Image source: The Motley Fool.
DATE
Thursday, August 14, 2025 at 5 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Ron Totton
Chief Financial Officer — Anthony Bellomo
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
Total Revenue-- $71.3 million in total revenue for Q2 2025, up by $3.4 million, or approximately 5% year over year, supported by increased connections and key customer wins.
IoT Connectivity Revenue-- $56.1 million in IoT connectivity revenue for Q2 2025, an increase of 1% year over year, driven by the increased number of connections.
IoT Solutions Revenue-- $15.2 million in IoT solutions revenue for Q2 2025, up 25% year over year, primarily from strong sales of connectivity-enabling hardware and services.
Non-GAAP Gross Margin-- 56.9% non-GAAP gross margin for Q2 2025; IoT Connectivity gross margin (non-GAAP) was 60% (down from 60.9%), IoT Solutions gross margin (non-GAAP) was 45.3% (up 682 basis points).
Total Connections-- 20.1 million total connections as of Q2 2025, an increase of 1.5 million, or 8% year over year, and surpassing the 20 million milestone.
ARPU-- $0.94 ARPU for the current quarter, compared to $1 in Q2 2024, reflecting growth in lower-ARPU use cases.
DBNER (Dollar-Based Net Expansion Rate)-- 99%, up from 92% in the twelve months ended June 30, 2024, attributed to revenue stabilization with existing customers.
Operating Expenses-- $44.6 million in operating expenses for Q2 2025, dropping by $4.9 million after adjusting for the prior year's noncash goodwill impairment, and mainly benefiting from foreign exchange gains and restructuring savings.
Net Loss-- Net loss was $16.9 million for Q2 2025, significantly narrowed compared to GAAP net loss of $83.6 million in Q2 2024, largely due to the prior impairment charge in Q2 2024 and improved operations.
Adjusted EBITDA-- Adjusted EBITDA was $16.7 million for Q2 2025, rising by $5.3 million, or 46%, compared to the prior year, due to expense control, other income, and higher gross profit.
Cash Provided by Operations-- $4.1 million cash provided by operations for Q2 2025, nearly flat with the $4 million reported for Q2 2024.
Free Cash Flow-- Positive free cash flow of $1.6 million in Q2 2025 (third consecutive positive quarter), compared to negative $100,000 in Q2 2024.
Cash and Restricted Cash-- $21.3 million at period end (as of Q2 2025), compared to $22.6 million as of June 30, 2024.
Sales Pipeline-- Total pipeline reached $84.6 million for Q2 2025, with $10.2 million in closed-won estimated annual recurring revenue, supported by new logo acquisitions and deeper existing customer engagements.
Full-Year 2025 Guidance-- Revenue projected at $288 million to $298 million for fiscal year 2025; adjusted EBITDA at $62 million to $67 million (midpoint growth of 19%); free cash flow guidance between $10 million and $14 million for the full year.
Operational Highlights-- The company surpassed the 20 million connections milestone in Q2 2025, implemented eight AI initiatives, and launched "Corey," an AI-powered customer support assistant.
Management Commentary-- CEO Totton reiterated, "We are delivering consistent revenue growth, improvements in profitability, and generating sustainable free cash flow."
SUMMARY
The company’s total connections surpassed 20.1 million, while recurring revenue visibility benefited from growth in the sales pipeline and closed-won opportunities. Executive remarks confirmed continued implementation of artificial intelligence, infrastructure enhancements, and strategic milestones targeted for the second half of 2025. Management reiterated full-year 2025 guidance for revenue, adjusted EBITDA (non-GAAP), and free cash flow, and stated confidence in market positioning despite macroeconomic headwinds.
CEO Totton said, "our execution is guided by our five-pillar value creation plan," framing operational priorities through 2025.
Specific highlights included AI-driven customer service initiatives, and a strengthened support process to accelerate response times.
No major client project cancellations, or delays related to new tariffs or economic uncertainty were reported during the call.
The company identified growth in pipeline and connection count as primary milestones for the remainder of 2025, with additional focus on completing three key technology and infrastructure projects.
INDUSTRY GLOSSARY
IoT (Internet of Things): Network of physical devices embedded with sensors and connectivity to exchange data for automation, monitoring, and analytics.
ARPU (Average Revenue Per User): Monthly metric indicating average revenue generated per active connection or subscriber.
DBNER (Dollar-Based Net Expansion Rate): Measurement of growth or contraction in revenue generated from existing customer accounts over the past twelve months, accounting for upsells, downgrades, and churn.
Estimated Annual Recurring Revenue (eARR): Projection of new or expanded contractually recurring revenue expected to repeat annually.
