klr-10q_20210331.htm

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, 2021

☐	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)

Via Marco D’Aviano, 2, Milano MI, Italy		20131
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: +39 02 288 5841

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

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 ☒

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	NYSE American LLC
Warrants, at an exercise price of $11.50 per share of Common Stock	KLR WS	NYSE American LLC

As of May 3, 2021, there were 31,307,336 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	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

Signatures		42

Item 1 – Financial Statements

KALEYRA, INC.

Condensed Consolidated Balance Sheets

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

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	35,507		$	32,970
Short-term investments		4,287			4,843
Trade receivables, net		41,611			43,651
Prepaid expenses		1,233			1,447
Other current assets		5,222			2,134
Total current assets		87,860			85,045
Property and equipment, net		7,113			6,726
Intangible assets, net		7,156			7,574
Goodwill		16,612			16,657
Deferred tax assets		40			703
Other long-term assets		299			1,797
Total Assets	$	119,080		$	118,502
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	46,135		$	51,768
Debt for forward share purchase agreements		—			483
Notes payable due to related parties		3,750			7,500
Lines of credit		4,439			5,273
Current portion of bank and other borrowings		8,082			10,798
Deferred revenue		3,107			3,666
Payroll and payroll related accrued liabilities		3,374			3,292
Other current liabilities		2,786			5,988
Total current liabilities		71,673			88,768
Long-term portion of bank and other borrowings		31,020			31,974
Long-term portion of notes payable		405			2,700
Long-term portion of employee benefit obligation		1,886			1,886
Other long-term liabilities		2,158			603
Total Liabilities		107,142			125,931
Commitments and contingencies (Note 14)
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, 2021 and December 31, 2020; 33,728,675 shares issued and 30,930,617 shares outstanding as of March 31, 2021 and 33,086,745 shares issued and 30,288,687 shares outstanding as of December 31, 2020		3			3
Additional paid-in capital		122,252			93,628
Treasury stock, at cost; 2,798,058 shares as of March 31, 2021 and December 31, 2020		(30,431	)		(30,431	)
Accumulated other comprehensive loss		(1,725	)		(2,826	)
Accumulated deficit		(78,161	)		(67,803	)
Total stockholders’ equity (deficit)		11,938			(7,429	)
Total liabilities and stockholders’ equity (deficit)	$	119,080		$	118,502

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

KALEYRA, INC.

Condensed Consolidated Statements of Operations

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

	Three Months Ended March 31,
	2021			2020
Revenue	$	39,714		$	33,633
Cost of revenue		33,390			28,902
Gross profit		6,324			4,731
Operating expenses:
Research and development		2,868			2,810
Sales and marketing		2,859			3,743
General and administrative		10,602			7,759
Total operating expenses		16,329			14,312
Loss from operations		(10,005	)		(9,581	)
Other income, net		45			42
Financial expense, net		(719	)		(41	)
Foreign currency income		355			168
Loss before income tax expense (benefit)		(10,324	)		(9,412	)
Income tax expense (benefit)		34			(589	)
Net loss	$	(10,358	)	$	(8,823	)
Net loss per common share, basic and diluted	$	(0.34	)	$	(0.44	)
Weighted-average shares used in computing net loss per common share, basic and diluted		30,364,943			19,979,589

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

KALEYRA, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)

	Three Months Ended March 31,
	2021			2020
Net loss	$	(10,358	)	$	(8,823	)
Other comprehensive income (loss):
Foreign currency translation adjustments		1,105			(502	)
Net change in unrealized gain on marketable securities, net of tax		(4	)		4
Total other comprehensive income (loss)		1,101			(498	)
Total comprehensive loss	$	(9,257	)	$	(9,321	)

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

KALEYRA, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited, in thousands, except share data)

	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 loss		—			—		—			—		—			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

	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, 2019		19,977,113		$	2	$	2,143			—	$	—		$	74		$	(40,993	)	$	(38,774	)
Common stock repurchased in connection with forward share purchase agreements		(235,169	)		—		2,587			235,169		(2,587	)		—			—			—
Change in forward share purchase agreement liability		—			—		(271	)		—		—			—			—			(271	)
Stock-based compensation (RSUs)		137,104			—		6,204			—		—			—			—			6,204
Common stock issued to settle a payable		140,000			—		527			—		—			—			—			527
Net loss		—			—		—			—		—			—			(8,823	)		(8,823	)
Other comprehensive loss		—			—		—			—		—			(498	)		—			(498	)
Balance as of March 31, 2020		20,019,048		$	2	$	11,190			235,169	$	(2,587	)	$	(424	)	$	(49,816	)	$	(41,635	)

____________________

(1)

On March 16, 2021, upon the final determination that GigAcquisitions, LLC, Cowen Investments II LLC, 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 have not vested have been forfeited by all but one Sponsor. That Sponsor has agreed with Kaleyra to cash settle their portion of the 2020 Sponsors’ Earnout Shares in lieu of forfeiting their shares.

