This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good afternoon. Welcome to Calera's first quarter 2022 earnings conference call. After the market closed, Calera released an unaudited result for the first quarter ended March 31st, 2022. The press release as well as a replay of today's call could be found on the company's investor relation website at investors.calera.com. Please view the release for additional information on what will be discussed today. Joining us today are Calaveras founder and chief executive officer, Dario Calagero, and chief financial officer, Giacomo Dallario. 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 filing 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 actual results to differ materially from those forward-looking statements. Calera questions investors not to place undue reliance on any forward-looking statement. The company does not undertake or specifically disclaim any obligation to update, revise, the statements to reflect a new circumstances or unanticipated events that occur except as required by law. Throughout today's press release and on the call, we will refer to adjusted gross profit margin, 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 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 Calegero. Please proceed, sir.
spk02: Welcome everyone and thank you for joining us today. For those 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 a CPaaS provider. At a high level, we provide our global partner base with an omni-channel suite of powerful APIs and visual tools to bridge the communication divide between businesses and their customers. Brands 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 business-to-customer relationships for our partner brands across channels, and to do so while providing services that our clients can trust. After continuing to execute against our growth strategy, our 2022 first quarter represents another meaningful step forward in many areas of our business. The Calera of today has increased capabilities and influence across our geographic footprint and channel offering, 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 global CPaaS provider for our partners. Our Chief Financial Officer, Giacomo Dallaglio, will 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 $80.5 million, up 103% 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 quarter gross profit and adjusted gross profit were $17.7 million and $19.3 million, a 180% and 198% increase from the last year's Q1, respectively, while our adjusted EBITDA increased over 600% in the first quarter, totaling $6.2 million. In addition, both our operating cash flow and adjusted earnings per share remain positive, our cash and equivalent position remains incredibly strong at over 95 million. On a pro forma basis, giving effect to the engaged acquisition as it had occurred on January 1st, 2021, our key metrics significantly improved as well, with our adjusted gross margin outpacing that of last year at 24%, compared to 21.4% in the prior year period and adjusted the BDA almost doubling from the prior year period from $3.2 million to $6.2 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 pandemic, the war in Ukraine, and recent market volatility and adverse effects on foreign exchange rates. These headwinds have persisted, which we believe may affect our previously projected growth for 2022. Specifically, there were two significant challenges in the quarter that contributed to our top line. First, we faced 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 maintain a diverse geographic customer mix overall, nearly 30% of our revenue comes from within the European countries, and many of those contracts are transacted in euros. We saw increased volatility within the foreign exchange rate market in the first quarter, enough that when compared to last year Q1 exchange rates, this year 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% less in 2022 than they were in 2021. And second, we were faced with harsh pricing competition in one of our geographies, Brazil, due to what we believe to be unique circumstances in that region during Q1. We decided to avoid compromising our business fundamentals and stay true to our financial priorities as a business. In doing so, we maintained the healthy, sustainable revenue source and margin that we have prioritized since our founding and continue to deliver high-quality services for our partners. Due to this environment, it will take additional effort to course correct and return to 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 to foster our growth. We typically find that our sales cycle can last between three to six months, and we have a robust pipeline of new customers to work with in enabling this growth. Also, when it comes to foreign exchange rates, we believe that it's prudent to view rates between euro and the dollar as a headwind in the near term. Although we expect rates to stabilize in the coming quarters, we have accounted for these headwinds in our current models. So as Giacomo will discuss at the end of his section, with those challenges in mind, we have decided to update our