kore-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 10-Q

_____________________________

(Mark One)


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

For the quarterly period ended June 30, 2024


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

Commission file number 001-40856

_____________________________

KORE Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

_____________________________


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

3 Ravinia Drive, Suite 500, Atlanta, GA			30346
(Address of principal executive office)			(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

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 Act). Yes o No x

As of August 12, 2024, there were 18,092,784 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS


		Page
Part I - Financial Information

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements	7
	Note 1 - Summary of Significant Accounting Policies	7
	Note 2 - Revenue Recognition	8
	Note 3 - Accounts Receivable	9
	Note 4 - Goodwill	9
	Note 5 - Condensed Consolidated Financial Statement Details	10
	Note 6 - Derivatives	10
	Note 7 - Fair Value Measurements	11
	Note 8 - Stock-based Compensation	13
	Note 9 - Net Loss Per Share	13
	Note 10 - Related Party Transactions	15
	Note 1 1 - Commitments and Contingencies	16
	Note 1 2 - Subsequent Events	17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

Part II - Other Information

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

	Signatures	35

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited)

KORE Group Holdings, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share data)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash	$	22,260	$	27,137
Accounts receivable, net	46,667		52,413
Inventories, net	7,842		8,215
Prepaid expenses and other current assets	11,443		14,222
Total current assets	88,212		101,987
Noncurrent assets:
Restricted cash	299		300
Property and equipment, net	10,383		10,956
Intangible assets, net	148,059		167,587
Goodwill	249,324		294,974
Operating lease right-of-use assets	9,131		9,367
Other non-current assets	4,386		1,813
Total assets	$	509,794	$	586,984

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	21,381	$	23,983
Accrued liabilities	26,713		23,421
Current portion of operating lease liabilities	1,522		1,446
Deferred revenue	8,531		9,044
Current portion of long-term debt and other borrowings, net	1,850		2,411
Warrant liabilities to affiliates	4,978		11,664
Total current liabilities	64,975		71,969
Noncurrent liabilities:
Operating lease liabilities	9,021		9,446
Long-term debt and other borrowings, net	295,863		296,109
Deferred income tax liabilities, net	7,854		13,795
Accrued interest due to affiliate	12,766		2,530
Mandatorily redeemable preferred stock due to affiliate, net	142,206		141,594
Other liabilities	14,936		14,568
Total liabilities	547,621		550,011
Commitments and Contingencies
Stockholders’ (deficit) equity:
Common stock, voting, par value $0.0001 per share; 315,000,000 shares authorized; 17,982,993 shares issued and 16,982,993 outstanding as of June 30, 2024, and 17,476,530 shares issued and 16,476,530 outstanding as of December 31, 2023	8		8
Additional paid-in capital	467,439		461,069
Accumulated other comprehensive loss	(5,353)		(6,070)
Accumulated deficit	(497,167)		(415,280)
Treasury stock, at cost, 1,000,000 shares	(2,754)		(2,754)
Total stockholders’ (deficit) equity	(37,827)		36,973
Total liabilities and stockholders’ (deficit) equity	$	509,794	$	586,984

See accompanying notes to 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue
Services	$	57,318	$	51,023	$	116,958	$	98,573
Products	10,550		18,513		26,885		36,938
Total revenue	67,868		69,536		143,843		135,511
Cost of revenue
Services	22,919		18,068		46,865		34,611
Products	6,326		13,648		16,593		27,422
Total cost of revenue (exclusive of depreciation and amortization shown separately below)	29,245		31,716		63,458		62,033
Operating expenses
Selling, general, and administrative expenses	35,810		32,563		71,177		62,430
Selling, general, and administrative expenses incurred with affiliates	159		329		329		662
Depreciation and amortization	14,423		14,512		28,029		28,637
Goodwill impairment	45,381		—		45,381		—
Total operating expenses	95,773		47,404		144,916		91,729
Operating loss	(57,150)		(9,584)		(64,531)		(18,251)
Other expense (income)
Interest expense, including amortization of deferred financing costs	7,976		10,298		15,729		20,618
Interest expense incurred with affiliate, including amortization of deferred financing costs	5,049		—		10,236		—
Interest income	(375)		(99)		(675)		(229)
Change in fair value of warrant liabilities to affiliates	(4,365)		3		(6,686)		—
Other expense, net	302		208		609		213
Loss before income taxes	(65,737)		(19,994)		(83,744)		(38,853)
Income tax benefit	(1,437)		(495)		(1,857)		(864)
Net loss	$	(64,300)	$	(19,499)	$	(81,887)	$	(37,989)

Loss per share:
Basic and diluted	$	(3.36)	$	(1.22)	$	(4.29)	$	(2.43)
Weighted average shares outstanding:
Basic and diluted	19,147,677		15,969,860		19,069,876		15,639,241

Comprehensive loss
Net loss	$	(64,300)	$	(19,499)	$	(81,887)	$	(37,989)
Other comprehensive loss:
Foreign currency translation adjustment	477		130		717		258
Comprehensive loss	$	(63,823)	$	(19,369)	$	(81,170)	$	(37,731)

See accompanying notes to condensed consolidated financial statements

KORE Group Holdings, Inc.

