Q1 2022 Kaleyra Inc Earnings Call
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Good afternoon, welcome to <unk> first quarter 2022 earnings conference call. After the market closed claim reserve release and unaudited results for the first quarter ended March 31st 2022.
The press release as well as a replay of today's call can be found on the company's Investor Relations website.
Investors that cholera dotcom.
<unk> view the release for additional information on what will be discussed today, joining us today are <unk> founder and Chief Executive Officer, Dario College, Arrow, and Chief Financial Officer Giacomo Filaria.
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 the Form 10-K for a summary of forward looking statements and the risks uncertainties and other factors that could cause.
<unk> actual results to differ materially from those forward looking statements culebra questions investors not to place undue reliance on any forward looking statements. The company does not undertake are specifically disclaim any obligation to update revise these statements to reflect the new circumstances.
Is R and anticipated events that occur except as required by law.
Today's press release and on the call we will refer to adjusted gross profit margin adjust.
Adjusted EBITDA adjusted earnings per share. These metrics are not determined in accordance with generally accepted accounting principles and therefore are not susceptible to varying calculations.
A definition calculation and reconciliation to the financial statement of these non-GAAP measures can be found in the tables included in our press release. We believe these non-GAAP measures I'll call era's financial results provide useful information regarding certain financial and business trends.
And the results of operations now we would like to turn the call over to cut labor as C. E O Dario College Arrow. Please proceed sir.
Welcome everyone and thank you for joining us today for those who are new to.
Through our story I'll begin with a brief overview of our business.
He is a communications platform as a service or a C bus provider.
We provide our draw about farmer base with an Omnichannel suite of powerful API is unusual.
The communication divide between businesses and their customers.
Brian often face galvanize gaps one Ryan when trying to communicate with their customers, especially in industries that require security must prioritize reliability.
Financial institution and that is good.
Our mission is to build lasting business to customer relationships for our economy brands across channels and to do so while providing services that our clients can thrust.
Also contributing to execute against our growth strategy, our 'twenty to 'twenty two first quarter represents another meaningful step forward many areas of our business.
<unk> today is the increased capabilities and influence across our geographic footprint in China La City, and we have a real opportunity to compete in more markets and at a greater scale as we move closer to realizing our long term vision of being the trusted glaub does see Pos provider for our partners.
Our Chief Financial Officer Jakob.
We'll discuss our financial results shortly but before I hand over the call I'd like to recap a few recent highlights from our first quarter.
I'll start with a financial overview of the quarter. Our first quarter revenue was 85 million up 3% from the same comparable year ago period.
From a profitability perspective, we are encouraged that we were able to exceed expectations across the board and do so while investing in the business and in our growth strategy.
For example, our first our first quarter gross profit and adjusted gross profit.
$17 7 million.
And $19 $3 million, 180% in the Honda and then 98% decrease from the last year's Q1, respectively.
While our adjusted EBITDA increased over 6% in the first quarter totaling $6 2 million.
In addition, both our operating cash flow and adjusted earning per shares remain positive our cash and equivalent position remains incredibly strong with over $95 million on a pro forma basis, giving effect to be engaged acquisition as he said the core on January 20 <unk>.
One our key metrics significantly improved as well.
Our adjusted gross margin outpacing that of last year up 24% compared to 21, 4% in the prior year period, and adjusted EBITDA almost doubling from the prior year period, other phone $3.2 million to seek spine $2 million.
We were able to achieve these results despite certain headwinds we faced during the quarter, namely distinct regional challenges and overlapping geopolitical and macroeconomic factors, including the ongoing global dynamic the war in Ukraine, and recent market volatility and the adverse effect on Paul.
Foreign exchange rates.
<unk> wins at the assistant, which we believe may affect our previously projected growth for 'twenty to 'twenty two.
Specifically there were two significant challenges in the quarter that contributed to our top line first we face significant foreign exchange headwinds in Europe in the first quarter the broader geopolitical landscape in Europe began to show signs of turmoil.
Although we were still free of direct exposure to Russia, and Ukraine, and maintaining a diverse geographic customer mix overall, nearly 50% of our revenue comes from within the European countries and many of those contracts that was transacted in euros, we saw increased volatility within the foreign exchange.
