kore-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-40856

KORE Group Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

__________________________


Delaware			86-3078783
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3 Ravinia Drive NE, Suite 500, Atlanta, Georgia 30346
(Address of principal executive offices and Zip Code)

877-710-5673

(Registrant’s telephone number, including area code)

__________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common stock, $0.0001 par value per share

KORE

New York Stock Exchange

Warrants to purchase common stock

KORE.WS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 6, 2023, there were 86,710,582 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.

KORE GROUP HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION		Page No.

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to the Condensed Consolidated Financial Statements
	Note 1 - Summary of Significant Accounting Policies	5
	Note 2 - Revenue Recognition	6
	Note 3 - Acquisitions	7
	Note 4 - Accounts Receivable	10
	Note 5 - Premium Finance Agreement	10
	Note 6 - Fair Value Measurements	10
	Note 7 - Net Loss Per Share	12
	Note 8 - Prepaid Expenses and Other Current Assets	12
	Note 9 - Commitments and Contingencies	12
	Note 10 - Related Party Transactions	13
	Note 11 - Supplemental Cash Flow Information	13
	Note 12 - Goodwill	13
	Note 13 - Subsequent Events	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION		28

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5.	Other Information	29
Item 6.	Exhibits	29

Signatures		30

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited)

KORE Group Holdings, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)


	September 30, 2023		December 31, 2022
ASSETS
Current assets
Cash	$	19,767	$	34,645
Accounts receivable, net	48,220		44,538
Inventories, net	9,925		10,051
Income taxes receivable	379		502
Prepaid expenses and other current assets	13,935		13,484
Total current assets	92,226		103,220
Non-current assets
Restricted cash	296		362
Property and equipment, net	12,122		11,899
Intangible assets, net	176,028		192,504
Goodwill	294,600		369,706
Operating lease right-of-use assets	9,905		10,019
Deferred tax assets	52		55
Other long-term assets	947		971
Total assets	$	586,176	$	688,736
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	22,455	$	17,835
Accrued liabilities	24,539		15,793
Current portion of operating lease liabilities	1,433		1,811
Income taxes payable	2,212		207
Deferred revenue	7,931		7,817
Current portion of long-term debt and other borrowings, net	4,268		5,345
Total current liabilities	62,838		48,808
Non-current liabilities
Deferred tax liabilities	14,168		25,248
Warrant liability	19		33
Non-current portion of operating lease liabilities	9,741		9,275
Long-term debt and other borrowings, net	412,633		413,910
Other long-term liabilities	15,671		10,790
Total liabilities	$	515,070	$	508,064

Commitments and Contingencies

Stockholders’ equity
Common stock, voting; par value $0.0001 per share; 315,000,000 shares authorized, 86,724,356 and 76,292,241 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively	$	9	$	8
Additional paid-in capital	459,047		435,292
Accumulated other comprehensive loss	(6,362)		(6,390)
Accumulated deficit	(381,588)		(248,238)
Total stockholders’ equity	71,106		180,672
Total liabilities and stockholders’ equity	$	586,176	$	688,736

See accompanying notes to the unaudited condensed consolidated financial statements

KORE Group Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenue
Services	$	57,046	$	46,448	$	155,619	$	141,796
Products	11,587		19,689		48,525		64,240
Total revenue	68,633		66,137		204,144		206,036
Cost of revenue
Cost of services	22,794		16,581		57,405		50,740
Cost of products	8,202		14,960		35,624		49,701
Total cost of revenue (exclusive of depreciation and amortization shown separately below)	30,996		31,541		93,029		100,441
Operating expenses
Selling, general and administrative	32,778		28,904		95,870		86,029
Depreciation and amortization	14,457		13,688		43,094		40,616
Goodwill impairment	78,255		—		78,255		—
Total operating expenses	125,490		42,592		217,219		126,645
Operating loss	(87,853)		(7,996)		(106,104)		(21,050)
Interest expense, including amortization of deferred financing costs, net	10,615		8,206		31,217		22,127
Change in fair value of warrant liability	(14)		(120)		(14)		(253)
Loss before income taxes	(98,454)		(16,082)		(137,307)		(42,924)
Income tax benefit	(3,093)		(1,805)		(3,957)		(6,285)
Net loss	$	(95,361)	$	(14,277)	$	(133,350)	$	(36,639)
Loss per share:
Basic and diluted	$	(1.10)	$	(0.19)	$	(1.65)	$	(0.49)

