Q2 2020 Kaleyra Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by this the conference operator, a conference calls only began in about two minutes try. Thank you for your occasions.
[music].
Good day, everyone welcome to the conference call to discuss killed Lira second quarter, that's called 2020 <unk> financial results.
At this time, all participants will remain in a listen only mode.
Call is being recorded.
Outside the U.S layer of Darrow Associates, you may begin.
Thank you operator, welcome to clarify second quarter fiscal 2020 conference call Clara released unaudited results for the second quarter ended June 30, 2020 aftermarket today the press release as well. It's a replay of today's call can be found on the investor section of the company's website and investors dot.
Clara Dotcom.
Joining us for today's call from management is diarrhea, collage girls founder and Chief Executive Officer, and Giacomo Twilio, The company's Chief Financial Officer management is doing this call from different locations. Today. So please bear with us as we transition between speakers and address your questions.
During today's call management will be making forward looking statements. Please refer to the company's FCC filings, including the company's annual report on form 10-K for a summary of the forward looking statements and the risks uncertainties and other factors that could cause actual results to differ materially from those forward looking statements Clara cautions investors.
Not to place undue reliance on any forward looking statements.
The company does not undertake specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur except as required by law throughout today's press release and our call today, we will refer to adjusted EBITDA. This metric is not determined in accordance with generally accepted.
Accounting principles, and therefore is susceptible to varying calculations.
A definition calculation and reconciliation to the financial statements of adjusted EBITDA can be found in the tables included in our press release.
Believes this non-GAAP measure of Claris financial results provides useful information regarding certain financial and business trends and results of operations with that I would like to turn the call over to dial. Please go ahead.
Thank you I lose them and thanks to everyone was join US today for our second quarter Conference call.
These are very difficult times, and one or more challenging periods in our 20 years. These three.
Our largest markets, where a lot sounds well my trip to second quarter. However, you end up can really do you have our employees around the world you see this lead began working chromosome flexibility in functionality will cover platform as well.
Our customer relationships as a little color your loan growth revenues year over year.
[noise] overcoming base, but they'll probably 90 revenues were 31 dog.
In the second quarter up 1.1% <unk> and the build out our guide dogs.
Beginning June frequently to July as economies around the World you open it for years now, we'll see volumes recall, there is being driven by decreasing penetration of <unk> billion and an increased number of digital transactions.
We believe the war is behind US and are confident we will see <unk> revenue growth as we all throughout the year [laughter] longer term the from the amicus Friday and increases in the usage and breach Ocala Fla slugs while.
I'm Lucky New segment.
Finally in Golden Monkey, and non call them in coffee, you'll see the United States, Europe and Asia Pacific.
Let's see bus or communication platform as I said, we see streak continues to offer tremendous potential for growth and clearly is very well positioned us to write this way.
[noise] being a publicly listed company is still pretty helpful color going I'm more people opportunities with large accounts in the United States. If you will the big digital Diane Bank, he can be square and other fortune 500 customers.
We'll see enterprise cost unless he crazy leukemia, or new ways, you guys, who wish that costs us expanding into new channels like light truck checkbook and IDR.
Accelerated or digital transformation by multiple years, you many cases.
In addition to the porches order with the U.S. Glob Omega Cup Media Company. We are now said last quarter, which has already led to additional porches or that's we have quoted the expanded our connectivity service footprint are the complex with five of the wants largest over the golf.
Comments made you end up services companies to deliver a message retracted globally.
We expect to announce additional agreements all the second another 50 years.
A year food, they're supporting our annual revenue while people.
Hello is also leveraging our position as the leading thrust to see best provider for banking and financial services are up and bringing our expertise complexity security and compliance to the United States.
Our Caleb initiative provides a platform for new product development to support enterprises.
All by customer experience utility identity authentication, Mumbai limbaugh's notification on transactions banking services that will position.
Different integrate them more by the channels.
Despite having began to try to get this not only a few months ago. We're already received very positive Goodson Becker.
We are also working with major U.S. based telecommunications providers when assisting me she did reduce spending by collecting the Baltic elite, leaving campaign inflammation and processing in sharing that information with mobile operators in messaging ecosystem, a soft launch of our.
Our campaign registry Sadly began earlier this year into commercial launch is respected into for the quarter.