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

(In thousands, except share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Par value of common stock
Balance, beginning of period	$	8	$	8	$	8	$	8
Balance, end of period	8		8		8		8

Additional paid-in capital
Balance, beginning of period	463,777		437,677		461,069		435,292
Common stock issued pursuant to acquisition	—		14,700		—		14,700
Stock-based compensation expense	3,731		3,005		6,439		5,575
Shares withheld related to net share settlement	(69)		—		(69)		(185)
Balance, end of period	467,439		455,382		467,439		455,382

Accumulated other comprehensive loss
Balance, beginning of period	(5,830)		(6,262)		(6,070)		(6,390)
Foreign currency translation adjustment	477		130		717		258
Balance, end of period	(5,353)		(6,132)		(5,353)		(6,132)

Accumulated deficit
Balance, beginning of period	(432,867)		(266,728)		(415,280)		(248,238)
Net loss	(64,300)		(19,499)		(81,887)		(37,989)
Balance, end of period	(497,167)		(286,227)		(497,167)		(286,227)

Treasury stock, at cost
Balance, beginning of period	(2,754)		—		(2,754)		—

Balance, end of period	(2,754)		—		(2,754)		—

Total Stockholders’ (Deficit) Equity	$	(37,827)	$	163,031	$	(37,827)	$	163,031

See accompanying notes to condensed consolidated financial statements

KORE Group Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024		2023




















Net cash provided by operating activities	$	5,890	$	1,303

Investing activities:
Purchases of property and equipment	(1,741)		(2,592)
Additions to intangible assets	(7,043)		(7,653)
Net cash used in investing activities	$	(8,784)	$	(10,245)

Financing activities:
Repayment of debt	(1,486)		(2,654)
Principal payments under finance lease obligations	(189)		—
Payment of employee tax withholdings through cancelled shares of stock	(64)		—
Net cash used in financing activities	$	(1,739)	$	(2,654)
Effect of exchange rate changes on cash	(245)		87
Net decrease in cash and restricted cash	$	(4,878)	$	(11,509)
Cash and restricted cash, beginning of period	$	27,437	$	35,007
Cash and restricted cash, end of period	$	22,559	$	23,498





Non-cash investing and financing activities:
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	485	$	1,031
Non-cash consideration (stock) issued for acquisition	$	—	$	14,700

Reconciliation of cash and restricted cash, end of period:
Cash	$	22,260	$	22,916
Restricted cash	299		582
Total cash and restricted cash, end of period:	$	22,559	$	23,498

See accompanying notes to condensed consolidated financial statements

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KORE Group Holdings, Inc.

Notes to 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 business 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 complementary 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’s common stock, par value $0.0001 per share (the “common stock”), is traded on the New York Stock Exchange (the “NYSE”) under the ticker symbol “KORE”. The Company implemented a reverse stock split of its common stock at a ratio of 1-for-5 effective as of July 1, 2024. No fractional shares were issued in connection with the reverse stock split. Any fractional shares resulting from the reverse stock split, regardless of the fractional amount, resulted in an additional one share in lieu of such fractional share. The number of shares of common stock covered by the warrants outstanding at the effective time of the reverse stock split was reduced to one-fifth the number of shares of common stock covered by the warrants immediately preceding the reverse stock split, and the exercise price per share was increased by five times the exercise price immediately preceding the reverse stock split, resulting in the same aggregate price being required to be paid therefor upon exercise thereof as was required immediately preceding the reverse stock split. The reverse stock split did not affect the shares of preferred stock outstanding. All calculations have been adjusted to reflect the reverse stock split for all periods presented.

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 annual consolidated financial statements and related notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“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.

Change in Accounting Estimate — Depreciation of Property and Equipment

On January 1, 2024, the Company elected to change its method of depreciation for long-lived assets from the declining balance method to the straight-line method. The Company’s use of the straight-line depreciation method was effective beginning January 1, 2024, and has been applied prospectively as a change in estimate.

Reclassifications

Certain immaterial amounts reported in prior periods in the condensed consolidated financial statements have been corrected and reclassified to conform to the current year’s presentation. To appropriately reflect the long-term nature of the obligation regarding the interest accrued on the mandatorily redeemable preferred stock, the amount of “accrued interest due to affiliate” of $2.5 million on the condensed consolidated balance sheet as of December 31, 2023 has been reclassified to noncurrent liabilities. See Note 10 - Related Party Transactions.

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KORE Group Holdings, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs currently applicable to the Company’s future financial statements are discussed in the Company’s Annual Report on Form 10-K, Part II, Item 8, Note 2 — Summary of Significant Accounting Policies.

