Q3 2021 Kaleyra Inc Earnings Call
Good afternoon, welcome to <unk> third quarter 2021 earnings conference call. After the market closed Clara released unaudited results for the third quarter ended September 32021.
The press release as well as a replay of today's call can be found on the company's Investor Relations website at Investor <unk> Dot color Dot com.
Please do the release for additional information on what will be discussed today.
Joining us today are Clarus, founder and Chief Executive Officer, Gary O Callow, Garo and Chief Financial Officer, Joe Coma Dallaglio. Following their remarks, we will open the call for 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 forward looking statements.
Hello 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 these statements to reflect new circumstances or unanticipated events that occur except as required by law.
Today's press release and on the call well refer to adjusted gross profit margin adjusted 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 a definition calculation and 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 a pillar of its financial results.
Useful information regarding certain financial and business trends and the results of operations.
Now I would like to turn the call over to Alero CEO stereo Calico Sir. Please proceed.
Welcome everyone and thank you for joining us today.
No.
Well our story I'll begin with a brief overview of our business.
As a communication platform as a service or C bus provider.
From a high level, we provide our partners with phenomenal channel suite of powerful communication.
As usual.
Bridges, the gap between businesses and their customers right.
Brands worldwide fulsome phase coverage gaps when you're trying to communicate with their customers, especially in industries that require circuity and must prioritize reliability such as financial institutions and that is good.
Our mission is to build lasting relationships between brands and medical customers across channels and to do so while providing service at that where clients can trust.
Today, our success in bridging the gap between businesses and their customers as they may bleed off to move closer to our long term vision of being the trusted Global festival either.
We have made substantial progress towards accomplishing this mission over the past few years.
Work over the last several quarters and the first quarter in particular has accelerated the bald mountain this.
And this quarter was the first community to our business.
The completed integration of our most recent acquisitions and engage and then deer.
Today, our new color in March one with the same vision, but with increased capabilities and influence across our global footprint in China last week.
Combined with the consistent execution in our existing operations. We now have a more diversified approach to grow that will enable us to compete in more markets with the greatest goes case, our chief Financial Officer, Jack will discuss our financial results shortly but before I hand over the call.
I'd like to recap a few recent highlights from our third quarter.
In our third quarter, we delivered $13 5 million billable messages and connected one 5 billion by schools, both represent records for all of our business.
This is an increase from our second quarter and one that better allows us to leverage the vantage at full scale.
Our main goal for our third quarter was to complete the integration of engage into our business as of today I'm pleased to report that we are now a single combined entity with consolidated management piece and cost structures, a key consideration and how about combining with engage was their existing messaging presence that day.
Absolutely, providing greater reach for our business not sure. The engage footprint is in the United States and they have a direct connection to all tier one carriers.
With this expansion will lead to American markets through I'm going to need infrastructure, our third quarter was closer to having around a third of our revenues from each of the Americas approximately 41% you were up approximately 27% and Asia approximately 26%.
Ciber will balance that makes gilead I want the most prominent things geographically diverse C bus companies in the world.
An additional point worth noting is that messaging termination cost, meaning the cost to deliver a tax base message desire at the endpoint.
Usually lower in the United States, so increasing our presence domestically U S presents an opportunity to improve our margin profile as well.
We thought what our margin profile in mind around the main goal of ours, both in the third quarter and moving forward.
There are a lot of our omnichannel savvy suffering.
Beyond providing the most robust suite of services to our partners new channels, such as video and voice at better margins than our traditional messaging channel due to additional costs associated with the messaging networks.
Quarter, most of my investments, including the acquisition of Mandir collateral Bill and collect our boys made significant progress since I allow you to buy the affirmation record volumes in both channels, we have already seen the impact of this progress on our margin profile and while we have work at.
Oh fast before our platform is truly omni is trying to like global scale advances in Colombia deal and bodies are indicators of our commitment to an omnichannel platform. The combination of a steadily growing cold messaging business, along with dealing with all the channels underlines both the robust opportunity available.
