined 2% year over year $69,500,000 compared to $70,900,000 in the Q2 of 2022 and did increase 5% sequentially in the Q1 of 2023. By segment, IoT Connectivity revenue of $48,300,000 including 1 month of revenue from the Twilio IoT acquisition increased 8% year over year. Q2 2023 marked the Q1 sequentially in many years that IoT connectivity revenue was not affected by the 2 gs, 3 gs sunsets in the U.

Speaker 3

S. IoT Connectivity revenue is forecasted to grow year over year and sequentially for the rest of 2023. Moving to IoT Solutions, revenue declined 19% year over year to 21,300,000 The decline was again driven by the difficult year over year comparison due to the LTE transition project revenue at our largest customer in the prior year. The LTE transition project concluded in the Q2 of 2022. So going forward, this will not impact the year over year quarterly comparison.

Speaker 3

Total gross margin in Q2 2023 was 54.4%, an increase of 180 basis points year over year. The 2nd quarter marks the highest gross margin since Core went public in the Q3 of 2020. IoT Connectivity gross margin of 65.2% was down slightly year over year. IoT Connectivity gross margins for the last four quarters have remained stable in the 65% range, but will decline overall in the second half of twenty 3, with the addition of the lower margin IoT connectivity revenue from the Twilio IoT acquisition. The good news is that, as Rommel mentioned, margins from the Twilio IoT business are expected to improve slightly quicker than we thought throughout the rest of 2023.

Speaker 3

IoT Solutions gross margin declined approximately 90 basis points year over year. The decline was mainly just due to the mix of hardware versus service revenue. Total connections at the end of the second quarter were 18,500,000, including approximately 2,900,000 connections from the acquisition of the Twilio IoT. Excluding the Twilio IoT Connections, Core's organic connections increased by 400,000 in the Q2 of 2022. Dollar based net expansion rate or DBNER for the 12 months ended June 30, 2023 was 99% compared to 114% in the prior As a reminder, DBNER measures the growth from existing customers in the trailing 12 months compared to the same customer cohort in the year ago period, much like same store sales growth rate.

Speaker 3

As I said on our last quarterly call, With the anniversary of the BNP Simon acquisition in the Q1 of this year, these customers are now included in the Keltilage. The new customers from the Twilio IoT acquisition are not included. EBNER year over year continues to be impacted by the LTE During this time period, our largest customers revenue more than doubled from this one time project. If we exclude total revenue from our largest Customer, because of this significant non recurring event, DBNER at the end of the quarter would have been 115% compared to 109% at the end of the Q2 of 2022. Operating expenses including depreciation and amortization in the 2nd quarter were $47,400,000 an increase of $4,200,000 or 10% compared to the same period last year.

Speaker 3

The increase is attributed to an increase in headcount related costs, the inclusion of the Twilio ILT business, Stock based compensation and higher depreciation and amortization expense compared to Q2 2022 due to the BNP acquisition in the prior year. 2nd quarter interest expense, including amortization of deferred financing fees increased year over year to $10,400,000 versus $7,300,000 in Q2 2022 due to the increased borrowing costs on our senior secured term loan. Net loss in the 2nd quarter was $19,500,000 compared to $10,800,000 in the same period in the prior year. The year over year increase in net loss was due to increased operating expenses, which were partially attributed to the inclusion of the Twilio IoT headcount, Higher depreciation and amortization expense, increased interest expense and a lower income tax benefit compared to the year ago quarter. Adjusted EBITDA in the 2nd quarter was $14,200,000 decline of $2,600,000 or approximately 15% compared to the same period last year.

Speaker 3

Our adjusted EBITDA margin in the 2nd quarter was 20.5%, down 3 20 basis points compared to the same period in the prior year. However, we did experience a 7% sequential improvement in adjusted EBITDA and a 30 basis point improvement in adjusted EBITDA margin from the Q1 of this year. The year over year decline in adjusted EBITDA Adjusted EBITDA margin were impacted by increased costs or headcount to invest in the company's growth, the additional Twilio IoT headcount And cost to enhance public company processes and systems, including SOX complaints. Moving to cash flow. Cash used in operations for the 3 months ended June 30, 2023 was approximately 700,000 compared to cash provided by operations of $14,700,000 for the same period in the prior year.