Full Conference Call Transcript
Ron Totton: Thank you, Vik, and good afternoon, everyone. Before we begin, I'd like to take a moment to introduce our new Chief Financial Officer, Anthony Bellomo. He is a seasoned financial leader with an understanding of our industry, and a successful track record of finance operations, strategic financial planning, and capital allocation. We are confident that his expertise will be invaluable as we continue on our growth strategy and deliver long-term value for our shareholders. I'm excited to have him as part of our leadership team as he has hit the ground running and I look forward to the contributions he will make.
For today's call, I'll provide an update on the company's business highlights for the second quarter, and then turn the call over to Anthony to go through the financial results. After which, I will share a current view on the financial guidance for 2025 before turning over the call to the operator for Q&A. I'm excited to share our results for the second quarter. First, we delivered steadily improving operating performance with solid growth in both revenue and profitability. This is the result of our relentless focus on execution and our commitment to driving profitable growth. Our total revenue for the quarter grew to $71.3 million, an increase of $3.4 million over the same period last year.
This upward trend is a direct result of our growing number of connections and key customer wins. Next, and just as important, is our profitability. And while we had a substantial improvement in net profit, more importantly, our adjusted EBITDA rose by $5.3 million to reach $16.7 million. This demonstrates that we are not just growing, but we are growing profitably and our focus on operational excellence is paying off. Next, I want to highlight what I believe is one of the most important indicators of our company's health. Our improvement in cash flow and, in particular, our free cash flow. This quarter, we generated $1.6 million in positive free cash flow, marking our third consecutive quarter of doing so.
This sustained cash generation strengthens our balance sheet, reduces our reliance on external capital, and gives us the financial flexibility to strategically reinvest in our business to accelerate our leadership position. In summary, the financial narrative of this quarter is clear. We are delivering consistent revenue growth, improvements in profitability, and generating sustainable free cash flow. As I mentioned previously, our execution is guided by our five-pillar value creation plan. This is our blueprint for building a world-class company. And on this slide, you can see tangible proof of the progress we're making across every pillar. Let's start with profitable growth.
We've delivered three straight quarters of positive cash flow, crossed the 20 million connection milestone while improving our IoT solutions gross margin. This is the core of our strategy. To grow in a smart, sustainable, and profitable way. That growth is fueled by product innovation. In a fast-moving industry like ours, standing still is not an option. We're leading the way with our super SIM offerings, and preparing our customers for the future with 32 readiness. Our wins in the highly regulated connected health space are a direct result of this forward-thinking approach. Proving that our innovation is solving real-world challenges for our customers. And this all comes together in service of our most important pillar, customer intimacy.
Our goal is to be loved by our customers and to be the easiest company to work in the IoT industry. We're unifying the customer experience on our core one platform, and have introduced Corey, an AI-powered live assistant to provide instant customer support. We're constantly listening to our customers and launching enhancements to make managing their IoT deployment simpler, and more intuitive. In our pillar of operational excellence, we're continuously strengthening our core operations to support our scale. This quarter, we've made key infrastructure and technology upgrades, and launched an enhanced customer support process to serve our customer better and faster.
Furthermore, we are embracing the future by deploying eight distinct AI initiatives across the company, aimed at enhancing everything from customer experience, revenue growth, as well as our own internal efficiency. Of course, none of this would be possible without a winning team. We're making strategic investments in our people. The heart of KORE. Through initiatives like our values relaunch, and new learning and development and recognition programs, we're building a culture of excellence and empowering our team to do their best work. As you can see, our progress is balanced and comprehensive. This is the core value creation plan in action. And it is the engine that will continue to drive our success.
Diving a bit deeper into our core business, this slide clearly illustrates steady foundational growth in our IoT connectivity segment. The key metric here is our total connection, which grew by a robust 8% year over year to surpass 20.1 million. This is the engine of our recurring revenue model, and its growth is a testament to our ability to both win new customers and expand the share of wallet within our existing customer base. Naturally, this healthy growth in connections translates directly to our top line driving a steady increase in our IoT connectivity revenue. While our results are strong, our sales momentum is what gives us such confidence in our future.
It shows the health of our sales engine, which we measure in estimated annual recurring revenue or eARR. This is our forward-looking metric for new expected recurring revenue. There are two key stories here. First, our total pipeline of opportunities grew to $84.6 million this quarter. This is the fuel for our future growth. And critically, this increase is being driven by new logos, which tells us that our value proposition is resonating in the market. And we are successfully capturing new demand. Second, we converted $10.2 million of that pipeline into closed one EARR. This is brand new committed annual recurring that will layer into our financials over the coming year. What's more, this success is balanced.
