Q3 2020 Kaleyra Inc Earnings Call
Greetings welcome to Caleres third quarter 2020 results call.
At this time, all participants will be not only mode brief question and answer session will follow the formal presentation if.
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At this time all its now my pleasure introduce Mark Griffin.
Thank you good morning, and welcome to Caleres third quarter fiscal 2020 conference call.
Hello, released unaudited financial results for the third quarter ended September Thirtyth 2020 earlier. This morning, the press release as well as a replay of today's call can be found on the investors section of the company's website at investors Dot color Dot com joining us for today's call. When the management is the CEO and founder as well as 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 SEC 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 other forward looking statements.
Blair cautions investors not to place undue reliance on any forward looking statements. The company does not take undertake any specific disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur except as required by law right.
Throughout today's press release.
On 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 a reconciliation to the financial statements of adjusted EBITDA can be found the tables in our press release, we believe this non-GAAP measure of color its financial results for both.
Useful information regarding certain financial and business trends.
And our results with that let me turn the call over to Gerry. Please go ahead. Thank you Mark and thank you to everyone joining us on the call today for an hour for corporate conference call.
As you are all well aware the goal by sometime it continues to evolve and why we believe we are most likely for the ball stops. It there is a lag effect on the global economy Austrian pricing, we saw a modest recovery in our two largest market the name yet and I'm exceptionally golf in the U.S.
Which is now our largest market we.
We are talking about well I just want the grabbing news in Q3 up 48.3 million exceeding our guidance of at least 56 medium. Most importantly, Q3 revenues [noise].
He was up 23% from [noise].
We experienced in Q2, which demonstrates the strength of the color.
Q3 revenue was also up 8.3 year over year.
Hi, This is on the wall Scott that will you open and we sold volumes recall there with month over month Sea creatures from June through September and this woman can you couldn't be moved into October.
Ladies right during the quarter. It was the right thing for large U.S. major enterprise customer.
The price cost was added to the main thing was pretty clean number all digital payment.
Actions, which still a 91% so when you show me Crazy messages on the voice side calls were up 22% year over year and more than one I will then 20% from Q2.
Digital transformation is driving change up organization set up on the wall and the primetime because on the actual everybody could last guidance.
Now where are your traction with some surprise cath labs that calculus out the money and how it should be called relationship to a variety of people trend looks like like Chuck Chuck bolt and interactive voice response idea.
Well to keep the two windows this additional demand and our full range of C. Pulse books cheapest tools will allow us to capitalize on these opportunities and provide solutions 20 communications platform challenges our cost unless my colleagues during these times.
The breadth of our platform no are we all boats, which was highlighted.
Well at least the there was a rough because I get the vendor you got married market guidance full communication platforms as established by the estimation by Twentytwenty free 90% of global enterprises, the level of J.P.I.N. able see basalt study. He is a stoppage of the skill set to Uh huh.
That'd be just a competitive mess up from 20% in 2020.
Oh, a wide range of developers to help customers get the most of our expansive platform, particularly our usual builder, which is crucial warchest without called these skills to access the full range of the sea Bustles.
The scale and the scope of our cheapest platform and our reputation as a global provider of communication tools, you have rigs on anything with large multinational corporations [noise].
We are starting to see traction outside of our core markets.
Yes, Indeed, we are seeing an increase in our pipeline of opportunities that she too large internet giant financial services firms in other fortune 500 customers.
We are leveraging our position as the most trusted seapass provider for banking and financial services in Europe, and bringing our expertise and compliance to the United States, what would be the visa strong demand for our industry, leading security <unk> goals.
As we mentioned on our prior call, but that's it that's the Delaware Softline shelf the campaign registering savvy. She could you do as a quick reminder, campaigns I just think he's a subsidiary of color and provide application to person.
Sure, Mike that Egypt long Cold messaging campaign registration services, the company Registry collection, Oh, the brand and compelling service provider and the walk all the use cases either segment. In addition, like have you ever Monday to the inflammation <unk> business message you probably I see what's your plan.
Yeah. It's companies have is still by the communicates with end users.
The registration you see left what yellow pages school business messaging services, which enables you didnt implication to echo system, but you see it.
Right.
[laughter] yeah.
Sending messages and what they intended to send in order to support the pool itself is quality and reducing production also and doesn't want the messaging to consumers we.
