KORE Group Holdings, Inc. Q1 FY2023 Earnings Call

Greetings, and welcome to the KORE Group Holdings First Quarter 2023 Earnings Call. Please note that this conference is being recorded. I will now turn the conference over to our host, Charley Brady, Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. On today's call, we'll be referring to the first quarter 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 first quarter 2023 results, both of which can be found on the Investor Relations page at ir.korewireless.com. Finally, a recording of the call will be available on the Investors section of the company's website later today. Please note that 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. The company encourages you to review the safe harbor statements, risk factors, and other disclaimers contained on this slide and today's press release as well as in the company's filings with the Securities and Exchange Commission, which identifies 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 I 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.

Thank you, Charlie. Good afternoon, everyone, and thank you for joining us today for our first quarter 2023 earnings call. With me is Paul Holtz, KORE's Chief Financial Officer. As always, I'll start with a brief overview of the key events and announcements from the first quarter, followed by Paul, who will discuss our financial results, and we will finish with a Q&A session. Slide 4 presents some key announcements from the first quarter, which I will briefly highlight. First, we are pleased to announce that KORE OmniSIM Safe has been selected as a winner of the M2M Product of the Year by IoT Breakthrough. This recognition underscores our commitment to developing products that effectively address the unique challenges faced by our customers. KORE OmniSIM pairs global zero-touch provisioning capabilities with our industry-leading eSIM secured by the GSMA Safe standards. This allows KORE customers to meet the challenges of global connectivity in a carrier and device-agnostic, secure manner for massive IoT use cases. Consistently being recognized as a leader in customer satisfaction and innovation is a testament to our commitment to meet and exceed customer expectations. This year marks the fourth year in a row that KORE has been named a leader by Gartner in its Magic Quadrant for IoT connectivity. This recognition highlights our unwavering dedication to understanding our customers' needs and creating cutting-edge solutions that simplify the complexities of IoT and empower customers to achieve their goals. To further support our customers, we are excited to launch MODGo, a SaaS solution that provides comprehensive visibility and support for IoT device deployment and logistics management. MODGo makes it easy to manage, order and deploy IoT on the go, providing organizations with a single solution for managing their entire IoT ecosystem. With MODGo, our customers can focus on their core business objectives while we take care of the complexities of IoT behind the scenes. Now let's turn to our first quarter financial results and 2023 guidance on Slide 5. We had a solid start to 2023 with first quarter revenue coming in above our forecast, and as expected, increasing sequentially from the fourth quarter by approximately 6%. On a year-over-year basis, revenue declined approximately 4%, primarily due to a difficult comparison to the first quarter of 2022, which was the highest quarter of non-KORE customers and 2G, 3G revenue in 2022 and had significant revenue from the LTE transition project at our largest customer. Absent just the LTE transition project revenue in 2022, first quarter 2023 revenue increased approximately 9% year-over-year, which is at the upper end of our pre-Twilio revenue growth guidance of mid-to-high single digits. Our 2023 second quarter will be the last quarterly year-over-year comparison impacted by the LTE transition project revenue and the impact will be substantially smaller. We expect sequential quarterly revenue growth for the remainder of 2023 and year-over-year growth beginning in the third quarter. Gross margin increased 518 basis points year-over-year to 54% as we continue to benefit from optimization of our carrier costs and the absence of lower-margin LTE transition project volumes with our largest customer. First quarter 2023 adjusted EBITDA of $13.3 million declined 13% from the first quarter of 2022, and adjusted EBITDA margin was 20.2% compared to 22.2% in the year-ago quarter. First quarter of 2023 adjusted EBITDA was impacted by increased headcount costs compared to the first quarter of 2022 and by temporarily higher-than-normal audit and accounting costs that we do not expect to repeat. We are reiterating the 2023 revenue and adjusted EBITDA guidance we provided on our 2022 fourth quarter earnings call just a few weeks ago. We expect revenue to grow in the mid-teens, resulting in our revenue guidance range of $300 million to $310 million. This includes the partial year contribution from the acquisition of Twilio's IoT business, which remains on track for a June 1 closing. It also includes the $24 million impact from the 2G and 3G sunsets in the U.S. and the LTE transition project at our largest customer, which we are confident we can more than replace from growth in our base business and the addition of new customers. Our adjusted EBITDA guidance of $60 million to $62 million and adjusted EBITDA margin of approximately 20% are also unchanged. With that, I will now hand the call over to Paul to cover the financials in more detail.