Finally, it finally, a serious they'll specialized cloud telephony services at the lowest 12 hour clients and other firms communicate with their employees clients and sustain business operations remotely.
I am confident we are the right make so for the sources broad that's ghastliness among people to continue the growth and the expansion of Columbia, No Scully globally, and we subsequently balance sheets from that 51.7 million no financial resources, comprising 36.2 million Scott.
That was raised in our leasing public offerings, including the additional 4.2 million from the exercise of the over the last night.
And an additional 15.5 million in attractive loan agreements when we come out of Twentytwenty, a much stronger company ready to accelerate our revenue growth trajectory and begin to unlock ready to value to our shareholders. Let me now during the cold all the two Caleres Chief Financial Officer.
Jack and will allow you will review our financial Seymour detainees Giacomo. Please thank you Nicole.
Thanks, Dark pool, just second quarter ended June 30, Twentytwenty reported total revenue of 31.2 million.
These are those all want like 1% from sort of keep on nine new yet your second quarter of its own PBT.
Hi, My Beach on duty includes.
Got a regular benefiting from shifting your coffee techniques and our first make enterprise, yes customer.
Even was partially offset by decline E. P. Your services you need to heat related to the credit card usage and boys, particularly in the emerging region related to the top two service usage moving their love Don will need to do they called the Nike brand gaming.
In the course, there we process 7 billion a massively in that began by schools Guardian noted starting in June we began to see an increase in transaction as they call them its recall, but and you contracts are implemented.
Gross margin was 14% into second quarter of Twentytwenty.
This compares with 19.5% <unk> second quarter, so when he made Pete.
Just you two of the teasing either margin between service involves viewing the lump them when they did do they cover 90 day.
Operating expenses you were 11.9 me young kids to Twentytwenty compared with 6.8 Me then you could do 20 <unk>.
These operating expenses include the 80, nearly 30 employees from the beginning of the or the money you always get wage support denounce engineering development and global Sage.
4.8 me young and stock based compensation 1.8 million of transaction and one I'll call and 1.1 million I'll call first really two public companies can climb you did not have in Q2 2018.
Excluding these costs the operating Stacy was actually decreased by <unk> 0.8 me young compared with it.
Just a place units fancy Oh pardon me can you just second quarter of 20 Pete.
Loss from operations show was Salem, Bona Fide need them for the second quarter of plenty plenty and includes four point. They need you know stock based compensation 1.8 to me then I'll put it was actually one off costs and 1.2, all public company costs I just mentioned.
This compares with the loss from will put Asia Europe on T.
Me and then second quarter of 2018.
Net loss was 8.1 million or 79 cents per share for the second cost of 20% compared with a net loss of 1.3 million or 12 cents for sure well the second part of 2018, when the company will see probably about.
I just need to be compatible with the previous year was zero point they need them in the second quarter of Twentytwenty and include approximately 1.1 million of cost incurred as a public company that the wasn't all that come out again second quarter 280 90.
Without adjusting those calls BOP, including the engineering sales or is that count increase just they'd be he would that be negative or Europe on t. media.
And compares to 1.7 million on the second quarter tend to make team.
Case, you usually you know break the activities was 1.6 million the second quality Clinton trend.
Compared with the cash provided.
2.2 million in the second quarter last year.
Gastric tissue.
Were 57.2 million.
As of June 30, 20 plant.
Cash position is after the big female substantially older obligation under the cooler Shane.
James agreement in the large portion of the immediately nodes.
Any compared with 77 million cash cash equivalents, whereas three occasion on December.
For 20 my team.
Well the things that have the six months ending June 30 jumped to 20 I refer you to the press release and our work. Thank you filing.
Before turning the cookies audio I want to offer some color on our people who got the cost structure.
There's also a day end up with the second quarter then were approximately.
28 million shares of kinda that he should outstanding common stock.
These include the.
7.8 million shares sold in the public offering in June that rate so to do me young need in net proceeds.
In July we sold the almost 1 million shares to the over allotment option, bringing the 4.2 million or financial needs. It was nice to see.
Payments on the poor should touches agreement related to the closing of the company's business combination would clearly be a.
2019, I dare to be prepaid the kids are from the water or made all the visa litigation and otherwise being these charts.