We are extremely excited that one ounce, we signed agreements with two of the three tier one.
The United States Nobody's Careonest seemed a core pillar for these important initiative. The campaign registry, we look back on the problem off a month of messages be cheap phones. So millions of people that do they.
Helping this guidance by providing any valuable service to their customers and allow you then the capex you need lots of getting split them just camps and doesn't want them global tax.
We are also pleased to have been selected as a Google partner for Google seeks a backchannel notified goals, which we announced in May.
The verified calls feature for Android phones, which enables customers to see why I'm enterprises called leaving I mean, they did well along with providing the enterprise Brian.
Then if I calls, there's two of them Google specified SMS established where neither better size it.
Message business sense to use that to go very well said, but yes specific entity. We are excited that Google has chosen we categorize or keep Bobby you said. This was good you spend and that the consumer class in the messages equals the Irish Sea link.
In summary, we believe that <unk> is well positioned to execute on our initiative with our blog.
Product called <unk> global reach and unbelievable warm why didn't we.
We continue to build traction outside of our core markets into the Logica and you see the United States, which we see as a key market going for one for calendar <unk>.
Now I'll turn the call over to collect about Chief Financial Officer, Jack I'm, a lot no we wouldn't even while our financial team. All these days Jacmel. Please take the call.
Thank God for.
For the third quarter that ending September 30, 20, Britney we reported total revenue of 38.3 million, beating the guidance. This goes in the previous quarter.
Q3 revenue was up 23.
Our sense from Q2, which demonstrate this train felt the recovery and will and was also up 8.3% year over year.
The main driver of revenue growth this quarter, well then I didn't go far waterproof, maybe got interpret I U.S. customer, which to me that our geographic a me me she toward the U.S. due to eat the U.S. and was 20.8% Oh far what revenues up from.
6% in the work that all went in a deep.
In the quarter, we process 6.3 billion messages. He line that we that the yeah that period, but up nicely.
19% on a sequential basis.
We connected the 1.1 billion voice call it in the quarter up 22% year over year ended up more then I'm going to 20% from Q2.
Gross margin was 19.6% in the first quarter Lucky brand and significant improvement compared to the 14% Oh Q2 and broadly in line.
The 19.8%, but nothing worked at all 20, maybe.
The main driver it's wherever they open New York economies, which led to do an increasing the higher margin premium Saturdays and board scores well.
Operating expenses were.
12.1 million in Q3, 20, Britney compare with that 5.6 million in Q2, when do they need.
You don't but it didn't fancy include 5.2 million stock based compensation nine on the toggle notes transaction, one I'll call. It 700000 pertinent to the public company coupons that we did not babies you treat drinking they do.
Excluding these costs operating expenses would have increased by 1.1 million compared with the adjusted operating expense you all 4.2 million just walked through 2018.
Mainly driven by significant investment made to <unk> human capital.
Losses from Operation was 4.6 million what are the kind of worked at all to any trend and you do 5.2 million of stock based compensation nine on the thousands of them injection one I'll call. It 700000 of public company cost as I just mentioned.
These compared to read that you come from operational 1.4 million in the third quarter of 20.
Net loss was 5.3 million or 19 cents per share for the third quarter of blending trend.
75% improvement when compared to Q2 net loss of 8.1 million.
This quarter other than that lawsuit can be prepared food and that the E. Comm all eight down to the wire.
Well I'd thousands.
Or eight cents per share for the third quarter of 2018, when the company was good bye.
I'll definitely be compatible with it do you see other was 2.8 million in the third quarter, though Wendy and include approximately 700000 of quote unquote of it as a public company that the word of mouth, but of course that took work have been de <unk>.
We don't adjusting for those costs go just maybe would that be in that 2.2 million and couldn't.
Fair to 3.5 million, we took worked out when do they do.
The decline in adjusted today that it would be pretty easy investment the edeniq needed to take advantage of the growth opportunity you plump of glass.
Cash used in operating activities was 9.6 million third quarter Twentytwenty, mainly due to the working capital changes.
In parallel with that cash provided of 2.6 million in the third quarter last year.
Cash and cash equivalents aware.
It would be 1.5 million, though is the September 30 23.
Okay should position he's off to be mainly through the K show 24 9 million did.