In our legacy business as well as the opportunity to grow our omnichannel offering as well.
Performance within existing operations combined with inorganic additions in the period, culminating in a third quarter off an exceptional record of year over year revenue growth of around 120% in the year over year gross profit growth of 161%.
While much of our growth came as a result of revenue recognition from acquisitions. We also saw an approximately 30% organic growth rate, though year over year. These results validate our original girl strategy is still viable within our traditional business unit.
As we look to close out the year, we believe we have a clear strategy to drive sustainable long term growth.
The strategy relies on three main pillars pillars number one we are focusing on expanding our geographical footprint as mentioned that collateral revenues come from global customer and we are working to both expand our footprint and maintaining our diverse revenue split among geographies.
The submission is driven by our view of the supermarket.
Which is a very fragmented and underpenetrated in many parts of the world.
We believe we are well positioned to expand our footprint to other geographies that would benefit from a support.
Number two we will continue to invest in our omni channel suite of services.
Our goal to meet our five minutes on whichever channels. They require cash connect with their customers as video and voice communications proliferate globally expanding into new communication screens.
He is an important area of.
Investments for our team.
And number three we remain committed to secure trusted service our business try as an industry that at the highest standards for security in their communications with their consumers banks financial institutions et cetera, all need to be able to track their interactions.
Consumers are handled with the.
Most security and consistency.
I believe there is something that in a way that no other industry player does.
While other players for vitamins volume, we know that our expertise in truck seat influences customer retention and that's with the right partners. This is not English we can access.
In support of our growth pillars strategic investment activity is an important part of our path forward as well.
Bus market. These was eight 7 billion this year.
Wharf older 54 billion in 'twenty to 'twenty six with a compound annual growth rate of 31, 48%, but the overall addressable market for KLA and I use much bigger when you consider also audio trends markets such as application to person messaging web RTC for me doing.
Communications voice Rcs and OTT messaging.
Our estimate is that in this market that are currently are maintaining players that own 10% or more of the market share. You said there are hundreds of smaller players competing at the lock 11 in each region.
As such and I at least fragmented industry wide spaces provide opportunity.
For organic expansion and for consolidation.
Is this the things to our M&A strategy, we are aware that our industry is consolidating at such a pace that they book will be managing organizations why we'd like to participate with our industry. We are sure that we can remain patient and committed to find the only device partners those that fit.
Our growth strategy.
Finally, we have a few non operational updates to share before I pass it over to Jack Morton in just a moment.
First we successfully at least in the from the New York Stock Exchange American to the New York Stock Exchange.
And anything to N Y N C. A premier worldwide market is a significant milestone being able to meet these more selective criteria is a testament of our ability to continually improve our selves.
Financially operationally incorporate a Gaba mouse and all of the key out as of our business. We appreciate this elevated equity listing and believe our announced investment profile with open more opportunities and generate more interest for.
The broader investment community.
Oh, So new September Helane I was recognized by Junipers shows an established leader in the global <unk> Paas market Juniper dessert is one of the leading independent analyst.
The mobile and digital Tech sector. So we received some recognition from such a respected source validates the work you're doing to build a more comprehensive platform of services.
You know the bedroom are also recognized.
At this time by government US market guide for communication platform as I said this as one of the 20th representative vendors of the seat bus market.
The growing number of industry accolades, we are receiving underscore a growing awareness socal area as a major player within the first month.
In summary, this quarter was one of tremendous growth and the re estimation of our deliberate growth strategy and now turn the call over to our Chief Financial Officer of Jacqueline will allow you to discuss our financial results for the quarter in greater meetings jacamar.
Thank you Dara you told me now to our financial results for the third quarter ended September 32021.
Our total revenue in third quarter increased 20% to 84 million from $38 three media in the comparable year ago period.
Increased 56% from 54 million in the previous quarter the growth during the quarter was driven by the completed integration of the engage in a bunch of businesses as well as strong 30% organic revenue growth across channels and a well balanced portfolio across.