Thank you, Romil, and good afternoon, everyone. Before getting into our results, I think it's worth mentioning two important milestones that were reached in Q1 2023. First, in February, we celebrated the one-year anniversary of our very successful BNP-Simon acquisition. These customers are now part of our organic growth going forward and are included in our DBNER calculation. Secondly, we finally reached the other side of the 2G, 3G network sunset in the United States. I'm happy to say the headwinds from the migrations associated with these sunsets and the impact of our non-KORE customers are officially behind us, which allows us to show the true organic growth of our business going forward. Now turning to our results. On Slide 6, first quarter revenue declined 4% year-over-year to $66 million compared to $69 million in the first quarter of 2022, but up 5.7% sequentially quarter-over-quarter. As previously communicated, the fourth quarter of 2022 represented a near-term revenue trough and the expected Q1 2023 to increase sequentially, which we delivered. By segment, IoT connectivity revenue of $43.5 million decreased 1% year-over-year and was flat quarter-over-quarter. As mentioned above, IoT connectivity revenue organic growth was masked throughout 2022 by the 2G 3G sunsets and the churning of our non-KORE customer cohort. Removing the effects of the non-KORE customers who no longer existed as of the beginning of 2023 and the estimated negative impact of lower pricing to existing customers as they migrated to LTE, IoT connectivity revenue grew approximately 9% year-over-year and 5% quarter-over-quarter. IoT Solutions’ revenue declined 10% year-over-year to $22.4 million. The decline was driven by the difficult year-over-year comparison as the first quarter of 2022 included significant revenue related to the LTE transition project at our largest customer. To put this in perspective, in the first quarter of 2022, the LTE transition project revenue accounted for over $8 million in IoT Solutions revenue. Excluding the LTE transition project revenue, IoT Solutions revenue would have increased approximately 38% year-over-year. Total gross margin in Q1 2023 was 54%, an increase of 518 basis points year-over-year, and remained flat with the prior quarter. For the last two quarters, gross margins were also the highest experience since we went public back in Q3 of 2021. IoT connectivity gross margins increased approximately 347 basis points year-over-year to 65.2% and 40 basis points sequentially from the fourth quarter of 2022. IoT connectivity gross margins for the last four quarters have remained stable in the 65% range, driven by the continued optimization of our carrier costs. IoT Solutions gross margin increased 640 basis points year-over-year and 373 basis points sequentially to 32.4% and was at the highest level since we went public. The increase was mainly driven by the absence of any lower-margin LTE transition revenues from our largest customer in the quarter versus over $8 million in Q1 of the prior year. Total connections at the end of the first quarter were $15.1 million, an increase of approximately $100,000 compared to the end of fourth quarter of 2022. Some existing customers continue to see delays in hardware deployments due to supply chain issues and the company also continues to focus more on higher bandwidth use cases, which bring higher revenue but lower connections. Dollar-based net expansion rate, or DBNER for the 12 months ended March 31, 2023, was 107% compared to 122% in the prior year. 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, which is like a same-store sales growth measure. As mentioned earlier, with the anniversary of the BNP and Simon acquisition happening this quarter, these customers are now included in the calculation. DBNER year-over-year continues to be impacted by the LTE transition project revenue from our largest customer. Excluding total revenue from our largest customer, DBNER at the end of the quarter would have been 126% compared to 114% at the end of the first quarter of 2022. Operating expenses, including depreciation and amortization in the first quarter were $44.3 million, an increase of $3.4 million or 8% compared to the same period last year. Excluding noncash items like depreciation, amortization, and stock-based compensation, operating expenses increased $1.9 million. The increase was attributed to higher headcount and its associated costs. These headcount cost increases were partially offset by $0.5 million in lower D&O insurance costs. First quarter interest expense, including amortization of the deferred financing fees increased year-over-year to $10.2 million due to increased borrowing costs on our senior secured term loan. We expect interest expense will be approximately $10 million to $10.5 million per quarter in 2023. Net loss in the first quarter was $18.5 million compared to $11.6 million in the same period in the prior year. The year-over-year increase in net loss was mainly due to higher interest expense and lower income tax benefits. Adjusted EBITDA in the first quarter was $13.3 million, a decline of $2 million or approximately 13% compared to the same period last year. Our adjusted EBITDA margin in the current quarter was 20.2%, down approximately 200 basis points compared to the same period in the prior year. This was due to higher headcount costs from hiring throughout 2022, but also due to approximately $1 million higher professional service fees related to the 2022 year-end audit and related reporting in the Form 10-K. We view the additional professional service fees for the most part as nonrecurring, and we do not expect them to repeat in the future. Moving to cash flow. Cash provided by operations in the three months ended March 31, 2023, was approximately $2 million. This compared to $4 million cash used in operations for the same period in the prior year. The change is mainly due to fewer annual bonus payments being made in Q1 2023 compared to the same quarter in the prior year. At the end of the first quarter, cash was $30.6 million compared to $34.7 million as of December 31, 2022. This change was primarily related to the timing of interest payments. Prior to passing it back to Romil, I wanted to quickly discuss our organic growth in both IoT connectivity and IoT solutions over the past couple of years. Going forward, this picture should be much clearer as headwinds like the U.S. 2G/3G sunsets, churning non-KORE customers and the adjustments from our largest customers LTE transition project will all finally be behind us. We have added Slide 8 to show the organic growth separately for IoT connectivity and IoT solutions. Over the last three years, IoT connectivity has had a compound annual growth rate of 12.7%, while IoT Solutions was 7.4%. Both are after adjusting for the various items detailed on Slide 15 in the appendix of this presentation. While we still have an estimated revenue of over $24 million to fill in 2023, we continue to expect both segments on an unadjusted basis to grow organically in the mid- to high single digits. And with that, I'll pass it back to Romil.