Weighted average number of shares outstanding:
Basic and diluted	86,655,279		76,240,530		81,046,880		75,514,986


Comprehensive loss
Net loss	$	(95,361)	$	(14,277)	$	(133,350)	$	(36,639)
Other comprehensive loss:
Foreign currency translation adjustment	(230)		(2,215)		28		(4,711)
Comprehensive loss	$	(95,591)	$	(16,492)	$	(133,322)	$	(41,350)

See accompanying notes to the unaudited condensed consolidated financial statements

KORE Group Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands, except share data)


Three Months Ended September 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Amount		Amount
Balance as of June 30, 2023	86,552,595	$	9	$	455,381	$	(6,132)	$	(286,227)	$	163,031
Foreign currency translation adjustment	—	—		—		(230)		—		(230)
Stock-based compensation expense	—	—		3,435		—		—		3,435
Vesting of restricted stock units	171,761	—		—		—		—		—
Private offering and merger financing refund	—	—		231		—		—		231
Net loss	—	—		—		—		(95,361)		(95,361)
Balance as of September 30, 2023	86,724,356	$	9	$	459,047	$	(6,362)	$	(381,588)	$	71,106


Three Months Ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Amount		Amount
Balance at June 30, 2022	76,239,989	$	8	$	429,547	$	(5,959)	$	(164,400)	$	259,196
Foreign currency translation adjustment	—	—		—		(2,215)		—		(2,215)
Stock-based compensation expense	—	—		3,019		—		—		3,019
Vesting of restricted stock units	52,252	—		—		—		—		—
Net loss	—	—		—		—		(14,277)		(14,277)
Balance as of September 30, 2022	76,292,241	$	8	$	432,566	$	(8,174)	$	(178,677)	$	245,723


Nine Months Ended September 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Amount		Amount
Balance as of December 31, 2022	76,292,241	$	8	$	435,292	$	(6,390)	$	(248,238)	$	180,672
Foreign currency translation adjustment	—	—		—		28		—		28
Stock-based compensation expense	—	—		9,010		—		—		9,010
Shares withheld related to net share settlement	(134,713)	—		(185)		—		—		(185)
Vesting of restricted stock units	566,828	—		—		—		—		—
Common stock issued pursuant to acquisition	10,000,000	1		14,699		—		—		14,700
Private offering and merger financing refund	—	—		231		—		—		231
Net loss	—	—		—		—		(133,350)		(133,350)
Balance as of September 30, 2023	86,724,356	$	9	$	459,047	$	(6,362)	$	(381,588)	$	71,106


Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Amount		Amount
Balance as of December 31, 2021	72,027,743	$	7	$	401,702	$	(3,463)	$	(142,038)	$	256,208
Foreign currency translation adjustment	—	—		—		(4,711)		—		(4,711)
Stock-based compensation	—	—		7,570		—		—		7,570
Vesting of restricted stock units	52,252	—		—		—		—		—
Common stock issued pursuant to acquisition	4,212,246	1		23,294		—		—		23,295
Net loss	—	—		—		—		(36,639)		(36,639)
Balance as of September 30, 2022	76,292,241	$	8	$	432,566	$	(8,174)	$	(178,677)	$	245,723

See accompanying notes to the unaudited condensed consolidated financial statements

KORE Group Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2023		2022




















Net cash provided by operating activities	$	4,493	$	20,527

Cash flows from investing activities
Additions to intangible assets	(12,186)		(9,027)
Additions to property and equipment	(3,410)		(2,945)
Payments for acquisitions, net of cash acquired	—		(46,002)
Net cash used in investing activities	$	(15,596)	$	(57,974)
Cash flows from financing activities


Repayment of term loan	(2,364)		(2,364)
Repayment of other borrowings—notes payable	(1,626)		(507)
Private offering and merger financing refund	231		—
Equity financing fees	—		(126)
Payment of deferred financing costs	—		(452)
Payment of financing lease obligations	—		(150)
Net cash used in financing activities	$	(3,759)	$	(3,599)
Effect of exchange rate changes on cash	(82)		(2,014)
Change in cash and restricted cash	$	(14,944)	$	(43,060)
Cash and restricted cash, beginning of period	35,007		86,343
Cash and restricted cash, end of period	$	20,063	$	43,283

See accompanying notes to the unaudited condensed consolidated financial statements

KORE Group Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

KORE Group Holdings, Inc. (together with its subsidiaries, “KORE,” or the “Company”) provides advanced connectivity services, location-based services, device solutions, managed and professional services used in the development and support of the “Internet of Things” (“IoT”) technology for the machine-to-machine market. The Company’s IoT platform is delivered in partnership with the world’s largest mobile network operators and provides secure, reliable, wireless connectivity to mobile and fixed devices. This technology enables the Company to expand its global technology platform by transferring capabilities across new and existing vertical markets and delivers complimentary products to channel partners and resellers worldwide.

