KORE - NYSE

Thanks, and welcome to the KORE Group Holdings second quarter earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Charley Brady, Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator. On today's call, we'll be referring to the second 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 second quarter 2023 results, both of which can be found on our Investor Relations page at ir.korewireless.com. Finally, our requiring 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 we'll 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. I'll now turn the call over to Romil Bahl, Kore's President and Chief Executive Officer.

Thank you, Charley. Good afternoon, everyone, and thank you for joining us today for our second quarter 2023 earnings call. With me is Paul Holtz, Kore's Chief Financial Officer. Before we get started, a warm welcome to our newest IoTers team, many of whom joined the Kore with the acquisition of Twilio's IoT business, and now let's get to the meat of our earnings call. As always, I'll start with a brief overview of the key events and announcements from the second quarter, and I will be followed by Paul, who will discuss our financial results. We will finish with a Q&A session. Slide four presents some key announcements from the second quarter. On June 1, we closed the acquisition of Twilio's IoT business, marking a key milestone in accelerating our journey to being the world's first IoT hyper-scaler. This acquisition, apart from providing us a world-class IoT connectivity product in Super SIM expands Kore's one-stop shop position by adding build to our deploy, manage and scale value proposition. Needless to say, we remain excited about the additional growth opportunities created by the combination of Kore and the Twilio IoT business. In May, we announced the launch of our preconfigured managed solution to offer retailers, restaurants and other multisite companies, high-bandwidth 5G cellular connectivity through fixed wireless access or FWA. Kore's FWA solution will allow customers to access high-speed Internet that has traditionally been available only through wireline applications. Retailers, restaurants and other consumer-facing companies are increasingly seeing the benefits of 5G solutions to support point-of-sale devices, digital ordering and integrating with third-party delivery services across multiple locations. This FWA solution positions Kore to attack a growing high-bandwidth use case and further expand our addressable market. As I'm sure you are all aware, ESG and sustainability have become important topics for companies and investors. With IoT increasingly playing a role in supporting ESG initiatives, we are seeing more opportunities where Kore can play a part, aligning with our purpose statement, IoT for good. Along these lines, in the second quarter, Kore announced its participation and support of two sustainability initiatives. We will provide scalable global IoT connectivity to a biodiversity sensor project conducted by AgTech company, Syngenta. Syngenta's biodiversity project is digitally connecting farmlands across the globe to provide farmers with analytics to aid them in adapting to climate change and improving biodiversity to protect crops. Last year, Syngenta connected over 200 hectares of land and has a goal to connect 1 billion hectares over the next three years. To further support sustainability and waste reduction, Kore has launched an initiative to reduce the amount of plastic used in SIM card bodies by 50%. In addition to cutting SIM card plastic waste by half, this initiative will lower SIM card shipping costs by 50% and reduced Kore's carbon footprint related to SIM cards by 16%. Now let's turn to our second quarter financial results and 2023 guidance on slide five. Our second quarter results continued the momentum established in the first quarter with Q2 revenue of $69.5 million, increasing sequentially from the first quarter by approximately 5%. On a year-over-year basis, revenue declined slightly by 2%, primarily due to a difficult comparison to the second quarter of ‘22, which had revenue from 2G, 3G customers and the LTE transition project at our largest customer. Absent the 2G, 3G and LTE transition project revenue in 2022, second quarter 2023 revenue increased over 2% year-over-year. Our 2023 second quarter was the last quarterly year-over-year comparison impacted by the LTE transition project revenue and the true organic growth of the company will be more evident going forward. While we have experienced some delays in IoT solutions revenue at a few customers, we continue to expect sequential quarterly revenue growth for the remainder of 2023 and year-over-year growth beginning in the third quarter. Gross margin increased 180 basis points year-over-year to 54.4% and benefited from continuing carrier cost optimization and a lower mix of hardware revenue. Second quarter 2023 adjusted EBITDA of $14.2 million increased approximately 7% sequentially from the first quarter, and adjusted EBITDA margin improved 30 basis points to 20.5% from 20.2%. Compared to the second quarter of 2022, adjusted EBITDA declined approximately 15%. We are reiterating our 2023 revenue and adjusted EBITDA guidance. We expect revenue to grow in the low to mid-teens, resulting in revenue in a range of $300 million to $310 million. This guidance includes absorbing the $24 million in year-over-year headwinds from the 2G and 3G sunsets in the U.S. and the LTE transition project at our largest customer, somewhat offset by the partial year contribution of the Twilio IoT business acquisition. Our reiterated guidance assume that much of the IoT solutions revenue pushback that we started to see in the second quarter and we'll see in the third quarter will be made up in Q4. We remain confident in our adjusted EBITDA guidance range of $60 million to $62 million and margin of approximately 20% as margins in the Twilio IoT business are improving slightly faster than we initially projected, which should offset any potential impact from the revenue delays I mentioned. With that, I will now hand the call over to Paul to cover the financials in more detail. Paul?