Mark at the end of first quarter enough that when compared to last year Q1 exchange rates.
<unk> revenue was reduced by nearly 2 million in the first quarter.
This impact when extrapolated over the full year translates to our European revenue being worth 10% glass in 'twenty to 'twenty two than they were in 2020 one.
And second we were faced with ash pricing competition in one of our geographies.
Brazil nut.
What we believe to be unique circumstances, that's what he's done during Q1, we decided to avoid compromising our business found him and loved and fundamentals and stay true.
Two our financial priorities as a business in doing so we maintain the healthy sustainable revenue source in my view that we have prioritized since our founding.
And continue to deliver high quality services for our partners.
New to this environment. It will take additional efforts to course, correct and retool them through our prior level of top line growth as many of you know our business is characterized by deep relationships and we are committed to continuing to drive our sales engine and integrate new customers into our business too.
Foster our growth, we typically find that our sales cycle can last between three to six months.
We have a robust pipeline of new customers to work with her name.
Hey, Blaine this growth.
Oh salt when it comes to foreign exchange rates, we believe that it's prudent to view rates between euro and the dollar is a headwind in the near term, although we expect rates to stabilize in the coming quarters. We are accounting for these headwinds in our guidance in August .
So exactly what will discuss at the end of this section with both challenges in mind, we have decided to update our revenue forecast for the year. We have made the 10% downward adjustment to our revenue outlook for the 'twenty to 'twenty two fiscal year and the line our outlook for the second quarter to match. This.
The action over at all.
However, while we adjust to our current climate.
Our focus remains on maintaining our consistent profitability metrics and driving healthy growth across our business with.
We believe that revenue growth that you are spending cellphone underlining fundamentals of our business is unsustainable and we are committed to linking our graph to our ability to drive profitability and maintain our improved margins.
We are proud of our team for serving them and their unwavering commitment to build a sustainable and valuable business moving forward.
Before I pass it over to Jacqueline just a moment in addition to our financials. There were a few operational highlights the stands out as well.
Looking at some of our key operating metrics in the first quarter, we delivered $14 4 billion billable messages and connected 1.6 billion by schools in our largely volume based business. This reflects our ability to leverage the benefits of scale.
And these are not I wish we hope to drive continued growth in the future.
Also last quarter, we introduced a new API dollar based net expansion rate, which highlights the rate at which customer accounts increase their usage of our products extend their usage of our products to new applications or adopt the new product within the <unk> platform.
We're seeing the dollar based net expansion rate. These are meaningful indication of our efforts to increase wallet share and revenue from existing customers.
And are pleased to report that our Q1 dollar based net expansion rate was 130% in line with the best in the industry.
Also as many of you listening today wasn't in the first quarter. We were selected by Bush group, a leading global supplier of technology and services as their trusted vendor to power the Bosch mobility solutions cloud communications in India. This.
This win reflects the success of our efforts to expand our presence in this region.
And I see that we see as a valuable opportunity with the Florida sheet backend software ecosystem and young population.
With this win we have added another fortune 500 brands to be a very extensive list of top global enterprises, the truth and rely on Colorado.
We look forward to our continued partnership with the Boston and the additional expansion opportunities we are pursuing in the Indian market.
In addition, that's supported India's rapidly expand the Unicorn startup system, providing our platform to 18 Unicorn in India, including Mobile Premier League bid down to me shoes.
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<unk> shop.
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Grocers like back in the good gone girl.
Oh, So we partnered with Banca seller, a leading Italian bank to provide an innovative video communication solution for the bank's new wealth management's last one Kelly.
<unk> video technology facilitates banker sell as a remote customer interactions, which is manage customer relationships.
Wins like this one provide the food the world in video communications and neither of our Omnichannel strategy that we are expanding.
In addition to these two new wins and partnerships <unk> was recently named cheapest provider of the year. The Juniper does this future Digital awards 2022.
Recognition from our major markets possess groups validates our team worked to build the most comprehensive and innovative platform more services.
In summary, we are encouraged by our momentum in many strategic areas of our business as we move into the second half of the year.
Although headwinds have dampened our growth in 2022, we are confident that we have the team and the processes in place to remain agile in the face of challenging environments and that our business remains very healthy and we look forward to driving sustainable value across our business in the quarter.