In addition, I was 4 million shares were changing July.
These that auction.
And greatly simplifies our capital structure and we currently have fostering.
28.5 million shares outstanding moving forward.
There are still approximately.
I've been following a 15 million shares of common stock related to the outstanding warrants would affect pricing of 11 50 actually.
In granted some people.
We also secured 15.5 million all loan agreement, we didn't seem to some fall in July.
These loans at six year terms, you done interest rate of approximately lump by 7%.
The first two years payments, our internet someone that.
I will turn it back garden now.
Thanks, Jack on.
The future these very bright for color looking out to the second off the year. We are at the very significant inflection point clear <unk> is uniquely positioned to else enterprises communicate with the customers expanded waves and take advantage of the growing opportunities there.
Then it gets created any deals Brady fast growing see trustmark.
Whether his voice messaging push notification or email enterprises communication continues to get more and more <unk> and.
And Kelly or not is ideally positioned it too many keep from the gross.
The third quarter empty space reporting revenues off at least 36 million, which would represent at least 15% sequential gross and resulted in record revenue quarter for Capella. This guidance assumes that the company's largest market equally and India will come.
Good to see improvement in the economies, even though India is it in an earlier stage associates recall there.
Our guidance also assumes that there could.
Still be continued pressure on transactions led those you certainly juice and those have been business lines like transportation.
For fiscal year Twentytwenty, we expect revenue in excess also went on to them 42 million. These anticipates a double digit sequential increase in fourth quarter revenue from the first quarter of Twentytwenty.
Adjusted EBITDA in the second half of Twentytwenty is expected to see a significant increase from the first house, let us for some reference <unk> 2019, the vast majority or approximately 80% of adjusted EBITDA was generated in the third and fourth quarters.
These seasonality is expected to benefit twentytwenty as well.
[noise] the Cintas marketplace continues to offer tremendous potential for growth in the polemic use a catalyst to accelerate the digital transformation office many industries.
Mobile technology is bridging the distance between the organizations and their audiences and Kelly and I is designed to I'd be enterprises seemingly communicate soup to seamlessly communicates with their customers to mobilize services.
We saw our reputation as the trusted C plus provider, our expanding blue chip customer base, new product initiatives recent strengthening of our balance sheet and growing footprint in the United States. We look for walk to a strong trajectory of girls flat.
In closing I want to Frank our customers and shareholders for their support as we establish our south in the U.S. geography as part of our global expansion.
I'd like to also recognize that Calacatta nicoletta team for their hard work and the excellent results.
He currently under such difficult conditions.
Very proud of what we have accomplished together and dynamics I am excited to sort of lost because.
With that operator, please open up the line hook questions.
Thank you.
People now begin the question answer session.
He joined the question can you hear me Press Star then one on your telephone keypad.
Well hear a tone that probably using your request.
If you are using a speaker phone he's pick up your handset before passing any keys.
Let me draw your question. Please press Star then too.
Oh, Pos for a moment as college join the queue.
The first question comes from might not more from Northland capital markets. Please go ahead.
Great. Thanks, Congratulations on a great results there.
Since they Dario you mentioned five customer wins [laughter] do you expect all of them too.
Our generating revenue in the third quarter, and then maybe talk a little bit about kind of why you won them or that.
Quality of service, a regional exposure any color and that would be great.
Thank you my time.
Well at the since we haven't been listened in November we almost data collected a as a trust swirsky vendor on a global babies for big ER visits on Giants hogs customers in general.
And after one of the deal with the Big digital Social media back in December and other companies are accepted to use a telling us having said that in multiple geographies one off the sign off color. Your line is to be.
Are you all know player with Saddam absolute friends. So maybe the most of this large over the top customers are usually tell a little bit structured to multiple geographies in commensurately may you have to see if he can be in Europe.
And do not 20 times, well and are yet.
They will provide additional revenues are you in the folk Walker and Ah I believe that what we made a difference is the sockets. We are now a public company and they're just create D or.
Plot phone call multiple all of its off to outage will dimensional accounts to use our services.
Great and then.
With this kind of work from.
Anywhere engage from anywhere environment, it sort of emerging given cover 19.
It seems like there's the potential for new use cases and services to the end demand I guess are you seeing.