We're winning new logos while also successfully expanding our relationships with existing customers. Which validates our account penetration strategy. This gives us visibility and a growing degree of confidence in our ability to deliver sustained, predictable revenue growth well into the future. The numbers in graph we just reviewed are important, but this slide shows how we're achieving them. This is the story behind the numbers. These four recent wins are excellent examples of our strategy in action and why customers are choosing KORE.
First, within a leading AI-driven security provider, we won by acting as a true strategic partner and leveraged our deep OEM relationships and technical expertise to help them navigate a complex competitive environment and accelerate their time to market. This is a perfect example of how we provide value far beyond our connectivity. Next, a win with a major telematics hardware provider. This is a story of technological leadership. We solve their critical coverage challenges with our multicarrier super SIM, provided advanced VPN capabilities to secure their data, and position them for the future with our s g p dot 32 solution.
According to this customer, we won because our technology is simply more powerful and more flexible than the competition. The win with a global fence provider came down to product reliability, Our Omnisyn Reach delivered performance so reliable that the customer described it as it just works under all circumstances. Which is the highest praise you can get in the world of IoT. It demonstrates the power of our global roaming capabilities and strong carrier partnerships. And finally, I want to highlight another win in the connected health space for remote patient monitoring customer. For this customer, we helped eliminate the complex of managing multiple carriers through our single SIM, multicarrier solution.
Our unified approach was critical given the work requirements with major health care systems. Customers aren't just buying connectivity. They're choosing KORE for our strategic expertise, our superior technology, our global reliability, and our IoT managed services. This is how we are winning and this is why our pipeline continues to grow. And now, I will turn the call over to Anthony to cover the financials in more detail.
Anthony Bellomo: Thanks, Ron, and thanks to those joining us this evening for our second quarter results. Total revenue for the second quarter increased $3.4 million or approximately 5% year over year to $71.3 million. Breaking revenue down by business lines, IoT connectivity revenue increased 1% to $56.1 million due to our increased number of connections. IoT solutions revenue increased 25% to $15.2 million driven by strong sales of connectivity enabling hardware and services. Overall, non-GAAP gross margin in Q2 2025 was 56.9% for the second quarter of the prior year. By business line, non-GAAP IoT connectivity gross margin was down slightly to 60% from 60.9% in the prior year due to the mix of revenue.
Non-GAAP IoT Solutions gross margin was up 682 basis points year over year to 45.3%, primarily due to certain high margin sales in 2025. We expect non-GAAP IoT Solutions gross margin percentage to return to historical averages in the future. Total connections at the end of the second quarter were 20.1 million, an increase of 1.5 million year over year. Average revenue per user per month or ARPU for the current quarter was 94¢ compared to $1 in Q2 2024. The decrease in ARPU year over year was due to the recent additions to connections coming from lower ARPU use cases. DBNER for the twelve months ended 06/30/2025 was 99% compared with 92% in the prior year.
The increase in DBNER was mainly due to the stabilization of revenue over the past twelve months versus the previous year. As a reminder, DBNER is similar to same source sales as it measures the growth of existing customers in the trailing twelve month compared to the same customer cohort in the year ago period. Operating expenses in the second quarter were $44.6 million, a decrease of $70.8 million compared to Q2 2024. Included in 2024 is a noncash goodwill impairment charge of $65.9 million. Excluding this charge, operating expenses decreased by $4.9 million largely due to a foreign exchange gain of $3.5 million in 2025. And savings from restructuring actions taken in the last twelve months.
This was partially offset by a $2 million decrease in the capitalization of internal labor. Net loss in the second quarter was $16.9 million compared to $83.6 million in the prior year. The decrease in our net loss of $66.7 million year over year was primarily attributable to the $65.9 million goodwill impairment in Q2 2024 along with the other factors previously discussed. In addition, we recorded other income of $3.8 million in Q2 2025 primarily due to other income from an employer tax credit related to prior years. Adjusted EBITDA in the second quarter was $16.7 million, an increase of $5.3 million or 46% compared to the prior year.
The $5.3 million increase in adjusted EBITDA was primarily attributable to lower operating expenses due to stronger expense management, increase in other income, as well as stronger gross profit due to higher revenue levels as discussed above. Finally, moving to cash flows. Cash provided by operations in the second quarter was $4.1 million as compared to cash provided by operations of $4 million in Q2 2024. Free cash flow, measured by cash provided by operations less cash used in investing activities, was positive $1.6 million in Q2 2025, compared to negative $100,000 in the prior year quarter. Free cash flow was positive for the third consecutive quarter and is expected to continue to be positive for the rest of 2025.
As of 06/30/2025, cash and restricted cash was $21.3 million compared to $22.6 million as of 06/30/2024. And with that, I'll pass it back to you, Ron.
