klr-10q_20220331.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, 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.

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.

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.

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.

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

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.

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 $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 1,600,000 shares of Kaleyra common stock at the $11.77 per share closing price of Kaleyra common stock on the date of issuance, equal to $18.8 million in value. 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 8,400,000 shares of Kaleyra common stock to the PIPE Investors at $12.50 per share. 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 mGage Europe Ltd. (UK) and mGage SA de SV (Mexico).

On July 8, 2021, Kaleyra completed the acquisition of Bandyer Srl (“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 uses, 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 laws 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 owner 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company are unaudited, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, this interim quarterly financial report does not include all disclosures required by US GAAP. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of the Company and its consolidated subsidiaries for all periods presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these condensed consolidated financial statements be read in conjunction with the Company’s consolidated financial statements and the notes thereto included in its 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2022.

These condensed consolidated financial statements have been prepared in conformity with US GAAP applicable for an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act provides, in part, that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. In particular, an emerging growth company can delay the adoption of certain accounting standards until those standards would apply to private companies. For the purpose of these condensed consolidated financial statements, the Company availed itself of an extended transition period for complying with new or revised accounting standards and, as a result, did not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies.

Liquidity