Particularly among your kind of Italian an Indian customers.
No new use cases, new demand for new new services a merger.
Oh, Yes of course, a a wall popping and since March is that multiple larger or non government organization, it's equally bad cross informational and sprint.
And can do that the using mobile telephony in Mumbai communication to engage with volume fierce and dawned on us worldwide.
And ER Kabi 19, I'm being a perfect storm created all sort of been flat home school.
Those organizations to take advantage of the platform services to be.
To close the gap and to bridge. The this sounds good start rolling.
He is up any also involved in the month or institutions policemen say you need yeah, we are providing a I need to see service, which is like a three Irish.
For a softer caught in 90.
Patients that instead of showing off so I'd be I'd be showing up at the hospital. They can calling the service with a number that we provided together with other technology providers and we bring based communication with Ah Ah medical doctors that volunteer across media.
To assess any qualifying the need for those passion to go to be Austin.
And he is a good example off call him and can be shipping said with downfall.
Government institutions.
Great and it's just very last question on gross margin.
Look to the third and fourth quarter I'm guessing you know you have some of your core regions and premium services. Growing then you have new customers coming on line and he has natural seasonality. So how should we think about kind of gross margin.
Third fourth quarter.
Oh, yes, definitely proving depending on the seasonality at can stay the way the contracts with ER operators are a shade insect second off so we we generally have a better profitability at the gross margin level and then after that.
Maybe a landlord last year, we recorded about 80% of did and be a in the second the offs.
And this is going to company again 2020.
Not a the first Dawson definitely we and the impact so called the 90 due to the very severe locked down we have you need to me in India, a nowadays, it's really easy and ready to start the call in July with start see volume out and the also a high management services like a SMS premium really cool.
And by assuming yeah, taking off again, so I'm quite positive about the increase of Frost foundry profile during the second off.
Yeah.
Right.
Thanks, a lot good luck.
Okay. Thank you Mike.
Thank you.
The next question comes from last by chance that phone call.
Please go ahead.
Hey, you guys. Thanks, very much and congratulations on quarter I guess I wanted to start just maybe going a little bit more detail to follow up on Mike's questions regarding some of the new customer wins and could you talking a little bit more I mean, I'm not just about whether or not the revenue is gonna be coming in the third quarter, but I guess I'm just trying.
To get a better sense for for the pace at which set revenue kind of ramps up is it could you you know is that something where we should expect a you know six to 12 month period before we hit you know sort of the normalized revenue contribution from these from these new customers for or is it more you know your terms space.
On day, one and what you see is gonna be what you get on a run rate basis, and then at some other questions as well, but maybe you can start there.
[noise]. Thank you last lose a very good question. So loved the county in general as a bright spot phebe out before they get the full fledged volume, but this is not blasting wrong is laskin between four to six weeks and we have so the midpoint every time, we launched a new customer.
Sure. It takes like a one on months' Walmart someone asked before you get the volume and when he gets the volume also we get the pricey fine on the sourcing side on the supply side. So let me say that larger the account longer the cycle.
We'll hold the sales cycle, EM and pool and the ramp up cost of revenues, but it's not lasting merian long four to six weeks before you get some volume. So we expect already in the third quarter volumes and revenues coming from those new customers.
Okay, and then I guess, you know there relative to at least our expectations right, you're you're doing better in terms of new customer wins and that's you know that's helping on the revenue side. It's obviously, putting some pressure on gross margin in the near term, but I'm wondering can you what should we assume for sort of like a steady state.
Longer term gross margin potential so I'm thinking you know when when you're at scale and but also you know when you're no longer incurring the additional new customers start up expenses and this maybe more of a theoretical question than anything else, because hopefully you're always going to be adding new customers, but you know if we were to think about it without.
The dilution from the new customers start up expenses, what kind of course margins, which you expect in this business.
Well in general or the gross margin is the result also multiples doctors and not all the product line to send the same gross margin in the one that is.
Get even more significant cost for moods.
So is a SMS back as long as we launched new services using the I'd be like voice or soccer.
We will manage to widen out more grosman G. Because the mix of the product wouldn't change also the customer mix he's going to changing because we have a about 72% of our revenue as a second quarter cammy crop cost 30 cost them out all the 3000 that we serve.
