IoT connectivity and solutions company Kore Wireless has begun trading on the New York Stock Exchange, after completing its combination with Cerberus Telecom Acquisition Corp. (CATC).
Kore Wireless President and CEO Romil Bahl sees a huge decade ahead for IoT; the company expects to see the market grow from about 12 billion IoT devices at the end of 2020 to 75 billion by 2030. He says that Kore’s transition to public company will reduce its debt, open up potential acquisitions that add to its capabilities, and enable it to grow faster.
“I think it now positions us to work this next decade of IoT as a public company and hopefully go from strength to strength,” said Bahl.
Bahl has headed up a transformation plan at Kore over the past few years, and the possibility of going public has been part of company discussions for some time, he said. Kore counts a number of factors in its favor as a public company: A base of about 3,600 customers globally, a large base of recurring revenues and its history as a longtime player in IoT with an established set of carrier relationships.
“From the beginning of my tenure here, I have personally believed that becoming a public company was an important next step in the evolution of this great company and team – a step that will allow us to continue our goal of leading the industry as we enter the ‘decade of IoT,'” Bahl said. “The natural attributes of our business including the growth potential given the massive market tailwinds over the next decade, our revenue visibility, and recurring revenue, make for excellent public-company characteristics.”
Ultimately, Kore opted to go public by combining with CTAC, a so-called “blank check” company, or special purpose acquisition company (SPAC) formed by an affiliate of Cerberus Capital Management and headed up by former Sprint Nextel CEO Tim Donahue. Donahue has now become the chairman of Kore’s board of directors. Kore was looking to raise around $400 million through the transaction, mostly to reduce its debt, and achieved more than that, Bahl said; according to a company release, Kore will have more than $100 million in post-merger liquidity available to it.
SPACs have been a hot vehicle in the past two years for companies seeking an alternative path to going public in lieu of a traditional IPO. More than 600 SPACs have gone public since last July, according to The New York Times; sometimes with celebrities and athletes signing on as advisors to high-profile SPACs. But the vehicle is drawing heightened scrutiny from both regulators and investors, with a number of the SPAC deals having crashed due to concerns that they are overvalued.
Bahl says that for Kore, the SPAC mechanism was simply a convenient tool in a step for the company that “is not being treated as an exit, this is being treated as an accelerator of growth and financial flexibility.” The company has noted that former shareholders of Kore prior to the CTAC merger have rolled 100% of their common equity interests into the common stock of the new public company, and that several of its former preferred equity holders elected to roll some of their proceeds into Kore common stock, signaling confidence in the company’s potential. While other SPACs are trying to sell the idea that they can become a growing company with an in-demand product and service portfolio, Bahl says, Kore already is.
In August, in the lead-up to its combination with Cerberus, Kore reported that its total revenues were up 19% year-over-year to $60.7 million for the second quarter of this year, with revenue in its connected health vertical up 21.6%, its IoT connectivity segment up 15% and IoT solutions revenues up nearly 30% year-over-year.
As far as Kore’s strategy for growth, Bahl describes a three-phase transformation plan that has been underway: Doubling down on Kore’s IoT connectivity business to ensure its strength, then launching industry-specific business lines targeting five verticals and focusing on eSIM leadership. Kore has already launched the first two of those, connected health and fleet management, according to Bahl. With the Cerberus combination on the books, he says, “I’d very much like to launch the other three, get those going. I’d like to do some acquisitions into those three, to give us strength and accelerate shareholder value creation.” On the eSIM front, he said that of the 5 million SIMs that Kore shipped last year, nearly a million of them were embedded SIMs. Phase three of Kore’s strategy is to focus on 5G readiness and digging deeper into the trove of real-time, streaming data that it sits on, looking for opportunities to simplify things for its IoT customers while creating new revenue streams.
Donahue, in a statement, called Kore’s go-public move “an incredible opportunity to participate in a publicly-listed, pure-play IoT company with significant runway. We have full confidence in the Kore management team’s ability to execute on their strategy to drive growth and sustained returns.”