Gross profit increased 61% totaled $19 6 million from seven 5 million in the comparable year ago period, and increased to 87% from $10 5 million in the previous quarter. The increase was driven by an increase in revenues for the <unk>.
And at that outpaced cost increases.
Gross margin from the third quarter of 2021.
Three the 223% compared to 20% for the third quarter of 'twenty than Crazy and girls monitoring was mainly due to the engagement by the integration and increased performance by Colorado, Colorado is one of them.
As by the campaign registry.
Our software as a service offering that has developed over the past quarters.
Net loss totaled $11 9 million on 29 cents per share based on $41 6 million weighted average shares outstanding comparison, the net loss of $5 3 million or 19 cents per share based on $28 3 million.
Weighted average shares outstanding in the comparable year ago period does that represent.
I'm going to 64% increase from $4 5 million in the previous quarter.
Using the net loss was mainly due to the amortization of acquired intangibles and the accrued interest expenses on our convertible notes.
Adjusted gross profit a non-GAAP measure of operating performance increased Andre and 74% to 21 million from $7 7 million in the comparable year ago period, an increase of 88% from $11 1 million in the previous quarter.
Adjusted gross margin for the third quarter.
Of the 2020, one it was 25% compared to 20% in the comparable year ago period.
Adjusted EBITDA, a non-GAAP measure of operating performance increased to 173% to 8 million nine 5% of revenue compared to two <unk>.
2 million, a five 6% of total revenue in the comparable year ago period anything 471% from $2 2 million in the previous quarter. The increase in adjusted EBITDA was primarily due to the effect of the business combinations, where they engage them, India and cost synergy between.
The two legacy businesses.
Adjusted net income a non-GAAP measure of operating performance increased three and.
6% to $3 6 million or nine cents per basic share.
Seven.
The share based on 41.6, and 52.4 million weighted average share of sending a scrip dividend.
Is an increase from.
891000.
Dollar or three cents per basic share or two cents per share based on 28 43 and.
$45 1 million weighted average shares outstanding should be different in their comfortably a go period.
At present.
618% increase from five on that.
$4000 in the previous quarter.
At the end of the third quarter cash cash equivalent into restricted cash and short term investments were.
On the 18th.
$8 5 million compared to 37.
Point 8 million at December 30 <unk>.
First the 2020.
It also considered the Bundy acquisition operating in July and they wanted to report a cheese all phone booths drinking water.
Of note during the quarter, we entered in a warranty reports chase agreement.
A group of.
Should I invest in Florida, I'm not going to get you. The amount of 1 million 684470 shares of our common stock the stock was in price $3.25 for underlying share an aggregate bullshit.
Surprise off 5 million, Florida.
74000.
525.
We believe the thinking there.
These steps to simplify all water coffee testosterone was so far the business long term financial and operational success.
Before I turn the call back over to David All I know.
Take a few minutes.
To provide our financial outlook for the remainder of the year.
As a reminder, at this time the collateral provides a quarterly and on a revenue guidance as we believe these metrics to be the key indicator affordable world for four months of all of our business.
Moving to our guidance as a reminder, for 2020 one our fiscal year ends on December 21st wanted to anymore.
As of today this call and we now expect revenue for the fourth quarter too.
To range it between 87 million and 89 million and therefore revenue for the full year to range between $264 7 million and $266 seven.
Seven medium represent an increase.
To our previous outlook overall, we remain confident.
In the financial aid, so far what our business as well as our ability to substantially grow for the foreseeable future.
This completes my financial summary, I'd now like to turn the call back over to David to additional insight.
Our operational progress during the quarter got it.
Thanks Jacqueline.
Looking back we believe this quarter will serve as a bellwether for the future direction of our business, our geographical footprint as materially expanded into a healthy global balance that we will look to maintain moving forward.
Our even more inroads into the new growth areas, including collateral video and voice along with promising results from the campaign registry has began to drive leverage into our operating model.