And continue to believe that our growth strategy is as positioned to be successful in this initiative.
As a reminder, our growth strategy relies on three main pillars. One we're focused on expanding our geographical footprint as mentioned in Calais that revenue comes from you all by customers and we are working to both expand our footprint and maintaining our diverse revenue split among geographies there.
Objective is driven by our view that the cheapest market the zillow or remains a very fragmented.
<unk> penetrated in many parts of the world.
We are well positioned to expand our footprint into other geographies that would benefit from C pulse support.
After last year expansion into American market through engaging for fracture. We continue to have around a third of the revenue from each of the Americas approximately 38% you were up approximately 29% and Asia approximately 33% a favorable balance that makes gilead on one of the most <unk>.
And then geographically diverse C bus companies in the world.
So we will continue to do.
Additionally, invest in our omni channel suite of services. It is our goal to meet our timelines on whichever channel as they require to best connect with their customers as video and voice communications proliferate globally expanding into new communications streams remains an important investment for our team.
And lastly, we remain committed to secure reliable and trusted service our business drives the need to see that they have the highest standards of security for their communications with their consumers banks financial institutions self care et cetera, all need to be able to trust their interactions with <unk>.
Consumers are handled with the utmost security inconsistency.
Are there other levers on deck in a way that no. Other industry player does why a lot of strides for vitamin or volume, we know that our expertise and trusted cheapest influences customers with things Simpson that with the right partners. This is the amount of English weekend access.
And with that I'll now too.
Over the call to our Chief Financial Officer, Jackson will allow you to discuss to discuss our financial results for the quarter the integrator days.
Giacomo.
Thank you Daddy, turning now to our financial results for the first quarter ended March 31st 2022 is that he mentioned our total revenue in the first quarter increase.
The 3% to $80 5 million from $59 7 million in the comparable year ago period. The increase in revenues was driven by the addition of engage which contribute.
$32 1 million in the quarter on a pro forma basis, giving the effect of the engage acquisition.
The occurred on January 1st 2021, our revenue growth was 12, 4%, while all other kpis outpace those of the prior year period, which pro forma adjusted gross profit increased by 25, 6% and adjusted EBITDA.
Exceeding 90% period over period.
Gross profit in the first quarter increased Andre 80% to $17 7 million from $6 3 million and the comparable year ago period. The increase was driven by the effects of <unk> in combination with engage.
Gross margin in the fourth quarter of 2022 increased to 22% compared to 16% for the fourth quarter of 2021. The increase in gross margin was mainly due to the engage and but yet integration and increased performance by Colorado video and voice as well.
It is by the company registered.
Net loss totaled $13 2 million or 51 cents per share based on $42 2 million weighted average shares outstanding compared to a net loss.
$10 4 million or 34 cents per share.
Based on 34 million weight today, but it's sure a standing in the comparable year ago period.
The increase in debt.
The net loss was mainly due to the amortization of acquired intangibles and the.
Sure the interest expenses on our convertible notes.
Adjusted gross profit I don't get me off operating performance increased under 98% to $19 3 million from $6 5 million in the comparable year ago period.
Gross margin for the first quarter of 2022 was 24% compared to 16% in the comparable year ago period.
Adjusted net income and non-GAAP measure of operating performance increased to 119% to $2 3 million or six cents per basic share based on $42 2 million weighted average shares outstanding and <unk>.
<unk> per diluted share based on $52 1 million weighted average shares thing.
From negative $2 million or negative seven cents.
Both basic and diluted share based on 54 million weighted average shares outstanding in the comparable year ago period.
Adjusted EBITDA, a non-GAAP measurement that awful, but it didnt performance increased 641% to $6 2 million or seven 7% of total revenue compared to negative $1 1 million in the comparable year ago period. The increase in adjusted EBITDA was primarily due to the.
Effector of business combination with engagement and cost synergy between the two legacy business as a way to buy the company registered.
At the end of the first quarter cash cash equivalents of restricted cash and short term investments.
$95 2 million compared to $97 9 million as of December 31st 2021 quarterly net cash provided by operating activity was $2 2 million in the three months ended March 31st 2022 compared to net cash used.
In the operating activities of negative $8 2 million in the comparable year ago period.
