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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-38320

 

KALEYRA, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

82-3027430

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

17 State Street, New York, NY

 

10004

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: +1 917 508 9185

(Former name or former address, if changed since last report): N/A

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbols

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

KLR

 

New York Stock Exchange

Warrants, at an exercise price of $11.50 per share of Common Stock

 

KLR WS

 

NYSE American LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

As of May 6, 2022, there were 43,475,608 shares of the Company’s common stock issued and outstanding.

 


 

 

KALEYRA, INC.

Quarterly Report on Form 10-Q

Table of Contents

 

PART I – FINANCIAL INFORMATION

Page

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited):

1

 

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

 

 

Condensed Consolidated Statements of Operations

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

 

 

 

Item 4.

Controls and Procedures

40

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

41

 

 

 

Item 1A.

Risk Factors

42

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

 

 

 

Item 3.

Defaults Upon Senior Securities

42

 

 

 

Item 4.

Mine Safety Disclosures

42

 

 

 

Item 5.

Other Information

43

 

 

 

Item 6.

Exhibits

44

 

 

 

Signatures

45

 

 

 


 

Item 1 – Financial Statements

KALEYRA, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share data)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,222

 

 

$

90,001

 

Restricted cash

 

 

1,667

 

 

 

1,701

 

Short-term investments

 

 

7,294

 

 

 

6,236

 

Trade receivables, net

 

 

82,038

 

 

 

85,945

 

Deferred cost

 

 

319

 

 

 

341

 

Prepaid expenses

 

 

4,718

 

 

 

5,357

 

Other current assets

 

 

1,662

 

 

 

2,599

 

Total current assets

 

 

183,920

 

 

 

192,180

 

Property and equipment, net

 

 

19,824

 

 

 

18,811

 

Intangible assets, net

 

 

120,575

 

 

 

125,396

 

Goodwill

 

 

110,088

 

 

 

110,465

 

Deferred tax assets

 

 

538

 

 

 

1,230

 

Other long-term assets

 

 

1,464

 

 

 

399

 

Total Assets

 

$

436,409

 

 

$

448,481

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

69,209

 

 

$

70,942

 

Lines of credit

 

 

4,649

 

 

 

5,256

 

Current portion of bank and other borrowings

 

 

10,657

 

 

 

10,508

 

Deferred revenue

 

 

6,778

 

 

 

9,553

 

Payroll and payroll related accrued liabilities

 

 

8,908

 

 

 

6,907

 

Other current liabilities

 

 

8,813

 

 

 

8,274

 

Total current liabilities

 

 

109,014

 

 

 

111,440

 

Long-term portion of bank and other borrowings

 

 

19,988

 

 

 

22,910

 

Long-term portion of notes payable

 

 

190,625

 

 

 

190,147

 

Long-term portion of employee benefit obligation

 

 

2,393

 

 

 

2,338

 

Deferred tax liabilities

 

 

2,756

 

 

 

2,384

 

Other long-term liabilities

 

 

1,253

 

 

 

1,840

 

Total Liabilities

 

 

326,029

 

 

 

331,059

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, par value of $0.0001 per share; 1,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, par value of $0.0001 per share; 100,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 45,159,891 shares issued and 42,361,833 shares outstanding as of March 31, 2022 and 44,831,695 shares issued and 42,033,637 shares outstanding as of December 31, 2021

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

258,418

 

 

 

251,659

 

Treasury stock, at cost; 2,798,058 shares as of March 31, 2022 and December 31, 2021

 

 

(30,431

)

 

 

(30,431

)

Accumulated other comprehensive loss

 

 

(2,639

)

 

 

(2,010

)

Accumulated deficit

 

 

(114,972

)

 

 

(101,800

)

Total stockholders’ equity

 

 

110,380

 

 

 

117,422

 

Total liabilities and stockholders’ equity (deficit)

 

$

436,409

 

 

$

448,481

 

__________________

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

KALEYRA, INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

80,481

 

 

$

39,714

 

Cost of revenue

 

 

62,743

 

 

 

33,390

 

Gross profit

 

 

17,738

 

 

 

6,324

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

4,890

 

 

 

2,868

 

Sales and marketing

 

 

7,100

 

 

 

2,859

 

General and administrative

 

 