Speaker 3

The change was mainly due to abnormally high collections from our largest customer in Q222 related to their LTE transition project. This compares to incremental cash outflows in Q2 2023 related to the Twilio IoT acquisition plus their incremental headcount costs paid in the quarter. These incremental cash outflows from the Twilio acquisition We're not offset by any Twilio revenue collections as these won't begin until Q3, 2023. At the end of the Q2, cash excluding restricted cash was $22,900,000 compared to $34,700,000 as of December 31, 2022. This change was primarily related to cash outflows from the Twilio IT acquisition, Annual bonus payments and increase in interest and income tax payments.

Speaker 3

Before passing it back to Rommel, I would like to make a couple of comments On our 2023 annual guidance that we are maintaining for both revenue and adjusted EBITDA. For revenue, we had a strong first half of the year With no headwinds from the 2 gs, 3 gs sunsets in the U. S, positive organic growth in IoT connectivity and the completion of the Twilio IoT acquisition. In the second half of the year, IoT Connectivity revenue is We are, however, more cautious regarding the IoT Solutions revenue as some of these customers have indicated they are pushing orders to the Q4, which increases the risk that these orders could slip even further meaning into 2024. At this point, we see Q4 being the largest quarter of the year for IoT Solutions when it has typically been our lowest score.

Speaker 3

We are much more confident about adjusted EBITDA because of the strong momentum in IoT connectivity and the faster improving Twilio IoT margins. On the OpEx side, we had built in incremental sales headcount into our guidance in the second half of twenty twenty three, which we and could delay if needed. And with that, I'll pass it back to Roman.

Speaker 2

Thanks, Paul. As you've heard and to reiterate with the 2nd quarter complete, The difficult year over year revenue growth comparison from the LTE transition project at our largest customer is now behind us. As a result, we expect to generate year over year growth beginning in the Q3 and further We are on track to achieve double digit revenue growth in 2024 as evidenced by our increasing global sales pipeline. Slide 8 presents a snapshot of our global sales pipeline as of June 30, 2023. Our sales pipeline now includes almost 1500 opportunities with an estimated potential total contract value or TCV of approximately $660,000,000 In the second quarter, we generated an incremental $32,000,000 Of closed won TCV, bringing the year to date total to $60,000,000 We continue to progress towards exceeding The $102,000,000 closed 1 TCV in 2022 and delivering a 5th consecutive year of TCV growth.

Speaker 2

As a reminder, the majority of sold TCV is recognized as revenue over 4 years. And it is important to note that the closed TCV figure is aggregated across all of our business lines, which have different durations of revenue recognition. For instance, IoT connectivity revenue tends to have a slower ramp and can go out beyond the 4 years we use for TCV calculations. While IoT Managed Services include both one time revenue projects that are generally recognized in 1 to 2 years And recurring revenue usually recognized over 3 years. Slide 9 showcases a few examples of our wins in the 2nd quarter That contributed to the closed won TCV of $32,000,000 These recent contract wins highlight the success of our growth strategy and demonstrate the expansion of new use cases for our products.

Speaker 2

Core has continued to have success in increasing its wallet share at existing customers. In the second quarter, We secured 3 contracts with TCVs of over $9,000,000 $6,000,000 $1,500,000 from customers in the fleet, Asset Tracking and Healthcare Markets respectively. These customers are seeking to improve operational efficiency and effectiveness By consolidating IoT connectivity to a single platform, single partner in Core. We continue to see customers taking advantage of Core's full range of capabilities and product offerings to support their growth. For example, Core recently won a $500,000 TCV engagement to support IoT managed services CORE followed on a recent win at a major restaurant chain with another engagement whereby CORE will provide fixed wireless access to 650 of the customers' locations and we'll upgrade these locations to 5 gs technology.

Speaker 2

This contract has a TCV of $850,000 We also continue to win customers outside the U. S. In Q2, Core 1 contracts from a leader in fleet AI video telematics headquartered in the UK and a leading medical equipment and remote patient monitoring provider based in France to support their entries into the U. S. Market.

Speaker 2

These contracts have a combined TCV of approximately $1,500,000 On to the final slide, Slide 10. As I said at the beginning of this call, we started the year with good momentum, which continued through the Q2. We organically grew connections by 500,000 SIEMs. We added $32,000,000 in TCV and delivered sequential quarterly growth. As we move into the second half of the year, we expect revenue to continue to increase sequentially each quarter and importantly generate year over year growth beginning in Q3.

