Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following management’s discussion and analysis in conjunction with the condensed consolidated financial statements of Kaleyra, Inc. (“Kaleyra,” the “Company,” “we,” “us,” and “our” refer to Kaleyra, Inc. and all of its consolidated subsidiaries) and the related notes included elsewhere in our Quarterly Report on Form 10-Q for the three-month period ended March 31, 2023. The discussion below includes forward-looking statements about Kaleyra’s business, operations and industry that are based on current expectations that are subject to uncertainties and unknown or changed circumstances. Kaleyra’s actual results may differ materially from these expectations as a result of many factors, including, but not limited to, those risks and uncertainties described under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022 and this Quarterly Report on Form 10-Q. We assume no obligation to update the forward-looking statements or such risk factors.
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference include forward‑looking statements within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are also made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to Kaleyra’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
Overview
1. History
Kaleyra is a result of the expansion of the former Ubiquity, which was founded in Milan, Italy in 1999. Ubiquity secured a leading market position in mobile messaging on behalf of the Italian financial services industry and then expanded its products and geographic offerings. Ubiquity acquired Solutions Infini of Bangalore, India in 2017 and Buc Mobile of Vienna, Virginia in 2018. Kaleyra was rebranded as Kaleyra S.p.A. in February 2018. Following the integration of the acquired entities, the combined company became collectively engaged in the operation of the Platforms on behalf of Kaleyra’s customers.
On February 22, 2019, the Company (f/k/a GigCapital, Inc.) entered into a stock purchase agreement (the “Stock Purchase Agreement”) by and among the Company, Kaleyra S.p.A., Shareholder Representative Services LLC, as representative for the holders of the ordinary shares of Kaleyra S.p.A. immediately prior to the closing of the business combination with Kaleyra (the “Business Combination”), and all of the stockholders of all of the Kaleyra S.p.A. stock (collectively, such Kaleyra S.p.A. stockholders, the “Sellers”), for the purpose of the Company acquiring all of the shares of Kaleyra S.p.A.. GigCapital Inc. was incorporated in Delaware on October 9, 2017 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
As a result of the Business Combination, which closed on November 25, 2019, the Company (headquartered in Milan, Italy) became a multi-channel integrated communications services provider on a global scale. At the time of the closing of the Business Combination, Kaleyra operated in the CPaaS market with operations primarily in Italy, India, Dubai and the United States. In connection with the closing, the Company changed its name from GigCapital, Inc. to Kaleyra, Inc..
Kaleyra provides mobile communications services to financial institutions, e-commerce players, OTTs, software companies, logistic enablers, healthcare providers, retailers, and other large organizations worldwide. Through its proprietary cloud communications platforms (collectively, the “Platforms”), Kaleyra manages multi-channel integrated communications services on a global scale, consisting of inbound/outbound messaging solutions, programmable voice and Interactive Voice Response (IVR) configurations, hosted telephone numbers, conversational marketing solutions, RCS, and other types of IP communications services such as e-mail, push notifications, video/audio/chat, and WhatsApp®.
On October 22, 2019, Kaleyra’s U.S. subsidiary, TCR, was incorporated under the laws of Delaware to promote a systems initiative to reduce spam by collecting robotically driven campaign information and processing and sharing that information with mobile operators and the messaging ecosystem. TCR started to account for its first revenue in the second half of fiscal year 2020 and revenue has constantly increased since then. On March 26, 2021, a wholly owned subsidiary of TCR was incorporated under the laws of Canada, with the registered office in Vancouver, British Columbia. This new subsidiary was established with the goal to further expand the registry legacy business in North America.
On July 29, 2020, Kaleyra registered a German branch of Kaleyra S.p.A. with the German Chamber Tax Authority of Commerce. Kaleyra established its branch in Germany to expand Kaleyra’s footprint in Central Europe and the Nordic countries and allow it to leverage Kaleyra’s trusted business solutions for customers in additional jurisdictions.
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On February 18, 2021, Kaleyra entered into an agreement and plan of merger (the “Merger Agreement”) with Vivial, Inc. (“Vivial”) for the acquisition of the business known as mGage (“mGage”), a leading global mobile messaging provider (the transaction contemplated by the Merger Agreement, the “Merger”).
On June 1, 2021, Kaleyra completed its acquisition of mGage for a total purchase price of $218.0 million. The Merger consideration consisted of both cash consideration and common stock consideration. On August 30, 2021, the Company prepared and delivered to the Stockholder Representative a written statement (the “Post-Closing Statement”) setting forth the calculation of closing cash and closing net working capital which ultimately resulted in the final Merger consideration to be equal to $217.0 million pursuant to the terms of the Merger Agreement. The cash consideration amounted to $199.2 million of which $198.6 million was paid on June 1, 2021 and the remaining amount was settled during the period ended September 30, 2021, including a working capital adjustment of $997,000. The common stock consideration was paid with the issuance to Vivial’s former equity holders of a total of 457,143 shares of Kaleyra common stock at the $41.20 per share closing price (on a post-reverse split basis) of Kaleyra common stock on the date of issuance, equal to $18.8 million. In support of the consummation of the Merger, on February 18, 2021, Kaleyra entered into subscription agreements (the “PIPE Subscription Agreements”), with certain institutional investors (the “PIPE Investors”), pursuant to which, among other things, Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, an aggregate of 2,400,000 shares of Kaleyra common stock to the PIPE Investors at $43.75 per share (on a post-reverse split basis). Kaleyra also entered into convertible note subscription agreements (the “Convertible Note Subscription Agreements”) with certain institutional investors (the “Convertible Note Investors”), pursuant to which Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, $200 million aggregate principal amount of unsecured convertible notes (the “Merger Convertible Notes”).
On July 1, 2021, Kaleyra completed a company reorganization of the acquired business of mGage through the initial dissolution of the Delaware single member LLCs of Vivial Holdings, LLC, Vivial Networks, LLC, and the following merger of mGage, LLC into the surviving holding company, Vivial Inc., which subsequently changed its name into Kaleyra US Inc., as a result of the reorganization. As a result of the merger, Kaleyra US Inc. became the holding company and one hundred percent (100%) owner of Kaleyra UK Limited – previously known as mGage Europe Ltd. (UK) and mGage SA de SV (Mexico).
