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spk01: Good afternoon. Welcome to Calera's first quarter 2023 earnings conference call. After the market close, Calera released unaudited results for the first quarter ended on March 31st, 2023. 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. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Joining us today are Calera's founder and chief executive officer, Dario Calegero, and chief financial officer, Giacomo Dallalio. Following their remarks, we will open the call for your questions. I would now like to turn the call over to investor relations, Shannon Devine. Please go ahead.
spk00: Thank you. Before we begin, we'd like to remind everyone that during today's call, management will be making forward-looking statements. Please refer to the company's SEC filings, including the company's quarterly report on Form 10-Q for a summary of the forward-looking statements, the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements. Polara 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 statement 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, adjusted gross margin, adjusted EBITDA, and adjusted earnings per share. These metrics are not determined in accordance with GAAP, 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'd like to turn the call over to Dario for an overview of Calera's first quarter. Dario?
spk07: Thank you, Shannon, and thank you to everyone for joining us here today. Before we get into the quarterly results, I want to take a minute and update our investment community with some very unfortunate news. You likely noticed our vice president of investor relations is not with us on this call today. Unfortunately, a few weeks ago, we lost Colin Gillis, who joined us last June as our head of investor relations. He died after a brief illness. and we ask that you keep his family in your thoughts and prayers. While only with the company for a brief period, Colin was an impactful contributor to Calera, and we will miss him deeply. The first quarter, which has historically been softer due to seasonality, produced growth of 4%, resulting in revenue of $83.6 million. exceeding the upper end of our previously stated guidance range of $81 million. On a constant currency basis, Q1 2023 revenue was $85.7 million, an increase of 6% over Q1 2022. We continue to show resilience, consistently growing our top line year over year, with a focus on our higher margin businesses, and importantly, generating positive EBDA and adjusted EBDA. As I stated during our fourth quarter earnings call, we are very focused on improving gross margin through reducing costs, driving efficiency, and balancing our product needs toward higher margin delivery channels. As a result, gross margin grew 19% in the first quarter to a record 25.2%. As we have emphasized in the past, We are a communication platform as a service. As our customers' needs change, we change with them in the most cost-effective manner, given our ability to be agile. This is very much a fragmented market with only a few global players, which is why our partnership with over 1,600 operators and direct connectivity in over 100 countries is an advantage to our enterprise customers that can use Calera as a single source to leverage their global needs. To this point, and notably during the quarter, we launched our Global Messaging Service on Oracle Cloud Infrastructure, or CI. This launch accelerated innovation in our space and further capitalized on our strong partnership with Oracle, driving the future of business communications and customer engagement. Together, we have powered billions of interactions serving thousands of customers serving a critical function of timely customer engagement. We continue to grow and solidify our leadership role in the CPaaS ecosystem, extending beyond traditional SMS messaging, enhancing our engagement with our customer base across various industry verticals, creating value for all of our constituents. For the first quarter, we delivered 11.7 billion billable messages, connected over 2.2 billion voice calls, and the dollar-based net expansion rate was 99%. But looking at the Calera top 30 customers, who contribute almost 70% of our total revenue, the dollar-based net expansion rate was 138% in the quarter. At Calera, we are committed to providing high-quality, trusted, and transparent service with a focus on customer satisfaction. This is evident in our low customer churn and long average tenure of our customer base. To finish this portion of the call, I'm very proud of our first quarter performance. Our value creation project efforts are producing solid results, as reflected in the gross margin and the EBDA improvement in the quarter, and we continue to grow our revenue in line with expectations. Customer satisfaction remains high, and we are proud of the trust and confidence our many existing and new customers place in us for their communication needs. I will now turn the call over to Giacomo to detail our financial results. Thank you, Dario.