Thanks, Romil, and good afternoon, everyone. Turning to our results on slide six, second quarter revenue declined 2% year-over-year to $69.5 million, compared to $70.9 million in the second quarter of 2022 and did increase 5% sequentially from the first quarter of 2023. By segment, IoT connectivity revenue of $48.3 million, including one month of revenue from the Twilio IoT acquisition increased 8% year-over-year. Q2 2023 marked the first quarter sequentially in many years that IoT connectivity revenue was not affected by the 2G, 3G sunsets in the U.S. IoT connectivity revenue is forecasted to grow year-over-year and sequentially to the rest of 2023. Moving to IoT solutions, revenue declined 19% year-over-year to $21.3 million. The decline was again driven by the difficult year-over-year comparison, due to the LTE transition project revenue at our largest customer in the prior year. The LTE transition project concluded in the second quarter of 2022. So going forward, this will not impact the year-over-year quarterly comparison. Total gross margin in Q2 2023 was 54.4%, an increase of 180 basis points year-over-year. The second quarter marks the highest gross margin since Kore went public in the third quarter of 2021. IoT connectivity gross margin of 65.2% was down slightly year-over-year. IoT Connectivity gross margins for the last four quarters have remained stable in the 65% range, but will decline overall in the second-half of 2023, with the addition of the lower-margin IoT connectivity revenue from the Twilio IoT acquisition. The good news, is that, as Romil mentioned, margins from the Twilio IoT business are expected to improve slightly quicker than we thought throughout the rest of 2023. IoT solutions gross margins declined approximately 90 basis points year-over-year. The decline was mainly just due to the mix of hardware versus service rate. Total connections at the end of the second quarter were $18.5 million, including approximately $2.9 million connections from the acquisition of the Twilio IoT business. Excluding the Twilio IoT connections, Kore’s organic connections increased by $400,000 in the second quarter of 2022. Dollar-based net expansion rate for DBNER for the 12-months ended June 30, 2023, was 99%, compared to 114% 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, much like same-store sales growth rate. As I said on our last quarterly call with the anniversary of the BNP Simon acquisition in the first quarter of this year, these customers are now included in the [Indiscernible]. The new customers from the Twilio IoT acquisition are not included. DBNER year-over-year continues to be impacted by the LTE transition project revenue from our largest customer that began in June 2021 and ended in June 2022. During this time period, our largest customer's revenue more than doubled from this one-time project. If we exclude total revenue from our largest customer, because of this significant non-recurring events DBNER at the end of the quarter would have been 115%, compared to 109% at the end of the second quarter of 2022. Operating expenses, including depreciation and amortization in the second quarter were $47.4 million, an increase of $4.2 million or 10%, compared to the same period last year. The increase is attributed to an increase in headcount-related costs, the inclusion of the Twilio IoT business, stock-based compensation and higher depreciation and amortization expense, compared to Q2 2022 due to the BNP acquisition in the prior year. Second quarter interest expense, including amortization of deferred financing fees, increased year-over-year to $10.4 million versus $7.3 million in Q2 2022, due to the increased borrowing costs under our senior secured term loan. Net loss in the second quarter was $19.5 million, compared to $10.8 million in the same period in the prior year. The year-over-year increase in net loss was due to increased operating expenses, which were partially attributed to the inclusion of the Twilio IoT headcount, higher depreciation and amortization expense, increased interest expense and a lower income tax benefit, compared to the year ago quarter. Adjusted EBITDA in the second quarter was $14.2 million, a decline of $2.6 million or approximately 15%, compared to the same period last year. Our adjusted EBITDA margin in the second quarter was 20.5%, down 320 basis points, compared to the same period in the prior year. However, we did experience a 7% sequential improvement in adjusted EBITDA and a 30 basis point improvement in adjusted EBITDA margin from the first quarter of this year. The year-over-year decline in adjusted EBITDA and adjusted EBITDA margin were impacted by increased costs for headcount to invest in the company’s growth, the additional Twilio's IoT headcount and cost to enhance public company processes and systems, including SOX- compliance. Moving to cash flow. Cash used in operations for the three months ended June 30, 2023, was approximately $0.7 million, compared to cash provided by operations of $14.7 million for the same period in the prior year. The change was mainly due to abnormally high collections from our largest customer in Q2 2022 related to their LTE transition projects. This compares to incremental cash outflows in Q2 2023 related to the Twilio IoT acquisition plus their incremental headcount costs paid in the quarter. These incremental cash outflows from the Twilio acquisition were not offset by any Twilio revenue collection as we won't begin until Q3 2023. At the end of the second quarter, cash, excluding restricted cash was $22.9 million, compared to $34.7 million as of December 31, 2022. This change was primarily the cash flows from the Twilio IoT acquisition, annual bonus payments and increase in interest and income tax payments. Before passing it back to Romil, I would like to make a couple of comments on our 2023 annual guidance that we are maintaining for both revenue and adjusted EBITDA. For revenue, we had a strong first-half of the year with no headwinds from the 2D, 3D sunset in the U.S., positive organic growth in IoT connectivity and the completion of the Twilio IoT acquisition. In the second-half of the year, IoT connectivity revenue is expected to continue its positive momentum, and we will have a full six months of revenue from the Twilio IoT business. We are, however, more cautious regarding the IoT solutions revenue as some of these customers have indicated they are pushing orders to the fourth quarter, which increases the risk that these orders could flip even further, meaning into 2024. At this point, we see Q4 being the largest quarter of the year for IoT solutions when it has typically been our lowest quarter. We are much more confident of our adjusted EBITDA because of the strong momentum in IoT connectivity and a faster improving Twilio IoT margins. On the OpEx side, we had built in incremental sales headcount into our guidance in the second-half of 2023, which we could delay if needed. And with that, I'll pass it back to Romil.