Speaker 2

As covered on our funnel chart, Our global sales pipeline is approaching 1500 opportunities with a potential new business TCV of approximately $660,000,000 which provides a solid backdrop for growth over the coming years. This sales pipeline coupled with our approximately 80% recurring revenue gives us confidence that we can achieve our medium term goal of generating top line revenue growth of at least 20% with an EBITDA margin of 20% or better, Thus becoming a rule of 40 company. As always, creating value for our shareholders remains a top priority and we believe we are well positioned to do that. In closing, I wish to thank all of our global employees, the core IoTers We're working hard every day to drive growth and serve our customers. With that, let's start the Q and A.

Operator

Thank you. We will now be conducting a question and answer Our first questions come from the line of Michael Latimore with Northland Capital Markets. Please proceed with your questions.

Speaker 4

Great. Thanks very much. The TCV funnel is really large, Group grew nicely. Does that include the Twilio business or is that organic?

Speaker 2

That's actually organic, Mike, we really only kind of I'll say we owned the IoT business for a month in Q2 as you know. And so far, we're just going off even revenue recognition and so forth that we're added by the Twilio back office and forth. So we haven't quite had a chance to consolidate everything. But hopefully, when we're speaking to you in mid November about Q3, we'll have that done.

Speaker 4

And what sort of use cases or applications are most pronounced in that funnel?

Speaker 2

We're continuing to see just sort of inexorable lift, Mike, in Some of these high bandwidth use cases, a lot of fleet. We've seen the momentum since really the beginning of the year in In fact, right at about 60% of the $32,000,000 we closed in Q2 was fleet. So there's a lot of video telematics and higher bandwidth as people are continuing to look at more of that, more AI At the Edge, those kinds of things. But there's others, right? I mean, there's you saw I suspect you saw a Press release we put out on a large restaurant chain and in fact we had a follow-up swing at that chain here that we announced in Q2.

Speaker 2

So there is good momentum in FWA and the dollars add up quicker there, hence the TCV sort of funnel growing.

Speaker 4

Yes. Great. And obviously, you're going to you're expecting good year over year growth in the second half. In the Q3, do you think you will get back to year over year organic growth kind of ex Twilio?

Speaker 2

Yes. We certainly believe that to be the case despite What both Paul and I talked about around the pushbacks we're seeing from IoT Managed Services and Net Solutions customers, But pending where all that falls out, we're still fairly confident this organic growth there, yes.

Speaker 3

Great. Thanks a lot. Thank

Operator

you. Our next questions come from the line of Scott Searle with ROTH, MKM, please proceed with your questions.

Speaker 5

Hey, good afternoon. Thanks for taking my questions. Maybe to follow-up quickly on Mike's Question, in terms of returning to organic growth in the Q3, I'm not sure I heard a Twilio contribution number in the second I'm wondering if you could calibrate us on that front. Remind us, how many employees also are coming on board as part of the transaction?

Speaker 2

Yes. So Scott, we haven't disclosed any of all of that. It's so small and sort of generally Kind of not material, but we did disclose this time because we could, because we got A count from them of their connections at the end of June. And of course, we had our own connections count. So you could see Kind of a 2,900,000 number there.

Speaker 2

There are boos around ours. I guess you could get a general idea of size from there, but it's just not something we've disclosed per se.

Speaker 3

And then Scott on the people we have disclosed, it's just a little bit over 50 people that came over. That's how it will be in the queue too.

Speaker 2

Right.

Speaker 5

Okay, great. Thank you. And Rommel, maybe to go back to the FWA opportunity, I'm wondering if you could dig into that a little bit more detail. I'd like to understand if you guys are just doing the device management of it or are you doing the full managed service capability for that fixed wireless access. And I was wondering if you could also frame the opportunity there as well.

Speaker 5

I imagine it comes with much higher ARPUs. So I'd love to kind of get my hands around that and what's your broad based expectations for that type of an end market or use case would be as we get into 2024, 2025?

Speaker 2

Yes. No, it's a great question, Scott. Look, so the first thing I'll say is we're now, Gosh, about 4 years since we first started to sort of prioritize the general use case in this area. In those days though it was backup. You remember it was like failover, right?