But we are looking to see Keller Hana cloud, which is aimed at a small media enterprises in the second I'll send this will change the mix of customers.
And a smaller customer accounts with some much wider gross margin. So these would be another mean to widen the gross margin going home loans.
Okay, and then I guess, the new customer wins have been mostly in the media O T. T. SEC scree, how is it coming penetrating the U.S. financial institutional market.
Actual institutions and I know that itself, we've talked about this and the passage up it's a long sales cycle, but have you been continuing to make progress there.
Sure we are competing to my fraught with that I think that the the first quarter, we'll announce at least one you deal with a large.
So quick.
Hi, good cash plus the cost to equip we're already working with them and ER I believe we will start see revenues.
South to Hook Walker again lots accounts in banking and financial services long sales cycles, we launched the T lab or back in May.
Oh now we are in August or something to see mounts, it's very small time too.
To de lever and accomplished but we are on the rights I can we see a local attraction.
Because the competencies and experiences that collateralized, providing with this Ah Caleb theme is impressive them very well.
Received them to accept the body by the customers.
Oh, sorry about that my phone was stuck one last question for me if I can and that is I'm on slide 18, I believe it is you basically you get some detail around the volume of messages and voice calls, obviously down quite a bit.
Yet in the second quarter can you provide any update on those metrics in terms of how how close to pre kogut levels.
You know amongst your existing customers would you say that we are you know as we sit here today, you know roughly halfway through the third quarter.
Again, you know how to good question, maybe Giacomo can make me you now. So you do these questions I know what I'd say that stopped the tone July we were back to normal innate gleeful banking and financial services and starting probably likely we have.
Recall that even voice you mean, yeah.
Actually due to a larger E commerce glass from which to using our by seven cents previously they were using all on the messaging.
ER Jacmel could you add some more color.
To belong yes.
Yes, probably from July we see a very good recovery in Italy and that from the end of July also in India. So we project that we gave the guidance of revenues all 50 states menu and be Newsday, hi, corked admiration for now.
Yeah. So.
We are recovering volume and revenues.
Great. Okay. Thanks, that's actually very helpful. I appreciate it.
Thank you Lance.
Thank you.
Your next question comes from Tim Horan Oppenheimer. Please go ahead.
Oh, Thanks, guys can you give us just maybe more color on like K lab and the positive feedback from financial institutions, what do they liked about what you're doing.
And Ah you know how does that kind of compare to what they're doing now and maybe do you have the right go to market strategy. There I guess do you have the right sales.
People and might sell support a in that market right now what do you have to invest a little bit more there.
Okay. Thanks, Hi.
So basically suddenly mobile banking services to last financial institution to use that strategic site.
Yeah, sorry, not like off the shelves or product placement rates.
Advisory, helping them in defining and designing new services on loyalty programs on Malibu publication on Transactionally Van Saun, not I'm keeps all protection and security. He has a credible experience in this in Europe than Europe is much bombs or.
Banking and mobile banking and we're now providing this knowledge and expertise with this Caleb theme, which is made them populated by senior executive with multiple them. So if you're in experiencing the strength and Ah well you talks with about 50 prospects.
And we're already working with one of them that unfortunately, it doesn't allow us to disclose name so I can't be more exclusive on this and ER.
We see a lot of traction because basically in the United States No. One off the Seapass player is a you know security compliance and integration first top of mind wise. We are like this that's what we've been doing over the last 20 years sleep apnea and.
Moving on time, we know exactly how to handle this and we know how to love them in designing the Needham services. So that's what's going on now obviously take some time.
And also called me the and a you know they're locked down and work from home practices, you know how much but we are not home managing to speed up the process and I didn't buy they've added positive about themselves to talk a lot but going forward.
A second one offs wouldn't be amazing.
Good luck.
And then can you give a little bit more just color at a high level, how new customer bookings are going and sales and baby both of the existing customers and just adding new customers on has that process that hit by cobot as that kinda started to pick up and maybe how does that compare to pre Toby.
[noise] well, obviously, the the new ways of working changing significantly over the last few months.
All of class, we are having refinance experience and no more on one to one face to face me things out a lot of why schools and video calls and I'll give me a the whole system is adjusting to this new normal.
