Q2 2021 Kaleyra Inc Earnings Call

[music].

Greetings and welcome to the Calera incorporated second quarter 2021 earnings conference call at.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please.

Please note this conference is being recorded.

We'll now turn the conference over to your host Marc Griffin. Thank you you may begin.

Thank you good morning, and welcome to Polaris second quarter fiscal 2021 conference call filler or at least unaudited results for second quarter ended June 30th 2021earlier 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 day Choleri dotcom.

Joining us for today's call from management is the founder and Chief Executive Officer, Gary Open edge at all and the company's Chief Financial Officer Yaacov Seattle.

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 on the forward looking statements on the risks uncertainties and other factors that could cause actual results to differ materially from those forward looking statements.

<unk> cautions investors not to place undue reliance on any forward looking statements. The company does not undertake and 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 todays press release and on the call today, we will refer to adjusted gross profit margin.

That EBITDA and adjusted earnings per share. These metrics are not determined in accordance with generally accepted accounting principles and therefore are susceptible to varying calculations.

Definition calculation on a reconciliation to the financial statements of these non-GAAP measures can be found in the tables included in our press release.

We believe these non-GAAP measures of Claris financial results provide useful information regarding certain financial and business trends and results of operations with that I'd like to turn the call over to this area. Please go ahead.

Thank you Mark and thank you to everyone joining us on the call today.

Hello, guys I reported another strong quarter with Q2 exceeding our revenue expectations, along with significant improvement in our gross margin our financial improvement validate both our strategy and execution as we continue on our journey to becoming a global sleep on spot.

The second quarter was transformational for <unk> as we completed the landmark acquisition of language as well maybe I can be sold at the closing of the second quarter acquiring Bundy Air and Sea vs acquisition do you have like somebody said that weren't growth expanded our geographic reach and brought them into our product portfolio.

Well the second quarter, our revenues were 54, maybe on dollars and equally use by 73% year over year.

More impressive revenue was 43 point.

So, let's say excluding gauge on organic increase of 40% year on linear.

The value proposition on putting in the mall based economy is a comedy.

Worldwide.

From there and it continues to pose challenges worldwide.

With positive from.

On the vaccination process, but also decrease the number on hot spots as the desktop audience of COVID-19, rather just south of the <unk> community.

He has continued to execute very well to be sent out a challenging giving you.

The main driver from the cold and wet on the call me from a quality with the reopening of the economy in Italy, I'm not picking on what I call them their Scott here.

Well based positive activity within our U S vs enterprise calcium and you've got from wasn't me back off the wall.

Pleased to see digital payments and construction.

Throw in nitrogen.

Aside from 1 year older.

Yes.

On the book calls.

The decrease year over year, and we're off to 1 on to the 95 per cent from debt free.

We believe the 8.5 billion messages and connected 144 billion box goes on behalf of Kelly.

Now I'd like to touch on some of our key initiatives in the quarter.

Got it.

In the second quarter on quantity quantity, we officially launched the campaign.

I'm very pleased with the progress to date.

As a quick reminder, the campaign please.

I didn't provide the application to person.

Thanks, and a 10 digit long code messaging.

7.

The container registry collects the on all the brands and some things.

And the work well they use cases.

Segment. In addition, I cover your Monday inflammation.

Core business message, because I don't see share plan by you.

You said before by the communicate with end users.

The graduate please see me last like yellow pages from business messaging sentences, which enables the identification to ecosystem, but the system can.

And do we send the messages and what they can to sending all the tissue for people that study well lithium production of spam and messaging.

Messaging to consumers.

Second quarter kind of thing.

I mean you have.

1000 going from the U S and other.

What's preventing estimated last 98 per cent of the U S value of market.

Moreover, I'm going to go from things that we spoke with.

Presenting on this debate the adult plus 95 per cent of existing 10 digit long code.

I'll speak volumes signed up end up participating interest lies just pick.

After spending time to the block the registry and starting on yes, we are pleased flemming on that.

He has been executing sadnesses, Jamie breaking bad and there's significant momentum.

We are acting on these trees from our initial revenue estimates.

We are competing with what we've asked them to convey registry and Debbie.

Didn't define new use cases, and it wasn't just caveat.

Yeah.

Ken things service provider channel.

These new IP eyes, and integrating them into their programs. These additional services that they thought that from now it should be generally available.

Sure.

We are very pleased with all the things that you would see is developing and look forward to share any more progress.

Oh geez.

On the quarter was the acquisition.

We could not be more income.

Hum.

It was in the entirety the collateral.

Okay layered on many days together are uniting 2 world class assets.