Ron Totton: Thank you, Anthony. Let's now look forward. On this slide, you'll see we are reiterating our full year guidance for 2025. Before I walk through the numbers, I want to frame them within the context of the broader environment. The macro landscape is indeed complex. We're seeing some economic uncertainty globally. And new tariffs are impacting the supply chains of some of our customers. However, KORE's business model is resilient, and we have very limited direct impact from these tariffs. Our focus remains on helping our clients navigate this environment with robust mission-critical connectivity, and in some cases, the ability to source devices or components from alternative suppliers helping them navigate several supply chain constraints.
More broadly, the outlook for our industry remains incredibly strong. Independent analysts are consistently forecasting strong growth for the IoT market, with CAGRs ranging from 9% to over 10.5% for the foreseeable future. It is a powerful secular growth trend, and KORE is perfectly positioned to cap this demand. Finally, we recognize the significant shift happening in the tech landscape around AI adoption and workforce changes. Our approach is strategic and deliberate. As you saw on our value creation plan, we are proactively implementing AI to drive efficiency for our teams, and accelerate business growth while simultaneously investing in our winning team pillar. We are building a company for the long term, with a strong culture that embraces innovation.
So it is with this full understanding of the opportunities and challenges that we reiterate our 2025 guidance. We expect revenue in the range of $288 million to $298 million. We expect adjusted EBITDA between $62 million and $67 million, representing a powerful 19% year over year growth at the midpoint. And underscoring our commitment to financial discipline, we project free cash flow between $10 million and $14 million. Our guidance is a direct reflection of the momentum you've seen today, the strength of our pipeline, and the disciplined execution of our value creation plan. We are confident in our ability to deliver on these commitments, and create significant value for our shareholders.
Before we open the line for questions, I want to build on a point I made last quarter about our team's determination. It's been very rewarding to see that same focus translate directly into the strong, consistent results we've shared with you today. The progress we're making is a direct reflection of our employees' hard work and their clear commitment to serving our customers. So to the entire KORE team, thank you. Your contributions are the foundation of our success. And they are genuinely appreciated. With that, we will now open the line for questions.
Operator: Thank you. And at this time, we'll conduct the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone would indicate that your line is in the question queue. You may press star 2 if you would like to remove your from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. And our first question comes from Jonathan Nevarete with TD Cowen. Please state your question.
Jonathan Nevarete: Thank you. Good job in the quarter, guys. You mentioned that while you're not facing any tariff-related or very limited tariff-related headwinds that some of your clients are. I'm just wondering, how are you guys gauging the possibility of your clients potentially pushing back some of the projects they're working on with you guys into 2026?
Ron Totton: Yeah. Thanks, Jonathan. Yeah. The tariff, I mean, I guess I would say that, you know, it's not a perfect science here. I think what we're finding is the demand from the customers isn't changing. In fact, I think if we look at where we were the same time last year, we're up, you know, definitely in double digits. In terms of, you know, SIM demand, for example. I think what we're seeing is they're coming to us with our expertise in the solutions business on helping them source, you know, alternative suppliers or, again, just looking into the supply chain, some of the challenges they're having. At this point, we're not seeing any projects, you know, canceled.
And I think that, you know, in terms of our customers, the orders of new connections are strong. So we're really not seeing any customers or any kind of trend that's evolving whereby, you know, projects are being canceled or certain verticals, their softness. We haven't seen that as of yet, but, again, still early days. I think our larger global customers are the ones that, you know, that are that it's impacting most, which would be very obvious to everybody. Right? And we're not seeing products being canceled or project delays and so forth. But thanks for the question.
Jonathan Nevarete: Alright. Sure. And just one more on my end is, any particular milestones that you guys are working in the back half of 2025 that are most critical for setting up a stronger growth trajectory into 2026? Thank you.
Ron Totton: Yeah. Sure. Yeah. I think for us, we talk in our value creation plan, sort of our five pillars. And so I would say that, you know, our milestones and priorities are sort of directly kind of laid out there. To me, maybe just in terms of the ones that are top of mind for me, you know, growth is, yeah, I would say, number one priority. In this case. So pipeline growth, growth in closed one EAR, we'd like to see connections pushing up past 21 million before the end of the year. And, you know, I say that would probably be primary sort of primary where the focus is.
I think we also have three fairly significant, you know, what I'll call tech-related projects that we want to conclude in the second half of the year both in terms of product but also infrastructure that are really important to support our growth. So those would probably be the ones that are top of mind.
Operator: Thank you.
Ron Totton: Thank you.
Operator: And that's the end of the question and answer session. I'll now hand it back to Ron Totton for closing remarks.
Ron Totton: Well, thank you, everyone, for joining today's earnings call. We look forward to updating you next quarter on our progress in 2025, and have a great night. And thank you for your time. Good night.
Operator: Thank you. And this concludes today's conference. All parties may disconnect. Have a good evening.