With large accounts, what's happening is that basically the the the coffee 19 has created the benefits last phone call them to accelerate the process of getting transform digitally transform to bridge the distance with their audiences on that customers.
And those so a lot of online services constitutional online services require a strong customer authentication to make sure that the ones that are largely men are trying to do that since actions on the wanted to allow the and are entitled to do that.
And a one off the things that these definitely meaning is the song cast mountain education, the onetime fast from being equal and just kind of thing I mean, just to beginning because basically this thing is getting more and more conversational.
I being some.
I see kits, so soft or artificial intelligence Mitchell language crosses saying you see an improvement theme. The design of the services that will change the way the brands interact with their audiences and their customers you end the transaction that no soft assays.
Paseo sensitive customer care and just kind of thing.
And Ah that's why I think like many other eat sleep fierce and EUR zero channel is that at the end of they the plan then make kids being the best seen coal to society and the economy is but definitely is she really he led the development of the sea bass player space.
Great and then lastly, could we get a little bit more color on the gross margin for the second half of the year.
You know last year, you were in I guess, the 21% range for gross margin for the second half of the or even more down 14% for the first half and the volumes are pretty close to being back to where we were but then I know you have a lot of new contracts that are initially gross margin dilutive. So you know any kind of but little bit more color on you know and the second half I know there will be up.
But you know can be kind of compare to last year second half and that you know 20, 21% type range or should we look for something you know in between 14 and 20. Thanks.
Oh, Okay, I will ask Jack wants it to these Ah I feel more specifically, but I want you to consider all sold that the notwithstanding the decrease in rossman Gee the company still profitable and is generating cash flow, which.
Now all the proceeds that we as a right with the primary and with that.
Over $50 million us, we'll use foreign investments because we do not gone cash we are still cashcall isn't doing keep on making money.
ER So Jack Mohr could you. Please answer who are the question really yes is across the second yeah.
I think we'd be in amino between 14, and 21% uplift here and I think there we do it and we do have call they offer premium and volumes, who can increase the new gross margin from the first off of course. It also as you know.
No we have a seasonality onsite and my congrats again.
And sourcing contracts they are on the cumulative they use a yearly so as as much you use and messaging, let's say you paid showing the second child fair, we can she gets somewhere.
Some 11, and we have a better price.
But the of course, we had to consider also this tough top of the these new big contracts, so they connectivity and the enterprise or.
Sectors. So I think we we'd be in.
The median often 14 anything 51%.
Thank you very much.
Thank you.
The next question comes from Allen Klee National Security Sport.
Please go ahead.
Yes, Hello, if we look at your operating expenses and what they had been running out in the first quarter and second quarter 2022.
Center with the exception of the 1.8 million of a onetime costs in this quarter.
Is that a reasonable run rate going forward for the second half.
Again, I really like Jack will want to ask this question Hi, Alan and nice so can you <unk> and.
Yeah, they <unk> I'm sorry.
You say.
Yeah.
One thing that they would like to say is that indicative that isn't litwin twentytwenty Mtwenty 19 with better keep in mind, and then 29 team.
Kelly and I was still a private company. So now is very young number off to a compliances and.
Oh cost there that related to the from the state this off a public company that whether or not.
I could and recognizing that the same quarter Oftwenty 19, so all the comparisons between Twentytwenty in 29 theme I didn't need leaving also be speeds up.
And yes, if you could please rephrase the question for the benefit Gulf Jakob.
Okay. If we look at operating expenses this quarter.
If you exclude the 1.8 million of transactional expenses.
Is that a reasonable run rates for where operating expenses will be in the third and fourth quarter.
Yes, it we.
It is they see it we add them almost 30 and new employees in the first out so you can add back.
Little increase in the Costa off.
Oh labor, but ER.
I think a we'd be not very many different.
Indiscriminate.
Okay. Thank you and then.
Could you help us a little bit more on what you said about guidance on adjusted EBITDA for this that the second half isn't there should be around 80% of the full year. That's the challenge I have worked out is.
The first half of your first two quarters, you've had negative adjusted EBITDA, So I'm not sure yes.
80%.
If you could maybe no no no no no it well what do we say if that's the last year, 82%. They often they're just they'd be that.
Was coming from the second gosh so.