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

KALEYRA, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	Three Months Ended March 31,
	2021			2020
Cash Flows from Operating Activities:
Net loss	$	(10,358	)	$	(8,823	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		909			638
Stock-based compensation, preference shares and others		4,560			6,308
Non-cash settlement of preference share liability		—			(2,486	)
Provision for doubtful accounts		813			117
Realized gains on marketable securities		(2	)		—
Employee benefit obligation		69			89
Change in fair value of warrant liability		1,263			—
Reversal of accrued interest on forward share purchase agreement		(659	)		—
Non-cash interest expense		115			72
Deferred taxes		663			(323	)
Change in operating assets and liabilities:
Trade receivables		440			1,710
Other current assets		(164	)		1,111
Other long-term assets		1,499			(808	)
Accounts payable		(4,128	)		(5,694	)
Other current liabilities		(2,735	)		3,526
Deferred revenue		(474	)		206
Long-term liabilities		(18	)		1,505
Net cash used in operating activities		(8,207	)		(2,852	)
Cash Flows from Investing Activities:
Purchase of short-term investments		—			(3,179	)
Sale of short-term investments		546			5,041
Purchase of property and equipment		(91	)		(89	)
Sale of property and equipment		—			16
Capitalized software development costs		(768	)		(731	)
Purchase of intangible assets		(2	)		(6	)
Net cash provided by (used in) investing activities		(315	)		1,052
Cash Flows from Financing Activities:
Proceeds from (repayments on) in line of credit, net		(663	)		1,721
Borrowings on term loans		—			8,800
Repayments on term loans		(1,869	)		(5,463	)
Repayments on notes		(3,750	)		—
Repurchase of common stock in connection with forward share purchase agreements		—			(2,587	)
Receipts (payments) related to forward share purchase agreements		17,045			(167	)
Proceeds related to settlement of non-forfeited 2020 Sponsor Earnout Shares		1,244			—
Repayments on capital lease		(37	)		—
Net cash provided by financing activities		11,970			2,304
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(911	)		(454	)
Net increase in cash, cash equivalents and restricted cash		2,537			50
Cash, cash equivalents and restricted cash, beginning of period		32,970			36,997
Cash, cash equivalents and restricted cash, end of period	$	35,507		$	37,047
Supplemental disclosures of cash flow information:
Cash paid for interest	$	368		$	153
Non-cash investing and financing activities
Change in value of forward share purchase agreements	$	(483	)	$	271
Common stock issued to settle a payable	$	—		$	423
Note payable issued to settle a payable	$	—		$	400

Stock-based compensation related to capitalized software development costs	$	170		$	—
Receivable for proceeds from the exercise of warrants	$	2,872		$	—
Conversion of convertible note to common stock	$	2,295		$	—
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	)	$	—

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

KALEYRA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Kaleyra, Inc., formerly GigCapital, Inc., (“Kaleyra,” the “Company,” “we,” “us,” and “our” refer to Kaleyra, Inc. and all of its consolidated subsidiaries) 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, as representative for the holders of the ordinary shares of Kaleyra S.p.A. immediately prior to the closing of a business combination (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, the Company (headquartered in Milan, Italy) became a cloud communications software provider delivering secure Application Protocol Interfaces (“APIs”) and user interface based tools for business-to-consumer communications on a global basis. Kaleyra operates in the Communication Platform as a Service (“CPaaS”) market with operations in Italy, India, Dubai and the United States.

Kaleyra’s underlying technology used in the platform is the same across all of its communication services which can generally be described as “omni-channel mobile first interactive notifications via a public or private cloud implementation”. These services include programmable voice/Interactive Voice Response (IVR) configurations, inbound/outbound messaging capabilities, hosted telephone numbers, conversational marketing solutions, and other types of IP communications services such as e-mail, push notifications, and WhatsApp®.

On February 18, 2021, Kaleyra entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Kaleyra, its wholly-owned subsidiary, Volcano Merger Sub, Inc. (“Merger Sub”), Vivial Inc. (“Vivial”) and GSO Special Situations Master Fund LP, solely in its capacity as the Stockholder Representative (the “Stockholder Representative”), for the acquisition of the business owned by Vivial known as mGage (“mGage”), a leading global mobile messaging provider (the transaction contemplated by the Merger Agreement, the “mGage Merger”). Kaleyra will acquire mGage for a total purchase price of approximately $215 million, subject to adjustments. The consideration to mGage shareholders will consist of cash in the amount of $195 million and