The remaining obligation under the quarter, where should it go chase agreement and compared with 77 million in cash cash equivalent and a good gauge.
December 10th before then be 90.
Now I'd like to expand our work to regarding our financial outlook.
We are raising our work on all the revenue guidance.
In the range of Andre 44.62 under them 45.6 million or 12% at the midpoint of the range.
For Q4 total revenue is expected to be the Ranger, all 41.5 to 42.5 million absent a fund that Asian ways, <unk> called <unk> and shutdowns.
Thank you for the time to join the call that and now we are happy to see that your question.
Thank you well now be conducting a question and answer session if.
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One moment, please while we poll for questions.
Thank you.
First question comes from the line of Mike Latimore with Northland Capital. Please proceed with your question.
Great. Thank you good morning, congratulations great rebounded this quarter.
Yes, sorry, or exactly what have you looked like a fourth quarter you know you've given solid sequential growth for the fourth quarter, what would what would be some of the main drivers that you're looking at a three that number in the fourth quarter.
Thank you Mike music value.
The driver of growth.
<unk>.
In general we are experiencing increasing volume in all the segments.
And we also see the increase in our modeling them see products before I guess margie like.
Nice sort of sounds like if this were doing pretty much.
Oh, we actually I'm very significant decrease in volume in India.
And Oh, so that would be the initial phase of launches.
That's when starting in Q4, and we proceed all that somebody's going to want Jakone once you want to add anything.
No Oh.
So the.
The Q3 number shows the high increases and the recovery of the economy itself that they look down.
The spring so.
Also the premium service you need study is continually increasing volumes and revenues.
Yes.
Great.
I guess you know you talked about I think 120% increase in voice volumes I believe in the third quarter.
I guess, if that continues to grow in the fourth quarter.
Further help gross margin.
Yes, yes of course, yes, well.
Oh go ahead, Jack or excuse me no [laughter] the answer is yes.
Okay [laughter].
And then I guess just last you know obviously, there's been a lot of headlines about just it's actually more restrictions in <unk> and Europe, and Italy, How do you think about that as it relates to your kind of volumes in Italy or in the fourth quarter.
[noise], Oh, well they never fiction that the government top would be placed in general very selective they are trying to contain the stride all viral we'll see the results, whereas the number of Star Wars.
So I've been moment elite study for instance, you do think Italy, we have only three region South of 21 reason, the so called Red Zone.
My expectation our expectation is that the government will keep on doing it or did you see it on the fusions knocked to squeeze two.
Smart should the societies EMEA economies, because many simply Andy.
No a developed country can afford.
Uh huh.
Another economic downturn like the one that we experienced it in.
Your strength said that said that the pandemic. It's it's strange on him so nobody exactly knows what's going on but so far so good I would say if I look at the numbers you know October and the first phase of members.
Okay perfect. Thanks.
Thanks very much.
Thank you let me say you are the only one thing that medical so in general what we experience you've now traction in the acceleration of the digital transformation multiple customers multiple industry. One thing that is very interesting is that the analogy itself got now say that that by 2020.
90% of the company's of enterprises will be connected.
Let's see bust.
That's the expectation at the moment at the moment the only 20%.
And so I come back so let me say that we feel very much meaningful growth.
Fall communication platform as a service company that we keep on evolving on product technology services, but the be the strong man. He did is betting Paul.
The next question comes from the line of Tim Horan with Oppenheimer. Please proceed with your question.
Thanks, guys can you give a little bit more color on campaign registry you know.
Maybe I'll just.
How does the carriers like the quality of what's going on and I kind of monetize it in and when when they werent really ramp up thanks a lot.
Oh, Thank you being high this is Daniel so comparing registry, it's a it's a very complex. They call made the also more complicated by the by the Krona Bios itself.
We have them or put under contract campaign Register yet under contract with two major tier one mobile network operators in the U.S. and disgusting were thought there's not only in the U.S. Mccall seen either.
Geographically the Americas.
And ER and ER and this is good.
I do not expect a significant revenues coming in at 21 did you never use a few on the thousands of dollars Max.
Maximum.
Because they are like a testing and validation off the overall process.
She is a complex process because go through.
The operators our selves the overhead once again the company service providers and enterprises. So it's not something that you can really turned around overnight, but its proceeding well and it's also all very promising.