What we can say or even he did here the vast majority of that just maybe there will be coming from the second Dodd, Frank and the digital media and the second out we'd be positive Mcknight give to you guys in the first off and that we are especially the Apollo.
And much higher adjusted EBITDA than the first time.
Uh huh.
Thank you and that could you just.
To help us educate us on the India market in terms of where it stands in the with the pandemic and [laughter] and the outlook for them a opening up their economy.
Oh, yes.
Well, India is a complex reality, it's a huge commentary with 1.3 billion and I beat them.
With more people a state them in towns, which <unk> ranking range of 12 to 25 million inhabitants, and obviously when you managed such a large town to west or session.
Huge number or not it then you must be careful eat them, so off a containing the pandemic and those so it's a federal state. So you don't have or the same line pretty much like in the United States. You don't have the same line across the board in all the states.
So you may or may be a new Delhi, and Mumbai, which are more close now and you may have the other states another sounds which are getting a much better situation.
But in general what me unless I'm doing them managing very well.
The impact to help the polemic and if you look at the numbers the number of Kansas and the number of Das it's definitely a lower than expected considering how complex and ER and the reality of the come through.
Well he is happening now in India is that they are opening up progressively in those so the economic system have been able to quickly and Josh though you did you go or interaction between 50, then some consumer and the organization.
And the government end to end the enterprises, so going forward I'm pretty positive about the impact offer a the fund they called or the seat pest services in India.
But it's extremely difficult to make or photo predictions about to about a the future because the polemic is with the end, it's also affecting them with the ER manner.
Or the society the economy.
But my feeling and the feeling that we have is that all sitting in there may be amounts later compared to eat the knee in Europe, it's a it's improving.
Okay. Thank you so much.
So most welcome.
Thank you.
The next question comes from George Sutton from Craig Hallum.
Please go ahead.
Thank you guys are for the benefit of the investors who are on the call and see the stock down 20% or so in the aftermarket I think it is because the guidance by the revenue guidance was below where the street was which is a bit surprising given that we spoke just a handful weeks ago and.
Establish numbers and so did you just discuss your 142 million or better guidance relative to the overall outlook I think that'd be helpful.
Oh sure what Aegion, let's say that let me say that the guidance that we gave the as being exceeded by the results off the call with or without although the guidance. We gave a GAAP guidance between 30 and 31 on them. We are a little over a 41.
Jacmel could you I mean honestly to this question about the ER the guidance from George.
Yes, what can we say that either NEXAFED AWS, one I'm in 42, and the streets consensus around handling for price. So we are very close in the consensus analyst.
Okay. Okay.
Okay. So there's there's been nothing in the last handful of way sort of necessarily change. Your perspective. This is just your way of guiding is to provide a single point number and potentially in excess and you're not uncomfortable per se with 145 million dollar consensus, yes, just trying to be clear about the.
Okay. Thank you.
Thank you.
Once again, if you have a question. Please press Star then one.
Next question comes from Jeff Bernstein from Cowen.
Please go ahead [noise].
Yeah, Hi, Gary on Giacomo. So you said in the press release, there's some headwinds from the cost of initial delivery phases and in a conversation we talked about margins improving as volume scale, but can you just go through the mechanics of what the costs are when you bring on a new customer and.
And a if you can split those at all between the scale up versus other initial costs to whatever extent you could do that would be great.
Sure. Thank you hijack well in general when you are open up but routes to a specific geography, where are you still don't that volume since all the contract who's the operator for the termination of traffic a volume base, so you've got better.
Prices when you get tie your volume in the beginning you don't add yeah. The volumes, but you open up the drought can be the cost of termination is fairly high compared to the price that you or sell the status as soon as the volume goes up can you get a better price. So you may.
Hey, Soc, where are the first few weeks at the very better you leave Ross managing as soon as you've got the volume and you start delivering I know who lots of SAPHIRA two best specific geography say gone out in Nigeria or come ball job. Then you just got that'd be a better price on the sourcing side and you can't fix the.
Price that you have made to the customers. So this is why the need to gross margin. So every rami pop off the volume on a specific geography cam of together with a very low gross margin at the beginning.
But going forward, it's improving any is getting the range off the typical conductivity cosmology, which is about 50%.