With the record in growing volumes, we are driving across our global customer base, we see a clear path to scale and increased profitability over the long term.
So far we have remained consistent in our ability to deliver on our promises and to execute against our growth strategy moving forward. We will look to build on our consistent track record and positive momentum as we advance along our journey to become the trusted partner in the rapidly expanding.
And the bulk being C bus market.
And with that we're ready to open the call for your questions. Operator, please provide the appropriate instructions.
Certainly and thank you very much.
If you would like to register a question. Please press the one followed by the four on your telephone you will hear a three ton impromptu acknowledged that request. If you could rewind 30, Chuck on scratch, one to go to them and.
And you would like to withdraw your registration. Please press the one followed by the three once again to register for a question. That's one four on your telephone keypad.
And our first question will come from George Sutton with Craig Hallum. Your line is open.
Hey, guys. This is James on for George Great results. So through our checks we learn that ring central is automatically enrolling brands using their SMS platform into campaign registry.
Sort of talk about how you have seen other CSP is approach enrollment and the traction you've seen so far and then if you were able to could you maybe quantify the campaign registry contribution this quarter.
Yes, these jacamar I.
Hi, George.
The.
The campaign registry is over performing and as we said the first the budgeting of the year and we are in.
In line with the message that you already said.
Last August.
We don't provide his plate, but let me say we are very happy with the performance. We're also could they complain registry.
We are still in the ramp up phase, though so but yes that's to come.
The best yet to come.
It's great to hear and then relative to video could you sort of talk about the level of interest from customers for video and maybe how cross selling within your existing customer base has progressed thus far.
Sure well recently is kind of the flavor of the month, because the pandemic brought a very.
Yeah.
The rents way video into the into the picture.
And we see a lot of traction and a lot of interest we are actively presenting to the largest account that we have and we are discussing with them. The possible use cases for this application since the transaction as soon as we will have news press release they sing.
If the customer will allow us to press release.
Shipments, but it's going well so far so Luke.
Got it.
Thanks for taking my questions.
Thank you very much.
Yes.
And our next question comes from Tim Horan with Oppenheimer. Your line is open.
Can you talk about how revenue progressed through the quarter.
Particularly for engage.
Did they exited the quarter at a much higher rate than what you entered the quarter because I know they have some pressures in the second quarter, just talking a little bit about the pace of rate changes.
In terms of.
This quarter engage our pro forma we did 34 million in the quarter.
The two months.
And the in the first month that we would consolidate <unk> in June for Q2. They performed 10.2 million. So we have a step up for engage.
Also a monthly revenue and we see starting to see also some senior do between the two blocks from cross selling opportunities.
And can you provide the same for the gross profit did you know at the beginning of the quarter versus the end of the quarter just to get a sense of the synergies on the pace and the importance of them games.
Uh huh.
You, usually we don't split because.
Having also synergy is difficult to say what is our Colorado what is engage it because.
We have also.
Got it.
They negotiate for the all the amount of volume of considering nordson gauge, but of course of it.
As we say the.
Before.
We have unemployment for the margin thanks to engage thanks for the V deal. Thanks for the data.
So I think they compare registry and boys. So all these elements and drivers, bringing a better margin profile there.
Yeah, if I can add some color to driver itself. The gross margin expansions basically the most important ones.
The larger presence of the U S market, which typically adds enjoys larger gross margin.
Engage contribute significantly on this and the <unk>.
The change of mix in product, where new channels with an aggregate gross margin profile. It gave them significantly the picture this quarter with.
Bodies be doing the companion rises.
And then essentially.
Buying metrics on $13 5 billion messages on $1 5 million voice calls can you give us some sense of how that was growing either sequentially or year over year or is it.
Any kind of color on what those volumes kind of meeting at this point.
Yes, let me dig into the numbers and Jackie so.
Messaging volume.
Increase.
14%.
Quarter to quarter quarter, three one quarter three lost here.
And voice it increased 36%.
The same in Belgium.
Oh, that's year over year.
Great that's great.
And then.