Thanks, Paul. As you can see, net of the transitory effects we have been discussing on our earnings call since going public, we are a double-digit organic growth story. To highlight that we remain on track to generate this level of growth, we recently began sharing our bookings and sales pipeline statistics. On Slide 9, we present a snapshot of our global sales pipeline as of March 31, 2023. Our sales pipeline now exceeds 1,400 opportunities with a potential estimated total contract value, or TCV, of over $500 million. In the first quarter, we generated $28 million of closed 1 TCV, so we are off to a solid start to the year, and we are focused on driving toward a year-end 2023 closed 1 TCV that exceeds 2022 level of $102 million. If we accomplish this, it will be the fifth consecutive year of growth in our key sales metric of TCV. Slide 10 showcases a few examples of our wins in the first quarter that contributed to the closed one TCV of $28 million. These recent contract wins highlight the success of our growth strategy and demonstrate the expansion of new use cases for our products. KORE OmniSIM continues to gain traction in the market and was a key driver in the decision of a leading advertising technology company to transfer all of their North American business to KORE, which added over $10 million to TCV, and there is potential for future growth at this customer. Our unique solution enables this customer to utilize multiple MNO profiles on a single eSIM and manage them from an edge device as well as the ability to use online APIs. Furthermore, KORE was successful in winning a contract with a TCV of approximately $2 million to provide hardware, connectivity, and forward and reverse logistics for a new connected health customer launching a remote patient monitoring or RPM service in the second quarter of 2023. KORE's ability to provide a complete solution was a key driver in winning the contract. This customer has multiple additional projects of a similar size that are expected to begin in 2023 and is also evaluating the use of our connected health telemetry solution or CHTS. This win and the potential adoption of CHTS demonstrate how KORE is differentiating itself from the competition with preconfigured solutions that reduce the complexities of IoT deployment. We are also excited to announce that KORE has been selected to provide fixed wireless access services to a major restaurant chain with over 700 locations. This contract involves upgrading these locations to 5G technology and has a TCV over $1 million with the potential to double. This opportunity highlights the scalability of our products and services as well as our ability to penetrate diverse markets and adapt to the unique demands of various industries. Lastly, a KORE customer headquartered in Australia is expanding their mobile personal emergency response system, or mPERS business to the U.S. after signing a multiyear contract with the U.S. Department of Veterans Affairs. Their device will be available free of charge to any member of the VA in the U.S. and KORE is proud to play a role in helping to support our veterans. To support the customer's mPERS solution, KORE will be providing managed connectivity. This is an example of KORE's commitment to expanding our global footprint and underscores our ability to support customers as they grow and enter new markets. In conclusion, these recent contract wins illustrate KORE's robust growth strategy and our ongoing success in expanding into new use cases for our products. We look forward to building on these achievements as we continue to innovate, grow and create value for our shareholders. Slide 11 is our evolution road map, of which I am sure many of you are familiar. It outlines our transformation from solely providing IoT connectivity to embracing a holistic approach, delivering comprehensive IoT solutions for our customers. As we are witnessing the evolution and growth of the IoT landscape, driven by advancements such as massive IoT, accelerating 5G adoption, and edge computing, we have expanded our capabilities and product offerings to meet the diverse needs of our customers who are seeking to harness the power of IoT. As we reduce the complexities of IoT deployment, we are increasingly helping our customers make sense of the tremendous volume of new data they are generating from their IoT solutions. The amount of information flowing through our global IoT network, the KORE Data Cloud represents a significant monetization opportunity and is the main reason we are building out broader analytics capabilities. Although analytics is a small part of our business today, it is growing and becoming a key component of our product offerings. Our platform empowers customers to derive valuable insights from the vast amounts of data generated by connected devices, enabling them to make informed decisions and optimize operations. With the acceleration of 5G adoption, we anticipate a surge in massive IoT deployments, further enhancing the capability and efficiency of our solutions. Additionally, edge computing and edge analytics have become integral components for reducing latency and improving processing capabilities, ultimately leading to improved user experiences. Over the next several years, AI paired with IoT will become a powerful tool. We have already begun leaning into this as we believe the synergy of AI and IoT or AIoT, will allow us to tap new markets and expand our reach into new segments. Finishing on Slide 12, we are off to a good start to the year with solid first quarter results, which included sequential quarterly revenue growth and year-over-year expansion of gross margin by over 500 basis points. Our team's dedication and hard work generated $28 million in TCV and increased our global sales pipeline to over 1,400 opportunities with a TCV of over $0.5 billion. As a recession-resistant company with more than 80% recurring revenue, we are well prepared to navigate economic uncertainties. We maintain focus on high-growth end markets such as connected health and expansion to new markets and use cases, some of which I mentioned earlier. Based on our current performance and pipeline, we remain optimistic about our revenue and EBITDA guidance for the remainder of the year. Our commitment to delivering value to our shareholders continues to be a top priority as we look ahead to the coming quarters. In closing, I want to convey my appreciation to all our employees around the world, the KORE IoTs for their continued hard work, loyalty, and dedication to KORE and our customers. With that, let's start the Q&A.