Gotcha, Okay, and and so it is are you are opening up new geographies for for all kinds of customers or are they really for these new customers that you're bringing on a which is a little bit of a a new experience for you.
Oh, well right customers adopt worldwide players there are companies that have you all those footprint the nearing traffic to 119, why that 95 geography to walk all of them. They moved the source and we are selectively.
Seven them all sounds procedure, all that foods I'll give me a reason win win situation. When you started the liberty for customer a proxy to do geography. X. Then you add back customer me, which is willing to believe it's not just on the same a geography acts.
And you enjoy better managing because you get much more volume on that specific or geographies are busy but I geographies, where we are you commented we are very strong like eataly, India or feel it became a Malaysia, Indonesia and that our job.
She is where we ought newbies like in Africa in Ghana in Nigeria, and ER to open up a new route you need to pay a ticket and that he could then you pay is that initially you get lower margin then when you on volume you get better match.
Gotcha I understand okay, and so as you are potentially add other customers who were desirous of the same routes you won't see the same level of of.
Dilution headwind at the beginning of the contracts those will come in at the exact better have exactly margins that turn some not so that's great come outbreaks, where the cost of termination is the same across the board for every customer. So the more you are cask must be Beth specific involved in that specific geography, I get the volumes the better.
The price on the better the match.
Great Fantastic I just wanted to follow up on on one other thing you were talking about K lab, and how you're helping customers and sort of the value added wrapped around the pure messaging.
And that you've had a lot of experience now in Europe with ER with more financial services related application security et cetera, and that you feel that that is a differentiator versus other U.S. kinds of players or players from other parts of the world that have not been compliant with the kind of.
Requirements that are issued in the European financial services market.
That's right that's absolutely right I believe that we bring an expertise and knowledge, which is being built over the last piece to me is in banking constant severances credits on the screen and acquiring and we are now export de his expertise to the United States by.
Okay. The mean off Caleb as a as or a trigger to engage with the customer and does not mean designing their services to becoming more effective more efficient theme, the mobile communication, which their audiences most of the services related to quantify.
All protection, but we're also working on loyalty you have walkie on other than to teach occasion on a state. This off the account most of the trusted kill Feynman calm, but you can you call. They are grandfathered coffee chrome or sends me. The later to prepaid plastic job prepaid plastic.
Got a typical leashes like you better understand you know bounce that you are rami out of credit on the comment you better you know refused account and we are handling notification on session. They plan to make sure that the customer known as you know bombs that next.
Netflix or a subscription one the Dave because youre CAD doesn't have enough balance so we send them up indication to let the customer no. Other cogdell them know that they'd better refenes because not to lose the subscription off that.
I have already.
Video provider like Netflix is an example.
Gotcha understand alright, and then my last question a in the U.S. a consortium of the carriers are investing in this C.C.M.I. for for a new risk rich messaging platform. I guess the same thing is happening a with a three carriers in Japan. How are you guys thinking about the these rcs kinds of.
Platforms are you going to sort of take your customers there or are you going to wait for customers to be looking to get involved and on those platforms.
Oh, Oh, we're working closely with fixing them I am with Google on mass yet so we were ready to lever read or see if you can use a this is on barely tie this management, which is a a new way off certifying the sand or is that an outcry center of the message.
Well, we've done a trialing, yeah, and we're working now with them to trying to anticipate not to follow you'll continue to design house, yes, I see asking if there's been around 40 years for many many years now it sounds like you're getting real with the backing of Google and the mobile network.
Right. So theyre willing to take advantage of how she asset then you reach a mean well see plotting with customer which is the next generation I'll pass a match.
And collateralize positioning to to work together with all of them on this.
Gotcha. Thanks, so much.
You know most welcome.
Thank you.
This concludes the question answer session I would like to tend to Congress back over to Mr., Jerry Kelley Harold for any closing remarks.
[noise]. So thank you very much operator, and thank you all for joining me today school and for your continued support.
We look very much for what the speaking with you again, one would report our discount for fourth or developing November please feel free to read childcare layer out for anything and ER, Our investor Relations team is always available to provide anyhow. So through any question that you Matt.
Thank you, ladies and gentlemen, and talk to some.
Thank you.
Today's conference call you may disconnect. Your lines, Thank you for participating and half a pleasant day.
[noise] [noise].
[noise].