15,380

 

 

 

10,602

 

Total operating expenses

 

 

27,370

 

 

 

16,329

 

Loss from operations

 

 

(9,632

)

 

 

(10,005

)

Other income, net

 

 

46

 

 

 

45

 

Financial expense, net

 

 

(3,152

)

 

 

(719

)

Foreign currency income

 

 

257

 

 

 

355

 

Loss before income tax expense

 

 

(12,481

)

 

 

(10,324

)

Income tax expense

 

 

691

 

 

 

34

 

Net loss

 

$

(13,172

)

 

$

(10,358

)

Net loss per common share, basic and diluted

 

$

(0.31

)

 

$

(0.34

)

Weighted-average shares used in computing net loss per common share, basic and diluted

 

 

42,247,518

 

 

 

30,364,943

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

KALEYRA, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(13,172

)

 

$

(10,358

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(634

)

 

 

1,105

 

Net change in unrealized gain on marketable securities, net of tax

 

 

5

 

 

 

(4

)

Total other comprehensive income (loss)

 

 

(629

)

 

 

1,101

 

Total comprehensive loss

 

$

(13,801

)

 

$

(9,257

)

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

 

KALEYRA, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited, in thousands, except share data)

 

 

 

Three Months Ended March 31, 2022

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Treasury Stock

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

Equity

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balance as of December 31, 2021

 

 

42,033,637

 

 

$

4

 

 

$

251,659

 

 

 

2,798,058

 

 

$

(30,431

)

 

$

(2,010

)

 

$

(101,800

)

 

$

117,422

 

Stock-based compensation (RSUs)

 

 

328,196

 

 

 

 

 

 

6,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,759

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,172

)

 

 

(13,172

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(629

)

 

 

 

 

 

(629

)

Balance as of March 31, 2022

 

 

42,361,833

 

 

$

4

 

 

$

258,418

 

 

 

2,798,058

 

 

$

(30,431

)

 

$

(2,639

)

 

$

(114,972

)

 

$

110,380

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Treasury Stock

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

Equity

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balance as of December 31, 2020

 

 

30,288,687

 

 

$

3

 

 

$

93,628

 

 

 

2,798,058

 

 

$

(30,431

)

 

$

(2,826

)

 

$

(67,803

)

 

$

(7,429

)

Conversion of Cowen Note

 

 

303,171

 

 

 

 

 

 

2,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,295

 

Forfeiture of 2020 Sponsors' Earnout Shares (1)

 

 

(469,343

)

 

 

 

 

 

1,244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,244

 

Forward share purchase agreement transactions

 

 

 

 

 

 

 

 

17,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,528

 

Stock-based compensation (RSUs)

 

 

558,396

 

 

 

 

 

 

5,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,011

 

Warrants exercised for common stock

 

 

249,706

 

 

 

 

 

 

2,872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,872

 

Fair value of warrants

 

 

 

 

 

 

 

 

(326

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(326

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,358

)

 

 

(10,358

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,101

 

 

 

 

 

 

1,101

 

Balance as of March 31, 2021

 

 

30,930,617

 

 

$

3

 

 

$

122,252

 

 

 

2,798,058

 

 

$

(30,431

)

 

$

(1,725

)

 

$

(78,161

)

 

$

11,938

 

____________________

 

(1)

On March 16, 2021, upon the final determination that GigAcquisitions, LLC, Cowen Investments II LLC (“Cowen”), Irwin Silverberg and Jeffrey Bernstein (the “Sponsors”) were not entitled to receive the final 50% of the Earnout Shares (“2020 Sponsors’ Earnout Shares”) pursuant to the terms of the Purchase Agreement entered into on February 22, 2019, such number of 2020 Sponsors’ Earnout Shares that did not vest were forfeited by all but one Sponsor. That remaining Sponsor settled its portion of the 2020 Sponsors’ Earnout Shares in cash in lieu of forfeiting its shares.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

KALEYRA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(13,172

)

 

$

(10,358

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,902

 

 

 

909

 

Stock-based compensation

 

 

6,759

 

 

 

4,560

 

Provision for doubtful accounts

 

 

176

 

 

 

813

 

Realized gains on marketable securities

 

 

5

 

 

 

(2

)

Employee benefit obligation

 

 