Speaker 2

It was like, all right, when power fails, Wi Fi fails, whatever, You can go to a cellular backup. Well, just in a scant 4 years or 3 years since we put our first kind of solution out there, We've grown by leaps and bounds in terms of just the bandwidth and the technology and what's possible. And now people are talking about cellular as primary, Right. Who needs to dig holes in the ground and put fixed lines and fiber into places when you can get the kinds of speed we're getting On cellular as a primary. This particular solution that we talked about as a press release and then talked about highlighted here on the call Easy consumption for those customers and to your point, it includes hardware and connectivity, right.

Speaker 2

So it's a fully managed solution, True definition of sort of as a service and by the way specifically supports 5 gs, right, and just basically enables businesses to cut entirely just like we're cutting the cord on landlines into our homes. And it's yes, I mean, it's got Solid partnerships on the hardware side that we're going to market with.

Speaker 5

Okay, great. And lastly, if I could, Looking out to 2024, it sounds like ending this year, there are some big opportunities that look like they're going to catalyze in the 4th quarter Around some device deployments and product sales, it sounds like it's setting you up for a nice return to organic growth ex Twilio Going into the 2024 time period, so we're back to 15% plus kind of organic growth on IoT

Speaker 2

Yes. No, again, Scott, we will to the question that was just asked earlier on this call here, right, we are back to organic growth year over year in Q3. Obviously, the Twilio contribution, while smaller than we had hoped for a year ago, year and a half ago when we first saw their forecasts and so on, We'll also contribute, right? And then some of this imbalance between Q3 and Q4, as Paul said, is Customers that normally would have placed POs in sort of the May June timeframe for Q3 sort of said to us, hey, 90 day delay, 120 day delay. So In theory, if all those come back in, that's moving revenue effectively from Q3 into Q4, right?

Speaker 2

And that's But if you looked at it regardless, even with that move, we should eat out organic growth In Q3, certainly Q4 should be sort of very, very good growth. And then, yes, and hopefully that continues and the sequential quarter streak continues end to end. Now on the question of is next year, are we ready to talk about sort of 15 And on connectivity, I'll stop short of saying that. I mean, again, we're bullish. You just saw an 8% type growth Q2 over Q1 on connectivity, which is Very encouraging.

Speaker 2

So yes, are the 8s and 10s possible for sure? How do we creep higher than that? How do we get to 15s 20s? We need the economy and the macro to settle down. We need the supply chain issues to settle down.

Speaker 2

We need to see upward movement on ARPU, All of which we think will happen. We certainly think we can get there. I'll just stop short of promising it in 2024.

Speaker 4

Great. Thank you.

Speaker 3

Nice to

Speaker 5

see a return to growth.

Speaker 2

Yes. Thank you.

Operator

Thank you. Our next questions come from the line of Meta Marshall with Morgan Stanley. Please proceed with your questions.

Speaker 6

Great. Thanks. Maybe first question just on Twilio. It sounds I just wanted to get a sense of how is it Different now that you've actually been able to get your hands on it and kind of see the organization and were you able to kind of hold on to some Key engineering talent that comes over that you are most excited about?

Speaker 2

Yes. Thanks, Meta. Look, I think the first thing I'll say is the Strategic rationale for the deal absolutely remains in place in terms of How excited we are about the engineering talent that you mentioned. Much of the core network team is actually in Germany. I was able to visit with them, I will have a really productive visit.

Speaker 2

And so very much looking forward to as early here as this quarter Seeing sort of a combined next generation product roadmap to seeing a Accelerated plan of building out that digital front end, which clearly these guys just were born digital or easily the best digital consumption of IoT So business model in the market and we're looking forward to having them help us build this year at lower cost, obviously, with cost savings that we talked about And we did the acquisition. So I would say all of those sort of strategic rationale points stay very much in place. The cultural fit Points also very encouraged. I mean, as I alluded to in Germany, but also in the UK, here in the United States, We've had excellent meetings with them. In some respects, the integration is going sort of better and faster than we could have hoped, including, by the way, on the gross margin line, Which is kind of nice to get really confident that we can get to breakeven here even this year sort of in the Q4 and Obviously, our promise of being accretive next year, therefore, becomes completely derisked, right?