Our solid financial position at the end of the first quarter results are reflected in our net current asset which exceed.
74 million.
Our debt financing structure is on the margin I.
As opposed to the four she will raise it in the interest rate with over 80% of all of our financing burdening, our coupon interest rate and debt.
Our neighborhood variable interest rate and then 3% building on our loans with Italian banks.
Before I turn the call back over to Daniel I'll now take a few minutes to provide our financial outlook for the remainder of the year, which ends on December 31st 2022.
Overall, we continue to highly confident and Kelly address financial health as well as our ability to sustainably and profitably grow for the foreseeable future is that it is playing we are proactively.
That said, our current climate and decided to adjust our full year guidance to prioritize the quality of services and products delivered.
Through our customer overdosed, and sustainable revenue growth and compresses margins.
We can't anticipate that revenue for the second quarter to range between 81 million and $83 million, representing 52% growth at the midpoint compared to the same year ago period with the full year 2022, we expect revenue in the range between 360 million and 365 million.
But presented 75% growth at the midpoint compared to 2021.
This completes my financial summary.
Now like to turn the call back over to Dieter to ramp up.
Our remarks for the call Daddy.
Thanks, Jack Mohr looking back while we were confronted with a broader global economic landscape that impacted our quarterly revenue. We believe that we took meaningful steps forward in the first quarter as we continued to invest in our omni channel platform and partnership wide voting still driving profitability.
Our product suite continues to grow in both from Beth and breadth and the quality of our service is a strong and trusted as ever our geographical footprint continues to expand into a healthy global dialogue with we will look to build on moving forward.
And our slides into new growth areas, including <unk> video and voice along with the promising results from the <unk> registry and.
Continued to drive leverage into our operating model.
As we move into the summer months, we do so with conviction.
And our long term growth strategy supported by a strong balance sheet and the LC business fundamentals above all we will continue to build on our track record and positive momentum as we advance along our journey to become the trusted partner in the rapidly expanding and massive the bus market and with that we're ready.
To open the call for questions operator, please provide the appropriate instructions.
Thank you.
I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
May press Star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Please ask one question and one follow up question and then re queue for additional questions.
Our first question is from Timothy Horan with Oppenheimer and company. Please proceed.
Thank you hi, guys.
Did you focus a little bit more on profitability and cash generation in the quarter than growth was that a conscious effort.
Because I noticed your gross margins were up really strong.
And I guess related to that.
Is this a good run rate for the gross margin percentage.
Yes, it did.
We are focusing on.
The quality of the revenues that we did in the previous quarter, the Q3 and Q4 and.
Obviously, we have to face the volatility of the exchange rates, but.
<unk>.
I believe that the apart from the top line all the other metrics of the profit and loss at a positive and also the cash generation is positive.
So it has been intentional yes it did.
And so obviously, it's a balancing act do you think the industry can still grow 30% per year. After this year end and can you grow in line with the industry or do you think because it looks like you grew around 15% normalized for currency this quarter.
Or do you think the industry is maybe more like a 2025% grower and maybe youll grow little slower too but.
With higher margin.
Well, let's say, it's better to segment by geography, because everything I'm going to use as you call them dynamics and now Europe is a founder song because of the warm because of the.
Pressure on the energy cost then.
Flash them.
And the United States is going well I see the United States, not very effective and far east to India. In particular are you still very much growing so I affect the industry.
The market as a whole could keep on growing maybe with some differences between geographies and maybe with a temporary slowdown during this.
Specter than desired situation that we are in the EU.
Thank you.
Our next question is from Lance.
The fan out with Cowen and company. Please proceed.
Thanks, guys.
Nice job managing through a tough environment. My question is actually to drill in a little bit more on the gross margin.
It seems like.
The biggest organic driver of the improvement was favorable mix shift with that with a lot more of the video and the voice versus the text could you remind us the margin differential for those three products and then if you could talk about the revenue share of the volume share for each of those products too.
Today versus maybe where you think that that share goes over the next year or two just to Turkey is try to get a sense for maybe how how additional progress.
The mix shift could could further augment the margins going forward.
Yes sure. This is Jack so in terms of volume are we grow about 20% in messaging and we grow about 33% in voice.