The Company is incorporated in the state of Delaware and its operations are primarily located in North America. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company is traded on the New York Stock Exchange under the ticker symbol “KORE”.

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report on Form 10-K”).

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year.

Use of Estimates

The preparation of financial statements requires the Company to make a number of significant estimates. These include estimates of revenue recognition, fair value measurements of assets acquired and liabilities assumed in business combinations, assessments of indicators of impairment regarding various assets including goodwill, calculation of capitalized software costs, accounting for uncertainties in income tax positions, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. Changes in these estimates may occur in the near term. The Company’s estimates are inherently subjective in nature and actual results could differ from the Company’s estimates and the differences could be material.

Recently Adopted and Recently Issued Accounting Pronouncements

The Company considers the potential applicability and effect of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”).

The following ASU was adopted by the Company subsequent to the issuance of its Annual Report on Form 10-K:

ASU 2022-04, Liabilities—Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations

In September 2022, the FASB issued ASU No. 2022-04, “Liabilities—Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations,” to enhance the transparency of supplier finance programs used by an entity in connection with the purchase of goods and services. ASU No. 2022-04 is effective for all companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the required rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption was permitted. During the fiscal year of adoption, ASU 2022-04 requires information on the key terms of the program(s) and the balance sheet presentation of the program obligations, which are annual disclosure requirements, to be disclosed in each interim period. The Company adopted ASU 2022-04, on January 1, 2023.

In each annual reporting period, the Company is required to disclose the following information:

1. The key terms of the program, including a description of the payment terms (including payment timing and basis for its determination) and assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary.

2. For the obligations that the Company has confirmed as valid to the finance provider or intermediary:

KORE Group Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

a. The amount outstanding that remains unpaid by the Company as of the end of the annual period (the “outstanding confirmed amount”);

b. A description of where those obligations are presented in the balance sheet;

c. A rollforward of those obligations during the annual period, including the amount of obligations confirmed and the amount of obligations subsequently paid.

In each interim reporting period (subject to the applicable transition guidance as described above in the initial year of adoption), the Company is required to disclose the amount of obligations outstanding that it has confirmed as valid to the finance provider or intermediary as of the end of the interim period.

The guidance does not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs, but rather, had the effect of requiring additional disclosures. See Note 5—Premium Finance Agreement.

Recently Issued Accounting Pronouncements

There were no significant changes in recently issued accounting pronouncements pending adoption from those disclosed in the Company’s Annual Report on Form 10-K. Recent accounting pronouncements pending adoption not discussed in the Annual Report on Form 10-K are either not applicable or are not expected to have a material impact on the Company’s consolidated financial condition, results of operations, or cash flows.

NOTE 2 – REVENUE RECOGNITION

Contract Balances

Deferred revenue as set forth on the Company’s condensed consolidated balance sheets as of September 30, 2023, and December 31, 2022, primarily relates to revenue that is recognized over time for IoT connectivity monthly recurring charges, with reductions in the balance related to the satisfaction or partial satisfaction of these contracts. The balance also contains a deferral for goods that are in transit at the period end for which control transfers to the customer upon delivery.

Disaggregated Revenue Information

The Company has presented the disaggregated disclosures below which are useful to understand the composition of the Company’s revenue during the respective reporting periods shown below:


	Three Months Ended				Nine Months Ended
($ in thousands)	September 30,				September 30,
	2023		2022		2023		2022
IoT Connectivity*	$	54,217	$	42,949	$	145,161	$	129,816
Hardware Sales	9,541		16,266		42,484		56,747
Hardware Sales—bill-and-hold	2,088		3,423		6,558		7,493
Deployment services, professional services, referral services and other	2,787		3,499		9,941		11,980
Total	$	68,633

SEC Form 10-Q filed by KORE Group Holdings Inc.