revenue forecast for the year. We have made a 10% downward adjustment to our revenue outlook for the 2022 fiscal year and align our outlook for the second quarter to match this reduction overall. However, while we adjust to our current climate, Our focus remains on maintaining our consistent profitability metrics and driving healthy growth across our business. We believe that revenue growth at the expense of an underlying fundamentals of our business is unsustainable and we are committed to linking our growth to our ability to drive profitability and maintain our improved margins. We are proud of our team perseverance and their unwavering commitment to build a sustainable and valuable business moving forward. Before I pass it over to Giacomo in just a moment, in addition to our financial, there were a few operational highlights that stand 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 voice calls. In our largely volume-based business, this reflects our ability to leverage the benefits of scale and is an area in which we hope to drive continued growth in the future. Also, last quarter, we introduced a new KPI, Dollar-Based Net Expansion Rate, which highlights the rate at which customer accounts increase their usage of a product, extend their usage of a product to new applications, or adopt a new product within the Calera platform. We think that dollar-based net expansion rate is a 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 will know, in the first quarter, we were selected by Bosch Group, a leading global supplier of technology and services as their trusted vendor to power the Bosch mobility solutions cloud communications in India. This win reflects the success of our efforts to expand our presence in this region, a geography that we see as a valuable opportunity with a flourishing tech and software ecosystem and young population. And with this win, we have added another Fortune 500 brand, to the already extensive list of top global enterprises that choose and rely on Calera. We look forward to our continued partnership with the Bosch team and the additional expansion opportunities we are pursuing in the Indian market. In addition, Calera supported India's rapidly expanding unicorn startup system, providing our platform to 18 unicorns in India, including Mobile Premier League, Vedantu, leashes, farm easy, share chat, cure fit, rovers, black back, and the good gland growth. Also, we partnered with Bancasella, a leading Italian bank, to provide an innovative video communication solution for the bank's new wealth management platform. Calera's video technology facilitates Bancasella's remote customer interactions, which helps manage customer relationships. Partners like this one provide a foothold in video communications, an area of our omni-channel strategy that we are expanding. In addition to new wins and partnerships, Calera was recently named CPaaS Provider of the Year at the Juniper Research Future Digital Awards 2022. Recognition from a major market research group validates our teamwork to build the most comprehensive and innovative platform of 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. We look forward to driving sustainable value across our business in the quarters ahead and continue to believe that our growth strategy has us positioned to be successful in this initiative. As a reminder, our growth strategy relies on three main pillars. One, we are focused on expanding our geographical footprint. As mentioned, Calera revenue comes from global customers. and we are working to both expand our footprint and maintain our diverse revenue split among geographies. This objective is driven by our view that the CIPAS market as a whole remains very fragmented and unpenetrated in many parts of the world. We are well-positioned to expand our footprint to other geographies that would benefit from CIPAS support. After last year expansion into American market through engaged infrastructure, we continue to have around a third of the revenue from each of the Americas, approximately 38%, Europe, approximately 29%, and Asia, approximately 33%. A favorable balance that makes Calera one of the most prominent and geographically diverse CPaaS companies in the world. Two, we will continue to judiciously invest in our omni-channel suite of services. It is 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 lastly, we remain committed to secure, reliable, and trusted services. Our business tries an industry that has the highest standards of security for their communications with their consumers, banks, financial institutions, healthcare, et cetera, only to be able to trust that their interactions with consumers are handled with the utmost security and consistency. Calera delivers on that in a way that no other industry player does. While others strive for partner volume, We know that our expertise in trusted SIPAs influences customers' retentions and that with the right partners, this is an area in which we can excel. And with that, I'll now turn over the call to our Chief Financial Officer, Giacomo Dallaglio, to discuss our financial results for the quarter in greater detail. Giacomo?