Our first question comes from Lance Vitanza with TD Cowen.

Hi, thanks. Thanks for taking my question. Nice job on the quarter. Romil, I'd like to start with sort of the underlying growth environment. And I hear you that KORE's performance has been quite good. And if you adjust the growth is really quite visible. But that being said, how would you describe the overall pace of corporate IoT deployments? Is that meeting your expectations? Or is that still a bit sluggish? And are you sensing that the murky macro environment is perhaps causing corporate customers, and corporate users to perhaps defer or delay or perhaps even cancel some potential deployments?

Yes, that's a great question. Lance, thank you. Look, it's sort of hard to tell where supply chain and the issues we've been seeing, and we still hear from some customers, although, again, in certain segments, there's sort of light at the end of that tunnel. But where the supply chain constraints for our customers to get their devices and deploy and grow is ending where the macro caution or conservatism may be kicking in, et cetera. That said, I'm delighted to say that we haven't seen enough sort of real proof or even anecdotal conversation out there to at all worry about reiterating, which is what we're doing in our guidance today, right? So, we sort of came into the year and said we will see the $24 million hole, right? We will put twice that on the top line and sort of overcome and get to mid- to low single high. The first quarter actually did better than that. As you saw, if you just take out the one-time LTE stuff at our largest customer, you're already at 9%. If you then add in the other stuff, you're kind of in the low double digits. I'm not ready to go there yet either and say organically, we'll grow low double, but it's a good solid start to the year, good activity in the funnel, good wins. Certainly, some conversations about slowing down the aggressive top-line growth-oriented solutions out there, but those are being replaced by efficiency-oriented automation-oriented kinds of use cases. So, we're not really feeling like we need to be more cautious than we already were coming into the year given that we knew that there was going to be some potential macro effects this year.