Thanks, Paul. As you've heard and to reiterate, with the second quarter complete, the difficult year-over-year revenue growth comparison from the LTE transition project at our largest customer is now behind us. As a result, we expect to generate year-over-year growth beginning in the third quarter, and further, we are on track to achieve double-digit revenue growth in 2024 as evidenced by our increasing global sales pipeline. Slide eight presents a snapshot of our global sales pipeline as of June 30, 2023. Our sales pipeline now includes almost 1,500 opportunities with an estimated potential total contract value, or TCV, of approximately $660 million. In the second quarter, we generated an incremental $32 million of closed one TCV, bringing the year to dig total to $60 million. We continue to progress towards exceeding the $102 million closed one TCV in 2022 and delivering a fifth consecutive year of TCV growth. As a reminder, the majority of sold TCV is recognized as revenue over four years, and it is important to note that the closed TCV figure is aggregated across all of our business lines, which have different durations of revenue recognition. For instance, IoT connectivity revenue tends to have a slower ramp and can go out beyond the four years we use for TCV calculations. While IoT managed services include both one-time revenue projects that are generally recognized in one to two years and recurring revenue usually recognized over three years. Slide nine showcases a few examples of our wins in the second quarter that contributed to the closed on one TCV of $32 million. These recent contract wins highlight the success of our growth strategy and demonstrate the expansion of new use cases for our products. Kore has continued to have success in increasing its wallet share at existing customers. In the second quarter, we secured three contracts with TCVs of over $9 million, $6 million and $1.5 million from customers in the fleet, asset tracking and health care markets, respectively. These customers are seeking to improve operational efficiency and effectiveness by consolidating IoT connectivity to a single platform, single partner in Kore. We continue to see customers taking advantage of Kore's full range of capabilities and product offerings to support their growth. For example, Kore recently won a $500,000 TCV engagement to support IoT managed services for a usage-based insurance company seeking to upgrade and improve their logistics. As an example of effective land and expand execution, Kore followed on a recent win at a major restaurant chain with another engagement, whereby Kore will provide fixed wireless access services to 650 of the customers' locations and will upgrade these locations to 5G technology. This contract has a TCV of $850,000. We also continue to win customers outside the U.S. In Q2, Kore one contracts from a leader in fleet AI video telematics headquartered in the U.K. and a leading medical equipment and remote patient monitoring provider based in France to support their entries into the U.S. market. These contracts have a combined TCV of approximately $1.5 million. On to the final slide, slide 10 as I said at the beginning of this call, we started the year with good momentum, which continued through the second quarter. We organically grew connections by 0.5 million SIMs. We added $32 million in TCE and delivered sequential quarterly growth. As we move into the second-half of the year, we expect revenue to continue to increase sequentially each quarter and importantly, generate year-over-year growth beginning in the third quarter. As covered on our funnel chart, our global sales pipeline is approaching 1,500 opportunities with a potential new business TCV of approximately $660 million, which provides a solid backdrop for growth over the coming years. This sales pipeline, coupled with our approximately 80% recurring revenue gives us confidence that we can achieve our medium-term goal of generating top line revenue growth of at least 20% with an EBITDA margin of 20% or better, thus becoming a Rule of 40 company. As always, creating value for our shareholders remains a top priority, and we believe we are well positioned to do that. In closing, I wish to thank all of our global employees, the Kore IO tiers are working hard every day to drive growth and serve our customers. With that, let's start with Q&A.