On July 8, 2021, Kaleyra completed the acquisition of Bandyer S.r.l. (“Bandyer”) for cash consideration of $15.4 million. Bandyer offers cloud-based audio/video communications services via Web Real Time Communication (“WebRTC”) technology to financial institutions, retail companies, utilities, industries, insurance companies, human resources, and digital healthcare organizations. Bandyer provides customers with programmable audio/video APIs and Software Development Kits (“SDKs”) based on WebRTC technology for a variety of use cases, including Augmented Reality (“AR”) applications for smart glasses.
Effective August 31, 2021, the common stock of the Company ceased trading on the NYSE American and commenced trading on the NYSE under the ticker symbol “KLR.” Kaleyra’s warrants continue to trade on the NYSE American under the symbol “KLR WS”.
On October 11, 2021, Kaleyra Africa Ltd, a wholly owned subsidiary of Kaleyra Inc., was incorporated under the law of South Africa with the registered office in Waterfall City, Gauteng. This newly established subsidiary is part of Kaleyra's broader strategic plan of expanding into emerging markets whereby South Africa will serve as Kaleyra's hub to enter the entire African market.
On November 15, 2021, pursuant to the provisions of the Merger Agreement, Kaleyra Dominicana, S.R.L., the ninety-nine percent (99%) direct owner of Kaleyra US Inc. and one percent (1%) direct ownership of Kaleyra Inc., was incorporated under the laws of the Dominican Republic with the registered office in Santo Domingo. This newly established subsidiary is aimed to provide the Kaleyra group with back-office technology support and engage in product development and innovation.
On January 13, 2022, Kaleyra completed a company reorganization of the acquired business of Bandyer by means of the merger of the Italian legal entity of Bandyer into the holding company, Kaleyra S.p.A.. As a result of the merger, Bandyer ceased to exist as a separate legal entity and all its assets and liabilities have been incorporated under Kaleyra S.p.A. effective January 13, 2022.
On November 7, 2022, Kaleyra received a written notice (the “Price Notice”) from the NYSE that it was not in compliance with the continued listing criteria set forth in Section 802.01C of the NYSE’s Listed Company Manual, as the average closing share price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period. Within ten business days of receipt of the Notice, the Company responded to the NYSE with respect to its intent to cure the deficiency and provided available alternatives, including, but not limited to, a reverse stock split, subject to shareholder approval, to regain compliance. Pursuant to Section 802.01C, the Company had a period of six months following the receipt of the Notice to regain compliance with the minimum share price requirement.
On February 14, 2023, Kaleyra held the Special Meeting to approve an amendment to the Company’s Certificate of Incorporation to effect, at the discretion of the Board of Directors, the Reverse Stock Split.
On March 6, 2023, the Company announced that, following shareholder approval at the Special Meeting of the stockholders held on February 14, 2023, the Company’s Board of Directors approved a 1-for-3.5 Reverse Stock Split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on March 9, 2023.
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Beginning with the opening of trading on March 9, 2023, Kaleyra’s common stock began trading on the New York Stock Exchange on a split-adjusted basis under new CUSIP number 483379202 and will continue to trade under the symbol “KLR”.
Subsequent to March 31, 2023, on April 3, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE that the Company was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirement. Within forty-five days of receipt of the Market Cap Notice, the Company will respond to the NYSE with a business plan to cure the deficiency and to regain compliance, subject to review, acceptance and monitoring by the NYSE, within the eighteen-month cure period following the receipt of the Market Cap Notice. In addition, with the Market Cap Notice, Kaleyra also received written confirmation from the NYSE that the Company has regained compliance with the minimum share price continued listing criteria set forth in Section 802.01C of the NYSE’s Listed Company Manual, as the Company's common stock had a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the consecutive 30 trading-day period ended March 31, 2023. Refer to Note 21 - Subsequent Events for more information.
The Company continues to pursue avenues to expand its customer base as well as increase revenue from existing customers. Kaleyra’s revenue growth is fueled by the Company’s ability to maintain its customers, drive new services into existing customers, and monetize its pipeline to expand its enterprise customer base. Combined with deep integrations with customer software, and the ability to deliver messages across the world on its trusted network, the Company's product offering remains compelling. Brands are always going to seek to connect with their customers, especially on mobile devices, and Kaleyra is ready to be their partner regardless of channel. While challenges in the global economy may impact near-term growth rates, the industry remains vital and healthy. Kaleyra’s ability to further penetrate its customer base, expand margins and grow geographically is dependent on the Company's success in attracting new customers, selling additional products into our existing customer base, and adding higher gross margin products in our product portfolio. The Company also plans to expand its reach geographically. The ability to expand into new geographies is supported by an already sizeable global footprint, both in terms of carrier direct connections and physical offices.
Kaleyra has always invested heavily in research and development, as the market is fast moving, and new channels are always developing. There are opportunities to layer in intelligence into the CPaaS market and the Company is actively pursuing these areas. Kaleyra has already achieved early success with chatbots and SMS-over-IP which cuts out termination costs yielding higher gross margins.
Kaleyra’s competitive positioning in the market is due in part to its unique infrastructure and continued enhancements and investments in research and development. This infrastructure entails a combination of security, compliance and integration capabilities that protect the integrity and privacy of our customers’ transactions. The Company believes this foundation leads to continued customer satisfaction and enables Kaleyra to maintain a leadership position in the fast-evolving industry in which it operates. Evidence of our success in maintaining best in class customer satisfaction can be seen by the top ten customers contributing 45.2% of revenue in the quarter ended March 31, 2023, and zero customer churn over the past year.
On February 15, 2023, in conjunction with the Company’s fourth quarter and full year earnings release, to drive improved financial and operating performance, and ensure continued sustainable and scalable growth, the Company announced an initial restructuring and cost reduction program for 2023: the Value Creation Program (the “Program”). The Program is designed to position Kaleyra to serve the demand from global businesses using existing and emerging communication channels, while driving labor and cost efficiencies. The Program is anticipated to start delivering results beginning as early as the first quarter of 2023 and will run through the remainder of 2023 when the effects will become measurable. As of the date of the announcement, significant cost savings and cash flow improvement plans have successfully been launched. This includes fixed costs being heavily scrutinized.
As a result of the Company’s recently launched initiatives, significant improvement in Adjusted EBITDA is expected in 2023 compared to 2022, with additional growth anticipated in 2024 when compared to 2023. This is further supported by the organizational streamlining aimed at reducing monthly cash payroll costs by more than 15%. Further savings are anticipated to be achieved by leveraging the Company's global footprint to relocate costs from high-cost geographies to low-cost geographies. Ultimately, the result of the Company’s Adjusted EBITDA improvement will convert to cash. The expected increase in cash flow is important and will significantly aid Kaleyra’s servicing its outstanding debt requirements. The improvement in the Company’s ability to service debt requirements is a direct result of the Program initiatives.