Communication companies to query adult 5 on those People's Blossom.

You bet, Hi, then balance throughout the portfolio and the geographical presentation as.

As we continually look to expand our product portfolio and build on our acquisition of <unk>, We agreed to acquire a bunch here and they're highly complementary audio video API and things, but yourself. It's cloud based out you'll be communications. This is the financial institution with day companies do you feel it is in the.

Insurance human resources and digital organizations.

Organizations, we look forward to integrating this technology.

Meanwhile, our platform and expanding our service offering to our customers.

Finally on was recognized as 1 of the top chart what solution provider.

Okay.

In D C O magazine.

2021edition.

I'm very proud to have our solution recognized by CIO applications and enterprise Technology magazine recognized as the go to resource for senior Atlanta on technology bias and decision makers to learn about products services technologies and technology trends.

Most of that would be kind of a critical in delivering a 24 by 7 support.

He has been values free streamline and optimize the customer experience. They offer every stage in the process.

The global chocolate market is expected to reach 10.5 billion by 'twenty.

Why do people want to see with a compound annual growth rate of 23.5 per cent in the 'twenty 2 'twenty 'twenty to 'twenty 6 periods.

In summary, we believe the calendar day as well positioning execute on that.

Our initiatives.

With our broad product portfolio and global reach low.

Right.

Let me now turn the call over to play it on as Chief Financial Officer, Jack from other law you.

When did you all are financially more these days.

Please go ahead.

Thanks for that for the second quarter ended June 30, 2021 and we reported.

A 54 million on NK cell <unk> 73 per song Yeah.

Engage the consumer with $10.2 million revenue.

Moving engagement was $43.8 million.

On organic increase of 40% year over year, demonstrating the value proposition on our offering and the modest economic.

Recovery worldwide organic net revenue in the quarter was I had oh first attention due to the significant increase in volume compared to the same being adult criteria.

The main drivers in the quarter 1 day.

The COVID-19 recovery with it on the opening of the economy in Italy.

And I speak in our ecommerce customers broadly positive activity without on what our U S. B.

<unk> customer.

And new customers during the rest of the war.

We continue to geographically diversify our revenue base.

I mean, 75%, India 25 per cent and U S up 20% on the rest of the world about 11%.

The acquisition also engage a strain on our position on U S and South America, which now represents 5% of Nick Coulter, We profit $8.5 billion of billable messages up 62% from the prior year on year in it and we connect to 1.4 billion voice goes on in the quarter.

On the other 95% you had already.

Gross profit per second quarter of 2021 increase on the 40% to $10.5 million from $4.4 million in debt.

You Gotta go peanuts.

The margin was 19% in the second quarter declining 21 up more than 5 per cent from 14% with a part in the second quarter of 2020 adjusted gross profit the second quarter on 2021 increase or I'm in a 47% to 11.1 medium from 4.5 million.

In the year ago period.

Gross margin was 21% in the second quarter of 2021 up more than 6 per cent from 1 day force.

<unk> per cent that we report in the second quarter of 'twenty 'twenty.

The main driver is often day adjusted gross margin moving keys or whether they are organic as fashion all of them.

Gross profit stability for calendar on legacy business, representing 81 per cent of the year over year increase and then advised problems with my view on acquisition of engage.

Operating expenses were $21.3 million in Q2, 2021 and compare it with debt 11.9 million in Q2, 'twenty 'twenty mainly.

Mainly driven by the recent acquisition of engage in investment sales and marketing and other citizen developer bought it.

Loss from operation was $10.8 million from the second quarter on 2021 and 2.6 million on stock based compensation on 4.5 million of transaction on 1 off costs.

This compared with the loss from operations of 7.5 million in the second quarter totaled 22 at Mendoza was $4.5 million or 13 cents per share for the second quarter of 2021 compared to the net loss of 8.1 million or 79 cents.

Sure. That's 1 of the second quarter on still any 20 adjusted net income was <unk> 5.

<unk> 5 million or 1 cent per share basic or diluted for the second quarter total 2021 compared to an adjusted net sales.

1.4 million or 7 cents per share.

Core total.

On 'twenty.

Adjusted EBITDA was 2.2, mainly on the in the second quarter of 2020, 1 compared to a loss of 300000 in the second quarter of 'twenty 'twenty.

The improvement in the other.

Adjusted EBITDA, you got to move to organic growth in Colorado Springs.

And 2 other effect to the business.

Combination with engage.

Atlanta continues to strongly investing in capital and in particular I'm not in the balance and non seem to hold the cash.

On grow you got on really yet to train a day omni channel platform and continuous investment.

In the global sales operation.