We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is come from the line of Michael Latimore with Northland Capital Markets.

Hi, great. Thanks very much. The TCV funnel is very large, grew nicely. Does that include the Twilio business? Or is that organic?

That's actually organic, Mike. We really only kind of, I'll say, owned Twilio IoT business for a month in Q2, as you know, and so far, we're just going off even revenue recognition and so forth, so provided by the Twilio back office and so forth. So we haven't quite had a chance to consolidate everything. But hopefully, when we're speaking to you in mid-November about Q3, we'll have that done.

And what sort of use cases or applications are most pronounced in that funnel?

We're continuing to see just sort of an inexorable lift, Mike, in some of these high bandwidth use cases, a lot of fleet. We've seen the momentum since really the beginning of the year in fleet, and in fact, right at about 60% of the $32 million we closed in Q2 with fleet. So there's a lot of video telematics and higher bandwidth as people are continuing to look at more of that more AI at the edge, those kinds of things. But there's others, right? I mean you saw -- I suspect you saw a press release we put out on a large restaurant chain, and in fact, we had a follow-up win at that chain here that we announced in Q2. So there is a good momentum in FWA and the dollars add up quicker there, hence, the TCV sort of funnel growing.

Yes. Great, and obviously, you're going to -- you're expecting good year-over-year growth in the second-half. In the third quarter, do you think you will get back to year-over-year organic growth, kind of, ex- Twilio?

Yes, we certainly believe that to be the case despite what both Paul and I talked about around the pushbacks we're seeing from IoT managed services, net solutions that customers. But depending where all that falls out, we're still fairly confident this organic growth there, yes.

Great. Thanks a lot.

Thank you. Our next questions come from the line of Scott Searle with ROTH MKM. Please proceed with your questions.

Hey, good afternoon. Thanks for taking my question. Maybe to follow-up quickly on Mike's question. In terms of returning to organic growth in the third quarter, I'm not sure I heard a Twilio contribution number in the second quarter. I'm wondering if you could calibrate us on that front? Remind us how many employees also are coming on board as part of the transaction?

Yes, so Scott, we haven't disclosed any of all of that. It's so small and sort of generally kind of not material, but we did disclose this time, because we could, because we got account from them of their connection at the end of June, and of course, we had our own connections count. So you could see kind of a $2.9 million number there. Their ARPUs are right around ours. So I guess you could get a general idea of size from there, but it's just not something we've disclosed per se.

And then, Scott on the people we have to disclose, it's just a little bit over 50 people electing over. That will be in the Q2.

Right. Okay, great, and Romil, maybe to go back to the FWA opportunity. I'm wondering if you could dig into that a little bit more in detail. I'd like to understand if you guys are just doing the device management of it or are you doing the full managed service capability for that fixed wireless access? And I was wondering if you could also frame the opportunity there as well. I imagine it comes with much higher ARPUs. So I'd love to kind of get my hands around that and what's your broad-based expectations for that type of an end market or use case would be as we get into ’24, ‘25?