Right.
[noise] and where are you with us based customers and I I guess, maybe a little bit more color on what really drove US you know the U.S. and all you know where are we in that growth process. I guess can this growth continue in the U.S.
[noise]. However, often do S.U.S. is mainly explained by very very large U.S. account.
Which are driving traffic to our multiple destinations worldwide and we basically weve delivered these traffic to the geography is what you are.
Mhm or what.
Penetrated let me see where we are the best Wilfred.
So what's happening is that most of the big vision.
Companies that you can think off the top 10 players. They are basically be all about land, yes, which the lever its own cost them authentication services worldwide not only on the U.S. domestic market. I mean, we are one of the profile of thought and therefore, the eco Michel Khalaf. So these are displaying the highest.
Okay off the girl Yeah. The thing that it's important to let me say.
I like is that the collabra, it's almost one m. out that it's a public company and this is validating.
Or even the vendor rating kalpana is that.
Trust Trust Warfield Bognor multiple fortune 500 companies in the U.S. and do this obviously, helping in penetrating the U.S. market, what we keep telling what we typically work with badlands accounts at the moment.
[laughter] and those very very large accounts that are ramping up you know where are you in the process do you think you have like.
10% of the potential traffic you can get you know, 50% you just any kind of rough idea, where we are in that enough adoption process.
Oh, no we do not make any assessment on the market share that we can win in the U.S. domestic market and the momentum we have a niche player which is more key Sally <unk> selectively with very large accounts willing to believe a prosecutor <unk> so at the moment.
We do not compete against the U.S. Kannan done.
She still either working in India.
In the United States domestic enterprise market.
I count.
Make any disclosure.
Yes.
You know I I understand the U.S., but we're you know I guess, probably the question is where are you in the process of delivering their international traffic or are you still in the early innings or.
How do you kind of ramped up that you're carrying a lot of their trial.
No. Yes, we are still very very rapidly at the very beginning of the process and really the huge potential if you'll see the overall markets has been estimated body was market family even range between 60 and $90 billion.
And ER and that you know we out he between 140 I'm on the 50 and ER.
Barry Barry Barry.
Leading market share I golf company, Great golf equipment business.
Thank you.
Thank you and good thing.
The next question comes from the line of George Sutton of Craig Hallum. Please proceed with your question.
Thank you Dart I Wonder if you first could talk outside of the you you obviously talked about verify you talked about camping registry wondered if you could talk about any other developing use cases that you're particularly excited about and seeing traction with.
[noise] well there are several things that we are very very excited being built which is providing more traction on weekends off revenue will grow all see it buys we.
We see voice services, becoming kind of the flavor of the year I'd say he went to 20.
Another thing that we are very excited about this deal we have been working in the lab. Some video solution using web site at <unk>.
I appreciate.
That's a profitable and this is a.
Potentially up.
You can find application in multiple use cases, both in banking financial services process is like a kid why see where are you from.
You can have the bee deal volume <unk> validation on the user to the Asian insurance. When you can have the claim process settling directly on on the online real time out of the mom and pop. They actually then people can have foreseen.
For simple situations, we chop ranking the highest number of goodness a five second month of the claim.
And did you say exciting and those so we are pretty much a bullish about the me a chance to see the omni channel blossom lots up a business is going fairly well, it's ramping up in volume and revenues and now we have the school partnership which is good because [noise].
Google is that I'm bailing, a number of products and services, which.
<unk> aimed at young our views is that still account for more than one off of the smartphone users worldwide.
ER that thought of 15 anybody well, even the trustees cheapest place a play off color escalator severances like verify that's the mathematics I'd calls are very very well sitting with our.
Product portfolio.
[noise] Super we are getting particularly good feedback a channel check wise on your flow builder I wondered if you could just walk through what that's doing for you.
In terms of opportunities.
Well, albeit a it's an interesting feature off galata cloud platform, because it's a resi deciding to use us not the ideal or I said to you guys that that we plan to application using <unk>. So it's like a self service for a long time that anyone can testing and trials because.
If you go on the website.
Www Dot com and you can open an account kind of like a free currently to test it and the idea is that any body with no technical skills would be available, we'll be able to design a fabulous using omni channel.
Oh, that's a mass Ah walked up a voice for the beginning but we lot more chime in going forward and can design a fabulous.