Cash you use it you know.

Operating net activity what was 4.9 million in Q2, 2021 mainly due to the working capital changes and transaction costs, which were cash.

For more than 50 million on in the quarter compared with net cash use of $1.6 million in the CMP.

Also in the prior year.

We have a very strong balance sheet, we debt cash cash equivalent net short on that investment, though I'm Gonna 24.7 million.

As of June 30, 2021cash position include net proceed from the pipe and issuance of convertible notes off the payment to acquire and engage.

Now I'd like to respond our total regarding our financial outlook.

Or what's going on on net.

Revenue guidelines from the range of 258 to 2 on 62 million for Q3 total revenue was suspected to be no range, Oh $79.5 to 85 mid day.

Thank you for taking the time to join us on our call today and when that debt, we would be happy to take your aircrafts.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad.

From making total indicate your line is from our question queue. You May press star 2 if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Our first question comes from Tim Horan with Oppenheimer and company. Please proceed with your question.

Thanks, guys and good quarter and I have a few questions, but feel free to cut me off.

First on on the can campaign registry.

You know when will carriers start blocking or really implemented on campaign registry, where it's the only way to do that.

Blast text messages, you know too yeah for people to do plastics niches as momentum with that kind of kick in in full force.

Hello, This is value.

This is a process, which is Oh boy now operators are mandating the campaign service provider. The just that the campaign also Brian and they stop sanctioning if they don't for these reasons all of the major campaigns service provider in the U S and and stride.

The campaign, so at least from either and we are now a stop.

You can kind of thing.

Sydney.

I believe that any old rates are rising on the policy.

In terms of sanctioning, but in general as a general rule. The idea is that the price of termination will vary significantly if you'd not with just because the campaign. So there's no convenience for the brand.

To do on logistics companies.

Got it so by year end do you think it'll be pretty well implemented I mean, it depends on each carrier, but our most carriers are or will be it will it happen before that I mean could it happen at the end of this quarter, where the carriers really implement this product.

Well, we are in the ramp up period, which is definitely on growing on the cue free.

And I assume it can be completed by the end of the year. So it will be full throttle.

With the registration process.

I believe by the end of things.

Yes.

Great and then secondly could you maybe quantify somewhat the what you think the impact to engage was from COVID-19 or to.

The company like you know what what could revenues have been if it wasn't per Covid I know, it's a hard hard question, but you know.

I guess some point as we exit Covid do you think engage can resume growth.

Ah well to answer to this question I must segment by geography, because the impact of coffee these batteries significantly on the geography.

John.

Definitely second quarter that has been impacting some geographies, including.

Brazil.

On the U S have been absolutely be clean.

Most of the business off engage is coming from the United States, but also from Brazil, and also from India, India again in the second quarter with the desktop while you're on pace.

In terms of volume Nevertheless, the volume as a whole on a consolidated basis went up significantly with some raw source of revenues organic without the engage on 40% year over year Q2 on Q2, and 74% 73 per cent.

Moving 1 months often engage so let me say Ah we keep on monitoring on a on a on a weekly basis. The performances of blossom into volume, but you can say that we use are uneven situation in the world. He's been really starting from scratch. It go on.

Segmentation.

I guess said another way. It has you know is engaged.

Engage started to resume growth again debt here in the third quarter or is COVID-19 still holding them back.

No no.

Pages on our company, well and volume on going on.

We only consolidated in the second quarter from June so he can only come from boutique 4 standpoint.

On to minions inside a member world, Jack move away from which I'm wrong.

Which is a definitely a.

Improving compared to the previous months.

Great and then lastly can you just give us a sense of the synergies I'm you know what you kind of expect now from the 2 companies with whom you know I guess more so of expense synergies in and then you know roughly.

You know kind of some rough ideas, where EBITDA margins can kind of get to by the end of the year. I know you have a lot of levers to pull on that.

Thanks.

Well, let's see let me say that we do not provide any guidance at least till now we haven't provided any guidance from your EBITDA.

So MTV tied to EBITDA.

Any forward looking guide us a multimedia I can tell you that in the second quarter EBITDA has been way better than what.

We had bad debt.

You do truly this isn't resolved on the continuous processing response from the gross margin and being more peaky selecting the browser.

Mark.

Our cash to use.

Basically we are working towards on expansion most of the gross margin profile, which has definitely been a platform company.

The impact from the Mark on line.

What was the other question Tim.

I was just trying to get a sense of the synergies on maybe you know, particularly the kind of seen it just yet.

Yes, it was.

Synergies with engage on more on the top line rather than the cost.

On the batch Walt is the upsell.