2. Positioning
The demand for cloud communications is increasingly driven by the growing, and often mandated, need for enterprises to undertake a digital transformation that includes omnichannel, mobile-first and interactive customer communications. Mobile network operators and OTTs typically are the gateway to reach end-users’ mobile devices. Kaleyra enables its customers and business partners to connect enterprise software and applications to mobile network operators by providing carefully documented Application Programming Interfaces (“APIs”). APIs allow building omnichannel journeys in a seamless way, with failover capabilities from one channel to another. In addition, Kaleyra also offers an extensive set of no-coding cloud-based visual interfaces to program communications to the customers across multiple channels. Kaleyra’s Platforms couple the possibility of sending communications to
29
end-users to a “Software as a Service” or SaaS business model, creating what is generally referred to as a “Communications Platform as a Service”, or simply CPaaS.
Kaleyra’s vision is to be the CPaaS provider that best aligns with its customers’ and business partners’ communication requirements and outcomes, and the most trusted provider in the world. This requires a combination of security, compliance and integration capabilities that protects the integrity and privacy of Kaleyra’s customers’ transactions and includes other key features such as ease of provisioning, reliable network connectivity, high availability for scaling, redundancy, embedded regulatory compliance, configurable monitoring, analytics, and reporting. Kaleyra believes the percentage of CPaaS customers that will require security, compliance and integrations will represent an increasingly larger portion of the market, particularly with the expected exponential growth of transactional-by-nature cloud communications applications, better enabling Kaleyra to set itself apart from its competition.
Kaleyra’s customers are primarily enterprises that use digital mobile communications in the conduct of their business. Kaleyra provides multiple levels of global customer support 24x7, SLAs and network reliability to meet the expectations and requirements of its customers. Customers and business partners that use the Platforms value the Platforms’ network reliability, and Kaleyra’s responsive customer support and competitive pricing. In particular, Kaleyra was listed by Gartner (Gartner, Market Guide for Communications Platform as a Service, Worldwide, Daniel O’Connell, Lisa Under-Farboud, October 2022) as a co-creator, in other words, a CPaaS focused on a consultative business model that emphasizes consulting services, solves business problems and often pursues specific verticals. Kaleyra also partners with consulting companies and digital transformation players worldwide. Kaleyra was awarded the Gold award for “CPaaS Provider of the Year” by Juniper Research in February 2022, and was ranked as a Leading Challenger in the global CPaaS market by Juniper Research, a leading independent market research, forecasting and consulting services firm, in its latest CPaaS Competitor Leaderboard (2023).
Kaleyra services a broad base of customers and business partners throughout the world operating in diverse sectors and regions. Kaleyra’s key customers are large Business to Consumer (“B2C”) and Business to Business to Consumer (“B2B2C”) enterprises that use digital and mobile communications in the conduct of their business. Kaleyra has a concentration of business within the financial services industry that serves its major European banking end-users. With each relationship, Kaleyra is the link between the financial institutions and their end-users. In linking these two parties, Kaleyra’s Platforms leverage the telecommunications providers to transmit message data to these end-users.
3. Business
During the three months ended March 31, 2023, Kaleyra processed nearly 11.7 billion billable messages and 2.2 billion voice calls. Kaleyra organizes its efforts in four regions, Americas, Europe, APAC and MEA. Its workforce is spread across the globe either in full-remote or office-based mode, in one of its principal offices based in New York, New York, Vienna, Virginia, Atlanta, Georgia, Milan, Italy, Munich, Germany, London, United Kingdom, and Bangalore, India. Kaleyra has over 640 employees across the four regions.
Kaleyra has customers and business partners worldwide across industry verticals such as financial services, e-commerce and transportation. In both the three months ended March 31, 2023 and 2022, Kaleyra had no individual customer which accounted for more than 10% of Kaleyra’s consolidated total revenue.
For the three months ended March 31, 2023, 94.8% of revenues came from customers which have been on the Platforms for at least one year. Although Kaleyra continues to expand by introducing new customers to the Platforms, the breadth and stability of its existing customers provide it with a solid base of revenue upon which it can continue to innovate and make investments. In continuity with the past, Kaleyra is committed to strengthening its product portfolio, expand its global presence, recruit world-class talent and develop synergies with external players to capitalize on its growing market penetration opportunities and value creation.
For the three months ended March 31, 2023 and 2022, the majority of Kaleyra’s revenue was derived from its multi-channel CPaaS product offering market.
Kaleyra’s revenue is primarily driven by the number of messages delivered and voice calls connected to its customers and business partners. Kaleyra’s fees vary depending on the contract. In the three months ended March 31, 2023, the number of messages delivered to customers decreased by 19.3%, compared to the three months ended March 31, 2022, and the number of voice calls connected to customers increased by 36.2%, compared to the three months ended March 31, 2022. The decrease in the number of messages delivered to customers was mainly driven by the revised product and geographic mix, as compared to the same period of the prior year. The increase in voice calls connected to its customers was mainly the result of higher voice activities in India, as compared to the same period of prior year.
Volume increase has been driven by the increased number of digital payments transactions made by the end-users (such as credit card transactions and other digital payments), by the increasing usage of mobile banking features and by the increasing penetration rate of digital payments in the underlying payments markets. Kaleyra is exposed to fluctuations of the currencies in which
30
its transactions are denominated. Specifically, a material portion of Kaleyra’s revenues and purchases are denominated in Euro, Indian Rupees and United Arab Emirates Dirham.
FACTORS AFFECTING COMPARABILITY OF RESULTS
In the three-month period ending March 31, 2023, there are no material factors affecting the comparability of results.
Critical Accounting Policies and Management Estimates
Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Aside from the below listed change in accounting policy relating to Financial Instruments – Credit Losses (Topic 326), our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. In January 2023, Kaleyra ceased to be an emerging growth company upon the end of fiscal year 2022, following the fifth anniversary of the IPO. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the disruptive effects of global inflation and the armed conflict between Russia and Ukraine.