Yes, it's a great question, Scott, so the first thing I'll say is we're now gosh, about four years since we first started to sort of prioritize the general use case in this area. In those days, though, it was back up. Remember, it was like failover, right? It was like all right, when power fails, Wi-Fi fails, whatever, you can go to a cellular backup. Well, just in the scent four years or three years since we put our first kind of solution out there, we've grown by leaps and bounds in terms of just the bandwidth and the technology and what's possible and now people are talking about cellular as primary, right? We need to dig holes in the ground and put fixed lines and fiber into places when we can get the kind of speed we're getting on cellular as a primary. This particular solution that we talked about in the press release and then talked about -- highlighted here on the call [Technical Difficulty] easy consumption for those customers, and to your point, it includes hardware and connectivity, right? So it's a fully managed solution, a true definition of sort of as a service, and by the way, specifically supports 5G, right, and just basically enables businesses to cut the cord entirely just like we're cutting the cord on landlines into our homes, and it's -- yes, I mean it's got solid partnerships on the hardware side that we're going to market with.

Okay. Great, and lastly, if I could, looking out to 2024, it sounds like ending this year, there are some big opportunities that look like they're going to catalyze in the fourth quarter around some device deployments and product sales. It sounds like it's setting you up for a nice return to organic growth ex-Twilio going into the 2024 time period. So we're back to a 15%-plus kind of organic growth on IoT connectivity in '24? Or is it still a little bit early to be making that call? Thanks.

Yes, again, Scott, we will -- to the question that was just asked earlier on this call here, right? We are back to organic growth year-over-year in Q3. Obviously, the Twilio contribution, while smaller than we had hoped for a year ago, 1.5 years ago, when we first saw their forecasts and so on, will also contribute, right? And then some of this imbalance between Q3 and Q4, as Paul said, is customers that normally would have placed POs in sort of the May, June time frame for Q3, so said to us hey 90-day delay 120-day delay. So in theory, if all those come back in, that's moving revenue effectively from Q3 into Q4, right? And that's -- but if you looked at it regardless, even with that move, we should eat out organic growth in Q3, certainly Q4 should be sort of very, very good growth, and then yes, and hopefully, that continues and the sequential quarter streak continues and end. Now on the question of is next year, are we ready to talk about sort of 15% on connectivity. I'll stop short of saying that, I mean, again, we're bullish. You just saw an 8% type growth Q2 over Q1 on connectivity, which is very encouraging. So yes, are the 8s and 10s possible for sure how do we creep higher than that? How do we get to 15s and 20s. We need the economy and the macro to settle down, we need the supply chain issues to settle down. We need to see upward movement on ARPU, all of which we think will happen. We certainly think we can get there. I'll just stop short of promising it in 2024.

Great. Thank you, nice to see a return to growth.

Yes, thank you.

Thank you. Our next questions come from the line of Meta Marshall with Morgan Stanley. Please proceed with your questions.

Great, thanks. Maybe first question just on Twilio, it sounds -- I just wanted to get a sense of how is it different now that you've actually been able to get your hands on it and kind of see the organization and were you able to kind of hold on to some of key engineering talent that comes over that you're most excited about?

Yes. Thanks, Meta. Look, I think the first thing I'll say is the strategic rationale for the deal absolutely remains in place in terms of how excited we're all about the engineering talent that you mentioned. Much of the Kore network team is actually in Germany, was able to visit with them, have a really productive visit -- and so very much looking forward to as early here as this quarter is seeing sort of a combined next-generation product road map to seeing an accelerated plan of building out that digital front end, which clearly these guys just born digital, we're easily the best digital consumption of IoT, sort of, business model in the market, and we're looking forward to having them help us build this year at lower cost, obviously, with cost savings that we talked about when we did the acquisition. So I would say all of those sort of strategic rationale points stay very much in place. The cultural fit point is also very encouraged. I mean, as I alluded to in Germany, but also in the U.K., here in the United States. We've had excellent meetings with them. In some respects, the integration is going sort of better and faster than we could have hoped including, by the way, on the gross margin line, which is kind of nice to get really confident that we can get to breakeven here even this year sort of in the fourth quarter, and obviously, our promise of being accretive next year, therefore, becomes completely de-risked, right? So the only thing that I would say that if you had to scratch for kind of a negative is that, again, alluding to my comment 18 months ago when we saw the plan and what they were supposed to be at, they're obviously sort of far off that smaller entity in terms of revenue today and even the growth rate is tampered than we were hoping and sort of getting to what the plan said. Some of that, look, it's just -- it's 12 and 18 months of distraction for this team when obviously, they sort of have heard rumors first and then confirmation that they were not strategic to the future of Twilio, people start looking for jobs. They've had attrition, especially in their sales force, really, very hard to sell with our sales force. So yes, they've come in smaller, but we've embraced the challenge. Our new CRO is all over working with the Twilio leaders on, I'll say, rebuilding the momentum that we know they can have and can be accretive to our growth.

