Kaleyra, Inc.

Greetings, and welcome to Calera Incorporated First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the form of presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to introduce your conference host today, Mark Griffin, Investor Relations. Please proceed, sir.

Thank you. Good afternoon and welcome to Calera's first quarter fiscal 2021 conference call. Calera released unaudited financials for its first quarter ended March 31st, 2021 after the market closed. The press release as well as today's replay can be found on the investor section of the company's website at investors.calera.com. Joining us for today's call for management is the founder and chief executive officer, Dario Collegio, and the company's chief financial officer, Giacomo Dall'Aio. 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 forward-looking statements. Clara 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 those statements to reflect new circumstances or unanticipated events as they occur, except as required by law. Throughout today's press release and on our call today, we refer to adjusted EBITDA. This metric is not determined in accordance with generally accepted accounting for principles and therefore is subject to varying calculations. A definition, calculation, and reconciliation to the financial statements of adjusted EVA can be found in the tables included in our press release. We believe this non-gap measure of Calera's financial results provides useful information regarding certain financial and business trends and results of our operations. With that, let me turn the call over to Dario. Please go ahead.

Thank you, Mark, and thank you to everyone joining us on the call today. As you all are all aware the effects of the global pandemic continue to pose challenges worldwide, but with certain geographies experiencing the continued temporarily negative effects of government-mandated lockdowns. While we see positive momentum building in the United States of America as the number of vaccinated citizens rise, Meanwhile, a resurgence in Europe has lowered the modest recovery we have been seeing in Italy, and most unfortunately, India is now experiencing the worst effect of the pandemic as cases rise. Moving on some financial highlights. We reported quarterly revenues in Q1 of $39.7 million. with an increase of 18% from the same period last year, demonstrating continued resilience in the recovery. We continue to experience growth in all of our major geographies with particular strength coming from regions in our rest of war segment that has been less affected from the pandemic. The main drivers in the quarter We had an uptick in our e-commerce customers in India, broad-based positive activity within our U.S.-based enterprise customers, and new customers in the rest of the world. In a seasonally challenging quarter, we were very pleased to see digital payments and transactions improve, which drove messages up 2% on a year-over-year basis. On the voice side, calls continued to increase year over year and were up 55% on that basis. For the quarter, we delivered 7 billion billable messages and connected 1.2 billion voice calls on behalf of our Caleras customers. Now, I would like to touch on some of our key initiatives in the quarter. Our K-Lab initiative continues to gain momentum. And during the quarter, we signed an agreement with Visa covering the Latin America and the Caribbean region. As part of the agreement, K-Lab will be creating communication solutions for Visa partners, solving digital communication issues that range from streamlining KYC to timely reminders of reward benefits and messaging to avoid transaction declines. The Visa Agreement is in addition to the agreements we signed last quarter with MasterCard banking customers in Latin America and the Caribbean. As a reminder, we launched K-Lab as a way to leverage our expertise in solutions development, digital innovation, and go-to-market strategies for the financial sector to build more impactful mobile customer experience solutions for both new and existing clients. We continue to be excited by the pipeline for these new initiatives and believe our bespoke solution for the financial service sector will quickly build sustainable momentum. Another newly announced KLAB agreement is with Trellance, the leading provider of data analytics, business intelligence, and professional services for credit unions. Together, we'll be creating communication solutions for credit unions powered by data from the Trelance M360 platform. Using KLAB services, credit unions will now be able to bridge the gap between their data sources and their member messages. Member and transaction data from Trelance M360 will be used by KLAB to integrate with the CPaaS platform of Calera which will result in a more contextually relevant way to communicate with members through multiple channels, including voice, SMS, application to person, A2P, and more. The most exciting news of the quarter was our announcement of the planned closing of the Engage acquisition, which, pending approval by our stakeholder at the May 27th stakeholder meeting, is set for June 1st. We could not be more excited to work Engage, its customers, and the entire team to the Calera family. Calera and Engage together are uniting two world-class enterprise cloud communication companies to create a top-five global CPaaS platform with a diversified and balanced product portfolio and geographical representation. As a reminder, Engage is a best-of-grade mobile messaging solution that focuses on the mobile engagement market and allows enterprise clients to effectively engage with their customers through all mobile channels for a variety of use cases, such as customer care, service alerts, and multi-factor authentication. Over the past few years, Engage has invested heavily to create two excellent solutions for their customers. The first is Communicate Pro, a cloud-based enterprise-grade messaging platform that connects brands and their customers through all major mobile messaging channels. The second solution, Connect, is engaged enterprise-grade APIs that allow customer clients to seamlessly build on existing messaging programs without the need for extensive development. Engage has a diversified base of over 300 blue-chip customers, some of which are associated with the world's most valuable brands, and Engage's top 10 clients have an average tenure of more than 10 years. For these customers, Engage is processing approximately 20 billion messages over 150 countries. More importantly, Engage's strength in the U.S., as one of four mobile messaging providers with direct connection to all four major U.S. carriers. Engage offering is very complementary to Calera's, and this combination will accelerate and expand Calera's opportunity to serve the CPAS market, which is expected to reach $26 billion in 2025, with a compounded annual growth rate of 35%, and the consolidated application-to-person enterprise messaging market, which is expected to reach $78 billion in 2022. In summary, we believe that Calera is well-positioned to execute on our initiatives with our broad product portfolio, global reach, and an unbelievable worldwide team. Let me now turn the call over to Calera's Chief Financial Officer, Giacomo Ballaglio, who will review our financials in more details. Giacomo, please, go ahead. Thanks, Dario. For the first quarter ended March 31st, 2021, we reported total revenue of $39.7 million, an increase of 18% year over year, and demonstrated the continued momentum of the recovery. The revenue in the quarter was slightly below expectation as the economic recovery was not as robust in Europe as we anticipate because of spiking COVID cases. Additionally, we turned off some extremely low margin messaging routes that lowered revenue but had a positive effect in our gross margins. The main drivers in the quarter were an uptick in our e-commerce customers in India, broad-based positive activity within our U.S.-based enterprise customer, a new customer in the rest of the world. Our revenue base continues to move away from Italy with India, which grew 32% year over year, while U.S. grew 19%, and the rest of the world segment was up 64%. In the quarter, we processed 7 billion billable messages, up 2% from the prior year period, and we connect 1.2 billion billion voice calls in the quarter, up 55% year over year. Gross profit first quarter 2021 increased 34% to 6.3 million from 4.7 million in the year ago period. Gross margin was 16% in the first quarter of 2021, up approximately 200 business points, from the 14% we reported in the first quarter of 2020. The remaining drivers of gross margin expansion were a revised product mix, an increasing trend toward higher margin premium service, invoice costs, and the churning of low margin routes. Operating expenses were $16.3 million in Q1 2021 compared with 14.3 million in Q1 2020, mainly driven by the increase in human capital. Loss from operation was 10 million for the first quarter of 2021 and included 5.5 million of stock-based compensation, 2.5 million of transaction one-off costs. This compared with the loss from operation of 9.6 million in the first quarter of 2020. Net loss was $10.4 million, or $0.34 per share for the first quarter of 2021, compared to the net loss of $8.8 million, or $0.44 per share for the first quarter of 2020. Adjusted bid loss was $1.1 million in the first quarter of 2021, compared to a loss of $300,000, in the first quarter of 2020. The decline in adjusted BDA is attributed to the increased headcount, predominantly in the engineering talent that has been hired to execute on our emerging growth opportunity to develop and deliver new products and services. Cash used in operating activities was $8.2 million in Q1 2021, mainly due to working capital changes and transaction costs compared with a cash use of 2.9 million in the same period of the prior year.