Refer to Note 2 - Summary of Significant Accounting Policies in the Company's condensed consolidated financial statements for more information relating Kaleyra's considerations on going concern basis of accounting
Trade receivables
The Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” as of January 1, 2023. The Company reports a loss allowance for expected credit losses on financial assets measured at amortized cost, mostly referring to trade receivables. In calculating expected credit losses the Company has determined a modified Loss Rate Method to be the most appropriate taking into consideration (i) data availability, (ii) familiarity with historical procedure and historical losses and (iii) compliance with the provisions of the standard with regard to the forecasting requirement. Receivables are grouped based on historical credit loss information, specific risk characteristics and any other credit factor determined appropriate such that the group of receivables shares a similar risk profile. An overall loss rate percentage is derived from an eight-quarter historical lookback period. The historical loss rate is then adjusted for reasonable and supportable forecasts with the adjusted expected credit loss rates applied to the respective groupings trade receivable balances outstanding. Expected credit losses are reviewed periodically by management. Trade receivables are presented net of an allowance for credit losses.
Key Business Metrics
Revenue
Kaleyra’s revenue is generated primarily from usage-based fees earned from the sale of communications services offered through access to the Company’s Platforms to customers and business partners across enterprises. Revenue can be billed in advance or in arrears depending on the terms of the agreement; for the majority of customers, revenue is invoiced on a monthly basis in arrears.
Cost of Revenue and Gross Profit
Cost of revenue consists primarily of costs of communications services purchased from network service providers. Cost of revenue also includes the cost of Kaleyra’s cloud infrastructure and technology platform, amortization of capitalized internal-use software development costs related to the platform applications and amortization of developed technology acquired in past business combinations.
Gross profit is equal to the revenue less cost of revenue associated with delivering the communication services to Kaleyra’s customers.
Operating Expenses
Kaleyra’s operating expenses include research and development expense, sales and marketing expense, general and administrative expense, transactions costs and depreciation and amortization, excluding the depreciation and amortization expense related to the technology platform, which is included in cost of revenues as per above.
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Research and Development Expense
Research and development expense consists primarily of personnel costs, including stock-based compensation, the costs of the technology platform used for staging and development, outsourced engineering services, amortization of capitalized internal-use software development costs (other than those related to the technology platform) and an allocation of general overhead expenses. Kaleyra capitalizes the portion of its software development costs that meet the criteria for capitalization.
Sales and Marketing Expense
Sales and marketing expense is comprised of compensation, variable incentive compensation, benefits related to Kaleyra’s sales personnel, along with travel expenses, other employee related costs including stock-based compensation, and expenses related to advertising, marketing campaigns and events.
General and Administrative Expense
General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, and other administrative costs such as facilities expenses, professional fees, and travel expenses.
Results of Operations
Comparison of the three months ended March 31, 2023 and 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
Revenue |
|
$ |
83,618 |
|
|
$ |
80,481 |
|
|
$ |
3,137 |
|
|
|
4 |
% |
Cost of revenue |
|
|
62,518 |
|
|
|
62,743 |
|
|
|
(225 |
) |
|
NM |
|
Gross profit |
|
|
21,100 |
|
|
|
17,738 |
|
|
|
3,362 |
|
|
|
19 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
5,402 |
|
|
|
4,890 |
|
|
|
512 |
|
|
|
10 |
% |
Sales and marketing |
|
|
6,014 |
|
|
|
7,100 |
|
|
|
(1,086 |
) |
|
|
(15 |
%) |
General and administrative |
|
|
14,036 |
|
|
|
15,380 |
|
|
|
(1,344 |
) |
|
|
(9 |
%) |
Total operating expenses |
|
|
25,452 |
|
|
|
27,370 |
|
|
|
(1,918 |
) |
|
|
(7 |
%) |
Loss from operations |
|
|
(4,352 |
) |
|
|
(9,632 |
) |
|
|
(5,280 |
) |
|
|
(55 |
%) |
Other income, net |
|
|
15 |
|
|
|
46 |
|
|
|
(31 |
) |
|
|
(67 |
%) |
Financial expense, net |
|
|
(3,634 |
) |
|
|
(3,152 |
) |
|
|
482 |
|
|
|
15 |
% |
Foreign currency income (loss) |
|
|
(969 |
) |
|
|
257 |
|
|
|
1,226 |
|
|
NM |
|
Loss before income tax expense |
|
|
(8,940 |
) |
|
|
(12,481 |
) |
|
|
(3,541 |
) |
|
|
(28 |
%) |
Income tax expense |
|
|
1,024 |
|
|
|
691 |
|
|
|
333 |
|
|
|
48 |
% |
Net loss |
|
$ |
(9,964 |
) |
|
$ |
(13,172 |
) |
|
$ |
(3,208 |
) |
|
|
(24 |
%) |
NM = Not meaningful
Revenue
In the three months ended March 31, 2023, revenue increased by $3.1 million or 4%, compared to the three months ended March 31, 2022. This increase was mainly driven by the significant increase in registry legacy business revenue in the quarter ended March 31, 2023, as compared to the same period of the prior year.
Cost of Revenue and Gross Profit
In the three months ended March 31, 2023, cost of revenue decreased by $225,000, compared to the three months ended March 31, 2022. Gross profit increased by 19% in the quarter ended March 31, 2023, compared to the same period of the prior year, mainly driven by the increase in registry legacy business revenue.
Operating Expenses
In the three months ended March 31, 2023, research and development expenses increased by $512,000, or 10%, compared to the three months ended March 31, 2022. Research and development expenses included $58,000 of stock-based compensation in the three months ended March 31, 2023, compared to $1.0 million in the three months ended March 31, 2022. Excluding such costs and $1.8 million in capitalized software development costs, compared to $2.3 million capitalized costs in the three months ended March 31, 2022, research and development expenses would have increased by $948,000, mainly due to severence costs of the period.
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In the three months ended March 31, 2023, sales and marketing expenses decreased by $1.1 million, or 15%, compared to the three months ended March 31, 2022. Sales and marketing expenses included $268,000 of stock-based compensation in the three months ended March 31, 2023, compared to $783,000 in the three months ended March 31, 2022. Excluding such costs, sales and marketing expenses would have decreased by $571,000.
In the three months ended March 31, 2023, general and administrative expenses decreased by $1.3 million, or 9%, compared to the three months ended March 31, 2022. General and administrative expenses included (i) $1.7 million of stock-based compensation in the three months ended March 31, 2023, compared to $5.0 million in the three months ended March 31, 2022; and (ii) $77,000 of mGage acquisition transaction costs in the three months ended March 31, 2023, compared to $81,000 in the three months ended March 31, 2022. Excluding such costs, general and administrative expenses would have increased by $1.9 million, mainly due to an increase in the provision for bad debt and the increase in headcount compared to the same period of last year.