Great, thanks. And maybe just a follow-up question. If you could just kind of remind us of how much of the solutions business is kind of what you would deem more recurring versus project base?

Yes, it is rough 60-40. Again, it depends it will vary each quarter, but that 60% has been pretty consistent on customers, who either order annually, so one PO or order on a quarterly basis. But yes, it’s 60-40.

Sort of, programmatically recurring, as we call it, yes.

Got it, okay, perfect, thanks so much guys.

Thank you, Meta. [Indiscernible] operator?

Yes, I’m here. I apologize, mike. Computer froze. Thank you. Our next line comes from the line of Matt Niknam with Deutsche Bank. Please proceed with your questions.

Hey, guys. Thanks for taking the question. So maybe first on adjusted EBITDA, so I think year-to-date, you've generated a little under $28 million. You're reaffirming the guide for 60% to 62% for the year. I'm just wondering, as we think about just -- initially, I think the expectation was the Twilio deal would be somewhat dilutive upfront, so I'm just wondering, you mentioned maybe a little bit more optimism there around the profitability prospects, so if you can maybe help us think about the bridge in the second-half of the year to hitting the adjusted EBITDA target? And maybe secondarily, as you think about the IoT Solutions business, I'm just wondering if you can maybe help quantify the headwind from the pushout of orders, and is the assumption then that 3Q still remains challenged and the deferred orders show up in 4Q? Thanks.

Okay, so I'll take the profitability one. So yes, year-to-date, we've done around 27%, so 13%-ish in the first quarter and 14.2%. Just remember, Matt, that the first-half of the year is really front-end loaded from a cost perspective, and going back to Q1, we did have additional costs from the audit and so forth there, so you -- we typically do see EBITDA grow throughout the year as we are growing. But to your point, we originally had Twilio to be accretive right out of the get-go, which for June, they were negative, but we're seeing that improvement, and as Romil mentioned by Q4, we have a good chance of them being breakeven and then obviously then positive into 2024, but really, the bridge to get to the 60%, 62% is where we are from a revenue perspective and growth with a lot of the growth coming from the connectivity business at the higher margins in Q4 being where we expect all the additional solutions revenue come back in, which will make it the biggest quarter of the year will get us to that 60% to 62% range. We had also built in like I had mentioned some incremental headcount in the back end for growth and so forth. And right now, we'll take a look at that and monitor that as we see what goes on with the solution pushback, but again, that was a little bit of a buffer that we can use if needed. Sorry, and I forget.

Then there was a question about just the confidence around the push -- well, quantifying the amount of pushback and then how much should back up in Q4?

Yes, so we saw about $1 million starting in Q2 at the end mainly in June here at the end, so for the back half of the year, the number between Q3 and Q4, we estimate between $5 million and $10 million, so again, depending on timing, where that is, we do expect most of that to be in the back end in Q4.

Right, so to be clear between $5 million and $10 million we’ll move, we hope only from Q3 to Q4.

So we're assuming -- just to be clear, Romil fall, so June was about $1 million. You're assuming that this kind of accumulation in 3Q and falls into 4Q. That gets you to that $50 million?

Yes. Correct. That's right.

Okay, great. Thank you.

Thank you.

Thank you. [Operator Instructions] I'm showing no further questions at this time. I would like to turn the floor back over to Romil Bahl for closing comments.

Thank you very much for your attention here today on our second quarter call, we certainly appreciate you taking the time to listen in and to ask your questions. We look forward to updating you in mid-November with our third quarter results. Good-bye.

Thanks.