Two more for me sorry.
Okay are you still seeing much impact from Covid at this point <unk> <unk>, obviously, no one knows what's gonna happen in December and it's I <unk> I appreciate being conservative but are you are you already seem much impact do you think of the revenues and you teach them this point from Covid.
No we don't see any impact we we keep them see a progress in the recovery in the economy is in the geography is what we all for right.
We'd might be Elizabeth more conservative because with the coming of the ultimate in the winter it might be that we get into a more complicated the theory Oh, there's some geography is like a new room, but.
But you don't really know what's going on it's pretty mass depending on the <unk> on the right of the vaccinations. So Ethan is good because right of occupation you need that he has the highest in Europe now is way over 8%.
Now the U S. It's lagging a little bit behind now and India seems to be recovering that as well. So it depends on this let me say, it's very hard to predict as any anything is related to the call of it.
Yeah, Unfortunately, and it just I I know you've seen those good synergies on the on the revenue on cross selling could.
Can you talk about what segments that you're seeing that in or what products or any more color around the revenue synergies would be great. Thank you, yes, what first thing with the the starting point in the process is talking with the existing customers trying to expand the reach new geography is that two five is.
<unk> broke into the match.
Match between can I hear that language.
Also some upselling in the omni San Jose, especially in the direction between <unk> and current let me say Yang gauge customer base.
Well, we definitely have to be acting before so you don't put your relatives of new channels. This is a very fast moving spaces, all symptoms of meats and those are the acceleration in the digital transformation that has been brought into the picture by the pandemic itself.
Creating can they'll suburban classroom for the acceleration. So this change so let.
Let me say V. Though is definitely very much of interest to multiple geographies also the omnichannel play in general advice and also the Easter message being over the top stuff and and this is also the focus of the <unk> business development teams because these more interesting goes in terms of finance.
The performances out music.
Thanks, guys congratulations.
Thank you very much and.
And as a reminder to all if we could ask questions are limited to one that Maine and one follow up.
Thank you. Our next question will come from the line of Lance <unk> with counting your line is open.
Hey, this is Jonathan and before Lance good afternoon, Daddy I'm paying jacamar.
Congrats on the corner could I have the same things are working well.
My first question here and chirping about them.
<unk> revenue guidance and can we expect engaged the contribution a similar amount you know somewhere between 34 to 35 or perhaps a minute how can we think about the fourth quarter.
No I'd say that the it engages there is less seasonality, but it doesn't mean that they engage doesn't not gross engaging growing. It. So we have spent to a better performance Q4, then kitschy also because it is we say that we.
We receive engage ellora point in June so we are trying to recovery.
Understand and my last follow up question, Oh, I know you mentioned that there's a lot of fries and video, but if I may play Devil's advocate here for a second S. The rate of vaccination against <unk> to increase and perhaps more people start returning to forfeit that's physically uhm do you see this perhaps.
<unk> headwind or perhaps are you speaking with your customer thing you've seen that video will be an integral part of our business going forward. Thank you.
This is a very good question and I. Thank you for the question because this is allowing me to.
Oh really use veto typical unified communications situation for enterprises, Oh enterprises are using our media said this is aimed interaction with their old yes is whose humor yesterday. So let me say your bank is using <unk> to perform.
K y U C processes with the customers or as care applications, where it is being used for the email session between the medical Doctor and the patient.
Or I made the name itself machineries.
So these kind of applications basically I'm not the absolutely adult affected by the change in attitude enterprises, either go to the work from home or walk home office policies, it's more related to innovation in the services and even the services.
That they may is down to change the way they interact with their conspicuous.
And our next question comes from Michael Lattimore with Northland. Your line is open.
Alright. Thanks.
Congratulations I was a great corner.
So so M gauge.
Nicely on a sequential basis is that based on seasonality in their markets or do you feel like there was some improved education.
[noise] well you immediately [laughter] thanks to.
Engaged management that.
Started the synergy and also starting to get the the new let me city strategy and then they come in umbrella.