Financial Expense, Net
In the three months ended March 31, 2023, financial expense, net increased by $482,000, compared to the same period last year. Such increase in financial expense is mainly attributable to the accrued contractual interest expense and the amortization of issuance costs amounting to $3.0 million and $515,000, respectively, and the change in the fair value of the private warrant liability of $12,000. The same period last year accounted for the accrued contractual interest expense and the amortization of issuance costs amounting to $3.0 million and $478,000, respectively, partially offset by the change in fair value of the private warrant liability of $546,000. Excluding such costs, financial expense, net would have decreased by $74,000
Foreign Currency Income (Loss)
In the three months ended March 31, 2023, foreign currency loss increased by $1.2 million, compared to the three months ended March 31, 2022. Such change was mainly attributable to the effects of the fluctuation of the Indian Rupee and Euro against the U.S. dollar.
Income Tax Expense
In the three months ended March 31, 2023, income tax expense increased by $333,000, from an income tax expense of $691,000 to an income tax expense of $1.0 million, mainly due to the increase in registry legacy business revenue.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2023, the Company had $74.4 million of cash and cash equivalents, $488,000 of restricted cash and $637,000 of short-term investments with maturity terms between 4 and 12 months held in India. Of the $75.5 million in cash, restricted cash and short-term investments, $29.0 million was held in U.S. banks, $27.6 million was held in Italy, $17.8 million was held in India with the remainder held in other banks. As of December 31, 2022, the Company had $77.5 million of cash and cash equivalents, $480,000 of restricted cash and $587,000 of short-term investments with maturity terms between 4 and 12 months held in India. Management currently plans to retain the cash in the jurisdictions where these funds are currently held.
The condensed consolidated balance sheets as of March 31, 2023 includes total current assets of $166.5 million and total current liabilities of $119.1 million, resulting in net current assets of $47.4 million and a short-term net financial position of $61.9 million.
Kaleyra finances its operations through a combination of cash generated from operations and from borrowings under Kaleyra bank facilities primarily with banks located in Italy, as well as proceeds from equity offerings and convertible note arrangements. Kaleyra’s long-term cash needs primarily include meeting debt service requirements, working capital requirements and capital expenditures.
Kaleyra may also pursue strategic acquisition opportunities that may impact its future cash requirements. There are a number of factors that may negatively impact its available sources of funds in the future including the ability to generate cash from operations, obtain additional financing or refinance existing short-term debt obligations, including those related to acquisitions completed in prior periods. The amount of cash generated from operations is dependent upon factors such as the successful execution of Kaleyra’s business strategies and worldwide economic conditions. The amount of debt available under future financings is dependent on Kaleyra’s ability to maintain adequate cash flow for debt service and sufficient collateral, and general financial conditions in Kaleyra’s market.
On February 18, 2021, and for the purposes of raising the cash portion of the consideration for the Merger, Kaleyra entered into the PIPE Subscription Agreements with the PIPE Investors and the Convertible Note Subscription Agreements with the Convertible Note Investors, pursuant to which Kaleyra agreed to issue $200 million in aggregate principal of Merger Convertible Notes. Subject to the terms of the Merger Convertible Notes, Kaleyra may opportunistically raise debt capital, subject to market and other conditions, to refinance its existing capital structure at a lower cost of capital and extend the maturity period of certain debt. Additionally, Kaleyra may also raise debt capital for strategic opportunities which may include acquisitions of additional companies, and general corporate
33
purposes. If additional financing is required from outside sources, Kaleyra may not be able to raise it on terms acceptable to it or at all. If Kaleyra is unable to raise additional capital when desired, Kaleyra’s business, operating results and financial condition may be adversely affected.
Kaleyra has a number of long-standing business and banking relationships with major Italian commercial banks where it maintains both cash accounts and a credit relationship. Historically, Kaleyra has used cash generated from operations and other sources to fund its growth and investment opportunities. As Kaleyra’s management made the decision to expand its operations outside of Italy and acquire additional companies, it took on certain additional financing in order to fund cash payments due on the acquisitions. As of March 31, 2023, Kaleyra’s total bank and other borrowings, including amounts drawn under the revolving credit line facilities, was $24.9 million ($28.8 million as of December 31, 2022).
Kaleyra has credit line facilities of $5.4 million as of March 31, 2023, of which $3.0 million has been used. As of December 31, 2022, Kaleyra had credit line facilities of $5.4 million, of which $4.0 million had been used. Amounts drawn under the credit line facilities are collateralized by specific customer trade receivables and funds available under the line are limited based on eligible receivables.
The Company’s outstanding Merger Convertible Notes in the amount of $192.3 million contain redemption features in the event Kaleyra is not able to maintain its NYSE listing or another eligible listing.
On November 7, 2022, Kaleyra received a written notice (the “Price Notice”) from the New York Stock Exchange (the “NYSE”) that it was not in compliance with the continued listing criteria set forth in Section 802.01C of the NYSE’s Listed Company Manual, as the average closing share price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period. Within ten business days of receipt of the Price Notice, the Company responded to the NYSE with respect to its intent to cure the deficiency and provided available alternatives, including, but not limited to, a reverse stock split, subject to shareholder approval, to regain compliance.
On February 14, 2023, Kaleyra held the Special Meeting to approve an amendment to the Company’s Certificate of Incorporation to effect, at the discretion of the Board of Directors, the Reverse Stock Split.
On March 6, 2023, the Company announced that, following shareholder approval at the Special Meeting of the stockholders held on February 14, 2023, the Company’s Board of Directors approved a 1-for-3.5 Reverse Stock Split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on March 9, 2023. Beginning with the opening of trading on March 9, 2023, Kaleyra’s common stock began trading on the New York Stock Exchange on a split-adjusted basis under new CUSIP number 483379202 and continued to trade under the symbol “KLR”.
Subsequent to March 31, 2023, on April 3, 2023, the Company received a written notice (the “Market Cap Notice”) from the NYSE that the Company was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirement. Within forty-five days of receipt of the Market Cap Notice, the Company will respond to the NYSE with a business plan to cure the deficiency and to regain compliance, subject to review, acceptance and monitoring by the NYSE, within the eighteen-month cure period following the receipt of the Market Cap Notice. In addition, with the Market Cap Notice, Kaleyra also received written confirmation from the NYSE that the Company has regained compliance with the minimum share price continued listing criteria set forth in Section 802.01C of the NYSE’s Listed Company Manual, as the Company's common stock had a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the consecutive 30 trading-day period ended March 31, 2023. Refer to Note 21 - Subsequent Events for more information.
