Kaleyra Announces Second Quarter 2023 Results

Second Quarter Revenue Increased 7.0% to $86.8 Million

Sequential Increase in Quarterly Adjusted EBITDA of $5.8 Million

Improved Operating Expenses By 14%

NEW YORK, Aug. 7, 2023 /PRNewswire/ --Kaleyra, Inc. (NYSE: KLR) (NYSE American: KLR WS) ("Kaleyra" or the "Company"), a growing omnichannel business communications platform, reported financial results for the second quarter ended June 30, 2023.

Second Quarter 2023 Highlights

• On June 28, 2023, Tata Communications Limited agreed to acquire Kaleyra in a cash only transaction at a price per share of $7.25, representing 158% premium to the last 6 months average share price of $2.81, for a total consideration to Kaleyra shareholders of approximately USD $100 million and the assumption of all outstanding debt (approximately $154.7 million of net debt outstanding as of June 30, 2023). The deal is subject to approval by Kaleyra's shareholders, certain regulatory approvals, and other customary closing conditions and expected to close in six to nine months of the announcement date
• Quarterly revenue of $86.8 million ($87.1 million on a constant currency basis), 96.7% of revenue is from customers on the platform for a minimum of one year
• Company gross margin and adjusted gross margin of 25.1% and 25.9%, an increase from 23.0% and 25.0%, respectively, in the comparable year-ago period on improved product and geographic mix, including the growth in the registry legacy business
• Quarterly gross profit increased 16.7% to $21.8 million from $18.7 million and adjusted gross profit, a non-GAAP measurement of operating performance, 10.9% to $22.4 million from $20.2 million in the comparable year-ago period
• Quarterly operating expenses of $26.2 million decreased (12.6%) or ($3.8) million from $30.1 million in the comparable year-ago period
• Positive quarterly Adjusted EBITDA of $4.8 million, another sequential positive operating performance in the comparable year-ago period
• Strong balance sheet with $65.0 million in cash and cash equivalents, including restricted cash and short-term investments
• Delivered 11.4 billion messages and connected 2.4 billion voice calls in the second quarter of 2023

Management Commentary
"During the second quarter, Tata Communications, a global digital ecosystem enabler, announced it entered into a definitive agreement to acquire Kaleyra. The all-cash transaction and investment in Kaleyra will accelerate Tata's push into the customer interactions platform market and further solidify Kaleyra's global CommTech position. This is truly a milestone and exciting development for Kaleyra and all our constituents and stakeholders, unlocking significant value to all and securing a bright future of continuous growth and development of our legacy and heritage," said Kaleyra Founder and CEO Dario Calogero. "Turning to our second quarter results, we continued to deliver topline results, showing consistent year over year growth, focusing on our higher margin businesses. I am also very pleased with our continued efforts to reduce expenses, evident in the reduction of our operating expenses of 14% on a year over year basis."

Second Quarter 2023 Financial Results
Results compare the 2023 second quarter ended June 30, 2023, to the second quarter ended June 30, 2022, unless otherwise indicated.

• Total revenue was $86.8 million, an increase of 7.0% from $81.1 million in the comparable year-ago period ($87.1 million or 7.4% increase using Q2 2022 foreign exchange rates). This increase was mainly driven by the favorable product mix in the second quarter compared to the same period of the prior year.
• Gross profit was $21.8 million compared to $18.7 million in the comparable year-ago period, an increase of 16.7%. This was mainly driven by the improved product mix and geographies, including the growth in the registry legacy business.
• Gross margin for the second quarter of 2023 was 25.1% compared to 23.0% for the second quarter of 2022.
• Adjusted gross profit, a non-GAAP measurement of operating performance reconciled below, was $22.4 million, up from $20.2 million in the comparable year-ago period.
• Adjusted gross margin, also a non-GAAP measurement of operating performance reconciled below, was 25.9% for the second quarter of 2023 compared to 25.0% in the comparable year-ago period.
• Net loss totaled $9.1 million, or $0.69 per share based on 13.3 million weighted-average shares outstanding, compared to a net loss of $15.8 million, or $1.28 per share based on 12.4 million weighted-average shares outstanding, in the comparable year-ago period. The decrease in the net loss was predominantly due to higher margins and reduced costs throughout the business.
• Adjusted net income (loss), a non-GAAP measurement of operating performance reconciled below, was a loss of $1.1 million, or $0.08 per both basic and diluted share based on 13.3 million weighted-average shares outstanding, compared to a profit of $0.1 million, or $0.00 per both basic and diluted share based on 12.4 million weighted-average shares outstanding and 13.8 million weighted-average shares outstanding, respectively, in the comparable year-ago period.
• Adjusted EBITDA, a non-GAAP measurement of operating performance reconciled below, was $4.8 million, or 5.6% of total revenue, compared to $6.0 million, or 7.4% of total revenue, in the comparable year-ago period.
• At the end of the second quarter, cash and cash equivalents, restricted cash and short-term investments were $65.0 million, compared to $78.6 million as of December 31, 2022.
• Dollar-Based Net Expansion Rate of 103.6% (113.8% within the top 30 customers, which account for almost 70% of total revenue of the period).

Supplemental Earnings Materials & Conference Call
In conjunction with today's earnings release, Kaleyra has published an earnings presentation, accessible via the Company's investor relations website at https://investors.kaleyra.com/.

Due to the pending acquisition by Tata Communications, Kaleyra will no longer host a quarterly earnings call.

About Kaleyra

Kaleyra, Inc. (NYSE: KLR) (NYSE American: KLR WS) is a global group providing 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 platform and robust APIs, Kaleyra manages multi-channel integrated communication services, consisting of messaging, rich messaging and instant messaging, video, push notifications, e-mail, voice services, and chatbots. Kaleyra's technology makes it possible to safely and securely manage billions of messages monthly with over 1,600 operator connections in 190+ countries, including all tier-1 US carriers. For more information, please visit www.kaleyra.com.