Speaker 2

So the only thing that I would say that If you had to scratch for kind of a negative is that, Again, alluding to my comment 18 months ago when we saw the plan and what they were supposed to be at, they're obviously sort of far off that Smaller entity in terms of revenue today and even the growth rate is damper than we were hoping and sort of again, sort of what the plan said. Some of that, look, it's just, it's 12 18 months of distraction for this team When obviously they sort of had heard rumors first and then confirmation that they were not strategic to the future of Twilio, People started looking for jobs. They've had attrition, especially in their sales force. Really, really hard to sell without sales force. So yes, they've come in smaller, but we've embraced the challenge.

Speaker 2

Our new CRO is all over working Well, with the Twilio leaders on, I'll say, rebuilding the momentum that we know they can have and can be accretive to our growth.

Speaker 6

Great. Thanks. And maybe just a follow-up question. If you could just Kind of remind us of how much of the solutions business is kind of what you would deem more recurring versus project base?

Speaker 7

Yes.

Speaker 3

It is rough sixty-forty. Again, it depends. It will vary each quarter, but That 60% has been pretty consistent on customers who either order annually, so 1 PO or order on a quarterly basis. So, yes, it's 6040.

Speaker 2

Sort of a programmatically recurring as we call it, yes.

Speaker 6

Got it. Okay, perfect. Thanks so much, guys.

Operator

Yes, I'm here. I apologize. My computer froze. Our next question comes from the line of Matt Niknam with Deutsche Bank. Please proceed with your questions.

Speaker 7

Hey guys, thanks for taking the question. So maybe first on adjusted EBITDA. So I think year to date you've generated a little $28,000,000 you're reaffirming the guide for $60,000,000 to $62,000,000 for the year. I'm just wondering as we think about just Initially, I think the expectation was the Twilio deal would be somewhat dilutive upfront. So I'm just wondering, you mentioned maybe a little bit more there around the profitability prospect.

Speaker 7

So if you can maybe help us think about the bridge in the second half of the year to hitting the adjusted EBITDA target. And maybe secondarily, as you think about the IoT Solutions business, I'm just wondering if you can help maybe help quantify The headwind from the push out of orders and is the assumption then that 3Q still remains challenged and the deferred orders

Speaker 3

Okay. So I'll take the profitability one. So yes, year to date, we've done around 7, so 13 ish in the Q1 and 14.2. Just remember, Matt, that the first half of the year is really Front end loaded from a cost perspective and going back to Q1, we did have additional costs from the audit and so forth there. So we typically do see EBITDA grow throughout the year as we are growing.

Speaker 3

But to your point, we originally had Twilio to be accretive right at the get go, which for June, they were negative, but we're Seeing that improvement, and as Rommel mentioned, by Q4, we have a good chance of them being breakeven and then obviously then positive into 2024. But really the bridge to get to the 60, 62 is where we are from a revenue perspective and growth With a lot of the growth coming from the connectivity business at the higher margins and Q4 being where we expect all The additional solutions revenue come back in, which will make it the biggest quarter of the year, will get us to that 60% to 62% range. We had also built in, like I had mentioned, some incremental headcount in the back end for growth and so forth. And Right now, we'll take a look at that and monitor that as we see what goes on with the solution pushback. But again, that was a little bit of a buffer that we can use If needed.

Speaker 3

Sorry, I forgot.

Speaker 2

Then there was a question about just the confidence around the push Well, quantifying the amount of pushback and then how much shows back up in Q4.

Speaker 3

Yes. So we saw about $1,000,000 ish starting in Q2 At the end, so mainly in June here at the end. So for the back half of the year, it's a number between Q3 and Q4, we estimate between $5,000,000 10,000,000 So again, depending on timing and where that is, we do expect most of that to be in the back end in Q4.

Speaker 2

Right. So to be clear, between 5 and 10, we'll move, We hope only from Q3 to Q4.

Speaker 7

Right. Yes, we're assuming just to be clear, Rommel and Paul, So June was about $1,000,000 You're assuming that this kind of accumulates in 3Q and falls into 4Q. That gets you to that 5 to 10 mil?

Speaker 2

Yes, correct. That's right.

Speaker 7

Okay, great. Thank you.

Speaker 2

Thank you.

Operator

Thank you. I'm showing no further questions at this time. I would like to turn the floor back over to Rommel Voll for closing comments.

Speaker 2

Thank you very much for your attention here today on our Q2 call. We certainly appreciate you taking the time To listen in and to ask your questions, we look forward to updating you in mid November with our Q3 results. Goodbye. Thanks.

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your evening.

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KORE Group Q2 2023
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