Now is that most of the very very large accounts that we serve on both from the 2 companies on Kelly engage that are taking advantage of the larger footprints on the group now.

On activating new drastic was new geographies.

There are many C bus, which I'm very glad about like we are on the wall and ER visits that locking very significant opportunities with the top 10 accounts, which on now.

Working together and follow on business development teams to expand.

Revenues in new trajectories.

Debt both ways on on G&A.

Good bye.

Kelly and I'm by rich.

And then just lastly, I know engage had lower cost of termination here in the United States and and you had lower in some other countries on the expense side. So are you able to start implementing expense improvements to improve the gross margin here.

Yes, Indeed, we are working on day, if needed as the process is not something that Q.

From an island on the ninth because it requires to sit down with the caveat.

Sure.

Volume, but definitely the addition of the volume of engage to the volume of Kelly and I is that providing battery batteries significant debt.

We should see in the sourcing of 70 million shouldn't dwell on them.

Most people Jonathan I'd give you on examples in India, we were running roughly 40 Neely on the $50 million in revenues, we're now, adding a significant amount of volume coming from engage that involved as neat.

Cherry picking the best are the least possible termination cost.

Thank you I think on somebody I didn't let it didn't.

Basically we have integrated day 1.

Sourcing so sourcing Islam is no longer buy my company is Kelly I got on group, which is.

Managing the soon we're seeing on the operation globally.

Congratulations thanks.

Thank you Tim.

Thank you. Our next question comes from Mike Latimore with Northland Capital markets. Please proceed with your question.

Great Yeah, good morning, and congratulations on the on the quarter.

I guess stereo.

You've had engaged in the fold now for a couple of months can you talk a little bit about what youre hearing from their customers about the acquisition.

Do they like the opportunities they see here any kind of cross sell opportunities or expansion with engaged customers you're seeing just a little more color on that would be great.

Hi, Mike Good to talk to you well the first thing, let me say I a personal 1 to 1 call with all the top accounts off of engage and all of them were very very positive about the integration on thin gauge on.

Because they see the benefits of having a larger.

Our supplier hardware, which is a also at least our company.

When you talk to the fortune 5 on the companies they prefer they tend to prefer to work together with other companies.

I can get it used to be before getting into the colleague on a go.

Also as.

As an outcome also on the 1 to 1 close to the day and the.

The business development team and.

Go to market team on working together with the major on engage accounts to expand the business towards the new geographies that Gilead I use providing end users on messaging, but it's also very much focusing on the new channel for new technologies that we provide the best engage was not the April.

Providing.

Basically messaging provider.

Only doing some cash, but the largest part of the revenues and the traffic was less than that now we are working together on voice. We are working to get in on the deal also thanks to the acquisition that we have completed with veneer, which was afraid walking.

Over the last year together on department with KLA on so we see multiple opportunities to expand our.

On the channel play with young age customers and easiest to talk with them on.

Alright.

And then you talked a little bit about.

Uh huh.

Traffic dynamics on Italy, India, Brazil on the second quarter can you give any color on how there.

Playing out so far in the third quarter have there been any kind of changes in those regions is kind of in the third quarter here in terms of traffic volume.

Well the trend the trend is positive the trend that we already observed in multiple geographies, where they called the reset.

From there from there.

I'll break off.

Desktop audience in particular.

<unk> began in the second quarter is income and it's continuing in the third quarter.

Is pretty much depending on the pace of the vaccination.

Where you have countries like Italy for instance, where the vaccination races, possibly the third day in the world.

In terms of the Prime Minister.

And.

The very strong focus on accelerating and activation frog in them.

And then the volume on the traffic in general on the functioning of the society and the economy is.

It's that it's taking off again I believe that Italy now on GDP is growing over 5%, which is absolutely unexpected on the.

5 months ago.

Hum.

Okay great.

Just last 1 on the campaign registry, you said, you're seeing significant momentum there and I think he made a comment around on revenue, but I wasn't sure.

Are you, giving any color on the kind of revenue from the campaign registry.

Well in the second quarter, we didn't recognize.

Much of the revenue is because basically we ended up being significant contracts.

Roughly at the second half of June So, we thought that being our revenue recognition in the first quarter.

I would say that the.

In general.

With double.

The guidance on the campaign right just to begin with.

Yeah.

Okay.

Okay.

Okay great.

Most importantly, Mike what's the most important Mike is the gross margin profile on the campaign budgets, which is over 80%.

Alright.

On that topic any any general guidance for gross margin on the second half of the year.

Not really we haven't given any guidance about gross mountain Ziggy.

Exactly again, correct me, if I'm wrong yeah.