As of March 31, 2023, and through the date the financial statements are issued, the Company believes it has sufficient liquidity to be able to operate its business for at least 12 months following the date that the financial statements are issued. However, the Company was not in compliance with NYSE continued listing criteria, as described above. If Kaleyra fails to regain and maintain compliance with the NYSE continued listing requirements, including but not limited to the above, the NYSE may take steps to delist the Company’s securities. Delisting from the NYSE (and the inability of Kaleyra to list its common stock on the Nasdaq Global Select Market or the Nasdaq Global Market, or any other eligible market) would trigger a fundamental change under the terms of the Indenture, which would entitle each holder of the Merger Convertible Notes, at such holder’s option, to require Kaleyra to repurchase for cash all or any portion of such holder’s notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon – refer to Note 10 – Notes Payable in the Company's condensed consolidated financial statements for additional information relating the Merger Convertible Notes. In such event, Kaleyra may not have enough available cash or be able to obtain financing to meet the repurchase obligations that may arise if the Company is not able to regain compliance with the NYSE continued listing criteria for at least the 12 months following the date that the financial statements are issued, and Kaleyra’s failure to repurchase such notes would constitute a default under the Indenture. The Company continues to seek other sources of capital and other alternatives to maintain its listing on the NYSE. In addition, the Company is focusing on improving operations with actions aimed at expanding its customer base, increasing revenue and margins from existing customers, reducing costs, as well as expanding into geographic areas where Kaleyra currently has low concentration.
34
On February 15, 2023, to drive improved financial and operating performance, and ensure continued sustainable and scalable growth, the Company announced an initial restructuring and cost reduction program for 2023 (the “Program”). The Program is designed to position Kaleyra to serve the demand from global businesses using existing and emerging communication channels, while driving labor and cost efficiencies. The Program is anticipated to start delivering results beginning as early as the first quarter of 2023 and will run through the remainder of 2023 when the effects will become measurable. This includes fixed costs being heavily scrutinized. As a result of the Company’s recently launched initiatives, significant improvements in the Company's results are expected in 2023 compared to 2022, with additional growth anticipated in 2024 when compared to 2023. This is further supported by the organizational streamlining aimed at reducing monthly cash payroll costs by more than 15%. Further savings are anticipated to be achieved by leveraging the Company's global footprint to relocate costs from high-cost geographies to low-cost geographies.
Despite the measures the Company is undertaking and plans to undertake, the factors outlined above raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that these financial statements are issued. Refer to Note 2 - Summary of Significant Accounting Policies in the Company's condensed consolidated financial statements for more information relating going concern.
Notes Payable - Other
On April 16, 2020, in connection with the Business Combination, Kaleyra entered into a Settlement Agreement and Release (the “Settlement Agreement”) with its financial advisory service firms, Cowen and Company, LLC (“Cowen”) and Chardan Capital Markets, LLC, (“Chardan” and collectively the “Service Firms”), pursuant to which it agreed to pay an affiliate of Cowen, Cowen Investments II LLC (“Cowen Investments”), and Chardan, in full satisfaction of all amounts owed to the Service Firms as of December 31, 2019, $5.4 million in the aggregate, as follows: (i) $2.7 million in the aggregate in common stock of Kaleyra (the “Settlement Shares”) to be issued the business day prior to the filing of a resale registration statement for such Settlement Shares (the “Resale Registration Statement”), (ii) convertible notes totaling $2.7 million in the aggregate with a maturity date three years after issuance and bearing interest at five percent (5%) per annum (but with lower interest rates if the notes are repaid earlier than one year or two years after issuance) and with interest paid in arrears to the payee on March 15, June 15, September 15 and December 15 of each year, with such convertible notes to also be issued the business day prior to the filing of the Resale Registration Statement and (iii) in the event that the Beneficial Ownership Limitation (as defined below) would otherwise be exceeded upon delivery of the Settlement Shares above, a warrant agreement also to be entered into with and issued to the Services Firms the business day prior to the filing of the Resale Registration Statement, whereby the amount of common stock of Kaleyra by which the Beneficial Ownership Limitation would otherwise have been exceeded upon delivery of the Settlement Shares will be substituted for by warrants with an exercise price of $0.01 per share issued pursuant to a Warrant Agreement (the “Warrant Agreement”) and the common stock underlying the Warrant Agreement (the “Warrant Shares”). The Beneficial Ownership Limitation shall initially be 4.99% of the number of shares of the common stock outstanding of Kaleyra immediately after giving effect to the issuance of these shares of common stock. The number of Settlement Shares was calculated using as the price per Settlement Share an amount equal to a fifteen percent (15%) discount to the ten-day (10-day) trailing dollar volume-weighted average price for the common stock of Kaleyra on the NYSE American LLC stock exchange (the “VWAP”) on the business day immediately prior to the date on which Kaleyra files the Resale Registration Statement. In addition, the price per share for determining the number of shares of common stock of Kaleyra to be issued upon the conversion of the convertible notes shall be a five percent (5%) premium to the ten-day (10-day) trailing VWAP as of the date immediately prior to the issuance date of the convertible notes, rounded down to the nearest whole number.
On May 1, 2020, in connection with the Settlement Agreement, Kaleyra issued: (i) an aggregate of 125,885 Settlement Shares to Cowen Investments and Chardan, consisting of 107,002 Settlement Shares issued to Cowen Investments, and 18,883 Settlement Shares issued to Chardan (on a post-reverse split basis); and (ii) convertible promissory notes in the aggregate principal amount of $2.7 million to Cowen Investments and Chardan, consisting of a convertible promissory note in the principal amount of $2.3 million issued to Cowen Investments (the “Cowen Note”) and a convertible promissory note in the principal amount of $405,000 issued to Chardan (the “Chardan Note”). The unpaid principal of the Cowen Note is convertible at the option of Cowen Investments into 86,620 shares of common stock of Kaleyra, if there has been no principal reduction, and the unpaid principal of the Chardan Note is convertible at the option of Chardan into 15,285 shares of common stock of Kaleyra, if there has been no principal reduction (on a post-reverse split basis). As the Beneficial Ownership Limitation was not triggered by the issuance of the Settlement Shares, no Warrant Agreement was necessary and no warrants were issued.