spk01: Thank you, Dario. Turning now to our financial results for the first quarter ended March 31st, 2022. As Dario mentioned, our total revenue in the first quarter increased 103% to $80.5 million from $39.7 million in the comparable year-ago period. The increase in revenues was driven by the addition of Engage, which contributes $32.1 million in the quarter. On a pro forma basis, giving the effect of an engaged acquisition if it had occurred on January 1, 2021. Our revenue growth was 12.4%, while all other KPIs outpaced those of the prior year period, which performed an adjusted gross profit increase by 25.6% and adjusted BDA exceeding 90% period over period. Gross profit in the first quarter increased 180% to 17.7 million from 6.3 million in the comparable year-ago period. The increase was driven by the effects of business combination with Engage. Gross margin in the first quarter of 2022 increased to 22% compared to 16% for the first quarter of 2021. The increase in gross margin was mainly due to the Engage and Bandera integration and increased performance by Calera Video, Calera Voice, as well as by the campaign registry. Net loss totaled $13.2 million or $0.31 per share, based on $42.2 million weighted average share outstanding, compared to a net loss of 10.4 million or 34 cents per share based on 30.4 million weighted average share outstanding in the comparable year-ago period. The increase in the net loss was mainly due to the amortization of acquired intangibles and the accrued interest expenses on convertible notes. Adjusted gross profit A non-GAAP measurement of operating performance increased 198% to 19.3 million from 6.5 million in the comparable year-ago period. Adjusted gross margin for the first quarter of 2022 was 24% compared to 16% in the comparable year-ago period. Adjusted net income, a non-GAAP measurement of operating performance increased 219% to $2.3 million or $0.06 per basic share based on $42.2 million weighted average share outstanding and $0.05 per diluted share based on $52.1 million weighted average share outstanding from negative $2 million or negative $0.07 per both basic and diluted share based on 30.4 million weighted average shares outstanding in the comparable year-ago period. Adjusted BDA and on-gauge measurement of operating performance increased 641% to 6.2 million or 7.7% of total revenue compared to negative 1.1 million in the comparable year-ago period. The increase in adjusted BDA was primarily due to the effect of business combination with Engage and Bandir and caused synergy between the two legacy businesses as well as by the campaign registry. At the end of the first quarter, cash, cash equivalent, restricted cash and short-term investment were 95.2 million compared to 97.9 million as of December 31st, 2021. Quarterly net cash provided by Operating activity was 3.2 million in the three months ended March 31, 2022, compared to net cash used in the operating activity of negative 8.2 million in the comparable year-ago period. Our solid financial position at the end of the first quarter is also reflected in our net current asset, which exceeds 74 million. our debt financing structure is only marginalized as opposed to the foreseeable raise in the interest rate, with over 80% of our financing burning a coupon interest rate and an average variable interest rate under 3% burning on our loans with Italian banks. Before I turn the call back over to Dario, 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 be highly confident in Calera's financial health as well as our ability to sustainably and profitably grow for the foreseeable future. As Dario explained, we are proactively reassess our current climate and decide to adjust our full-year guidance to prioritize the quality of services and products delivered to our customers over unsustainable revenue growth and compressed margins. We currently expect 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. The full year, 2022, we expect revenue in the range between $360 million and $365 million, representing 35% growth at the midpoint compared to 2021. This completes my financial summary. I'd now like to turn the call back over to Dario to ramp up our remarks for the call. Dario.
spk02: Thanks, Giacomo. Looking back, while we were confronted with the broader global economic landscape that impacted our quarterly revenue, we believe that we took meaningful steps forward in the first quarter as we continue to invest in our omni-channel platform and partnership while still driving profitability. Our product suite continues to grow in both depth and breadth, and the quality of our service is as strong and trusted as ever. Our geographical footprint continues to expand into a healthy global balance that we will look to build on moving forward. And our strides into new growth areas, including Calera Vida and Voice, along with the promising results from the campaign registry, have continued to drive leverage into our operating model. As we move into the summer months, we do so with convictions in our long-term growth strategy supported by a strong balance sheet and healthy 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 CPaaS market. And with that, we're ready to open the call for questions. Operator, please provide the appropriate instructions.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you 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.
spk08: Thank you. Hi, guys. Dario, did you focus a little bit more on profitability and cash generation in the quarter than growth? Was it 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?
spk02: Yes, indeed. We are focusing on the quality of the revenues as we did in the previous quarters, the Q3 and Q4. And obviously, we have to face the volatility of the exchange rate. But I believe that apart from the top line, all the other metrics of the profit and loss are positive. And also the cash generation is positive. So it has been intentional. Yes, indeed.
spk08: So obviously it's a balancing act. Do you think the industry can still grow 30% per year after this year, and can you grow in line with the industry? Because it looks like you grew around 15% normalized for currency this quarter. Or do you think the industry is maybe more like a 20%, 25% grower, and maybe you'll grow a little slower too, but with higher margins?
spk02: Well, it's better to segment by geography because every geography has its own dynamics. And now Europe is in a thunderstorm because of the war, because of the pressure on the energy costs and inflation. And the United States is going well. I see the United States not very affected. And Far East, India in particular, is still very much growing. So I expect the industry the market as a whole to keep on growing, maybe with some differences between geographies and maybe with a temporary slowdown during this unexpected and undesired situation that we are in in Europe.
