Kaleyra, Inc.

Good afternoon. Welcome to Calera's third quarter 2021 earnings conference call. After the market closed, Calera released unaudited results for the third quarter ended September 30, 2021. The press release, as well as a replay of today's call, can be found on the company's investor relations website at investors.calera.com. Please view the release for additional information on what will be discussed today. Joining us today are Calera's founder and chief executive officer, Dario Calogero, and Chief Financial Officer Giacomo Dellaglio. 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. Polaro 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 the statements to reflect new circumstances or unanticipated events that occur, except as required by law. Throughout today's press release and on the call, we'll 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 of Calera's financial results provide useful information regarding certain financial and business trends and the results of operations. Now I would like to turn the call over to Calera's CEO, Dario Calagaro. Sir, please proceed.

Welcome everyone and thank you for joining us today. For those of you who are new to our story, I'll begin with a brief overview of our business. Calera is a communication platform as a service or CPaaS provider. From a high level, we provide our partners with an omni-channel suite of powerful communication APIs and visual tools to bridge the gap between businesses and their customers. Brands worldwide often face coverage gaps when trying to communicate with their customers, especially in industries that require security and must prioritize reliability, such as financial institutions and healthcare. Our mission is to help build lasting relationships between brands and their customers across channels. and to do so while providing services that our client can trust. Today, our success in bridging the gap between businesses and their customers has enabled us to move closer to our long-term vision of being the trusted global CPaaS provider. While we have made substantial progress towards accomplishing this mission over the past few years, our work over the last several quarters, and the third quarter in particular, has accelerated the roadmap. This quarter was the first look into our business past the completed integration of our most recent acquisitions, Engage and Bandir. Today, a new Calera has emerged, one with the same vision, but with increased capabilities and influence across our global footprint and channel offering. Combined with the consistent execution in our existing operations, we now have a more diversified approach growth that will enable us to compete in more markets at a greater scale our chief financial officer giacomo delaglio will discuss our financial results shortly but before i end over the call i'd like to look up a few recent highlights from our stellar third quarter in our third quarter we delivered 13.5 billion billable messages and connected 1.5 billion voice calls both representing new records for our business. This is an increase from our second quarter and one that better allows us to leverage the benefits of 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 teams and cost structures. A key consideration in our combining with Engage was their existing messaging presence that immediately provides greater reach for our business. Much of the Engage footprint is in the United States, and they have direct connection to all Tier 1 carriers. With this expansion into American markets through Engage infrastructure, Our third quarter was closer to having around a third of our revenues from each of the Americas, approximately 41%, Europe, approximately 27%, and Asia, approximately 26%. A favorable balance that makes Calera one of the most prominent and geographically diverse CPAS companies in the world. An additional point worth noting is that messaging termination costs meaning the cost to deliver a text-based message to its desired endpoint, are usually lower in the United States. So increasing our presence domestically in the U.S. presents an opportunity to improve our margin profile as well. With our margin profile in mind, another main goal of ours, both in the third quarter and moving forward, is to develop our omni-channel service offerings. Beyond providing the most robust suite of services to our partners, new channels such as Video and Voice have better margins than our traditional messaging channel due to additional costs associated with the messaging networks. This quarter, bolstered by investments including the acquisition of Bandera, Calera Video, and Calera Voice, made significant progresses highlighted by the aforementioned record volumes in both channels. We have already seen the impacts of this progress on our margin profile, and while we have work ahead of us before our platform is truly omnichannel at global scale, advances in Calera Video and Voice are indicators of our commitment to an omnichannel platform. The combination of a steadily growing core messaging business along with new evolving channels underlines both the robust opportunity available in our legacy business as well as the opportunity to grow our omnichannel offering as well. Our performance within existing operations combined with inorganic additions in the period culminated in a third quarter of exceptional record year-over-year revenue growth of around 120%, and the year-over-year gross profit growth of 161%. While much of our growth came as a result of revenue recognition efforts from acquisitions we also saw an approximately 30 organic growth rate or year over a year these results validate our original growth 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 pillar number one We are focused on expanding our geographical footprint. As mentioned, Calera revenues come from global customers, and we are working to both expand our footprint and maintain our diverse revenue split among geographies. This ambition is driven by our view of the supermarket as a whole, which is very fragmented and under-penetrated in many parts of the world. We believe we are well-positioned to expand our footprint to other geographies that would benefit from CPaaS support. Pillar number two, we will continue to invest in our omnichannel suite of services. It's our goal to meet our partners on whichever channels they require to best connect with their customers. As video and voice communication proliferate globally, expanding into new communication streams remains an important area of investment for our team. And pillar number three, we remain committed to secure trusted service. Our business tries in industry that have the highest standard for security in their communications with their consumers. Banks, financial institutions, healthcare, et cetera, all need to be able to trust that their interaction with consumers are handled with the utmost security and consistency. Calera delivers on that in a way that no other industry player does. While other players strive for partner volume, we know that our expertise in trusted SIPAs influences customer retention and that with the right partners, this is an area in which we can excel. In support of our growth pillars, strategic investment activity is an important part of our path forward as well. The CPAS market is worth $8.7 billion this year and will be worth over $34 billion in 2026, with a compound annual growth rate of 31.48%. But the overall addressable market for Calera is much bigger, when you consider also adiabatic markets, such as application-to-person messaging, WebRTC for video and audio communications, voice, RCS, and OTT