On February 4, 2021, Cowen Investments elected to convert the outstanding amount of the Cowen Note into 86,620 shares of common stock pursuant to the terms of the Cowen Note, and as a result the Company has no further obligations with respect to the Cowen Note (on a post-reverse split basis).
As of March 31, 2023, the outstanding amount of the Chardan Note was $405,000 and accrued interest was $59,000. On May 1, 2023, Kaleyra reimbursed the outstanding amount of the Chardan Note. Following this payment, the Company has no further obligations with respect to the Chardan Note. Refer to Note 21 - Subsequent Events in the Company's condensed consolidated financial statements for more information relating the settlement of the Chardan Note.
35
Merger Convertible Notes
On February 18, 2021, in support of the consummation of the Merger, Kaleyra entered into Convertible Note Subscription Agreements, each dated February 18, 2021, with the Convertible Note Investors. In June 2021, the Company issued the Merger Convertible Notes with an aggregate principal amount of $200 million. The Company incurred $11.4 million of issuance costs as a result of the issuance of the Merger Convertible Notes.
In connection with the issuance of the Merger Convertible Notes pursuant to the terms of the Convertible Note Subscription Agreements, the Company entered into an indenture (the “Indenture”) with Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder, in respect of the $200 million of Merger Convertible Notes that were issued to the Convertible Note Investors.
The Merger Convertible Notes bear interest at a rate of 6.125% per annum, payable semi-annually, in arrears on each June 1 and December 1 of each year, commencing on December 1, 2021, to holders of record at the close of business on the preceding May 15 and November 15, respectively. After giving effect to the Reverse Stock Split of Kaleyra's shares of common stock as of March 9, 2023, as described in Note 1 - Description of Organization and Business Operations, the Merger Convertible Notes are convertible into 3,386,243 shares of Kaleyra common stock at a conversion price of $59.063 per share of Kaleyra common stock in accordance with the terms of the Indenture, and mature five years after their issuance. The Company may, at its election, force conversion of the Merger Convertible Notes after (i) the first anniversary of the issuance of the Merger Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Kaleyra common stock exceeds 150% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter and (ii) the second anniversary of the issuance of the Merger Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Kaleyra common stock exceeds 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Following certain corporate events that occur prior to the maturity date or if the Company forces a mandatory conversion, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Merger Convertible Notes in connection with such a corporate event or has its Merger Convertible Notes mandatorily converted, as the case may be. In addition, in the event that a holder of the Merger Convertible Notes elects to convert its Merger Convertible Notes prior to the third anniversary of the issuance of the Merger Convertible Notes, the Company will be obligated to pay an amount equal to twelve months of interest, or if on or after such third anniversary of the issuance of the Merger Convertible Notes, any remaining amounts that would be owed to, but excluding, the fourth anniversary of the issuance of the Merger Convertible Notes (the “Interest Make-Whole Payment”). The Interest Make-Whole Payment will be payable in cash or shares of Kaleyra common stock as set forth in the Indenture.
The terms of the Merger Convertible Notes require Kaleyra to repurchase the Merger Convertible Notes for cash at the option of the holder in the event of a fundamental change. The Merger Convertible Notes provide that the delisting of our common stock from the NYSE would constitute a “fundamental change” under Section 15.02 of the Indenture, which would entitle each holder, at such holder’s option, to require the Company to repurchase for cash all or any portion of such holder’s notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon. On April 3, 2023, Kaleyra received a written notice (the “Market Cap Notice”) from the NYSE that it was not in compliance with the continued listing criteria set forth in Section 802.01B of the NYSE’s Listed Company Manual with respect to the minimum market capitalization and shareholders' equity requirement. Kaleyra is committed to regaining compliance with the market capitalization and shareholders' equity continued listing standard within the eighteen-month cure period following the receipt of the Market Cap Notice, as provided by the NYSE’s Listed Company Manual. However, if Kaleyra fails to regain compliance with the NYSE continued listing requirements, including but not limited to the above, it is at risk of having the Company's common stock delisted, triggering a fundamental change under the Indenture for the Merger Convertible Notes, as discussed below in Part 2, Item 1A. Risk Factors. Refer to Note 2 - Summary of Significant Accounting Policies and Note 21 - Subsequent Events in the Company's condensed consolidated financial statements for more information relating Kaleyra's considerations on going concern basis of accounting and the Market Cap Notice, respectively.
Upon the issuance of the Merger Convertible Notes management made the assessment whether the convertible instrument contained embedded conversion features for bifurcation and concluded that such embedded conversion features met the definition of a derivative but qualified for the scope exception under ASC 815-10-15-74(a) as they are indexed to the Company’s stock and qualify for classification within stockholders’ equity. Management determined that the Interest Make-Whole Payment feature met the definition of a derivative but did not fall within the above scope exception, nonetheless its value was de minimis and as such no amount was recorded at the time of the issuance of the Merger Convertible Notes nor at any subsequent reporting date. Management will continue to monitor the valuation of the Interest Make-Whole Payment provision and assess the need to record a liability in future periods.
As of March 31, 2023, the outstanding amount of the Merger Convertible Notes was $192.3 million, net of issuance costs. During the three ended March 31, 2023, contractual interest expense on the Merger Convertible Notes amounted to $3.0 million and amortization of the debt issuance costs amounted to $515,000. The liability is included in the condensed consolidated balance sheet
36
line item “Long-term portion of notes payable” and the interest expense is included in “Financial expense, net” on the condensed consolidated statements of operations.