We we can say that we aspire to do to improve on water gross margin in the second half.

Or because.

Because the seasonality of the.

Our legacy business.

And the second half is much better than the first and the impact of engage win in Q3, and Q4 will be fully consolidated.

Okay very good thank you.

Thank you Mike.

Our next question comes from George Sutton with Craig Hallum. Please proceed with your question.

Thank you guys. So I wondered if you could provide a bigger picture expectation for campaign registry in the U S. In other words, how big could this be once it's you.

Definitional, even more mature.

Yeah.

This is a very good question on high jobs How're, you doing Oh, well the campaign registry is definitely a very promising because of the very wide adoption of the system. This is a system in Asia. So it's absolutely free competitive, but I would say your debt.

Over 95 per cent of the campaign service provider and over 98 per cent of the Mumbai caveat.

Wes.

Endorsing and adopt them to convey everybody says Oh my gosh it could be in the longer term it still can be a let me say.

On the line because he thought he had on me and he's very difficult, but I think that is gonna be like centered on minions.

Several.

Gotcha, Okay. Thank you and as we look at your band your acquisition I understand it's a small acquisition, but it reminds me a lot of the Tokbox acquisition by vantage.

Handful of years ago, which really I think became a defining strength for that brand.

Given their focus on high value Apis is is there any sense that badger could represent a similar kind of opportunity for you.

Absolutely, yes, but a year, it's a very very nice.

Stripped off programmable IP is an SDK to embed the deal using web RPC technology to the application of the customers and it's the kind of our flagship channel for Kellogg, Iran.

The market share acquisition is not the revenue acquisition, it's a product and technology acquisition, which was very much keep thinking into our database silverdome architecture. So basically it's already embedded and integrate them into black book and and definitely we'll keep on.

On investing money.

Spanned the capability is off by a year across the board in the war because it's been day or regionally was the European operation with Kathy was on the New York, but now we are already working with young age.

The last day.

With the team in India to expand the BDO capabilities, which is let me say kind of a flavor of the month because of the pandemic everybody wants to go.

Gotcha, Okay, and lastly from me when we look at M gauge you took it over after a little bit more of a delay than you anticipated and I think when you took it over it had started to see some slowdown and I just wanted to be clear where you feel it is today under your relatives.

The short leadership.

Oh Wow.

Let me say.

As a total.

As I told you before and as I told the market would be small.

The acquisition also engage a 1.2 book.

Yes.

Compliance process with their cash year to approve us between February and June So basically the company suffered a little bit the lack of snow.

Usability of management, because we couldn't manage.

And the seller was not really on top of day during those months as soon as we integrate with engaging in the month of June we brought together the management team and company and 1 single Battle. We worked together on the integration problem and this is also a multi day.

And also the customers that we're a little bit on easy with the uncertainty of.

The acquisition have been absolutely secured.

So let me say the outlook for the business the language in the second lots is absolutely in line with our expectations.

I'm positive.

Wonderful great job on a tough environment guys.

Thank you very much Josh.

Thank you. Our final question comes from Allen Klee with Maxim Group. Please proceed with your question.

Yes. Good morning could you provide a little more information on how your markets are doing in India, and Brazil, and how you think about.

The timing.

On to get back to kind of a more pre DAC pre pandemic levels. Thank you.

Hi, Alan and who the players are going to do well.

If you want to know exactly when and how well we perform in terms of volume in those geographies.

Over the assets.

Access to the Doctor.

Again, as a general rule of thumb rule.

Say that work is making the distant assets is the speed and the pace of the bathroom tissue.

The vaccination program on the Floyd and reaching a 40.50 per cent of the population than the number of hospitalization and the number on that is getting down significantly in the economy.

Spending a gate so on.

At the end on the day the county, 3 debt is lagging a little bit behind now I think it's per view, but more for political reasons rather than for technical things in.

India has made a significant improvement.

Process, because they are British at the end of the day, so that process of anthem.

And they are I I don't have last eager, but they think that they are going over 2025 per cent.

Counting.

Yeah.

Jack on when do you want to have anything from this.

Yes E India I E the developing world.

End of June and the start in Q3.

And we see also starting on recover the oldest in Brazil. So I believe in the second half of the year, we will have a better a better number on from these 2 countries.

Okay. Thank you so much.

Thank you Alan.

Thank you ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Dario Cologuard on for closing remarks.

Yeah.

Thank you operator, and thank you all of you, ladies and gentlemen for joining our call today and Mickey you got enough for what may be moving person as soon as possible because.

It's important that we get together, we can stop working from yet.

Talking to you soon and stay with us right.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.