You began to address my next question, which relates to Page 2 of the press release. I thought you did an excellent job outlining the three factors and quantifying them in terms of growth rates. Could you confirm the dollar amounts as you did for the LTE? You mentioned that the LTE's normalized revenue would have increased by 9%, with an $8.6 million impact. I’m curious if you could provide the same for the non-KORE customers and the IoT Solutions revenue. I tried to calculate those myself, but my estimates were much higher than the low to mid-single digits you mentioned in growth rates—I’m seeing much larger numbers, closer to the low to mid-teens. Could you walk me through those figures?

Yes. Paul will confirm this for me. Just checking on the trail, it’s about $3.8 million. Is that correct, Paul?

Yes. You can find the numbers in the appendix on Page 15 of the deck. The non-KORE customers accounted for 3.4%, and the LTE pricing year-over-year was approximately $350,000. Regarding IoT solutions, there are no non-KORE customers to consider. When you combine the figures of around 3.8 and 2.75 with 8.6%, the result shifts from about 9% to the low range of 13% based on my calculations.

Great. Now, that's super helpful. Thank you. And then maybe just on the Twilio acquisition or investment in the KORE, however, you want to look at that. Any update there? I might have missed this, I apologize, but could you just update me on the timing and the status? And with respect to the net increase in the TCV, do you think that has had any sort of favorable impact perhaps just on the anticipation of that transaction? Or no, is that still sort of to come?

Yes. I believe the advantages of the combination and the synergies we've discussed will manifest in due time, but I want to emphasize that we are still committed to the idea that this is the right move for us. We initially aimed to close on June 1, and our leadership team is consistently meeting, typically two or three times each week. I attended one of these meetings this morning, and all indications align with closing by June 1. We are eager to finalize this process and to welcome the team and their customers.

Our next question comes from Mike Latimore with Northland Capital.

This is Aditya on behalf of Mike Latimore. Could you give me some color on how the ARPU has been trending, especially the organic ARPU? Has it been stable for this year?

Yes. I think largely speaking, we continue to see the stability in ARPU. I personally wouldn't necessarily have bet or said strongly on our earnings call a year ago, 15 months ago, 18 months ago, in fact, I didn't say that we would expect to be flat over 2022 because I expected us to have the pressures of that 1.3 million 2G, 3G SIMs that we still had that were going away that were typically at much higher ARPU, right? And we did feel that impact. But we made up for it with higher bandwidth use cases starting to creep in. And we're actually, if anything, seen more momentum with that this year. And Paul, I'll let you make any color commentary you want. But generally speaking, very encouraged by the stability in ARPU and continue to believe that in the mid and long term, there could be upside if our focus on connectivity and our focus on high bandwidth continues to pay off.

Yes, I agree that we're seeing the potential for increases in average revenue per user from an organic perspective due to higher bandwidth use cases. This year, the 2G and 3G sunsets resulted in a higher average revenue per user than what we typically observe. However, it's important to note that these changes occur on a customer-by-customer basis. Many of the new connections we are seeing are higher bandwidth, and even some existing customers are utilizing more data for different use cases, which is contributing to higher revenue per user. This trend is very encouraging for the future.

All right. And could you also give some color on how the pipeline has been for the Eastern?

The pipeline on Eastern. Look Aditya I'll tell you, there isn't a customer-facing conversation, right, that I can think of that doesn't sort of begin with eSIM, right? We are presenting, we are campaigning with kind of a KORE OmniSIM the leading proposition and really seeing tremendous market reaction, customer reaction when they understand the flexibility it provides us. In fact, we obviously haven't been able to do a lot with Twilio's IoT customers yet because obviously, we aren't closed yet and include the remaining competitors until we close, et cetera. But even some of their customers in early introduction calls with us, several that have been on have been very encouraged by what they've heard and are looking forward to sort of the cross-sell opportunity of KORE OmniSIM into them. Now that said, the volumes are obviously still small, right? I mean, of our 15-odd million connections out there, only about 10% are eSIM today. I expect in three to five years, it will be more than 50% that will be out there of whatever our total connections will be. But the marketplace, the conversations are all very encouraging.

Our next question comes from Meta Marshall with Morgan Stanley.

This is Mary on behalf of Meta Marshall. I have a question on the BNP and Simon IoT acquisitions. How are these acquisitions performing compared to expectations?

We generally recognize that it's been a year since the anniversary, so we won’t be disclosing those numbers separately. However, they have consistently exceeded our expectations, as we've mentioned throughout last year, and they continue to perform exceptionally well in the current quarter.