NOTE 2 – REVENUE RECOGNITION

Disaggregated Revenue

The table below sets forth a summary of revenue by major service line and product category:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Services:
IoT Connectivity (1)	$	54,579	$	47,699	$	111,240	$	90,943
IoT Solutions	2,739		3,065		5,718		7,155
	$	57,318	$	50,764	$	116,958	$	98,098
Products:
Hardware (2)(3)	$	10,550	$	18,772	$	26,885	$	37,413

Total	$	67,868	$	69,536	$	143,843	$	135,511

(1) Includes connectivity-related revenue from IoT Connectivity and IoT Solutions.

(2) Includes hardware-related revenue from IoT Connectivity and IoT Solutions.

(3) Includes $0.3 million and $2.3 million of bill-and-hold arrangements for the three months ended June 30, 2024 and 2023, respectively, and $2.9 million and $4.5 million for the six months ended June 30, 2024 and 2023, respectively.

The table below sets forth a summary of revenue by geographic area:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
United States	$	57,181	$	56,709	$	120,802	$	106,759
Other countries (1)	10,687		12,827		23,041		28,752
Total	$	67,868	$	69,536	$	143,843	$	135,511

(1) No single country in “other countries” exceeded 10% of the total revenue for the three months ended June 30, 2024 and 2023, and the six months ended June 30, 2024 and 2023.

Contract Assets

The following table sets forth the change in contract assets, or unbilled receivables:


(in thousands)	June 30, 2024		December 31, 2023
Beginning balance	$	2,173	$	—
Revenue recognized during the period but not billed (1)	1,779		2,173
Amounts reclassified to accounts receivable	(807)		—
Ending balance	$	3,145	$	2,173

(1) Net of financing component of $0.5 million and $0.3 million as of June 30, 2024 and December 31, 2023, respectively.

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KORE Group Holdings, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Contract Liabilities

The table below sets forth the change in contract liabilities, or deferred revenue:


(in thousands)	June 30, 2024		December 31, 2023
Beginning balance	$	9,044	$	7,817
Amounts billed but not recognized as revenue	8,483		9,041
Revenue recognized from balances held at the beginning of the period	(9,044)		(7,817)
Foreign exchange	48		3
Ending balance	$	8,531	$	9,044

Remaining Performance Obligations

Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations that are unsatisfied, or partially unsatisfied, at the end of the reporting period. Remaining performance obligations estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that have not materialized, and adjustments for currency. As of June 30, 2024 the Company had approximately $13.5 million of remaining performance obligations on contracts with an original duration of one year or more. The Company expects to recognize approximately 52% of these remaining performance obligations in 2024, with the remaining balance recognized thereafter.

The Company has variable consideration of approximately $2.4 million that was constrained revenue and excluded from the transaction price for the period ended June 30, 2024. There were no material instances where variable consideration was constrained and not recorded at the initial time of sale for the period ended June 30, 2023.

Costs to Obtain and Fulfill a Contract

The Company did not have material costs related to obtaining a contract, or fulfilling a contract that are not addressed by other accounting standards, with amortization periods greater than one year for the three and six months ended June 30, 2024 and 2023.

NOTE 3 – ACCOUNTS RECEIVABLE

The following table sets forth the details of the Company’s accounts receivable, net balances included on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023:


(in thousands)	June 30, 2024		December 31, 2023
Accounts receivable	$	47,081	$	52,843
Less: allowance for credit losses	(414)		(430)
Accounts receivable, net	$	46,667	$	52,413

As of January 1, 2023, the Company’s accounts receivable balance was $44.5 million. The bad debt expense was $0.2 million for the three months ended June 30, 2024 and immaterial for the three months ended June 30, 2023. The bad debt expense was $0.4 million and $0.2 million, for the six months ended June 30, 2024 and 2023, respectively. The write-offs and recoveries were immaterial for the three and six months ended June 30, 2024 and 2023.

NOTE 4 – GOODWILL

The Company tests goodwill for impairment on an annual basis on October 1 of each year, or when events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. During the second quarter of 2024, the Company identified circumstances prior to its annual goodwill test that indicated that it was “more likely than not” that the fair value of the reporting unit (the Company) was below its carrying value. The Company therefore performed qualitative and quantitative goodwill impairment tests during the second quarter of 2024. The qualitative impairment indicators noted include a sustained decline in the Company’s share price, decreasing cash flows, lower actual or planned revenue or earnings compared with actual and projected results of relevant prior periods, and changes in management.

The fair value of the Company was estimated by equally weighing the results of an income approach and market approach. Valuation techniques utilized were substantially considered Level 3 inputs in the fair value hierarchy. These inputs included the Company’s internal forecasts of its future results, cash flows, and its weighted average cost of capital. Key assumptions used in the impairment analysis included projected revenue growth rates, discount rates, and market factors such as earnings multiples from comparable publicly traded companies.

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KORE Group Holdings, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As a result of the Company’s goodwill impairment testing, the Company concluded that the carrying value of the Company exceeded its estimated fair value and recorded a goodwill impairment loss of approximately $45.4 million, which represents the impairment loss subsequent to December 31, 2023, for both the three and six months ended June 30, 2024.

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