Long-term financial obligations
Long-term financial obligations, excluding credit line facilities, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Nominal Rate |
|
|
|
As of
March 31, |
|
|
As of
December 31, |
|
|
|
|
Interest Contractual Rate |
|
|
As of
March 31, |
|
|
As of
December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
Maturity |
|
as of March 31, 2023 |
|
|
2023 |
|
|
2022 |
|
UniCredit S.p.A. (Line A Tranche 1) |
|
$ |
639 |
|
|
$ |
943 |
|
|
July 2023 |
|
Euribor 3 months + 3.10% |
|
|
|
2.80 |
% |
|
|
2.80 |
% |
UniCredit S.p.A. (Line A Tranche 2) |
|
|
41 |
|
|
|
53 |
|
|
November 2023 |
|
Euribor 3 months + 3.10% |
|
|
|
2.80 |
% |
|
|
2.80 |
% |
UniCredit S.p.A. (Line B) |
|
|
1,121 |
|
|
|
1,324 |
|
|
May 2024 |
|
Euribor 3 months + 2.90% |
|
|
|
2.60 |
% |
|
|
2.60 |
% |
UniCredit S.p.A. (Line C) |
|
|
514 |
|
|
|
755 |
|
|
August 2023 |
|
Euribor 3 months + 3.90% |
|
|
|
6.94 |
% |
|
|
6.03 |
% |
Intesa Sanpaolo S.p.A. (Line 2) |
|
|
1,407 |
|
|
|
1,654 |
|
|
April 2024 |
|
Euribor 3 months + 3.10% |
|
|
|
6.14 |
% |
|
|
5.23 |
% |
Intesa Sanpaolo S.p.A. (Line 3) |
|
|
6,982 |
|
|
|
7,927 |
|
|
June 2026 |
|
Euribor 3 months + 2.15% |
|
|
|
5.19 |
% |
|
|
4.28 |
% |
Intesa Sanpaolo S.p.A. (Line 4) |
|
|
4,248 |
|
|
|
4,466 |
|
|
July 2026 |
|
Euribor 3 months + 2.20% |
|
|
|
5.24 |
% |
|
|
4.33 |
% |
Monte dei Paschi di Siena S.p.A. (Line 2) |
|
|
362 |
|
|
|
356 |
|
|
June 2023 |
|
|
1.50 |
% |
|
|
1.50 |
% |
|
|
1.50 |
% |
Banco BPM S.p.A. (Line 1) |
|
|
97 |
|
|
|
189 |
|
|
June 2023 |
|
Euribor 3 months + 2.00% |
|
|
|
5.04 |
% |
|
|
4.13 |
% |
Banco BPM S.p.A. (Line 3) |
|
|
2,683 |
|
|
|
3,059 |
|
|
September 2024 |
|
Euribor 3 months + 3.00% |
|
|
|
6.04 |
% |
|
|
5.13 |
% |
Banco BPM S.p.A. (Line 4) |
|
|
2,301 |
|
|
|
2,491 |
|
|
July 2025 |
|
Euribor 3 months + 1.95% |
|
|
|
4.99 |
% |
|
|
4.08 |
% |
Simest 1 |
|
|
91 |
|
|
|
134 |
|
|
December 2023 |
|
|
0.50 |
% |
|
|
0.50 |
% |
|
|
0.50 |
% |
Simest 2 |
|
|
90 |
|
|
|
133 |
|
|
December 2023 |
|
|
0.50 |
% |
|
|
0.50 |
% |
|
|
0.50 |
% |
Simest 3 |
|
|
165 |
|
|
|
244 |
|
|
December 2023 |
|
|
0.50 |
% |
|
|
0.50 |
% |
|
|
0.50 |
% |
Simest 4 |
|
|
1,168 |
|
|
|
1,150 |
|
|
April 2027 |
|
|
0.50 |
% |
|
|
0.50 |
% |
|
|
0.50 |
% |
Total bank and other borrowings |
|
|
21,909 |
|
|
|
24,878 |
|
|
|
|
|
|
|
|
|
|
|
|
Less: current portion |
|
|
10,234 |
|
|
|
11,419 |
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term portion |
|
$ |
11,675 |
|
|
$ |
13,459 |
|
|
|
|
|
|
|
|
|
|
|
|
All bank and other borrowings are unsecured borrowings of Kaleyra.
Cash Flows
The following table summarizes cash flows for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Net cash provided by operating activities |
|
$ |
2,453 |
|
|
$ |
3,192 |
|
Net cash used in investing activities |
|
|
(2,083 |
) |
|
|
(3,983 |
) |
Net cash used in financing activities |
|
|
(4,402 |
) |
|
|
(2,688 |
) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
902 |
|
|
|
(334 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(3,130 |
) |
|
$ |
(3,813 |
) |
In the three months ended March 31, 2023, cash provided by operating activities was $2.5 million, primarily consisting of $2.8 million of changes in operating assets and liabilities, mainly attributable to changes in other current liabilities of $6.4 million and accounts payable of $2.6 million.
In the three months ended March 31, 2022, cash provided by operating activities was $3.2 million, primarily consisting of $2.2 million of changes in operating assets and liabilities and non-cash items, mainly $6.8 million of stock-based compensation, $5.9 million of depreciation and amortization expense, $820,000 of deferred taxes, $534,000 of change in the fair value of the warrant liability and $490,000 of non-cash interest expense, partially offset by a net loss of $13.2 million.
In the three months ended March 31, 2023, cash used in investing activities was $2.1 million, primarily consisting of $1.8 million to fund the cost of internally developed software and $231,000 of purchases of property and equipment.
37
In the three months ended March 31, 2022, cash used in investing activities was $4.0 million, primarily consisting of $2.3 million to fund the cost of internally developed software, $1.2 million of purchases in short-term investments and $544,000 of purchases of property and equipment.
In the three months ended March 31, 2023, cash used in financing activities was $4.4 million, primarily consisting of $3.3 million of repayments on term loans and $1.0 million of repayments on lines of credit.
In the three months ended March 31, 2022, cash used in financing activities was $2.7 million, primarily consisting of $2.1 million of repayments on term loans and $525,000 of repayments on lines of credit.
Seasonality
Historically, Kaleyra has experienced clear seasonality in its revenue generation, with slower traction in the first calendar quarter, and increasing revenues as the year progresses. Kaleyra typically experiences higher revenues in messaging and notification services during the fourth calendar quarter. This patterned revenue generation behavior takes place due to Kaleyra’s customers sending more messages to their end-users who are engaged in consumer transactions at the end of the calendar year, resulting in an increase in notifications of electronic payments, credit card transactions and e-commerce.
Taxes
The Company files income tax returns in the United States and in foreign jurisdictions including Italy, Germany, United Kingdom, Dominican Republic, Greece and India. As of March 31, 2023, the tax years 2016 through the current period remain open to examination in certain of the major jurisdictions in which the Company is subject to tax.
Additionally, Kaleyra is closely monitoring the OECD’s development and imposition of proposed BEPS Pillar Two rules which would impose global minimum tax mechanisms in most tax jurisdictions sometime in 2024 and thereafter. At this time based on the guidance issued to date, we do not expect to be materially impacted by these BEPS Pillar Two rules when fully implemented but will continue to monitor further developments in this area.
The Company recorded an income tax expense of $1.0 million and $691,000 for the three months ended March 31, 2023 and 2022, respectively.
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies – to the condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q for more information on new accounting pronouncements.