Yeah, we have hi.
Is that your Mike.
Obviously, we have.
Completely new leave the ship, which is also building an engagement has went into the leadership and this is a game changer way.
Deliver it to the market.
And also the company is is trying to be very sorry that resilience.
And what at the end was her phone so.
Scott.
The phone was.
Yep and I think he's one of the cost benefits was being able to negotiate maybe better.
Termination Cos with more volume and I guess, how does that kind of play them in the preceding.
Okay. This is a process.
Seven a hamburger counterparties in this process and you'll go off to renegotiate the condition, so midnight, but definitely wherever we have a double boot you off the contracts with termination fine the way sit down and we'll discuss with them a better contract and also a unified contact because.
Yeah, they used to be too before the match, but now we have one set and that's the reason why we should have two different conflict. So this is a process, which is ongoing still I'm going and frankly speaking this is a never ending process.
The the way combination.
Fees negotiation in relationship Heartburn see it's it's kind of a monthly discussion small apartment sheep, rather than a commercial thing.
Okay I got.
And then just last one on India I think on the laugh corner, you mentioned in India started to improve at the end of the second quarter.
I guess, how would you characterize the pace of business and and kind of this corner and even up to November.
Yeah E India perform Wow.
And yeah.
Need to a recovery and it started to increase.
Mmm previews as as in the past.
The outperformer in in the group. So we are very happy with the India performance, Yes. Another thing. They just wanted to mention that I forgot to say before is that Oh, new additional revenues that we are getting a recurring revenue. So the business model then and then.
Let me see the seventies model that we put in place in <unk> voice messaging, it's always pay as you go so increasing volume of our existing customers block. The addition of new customers and the addition of geography is always a record in revenue.
Stream, which is.
Let me say, making the man has been very confident about about the outlook.
<unk> because this is not like licensing software licenses, it's like entering your service provisioning relationship that better easily evolved into Thunder shake with our largest customers and it's always important when you think of can I got to go see that this is Catherine.
80% of the time it was with the all star 40 customers with the with the neighborhood standard which is like older than a S. So it's more of a finely shaped relationship rather than a bender customer relations.
Yeah.
Alright, thank you.
Thank you Mike.
See you soon.
And our next question comes from Ellen Clint with Maxim Group. Your line is open.
Hi, This is a diet entre Allen My first question is kind of a garden code as well you mentioned, Brazil was kind of seeing some issues that I just kind of wondering how you saw improvements they're similar to India.
Mozilla is are calling as well.
You can see also E E E and the number that I gave up about <unk> <unk> <unk>.
But I needed and poured some pasta often engage a revenue and so is is.
Is a little less than India and get them all four of <unk> grow, but yeah, we we would call them goes to Brazil.
Okay. Thank you and then I have one more question just related to margins are solid getting pregnant. This quarter with the immigration have engaged in your U S exposure and also from the campaign registry and product mix I was just wondering if you could provide any color on where do you see these margins trending long time.
Yeah. So so that they can crazy amount of doing that he has that important significant this quarter and also video. Okay can gave in the future I go with the contributions with a margin because of we reduced to <unk>.
Arguing video higher than 80%.
The complaint registry is Taylor, hi mm beg your contribution margin and also engage you see the very significant Saudi the high margin compared to Galeana. So we think that in the future. We can have Monday in the.
His job, but in an osha improve and margin going forward.
Okay. Thank you congrats on the quota.
Thank you very much.
[noise] at this time. This concludes our question and answer session I'd now like to turn the call back over to Mister Keller Gero for his closing remarks.
Thank you very much sleep. So thank you all for joining us on today's call as always we'd like to thank you hour a fantasy world wide network of partners and investors as well as our employees were working up for this resolved and for the computer support.
Well brighter.
Thank you I would like to remind everyone that a recording of today's call will be available for replay via a link available and the investors section of the company's web site.
Thank you for joining us today for colors third quarter of 2021 earnings Conference call you may now disconnect.
[noise] [music].