messaging. Our estimate is that in this market, there currently aren't any players that own 10% or more of the market share. Instead, there are hundreds of smaller players competing at the local level in each region. In such an highly fragmented industry, white spaces provide opportunity, both for organic expansion and for consolidations. As this pertains to our M&A strategy, we are aware that our industry is consolidating at such a pace that if we pay put, we risk near marginalization. While we would like to participate with our industry, we are sure that we can remain patient and committed to finding only the right partners, those that fit our growth strategy. Finally, we have a few non-operational updates to share before I pass it over to Giacomo in just a moment. First, in August, we successfully uplisted from the New York Stock Exchange American to the New York Stock Exchange. Graduating to NYSE, a premier worldwide market, is a significant milestone. Being able to meet these most selected criteria is a testament of our ability to continually improve ourselves financially, operationally, in corporate governance, and all the key areas of our business. We appreciate this elevated equity listing and believe our announced investment profile will open more opportunities and generate more interest from the broader investment community. Also, in September, Calera was recognized by Juniper Research as an established leader in the global CPAS market. Juniper Research is one of the leading independent analyst firms in the mobile and digital tech sector, so to receive this recognition from such a respected source validates the work we are doing to build a more comprehensive platform of services. In October, we were also recognized this time by Gartner's Market Guide for Communication Platform as a Service as one of the 20 representative vendors of the CPaaS market. In aggregate, the growing number of industry accolades we are receiving underscore a growing awareness of Calera as a major player within the CPAS market. In summary, this quarter was one of tremendous growth and a reaffirmation of our deliberate growth strategy. I now turn the call over to our Chief Financial Officer, Giacomo Dallaglio, to discuss our financial results for the quarter in greater details. Giacomo. Thank you, Dario. Turning now to our financial results for the third quarter ending September 30, 2021. Our total revenue in the third quarter increased 120% to $84 million from $38.3 million in the comparable year-ago period. It increased 56% from $54 million in the previous quarter. The growth during the quarter was driven by the completed integration of the Engage and Bandir businesses, as well as strong 30% organic revenue growth across channels and a well-balanced portfolio across geographies. Gross profit increased 161% to $19.6 million from $7.5 million in the comparable year-ago period and increased 87% from 10.5 million in the previous quarter. The increase was driven by an increase in revenues for the quarter that outpaced cost increases. Gross margin from the third quarter of 2021 increased to 23% compared to 20% for the third quarter of 2020. The increase in gross margin was mainly due to the Engage and Bandia integrations and increased performance by Calera Video and Calera Voice, as well as by the campaign registry, our software as a service offering that has developed over the past quarter. Net loss totaled $11.9 million, or $0.29 per share, based on $41.6 million with average shares outstanding, compared to the net loss of $5.3 million, or $0.19 per share based on $28.3 billion weighted average share outstanding in the comparable year-ago period. This represents a 164% increase from $4.5 million in the previous quarter. The increase in the net loss was mainly due to the amortization of acquired intangibles and accrued interest expenses on convertible notes. Adjusted gross profit, a non-GAAP measure of operating performance, increased 174% to 21 million from 7.7 million in the comparable year-ago period and increased 88% from 11.1 million in the previous quarter. Adjusted gross margin for the third quarter of 2021 was 25% compared to 20% in the comparable year-ago period. Adjusted BDA, a non-GAAP measure of operating performance, increased 273% to $8,009.5% of total revenue compared to $2.2 million, 5.6% of total revenue in the comparable year-ago period and increased 271% from $2.2 million in the previous quarter. The increase in adjusted EBD was primarily due to the effect of the business combinations with Engage and Bandia and cost synergy between the two legacy businesses. Adjusted net income, a non-GAAP measure of operating performance, increased 306% to $3.6 million, or $0.09 per basic share and $0.07 per dilute share, based on 41.6 and 52.4 million weight average share of sending, respectively. This is an increase from $891,000, or 3 cents per daily share, or 2 cents per diluted share, based on 28.3% 45.1 million weighted average shares outstanding in the comparable year ago period. This represents a 618% increase from $504,000 in the previous quarter. At the end of the third quarter, cash equivalent, restricted cash, and short-term investment were $118,000 8.5 million compared to 37.8 million at December 31st, 2020. It also considered the band year acquisition happening in July and the warranty repurchase of August 2021. Of note, during the quarter, we entered in a warranty repurchase agreement with a group of institutional investors for an aggregate amount of $1 million 684,470 shares of our common stock. The stock was priced at $3.25 per underlying share on aggregate purchase price of $5,474,525. We believe that taking These steps to simplify our capital structure will support the business long-term financial health and operational success. Before I turn the call back over to Dario, I'll now take a few minutes to provide our financial outlook for the reminder of the year. As a reminder, at this time, Calera provides quarterly and annual revenue guidance. as we believe this metric to be the key indicator for the overall performance of our business. Moving to our guidance, as a reminder, for 2021, our fiscal year ends on December 21, 2021. As of today's call, we now expect revenue for the fourth quarter to range between $87 million million and 89 million and for revenue for the full year to range between 264.7 million and 266.7 million representing an increase to our previous outlook overall we remain highly confident in the financial health of 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 Dario for additional insights into our operational progress during the quarter. Dario. Thanks, Giacomo. Looking back, we believe this quarter will serve as a bellwether for the future direction of our business. Our geographical footprint has materially expanded into a healthy global balance that we will look to maintain moving forward. Our inroads into the new growth areas, including Calera Video and Voice, along with promising results from the campaign registry, have begun to drive leverage into our operating model. Combined with the record and growing volumes, We are driving across our global customer base. We see a clear path to scale and increase 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 evolving CPaaS market. And with that, we are 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 telephone. You will hear a three-tone prompt to acknowledge that request. If your question has been answered, 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 1-4 on your telephone keypad. And our first question will come from George Sutton with Craig Hallam. Your line is open.