Destined to try on the south they are starting to see some box and then deployed and this is completely because it's not the dressing developed worse or.
Oh I see department the enterprises is a blessing directory.
Let me say the business manager who are designing the processor.
Also since like marketing or a customer relationship management just to give you. An example, without any involvement though oh yeah.
[noise] Gotcha again, we hear good things there. Thank you very much.
Most of what comes out.
Thank you.
Next question is from the line of Allen Klee with National Securities. Please proceed with your question.
Yes, Hello could could you give us a little commentary on how you're thinking about India and potential growth prospects there.
Hello, Alan Nice talking yeah sure.
We didn't actually you gave the steel <unk> General Asia Pacific and Yeah within Asia Pacific is one off and that one of the highest growth.
Not to get into all the kinds of population Asia Pacific accounted for 60% of the worldwide population, but what is amazing in India and Indonesia.
People Vietnam, Philippines is is that growth off the real economy, which is very very strong much stronger than the north western countries. So in India. The growth has been over the last few years long seek some off the Stan.
When you have a county off 1 billion my preamble meet any not beat them, where at least one off of the population I have ever let me say 11.
Off life side, and ER off or let me say, a spending capex capabilities in line with the European one.
Did its best say, it's about a huge markets. So we will keep on investing we are hiring very much in India. We keep on investing we will keep on having got worse.
I'd like but and hub in Bangalore.
We have commercial offices these seven locations in India.
And we keep on seeing a significant role in the revenues in fact in fact that we have a point that Mr. He can drain as chief revenue officer worldwide. While he was at in the business you mean there.
And so you will manage from Iran.
Operation worldwide, including the Americas, and he will keep on fueling the growth.
Well.
Thank you and then good.
Can you give us an idea of what the diluted share count would be for next quarter.
Sure.
Ross this with your numbers and.
Yes, so at the end of Q3 the share count was about 28 medium for five.
As of now the share of then you got 29.3, you today [laughter] Convention Archer conventional Sunborn C shares up and then how did you give me also sober and do we aspect to it where that 30.2 million outstanding shares by the end of the year.
Thank you and then due to working.
Working capital changes during the quarter could you could you it looks like there was the accounts receivable and accounts payables could you talk about what was behind that and you do that it's a timing issue or or how do we think about that.
Yeah Yeah.
You didn't change your very much on they are counted as you most of that that we are in line or better most dollars and this is a event of the year, but oh, we clean up today.
Our accounts payable so there.
There is a change in networking got to go above $10 million.
That we would like to.
Clean up our balance sheet that as much as possible. So we accelerate that work are you man.
[noise] policy.
As we promised cost of the capital increase so we pay the they ship, which is agreements we pay the notes it indoors. So we'd be there a certain amount of buck on Paypal.
Thank you and then my last question is related to Capex lab.
Well, you're going after <unk> financial customers in the U.S. how is your progress there going.
[noise] well Caleb is working closely with the very large financial services. Brenda is now focusing more on Latin America and carry them rather than the U.S. domestic even though all being based in the U.S. the theme, partially San Francisco, especially in New York, we have.
Multiple interaction with potential large financial.
76 customers in the U.S., especially swear off credit card they become.
The big banks.
It's an opinion he has explained multiple times during the calls with analysts.
It's a typical like account development the PBT on very large accounts you do not really get flew overnight. It takes time it build the relationship and those relationship in general a lot for whom we people. Yes. If you take the average off the bank he cost money Kelly and I have been with Canaccord.
Some of them for more than 15 years.
Maybe to win Wildebeest Guestimate takes 12 months also because in general you have to substitute another lender.
That yeah, the vendor Isaac on thought these established so before you get them.
He didn't make a pod alone you perform better it takes time, but we are we keep on investing we also I think a few mccaleb theme.
Yes, Sean later this month and the we think that is a good move because we think that the very nature of color and I used to be the trust us to keep us in.
In the banking and financial services, we do shouldn't need trust that those suicide bombing us with a very strong knowledge and kept a BDC and expected using the medical.
Okay. Thank you so much.
Thank you. Thank you me. Thank you. This will conclude today's question and answer session I will now hand, the floor back to diarrhea tire show for closing remarks.
Thank you operator, thank you all for joining us for today's call.
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