spk06: I will now run through our financial results in greater detail. As Dario noted, our total revenue in the first quarter was $83.6 million, an increase of $3.1 million versus $80.5 million in the comparable year-ago period, and again above the previous provided guidance. We have a global revenue footprint and a well-balanced portfolio across geographies in the industry sectors. Our customer base remains strong, with virtually zero churn with our top 10 customers, which accounted for approximately 45% of revenues during the first quarter. Gross profit for the first quarter of 2023 was $21.1 million, an 18% increase when compared to $17.7 million for the first quarter of 2022, mainly driven by the improved product and geographic mix. Cross-margin of the first quarter of 2023 was 25.2% compared to 22% of the first quarter of 2022, an increase of 19% and up 23.9% on a sequential quarterly basis. Q1 net loss total 10 million or 76 cents per share based on 13 million with average share outstanding compared to a net loss of $13.2 million, or $1.09 per share based on $12.1 million weighted average share outstanding in the comparable year-ago period. The decrease in net loss period over period is mainly driven by higher gross margins and cost of savings generated through our value creation project initiative outlined in last quarter. Adjusted gross profit and on-gap measure of operating performance increased 2.4 million in the first quarter to 21.8 million when compared to 19.3 million in the first quarter prior year. Adjusted gross margin in the first quarter of 2023 was 26% compared to 24% in the comparable year-ago period and compared to 20.3% in the first quarter of 2022. Notably, and most importantly, The first quarter of 2023 produced the first quarter of post-ABDA since first quarter of 2021, a clear testimonial of the company's successful deployment of the cost reduction we launched in the fourth quarter of 2022. And finally, just ABDA, an ongoing measure of operating performance, was $5.3 million in the first quarter compared to $6.2 million in the first quarter of 2022, and compared to $2.5 million in the fourth quarter of 2022. Turning to the balance sheet, at the end of the first quarter, cash and cash equivalent, restricted cash, short-term investment, were $75.5 million, compared to $78.6 million as of December 31, 2022. Now, turning to our previous announced restructuring and cost reduction program. The value creation program is a crucial continuum during the first quarter of 2023, and as we have previously stated, is designed to position Calera to serve the demand from global businesses to interact with their customer base using existing and emerging communication channels while driving labor and cost efficiency by leveraging our global scale. The program seeks to achieve the following goals. One, Adjusted BDA to exceed 20% growth in fiscal year 2023 compared to fiscal year 2022, with additional growth in fiscal year 2024. Two, organization's three lines aim to reduce monthly cash payroll costs by more than 15% in fiscal year 2023. Three, increasing net cash provided by operating activities by fiscal year 2023 year-end compared to fiscal year 2022. Four, continue to focus on R&D investment to always provide high-quality service standards and offer new products to our customers. Now, turning to our second quarter expectation, we remain focused on delivering on our promises with our value creation initiative throughout the year. We expect the company to continue to grow revenue in 2023 when compared to 2022. We remain committed to provide specific guidance one quarter of time for the near future. With that, we expect second quarter revenue to be in the range of 80 to 84 million compared to 81.1 million in the second quarter of 2022 and in line with the seasonality trend. This completes my financial summary. I now like to turn the call back over to Dari to close in remarks.
spk07: Thank you, Giacomo. In summary, we had a very good quarter, and we are pleased with our top line results, our record margins, and adjusted gross profit. As we continue to focus on investing in ways to layer in our high growth channels to existing customers, maintaining success winning new customers, and consistently expanding our operating footprint, we can expect to keep our new momentum. And with that, we are ready to open the call for your questions. Operator, please provide the appropriate instructions.
spk01: We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your questions, please press star then two. We will pause a moment as callers join the queue. The first question comes from George Sutton with Craig Halem. Please go ahead.
spk02: Hey, guys. This is James on for George. Sorry to hear about Colin. It's very unfortunate. I guess a really nice quarter here. I guess could you – you mentioned product mix sort of drove the higher gross margin this quarter. Could you talk about what the revenue mix is? is between SMS and some of the higher value revenue?
spk06: Yeah, so we are increasing non-messaging revenue from voice, from video, and TCR, and WhatsApp. So the mix is more favorable than in the past. And as we say, we have the target to approach 80%, 20%. and we are approaching the target.
spk04: Gotcha.
spk02: And then was there anything in particular that drove the strength in Q1? I noticed the guide for Q2, the midpoint, reflects a quarter-by-quarter decline. I know typically Q1 is the low point, and we sort of scale throughout the year.
spk04: Did you just touch on that?
spk07: Oh, yes. In general, our seasonality is more favorable in the second half. So historically, we had 55% of the revenues, at least 55% of the revenues coming in the second half. So Q1 and Q2 are low seasonality for us compared to Q3 and Q4.
spk04: Gotcha. I guess maybe just ask a different way, like why would Q2 be down from Q1?
spk06: If you consider last year, we are up. Consider last year, Q1 and Q2 were flat. So we consider the midpoint to be prudent and want to keep in a tough environment to have prudent guidance.
spk05: Gotcha. Thanks, guys. Good for me. Thank you, James. My best to Josh.
spk01: Next question comes from Vivek Palani with Northland Capital. Please go ahead.
spk03: Hi, this is Vivek on for Mike Latimo. And I have a couple of questions with me here. The first one is, how much revenue did the campaign registry contribute to this quarter?
spk07: Vivek, look, we don't disclose exactly how much revenues are coming from each segment of the business or each piece of product. It's still increasing. It keeps on growing, and it's very satisfactory, I would say. But we don't disclose exactly the amount of revenues coming from the campaign register.
spk03: All right. And how about the price? Is it getting more aggressive or less aggressive?
spk07: But on the pricing, the pricing dynamics are pretty much in line with the previous quarters. Calera is pushing a policy to expand the gross profit and expand the gross margin. So we might be tighter in selecting which countries, which routes and which operators we want to work with when we come to messaging, which is typically the part that is under higher pressure in terms of pricing. If you focus on the expansion of the gross margin, which is reaching a sizable 26% in this quarter, this is, I would say, witnessing the effectiveness of our policies.
spk05: All right. That's it from my side. Thank you. Thank you, Vivek. Again, my best to Mike.
spk01: This concludes the question and answer session. I would like to turn the conference back over to Mr. Calagero for any closing remarks. Please go ahead.
spk07: Thank you, operator. Thank you for joining us on today's call. And as always, we would like to thank our extensive worldwide network of partners and investors, as well as our employees, for their continuous support.
spk05: Operator?
spk01: I would like to remind everyone that a recording of today's call would be available for replay via a link available in the investor section of the company's website. Thank you for joining us today for Calera's first quarter 2023 earnings conference call. you may disconnect your lines. Have a great day.
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