Non-GAAP Financial Measures and Related Information
To provide investors and others with additional information regarding Kaleyra's results, the following non-GAAP financial measures, not prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), are disclosed:

• Non-GAAP Adjusted Gross Profit and Non-GAAP Adjusted Gross Margin. For the periods presented, Kaleyra defines non-GAAP Adjusted Gross Profit and non-GAAP Gross Margin as GAAP gross profit and GAAP gross margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below;
• Adjusted EBITDA is defined as of any date of calculation, as the consolidated earnings/(loss) of Kaleyra and its subsidiaries, before finance income and finance cost (including bank charges), tax, depreciation and amortization, plus (i) transaction and one-off expenses, (ii) without duplication of clause (i), severance or change of control payments, (iii) any expenses related to company restructuring, (iv) any compensation expenses relating to stock options, restricted stock units, restricted stock or similar equity interests as may be issued by Kaleyra or any of its subsidiaries to its or their employees and (v) any provision for the write-down of assets;
• Non-GAAP Adjusted Net Income (Loss) and Non-GAAP Adjusted Net Income Per Share, Basic and Diluted. For the periods presented, Kaleyra defines non-GAAP net income (loss) and non-GAAP net income (loss) per share, basic and diluted, as GAAP net loss and GAAP net loss per share, basic and diluted, respectively, adjusted to exclude, as applicable, certain expenses presented in the table below.

Management uses the foregoing non-GAAP financial information, collectively, to evaluate its ongoing operations and for internal planning and forecasting purposes. Kaleyra's management believes that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, facilitates period-to-period comparisons of results of operations, and assists in comparisons with other companies, many of which use similar non-GAAP financial information to supplement their GAAP results. Non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. Whenever Kaleyra uses a non-GAAP financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Operating Metrics
Dollar-Based Net Expansion Rate. Kaleyra's ability to drive growth and generate incremental revenue depends, in part, on the Company's ability to maintain and grow its relationships with Active Existing Customer Accounts and to increase their use of the platform. An important way in which Kaleyra has historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for those customer accounts. Kaleyra's Dollar-Based Net Expansion Rate increases when such customer accounts increase their usage of a product, extend their usage of a product to new applications or adopt a new product. Kaleyra's Dollar-Based Net Expansion Rate decreases when such customer accounts cease or reduce their usage of a product or when the Company lowers usage prices on a product. Kaleyra believes that measuring Dollar-Based Net Expansion Rate provides a more meaningful indication of the performance of the Company's efforts to increase revenue from existing customers. To calculate the Dollar-Based Net Expansion Rate, the Company first identifies the cohort of customer accounts that were customer accounts in the same quarter of the prior year. The Dollar-Based Net Expansion Rate is the quotient obtained by dividing the revenue generated from that cohort in a quarter, by the revenue generated from that same cohort in the corresponding quarter in the prior year.

Active Existing Customer Accounts. Kaleyra believes that the number of Active Customer Accounts is an important indicator of the growth of its business, the market acceptance of its platform and future revenue trends. Kaleyra defines an Active Customer Account at the end of any reporting period as an individual account, as identified by a unique account identifier, for which Kaleyra has recognized revenue in the period.

Important Cautions Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of U.S. federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding the financial statements of Kaleyra, its omnichannel and other product and global customer developments, its expectations, beliefs, intentions, plans, prospects or strategies regarding the future revenue (including revenue guidance) and the business plans of Kaleyra's management team, and the broader market volatility and geopolitical and macroeconomic factors on its business and financial performance. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this press release are based on certain assumptions and analyses made by Kaleyra in light of its experience and perception of historical trends, current conditions and expected future developments and their potential effects on Kaleyra as well as other factors they believe are appropriate in the circumstances. There can be no assurance that future developments affecting Kaleyra will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the parties) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including including Kaleyra's ability to regain compliance with the NYSE Listing Company Manual, the mix of services utilized by Kaleyra's customers and such customers' needs for these services, including any variability by geography, market acceptance of new service offerings, the ability of Kaleyra to expand what it does for existing customers as well as to add new customers, that Kaleyra will have sufficient capital to operate as anticipated, and the impact that geopolitical and macroeconomic factors such as the war in Ukraine, may have on Kaleyra's operations, the demand for Kaleyra's products, global supply chains and economic activity in general. Additional risk factors that that may cause such a difference include, but are not limited to: (i) the ability of the parties to consummate the proposed transaction with Tata Communications in a timely manner or at all; (ii) the satisfaction (or waiver) of closing conditions to the consummation of the proposed transaction; (iii) potential delays in consummation the proposed transaction; (iv) the ability of Kaleyra and Tata Communications to timely and successfully achieve the anticipated benefits of the proposed transaction; (v) the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement; (vi) significant transaction costs associated with the proposed transaction; (vii) potential litigation relating to the proposed transaction; (viii) the risk that disruptions from the proposed transaction will harm Kaleyra's business, including current plans and operations; (ix) the ability of Kaleyra to retain and hire key personnel; (x) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction; (xi) legislative, regulatory and economic developments affecting Kaleyra's business; (xii) general economic and market developments and conditions; (xiii) the evolving legal, regulatory and tax regimes under which Kaleyra operates; and (xiv) potential business uncertainty, including changes to existing business relationships, during the pendency of the merger that could affect Kaleyra's financial performance.. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Investor Contacts:

MZ North America
Shannon Devine/ Mark Schwalenberg
203-741-8811
[email protected]

-Financial Tables to Follow-