Our next question comes from Walter Piecyk with LightShed.

Thanks. You mentioned that the increase in SG&A was due to hiring accountants to address some issues and that this would decrease over time. However, if I'm calculating correctly, taking your revenue and looking at the EBITDA guidance suggests that, with a decrease in SG&A, you're anticipating gross margin contraction. Is it possible that you are being conservative with the EBITDA numbers? Or am I misunderstanding the calculations? What are the factors within SG&A and gross margin that we should consider for why the EBITDA guidance is not higher?

Thank you, Walter. I want to provide some additional context. First, regarding our steady-state organic KORE revenue, gross margin, and EBITDA differences. We have been working towards and expect improvements in our gross margin. Additionally, we have been investing in some headcount, particularly in sales and finance and accounting, to ensure we are prepared for being public and compliant. Therefore, the gross margin improvement presented for Q1, along with the headcount costs, would have kept us about in the same position as last year. The unexpected factor in Q1 was a one-time expense of around one million dollars related to accounting professional services fees from our filing process, which was slightly delayed. We do not anticipate this happening again. We expect EBITDA to improve because if you take Q1 EBITDA and multiply it by four, we still fall short of our guidance. Regarding your question about why it's not higher, keep in mind that Twilio is an EBITDA dilutive unit for this year. Last year, it was significantly negative, but we expect its performance to be much better this year as we're taking on fewer losses and will work on improving their gross margins, making them accretive next year. This might clarify some of the reasons behind our EBITDA outlook.

I think that’s exactly what I might have overlooked. Could you remind me about the components related to the improvements in Twilio? What you mentioned suggests that there are opportunities to enhance their gross margin moving forward. Is that the main point that was missed, or does it also involve improvements in operating expenses for that entity you're integrating?

Yes. Certainly, from their performance as part of Twilio last year, for the full year 2022, we will see improvement in operating expenses as well. We're not absorbing their support staff, including finance, as we have our own team prepared to handle that. Additionally, we are taking on a smaller portion of their global team since Twilio hadn't heavily invested in that business over the last few years. We've been prudent in our approach to ensure we don't incur significant losses this year. The improvements going forward will primarily come from the gross profit line. Like everyone, we are not seeking additional cost synergies with those employees. The opportunities for gross margin improvement are substantial due to our extensive reach and multiple mobile network operator relationships, as well as our negotiating power. Although this will be a multi-year process, we believe we can align their margins closer to ours rather than moving in the opposite direction.

There is a lot of discussion in the market, and things are progressing quickly in the space sector, although this might seem slow compared to what you're used to on the terrestrial side. The end goal appears to be reducing component costs due to this directed device. I understand that this is being incorporated into Android and iPhones, and Qualcomm is on board with it. Other satellite constellations seem to be interested as well. I'm curious about when you will begin conversations with your customers regarding this integration. Will this primarily contribute to an incremental market for phones, or do you think it will expand into the IoT space if you achieve scale with component suppliers? Have you had any initial discussions about this or thoughts on how you see that market developing?

Yes, it's a great question, and we often ask ourselves the same thing. We’ve been focused on terrestrial cellular and unlicensed cellular e-SIMs to establish our leadership position. However, we do engage with satellite technology and have partnerships with several satellite companies like Intelsat. We see the need to leverage satellite solutions for various applications, such as tracking supply chains or using drones for COVID vaccinations in remote areas. While satellite revenue is not yet a substantial part of our business, we are keeping a close eye on this market. We’ve had positive conversations with several players in the satellite sector, and we believe that interesting developments could arise from private 5G networks supported by satellites. Our board and other relationships provide us with unique opportunities in this space. As you mentioned, Walt, it's just a matter of time before we expand into this area. Every six months, during our business planning cycle, we review our opportunities and prioritize them based on ROI. We recognize that we've been behind in the consumer and phone markets for a few years, but we plan to allocate more resources to this area. If not next year, I anticipate we will make this shift in 2024.

There are no further questions at this time. I'll hand it back to management for closing remarks.

Thank you, Diego, and thank you, everyone, for taking the time to listen to our earnings call. We look forward to updating you with our second quarter results in May, August.

Thank you. We conclude today's conference. All parties may disconnect. Have a great evening.