And this is a pro.
So for my grow and this is a very important because on voice we have a profitability that these are on average it depends on geography, but is double than messaging so growing much more on voice video.
Is that a new broad with a with a profitability that is.
Almost three times that for.
Mm three times a day messaging.
And it was.
<unk> does not include the last year so.
Again, yes, with a better mix, we can improve our margin going forward.
Do they aim.
Okay, Great and then if I could just as my follow up on the cash flow and liquidity you did better than we had modeled in the first quarter.
But for the full year, we had previously expected that labor would generate at least a little bit of cash and that now seems unlikely.
Do you think a reasonable estimate would be for cash at the end of this year should we be thinking like in the $85 million range.
Yes. So this quarter, we generated we are looking at.
Very carefully at the operating level. This quarter is positive by $3 2 million and the.
As you know this quarter for the seasonality is the weaker quarter in the year for the Kashi generation. So next quarter will be better and then Q3 and Q4 are stronger so.
We we are looking for better generic share an operating generation of cash in the future.
So okay. So then I had it wrong. So so my <unk>.
I missed that you would actually be burning cash over the balance of the year Youre, saying you will actually do better as we go throughout the year here, Okay, alright, Thanks, Jeff I appreciate that.
If I may just one.
A little color.
At the end of the year also will have.
Paid back a more than $10 million soccer player support op income in that from the European banks.
So including the.
The free cash flow in the payback of more than $10 million.
Thanks, guys.
Our next question is from Mike Latimore with Northland Capital. Please proceed.
Yeah.
Hi, and we'll work on behalf of Mike Latimore of Northland Capital I have a couple of questions here.
First one is what are the opportunities for the campaign registry outside the U S.
Well the company registry is still a.
Uh huh.
Looking for opportunities outside of the U S P.
Seeing opportunities in multiple jurisdictions, especially in the western Kansas and.
We think we can exploit this business model in other geographies that we're working on it.
Alright. My second question is are any specific verticals, showing particular strength or weakness.
Well we have.
Banking financial institutions very stable to keep on growing steadily.
Over the last few years, because the more mobile banking in the world rather than last mobile banking.
And also in the <unk> space.
Just to be in India.
It's booming.
One business with a number of new unit costs in India.
<unk> 2021.
<unk> generated 42, new unit goes out of which 18 are costs.
Colorado customers and ICL.
I see a lot of traction on that.
Alright, great. Thanks.
Thank you.
And our next question is from George Sutton with Craig Hallum Capital Group. Please proceed.
Thank you.
So guys. The estimates for the quarter were about $85 million and you came in at 80, and you referenced 2 million related to FX. So I just wanted to walk through the other deltas and you did point out Brazil.
I wanted to better understand the dynamics in Brazil did you walk away from customer opportunities did you walk away from specific programs are those programs you can.
Go back after so that's that.
Just to my question.
Well the only thing that I can say is that those being kind of a price war in Brazil, and we do not like to play price wars, So basically with the Vista.
And that's very peculiar of Brazil, because of the dynamic of the of the market in Brazil. So that's why considering how we want to keep them working on the quality in the system and sustainability of our revenues, we basically walked away from.
I'm a situation that was unhealthy.
But we definitely everything the customer visits the grubhub customer is not the lockout customer and we're working together with them towards the other geographies saw him off most of them.
And again, if I'm trying to account for the $3 million Delta where would you point to the 3 million Delta from original expectations.
That's explaining the database.
The account the less volume in Brazil less revenues.
Maybe if we take off the FX effects in that specific presentation in Brazil, the organic growth for the rest of the group has been over 22%.
I understand okay. That's it for me thanks, guys.
Thank you George.
Thank you at this time. This concludes our question and answer session I would like to turn the call back over to Mr. Kelly for closing remarks.
Okay. Thank you very much for joining us on today's call.
Yeah.
As always we would like to thank our extensive worldwide network of fondness and basketball as well as our employees for their continued support.
Operator.
Thank you I would like to remind everyone that a recording of today's call will be available for replay via a.
A link available in the Investor.
<unk> of the company's website. Thank you for joining us for Polaris first quarter 2022 earnings Conference call you may now disconnect.
Thank you.
Yeah.
Sure.
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