spk07: Thank you.
spk00: Our next question is from Lance Vizana with Cowen & Company. Please proceed.
spk04: Thanks, guys, and 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 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, the volume share, for each of those products today versus maybe where you think that that share goes over the next year or two, just so we can try to get a sense for maybe how additional progress on the mix shift could further augment the margins going forward.
spk05: Thanks.
spk01: Yes, sure. This is Giacomo. So in terms of volume, we grow about 20% in messaging, and we grow about 33% in voice. And this is a performer growth. And this is very important because on voice, we have a profitability that is, on average, it depends on geography, but it's double the messaging. So growing much more on voice, video is a new product with a profitability that is increasing. almost three times, or four times, three times the messaging, and was not included last year. So again, yes, with a better mix, we can improve our margin going forward. This is the aim.
spk04: Okay, great. And then if I could just, my follow-up on the cash flow and liquidity, you did better than we had modeled in the first quarter before. But for the full year, we had previously expected that Calera would generate at least a little bit of cash, and that now seems unlikely. What 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?
spk01: Yes. So this quarter we generated, we are looking very carefully at the operating level. This quarter is positive by $3.2 million. And as you know, this quarter positionality is the weaker quarter in the year for the cash regeneration. So next quarter will be better and Q3 and Q4 are stronger. So we are looking for better generation, operating generation of cash in the future.
spk04: So, okay, so then I had it wrong. So my premise that you would actually be burning cash over the balance of the year, you're saying, no, you'll actually do better as we go throughout the year here.
spk05: Okay. All right. Thanks for clarifying. Appreciate that.
spk02: If I may, just want a little color. At the end of the year, also, we'll have payback payments. more than $10 million of the principal of the incumbent debt from the European banks. So including the free cash flow is the payback of more than $10 million.
spk07: Thanks, Pat.
spk00: Our next question is from Mike Lattimore with Northland Capital. Please proceed.
spk03: Hi, I'm Vivek on behalf of Mike Latimore of Northland Capital. I have a couple of questions here. The first one is, what are the opportunities for the campaign registry outside the U.S.?
spk02: Well, the campaign registry is still looking for opportunities outside of the U.S. and it's pursuing opportunities in multiple jurisdictions, especially in the Western countries. And we think that we can exploit this business model in other geographies. Definitely, we're working on it.
spk03: All right. My second question is, are any specific verticals showing particular strength or weakness?
spk02: Well, we have the banking and financial institution, very stable, keep on growing steadily. like it did over the last few years because it's more mobile banking in the world rather than less mobile banking. And also the tech space, especially in India, is booming. We won business with a number of new unicorns. In India, in year 2021, India generated 42 new unicorns, out of which 18 are Calera customers. and I see a lot of traction over there.
spk07: All right, great, thanks. Thank you.
spk00: And our next question is from George Sutton with Craig Callum Capital Group. Please proceed.
spk06: 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 the gist of my question.
spk02: Well, the only thing that I can say is that there has been kind of a price war in Brazil, and we do not like to play price wars. So basically, we desisted. And that's very peculiar of Brazil because of the dynamic of the market in Brazil. So that's why, considering how we want to keep on working on the quality and the sustainability of our revenues, we basically walked away from a situation that was unhealthy. But we definitely retained the customer. This is a global customer. It's not a local customer. and we're working together with them towards other geographies, so I'm not concerned.
spk06: 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?
spk02: That's explaining the delta, basically. It's a large account, less volume in Brazil, less revenues in Brazil, and that's explaining. If we take off The FX effect and that specific presentation in Brazil, the organic growth of the rest of the group has been over 20, 22%. I understand.
spk07: Okay. That's it for me. Thanks, guys. Thank you, George.
spk00: Thank you. At this time, this concludes our question and answer session. I would like to turn the call back over to Mr. Calagiro for closing remarks.
spk02: Okay, thank you very much for joining us on today's call. As always, we would like to thank our extensive worldwide network of partners and investors as well as our employees for their continued support. Operator?
spk00: Thank you. I would like to remind everyone that a recording of today's call will be available for replay via a link available in the investor section of the company's website. Thank you for joining us for Calera's first quarter 2022 earnings conference call. You may now disconnect.
Disclaimer