514

 

 

 

69

 

Change in fair value of warrant liability

 

 

(534

)

 

 

1,263

 

Reversal of accrued interest on forward share purchase agreement

 

 

 

 

 

(659

)

Non-cash interest expense

 

 

490

 

 

 

115

 

Deferred taxes

 

 

820

 

 

 

663

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables

 

 

3,010

 

 

 

440

 

Other current assets

 

 

1,504

 

 

 

(164

)

Deferred cost

 

 

22

 

 

 

 

Other long-term assets

 

 

(1,074

)

 

 

1,499

 

Accounts payable

 

 

(816

)

 

 

(4,128

)

Other current liabilities

 

 

2,334

 

 

 

(2,735

)

Deferred revenue

 

 

(2,708

)

 

 

(474

)

Long-term liabilities

 

 

(40

)

 

 

(18

)

Net cash provided by (used in) operating activities

 

 

3,192

 

 

 

(8,207

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of short-term investments

 

 

(1,165

)

 

 

 

Sale of short-term investments

 

 

 

 

 

546

 

Purchase of property and equipment

 

 

(544

)

 

 

(91

)

Capitalized software development costs

 

 

(2,332

)

 

 

(768

)

Purchase of intangible assets

 

 

 

 

 

(2

)

Acquisition of Bandyer, net of cash acquired

 

 

58

 

 

 

 

Net cash used in investing activities

 

 

(3,983

)

 

 

(315

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Repayments on line of credit, net

 

 

(525

)

 

 

(663

)

Repayments on term loans

 

 

(2,134

)

 

 

(1,869

)

Repayments on notes

 

 

 

 

 

(3,750

)

Receipts related to forward share purchase agreements

 

 

 

 

 

17,045

 

Proceeds related to settlement of non-forfeited 2020 Sponsor Earnout Shares

 

 

 

 

 

1,244

 

Repayments on capital lease

 

 

(29

)

 

 

(37

)

Net cash provided by (used in) financing activities

 

 

(2,688

)

 

 

11,970

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(334

)

 

 

(911

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(3,813

)

 

 

2,537

 

Cash, cash equivalents and restricted cash, beginning of period (1)

 

 

91,702

 

 

 

32,970

 

Cash, cash equivalents and restricted cash, end of period (1)

 

$

87,889

 

 

$

35,507

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

173

 

 

$

368

 

Cash paid for income taxes

 

$

 

 

$

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Change in value of forward share purchase agreements

 

$

 

 

$

(483

)

Stock-based compensation capitalized as software development costs

 

$

 

 

$

170

 

Receivable for proceeds from the exercise of warrants

 

$

 

 

$

2,872

 

Conversion of convertible note to common stock

 

$

 

 

$

2,295

 

5


 

Restricted stock units granted to employees for bonuses

 

$

 

 

$

281

 

Fair value of warrant liability

 

$

 

 

$

344

 

Reclassification of warrant liability to additional paid-in capital upon exercise of warrants

 

$

 

 

$

(18

)

Consideration payable

 

$

(34

)

 

$

 

______________________

 

(1)

As of March 31, 2022, includes $86.2 million of cash and cash equivalents and $1.7 million of restricted cash; as of December 31, 2021, includes $90.0 million of cash and cash equivalents and $1.7 million of restricted cash.

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

KALEYRA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Kaleyra, Inc., formerly GigCapital, Inc., (hereinafter “Kaleyra” or the “Company”), was incorporated in Delaware on October 9, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On February 22, 2019, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) by and among the Company, Kaleyra S.p.A., Shareholder Representative Services LLC (the “Seller Representative”), 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.

As a result of the Business Combination, which closed on November 25, 2019, the Company (headquartered in Milan, Italy) became a multi-channel integrated communication services provider on a global scale. Kaleyra operates in the Communications Platform as a Service (“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’s underlying technology used in the platform is the same across all its communication services which can generally be described as “omni-channel mobile first interactive notifications via a public or private cloud implementation”.

Kaleyra provides mobile communication 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 communication 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 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.

Kaleyra’s subsidiary, Campaign Registry Inc., 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, began its soft launch during the second quarter of fiscal year 2020, ending up with its first revenue contracts in the second half of fiscal year 2020.

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 in the United States (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 $19